As filed with the Securities and Exchange Commission on December 5, 1997
Registration No. _____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
LILLY INDUSTRIES, INC.
(exact name of registrant as specified in its charter)
Indiana 2851 35-0471010
(State or other (primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code No.) Identification No.)
incorporation
or organization)
733 South West Street
Indianapolis, Indiana 46225
(317) 687-6700
(Address, including ZIP Code, and telephone number, including area code, of
registrant's principal executive offices)
Kenneth L. Mills
Lilly Industries, Inc.
733 South West Street
Indianapolis, Indiana 46225
(317) 687-6700
(Name, address, including ZIP Code, and telephone number, including area
code, of agent for service)
Copies to:
Catherine L. Bridge, Esq.
Barnes & Thornburg
11 South Meridian Street
Indianapolis, Indiana 46204
Approximate date of commencement of proposed sale of the securities to
the public: As promptly as practicable after the effective date of this
registration statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.o
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.o
- ------
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.o ______
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================================
Proposed
Title of Each Class Proposed Maximum
of Securities to be Amount to be Maximum Offering Aggregate Offering Amount of
Registered Registered Price Per Unit (1) Price Registration Fee
7 3/4% Senior Notes
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due 2007 $100,000,000 100% $100,000,000 $30,303.04
======================================================================================================================
</TABLE>
(1) In equivalent value of principal amount of issued and outstanding 7 3/4%
Senior Notes, Series A to be exchanged pursuant to Rule 457(f)(2).
<PAGE>
LILLY INDUSTRIES, INC.
------------------------------
CROSS REFERENCE SHEET
------------------------------
Pursuant to Rule 404(a) and Item 501(b) of Regulation S-K Showing
Location in Prospectus of the Information Required by Part I of Form S-4
<TABLE>
<CAPTION>
Form S-4 Caption or Location
Item Number and Caption In Prospectus
<S> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus................................. Forepart of the Registration Statement; Outside Front
Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................... Inside Front Cover Page; Outside Back Cover Page
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information........................................ Available Information; Summary; Risk Factors;
Selected Consolidated Financial Information and
Certain Operating Data
4. Terms of the Transaction................................. The Exchange Offer; Description of Notes;
Exchange Offer; Registration Rights; Certain United
States Federal Income Tax Considerations; Plan of
Distribution
5. Pro Forma Financial Information.......................... Information Incorporated By Reference
6. Material Contracts With the Company Being Acquired....... Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters............ Not Applicable
8. Interests of Named Experts and Counsel................... Not Applicable
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities........................... Not applicable
10. Information With Respect to S-3 Registrants.............. Available Information; Information Incorporated By
Reference; Forward Looking Statements; Summary;
Risk Factors; Private Placement; Use of Proceeds;
Capitalization; Selected Consolidated Financial
Information and Certain Operating Data;
Management's Discussion and Analysis of Results of
Operations and Financial Condition; Business;
Management; Description of Old Debt and New
Bank Credit Facility; The Exchange Offer;
Description of Notes; Exchange Offer; Registration
Rights; Certain United States Federal Income Tax
Considerations; Plan of Distribution; Transfer
Restrictions on Old Notes; Legal Matters; Experts;
Index to Financial Statements
11. Incorporation of Certain Information by Reference........ Information Incorporated By Reference
</TABLE>
<PAGE>
12. Information With Respect to S-2 of S-3 Registrants....... Not Applicable
13. Incorporation of Certain Information by Reference........ Not Applicable
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants................................... Not Applicable
15. Information With Respect to S-3 Companies................ Not Applicable
16. Information With Respect to S-2 or S-3 Companies......... Not Applicable
17. Information With Respect to Companies Other Than
S-2 or S-3 Companies..................................... Not Applicable
18. Information if Proxies, Consents or Authorizations Are
to be Solicited.......................................... Not Applicable
19. Information if Proxies, Consents or Authorizations Are
Not to be Solicited or in an Exchange Offer.............. Information
Incorporated
By Reference;
Management
<PAGE>
SUBJECT TO COMPLETION, DATED ___________________, 1998
PROSPECTUS
LILLY INDUSTRIES, INC.
OFFER TO EXCHANGE
7 3/4% SENIOR NOTES DUE 2007, SERIES B
FOR ALL OUTSTANDING 7 3/4% SENIOR NOTES DUE 2007, SERIES A
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME,
ON _______________, 1998, UNLESS EXTENDED.
------------------
Lilly Industries, Inc., an Indiana corporation (the "Company" or
"Lilly"), hereby offers, upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange $1,000 principal amount of its 7 3/4% Senior Notes due 2007, Series B
(the "Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement
(as defined) of which this Prospectus constitutes a part, for each $1,000
principal amount of its outstanding 7 3/4% Senior Notes due 2007, Series A (the
"Old Notes"), of which $100,000,000 principal amount is outstanding. The form
and terms of the Exchange Notes are identical in all material respects to the
form and terms of the Old Notes except for certain transfer restrictions and
registration rights relating to the Old Notes. The Exchange Notes will evidence
the same debt as the Old Notes and will be issued under and be entitled to the
benefits of the Indenture (as defined). The Exchange Notes and the Old Notes are
collectively referred to herein as the "Notes."
The Notes are senior unsecured obligations of the Company, ranking pari
passu with all existing and future senior debt of the Company and senior in
right of payment to all future subordinated debt of the Company. The Indenture
for the Notes and the New Bank Credit Facility (as defined) permit the Company
and its subsidiaries to incur significant amounts of additional debt under
certain circumstances. See "Use of Proceeds," "Capitalization," "Description of
Old Debt and New Bank Credit Facility," and "Description of Notes."
The Company will accept for exchange any and all Old Notes that are
validly tendered on or prior to 5:00 p.m., New York City time, on the date the
Exchange Offer expires, which will be _____________, 1998, unless the Exchange
Offer is extended. See "The Exchange Offer--Expiration Date; Extensions;
Amendment." Tenders of Old Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the business day prior to the Expiration Date (as
defined), unless previously accepted for exchange. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. However, the Exchange Offer is subject to certain conditions which may
be waived by the Company and to the terms and provisions of the Registration
Rights Agreement (as defined). Old Notes may be tendered only in denominations
of $1,000 principal amount and integral multiples thereof. The Company has
agreed to pay the expenses of the Exchange Offer. See "The Exchange Offer."
(Cover continued on next page)
------------------
See "Risk Factors" beginning on Page 16 of this Prospectus for a
discussion of certain factors that should be considered by holders prior to
tendering their Old Notes in the Exchange Offer.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
------------------
The date of this Prospectus is _____________, 1998
<PAGE>
The Notes will bear interest at the rate of 7 3/4% per annum, payable
semi-annually on June 1 and December 1 of each year, commencing December 1,
1997, to holders of record at the close of business on the May 15 or November 15
immediately preceding the interest payment date. Holders of Exchange Notes of
record on May 15, 1998 will receive interest on June 1, 1998 from the date of
issuance of the Exchange Notes, plus an amount equal to the accrued interest on
the Old Notes from the last interest payment date of the Old Notes, December 1,
1997, to the date of exchange thereof. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the Exchange Notes.
The Old Notes were sold by the Company on November 10, 1997 to the
Initial Purchasers (as defined) in a transaction not registered under the
Securities Act in reliance upon Section 4(2) of the Securities Act. The Old
Notes were thereupon offered and sold by the Initial Purchasers only to
"qualified institutional buyers" (as defined in Rule 144A under the Securities
Act). Accordingly, the Old Notes may not be offered, resold or otherwise
transferred unless registered under the Securities Act or unless an applicable
exemption from the registration requirements of the Securities Act is available.
The Exchange Notes are being offered hereunder in order to satisfy the
obligations of the Company under the Registration Rights Agreement entered into
with the Initial Purchasers in connection with the offering of the Old Notes.
See "The Exchange Offer" and "Exchange Offer; Registration Rights."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission" or "SEC") to third parties, including
Exxon Capital Holdings Corporation, SEC No-Action Letter (available April 13,
1988), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June 5, 1991)
(the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC No-Action Letter
(available June 5, 1991), the Company believes that the Exchange Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by the respective holders thereof (other than a "Restricted Holder,"
being (i) a broker-dealer who purchased Old Notes exchanged for such Exchange
Notes directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act or (ii) a person that is an
affiliate of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business and such holder is not
participating in, and has no arrangement with any person to participate in, the
distribution (within the meaning of the Securities Act) of such Exchange Notes.
Eligible holders wishing to accept the Exchange Offer must represent to the
Company that such conditions have been met. Holders who tender Old Notes in the
Exchange Offer with the intention to participate in a distribution of the
Exchange Notes may not rely upon the Morgan Stanley Letter or similar no-action
letters. See "The Exchange Offer--General." Each broker-dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution." The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Old Notes where such Exchange Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities. The Company has
agreed that, starting on the date the Exchange Offer is consummated (the
"Exchange Offer Consummation Date") and ending on the close of business on the
first anniversary of the Exchange Offer Consummation Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer.
The Exchange Notes will constitute a new issue of securities with no
established trading market, and there can be no assurance as to the liquidity of
any markets that may develop for the Exchange Notes or as to the ability of or
price at which the holders of Exchange Notes would be able to sell their
Exchange Notes. Future trading prices of the Exchange Notes will depend on many
factors, including, among others, prevailing interest rates, the Company's
<PAGE>
operating results and the market for similar securities. The Company does not
intend to apply for listing of the Exchange Notes on any securities exchange.
Salomon Brothers Inc, Lehman Brothers and Schroder & Co. Inc. (together, the
"Initial Purchasers") have informed the Company that they currently intend to
make a market for the Exchange Notes. However, they are not so obligated, and
any such market making may be discontinued at any time without notice.
Accordingly, no assurance can be given that an active public or other market
will develop for the Exchange Notes or as to the liquidity of or the trading
market for the Exchange Notes.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. These documents are available upon
request from the Corporate Finance Director of the Company at 733 South West
Street, Indianapolis, Indiana 46255, phone: (317) 687-6700. In order to ensure
timely delivery of the documents, any request should be made by the date five
business days prior to the Expiration Date (as defined).
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith is required to file reports and other information with the
Commission. All reports and other information filed by the Company with the
Commission may be inspected without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, NW, Washington, D.C. 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such documents
can be obtained from the public reference section of the Commission, 450 Fifth
Street, NW, Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web side (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants, including
the Company, that file electronically with the Commission. The Company's Class A
Common Stock is listed on the New York Stock Exchange. Reports, proxy and
information statements and other information relating to the Company can be
inspected at the offices of the New York Stock Exchange at 20 Broad Street, New
York, New York 10005.
While any Old Notes remain outstanding, the Company will make
available, upon request, to any holder and any prospective purchaser of Old
Notes the information required pursuant to Rule 144A(d)(4) under the Securities
Act during any period in which the Company is not subject to Section 13 or 15(d)
of the Exchange Act. Any such request should be directed to the Chief Financial
Officer of the Company at 733 South West Street, Indianapolis, Indiana 46225,
phone: (317) 687-6700.
This Prospectus constitutes part of a registration statement on Form
S-4 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus omits certain of the information set forth in
the Registration Statement. Reference is hereby made to the Registration
Statement and to the exhibits relating thereto for further information with
respect to the Company and the securities offered hereby. Statements contained
herein concerning the provisions of contracts or other documents are not
necessarily complete, and each such statement is qualified in its entirety by
reference to the copy of the applicable contract or other document filed with
the Commission. Copies of the Registration Statement and the exhibits thereto
are on file at the offices of the Commission and may be obtained upon payment of
the fee prescribed by the Commission, or may be examined without charge at the
public reference facilities of the Commission described above.
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission (File
No. 001-11553) pursuant to the Exchange Act are incorporated by reference in
this Prospectus:
1. The Company's Proxy Statement for its 1997 Annual Meeting
of Stockholders on Schedule 14A, dated March 20, 1997.
2. The Company's Annual Report on Form 10-K for the fiscal
year ended November 30, 1996.
3. The Company's Quarterly Reports on Form 10-Q for the
quarters ended February 28, 1997, May 31, 1997, and August 31, 1997.
4. The Company's Current Report on Form 8-K, dated April 8,
1996, and Amendment No. 1 to the Current Report on Form 8-K, dated
April 8, 1996.
5. The Company's Current Reports on Form 8-K, dated October
17, 1997 and November 10, 1997.
In addition, all reports and other documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15 of the Exchange Act after
the date of this Prospectus and prior to the termination of the Exchange Offer
made by this Prospectus shall be deemed to be incorporated by reference in, and
to be a part of, this Prospectus from the date of filing of such documents. Any
statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
that is also, or is deemed to be, incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus. The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents that are incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents or this Prospectus). Requests for
such documents should be directed to the Corporate Finance Director of the
Company at 733 South West Street, Indianapolis, Indiana 46225, phone: (317)
687-6700.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH
TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
FORWARD LOOKING STATEMENTS
This Prospectus contains statements which constitute forward looking
statements within the meaning of Section 27A of the Securities Act. Discussions
containing such forward looking statements may be found under the captions
"Summary," Management's Discussion and Analysis of Results of Operations and
Financial Condition ("MD&A"), and "Business," as well as elsewhere within this
Prospectus. Forward looking statements include statements regarding the intent,
belief or current expectations of the Company, primarily with respect to the
future operating performance of the Company or related industry developments.
When used in this Prospectus, terms such as "anticipate," "believe," "estimate,"
"expect," "intend," "indicate," "may be," "objective," "plan," "predict," and
"will be" are intended to identify such statements. Holders of Old Notes who are
considering tendering such Old Notes in the Exchange Offer are cautioned that
any such forward looking statements are not guarantees of future performance and
involve risks and uncertainties. Forward looking statements are based upon
management's expectations at the time they are made. Actual results could differ
materially from those projected in the forward looking statements as a result of
the risk factors set forth below in "Risk Factors" and the matters set forth in
this Prospectus generally, many of which are beyond the control of the Company.
The Company cautions the reader, however, that this list of factors may not be
exhaustive.
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information (including financial
information and the related notes thereto) included elsewhere in this Prospectus
or incorporated herein by reference. Lilly Industries, Inc. and its subsidiaries
are collectively referred to herein as "Lilly" or the "Company" unless the
context otherwise requires. Prospective investors should carefully consider the
factors set forth under the caption "Risk Factors."
The Company
Overview
Lilly, founded in 1865, is a leader in the industrial coatings
industry. The Company believes it is one of the five largest industrial coatings
manufacturers in North America and one of the 15 largest in the world based on
net sales of $509.0 million in fiscal 1996. Lilly formulates, produces and sells
coatings to original equipment manufacturers ("OEMs"), enhancing the appearance
of and providing durability to products such as home and office furniture,
cabinets, appliances, building materials, transportation, agricultural and
construction equipment, mirrors and a variety of metal and fiberglass reinforced
surfaces. A significant amount of the Company's sales represent coatings
developed in cooperation with its customers to meet their specific product
requirements, resulting in a number of primary supplier relationships. Lilly
also produces and sells household products, such as fabric protectors, furniture
care products and cleaning aids.
Lilly's technical sales force of approximately 600 people markets and
sells its industrial coatings directly to over 6,000 industrial customers
throughout the world. In fiscal 1996, no single customer of the Company
represented more than 5% of net sales. The Company has plants and sales offices
in the U.S., Canada, China, Germany, Ireland, Malaysia, Singapore, Taiwan and
the United Kingdom. Foreign sales have grown to $85.2 million in fiscal 1996
from $28.8 million in fiscal 1992, representing approximately 17% of net sales
in fiscal 1996 versus 12% in fiscal 1992.
With its April 1996 acquisition of Guardsman Products, Inc.
("Guardsman"), Lilly increased its fiscal 1996 net sales by approximately 55%
over fiscal 1995 net sales. The Guardsman acquisition enhanced Lilly's market
position in the industrial coatings industry by broadening its product lines and
customer base, increasing its presence in the industrial wood and metal coatings
segments of the industry, and providing it with an increasingly important
environmentally-friendly water-borne technology. Lilly also gained a household
products business focused on fabric and stain protection products for household
furniture. This business is characterized by relatively high margins and the
potential for new product development and adds a degree of diversification to
the Company's product offerings.
Lilly focuses on three principal industrial coatings markets: (i) wood
coatings, such as furniture lacquer and protective color; (ii) metal coatings,
such as coil and powder coatings used to finish furniture, appliances and
transportation equipment; and (iii) composites and glass coatings, such as those
used for mirrors. Annual sales for the non-architectural industrial coatings
market, in which Lilly participates, are approximately $25 billion globally and
$8.5 billion domestically. The industrial coatings industry has experienced
stable growth over the past decade, and the Company expects this trend to
continue. The industrial coatings market is highly fragmented and includes many
small competitors that have limited product lines. Furthermore, only a limited
number of non-architectural coatings manufacturers, such as the Company, have
the design and manufacturing capabilities to produce application-specific and
customized coatings products for OEMs. Large competitors, such as the Company,
benefit from a greater diversification of end-use applications and markets,
customers, technology and geography, which reduces the impact of industry or
regional cyclicality, increases bargaining power with suppliers of key raw
materials and permits one-stop shopping for global OEM clients.
<PAGE>
Competitive Strengths
The Company believes it benefits from the following competitive
strengths, which have enabled it to increase its penetration of existing
customers and markets, establish new customer relationships, enter new markets,
develop additional products and applications, and realize growth in revenues and
profits:
Solid Market Position; Broad Product Base. Lilly believes it is one of
the top five industrial coatings manufacturers in North America, one of the top
15 worldwide, and that, with the acquisition of Guardsman, it became the largest
supplier to the U.S. residential furniture market, serving virtually all of the
top 25 U.S. furniture manufacturers. The Company's broad product base and its
technological support services enable the Company to maintain strong market
positions in its wood, coil, powder, specialty and glass coatings markets, and
to meet a variety of its customers' coatings needs.
Technological Leadership. The Company is an industry leader in coatings
technology, developing both high quality products and efficient application
processes. The Company's manufacturing facilities provide reliable products that
are backed by responsive technologists. As of August 31, 1997, over 65% of the
Company's manufacturing facilities were ISO-certified, and certification for the
remainder of its manufacturing facilities is planned. Lilly's technology
portfolio includes a number of environmentally-friendly systems that are
becoming increasingly important in the coatings industry. Each of the Company's
six strategic business units has a "Center of Excellence" that is responsible
for coordinating the technology and technical support for its respective product
lines. Lilly provides its customers with on-site education, training and
technical assistance, including extensive application process consulting.
Customers further benefit from the Company's strategically located color and
design centers that provide premier color styling services. The Company has
further enhanced its technological and environmental expertise through selective
hiring and the Guardsman acquisition. See "Business--Products and Markets."
Strong Customer Relationships. The Company's leadership positions
within its markets, reputation for high levels of quality and customer service,
customized products and proven product development skills have allowed it to
secure strong primary supplier relationships across its customer base. The
Company's products are sold to a diversified group of blue chip and middle
market companies including Caterpillar Inc., Deere & Company, Ethan Allen Inc.,
General Electric Company and International Paper Company.
Successful Acquisitions. Over the last five years, the Company has
acquired and successfully integrated four coatings and related businesses, the
largest of which was Guardsman. Through the consolidation of manufacturing and
corporate facilities, workforce reductions and increased purchasing power, Lilly
has achieved significant synergies following these acquisitions. The Company's
ability to successfully manage the acquisitions and integrate other industry
competitors should enable it to further participate in the on-going industry
consolidation. See "MD&A--Guardsman Acquisition and Restructuring" and
"Business--Industry Information."
Experienced Management. The Company's seven executive officers have
over 125 years of combined experience in the coatings industry. The Company
relies on this expertise to identify and meet customer and industry demands and
to create new applications and opportunities in a mature business. The depth of
management's industry knowledge also enables the Company to negotiate lower raw
material prices with the goal of controlling costs and maximizing gross profit
margins. See "Management."
Strategy
Preferred Supplier; Focus on Attractive End Markets. Lilly's goal is to
leverage its leadership position in each of the niche markets it serves (wood
coatings, metal coatings, composites and glass coatings, and household products)
and to expand its position as a preferred supplier in each of these markets. The
Company has established itself as a leader in the industrial coatings industry
segments in which it competes by focusing on coatings technology and customer
service and support. The Company has supplemented internal growth within its
core coatings market segments with a number of acquisitions to extend its market
<PAGE>
share and broaden its market participation, technologies and product offerings.
Lilly is investing in new, more efficient plant capacity, with a particular
emphasis on environmentally-friendly market segments. These investments are
expected to provide the Company with incremental capacity in some of the
industrial coatings industry's fastest growing segments, such as coil and powder
coatings. Lilly will also continue to focus on developing value-added new
product offerings for end-use applications in its coatings markets. Management
believes the Company's market leadership positions, technological expertise and
strong customer relationships provide it with advantages in product development
and market penetration of its four core markets.
Cost Savings Opportunities. The Company intends to continue focusing on
reducing its cost structure by (i) managing its working capital, (ii)
consolidating manufacturing operations into lowest-cost plants, (iii) reducing
its number of raw material specifications, (iv) standardizing its products based
on lowest-cost formulations and (v) leveraging larger orders to achieve lower
raw material costs. Recent operating system upgrades, such as the establishment
of additional wide area and local area networks, are expected to result in
additional operating efficiencies.
Global Expansion. Lilly adheres to a strategy of following, and being
in close proximity to, its customers as they open plants around the world. This
strategy supports the Company's globalization efforts and helps solidify its
relationships with its blue chip customers. In this regard, the Company has
recently opened a plant in Ireland and a new headquarters in Singapore for its
Asia/Pacific operations. In addition, the Company announced on December 1, 1997
that it acquired a German industrial coatings company with annual revenues in
excess of $15 million. See "Recent Developments."
Acquisitions of Selective Product Lines. Lilly will continue to
evaluate acquisition opportunities that support its strategic business objective
of becoming the preferred industrial coatings supplier in its markets. To that
end, Lilly looks for acquisitions that would enhance its existing product lines
and provide it with top line growth and potential margin expansion. The Company
believes its industry and acquisition experience helps it properly quantify the
operational, strategic and cost structure advantages it can offer an acquisition
candidate.
Recent Developments
The Company announced on December 1, 1997 that it acquired Merckens
Lackchemie GmbH & Co. Kommanditgesellschaft ("Merckens" or the "Foreign
Company"), located in Eschweiler, Germany, for a purchase price of approximately
$12.0 million. Merckens has less than $20.0 million in annual revenues and
serves non-U.S. customers in the Company's metal and glass coatings markets.
Although the purchase price was financed under the New Bank Credit Facility, the
Company intends to refinance the entire amount with an unsecured credit facility
to be entered into by a foreign Subsidiary of the Company with no credit support
from the Company or its other Subsidiaries.
The Private Placement and Use of Proceeds
The Old Notes were sold by the Company on November 10, 1997 to the
Initial Purchasers and were thereupon offered and sold by the Initial Purchasers
only to certain qualified buyers (the "Offering"). The net proceeds of $97.5
million received by the Company in connection with the sale of the Old Notes,
together with borrowings under the New Bank Credit Facility, were used to repay
all the outstanding debt under the Company's Old Bank Credit Agreement (as
defined). The Company will not receive any cash proceeds from the issuance of
the Exchange Notes offered hereby. In consideration for issuing the Exchange
Notes, the Company will receive in exchange a like principal amount of Old Notes
which will be retired and canceled. See "Private Placement," "Use of Proceeds"
and "Description of Old Debt and New Bank Credit Facility."
<PAGE>
The Exchange Offer
The Exchange Offer relates to the exchange of up to $100,000,000
principal amount of Exchange Notes for up to $100,000,000 principal amount of
Old Notes. The form and terms of the Exchange Notes are identical in all
material respects to the form and terms of the Old Notes except that the
Exchange Notes have been registered under the Securities Act and will not
contain certain transfer restrictions and hence are not entitled to the benefits
of the Registration Rights Agreement relating to the contingent increases in the
interest rate provided for pursuant thereto. The Exchange Notes will evidence
the same debt as the Old Notes and will be issued under and be entitled to the
benefits of the Indenture governing the Old Notes. See "Description of the
Notes."
The Exchange Offer..................Each $1,000 principal amount of Exchange
Notes will be issued in exchange for each
$1,000 principal amount of outstanding Old
Notes. As of the date hereof, $100,000,000
principal amount of Old Notes are issued and
outstanding. The Company will issue the
Exchange Notes to tendering holders of Old
Notes on or promptly after the Expiration
Date.
Resale..............................The Company believes that the Exchange Notes
issued pursuant to the Exchange Offer
generally will be freely transferable by the
holders thereof without registration or any
prospectus delivery requirement under the
Securities Act, except for certain
Restricted Holders (as defined) who may be
required to deliver copies of this
Prospectus in connection with any resale of
the Exchange Notes issued in exchange for
such Old Notes. See "The Exchange
Offer--General" and "Plan of Distribution."
Expiration Date.....................5:00 p.m., New York City time, on
___________, 1998, unless the Exchange Offer
is extended, in which case the term
"Expiration Date" means the latest date to
which the Exchange Offer is extended. See
"The Exchange Offer--Expiration Date;
Extensions; Amendments."
Interest on the Notes...............The Notes will bear interest payable
semi-annually on June 1 and December 1 of
each year, commencing December 1, 1997.
Holders of Exchange Notes of record on May
15, 1998 will receive interest on June 1,
1998 from the date of issuance of the
Exchange Notes, plus an amount equal to the
accrued interest on the Old Notes from the
last interest payment date of the Old Notes,
December 1, 1997, to the date of exchange
thereof. Consequently, assuming the Exchange
Offer is consummated prior to the record
date in respect of the June 1, 1998 interest
payment for the Old Notes, holders who
exchange their Old Notes for Exchange Notes
will receive the same interest payment on
June 1, 1998 that they would have received
had they not accepted the Exchange Offer.
Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance
of the Exchange Notes. See "The Exchange
Offer--Interest on the Exchange Notes.
<PAGE>
Procedures for Tendering
Old Notes...........................Each holder of Old Notes wishing to accept
the Exchange Offer must complete, sign and
date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, or an
Agent's Message (as defined) together with
the Old Notes to be exchanged and any other
required documentation to the Exchange Agent
at the address set forth herein and therein
or effect a tender of Old Notes pursuant to
the procedures for book-entry transfer as
provided for herein. See "The Exchange
Offer-- Procedures for Tendering."
Special Procedures for
Beneficial Holders..................Any beneficial holder whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender in the
Exchange Offer should contact such
registered holder promptly and instruct such
registered holder to tender on the
beneficial holder's behalf. If such
beneficial holder wishes to tender directly,
such beneficial holder must, prior to
completing and executing the Letter of
Transmittal and delivering the Old Notes,
either make appropriate arrangements to
register ownership of the Old Notes in such
holder's name or obtain a properly completed
bond power from the registered holder. The
transfer of record ownership may take
considerable time. See "The Exchange
Offer--Procedures for Tendering."
Guaranteed Delivery
Procedures..........................Holders of Old Notes who wish to tender
their Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes and a properly completed
Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date,
or who cannot complete the procedure for
book-entry transfer on a timely basis and
deliver an Agent's Message, may tender their
Old Notes according to the guaranteed
delivery procedures set forth in "The
Exchange Offer-- Guaranteed Delivery
Procedures."
Withdrawal Rights...................Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time,
on the business day prior to the Expiration
Date, unless previously accepted for
exchange. See "The Exchange
Offer--Withdrawal of Tenders."
Termination of the Exchange
Offer...............................The Company may terminate the Exchange Offer
if it determines that the Exchange Offer
violates any applicable law or
interpretation of the staff of the SEC.
Holders of Old Notes will have certain
rights against the Company under the
Registration Rights Agreement should the
Company fail to consummate the Exchange
Offer. See "The Exchange Offer--Termination"
and "Exchange Offer; Registration Rights."
<PAGE>
Acceptance of Old Notes
and Delivery of Exchange
Notes...............................Subject to certain conditions (as summarized
above in "Termination of the Exchange Offer"
and described more fully in "The Exchange
Offer --Termination"), the Company will
accept for exchange any and all Old Notes
which are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer
will be delivered promptly following the
Expiration Date. See "The Exchange
Offer--General."
Exchange Agent......................Harris Trust and Savings Bank is serving as
exchange agent (the "Exchange Agent") in
connection with the Exchange Offer. The
mailing address of the Exchange Agent is:
Harris Trust and Savings Bank c/o Harris
Trust Company of New York, P.O. Box 1010,
Wall Street Station, New York, New York
10268-1010. Hand deliveries and deliveries
by overnight courier should be sent to:
Harris Trust and Savings Bank c/o Harris
Trust Company of New York, 88 Pine Street,
19th Floor, New York, New York 10005. For
information with respect to the Exchange
Offer, the telephone number for the Exchange
Agent is (212) 701-7624 and the facsimile
number for the Exchange Agent is (212)
701-7636. See "The Exchange Offer--Exchange
Agent."
Use of Proceeds.....................There will be no cash proceeds payable to
the Company from the issuance of the
Exchange Notes pursuant to the Exchange
Offer. See "Use of Proceeds." For a
discussion of the use of the net proceeds
received by the Company from the sale of the
Old Notes, see "Private Placement."
Terms of the Notes
Notes Outstanding ..................$100,000,000 aggregate principal amount of 7
3/4% Senior Notes Due 2007, Series A.
Maturity Date.......................December 1, 2007.
Interest Payment Dates..............June 1 and December 1 of each year,
commencing December 1, 1997.
Sinking Fund .......................None.
<PAGE>
Ranking ............................The Notes will be senior unsecured
obligations of the Company, ranking pari
passu with all existing and future senior
debt of the Company and senior in right of
payment to all future subordinated debt of
the Company. The Notes will be effectively
subordinated to all existing and future debt
and other liabilities of the Company's
subsidiaries. The Notes will also be
effectively subordinated to all secured debt
and other obligations of the Company to the
extent of the value of the assets securing
such debt and other obligations. As of
August 31, 1997, after giving effect to the
Offering, borrowings under the New Bank
Credit Facility in connection with the
Offering and the application of the
estimated net proceeds therefrom, the
Company would have had approximately $231.9
million of consolidated debt outstanding
(excluding outstanding letters of credit,
purchase money security obligations and
trade payables incurred in the normal course
of business), none of which would have
ranked effectively senior to the Notes. The
Company does intend to refinance all of the
approximately $12.0 million purchase price
of the Merckens acquisition, currently
financed under the New Bank Credit Facility,
with subsidiary debt. The Indenture and the
New Bank Credit Facility will permit the
Company and its subsidiaries to incur
significant amounts of additional debt under
certain circumstances. See "Description of
Notes."
Optional Redemption.................The Notes may be redeemed at any time at the
option of the Company, in whole or from time
to time in part, at a price equal to 100% of
the principal amount thereof plus accrued
and unpaid interest, if any, to the date of
redemption plus a Make-Whole Premium (as
defined), if any, relating to the then
prevailing Treasury Yield (as defined) and
the remaining life of the Notes. See
"Description of Notes--Optional Redemption."
Certain Covenants...................The Indenture will contain limitations on
the ability of the Company and the
Restricted Subsidiaries to (i) Incur Liens,
(ii) engage in Sale and Leaseback
Transactions, and (iii) enter into mergers
or consolidations or transfer substantially
all their assets. In addition, until the
Company attains Investment Grade Status, the
Indenture will limit the ability of the
Company and the Restricted Subsidiaries to
Incur additional Debt. Once the Company
attains Investment Grade Status, the
limitations on the Incurrence of Debt will
no longer be applicable to the Company and
the Restricted Subsidiaries, even if the
Company ceases thereafter to have an
Investment Grade Rating. The covenants are
subject to numerous significant exceptions
and qualifications. See Description of
Notes--Certain Covenants" and "--Certain
Definitions."
<PAGE>
Exchange Offer; Registration
Rights...........................The Company agreed to commence an offer,
pursuant to an effective registration
statement, to exchange the Old Notes for
substantially identical Exchange Notes,
except that interest rate step-up provisions
and certain transfer restrictions will be
modified or eliminated, as appropriate, or
to cause the Old Notes to be registered
under the Securities Act so as to permit
resales. If (a) on or prior to the 90th day
following the date of original issuance of
the Old Notes, neither the Exchange Offer
Registration Statement (as defined) nor the
Shelf Registration Statement (as defined)
has been filed with the Commission, (b) on
or prior to the 150th day following the date
of original issuance of the Old Notes,
neither the Exchange Offer Registration
Statement nor the Shelf Registration
Statement has been declared effective, (c)
on or prior to the 180th day following the
date of original issuance of the Old Notes,
neither the Exchange Offer has been
consummated nor the Shelf Registration
Statement has been declared effective, or
(d) after either the Exchange Offer
Registration Statement or the Shelf
Registration Statement has been declared
effective, such Registration Statement
thereafter ceases to be effective or usable
(subject to certain exceptions) in
connection with resales of Old Notes or
Exchange Notes in accordance with and during
the periods specified in the Registration
Rights Agreement, then Special Interest (as
defined) (in addition to the interest
otherwise due on the Old Notes or the
Exchange Notes) will accrue on such Old
Notes or Exchange Notes. Upon the subsequent
consummation of the Exchange Offer or the
declaration of effectiveness of the Shelf
Registration Statement, such Special
Interest will cease to accrue. See "Exchange
Offer; Registration Rights."
Absence of a Public Market
for the Notes....................The Exchange Notes will be a new issue of
securities for which there is currently no
market. The Company does not intend to apply
for listing of the Notes on any securities
exchange or stock market. Although the
Initial Purchasers have informed the Company
that they each currently intend to make a
market in the Old Notes and the Exchange
Notes, they are not obligated to do so, and
any such market making may be discontinued
at any time without notice. Accordingly,
there can be no assurance as to the
development or liquidity of any market for
the Notes. The Old Notes currently trade in
The Portal Market.
Risk Factors
See "Risk Factors" beginning on page 16 for a discussion of certain
factors that should be considered by holders prior to tendering their Old Notes
in the Exchange Offer.
<PAGE>
Summary Consolidated Financial Information and Certain Operating Data
The following table presents summary consolidated financial information
and certain operating data for the Company for the periods indicated. The
financial information and operating data for each of the fiscal years ended
November 30, 1996, 1995, 1994, 1993 and 1992 is derived from the Company's
audited consolidated financial statements. The financial information and
operating data for the twelve months ended August 31, 1997 and the nine months
ended August 31, 1997 and 1996 is derived from the Company's unaudited financial
statements. The results of operations for the nine months ended August 31, 1997
are not necessarily indicative of results to be expected for the Company's full
fiscal year. The following financial information and operating data should be
read in conjunction with "Selected Consolidated Financial Information and
Certain Operating Data," "MD&A," the Consolidated Financial Statements for the
fiscal years ended November 30, 1996, 1995 and 1994 and for the nine months
ended August 31, 1997 and 1996 and related notes thereto, and the other
information included elsewhere in this Prospectus or incorporated herein by
reference.
<TABLE>
<CAPTION>
Twelve
months Nine months
ended ended
August 31, August 31, Year ended November 30,
1997 1997 1996(a) 1996(a) 1995 1994 1993 1992
---- ---- ------- ------- ---- ---- ---- ----
(unaudited)
(Dollars in thousands)
Income Statement:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.................... $600,437 $447,302 $355,841 $508,976 $328,345 $331,306 $284,325 $236,476
Restructuring charge (b)..... -- -- 9,607 9,607 -- -- -- --
Operating income............. 69,777 50,604 28,793 47,966 35,388 42,017 29,570 22,838
Operating income
excluding restructuring
charge in 1996............ 69,777 50,604 38,400 57,573 35,388 42,017 29,570 22,838
Interest income and sundry... 326 159 471 638 544 554 294 731
Interest expense............. 20,174 14,781 9,073 14,466 2,158 2,919 1,925 1,662
Income taxes................. 22,477 16,192 9,077 15,362 13,510 16,350 11,784 9,201
Net income................... 27,452 19,790 11,114 18,776 20,264 23,302 16,155 12,706
Net income excluding
restructuring charge
in 1996................... 27,452 19,790 16,398 24,060 20,264 23,302 16,155 12,706
Net income per share......... 1.18 .85 .48 .81 .88 1.00 .70 .55
Net income per share
(excluding restructuring
charge in 1996)........... 1.18 .85 .71 1.04 .88 1.00 .70 .55
Other Data:
Capital expenditures......... $13,418 $9,618 $15,433 $19,233 $15,599 $6,693 $7,598 $3,262
Depreciation and
amortization.............. 20,088 15,252 10,714 15,550 8,174 8,965 6,887 6,792
EBITDA (excluding
restructuring charge
in 1996) (d).............. 89,865 65,856 49,114 73,123 43,562 50,982 36,457 29,630
Ratio of EBITDA (excluding
restructuring
charge in 1996) to interest
expense (e)............... 4.45x 4.46x 5.41x 5.05x 20.19x 17.47x 18.94x 17.83x
Ratio of earnings to fixed
charges (f)............... 3.14x 3.10x 2.89x 3.03x 13.83x 12.95x 12.15x 10.61x
Ratio of total debt to EBITDA
(excluding restructuring
charge in 1996) (g)....... 2.58x NM NM 3.58x 0.65x 0.69x 1.21x 0.49x
Balance Sheet Data
(at period end):
Cash and cash equivalents........... $ 6,185 $ 9,749 $ 6,790 $ 20,260 $ 26,581 $ 7,384 $ 8,334
Working capital..................... 27,214 66,700 50,579 35,505 41,604 33,270 27,131
Intangible assets (c)............... 248,569 254,419 258,811 47,401 50,978 55,471 26,192
Property and equipment.............. 81,675 80,166 80,582 45,469 35,753 33,776 30,571
Total assets........................ 495,882 508,279 521,860 183,582 190,252 167,044 117,049
Total debt.......................... 231,906 277,200 261,561 28,229 35,110 44,101 14,642
Shareholders' equity................ 136,591 115,887 121,889 109,374 99,424 81,128 70,125
</TABLE>
(see footnotes on following page)
<PAGE>
(a) Includes the results of operations of Guardsman from and after April 8,
1996, the date the acquisition of Guardsman was consummated. See
"Selected Consolidated Financial Information and Certain Operating
Data" and "MD&A--Guardsman Acquisition and Restructuring."
(b) In connection with the acquisition of Guardsman, the Company has
adopted and commenced implementation of plans for the consolidation of
manufacturing facilities. These plans, which include both Company and
Guardsman facilities, will result in the closure of some plants and
workforce reductions totaling approximately 250 employees. Closure
costs consist of facility and equipment valuation adjustments,
inventory disposal costs, dismantling and maintenance costs, and
termination benefits. The primary employee groups affected include
manufacturing, selling, administrative and research and development
personnel. It is anticipated these plans will be completed by the end
of the first half of fiscal 1998, although no assurances to that effect
are given. Costs associated with the planned closure of former Company
facilities and related reductions in workforce are reflected as a
restructuring charge totaling $9.6 million taken in fiscal 1996, which
reduced fiscal 1996 net income by $5.3 million. Costs associated with
the closure of former Guardsman facilities and related reductions in
workforce totaled $9.0 million and were recorded as liabilities in the
opening balance sheet of the combined entity as of the date of the
acquisition of Guardsman.
(c) Includes goodwill.
(d) EBITDA represents operating income plus depreciation and amortization.
EBITDA (excluding restructuring charge in 1996) represents EBITDA plus
the restructuring charge taken in 1996. The Company believes that
EBITDA and EBITDA (excluding restructuring charge in 1996) provide
useful information regarding the Company's ability to service its debt
and other obligations; however, EBITDA and EBITDA (excluding
restructuring charge in 1996) do not represent cash flow from
operations as defined by generally accepted accounting principles and
should not be considered as substitutes for net income as an indicator
of the Company's operating performance or substitutes for cash flow as
a measure of liquidity. The definition of EBITDA differs from the
definition of EBITDA used in the Indenture for the Notes. See "MD&A"
and "Description of Notes--Certain Definitions."
(e) The ratio of EBITDA (excluding restructuring charge in 1996) to
interest expense is determined by dividing EBITDA (excluding
restructuring charge in 1996) by the sum of total interest expense plus
capitalized interest expense.
(f) The ratio of earnings to fixed charges is determined by dividing the
sum of operating income, interest income and sundry, interest expense,
amortization of debt expense, and the interest portion of rent expense
by the sum of interest expense, amortization of debt expense, and the
interest portion of rent expense.
(g) The ratio of total debt to EBITDA (excluding restructuring charge in
1996) is determined by dividing total debt by EBITDA (excluding
restructuring charge in 1996).
<PAGE>
RISK FACTORS
Holders of the Old Notes should carefully consider the following risk
factors, as well as the other information contained in this Prospectus, before
tendering their Old Notes in the Exchange Offer.
Risk Factors Relating to the Company and its Business
Effects of Leverage
As of August 31, 1997, after giving effect to the Offering, borrowings
under the New Bank Credit Facility in connection with the Offering, the
application of the estimated net proceeds therefrom and the refinancing of the
Merckens acquisition debt, the Company's long-term debt would have been
approximately $243.9 million and the Company would have had approximately $45.0
million of additional available borrowing capacity under the New Bank Credit
Facility. In addition, the New Bank Credit Facility and the Indenture will allow
the Company to incur significant amounts of additional debt under certain
circumstances. See "Capitalization," "Description of Old Debt and New Bank
Credit Facility" and "Description of Notes."
The Company's level of indebtedness will have several important effects
on its operations, as well as significant consequences to holders of the Notes,
including (i) a substantial portion of the Company's cash flow from operations
will be dedicated to the payment of interest on its indebtedness and will not be
available for other purposes, (ii) the covenants contained in the New Bank
Credit Facility and the Indenture may limit the Company's ability to borrow
additional funds and may affect the Company's flexibility in planning for, and
reacting to, changes in business conditions, (iii) the Company's ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, general corporate purposes or other purposes may be
impaired, (iv) the Company's leveraged financial position may make the Company
more vulnerable to economic downturns and may limit its ability to withstand
competitive pressures, (v) to the extent that the Company incurs debt under the
New Bank Credit Facility, which debt will be at variable rates, the Company may
be vulnerable to increases in interest rates, and (vi) the Company's flexibility
in planning for, or reacting to, changes in market conditions may be limited.
Moreover, future acquisition or development activities may require the Company
to alter its capitalization significantly. These changes in capitalization may
significantly increase the leverage of the Company. The Company's ability to
meet its debt service obligations and to reduce its total debt will be dependent
upon the Company's future performance, which will be subject to general economic
conditions and to financial, business and other factors affecting the operations
of the Company, many of which are beyond its control. If the Company is unable
to generate sufficient cash flow from operations in the future to service its
debt and to meet its other commitments, the Company will be required to adopt
one or more alternatives, such as refinancing or restructuring its debt, selling
material assets or operations or seeking to raise additional debt or equity
capital. There can be no assurance that any of these actions could be effected
on a timely basis or on satisfactory terms or that these actions would enable
the Company to continue to satisfy its capital requirements. The terms of the
Company's debt, including the New Bank Credit Facility and the Indenture, also
may prohibit the Company from taking such actions.
Sensitivity to General Economic and Industry Conditions; Interest Rate
Environment; Seasonality
The Company's business, and the industrial coatings industry as a
whole, is cyclical in nature and affected by the general trends of the economy.
In particular, consumer behavior and confidence, the level of personal
discretionary spending, housing activity, interest rates, credit availability,
and demographics influence the Company's end-user markets, such as the housing,
construction, agricultural, appliance, furniture and automotive industries.
During economic downturns, these industries tend to experience declines, which
in turn diminish demand for the Company's products and lead to sharp decreases
in prices for such products. Moreover, since the products produced by the
Company's end-user industries are predominantly big-ticket items (e.g.,
construction equipment, tractors, furniture, and household appliances), they
tend to be more sensitive to general economic changes than smaller ticket items.
As a result of this cyclicality, the Company has experienced, and in the future
could experience, reduced net sales and profit margins. Such reductions may
affect the Company's ability to satisfy its debt service obligations, including
payments on the Notes, on a timely basis. There can be no assurance that a
prolonged economic downturn would not have a material adverse effect on the
Company.
<PAGE>
Many of the end-user markets on which the Company focuses are
interest-rate sensitive. These include the markets for appliances, agricultural
and construction equipment, furniture coatings for new housing, and the
automotive products. Increases in interest rates could decrease end-user demand
in the Company's primary end-user markets, as they have in the past, and thereby
adversely affect demand for the Company's products.
In addition, the Company's business is seasonal, with its lowest
revenues in the first quarter of its fiscal year due to lower demand from
industrial end-users during the December holiday period. Due to such
seasonality, the Company will likely continue to experience quarter-to-quarter
fluctuations in operating results. See "MD&A."
Competition; Mature Industry
The industrial coatings industry is mature, highly fragmented and
competitive. There are more than 700 manufacturers of protective and decorative
coatings in North America. Manufacturers include large international companies
as well as small regional firms. Certain of the Company's competitors have
substantially greater manufacturing, financial, research and development and
marketing resources than the Company. In addition, industrial coatings is a
mature business in the U.S., growing in line with industrial production. Long
term annual unit growth in the U.S. industrial coatings industry is projected in
the 1% to 2% range. To expand and to remain competitive, the Company will be
required to continue (i) to develop coatings that meet specific customer
requirements, (ii) to price those coatings competitively, and (iii) to deliver
quality products on time. In addition, the Company will also need to keep pace
with technological developments to remain competitive, particularly
technological developments that relate to environmental demands such as
reductions of volatile organic compound ("VOC") emissions imposed by the Clean
Air Act Amendments of 1990 ("CAAA"). See "Business--Industry Information,"
"--Competition" and "--Environmental Regulation."
Environmental Matters
The operations of the Company, like those of other companies in the
industrial coatings industry, are subject to numerous foreign, federal, state
and local environmental laws and regulations. These laws and regulations not
only affect the Company's current operations and products, but also could impose
liability on the Company for past operations that were conducted in compliance
with then applicable laws and regulations. The Company anticipates that such
laws and regulations will become increasingly stringent. These environmental
laws and regulations, along with the Company's internal compliance efforts, have
required and will continue to require significant capital expenditures by the
Company.
The Company is currently investigating and remediating contamination at
some of its current and former properties, including certain properties formerly
owned by Guardsman. The Company, together with other parties, has also been
designated a potentially responsible party ("PRP") under federal and state
environmental laws for the remediation of hazardous waste at approximately 17
federal and 7 state Superfund sites. In general, these laws impose joint and
several liability on PRPs for investigation and remediation costs regardless of
fault. The Company may be similarly designated with respect to additional
third-party sites in the future. Although the Company continually assesses its
potential liability for cleanup obligations with respect to its past operations
and third-party sites, such liability is subject to a number of uncertainties
including, among others, the number and financial condition of parties involved
with respect to any given site, the volumetric contribution which may be
attributed to the Company relative to that attributable to other parties, the
nature and magnitude of the wastes involved, the various technologies that can
be used for remediation and the determination of acceptable remediation with
respect to a particular site. The Company has accrued reserves for certain
environmental remediation activities relating to its past operations and
third-party sites, including Superfund sites, for which commitments or cleanup
plans have been developed or for which costs or minimum costs can be reasonably
estimated. These accruals are adjusted as information becomes available upon
which more accurate costs can be reasonably estimated. There can be no
assurance, however, that the actual costs of remediation will not eventually
materially exceed the amount presently accrued.
<PAGE>
The CAAA requires significant reductions in VOC emissions, which are
generated from, among other things, solvents traditionally used by the coatings
industry. As a result, the Company is attempting to develop water-based
coatings, powder coatings and other forms of environmentally-friendly coatings
to replace commonly-used, solvent-based coatings. There can be no assurance that
the Company will be able to develop coatings that will comply with the CAAA or
customer demands.
While the Company believes that it is currently in material compliance
with environmental requirements, any failure to comply with such present and
future requirements could subject the Company to future liabilities. Such
requirements, including those under the CAAA with respect to VOC emissions,
could restrict the Company's ability to expand its facilities or could require
the Company to install costly pollution control equipment or to incur other
significant expenses to comply with environmental requirements. The imposition
of more stringent environmental requirements, the results of future testing at
the Company's facilities, or a determination that the Company is potentially
responsible for remediation at other sites where contamination is not presently
known could result in expenditures for which no accrual has been made or in
expenditures in excess of amounts currently accrued for such matters. See
"MD&A--Liquidity, Capital Resources and Commitments," "Business--Industry
Information" and "--Environmental Regulation."
Raw Materials
Over 50% of the Company's operating costs are typically attributable to
the cost of raw materials. The cost of these raw materials, most of which are
derived from petrochemical products, depends on numerous factors, including
changes in the economy, the level of foreign and domestic production, the
availability of imports, the marketing of competitive materials and the extent
of government regulation. The prices for petrochemicals are particularly
dependent on the crude oil supply and demand balance. Certain of the Company's
raw materials are not widely available and cannot be substituted with other raw
materials. In addition, raw material price inflation is not quickly offset by
price increases for the Company's products, as the ability of the Company to
pass through cost increases often lags for several months. Under certain
circumstances, the Company is not able to pass through such cost increases at
all. A rise in the price of raw materials could materially increase the
Company's operating costs and thereby adversely affect its profit margins.
In particular, the Company is dependent on the supply of titanium
dioxide ("TiO2"), which is used for white pigment and accounts for 30% of
pigment usage in the coatings industry and for which there is no substitute
material. The Company's annual TiO2 expenses total approximately 4% of its
annual net sales. An 8% increase in the cost of TiO2 in fiscal 1995 from fiscal
1994 significantly reduced the Company's operating margins for that year. While
TiO2 prices were stable over the past fiscal year, they have begun to rise again
recently. There can be no assurance that prices of TiO2 will not continue to
rise or that such a rise will not have a material adverse effect on the
Company's financial position and results of operations.
In addition, the Company uses silver and copper to produce many of its
products. While silver and copper are normally available on the open market,
their price and availability are subject to fluctuation from time to time. See
"Business--Raw Materials."
Acquisitions; Restructuring
The Company's strategy contemplates continued expansion, including
growth through acquisitions. There can be no assurance that the Company will be
able to consummate future acquisitions, if any, on terms that are favorable to
the Company. Moreover, the Company may incur significant expenses in connection
with the consummation of an acquisition, and there can be no assurance that any
acquired assets or businesses will be successfully integrated into the Company's
existing business.
In connection with the Guardsman acquisition, the Company incurred a
$9.6 million restructuring charge, and recorded an additional $9.0 million
liability in the opening balance sheet of the combined entity, for the
consolidation of certain manufacturing operations and related workforce
<PAGE>
reductions. There can be no assurance that the Company will be able to realize
the benefits it anticipates from this restructuring or that additional charges
will not be incurred in the future in connection with this restructuring or
other actions or acquisitions. See "MD&A--Guardsman Acquisition and
Restructuring."
Foreign Operations
During fiscal 1996, the Company's foreign operations accounted for
approximately 17% of its net sales, and the Company may increase this percentage
in the coming years. The Company's foreign operations subject it to the risks of
doing business abroad, including currency fluctuations, tariffs, duties,
customs, import controls and other trade barriers, restrictions on the transfer
of funds, greater difficulty in accounts receivable collection, longer payment
cycles, difficulties in staffing and managing foreign operations, adverse tax
consequences from operating in multiple jurisdictions, burdens of complying with
a wide variety of foreign laws, and, in certain parts of the world, social and
political instability, any of which could have a material adverse effect on the
Company's financial position and results of operations.
Control by Key Employees
The Company has two classes of common stock, Class A Common Stock (the
"Class A Stock") and Class B Common Stock (the "Class B Stock"). The holders of
Class B Stock, which is only held by key employees, are entitled to vote on all
questions presented to shareholders and to elect as a class a majority of the
Company's Board of Directors, resulting in their being in a position to
substantially control the Company. The holders of Class A Stock, which has more
limited voting rights, have the following voting rights: (i) the right to elect
four directors if there are ten or more directors and two directors of the
Company if there are nine or fewer directors, (ii) the right to vote as one
class with the Class B Stock on a (1) merger, consolidation or dissolution of
the Company and certain sales or other dispositions by the Company of all or
substantially all of its assets and (2) certain amendments to the Articles of
Incorporation of the Company, (iii) class voting rights with respect to
amendments to the Articles of Incorporation increasing the number of authorized
shares of capital stock and (iv) voting rights required by applicable laws and
regulations, including the rules of the New York Stock Exchange and the Internal
Revenue Code.
Reliance on Key Personnel
The Company's operations are dependent upon a relatively small group of
key management and technical personnel. There can be no assurance that such
individuals will remain with the Company for the immediate or foreseeable
future. The unexpected loss of the services of one or more of these individuals
could have a detrimental effect on the Company. See "Management."
Risk Factors Relating to the Notes
Holding Company Structure; Asset Encumbrance
The Notes are obligations exclusively of the Company and not of any of
its subsidiaries. As such, the Notes will be effectively subordinated to all the
liabilities of the Company's subsidiaries (including trade creditors, secured
creditors and creditors holding guarantees, and claims of preferred
stockholders, if any). As of August 31, 1997, the debt and other liabilities of
the Company's subsidiaries approximated $37.2 million (excluding outstanding
letters of credit). The Company intends to refinance all of the less than $15
million purchase price of the Merckens acquisition, currently financed under the
New Bank Credit Facility, with subsidiary debt. See "MD&A-Recent Developments."
Since a significant portion of the operations of the Company are
conducted through subsidiaries, the cash flow and the consequent ability to
service debt and other obligations of the Company, including the Notes, will be
dependent upon the earnings of the Company's subsidiaries and the distribution
of those earnings to, or upon loans or other payments of funds by those
subsidiaries to, the Company. The payment of dividends and the making of loans
and advances to the Company by its subsidiaries are subject to statutory and
contractual restrictions, are dependent upon the earnings of those subsidiaries
<PAGE>
and are subject to various business considerations. In addition, to the extent
that the earnings of the Company's foreign subsidiaries have been subject to
foreign tax at rates that are lower than the then prevailing U.S. corporate tax
rates, a distribution of such earnings as a dividend to the Company or any of
its U.S. subsidiaries would be subject to U.S. corporate taxes.
The Notes also will be effectively subordinated to any secured debt of
the Company to the extent of the value of the assets securing such debt. As of
August 31, 1997, after giving effect to the Offering, borrowings under the New
Bank Credit Facility in connection with the Offering and the application of the
estimated net proceeds therefrom, the Company would have had $0.2 million of
secured debt or other secured obligations outstanding (other than outstanding
letters of credit and purchase money security obligations incurred in the normal
course of business, which totaled approximately $2.7 million).
The Company and its subsidiaries have other liabilities, including
contingent liabilities, which may be significant. Although the New Bank Credit
Facility and the Indenture contain limitations on the amount of additional debt
the Company and its subsidiaries may incur, the amount of debt that will be
permitted to be incurred could be substantial and, in any case, such debt may be
debt of the Company's subsidiaries or secured debt (which will be effectively
senior in right of payment to the Notes).
Fraudulent Conveyance
If a court in a lawsuit brought by an unpaid creditor or representative
of creditors, such as a trustee in bankruptcy, or by the Company as
debtor-in-possession, were to determine under relevant federal or state
fraudulent conveyance statutes that the Company did not receive fair
consideration or reasonably equivalent value for incurring debt, including the
Notes, and that, at the time of such incurrence, the Company (i) was insolvent,
(ii) was rendered insolvent by reason of such incurrence, (iii) was engaged or
was about to engage in a business or transaction for which the assets remaining
with the Company constituted unreasonably small capital, or (iv) intended to
incur, or believed that it would incur, debts beyond its ability to pay such
debts as they matured or became due, then, under applicable provisions of the
U.S. Bankruptcy Code, such court, subject to applicable statutes of limitations,
could void the Company's obligations under the Notes, subordinate the Notes to
other debt of the Company or take other action detrimental to the holders of the
Notes.
The measure of insolvency for purposes of a fraudulent conveyance or
other similar claim will vary depending upon the laws of the jurisdiction being
applied. Generally, however, a company will be considered insolvent at a
particular time if the sum of its debts at that time is greater than the then
fair value of its assets or if the fair salable value of its assets at that time
is less than the amount that would be required to pay its probable liability on
its existing debts as they become absolute and mature. Moreover, regardless of
solvency, a court could void an incurrence of debt, including the Notes, if it
determined that such transaction was made with the intent to hinder, delay or
defraud creditors. In addition, a court could subordinate debt, including the
Notes, to the claims of all existing and future creditors on similar grounds.
The Company believes that, after giving effect to the Offering, the Company will
be (i) neither insolvent nor rendered insolvent by the incurrence of debt in
connection with the Offering, (ii) in possession of sufficient capital to run
its business effectively and (iii) incurring debts within its ability to pay as
the same mature or become due.
Compliance with Restrictive Covenants
The New Bank Credit Facility imposes financial and other restrictions
on the Company and its subsidiaries, including restrictions on the incurrence of
additional debt, restrictions on investments and limitations on the sale of
assets. The New Bank Credit Facility also requires the Company to maintain and
meet certain financial ratios and tests. There can be no assurance that these
requirements will be met in the future. If they are not, or if other defaults or
events of default occur under the New Bank Credit Facility, (i) all amounts due
thereunder could become immediately due and payable or (ii) the lenders under
the New Bank Credit Facility could be entitled to declare the debt outstanding
thereunder due and payable. Additionally, non-payment of amounts due under the
<PAGE>
Notes, or the occurrence of other defaults or events of defaults under the
Indenture, could constitute defaults or events of default under the New Bank
Credit Facility. See "Description of Old Debt and New Bank Credit Facility" and
"Description of Notes."
Absence of Public Market for the Notes
The Notes will be new securities for which there is currently no
established trading market, and for which none may develop. Although the Old
Notes are, and the Exchange Notes are expected to be, eligible for trading in
The Portal Market, the Company does not intend to list the Notes on any
securities exchange or to arrange for them to be quoted on the Nasdaq National
Market or other quotation system. Each of the Initial Purchasers has indicated
to the Company that it intends to make a market in the Notes, as permitted by
applicable laws and regulations, but none of the Initial Purchasers is under an
obligation to do so; and any such market-making could be discontinued at any
time without notice, at the sole discretion of such Initial Purchaser. The
liquidity of any market for the Notes will depend upon the number of holders of
the Notes, the interest of securities dealers in making a market in the Notes,
and other factors. Accordingly, there can be no assurance as to the development
or liquidity of any market for the Notes.
If the Notes are traded after their initial issuance, they may trade at
a discount from their initial offering price, depending upon prevailing interest
rates, the market for similar securities, general economic conditions, the
performance and financial condition of the Company and certain other factors.
Historically, the market for noninvestment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the Notes. There can be no assurance that the market, if any, for the
Notes will not be subject to similar disruptions. Any disruptions may have an
adverse effect on the holders of the Notes.
Failure to Exchange Old Notes
The Exchange Notes will be issued in exchange for the Old Notes only
after timely receipt by the Exchange Agent of such Old Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Old Notes desiring to tender such Old Notes in
exchange for Exchange Notes should allow sufficient time to ensure timely
delivery. Neither the Exchange Agent nor the Company is under any duty to give
notification of defects or irregularities with respect to tenders of Old Notes
for exchange. Old Notes that are not tendered or are tendered but not accepted
will, following consummation of the Exchange Offer, continue to be subject to
the existing restrictions upon transfer thereof. In addition, any holder of Old
Notes who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. To the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected. See "The Exchange Offer" and "Plan of Distribution."
PRIVATE PLACEMENT
On November 10, 1997, the Company completed the private sale to the
Initial Purchasers of $100,000,000 principal amount of the Old Notes at a price
of 97.4689% of the principal amount thereof in a transaction not registered
under the Securities Act in reliance upon Section 4(2) of the Securities Act.
The Initial Purchasers thereupon offered and resold the Old Notes only to
qualified institutional buyers at an initial price to such purchasers of
99.2050% of the principal amount thereof. The net proceeds of $97.5 million
received by the Company in connection with the sale of the Old Notes, together
with borrowings under the New Bank Credit Facility, were used to repay all the
outstanding debt under the Company's Old Bank Credit Agreement. See "Description
of Old Debt and New Bank Credit Facility."
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange a like
principal amount of Old Notes, the terms of which are identical in all material
respects to the Exchange Notes. The Old Notes surrendered in exchange for the
Exchange Notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the Exchange Notes will not result in any change in capitalization
of the Company.
CAPITALIZATION
The following table sets forth the historical capitalization of the
Company as of August 31, 1997, and as adjusted to give effect to the Exchange
Offer, the Offering, borrowings under the New Bank Credit Facility in connection
with the Offering and the application of the estimated net proceeds therefrom.
This information should be read in conjunction with "Private Placement," "Use of
Proceeds," "Selected Consolidated Financial Information and Certain Operating
Data," "MD&A," "Description of Old Debt and New Bank Credit Facility,"
"Description of Notes" and the Consolidated Financial Statements and related
notes thereto, all included elsewhere in this Prospectus.
As of August 31, 1997
Actual As Adjusted
(In Thousands)
Cash and cash equivalents ................. $ 6,185 $ 3,885(a)
Long-term debt:
Kentucky Development Note .............. $ 186 $ 186
Facility A Term Note ................... 159,633 --
Facility B Term Note ................... 49,087 --
Revolving Note ......................... 23,000 --
New Bank Credit Facility ............... -- 131,720
Notes offered hereby ................... -- 100,000
Total long-term debt ................. 231,906 231,906
Shareholders' equity:
Capital stock:
Class A Common Stock ................. 15,341 15,341
Class B Common Stock ................. 300 300
Additional capital ..................... 78,671 78,671
Retained earnings ...................... 77,292 77,292
Currency translation adjustments ....... (1,129) (1,129)
Cost of capital stock in treasury ...... (33,884) (33,884)
Total shareholders' equity ........... 136,591 136,591
Total capitalization ................. $ 368,497 $ 368,497
(a) The decrease in cash is associated with $2,300 of expenses related to
the Offering and the New Bank Credit Facility.
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
AND CERTAIN OPERATING DATA
The following table presents selected consolidated financial
information and certain operating data for the Company for the periods
indicated. Effective April 8, 1996, the Company acquired for approximately
$235.0 million in cash all the outstanding shares of Guardsman. The acquisition
of Guardsman was recorded using the purchase method and the consolidated
financial statements include the results of operations of Guardsman since the
date of acquisition. The fair value of net assets acquired include approximately
$40.0 million of net working capital, $50.2 million of noncurrent assets, $213.6
million of intangible assets, $28.5 million of long-term debt, and $40.4 million
of noncurrent liabilities. The financial information and operating data is
derived from the Company's audited consolidated financial statements for each of
the fiscal years ended November 30, 1996, 1995, 1994, 1993 and 1992, which were
audited by Ernst & Young LLP, independent auditors. The financial information
and operating data for the twelve months ended August 31, 1997 and the nine
months ended August 31, 1997 and 1996 is derived from the Company's unaudited
financial statements. The results of operations for the nine months ended August
31, 1997 are not necessarily indicative of results to be expected for the
Company's full fiscal year. The following financial information and operating
data should be read in conjunction with "MD&A," the Consolidated Financial
Statements for the years ended November 30, 1996, 1995 and 1994 and for the nine
months ended August 31, 1997 and 1996 and the related notes thereto, and the
other information included elsewhere in this Prospectus or incorporated herein
by reference.
<TABLE>
<CAPTION>
Twelve months Nine months
ended ended
August 31, August 31, Year ended November 30,
1997 1997 1996(a) 1996(a) 1995 1994 1993 1992
(unaudited)
Income Statement: (Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.................... $600,437 $447,302 $355,841 $508,976 $328,345 $331,306 $284,325 $236,476
Cost of products sold........ 372,619 278,989 228,118 321,748 219,899 214,809 189,111 152,480
Selling, general and
administrative
expense................... 139,286 103,701 76,776 112,361 59,874 61,498 53,319 50,128
Research and development
expense................... 18,755 14,008 12,547 17,294 13,184 12,982 12,325 11,030
Restructuring charge (b)..... -- -- 9,607 9,607 -- -- -- --
Operating income............. 69,777 50,604 28,793 47,966 35,388 42,017 29,570 22,838
Interest income and sundry... 326 159 471 638 544 554 294 731
Interest expense............. 20,174 14,781 9,073 14,466 2,158 2,919 1,925 1,662
Income before income taxes... 49,929 35,982 20,191 34,138 33,774 39,652 27,939 21,907
Income taxes................. 22,477 16,192 9,077 15,362 13,510 16,350 11,784 9,201
Net income...................$ 27,452 $ 19,790 $ 11,114 $ 18,776 $ 20,264 $ 23,302 $ 16,155 $ 12,706
Operating income
(excluding restructuring
charge in 1996)...........$ 69,777 $ 50,604 $ 38,400 $ 57,573 $ 35,388 $ 42,017 $ 29,570 $ 22,838
Net income (excluding
restructuring charge
in 1996).................. 27,452 19,790 16,398 24,060 20,264 23,302 16,155 12,706
Net income per share......... 1.18 .85 .48 .81 .88 1.00 .70 .55
Net income per share
(excluding restructuring
charge in 1996)........... 1.18 .85 .71 1.04 .88 1.00 .70 .55
Other Data:
Capital expenditures.........$ 13,418$ 9,618 $ 15,433 $ 19,233 $ 15,599$ 6,693$ 7,598$ 3,262
Depreciation and
amortization.............. 20,088 15,252 10,714 15,550 8,174 8,965 6,887 6,792
EBITDA (excluding
restructuring charge
in 1996) (d).............. 89,865 65,856 49,114 73,123 43,562 50,982 36,457 29,630
Ratio of EBITDA (excluding
restructuring
charge in 1996) to interest
expense (e)............... 4.45x 4.46x 5.41x 5.05x 20.19x 17.47x 18.94x 17.83x
Ratio of earnings to fixed
charges (f)............... 3.14x 3.10x 2.89x 3.03x 13.83x 12.95x 12.15x 10.61x
Ratio of total debt to EBITDA
(excluding restructuring
charge in 1996) (g)....... 2.58x NM NM 3.58x 0.65x 0.69x 1.21x 0.49x
(table and footnotes continued on following page)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
As of
August 31, As of November 30,
1997 1996(a) 1996(a) 1995 1994 1993 1992
(unaudited)
(Dollars in thousands)
Balance Sheet Data
(at period end):
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents........... $ 6,185 $ 9,749$ 6,790 $ 20,260 $ 26,581$ 7,384$ 8,334
Working capital..................... 27,214 66,700 50,579 35,505 41,604 33,270 27,131
Intangible assets (c)............... 248,569 254,419 258,811 47,401 50,978 55,471 26,192
Property and equipment.............. 81,675 80,166 80,582 45,469 35,753 33,776 30,571
Total assets........................ 495,882 508,279 521,860 183,582 190,252 167,044 117,049
Total debt.......................... 231,906 277,200 261,561 28,229 35,110 44,101 14,642
Shareholders' equity................ 136,591 115,887 121,889 109,374 99,424 81,128 70,125
</TABLE>
(a) Includes the results of operations of Guardsman from and after April 8,
1996, the date the acquisition of Guardsman was consummated. See
"Selected Consolidated Financial Information and Certain Operating
Data" and "MD&A--Guardsman Acquisition and Restructuring."
(b) In connection with the acquisition of Guardsman, the Company has
adopted and commenced implementation of plans for the consolidation of
manufacturing facilities. These plans, which include both Company and
Guardsman facilities, will result in the closure of some plants and
workforce reductions totaling approximately 250 employees. Closure
costs consist of facility and equipment valuation adjustments,
inventory disposal costs, dismantling and maintenance costs, and
termination benefits. The primary employee groups affected include
manufacturing, selling, administrative and research and development
personnel. It is anticipated these plans will be completed by the end
of the first half of fiscal 1998, although no assurances to that effect
are given. Costs associated with the planned closure of former Company
facilities and related reductions in workforce are reflected as a
restructuring charge totaling $9.6 million taken in fiscal 1996, which
reduced fiscal 1996 net income by $5.3 million. Costs associated with
the closure of former Guardsman facilities and related reductions in
workforce totaled $9.0 million and were recorded as liabilities in the
opening balance sheet of the combined entity as of the date of the
acquisition of Guardsman.
(c) Includes goodwill.
(d) EBITDA represents operating income plus depreciation and amortization.
EBITDA (excluding restructuring charge in 1996) represents EBITDA plus
the restructuring charge taken in 1996. The Company believes that
EBITDA and EBITDA (excluding restructuring charge in 1996) provide
useful information regarding the Company's ability to service its debt
and other obligations; however, EBITDA and EBITDA (excluding
restructuring charge in 1996) do not represent cash flow from
operations as defined by generally accepted accounting principles and
should not be considered as substitutes for net income as an indicator
of the Company's operating performance or substitutes for cash flow as
a measure of liquidity. The definition of EBITDA differs from the
definition of EBITDA used in the Indenture for the Notes. See "MD&A"
and "Description of Notes--Certain Definitions."
(e) The ratio of EBITDA (excluding restructuring charge in 1996) to
interest expense is determined by dividing EBITDA (excluding
restructuring charge in 1996) by the sum of total interest expense plus
capitalized interest expense.
(f) The ratio of earnings to fixed charges is determined by dividing the
sum of operating income, interest income and sundry, interest expense,
amortization of debt expense, and the interest portion of rent expense
by the sum of interest expense, amortization of debt expense, and the
interest portion of rent expense.
(g) The ratio of total debt to EBITDA (excluding restructuring charge in
1996) is determined by dividing total debt by EBITDA (excluding
restructuring charge in 1996).
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The following discussion should be read in conjunction with "Selected
Consolidated Financial Information and Certain Operating Data" and the Company's
Consolidated Financial Statements and the related notes thereto included
elsewhere in this Prospectus. See "Business" for an overview of the Company's
business and a description of products and services. Also see "Risk Factors" for
discussions of certain factors that may affect the Company's business, financial
condition and results of operations.
Recent Developments
The Company announced on December 1, 1997 that it acquired Merckens
Lackchemie GmbH & Co. Kommanditgesellschaft ("Merckens" or the "Foreign
Company"), located in Eschweiler, Germany, for a purchase price of approximately
$12.0 million. Merckens has less than $20.0 million in annual revenues and
serves non-U.S. customers in the Company's metal and glass coatings markets.
Although the purchase price was financed under the New Bank Credit Facility, the
Company intends to refinance the entire amount with an unsecured credit facility
to be entered into by a foreign Subsidiary of the Company with no credit support
from the Company or its other Subsidiaries.
Guardsman Acquisition and Restructuring
Effective April 8, 1996, the Company acquired the outstanding shares of
Guardsman for $235 million financed under the Old Bank Credit Agreement.
Guardsman's technology and related products were complementary to Lilly's with
little customer overlap. Guardsman was well-known for its technological
strengths in two-component coatings for agricultural and construction equipment,
high solid coatings for major appliances and waterborne coatings for furniture
and kitchen cabinets. The combination of both companies' technologies and
products has materially aided Lilly's expansion into several key strategic
markets.
By the end of fiscal 1997, Lilly expects the combined companies' annual
operating costs to be approximately $25 million less than when the two companies
operated separately, although no assurance can be given that such cost savings
will be realized. These savings result from the elimination of redundant
functions and expenses, including the consolidation of both Lilly and Guardsman
manufacturing facilities and related workforce reductions totaling approximately
250 employees. Consolidation costs consist of facility and equipment valuation
adjustments, inventory disposal costs, dismantling and maintenance costs, and
termination benefits. In conjunction with these consolidation plans, the Company
has closed older plants located in Grand Rapids, Michigan, Tulsa, Oklahoma and
Jamestown, New York, and the Company is in the process of closing a plant in
South Gate, California. The Company expects further facility consolidations to
occur.
The liabilities associated with the closure of former Lilly facilities
and related reductions in workforce were reflected as a restructuring charge
totaling $9.6 million, which reduced net income by $5.3 million in fiscal 1996.
As of August 31, 1997, approximately $2.0 million had been paid or charged
against this reserve leaving a balance of approximately $7.6 million. The
liabilities associated with the closure of former Guardsman facilities and
related reductions in workforce totaled $9.0 million and were recorded as
liabilities in the opening balance sheet of the combined entity as of the date
of the acquisition of Guardsman. As of August 31, 1997, approximately $4.5
million had been paid or charged against this reserve leaving a balance of
approximately $4.5 million. See "Risk Factors--Acquisitions; Restructuring."
Comparison of First Nine Months of Fiscal 1997 With First Nine Months of Fiscal
1996
For the nine month period ended August 31, 1997, net sales were up
25.7% to $447.3 million compared to $355.8 million for the nine month period
ended August 31, 1996. Net income was $19.8 million for the first three fiscal
quarters of 1997 compared with $11.1 million for the comparable period in fiscal
1996, which included a restructuring charge of $9.6 million that reduced net
income by $5.3 million.
<PAGE>
Net sales gains largely reflected Lilly's ownership of Guardsman for
the full nine months of fiscal 1997 compared with five months in fiscal 1996.
Gross profit margin improved to 37.6% for the nine month period ended August 31,
1997 from 35.9% for the comparable period in fiscal 1996 due to efficiencies in
purchasing and manufacturing, as well as a better sales mix, realized through
the Guardsman acquisition and other Company initiatives, offset in part by
start-up costs in fiscal 1996 related to the Company's facilities in Bowling
Green, Kentucky and Charlotte, North Carolina.
Selling, general and administrative expense, research and development
expense and restructuring charge (collectively, "operating expenses") increased
$18.8 million, or 19.0%, to $117.7 million for the nine months ended August 31,
1997 from $98.9 million for the comparable period ended August 31, 1996. This
increase reflected Lilly's ownership of Guardsman for the full nine months of
fiscal 1997 compared with five months in fiscal 1996, and was offset partially
by the absence of the restructuring charges previously discussed which were
recognized in the nine month period ended August 31, 1996. See "--Guardsman
Acquisition and Restructuring."
Interest expense increased $5.7 million, or 63.3%, to $14.8 million for
the nine months ended August 31, 1997 from $9.0 million for the comparable
period ended August 31, 1996 due to the Company's carrying of the Guardsman
acquisition debt for the full nine months of fiscal 1997 compared with five
months in fiscal 1996. The Company's effective tax rate was 45% for both nine
month periods.
Net income increased $8.7 million, or 78.1%, to $19.8 million for the
nine months ended August 31, 1997 from $11.1 million for the comparable period
ended August 31, 1996 due to higher net sales, improved gross profit margins and
the absence of restructuring charges which were recognized in the nine month
period ended August 31, 1996, offset somewhat by increased interest expense.
Comparison of Fiscal Years 1996, 1995 and 1994
Net sales for fiscal year 1996 increased 55.0% to $509.0 million from
$328.3 million in fiscal year 1995. This increase was due to higher volumes
associated with the acquisition of Guardsman, overall volume increases in
Lilly's pre-acquisition business and some selling price increases instituted in
the second half of fiscal 1995. Net sales in fiscal 1995 decreased from fiscal
1994 net sales of $331.3 million. This decrease resulted from lower demand for
liquid coatings due to decreased U.S. manufacturing activity in markets served
by the Company.
Gross profit margins were 36.8%, 33.0% and 35.2% for fiscal 1996, 1995
and 1994, respectively. The improved fiscal 1996 gross margin was due to lower
raw material costs, efficiencies in raw material procurement, and selling price
increases instituted in the second half of fiscal 1995. The decline in the
fiscal 1995 gross margin from fiscal 1994 was due to sharp increases in raw
material prices during the first three quarters of fiscal 1995.
Operating expenses totaled $139.3 million, $73.1 million and $74.5
million in fiscal 1996, 1995 and 1994, respectively. Increases in fiscal 1996
operating expenses were due to the inclusion of Guardsman operations, increased
amortization expense associated with intangibles acquired in the Guardsman
acquisition and the restructuring charge of $9.6 million previously discussed.
Operating expenses decreased in fiscal 1995 compared to fiscal 1994 due to cost
control measures as well as lower business volumes.
Interest expense in fiscal 1996 was $14.5 million compared to $2.2
million in fiscal 1995. The increase resulted from borrowings necessary to fund
the Guardsman acquisition. Interest expense in fiscal 1995 declined from fiscal
1994 interest expense of $2.9 million due to reductions in outstanding
borrowings.
The Company's effective tax rate was 45%, 40% and 41.2% in fiscal 1996,
1995 and 1994, respectively. The increase to 45% in fiscal 1996 is due largely
to non-deductible goodwill associated with the Guardsman acquisition.
<PAGE>
Net income was $18.8 million, $20.3 million and $23.3 million for
fiscal 1996, 1995 and 1994, respectively. The 7.4% decline in fiscal 1996 net
income from fiscal 1995 was due to increased interest expense and the
restructuring charge of $9.6 million as previously discussed, which more than
offset increased net sales and gross profit margins. Excluding the effect of
this restructuring charge, fiscal 1996 net income would have been $24.1 million,
surpassing fiscal 1995 net income of $20.3 million. Net income declined in
fiscal 1995 from fiscal 1994 as a result of increased raw material costs and
decreased demand for liquid coatings.
Liquidity, Capital Resources and Commitments
In fiscal 1996, the Company changed its capital structure by entering
into the Old Bank Credit Agreement which provided funds necessary to complete
the Guardsman acquisition. The Old Bank Credit Agreement provided for $225
million of borrowings under Term Notes and $75 million under a Revolving Note.
Annual principal payments on the Term Notes escalated annually and ranged from
$16.5 million to $39.0 million with final payment due in 2003. Final payment on
the Revolving Note was due in 2002. The Company entered into interest rate swap
agreements to convert the interest rate on a portion of these borrowings to a
fixed rate which averaged approximately 7.5% on a notional amount of $185
million at August 31, 1997. The interest rate for the remaining $46.7 million of
debt not covered by the interest rate swap agreements was based on the prime
rate or LIBOR, as applicable, and was also 7.5% as of August 31, 1997. As of
August 31, 1997, the Company was in compliance with all restrictive covenants
included in the Old Bank Credit Agreement.
The Company used $275 million under the Old Bank Credit Agreement ($225
million in Term Notes and $50 million under the Revolving Note) to fund the
purchase of Guardsman shares, to repay existing debt and to pay acquisition
related expenses. During fiscal 1996, the Company made additional borrowings
under the Revolving Note totaling $35.6 million which were used to fund various
operating needs. The Company reduced the above borrowings by $49.2 million
during fiscal 1996. Total debt at November 30, 1996 of $261.6 million was
reduced to $231.9 million at August 31, 1997. Additional amounts available for
borrowing under the Revolving Note totaled $52.0 million at August 31, 1997.
Over the twelve month period ended August 31, 1997, debt was reduced by
$45.3 million. Lower debt levels were accomplished through improved cash flow
from operating profits, lower working capital and the sale of certain
nonoperating assets.
The Company's fiscal 1996 investing activities included the acquisition
of Guardsman as previously discussed. The Company also invested $19.2 million in
property and equipment. These investments were made to increase capacity,
increase manufacturing efficiencies and improve product quality. Expenditures in
fiscal 1996 included approximately $12.0 million for completion of the Company's
new facility in Bowling Green, Kentucky and for the purchase of a powder
coatings facility in Charlotte, North Carolina. Capital expenditures in fiscal
1997 are expected to be below $15.0 million and are being financed from internal
sources and existing credit facilities. The Company projects capital
expenditures for fiscal 1998 to be approximately $20.0 million.
Cash provided by operations in fiscal 1996 increased to $37.5 million
from $27.2 million in fiscal 1995. The increase was primarily due to the $9.6
million restructuring charge, a $5.2 million increase in amortization expense,
and higher accounts payable, offset by higher levels of accounts receivable and
inventories. Higher levels of accounts receivable, inventories and accounts
payable reflect increased business volumes.
The Company's fiscal 1996 ratio of current assets to current
liabilities was 1.5:1 compared to 1.9:1 for fiscal 1995. The decrease was
predominately due to the restructuring charge and other acquisition liabilities.
The significant increases in deferred income taxes, goodwill and other
noncurrent liabilities on the November 30, 1996 balance sheet were primarily
related to the Guardsman acquisition.
The Company used the net proceeds from the Offering, together with
borrowings under the New Bank Credit Facility in connection with the Offering,
to repay all outstanding debt under the Old Bank Credit Agreement. See "Use of
Proceeds" and "Description of Old Debt and New Bank Credit Facility."
<PAGE>
The Company expects to generate sufficient cash flow from operations,
together with borrowings from the Offering and under the New Bank Credit
Facility, to fund debt service requirements and meet other operating needs for
the foreseeable future. The Company expects to pay down debt principal under the
New Bank Credit Facility with any excess cash flow.
Regulatory Issues
The Company's operations, like those of most companies in the coatings
industry, are subject to regulations related to maintaining or improving the
quality of the environment. Such regulations, along with the Company's internal
compliance efforts, have required and will continue to require significant
capital expenditures. The Company does not anticipate that capital spending for
environmental compliance will be material to its operating results or financial
condition, although there can be no assurance to that effect. The Company has
been notified that it is a PRP for cleanup costs with respect to approximately
17 federal and 7 state Superfund sites previously used by the Company and is
currently remediating contamination at some of its current and former
properties. The Company has established financial reserves in cases where the
amount of environmental expenditures can be reasonably estimated. As
environmental assessments and cleanups proceed and additional information
becomes available, these reserved amounts are reviewed and adjusted, as
necessary. The Company believes that the liabilities associated with these sites
will not have a material adverse effect on its operating results or financial
condition, although there can be no assurance to that effect. See "Risk
Factors--Risk Factors Relating to the Company and its Business--Environmental
Matters" and "Business--Environmental Regulation."
<PAGE>
BUSINESS
Overview
Lilly, founded in 1865, is a leader in the industrial coatings
industry. The Company believes it is one of the five largest industrial coatings
manufacturers in North America and one of the 15 largest in the world based on
net sales of $509.0 million in fiscal 1996. Lilly formulates, produces and sells
coatings to OEMs, enhancing the appearance of and providing durability to
products such as home and office furniture, cabinets, appliances, building
materials, transportation, agricultural and construction equipment, mirrors and
a variety of metal and fiberglass reinforced surfaces. A significant amount of
the Company's sales represent coatings developed in cooperation with its
customers to meet their specific product requirements, resulting in a number of
primary supplier relationships. Lilly also produces and sells household
products, such as fabric protectors, furniture care products and cleaning aids.
Lilly's technical sales force of approximately 600 people markets and
sells its industrial coatings directly to over 6,000 industrial customers
throughout the world. In fiscal 1996, no single customer of the Company
represented more than 5% of net sales. The Company has plants and sales offices
in the U.S., Canada, China, Germany, Ireland, Malaysia, Singapore, Taiwan and
the United Kingdom. Foreign sales have grown to $85.2 million in fiscal 1996
from $28.8 million in fiscal 1992, representing approximately 17% of net sales
in fiscal 1996 versus 12% in fiscal 1992.
With its April 1996 acquisition of Guardsman, Lilly increased its
fiscal 1996 net sales by approximately 55% over fiscal 1995 net sales. The
Guardsman acquisition enhanced Lilly's market position in the industrial
coatings industry by broadening its product lines and customer base, increasing
its presence in the industrial wood and metal coatings segments of the industry,
and providing it with an increasingly important environmentally-friendly
water-borne technology. Lilly also gained a household products business focused
on fabric and stain protection products for household furniture. This business
is characterized by relatively high margins and the potential for new product
development and adds a degree of diversification to the Company's product
offerings.
Lilly focuses on three principal industrial coatings markets: (i) wood
coatings, such as furniture lacquer and protective color; (ii) metal coatings,
such as coil and powder coatings used to finish furniture, appliances and
transportation equipment; and (iii) composites and glass coatings, such as those
used for mirrors. Annual sales for the non-architectural industrial coatings
market, in which Lilly participates, are approximately $25 billion globally and
$8.5 billion domestically. The industrial coatings industry has experienced
stable growth over the past decade, and the Company expects this trend to
continue. The industrial coatings market is highly fragmented and includes many
small competitors that have limited product lines. Furthermore, only a limited
number of non-architectural coatings manufacturers, such as the Company, have
the design and manufacturing capabilities to produce application-specific and
customized coatings products for OEMs. Large competitors, such as the Company,
benefit from a greater diversification of end-use applications and markets,
customers, technology and geography, which reduces the impact of industry or
regional cyclicality, increases bargaining power with suppliers of key raw
materials and permits one-stop shopping for global OEM clients.
Competitive Strengths
The Company believes it benefits from the following competitive
strengths, which have enabled it to increase its penetration of existing
customers and markets, establish new customer relationships, enter new markets,
develop additional products and applications, and realize growth in revenues and
profits:
Solid Market Position; Broad Product Base. Lilly believes it is one of
the top five industrial coatings manufacturers in North America, one of the top
15 worldwide, and that, with the acquisition of Guardsman, it became the largest
supplier to the U.S. residential furniture market, serving virtually all of the
top 25 U.S. furniture manufacturers. The Company's broad product base and its
technological support services enable the Company to maintain strong market
positions in its wood, coil, powder, specialty and glass coatings markets and to
meet a variety of its customers' coatings needs.
<PAGE>
Technological Leadership. The Company is an industry leader in coatings
technology, developing both high quality products and efficient application
processes. The Company's manufacturing facilities provide reliable products that
are backed by responsive technologists. As of August 31, 1997, over 65% of the
Company's manufacturing facilities were ISO-certified, and certification for the
remainder of its manufacturing facilities is planned. Lilly's technology
portfolio includes a number of environmentally-friendly systems that are
becoming increasingly important in the coatings industry. Each of the Company's
six strategic business units has a "Center of Excellence" that is responsible
for coordinating the technology and technical support for its respective product
lines. Lilly provides its customers with on-site education, training and
technical assistance, including extensive application process consulting.
Customers further benefit from the Company's strategically located color and
design centers that provide premier color styling services. The Company has
further enhanced its technological and environmental expertise through selective
hiring and the Guardsman acquisition. See "Business--Products and Markets."
Strong Customer Relationships. The Company's leadership positions
within its markets, reputation for high levels of quality and customer service,
customized products and proven product development skills have allowed it to
secure strong primary supplier relationships across its customer base. The
Company's products are sold to a diversified group of blue chip and middle
market companies including Caterpillar Inc., Deere & Company, Ethan Allen Inc.,
General Electric Company and International Paper Company.
Successful Acquisitions. Over the last five years, the Company has
acquired and successfully integrated four coatings and related businesses, the
largest of which was Guardsman. Through the consolidation of manufacturing and
corporate facilities, workforce reductions and increased purchasing power, Lilly
has achieved significant synergies following these acquisitions. The Company's
ability to successfully manage the acquisitions and integrate other industry
competitors should enable it to further participate in the on-going industry
consolidation. See "MD&A--Guardsman Acquisition and Restructuring" and
"Business--Industry Information."
Experienced Management. The Company's seven executive officers have
over 125 years of combined experience in the coatings industry. The Company
relies on this expertise to identify and meet customer and industry demands and
to create new applications and opportunities in a mature business. The depth of
management's industry knowledge also enables the Company to negotiate lower raw
material prices with the goal of controlling costs and maximizing gross profit
margins. See "Management."
Strategy
Preferred Supplier; Focus on Attractive End Markets. Lilly's goal is to
leverage its leadership position in each of the niche markets it serves (wood
coatings, metal coatings, composites and glass coatings, and household products)
and to expand its position as a preferred supplier in each of these markets. The
Company has established itself as a leader in the industrial coatings industry
segments in which it competes by focusing on coatings technology and customer
service and support. The Company has supplemented internal growth within its
core coatings market segments with a number of acquisitions to extend its market
share and broaden its market participation, technologies and product offerings.
Lilly is investing in new, more efficient plant capacity, with a particular
emphasis on environmentally-friendly market segments. These investments are
expected to provide the Company with incremental capacity in some of the
industrial coatings industry's fastest growing segments, such as coil and powder
coatings. Lilly will also continue to focus on developing value-added new
product offerings for end-use applications in its coatings markets. Management
believes the Company's market leadership positions, technological expertise and
strong customer relationships provide it with advantages in product development
and market penetration of its four core markets.
Cost Savings Opportunities. The Company intends to continue focusing on
reducing its cost structure by (i) managing its working capital, (ii)
consolidating manufacturing operations into lowest-cost plants, (iii) reducing
its number of raw material specifications, (iv) standardizing its products based
on lowest-cost formulations and (v) leveraging larger orders to achieve lower
raw material costs. Recent operating system upgrades, such as the establishment
of additional wide area and local area networks, are expected to result in
additional operating efficiencies.
<PAGE>
Global Expansion. Lilly adheres to a strategy of following, and being
in close proximity to, its customers as they open plants around the world. This
strategy supports the Company's globalization efforts and helps solidify its
relationships with its blue chip customers. In this regard, the Company has
recently opened a plant in Ireland and a new headquarters in Singapore for its
Asia/Pacific operations. In addition, the Company announced on December 1, 1997
that it acquired a German industrial coatings company with annual revenues in
excess of $15 million. See "MD&A--Recent Developments."
Acquisitions of Selective Product Lines. Lilly will continue to
evaluate acquisition opportunities that support its strategic business objective
of becoming the preferred industrial coatings supplier in its markets. To that
end, Lilly looks for acquisitions that would enhance its existing product lines
and provide it with top line growth and potential margin expansion. The Company
believes its industry and acquisition experience helps it properly quantify the
operational, strategic and cost structure advantages it can offer an acquisition
candidate.
Industry Information
Sales for the global paints and coatings market equal approximately $50
billion annually, with annual sales for the domestic market equaling
approximately $17 billion. Annual sales for the industrial coatings segment in
which Lilly participates are approximately $25 billion globally and $8.5 billion
domestically. The architectural coatings segment, in which Lilly does not
participate, consists mainly of house paints and accounts for the majority of
the remainder of the coatings market. Specialty coatings, including maintenance
coatings and traffic paints, round out the market. Lilly's main products are
sold to manufacturers of home and office furniture, cabinets, appliances,
building materials, transportation, agricultural and construction equipment,
mirrors and a variety of metal and fiberglass reinforced surfaces. For this wide
range of applications, coatings are designed for use on wood, metal, plastic,
and glass.
Industrial coatings is a mature industry in the U.S., growing in-line
with industrial production. Long term annual unit growth in the U.S. industrial
coatings business is projected between 1% and 2%, fluctuating in-line with the
economy. Annual unit growth rate is projected between 1% and 2% in Europe and
between 4% and 6% in Asia.
Coatings perform a critical function by protecting a product from
corrosion and the effects of external elements over the life of the product.
Coatings also provide an attractive appearance, which is particularly important
for big-ticket, consumer items such as furniture and appliances. Purchasers of
industrial coatings tend to base their buying decisions more on performance than
on price since the cost of specially designed coatings is generally
insignificant relative to the overall production cost of the end product.
Manufacturers are reluctant to skimp on coatings and risk damage, corrosion, or
poor aesthetics resulting from inferior coatings. Therefore, prices for these
value-added products tend to fluctuate less than non-differentiable commodity
chemicals. Additionally, OEM coatings are often proprietary formulations,
designed with a specific application in mind.
The CAAA requires significant reductions in VOC emissions from the
coatings industry and the end-users of coatings. As a result, the Company and
the coatings industry are attempting to develop water-based coatings, powder
coatings and other forms of environmentally-friendly coatings to replace
commonly-used, solvent-based coatings, which are a major source of regulated
emissions.
Solvent-based coatings are, however, still widely used as a result of
limitations which are still inherent in the application of
environmentally-friendly coatings. For example, while powder coatings can be
used to coat certain metal surfaces through heat-based application methods, the
large size of agricultural and construction equipment make application of powder
coatings impractical. Moreover, certain high-performance industrial coatings
must meet specific product performance criteria as determined by coatings
customers. At present, only solvent-based coatings formulations are satisfactory
for these specialized applications. While in certain circumstances the Company's
customers have installed emissions controls to reduce VOC emissions, such as
large users of coil coatings who have installed incinerators to burn off the
VOCs in the solvent-based coatings they use, the coatings industry typically
looks to the coatings producers to develop environmentally-friendly technology.
As such, successful coatings producers will need to develop alternatives to
solvent-based coatings which satisfy both environmental requirements and the
strict performance criteria of end-users. Coatings manufacturers have also been
required, and will likely continue to be required, to make significant capital
expenditures for pollution control and other equipment that decrease VOC
emissions. There can be no assurance that increasingly stringent environmental
regulations will not be promulgated in the future or that pending regulations
will not be phased-in more quickly, thereby limiting the production of
solvent-based coatings currently manufactured by the Company. See "Risk
Factors--Competition; Mature Industry" and "--Environmental Matters."
<PAGE>
Due to its maturity and historically fragmented customer base, the
coatings industry is becoming increasingly consolidated through mergers and
acquisitions. Despite its $8.5 billion size, the domestic industrial coatings
industry remains split among over 700 participants. The industry appears even
more fragmented when $1.7 billion of automotive OEM coatings, a segment of the
industrial coatings market in which Lilly does not participate, are excluded --
this segment being concentrated among a few large companies serving the
worldwide automotive industry. Consolidation of the coatings industry is being
driven by several factors, including (i) the need for growth in maturing
markets; (ii) environmental costs which, together with a more demanding
globalizing customer base, will make it difficult for smaller manufacturers with
limited financial resources to maintain independence; and (iii) the increasing
technical and financial resources of the larger players. The effects to date of
industry consolidation include a greater concentration of the world market share
held by fewer companies, a reduction in the number of competitors and the
creation of new synergies within the larger coatings companies, such as raw
material purchasing power and manufacturing economies of scale.
Products and Markets
The Company is principally in the business of formulating, producing
and selling industrial coatings to manufacturing companies. The Company operates
through six strategic business units ("SBUs") which target four principal
markets: wood coatings; metal coatings; composites and glass coatings; and
household products. These four markets accounted for approximately 40%, 40%, 10%
and 10% of the Company's fiscal 1996 net sales, respectively. Lilly serves these
markets through multiple domestic and foreign locations. The table below
outlines Lilly's SBUs and the respective markets served, as well as the location
of each SBU's respective research and technical support center.
<TABLE>
<CAPTION>
Center of
SBU Markets Served Excellence*
- --- -------------- ----------
<S> <C> <C>
Wood................................Residential and office furniture; building
products; kitchen cabinets High Point, NC
Specialty...........................Building products; appliances; furniture; office,
transportation, agricultural and construction
equipment; caskets Indianapolis, IN
Coil................................Appliances; building products and fixtures;
office and transportation equipment Bowling Green, KY
Powder..............................Most metal applications (no solvents);
office equipment; appliances; furniture;
construction equipment; underground pipes;
consumer products North Kansas City, MO
Glass...............................Metal concentrates--copper and silver
for mirrors, non-lead coating for mirrors Rocky Hill, CT
Guardsman Products..................Household products, including fabric protectors,
furniture care products and cleaning aids Grand Rapids, MI
</TABLE>
- ---------------
* Each Center of Excellence provides global technology and support for its
respective SBU.
Wood Coatings SBU. Lilly's Wood Coatings SBU provides a full range of
custom-formulated coatings designed to enhance the beauty of wood while
providing maximum durability for products such as residential and office
furniture, building products and kitchen cabinets. The Wood Coatings SBU is
based in the heart of the U.S. furniture market, High Point, North Carolina, and
has six U.S. manufacturing locations, as well as five foreign manufacturing
facilities located in Canada, China, Ireland, Malaysia and Taiwan. Additionally,
design centers are located in key furniture markets domestically as well as in
Canada, China, Honduras, Malaysia and Taiwan. Domestic and international
customers also have the support of an applications laboratory to verify
application capabilities, including spray, reverse roll coat, direct roll coat
and flow coat systems and radiation curing. The design centers and the
applications laboratory facilitate cooperative product development, design and
testing between the Company and its customers, enabling the Company to help its
customers meet their requirements for improved transfer efficiency, protection,
emissions reduction and aesthetics.
<PAGE>
Specialty Coatings SBU. The Company's Specialty Coatings SBU develops
and markets innovative, practical solutions that address specialized coating
requirements in such applications as appliances, agricultural and construction
equipment, furniture, bicycles, digital satellite systems, automotive trim and
wheels, entry and garage doors, computers, window trim, shelving, playground
equipment and golf balls. Additionally, the Specialty Coatings SBU provides
in-mold coatings ("gelcoats") that are used as the surface finish on boats,
recreational vehicles, cultured marble vanity tops, custom van and truck
components and personal watercraft. The Specialty Coatings SBU has ten
manufacturing facilities in the U.S. and two in Canada.
Coil Coatings SBU. Lilly's Coil Coatings SBU offers polyester-based
coil coatings used as a part of the fabrication of, or the protection of,
building products and fixtures (such as residential siding, aluminum gutters,
doors, windows, metal roofing and heating units), appliances and office and
transportation equipment. The coil coatings process is considered one of the
most environmentally safe, energy-efficient methods of applying coatings to
metal substrates. Lilly's technical innovation has produced conventional and
waterborne coil coatings formulated with proprietary resins that provide high
exterior durability, flexibility, corrosion resistance and chemical resistance.
Lilly's Ultra Flexar(R) appliance coating and Nubelar(R) fluoropolymer coatings
are among the highest performing products for their respective applications. The
Coil Coatings SBU has manufacturing facilities located in Kentucky, California,
New Jersey and Canada.
Powder Coatings SBU. The Company's Powder Coatings SBU provides a full
range of decorative and functional powder coating products to satisfy a myriad
of finishing requirements for items including office equipment, appliances,
underground pipelines, store shelving, fixtures, steel reinforcing bars, office
and outdoor furniture, lawn and garden equipment and a variety of consumer
products. Powder coatings are experiencing growth because of their environmental
desirability, as powder coatings have no solvent content. Lilly powder coatings
are environmentally compliant and provide outstanding durability and performance
for both interior and exterior applications. Lilly has earned the reputation as
an innovator in powder coatings technology by offering cost-effective products
that meet customer needs. These innovations include: (i) high-heat resistant
powder coatings; (ii) Hy-Flow(R), a thin film powder technology; and (iii) a
metallic reclaimable powder. The PipeClad(TM) 2000 series is the first
multilayer coating system combining mechanical damage protection and
fusion-bonded epoxy technology. The Powder Coatings SBU has manufacturing
facilities located in North Carolina and Missouri.
Glass Coatings SBU. Lilly's Glass Coatings SBU is recognized globally
as a leader in plating solutions and glass coatings. The Glass Coatings SBU is
dedicated to providing mirror manufacturers with everything needed to convert
glass into mirrors of premier quality. Because a mirror is the combination of
many delicate materials and processes, scientifically engineered coatings are
required to maximize the mirror's durability and performance. The Glass Coatings
SBU provides patented silver and copper plating solutions, as well as low-lead
and lead-free coatings, to meet the environmental and quality performance
standards of mirror manufacturers. Typical products supplied by the Glass
Coatings SBU include glass cleaning and sensitizing materials, silvering and
galvanic coppering systems and coatings for mirror-back protection. Patented new
technology includes high-efficiency silver plating systems, unique Dispro(R)
copper plating systems, and mirror-back coatings that can be applied via roll
coat, curtain coat or spray in either single-coated or double-coated processes.
The Glass Coatings SBU has two domestic manufacturing facilities located in
Connecticut, and foreign manufacturing facilities located in Canada and Germany.
Guardsman Products SBU. The Company's Guardsman Products SBU
manufactures and distributes a wide variety of household products consisting of
four distinct businesses: Interior Care, Consumer Products, Specialty Products
and WoodPro(R). The Interior Care business provides fabric protection and
furniture care products to consumers through furniture stores, and is the
world's largest supplier of retail-applied fabric protection , Fabri-Coate(R).
The Consumer Products business markets several well-known brand name household
specialty items, such as Guardsman(R) Furniture Polish, Goof Off(R) remover,
One-Wipe(R) dust cloth and Chip Clip(R) snack closures. These products are sold
through hardware, home center, paint, mass merchant and grocery retailers. The
Specialty Products business manufactures private-label automotive chemicals such
as brake part cleaner, fuel injector cleaner, and engine oil supplement for
national automotive customers. This division also serves as a private-label
contractor in the chemical packaging market. The WoodPro business is a franchise
group that offers on-site repair and maintenance of wood and upholstered
furnishings for the home or office. The Guardsman Products SBU has two domestic
manufacturing facilities located in Michigan and foreign manufacturing plants
located in Canada and the United Kingdom.
<PAGE>
Acquisitions
Management is experienced in identifying potential acquisitions and
assimilating companies into Lilly. Over the last ten years, Lilly has made
multiple acquisitions to strengthen its core businesses while divesting
businesses inconsistent with its core competencies. Lilly's acquisition
parameters require that a target provide an opportunity for Lilly to bolster its
product technology and customer service capabilities. The table below outlines
Lilly's recent acquisitions.
<TABLE>
<CAPTION>
Acquisition Acquisition
Acquired Company Date Cost(MM) SBU
<S> <C> <C> <C>
Guardsman Products, Inc. 04/08/96 $235.0 Wood Coatings,
Guardsman Products
Glass Coating Unit of PPG Industries,
Inc. 11/30/95 Swap(a) Glass Coatings
Summit Industrial Coating, Inc. 12/01/94 2.0 Specialty Coatings
Liquid Industrial Coatings Business
from Imperial Chemical Industries
Plc/The Glidden Company
("ICI/Glidden") 05/07/93 37.5 Coil, Wood and Specialty
Coatings
Gelcoat Business from ICI/Glidden 07/29/91 2.9 Specialty Coatings
(Gelcoats)
Komac Paint 11/19/90 0.2 Specialty Coatings
Lawrence David, Plastics Division 02/12/90 0.6 Specialty Coatings
(Gelcoats)
Fiberglass Products Group of Elpaco
Coatings Corp. 01/18/90 0.4 Specialty Coatings
(Gelcoats)
Foura Enterprises 10/02/89 0.2 Specialty Coatings
(Gelcoats)
Ram Chemical Div. of Whittaker
Corporation 09/29/89 16.8 Specialty Coatings
(Gelcoats)
Western Specialty Coatings Corp. 07/26/89 0.4 Wood Coatings
- ---------------
</TABLE>
(a) Lilly purchased the Glass Coating unit of PPG Industries, Inc. through a
swap in which Lilly exchanged its automotive refinishing operations in
return for the Glass Coatings unit.
Sales and Marketing
The Company's products are sold into industrial markets through a
technical sales force of approximately 600 people. Some products are also sold
through retail outlets or through distributors. The Company sells its products
to approximately 6,000 different industrial customers. Most of the Company's
customers are located in the United States and Canada, with the remaining
customers concentrated in Asia and Europe. No material part of the Company's
business is dependent on any single customer, or group of customers, the loss of
which would have a material adverse effect on the Company. Over 100 customers
each accounted for $1.0 million or more of the Company's net sales in fiscal
1996, but no single customer accounted for more than 5% of the Company's total
net sales in fiscal 1996.
Through "Programmed Innovation," the Company aims to further its
leadership positions with market-driven new product development. As part of
Programmed Innovation, Lilly's technical service team works closely with its
customers to develop customized formulations that meet the exact specifications
for each customer's process and application. As a result, the Company rarely
sells the same formulations to more than one customer. Formulation modifications
resulting from Programmed Innovation have been a principal method through which
the Company has achieved price and margin increases. In addition to product
innovations, Lilly's research and technical staff focuses on process
optimization to enhance customers' manufacturing throughput quality.
<PAGE>
The Company has no significant order backlog. No material part of the
business is subject to renegotiation of profit or termination of contracts or
subcontracts at the election of any governments. Historically, first quarter
operating results are below operating results for the second, third and fourth
quarters due to the lower demand for industrial production which typically
occurs in December.
Foreign sales represented approximately 17% of the Company's fiscal
1996 net sales. For fiscal 1996, the Company's foreign net sales were $85.2
million and its foreign income before taxes, interest expense and restructuring
charge totaled $16.7 million.
As of November 30, 1996, the book value of the Company's foreign assets equaled
$58.7 million.
Raw Materials
Raw materials represent the largest single expense in the coatings
business, amounting to about half of the selling price of most coatings. The
typical coating consists of a pigment dispersed in a liquid known as a
"vehicle," which is usually composed of either a resin or binder and a solvent.
The solvent helps the compound spread over the coated surface; the resin forms a
film to hold the coating in place after the solvent has evaporated and provides
the unique characteristics of the coating. Solvents are typically
petrochemical-based products that evaporate quickly, while resins consist of
polymers. The pigment, usually an inorganic substance, provides the color.
"Fillers" and "extenders" provide gloss and sheen control, while additives
enhance the properties and spreadability of the coating. Additives have become
more important with the increased use of water-based or high-solids coatings in
place of low-solids, high-solvent coatings. See "--Industry Information."
The Company manufactures its industrial coatings from a variety of
resins, pigments, solvents and other chemicals, the bulk of which are obtained
from petrochemical feed stocks. In addition to petrochemicals, the Company uses
both silver and copper. Under normal conditions, all of these raw materials are
available on the open market, although prices and availability are subject to
fluctuation from time to time. Lilly, like most other companies in the coatings
industry, uses a variety of organic and inorganic materials in its products. No
single raw material expense currently accounts for over 4% of net sales and most
account for 1% of net sales or less.
The Company's largest raw material expense is TiO2, which is used for
white pigment and accounts for 30% of pigment usage in the coatings industry.
The Company's annual TiO2 expenses total approximately 4% of the Company's
annual net sales. See "Risk Factors--Raw Materials."
Research and Development
Research and development expenses were $17.3 million (3.4% of net
sales), $13.2 million (4.0% of net sales) and $13.0 million (3.9% of net sales)
for the fiscal years 1996, 1995 and 1994, respectively. Future research and
development expenses as a percent of net sales are anticipated to remain at
current levels with emphasis on new product development.
Although the Company holds several patents and trademarks and considers
patent and trademark protection to be important, no individual patent is
currently material to the Company's business as a whole. However, the many
patents and licenses for glass coatings are material to those specific products.
Properties
As of August 31, 1997, Lilly had 29 plant locations, of which 21 were
located in the U.S. in the following states: Alabama, Arkansas, California,
Connecticut, Florida, Illinois, Indiana, Kentucky, Michigan, Missouri, New
Jersey, North Carolina, Texas and Washington. Lilly's eight foreign plants are
located in Canada, China, Germany, Ireland, Malaysia, Taiwan, and the United
Kingdom. Of Lilly's 29 plants, 25 are owned, with the remaining being leased.
The plants range in size from approximately 250,000 square feet to approximately
9,000 square feet.
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The facilities vary in age and are well maintained and adequate for
their present uses. Utilization rates vary from site to site depending on
capacity, customers served and range of production capabilities. The Company
believes it can take advantage of special situations (e.g., special orders, new
customers, new technology) that may arise during the course of an operating
cycle by adding capacity through incremental shifts. Each facility operates
technical support centers to assist customers in addressing both application and
processing issues.
Although the Company has traditionally located its domestic plants near
its customer base, the Company has begun to rely on larger, more efficient,
centralized plants in the U.S. With respect to its foreign operations, the
Company continues to adhere to its strategy of following, and being in proximity
to, its customers as they open plants around the world to take advantage of
lower labor costs. In furtherance of this strategy, the Company has recently
opened a plant in Ireland along with a new headquarters in Singapore for its
Asia/Pacific operations. In addition, the Company announced on December 1, 1997
that it acquired a German industrial coatings company with annual revenues in
excess of $15 million. See "MD&A--Recent Developments" and "--Guardsman
Acquisition and Restructuring."
Competition
The industrial coatings industry is very competitive, with more than
700 North American manufacturers competing in numerous market segments.
Manufacturers include large international companies as well as small regional
firms, and no one manufacturer dominates. Competitive advantages include
developing coatings that meet specific customer requirements, pricing coatings
competitively and rapidly delivering quality products. Increasingly,
technological developments that reduce negative environmental effects are
becoming an important competitive factor.
Lilly believes it is one of the top five industrial coatings
manufacturers in North America, one of the top 15 worldwide, and that, with the
acquisition of Guardsman, it became the largest supplier to the U.S. residential
furniture market, serving virtually all of the top 25 U.S. furniture
manufacturers. The Company is also well represented in other wood coatings,
industrial metal finishes, coil and powder coatings and mirror glass coatings
markets. While Lilly believes it is among the top five North American producers
of industrial coatings, its competitors are generally more diversified and have
far greater financial resources than the Company. Major competitors include Akzo
Nobel; Ferro Corporation; Morton International, Inc.; The Sherwin-Williams
Company; PPG Industries, Inc.; and The Valspar Corporation.
Employees
As of August 31, 1997, Lilly employed approximately 2,100 individuals.
The coatings industry is not heavily unionized and to the extent that there is
unionization, it is highly fragmented. Unionized workers account for
approximately 14% of the Company's total work force and operate through unions
at seven Lilly facilities. The Company believes that its relations with its
employees are good.
Environmental Regulation
The Company's operations are subject to numerous foreign, federal,
state and local environmental laws and regulations relating to protection of the
environment, employee health and safety, and the discharge, storage, treatment
and disposal of hazardous materials. In the United States, these laws include
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA" or "Superfund"), the Resource Conservation and Recovery Act, the Clean
Water Act and the Clean Air Act. Certain operations of the Company use pigments,
resins and solvents that contain chemicals that are considered hazardous under
various environmental laws. Accordingly, management closely monitors the
Company's environmental performance at its facilities. Management believes that
the Company is in compliance in material respects with all environmental laws
and regulations.
<PAGE>
CERCLA imposes joint and several liability, without regard to fault or
the legality of the original conduct, on certain classes of persons that are
considered to have contributed to the release of hazardous substances into the
environment. These persons include the owner and operator of the disposal site
where the release occurred and companies that disposed or arranged for disposal
of the hazardous substances found at the site. The Company is currently a PRP at
approximately 17 federal and 7 state Superfund sites. Generally, where there are
a number of financially viable PRPs, liability at these sites has been
apportioned, or the Company believes, based on its experience with such matters,
that liability will be apportioned, based on the type and amount of waste
disposed of by each PRP at such disposal site and the number of financially
viable PRPs, although no assurance can be given as to any particular site.
In addition to the Superfund sites, the Company is currently
investigating and remediating on-site disposal areas at certain of its current
and former facilities. There can be no assurance that the Company has identified
all on-site remediation matters for its current or former facilities or that the
cost of such known or unknown remediation matters, including Superfund
liabilities, will not be material. The Company has established financial
reserves in cases where the amount of environmental expenditures can be
reasonably estimated. As assessments and cleanups proceed, and as additional
information becomes available, these reserved amounts are reviewed and adjusted,
as necessary. There can be no assurance, however, that the actual costs of
remediation will not eventually materially exceed the amount presently accrued.
Under the CAAA, the Environmental Protection Agency ("EPA") is required
to regulate VOC emissions from a variety of consumer and commercial products,
including coatings. Accordingly, in June 1996, the EPA proposed regulations that
would limit VOCs from architectural and industrial maintenance coatings. The EPA
does not expect to issue these regulations in final form until sometime in 1998.
In July 1997, the EPA issued regulations establishing new national ambient air
quality standards to ozone. These regulations are the subject of numerous
industry lawsuits. In addition, the EPA may promulgate additional regulations to
address recommendations of the Ozone Transport Assessment Group which would
reduce VOC emissions in certain states that contribute pollution to downwind
states. The CAAA directs the EPA to promulgate stringent standards applicable to
hazardous air pollutant emissions from the coatings industries, including Lilly,
by November 2000. Although the Company cannot accurately assess the impact of
these regulations prior to their promulgation or implementation in final form,
based on currently available information, the Company believes that these
regulations will not have a material adverse effect on the operating results or
the financial condition of the Company as a whole. There can be no assurance,
however, that compliance with these existing and future regulations will not
require the installation of pollution control equipment, significant capital
expenditures, or increased operating expenses, or that such compliance will not
significantly curtail the production or use of the Company's many solvent-based
coatings. See "--Industry Information" and "Risk Factors--Competition; Mature
Industry" and "--Environmental Matters."
Legal Proceedings
The Company is a party to various litigation matters incidental to the
conduct of its business. Although there can be no assurance, the Company does
not believe that the outcome of any of the matters in which it is currently
involved will have a material adverse effect on its financial condition or
results of operations.
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth the names, ages and titles of the
directors and executive officers of the Company.
Name Age Position
Douglas W. Huemme 56 Chairman of the Board, President and
Chief Executive Officer
Robert A. Taylor 43 Executive Vice President, Chief Operating
Officer and Director
William C. Dorris 54 Vice President--Corporate Development
and Director
John C. Elbin 44 Vice President, Chief Financial Officer and
Secretary
Larry H. Dalton 50 Vice President--Manufacturing and
Engineering
A. Barry Melnkovic 40 Vice President--Human Resources
Kenneth L. Mills 49 Corporate Accounting Director and
Assistant Secretary
James M. Cornelius 53 Director
Paul K. Gaston 63 Director
Harry Morrison, Ph.D. 60 Director
Norma J. Oman 50 Director
John D. Peterson 64 Director
Thomas E. Reilly, Jr. 57 Director
Van P. Smith 69 Director
The following biographies describe the business experience of the
directors and executive officers of the Company.
Douglas W. Huemme has been a director of the Company since 1990. Mr.
Huemme has been Chairman, President and Chief Executive Officer of the Company
since 1991 and President and Chief Operating Officer of the Company from 1990 to
1991. He is also a director of First Indiana Corporation and The Somerset Group,
Inc.
Robert A. Taylor has been a director of the Company since April, 1997.
Mr. Taylor has been Executive Vice President and Chief Operating Officer of the
Company since February, 1997. He was Vice President and General Manager--Wood
Coatings of the Company from 1994 to 1997. He was Vice President-Specialty and
Container Coatings of AKZO Coatings, Inc. from 1992 to 1994 and Managing
Director-Southeast Asia of AKZO Coatings, Inc. from 1990 to 1992.
William C. Dorris has been a director of the Company since 1989. He has
been Vice President-Corporate Development of the Company since 1994. He was
General Manager of the Company's High Point Division from 1986 to 1994, of the
Company's Templeton Division from 1991 to 1994, and of the Company's Dallas
Division from 1993 to 1994.
John C. Elbin has been Vice President, Chief Financial Officer and
Secretary of the Company since April, 1997. Mr. Elbin was Senior Vice President
and Chief Financial Officer of Pet Incorporated, a New York Stock Exchange
packaged food company, from 1990 to 1995.
Larry H. Dalton has been Vice President-Manufacturing and Engineering
of the Company since July, 1994. Mr. Dalton was General Manager of the Company's
Indianapolis Division from 1989 to 1994.
A. Barry Melnkovic has been Vice President-Human Resources of the
Company since April, 1996. Mr. Melnkovic was Director--Corporate Employee &
Labor Relations and Director--Corporate Compensation and Benefits of Cummins
Engine Company, Inc. from August, 1993 to February, 1996. He was Division Human
Resource Manager of Ashland Chemical, Inc. from 1990 to 1993.
Kenneth L. Mills has been Assistant Secretary of the Company since 1983
and Corporate Accounting Director of the Company since October, 1993. Mr. Mills
was Treasurer of the Company from 1983 to 1993.
<PAGE>
James M. Cornelius has been a director of the Company since 1996. Mr.
Cornelius has been Chairman of the Board of Directors of Guidant Corporation
since 1994. He was Vice President of Finance and Chief Financial Officer of Eli
Lilly and Company from prior to 1991 to 1995. He is also a director of American
United Life Insurance Company and the National Bank of Indianapolis.
Paul K. Gaston has been a director of the Company since 1996. Mr.
Gaston has been a consultant since 1996. He was Chairman of Guardsman Products,
Inc. from 1994 to 1996. He was a partner of Warner, Norcross and Judd LLP,
attorneys, from 1965 to 1993 and Managing Partner of Warner, Norcross and Judd
LLP from 1988 to 1992. He is also a director of Kysor Industrial Corporation.
Harry Morrison, Ph.D. has been a director of the Company since 1995.
Dr. Morrison has been Dean of the School of Science of Purdue University since
1992. He was Head of the Chemistry Department of Purdue University from prior to
1992 to 1992 and a chemical consultant for Great Lakes Chemical Corporation
(1991 to 1993) and American Cyanamid (1993).
Norma J. Oman has been a director of the Company since April, 1997.
Mrs. Oman has been President and Chief Executive Officer of Meridian Mutual
Insurance Company and Meridian Insurance Group, Inc. since 1991. She is also a
director of Meridian Mutual Insurance Company, Meridian Insurance Group, Inc.
and Bank One, Indianapolis N. A.
John D. Peterson has been a director of the Company since 1964. Mr.
Peterson has been Chairman of City Securities Corporation, a securities dealer,
since prior to 1990. He is also a director of Duke Realty Investments, Inc. and
Capital Industries, Inc.
Thomas E. Reilly, Jr. has been a director of the Company since 1981.
Mr. Reilly has been Chairman and Chief Executive Officer of Reilly Industries,
Inc., a diversified chemical manufacturing firm, since 1990. He is also a
director of First Chicago NBD Corporation.
Van P. Smith has been a director of the Company since 1985. Mr. Smith
has been Chairman of Ontario Corporation, Muncie, Indiana, a manufacturing and
service company providing a variety of products and services to the
semiconductor, testing laboratory and computer software industries, since prior
to 1990. He is also a director of CINergy Corporation, PSI Energy, Inc.,
Meridian Mutual Insurance Company and Meridian Insurance Group, Inc.
Certain Transactions and Relationships
As of August 31, 1997, the Company had outstanding borrowings of
approximately $231.7 million under the Old Bank Credit Agreement with NBD Bank,
N.A., as agent and lender. In connection with the consummation of the Offering,
the Company entered into the New Bank Credit Facility with NBD Bank, N.A., as
agent and lender, whereby NBD Bank, N.A. has made available to the Company an
unsecured $175.0 million revolving credit facility. The net proceeds from the
Offering, together with borrowings under the New Bank Credit Facility, were used
to repay the outstanding borrowings under the Old Bank Credit Agreement. Thomas
E. Reilly, Jr., a director of the Company, is also a director of First Chicago
NBD Corporation, the parent corporation of NBD Bank, N.A. See "Private
Placement," "Use of Proceeds" and "Description of Old Debt and New Bank Credit
Facility."
DESCRIPTION OF OLD DEBT AND NEW BANK CREDIT FACILITY
Old Bank Credit Agreement
In April, 1996, the Company entered into a $300 million credit
agreement (the "Old Bank Credit Agreement") with a group of financial
institutions led by NBD Bank, N.A., as agent and lender, to finance the
acquisition of Guardsman, to repay existing debt and for general corporate
purposes. The Old Bank Credit Agreement provided for up to $175 million and $50
million of borrowings under term notes (the "Facility A Term Notes" and the
"Facility B Term Notes," respectively, and collectively, the "Term Notes") and
up to $75 million of borrowings under a revolving note (the "Revolving Note").
As of August 31, 1997, $159.6 million, $49.1 million and $23.0 million were
outstanding under the Facility A Term Note, the Facility B Term Note and the
<PAGE>
Revolving Note, respectively. The outstanding principal of the Term Notes was
due in quarterly payments which escalated annually with final payment due
November 30, 2003. Interest on the Term Notes was payable quarterly. The
outstanding principal of the Revolving Note was due May 31, 2002 and interest
was due quarterly. Amounts available under the Revolving Note were limited to a
borrowing base, as defined in the Old Bank Credit Agreement. The Term Notes and
Revolving Note bore interest, at the Company's option, at (i) the higher of the
agent bank's prime rate or the Federal Funds rate plus 50 basis points, or (ii)
the London Interbank Offered Rate ("LIBOR") plus 50 to 225 basis points
depending on the Company's Leverage Ratio (as defined in the Old Bank Credit
Agreement). A commitment fee, ranging from 25 basis points to 50 basis points,
was payable on the unused portion of the Revolving Note. Borrowings under the
Old Bank Credit Agreement were secured by substantially all the assets of the
Company and its subsidiaries. The Company may have voluntarily prepaid all or
any portion of the balance outstanding under the Old Bank Credit Agreement at
any time, without penalty, except that a prepayment premium would have applied
if a LIBOR loan were prepaid on a date other than the end of the interest period
specified for such loan.
New Bank Credit Facility
General. The Company has entered into a Credit Agreement, dated as of
October 24, 1997, among a group of commercial bank lenders (the "Lenders") and
NBD Bank, N.A., as agent for the Lenders (the "New Credit Agreement"), with
respect to the New Bank Credit Facility. The following summary of the principal
terms of the New Bank Credit Facility does not purport to be complete and is
qualified in its entirety by reference to the provisions of the New Credit
Agreement and other related documents.
Pursuant to the New Credit Agreement, NBD Bank, N.A., as agent (the
"Agent"), has agreed to make available to the Company for a five-year period an
unsecured $175.0 million revolving credit facility (the "New Bank Credit
Facility"), of which (i) $10.0 million will be available for the issuance of
standby letters of credit ("L/Cs") and (ii) $15.0 million will be available, in
the sole discretion of the Agent, for swingline loans. Borrowings of $133.0
million under the New Bank Credit Facility were used, together with the net
proceeds of the Offering, to repay the Term Notes and Revolving Note outstanding
under the Old Bank Credit Agreement. In addition, borrowings under the New Bank
Credit Facility approximating $12.0 million were used to finance the acquisition
of Merckens; however, the Company intends to refinance the entire amount of the
Merckens acquisition debt with an unsecured credit facility to be entered into
by a foreign Subsidiary of the Company with no credit support from the Company
or its other Subsidiaries. Additional borrowings under the New Bank Credit
Facility may be used to fund working capital and other general corporate
purposes for the Company and its subsidiaries, including permitted acquisitions
and investments. The New Bank Credit Facility is not secured and is not
guaranteed by the subsidiaries of the Company.
Interest Rate and Fees. Interest payable on loans made under the New
Bank Credit Facility may be fixed at the Company's option at either (i) a
fluctuating Base Rate (defined below) or (ii) the Eurodollar Rate (defined
below) plus the Applicable Margin (defined below); provided, however, that
swingline loans will only bear interest at the Base Rate. The "Base Rate" to be
in effect from time to time will be equal to the greater of (x) the then
effective prime rate of interest as announced by the Agent or (y) the Federal
Funds rate plus 50 basis points. The "Eurodollar Rate" equals the average of the
rates offered by the Lenders in the London Interbank Market for deposits in
similar amounts and with similar maturities as such Lenders' portion of the New
Bank Credit Facility. The "Applicable Margin" ranges from 40 basis points to 100
basis points based on the Company's ratio of total debt to EBITDA (as defined in
the Commitment Letter) (the "Leverage Ratio").
A commitment fee, ranging from 15 basis points to 25 basis points (as
determined by reference to the Company's Leverage Ratio) of the average daily
unused portion of the New Bank Credit Facility, will be payable quarterly in
arrears by the Company until termination of the New Bank Credit Facility.
Swingline loans will not constitute usage for purposes of calculating the
commitment fee. In addition, in connection with each L/C issued under the New
Bank Credit Facility, a fee at the rate of the Applicable Margin on the undrawn
stated amount of each L/C will be payable quarterly in arrears by the Company.
The Company has also paid a customary up-front fee upon entering into the New
Credit Agreement.
<PAGE>
Certain Covenants. The New Credit Agreement governing the New Bank
Credit Facility contains customary financial and other restrictive covenants
that, among other things, limit the ability of the Company (subject to customary
and negotiated exceptions) to (i) incur additional liens or encumbrances, (ii)
incur additional debt over $130.0 million (increasing to $150.0 million on May
31, 1999), of which the Notes will initially account for $100.0 million of such
additional debt, (iii) make investments and acquisitions in excess of $50.0
million, (iv) prepay debt, including the Notes, (v) engage in certain affiliate
transactions, (vi) make certain asset dispositions, and (vii) participate in
certain mergers or consolidations.
Prepayments. The Company may voluntarily prepay all or any portion of
the balance outstanding under the New Bank Credit Facility at any time, without
penalty, except that a prepayment premium would apply if a Eurodollar loan were
prepaid on a date other than the end of the interest period specified for such
loan. The New Bank Credit Facility does not contain any mandatory prepayment
provisions.
Voluntary Commitment Reductions. The New Bank Credit Facility's $175.0
million commitment may be reduced by the Company in multiples of $5.0 million at
any time without penalty.
Events of Default. Events of default under the New Bank Credit Facility
include, among other things, (i) nonpayment of any amounts due under the New
Bank Credit Facility, (ii) nonpayment of principal or interest due under, or any
other default under, any other debt of the Company or any of its subsidiaries in
an aggregate principal amount in excess of $10.0 million (including the Notes),
(iii) the occurrence of a Change in Control (as defined), (iv) certain events of
bankruptcy or insolvency, and (v) the occurrence of one or more material
judgments against the Company and its subsidiaries. Change in Control means (a)
the acquisition by any person or entity, or two or more persons or entities
acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of
the Commission under the Exchange Act) of 331/3% or more of the outstanding
shares of Class A Stock or (b) the occurrence, during any period of twelve
consecutive months, commencing before or after the date of the New Credit
Agreement, of individuals who on the first day of such period were directors of
the Company (together with any replacement or additional directors who were
nominated or elected by a majority of directors then in office) ceasing to
constitute a majority of the Board of Directors of the Company.
THE EXCHANGE OFFER
General
In connection with the sale of the Old Notes, the purchasers thereof
became entitled to the benefits of certain registration rights under the
Registration Rights Agreement. The Exchange Notes are being offered hereunder in
order to satisfy the obligations of the Company under the Registration Rights
Agreement. See "Exchange Offer; Registration Rights."
For each $1,000 principal amount of Old Notes surrendered to the
Company pursuant to the Exchange Offer, the holder of such Old Notes will
receive $1,000 principal amount of Exchange Notes. Upon the terms and subject to
the conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal, the Company will accept all Old Notes properly tendered prior to
5:00 p.m., New York City time, on the Expiration Date. Holders may tender some
or all of their Old Notes pursuant to the Exchange Offer in integral multiples
of $1,000 principal amount.
Under existing interpretations of the staff of the SEC, including Exxon
Capital Holdings Corporation, SEC No-Action Letter (available April 13, 1988),
the Morgan Stanley Letter and Mary Kay Cosmetics, Inc., SEC No-Action Letter
(available June 5, 1991), the Company believes that the Exchange Notes would in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act by the respective holders thereof (other
than a "Restricted Holder," being (i) a broker-dealer who purchased Old Notes
exchanged for such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an affiliate of the Company within the meaning of Rule 405 under
the Securities Act), without compliance with the registration and prospectus
<PAGE>
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and such holder is not
participating in, and has no arrangement with any person to participate in, the
distribution (within the meaning of the Securities Act) of such Exchange Notes.
Eligible holders wishing to accept the Exchange Offer must represent to the
Company that such conditions have been met. Any holder of Old Notes who tenders
in the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes could not rely on the interpretation by the staff of the SEC
enunciated in the Morgan Stanley Letter and similar no-action letters, and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations,
including that (i) it is neither an affiliate of the Company nor a broker-dealer
tendering Old Notes acquired directly from the Company for its own account, (ii)
any Exchange Notes to be received by it are being acquired in the ordinary
course of its business, and (iii) it is not participating in, and it has no
arrangement with any person to participate in, the distribution (within the
meaning of the Securities Act) of the Exchange Notes. Each broker-dealer (a
"Participating Broker-Dealer") that receives Exchange Notes for its own account
in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution." The staff of
the SEC has taken the position in no-action letters issued to third parties
including Shearman & Sterling, SEC No-Action Letter (available July 2, 1993),
that Participating Broker-Dealers may fulfill their prospectus delivery
requirements with respect to the Exchange Notes (other than a resale of an
unsold allotment from the original sale of Old Notes) with this Prospectus, as
it may be amended or supplemented from time to time. Under the Registration
Rights Agreement, the Company is required to allow Participating Broker-Dealers
to use this Prospectus, as it may be amended or supplemented from time to time,
in connection with the resale of such Exchange Notes. See "Plan of
Distribution."
The Exchange Offer shall be deemed to have been consummated upon the
earlier to occur of (i) the Company having exchanged Exchange Notes for all
outstanding Old Notes (other than Old Notes held by a Restricted Holder)
pursuant to the Exchange Offer and (ii) the Company having exchanged, pursuant
to the Exchange Offer, Exchange Notes for all Old Notes that have been tendered
and not withdrawn on the date that is 30 days following the commencement of the
Exchange Offer. In such event, holders of Old Notes seeking liquidity in their
investment would have to rely on exemptions to registration requirements under
the securities laws, including the Securities Act.
As of the date of this Prospectus, $100,000,000 aggregate principal
amount of Old Notes are issued and outstanding. In connection with the issuance
of the Old Notes, the Company arranged for the Old Notes to be eligible for
trading in The Portal Market, the National Association of Securities Dealers'
screen-based, automated market for trading of securities eligible for resale
under Rule 144A.
The Company shall be deemed to have accepted for exchange validly
tendered Old Notes when, as and if the Company has given oral or written notice
thereof to the Exchange Agent. See "--Exchange Agent." The Exchange Agent will
act as agent for the tendering holders of Old Notes for the purpose of receiving
Exchange Notes from the Company and delivering Exchange Notes to such holders.
If any tendered Old Notes are not accepted for exchange because of an invalid
tender or the occurrence of certain other events set forth herein, certificates
for any such unaccepted Old Notes will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders of Old Notes who tender in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"--Fees and Expenses."
<PAGE>
This Prospectus, together with the accompanying Letter of Transmittal,
is being sent to all registered holders as of the date of this Prospectus.
Expiration Date; Extensions; Amendments
The term "Expiration Date" shall mean _______________, 1998 unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date to which the Exchange Offer is
extended. In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time. The Company reserves the right
(i) to delay acceptance of any Old Notes, to extend the Exchange Offer or to
terminate the Exchange Offer and to refuse to accept Old Notes not previously
accepted, if any of the conditions set forth herein under "--Termination" shall
have occurred and shall not have been waived by the Company (if permitted to be
waived by the Company), by giving oral or written notice of such delay,
extension or termination to the Exchange Agent, and (ii) to amend the terms of
the Exchange Offer in any manner deemed by it to be advantageous to the holders
of the Old Notes. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof. If the Exchange Offer is amended in a manner determined by the Company
to constitute a material change, the Company will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of the Old
Notes of such amendment. Without limiting the manner in which the Company may
choose to make public announcements of any delay in acceptance, extension,
termination or amendment of the Exchange Offer, the Company shall have no
obligation to publish, advertise, or otherwise communicate any such public
announcement, other than by making a timely release to the Dow Jones News
Service.
Interest on the Exchange Notes
The Notes will bear interest payable semi-annually on June 1 and
December 1 of each year, commencing December 1, 1997. Holders of Exchange Notes
of record on May 15, 1998 will receive interest on June 1, 1998 from the date of
issuance of the Exchange Notes, plus an amount equal to the accrued interest on
the Old Notes from the last interest payment date of the Old Notes, December 1,
1997, to the date of exchange thereof. Consequently, assuming the Exchange Offer
is consummated prior to the record date in respect of the June 1, 1998 interest
payment for the Old Notes, holders who exchange their Old Notes for Exchange
Notes will receive the same interest payment on June 1, 1998 that they would
have received had they not accepted the Exchange Offer. Interest on the Old
Notes accepted for exchange will cease to accrue upon issuance of the Exchange
Notes.
Procedures for Tendering
To tender in the Exchange Offer, a holder must complete, sign and date
the Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, or an Agent's Message,
together with the Old Notes and any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date. In
addition, either (i) the certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if such procedure is available, into the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent along with an Agent's Message prior to the Expiration Date, or
(iii) the Holder must comply with the guaranteed delivery procedures described
below. The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal. Delivery of all
documents must be made to the Exchange Agent at its address set forth herein.
Holders may also request that their respective brokers, dealers, commercial
banks, trust companies or nominees effect such tender for such holders.
<PAGE>
The term "Agent's Message" means a message, transmitted by the
Book-Entry Transfer Facility to, and received by, the Exchange Agent and forming
a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer
Facility has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering Old Notes which are the subject of such
Book-Entry Confirmation that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal, and that the Company may
enforce such agreement against such participant.
The method of delivery of Old Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the holders. Instead of delivery by mail, it is recommended that holders use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. No Letter of Transmittal or Old Notes should
be sent to the Company. Only a holder of Old Notes may tender such Old Notes in
the Exchange Offer. The term "holder" with respect to the Exchange Offer means
any person in whose name Old Notes are registered on the books of the Company or
any other person who has obtained a properly completed stock power from the
registered holder.
Any beneficial holder whose Old Notes are registered in the name of
such holder's broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender should contact such registered holder promptly and
instruct such registered holder to tender on behalf of the beneficial holder. If
such beneficial holder wishes to tender directly, such beneficial holder must,
prior to completing and executing the Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such holder's name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take considerable time.
If the Letter of Transmittal is signed by the record holder(s) of the Old Notes
tendered thereby, the signature must correspond with the name(s) written on the
face of the Old Notes without alteration, enlargement or any change whatsoever.
If the Letter of Transmittal is signed by a participant in The Depositary Trust
Company (the "DTC"), the signature must correspond with the name as it appears
on the security position listing as the holder of the Old Notes. Signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, must be
guaranteed by a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution") unless the Old Notes tendered pursuant thereto are
tendered (i) by a registered holder (or by a participant in the DTC whose name
appears on a security position listing as the owner) who has not completed the
box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on the Letter of Transmittal and the Exchange Notes are being issued directly to
such registered holder (or deposited into the participant's account at the DTC)
or (ii) for the account of an Eligible Institution. If the Letter of Transmittal
is signed by a person other than the registered holder of any Old Notes listed
therein, such Old Notes must be endorsed or accompanied by appropriate bond
powers which authorize such person to tender the Old Notes on behalf of the
registered holder, in either case signed as the name of the registered holder or
holders appears on the Old Notes. If the Letter of Transmittal or any Old Notes
or bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with the Letter of Transmittal.
A tender will be deemed to have been received as of the date when the
tendering holder's duly signed Letter of Transmittal accompanied by Old Notes
(or a timely confirmation received of a book-entry transfer of Old Notes into
the Exchange Agent's account at the DTC with an Agent's Message) or a Notice of
Guaranteed Delivery from an Eligible Institution is received by the Exchange
Agent. Issuances of Exchange Notes in exchange for Old Notes tendered pursuant
to a Notice of Guaranteed Delivery by an Eligible Institution will be made only
against delivery of the Letter of Transmittal (and any other required documents)
and the tendered Old Notes (or a timely confirmation received of a book-entry
transfer of Old Notes into the Exchange Agent's account at the DTC with an
Agent's Message) with the Exchange Agent.
<PAGE>
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any conditions of the Exchange Offer or
defects or irregularities in tender as to particular Old Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Notes nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost by
the Exchange Agent to the tendering holder of such Old Notes unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date. In addition, the Company reserves the right in its sole
discretion to (i) purchase or make offers for any Old Notes that remain
outstanding subsequent to the Expiration Date, or, as set forth under
"--Termination," to terminate the Exchange Offer, and (ii) to the extent
permitted by applicable law, purchase Old Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
may differ from the terms of the Exchange Offer.
Book-Entry Transfer
The Exchange Agent will establish an account with respect to the Old
Notes at the DTC within two business days after the date of this Prospectus, and
any financial institution which is a participant in the DTC may make book-entry
delivery of the Old Notes by causing the DTC to transfer such Old Notes into the
Exchange, Agent's account in accordance with the DTC's procedure for such
transfer. Although delivery of Old Notes may be effected through book-entry
transfer into the Exchange Agent's account at the DTC, an Agent's Message must
be transmitted to and received by the Exchange Agent on or prior to the
Expiration Date at one of its addresses set forth below under "--Exchange
Agent," or the guaranteed delivery procedure described below must be complied
with. DELIVERY OF DOCUMENTS TO THE DTC DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT. All references in this Prospectus to deposit or delivery of Old
Notes shall be deemed to include the DTC's book-entry delivery method.
Guaranteed Delivery Procedures
Holders who wish to tender their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or who cannot complete the procedure for book-entry transfer on
a timely basis and deliver an Agent's Message, may effect a tender if: (i) the
tender is made by or through an Eligible Institution; (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder of the Old Notes, the registration number or numbers of such Old Notes
(if applicable), and the total principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three
business days after the Expiration Date, the Letter of Transmittal, together
with the Old Notes in proper form for transfer (or a confirmation of a
book-entry transfer into the Exchange Agent's account at the DTC with an Agent's
Message) and any other documents required by the Letter of Transmittal, will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) such
properly completed and executed Letter of Transmittal, together with the
certificate(s) representing all tendered Old Notes in proper form for transfer
(or a confirmation of such a book-entry transfer) and all other documents
required by the Letter of Transmittal are received by the Exchange Agent within
three business days after the Expiration Date.
<PAGE>
Terms and Conditions of the Letter of Transmittal
The Letter of Transmittal contains, among other things, certain terms
and conditions which are summarized below and are part of the Exchange Offer.
Each holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that such holder is not participating in, and
has no arrangement with any person to participate in, the distribution (within
the meaning of the Securities Act) of the Exchange Notes, and that such holder
is not a Restricted Holder.
Old Notes tendered in exchange for Exchange Notes (or a timely
confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at the DTC) must be received by the Exchange Agent, with the
Letter of Transmittal or an Agent's Message and any other required documents, by
the Expiration Date or within the time periods set forth above pursuant to a
Notice of Guaranteed Delivery from an Eligible Institution. Each holder
tendering the Old Notes for exchange sells, assigns and transfers the Old Notes
to the Exchange Agent, as agent of the Company, and irrevocably constitutes and
appoints the Exchange Agent as the holder's agent and attorney-in-fact to cause
the Old Notes to be transferred and exchanged. The holder warrants that it has
full power and authority to tender, exchange, sell, assign and transfer the Old
Notes and to acquire the Exchange Notes issuable upon the exchange of such
tendered Old Notes, that the Exchange Agent, as agent of the Company, will
acquire good and unencumbered title to the tendered Old Notes, free and clear of
all liens, restrictions, charges and encumbrances, and that the Old Notes
tendered for exchange are not subject to any adverse claims when accepted by the
Exchange Agent, as agent of the Company. The holder also warrants and agrees
that it will, upon request, execute and deliver any additional documents deemed
by the Company or the Exchange Agent to be necessary or desirable to complete
the exchange, sale, assignment and transfer of the Old Notes. All authority
conferred or agreed to be conferred in the Letter of Transmittal by the holder
will survive the death, incapacity or dissolution of the holder and any
obligation of the holder shall be binding upon the heirs, personal
representatives, successors and assigns of such holder.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the business
day prior to the Expiration Date, unless previously accepted for exchange. To
withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile
transmission notice of withdrawal must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the business
day prior to the Expiration Date and prior to acceptance for exchange thereof by
the Company. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including, if applicable, the
registration number or numbers and total principal amount of such Old Notes),
(iii) be signed by the Depositor in the same manner as the original signature on
the Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to permit the Trustee (as defined) with respect to the Old Notes to
register the transfer of such Old Notes into the name of the Depositor
withdrawing the tender, (iv) specify the name in which any such Old Notes are to
be registered, if different from that of the Depositor, and (v) if applicable
because the Old Notes have been tendered pursuant to the book-entry procedures,
specify the name and number of the participant's account at the DTC to be
credited, if different than that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Old Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
<PAGE>
Termination
Notwithstanding any other term of the Exchange Offer, the Company will
not be required to accept for exchange any Old Notes not theretofore accepted
for exchange, and may terminate the Exchange Offer if it determines that the
Exchange Offer violates any applicable law or interpretation of the staff of the
SEC.
If the Company determines that it may terminate the Exchange Offer, as
set forth above, the Company may (i) refuse to accept any Old Notes and return
any Old Notes that have been tendered to the holders thereof, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of the
Exchange Offer, subject to the rights of such holders of tendered Old Notes to
withdraw their tendered Old Notes, or (iii) waive such termination event with
respect to the Exchange Offer and accept all properly tendered Old Notes that
have not been withdrawn. If such waiver constitutes a material change in the
Exchange Offer, the Company will disclose such change by means of a supplement
to this Prospectus that will be distributed to each registered holder of Old
Notes, and the Company will extend the Exchange Offer for a period of five to
ten business days, depending upon the significance of the waiver and the manner
of disclosure to the registered holders of the Old Notes, if the Exchange Offer
would otherwise expire during such period. Holders of Old Notes will have
certain rights against the Company under the Registration Rights Agreement
should the Company fail to consummate the Exchange Offer.
Exchange Agent
Harris Trust and Savings Bank, the trustee under the Indenture, has
been appointed as Exchange Agent for the Exchange Offer. Questions and requests
for assistance and requests for additional copies of this Prospectus or of the
Letter of Transmittal should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<CAPTION>
Facsimile By Hand/ By Registered or
Transmission Number Overnight Delivery Certified Mail
<S> <C> <C>
(For Eligible Institutions Only) Harris Trust and Savings Bank Harris Trust and Savings Bank
(212) 701-7636 c/o Harris Trust Company c/o Harris Trust Company
of New York of New York
Confirm Receipt of 88 Pine Street P.O. Box 1010
Facsimile by Telephone: 19th Floor Wall Street Station
(212) 701-7624 New York, NY 10005 New York, NY 10268-1010
</TABLE>
Fees and Expenses
The expenses of soliciting tenders pursuant to the Exchange Offer will
be borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone. The Company will not make any payments to brokers,
dealers or other persons soliciting acceptances of the Exchange Offer. The
Company, however, will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse the Exchange Agent for its reasonable
out-of-pocket expenses in connection therewith. The Company may also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus,
Letters of Transmittal and related documents to the beneficial owners of the Old
Notes and in handling or forwarding tenders for exchange.
The other expenses incurred in connection with the Exchange Offer,
including fees and expenses of the Exchange Agent and Trustee and accounting and
legal fees, will be paid by the Company. The Company will pay all transfer
taxes, if any, applicable to the exchange of Old Notes pursuant to the Exchange
Offer. If, however, Exchange Notes or Old Notes not tendered or accepted for
exchange are to be delivered to, or are to be registered or issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
<PAGE>
Accounting Treatment
No gain or loss for accounting purposes will be recognized by the
Company upon the consummation of the Exchange Offer. The expenses of the
Exchange Offer will be amortized by the Company over the term of the Exchange
Notes under generally accepted accounting principles.
DESCRIPTION OF NOTES
The Exchange Notes will be issued and the Old Notes were issued under
an indenture, dated as of November 10, 1997 (the "Indenture"), between the
Company and Harris Trust and Savings Bank, as Trustee (the "Trustee"). A copy of
the Indenture and the form of the Notes are available upon request to the
Company at the address set forth under "Available Information." The following
summary of certain terms and provisions of the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Trust Indenture Act of 1939 and to all the provisions of the Notes and the
Indenture, including the definitions therein of certain terms.
For purposes of this Section, references to the "Company" shall mean
Lilly Industries, Inc., excluding its subsidiaries. Capitalized terms used in
this Section and not otherwise defined below have the respective meanings
assigned to them in the Indenture.
General
The Notes will be unsecured senior obligations of the Company, limited
to $100 million aggregate principal amount, and will mature on December 1, 2007.
The Notes will bear interest at the rate per annum shown on the cover page
hereof from November 10, 1997, or from the most recent date to which interest
has been paid, payable semiannually on June 1 and December 1 of each year,
commencing December 1, 1997, to Holders of record at the close of business on
the May 15 or November 15 immediately preceding the interest payment date. The
Company will pay interest on overdue principal at 1% per annum in excess of such
rate, and it will pay interest on overdue installments of interest at such
higher rate to the extent lawful. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
Principal of and interest on the Notes will be payable, and the Notes
will be exchangeable and transferable, at an office or agency of the Company,
one of which will be maintained for such purpose in The City of New York (which
initially will be the corporate trust office of the Trustee); provided, however,
that payment of interest may be made at the option of the Company by check
mailed to the Person entitled thereto as shown on the Security Register.
The Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple thereof. No
service charge shall be made for any registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection
therewith.
The interest rate on the Notes is subject to increase in certain
circumstances (such additional interest being referred to as "Special Interest")
if the Company does not file a registration statement relating to an exchange
offer for the Notes or, in lieu thereof, a resale shelf registration statement
for the Notes on a timely basis, if such registration statement is not declared
effective on a timely basis or if certain other conditions are not satisfied,
all as further described under "Exchange Offer; Registration Rights." All
references herein to interest shall include such Special Interest.
Optional Redemption
The Notes will be redeemable, at the option of the Company, in whole or
in part at any time or from time to time, upon not less than 30 and not more
than 60 days' notice as provided in the Indenture, on any date prior to maturity
(the "Redemption Date") at a redemption price equal to 100% of the principal
amount of the Notes to be redeemed plus accrued interest to the Redemption Date
(subject to the right of Holders of record on the relevant record date to
receive interest due on an interest payment date that is on or prior to the
Redemption Date) plus a Make-Whole Premium, if any (the "Redemption Price"). In
no event will the Redemption Price ever be less than 100% of the principal
amount of the Notes plus accrued interest to the Redemption Date.
<PAGE>
The amount of the Make-Whole Premium with respect to any Note (or
portion thereof) to be redeemed will be equal to the excess, if any, of:
(1) the sum of the present values, calculated as of the Redemption
Date, of:
(a) each interest payment that, but for such redemption, would have
been payable on the Note (or portion thereof) being redeemed on each interest
payment date occurring after the Redemption Date (excluding any accrued interest
for the period prior to the Redemption Date); and
(b) the principal amount that, but for such redemption, would have been
payable at the final maturity of the Note (or portion thereof) being redeemed;
over
(2) the principal amount of the Note (or portion thereof) being
redeemed.
The present values of interest and principal payments referred to in
clause (1) above will be determined in accordance with generally accepted
principles of financial analysis. Such present values will be calculated by
discounting the amount of each payment of interest or principal from the date
that each such payment would have been payable, but for the redemption, to the
Redemption Date at a discount rate equal to the Treasury Yield (as defined
below) plus 50 basis points.
The Make-Whole Premium will be calculated by an independent investment
banking institution of national standing appointed by the Company; provided,
that if the Company fails to make such appointment at least 45 business days
prior to the Redemption Date, or if the institution so appointed is unwilling or
unable to make such calculation, such calculation will be made by Salomon
Brothers Inc or, if such firm is unwilling or unable to make such calculation,
by an independent investment banking institution of national standing appointed
by the Trustee (in any such case, an "Independent Investment Banker").
For purposes of determining the Make-Whole Premium, "Treasury Yield"
means a rate of interest per annum equal to the weekly average yield to maturity
of United States Treasury Notes that have a constant maturity that corresponds
to the remaining term to maturity of the Notes, calculated to the nearest 1/12th
of a year (the "Remaining Term"). The Treasury Yield will be determined as of
the third business day immediately preceding the applicable Redemption Date.
The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent statistical release published by the
Federal Reserve Bank of New York and designated "H.15(519) Selected Interest
Rates" or any successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States Treasury
Notes having a constant maturity that is the same as the Remaining Term, then
the Treasury Yield will be equal to such weekly average yield. In all other
cases, the Treasury Yield will be calculated by interpolation, on a
straight-line basis, between the weekly average yields on the United States
Treasury Notes that have a constant maturity closest to and greater than the
Remaining Term and the United States Treasury Notes that have a constant
maturity closest to and less than the Remaining Term (in each case as set forth
in the H.15 Statistical Release). Any weekly average yields so calculated by
interpolation will be rounded to the nearest 1/100th of 1%, with any figure of
1/200th of 1% or above being rounded upward. If weekly average yields for United
States Treasury Notes are not available in the H.15 Statistical Release or
otherwise, then the Treasury Yield will be calculated by interpolation of
comparable rates selected by the Independent Investment Banker.
Any notice to the Holders of Notes of such a redemption need not set
forth the redemption price of such Notes but need only set forth the calculation
thereof as described in the immediately preceding paragraph. The redemption
price, calculated as aforesaid, shall be set forth in an Officers' Certificate
delivered to the Trustee no later than two business days prior to the Redemption
Date.
<PAGE>
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note.
Ranking
The Notes will be senior unsecured obligations of the Company, will
rank pari passu in right of payment with all existing and future senior debt of
the Company and will be senior in right of payments to all future subordinated
debt of the Company. As of August 31, 1997, after giving effect to the Offering,
borrowings under the New Bank Credit Facility in connection with the Offering
and the application of the estimated net proceeds therefrom, the Company would
have had approximately $231.9 million of consolidated debt outstanding(excluding
unused commitments under the Senior Credit Facility and outstanding letters of
credit). None of the Company's debt as of such date, after giving such effect,
would have been subordinated to the Notes.
A substantial portion of the Company's operating income and cash flow
is generated by its subsidiaries. As a result, funds necessary to meet the
Company's debt service obligations are provided in part by distributions or
advances from its subsidiaries. Under certain circumstances, contractual and
legal restrictions, as well as the financial condition and operating
requirements of the Company's subsidiaries, could limit the Company's ability to
obtain cash from its subsidiaries for the purpose of meeting its debt service
obligations, including the payment of principal and interest on the Notes. In
addition, to the extent that amounts paid by the Company's foreign Subsidiaries
to the Company as dividends have been subject to foreign tax at a rate that is
less than the then-prevailing U.S. corporate tax rate, additional U.S. tax
generally will be imposed on the Company.
All existing and future debt and other liabilities of the Company's
Subsidiaries, including the claims of trade creditors and claims of preferred
stockholders, if any, of such Subsidiaries, will be effectively senior to the
Notes. The total balance sheet liabilities of the Company's Subsidiaries after
giving effect to the application of the estimated net proceeds from the Offering
and the refinancing of the Merckens acquisition debt at the Subsidiary level, as
of August 31, 1997, would have been approximately $49.2 million (excluding
outstanding letters of credit). The Company and its Subsidiaries have other
liabilities, including contingent liabilities, which may be significant. The
Notes also will be effectively subordinated to any secured debt of the Company
to the extent of the value of the assets securing such debt. The Company would
have had no secured debt after giving effect to the Offering, borrowings under
the New Bank Credit Facility in connection with the Offering and the application
of the estimated net proceeds therefrom. Although the Indenture contains
limitations on the amount of additional Debt which the Company and the
Restricted Subsidiaries may Incur, the amounts of such Debt could be substantial
and, in any case, a significant portion of such Debt may be Debt of Subsidiaries
of the Company or secured Debt (which will be effectively senior in right of
payment to the Notes). In addition, such limitations on the Incurrence of Debt
no longer apply to the Company and the Restricted Subsidiaries once the Company
reaches Investment Grade Status, notwithstanding that the Company may later
cease to have an Investment Grade Rating. See "--Certain Covenants--Limitation
on Debt."
Book-Entry, Delivery and Form
The Notes sold will initially be issued in the form of one or more
Global Notes. The Global Notes will be deposited with, or on behalf of, the
Depository and registered in the name of the Depository or its nominee. Except
as set forth below, the Global Notes may be transferred, in whole and not in
part, only to the Depository or another nominee of the Depository. Investors may
hold their beneficial interests in the Global Notes directly through the
Depository if they have an account with the Depository or indirectly through
organizations which have accounts with the Depository.
<PAGE>
The Depository has advised the Company as follows: The Depository is a
limited-purpose trust company and organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of institutions that have accounts
with the Depository ("participants") and to facilitate the clearance and
settlement of securities transactions among its participants in such securities
through electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depository's participants include securities brokers and dealers (which may
include the Initial Purchasers), banks, trust companies, clearing corporations
and certain other organizations. Access to the Depository's book-entry system is
also available to others such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
whether directly or indirectly (collectively, the "indirect participants").
Holders who are not participants may own securities held by or on behalf of the
Depository only through participants or indirect participants.
Upon the issuance of the Global Notes, the Depository will credit, on
its book-entry registration and transfer system, the principal amount of the
Notes represented by such Global Notes to the accounts of participants. The
accounts to be credited upon issuance shall be designated by the Initial
Purchasers of such Notes. Ownership of beneficial interests in the Global Notes
will be limited to participants or persons that may hold interests through
participants. Any person acquiring an interest in a Global Note through an
offshore transaction in reliance on Regulation S may hold such interest through
Euroclear or Cedel. Ownership of beneficial interests in the Global Notes will
be shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depository (with respect to participants'
interest) and such participants (with respect to the owners of beneficial
interests in the Global Notes other than participants). The laws of some
jurisdictions may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and laws may impair
the ability to transfer or pledge beneficial interests in the Global Notes.
So long as the Depository, or its nominee, is the registered holder and
owner of the Global Notes, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related Notes for all
purposes of such Notes and the Indenture. Except as set forth below, owners of
beneficial interests in the Global Notes will not be entitled to have the Notes
represented by the Global Notes registered in their names, will not receive or
be entitled to receive physical delivery of certificated Notes in definitive
form and will not be considered to be the owners or holders of any Notes under
the Global Notes. The Company understands that under existing industry practice,
in the event an owner of a beneficial interest in the Global Notes desires to
take any action that the Depository, as the holder of the Global Note, is
entitled to take, the Depository would authorize the participants to take such
action, and that the participants would authorize beneficial owners owning
through such participants to take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Payment of principal of and interest on Notes represented by the Global
Notes registered in the name of and held by the Depository or its nominee will
be made to the Depository or its nominee, as the case may be, as the registered
owner and holder of the Global Notes.
The Company expects that the Depository or its nominee, upon receipt of
any payment of principal of or interest on the Global Notes, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Notes as
shown on the records of the Depository or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in the Global
Notes held through such participants will be governed by standing instructions
and customary practices and will be the responsibility of such participants. The
Company will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Notes for any Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depository and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Notes owning through such participants.
<PAGE>
Unless and until it is exchanged in whole or in part for certificated
Notes in definitive form, the Global Notes may not be transferred except as a
whole by the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing procedures in order
to facilitate transfers of interests in the Global Notes among participants of
the Depository, it is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither the
Trustee nor the Company will have any responsibility for the performance by the
Depository or its participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
Certificated Notes
The Notes represented by the Global Notes are exchangeable for
certificated Notes in definitive form of like tenor as such Notes in
denominations of U.S. $1,000 and integral multiples thereof if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for the Global Notes or if at any time the Depository ceases to be a
clearing agency registered under the Exchange Act and a successor Depository is
not appointed by the Company within 90 days, (ii) the Company in its discretion
at any time determines not to have all of the Notes represented by the Global
Notes or (iii) an Event of Default has occurred and is continuing. Any Note that
is exchangeable pursuant to the preceding sentence is exchangeable for
certificated Notes issuable in authorized denominations and registered in such
names as the Depository shall direct. Subject to the foregoing, the Global Notes
are not exchangeable, except for Global Notes of the same aggregate denomination
to be registered in the name of the Depository or its nominee. In addition, such
certificates will bear the legend referred to under "Notice to Investors"
(unless the Company determines otherwise in accordance with applicable law)
subject, with respect to such Notes, to the provisions of such legend.
Same-Day Payment
The Indenture will require that payments in respect of Notes (including
principal and interest) be made by wire transfer of immediately available funds
to the accounts specified by the Holders thereof. The Notes will clear in the
Depository's Same-Day Funds Settlement System until maturity, and secondary
market trading activity in the Notes that is effected through the Depository
will therefore be required by the Depository to settle in immediately available
funds.
Certain Covenants
The Indenture will not contain provisions which would give Holders of
Notes the right to require the Company to repurchase their Notes in the event of
a decline in the credit rating of the Company's debt securities or a change of
control of the Company.
The Indenture does contain the following covenants, among others:
Limitation on Debt. The Indenture will provide that the Company will
not, and will not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Debt unless, after giving pro forma effect to the application of
the proceeds thereof, no Default or Event of Default would occur as a
consequence of such Incurrence or be continuing following such Incurrence and
either such Debt is (a) Debt of the Company, provided that, after giving pro
forma effect to the Incurrence of such Debt and the application of the proceeds
thereof, the Consolidated Interest Coverage Ratio would be greater than 2.00 to
1.00, (b) Debt of the Company evidenced by the Notes or (c) Permitted Debt of
the Company or any Restricted Subsidiary.
The term "Permitted Debt" will be defined to include the following:
(a) Debt of the Company under the Credit Facility, provided that the
aggregate principal amount of all such Debt under the Credit Facility, together
with all Permitted Refinancing Debt Incurred in respect of Debt previously
Incurred pursuant to this clause (a), at any one time outstanding shall not
exceed the greater of (i) $175.0 million and (ii) the sum of amounts equal to
(x) 65% of the book value of the inventory of the Company and the Restricted
Subsidiaries and (y) 85% of the book value of the accounts receivables of the
Company and the Restricted Subsidiaries, in each case as of the end of the most
recent fiscal quarter of the Company ending at least 45 prior to the date of
determination;
<PAGE>
(b) Capital Expenditure Debt, provided that (i) the aggregate principal
amount of such Debt does not exceed the fair market value (on the date of the
Incurrence thereof) of the Property acquired, constructed or leased and (ii) the
aggregate principal amount of all Debt Incurred pursuant to this clause (b),
together with all Permitted Refinancing Debt Incurred in respect of Debt
previously Incurred pursuant to this clause (b), during any calendar year does
not exceed $25 million (the "Base Amount"), provided that, to the extent not all
the Base Amount is utilized to Incur such Debt in such year, up to 50% of such
Base Amount may be carried forward to the immediately subsequent year, provided
further that any such carried-forward amount shall not be carried forward beyond
such immediately subsequent year and, with respect to such immediately
subsequent year, shall be utilized only after all the Base Amount for such year
has been utilized;
(c) Debt of the Company owing to and held by any Wholly Owned
Subsidiary and Debt of a Restricted Subsidiary owing to and held by the Company
or any Wholly Owned Subsidiary; provided, however, that any subsequent issue or
transfer of Capital Stock or other event that results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of
any such Debt (except to the Company or a Wholly Owned Subsidiary) shall be
deemed, in each case, to constitute the Incurrence of such Debt by the issuer
thereof;
(d) Debt of a Restricted Subsidiary Incurred and outstanding on or
prior to the date on which such Restricted Subsidiary was acquired by the
Company or otherwise became a Restricted Subsidiary (other than Debt Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of transactions
pursuant to which such Restricted Subsidiary became a Subsidiary of the Company
or was otherwise acquired by the Company), provided that at the time such
Restricted Subsidiary was acquired by the Company or otherwise became a
Restricted Subsidiary and after giving pro forma effect to the Incurrence of
such Debt, the Company would have been able to Incur $1.00 of additional Debt
pursuant to clause (a) of the immediately preceding paragraph;
(e) Debt under Interest Rate Agreements entered into by the Company or
a Restricted Subsidiary for the purpose of limiting interest rate risk in the
ordinary course of the financial management of the Company or such Restricted
Subsidiary and not for speculative purposes, provided that the obligations under
such agreements are directly related to payment obligations on Debt otherwise
permitted by the terms of this covenant;
(f) Debt under Currency Agreements entered into by the Company or a
Restricted Subsidiary for the purpose of limiting currency exchange rate risks
directly related to transactions entered into by the Company or such Restricted
Subsidiary in the ordinary course of business and not for speculative purposes;
(g) Debt in connection with one or more standby letters of credit or
performance bonds issued by the Company in the ordinary course of business or
pursuant to self-insurance obligations and not in connection with the borrowing
of money or the obtaining of advances or credit;
(h) Debt outstanding on the Issue Date not otherwise described in
clauses (a) through (g) above;
(i) Debt (other than Debt permitted by clause (a) or (b) of the
immediately preceding paragraph or the other clauses of this paragraph) in an
aggregate principal amount outstanding at any one time not to exceed $45.0
million;
(j) Debt under a local currency credit facility entered into to finance
the acquisition of the Foreign Company contemplated by the letter of intent
dated August 28, 1997, between the Company and the other parties thereto,
provided that the aggregate principal amount outstanding, together with all
Permitted Refinancing Debt Incurred in respect of Debt previously Incurred
pursuant to this clause (j), at any one time not to exceed $15.0 million; and
(k) Permitted Refinancing Debt Incurred in respect of Debt Incurred
pursuant to clause (a) or (b) of the immediately preceding paragraph and clauses
(a), (b), (d), (h) or (j) of this paragraph, subject, in the case of clauses
(a), (b) and (j) of this paragraph, to the limitations set forth in the
respective provisos thereto.
<PAGE>
Notwithstanding the immediately foregoing two paragraphs, the Company
shall not Incur any Permitted Debt if the proceeds thereof are used, directly or
indirectly, to Refinance any Subordinated Obligations unless such Debt shall be
subordinated to the Notes to at least the same extent as such Subordinated
Obligations.
The foregoing covenant will be applicable to the Company and the
Restricted Subsidiaries unless the Company reaches Investment Grade Status.
After the Company has reached Investment Grade Status, and notwithstanding that
the Company may later cease to have an Investment Grade Rating from either or
both of the Rating Agencies, the Company and the Restricted Subsidiaries will be
released from their obligations to comply with the foregoing covenant.
Limitation on Liens. The Indenture will provide that the Company will
not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, Incur or otherwise cause or suffer to exist or become
effective any Liens of any kind upon any Principal Property or any Capital Stock
or Debt of any Restricted Subsidiary (whether such Principal Property, Capital
Stock or Debt are now owned or hereafter acquired), or any interest therein or
any increase or profits therefrom, unless all payments due under the Indenture
and the Notes are secured on an equal and ratable basis with (or prior to) the
obligations so secured, except in the case of Permitted Liens or as provided
under "--Exempted Debt" below.
Limitation on Sale and Leaseback Transactions. The Indenture will
provide that, except as provided under "--Exempted Debt" below, the Company will
not, and will not permit any Restricted Subsidiaries to, enter into any Sale and
Leaseback Transaction with respect to any Principal Property unless either (a)
the Company or such Restricted Subsidiary would be entitled, pursuant to the
provisions of the Indenture, to Incur Debt secured by a Lien on the Property to
be leased in an amount equal to the Attributable Debt with respect to such
transaction without equally and ratably securing the Notes, or (b) the Company,
within 180 days after the effective date of such transaction, applies to the
voluntary retirement of its Funded Debt an amount equal to the value of such
transaction, defined as the greater of the net proceeds of the sale of the
Property leased in such transaction or the fair value, in the opinion of the
Company's Board of Directors, of the leased Property at the time such
transaction was entered into.
Exempted Debt. Notwithstanding the foregoing limitations on Liens and
Sale and Leaseback Transactions, the Company and its Restricted Subsidiaries may
issue, assume or guarantee Debt secured by a Lien without securing the Notes, or
may enter into Sale and Leaseback Transactions without retiring Funded Debt, or
enter into a combination of such transactions, if the sum of (x) the principal
amount of such Debt or the Attributable Debt in respect of such Sale and
Leaseback Transaction, as the case may be, and (y) the principal amount of all
other such Debt and all other Attributable Debt in respect of Sale and Leaseback
Transactions then outstanding, does not exceed 15% of the Consolidated Net
Tangible Assets of the Company and its Restricted Subsidiaries as shown in the
consolidated balance sheet of the Company as of the end of the most recent
fiscal quarter ending at least 45 days prior to the date of determination.
Merger and Consolidation. The Indenture will provide that the Company,
without the consent of the Holders of any of the outstanding Notes, may
consolidate or amalgamate with or merge into any other Person or convey,
transfer, lease or otherwise dispose of its Property substantially as an
entirety to any Person or may permit any Person to consolidate or amalgamate
with or merge into, or convey, transfer, lease or otherwise dispose of its
Property substantially as an entirety to, the Company; provided, however, that
(a) the successor, transferee or lessee is organized under the laws of any
United States jurisdiction; (b) the successor, transferee or lessee, if other
than the Company, expressly assumes the Company's obligations under the
Indenture and the Notes by means of a supplemental indenture entered into with
the Trustee; (c) immediately before and after giving effect to the transaction
on a pro forma basis, no Default shall have occurred and be continuing; and (d)
certain other conditions are met.
<PAGE>
Under any consolidation or amalgamation by the Company with, or merger
by the Company into, any other Person or any conveyance, transfer, lease or
other disposition of the Property of the Company substantially as an entirety as
described in the preceding paragraph, the successor resulting from such
consolidation or amalgamation or into which the Company is merged or the
transferee or lessee to which such conveyance, transfer, lease or disposition is
made, will succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture, and thereafter, except in the case of
a conveyance, transfer, lease or disposition, the predecessor (if still in
existence) will be released from its obligations and covenants under the
Indenture and the Notes.
Designation of Restricted and Unrestricted Subsidiaries. The Board of
Directors may designate any Subsidiary of the Company to be an Unrestricted
Subsidiary if (a) the Subsidiary to be so designated does not own any Capital
Stock or Debt of, or own or hold any Lien on any Property of, the Company or any
other Restricted Subsidiary, (b) the Subsidiary to be so designated is not
obligated under any Debt, Lien or other obligation that, if in default, would
result (with the passage of time or notice or otherwise) in a default on any
Debt of the Company or of any Restricted Subsidiary and (c) either (i) the
Subsidiary to be so designated has total assets of $1,000 or less or (ii) such
designation is effective immediately upon such entity becoming a Subsidiary of
the Company. Unless so designated as an Unrestricted Subsidiary, any Person that
becomes a Subsidiary of the Company will be classified as a Restricted
Subsidiary; provided, however, that such Subsidiary shall not be designated a
Restricted Subsidiary and shall be automatically classified as an Unrestricted
Subsidiary if (A) such Subsidiary is a Subsidiary of a Restricted Subsidiary
(other than a Wholly Owned Subsidiary) or (B) either of the requirements set
forth in clauses (x) and (y) of the immediately following paragraph will not be
satisfied after giving pro forma effect to such classification. Except as
provided in the first sentence of this paragraph, no Restricted Subsidiary may
be redesignated as an Unrestricted Subsidiary.
The Board of Directors may designate any Unrestricted Subsidiary to be
a Restricted Subsidiary if, immediately after giving pro forma effect to such
designation, (x) subject to the last paragraph of the covenant described under
"--Limitation of Debt," the Company could Incur at least $1.00 of additional
Debt pursuant to clause (a) of the first paragraph of such covenant and (y) no
Default or Event of Default shall have occurred and be continuing or would
result therefrom.
Any such designation or redesignation by the Board of Directors will be
evidenced to the Trustee by filing with the Trustee a Board Resolution giving
effect to such designation or redesignation and an Officers' Certificate (a)
certifying that such designation or redesignation complies with the foregoing
provisions and (b) giving the effective date of such designation or
redesignation, such filing with the Trustee to occur within 45 days after the
end of the fiscal quarter of the Company in which such designation or
redesignation is made (or, in the case of a designation or redesignation made
during the last fiscal quarter of the Company's fiscal year, within 90 days
after the end of such fiscal year).
Events of Default
An Event of Default will be defined in the Indenture to be a (i)
failure to pay any interest upon any of the Notes for 30 days or more after such
payment is due, (ii) failure to pay the principal of any of the Notes when due,
(iii) failure to comply with the covenant described above under "-Certain
Covenants-Merger and Consolidation", (iv) failure to comply with any other
covenants in the Indenture which will not have been remedied by the end of a
period of 60 days after written notice to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in principal amount of
the outstanding Notes, (v) acceleration of, or failure by the Company or any
Restricted Subsidiary to pay when due, the principal of any Debt for money
borrowed of the Company or any Restricted Subsidiary having an aggregate
principal amount at the time in excess of $10.0 million or its foreign currency
equivalent at such time, if such acceleration is not annulled, or such Debt is
not discharged, by the end of a period of 10 days after written notice to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% in principal amount of the outstanding Notes (the "cross acceleration
provision"), (vi) any judgement or judgements for the payment of money in an
uninsured aggregate amount in excess of $10.0 million or its foreign currency
equivalent at the time shall be rendered against the Company or any Restricted
Subsidiary and shall not be waived, satisfied or discharged for any period of 30
consecutive days during which a stay of enforcement shall be in effect (the
"judgement default provision") or (vii) certain events of bankruptcy, insolvency
or reorganization of the Company or a Significant Subsidiary (the "bankruptcy
provisions").
<PAGE>
The Indenture will provide that if an Event of Default (other than of a
type referred to in clause (vii) of the preceding paragraph with respect to the
Company) shall have occurred and is continuing, either the Trustee or the
Holders of at least 25% in principal amount of the outstanding Notes may declare
the principal amount of all Notes to be immediately due and payable. Such
declaration may be rescinded if certain conditions are satisfied. If an Event of
Default of the type referred to in clause (vii) of the preceding paragraph shall
have occurred with respect to the Company, the principal amount of the
outstanding Notes shall automatically become immediately due and payable.
The Indenture will also provide that the Holders of not less than a
majority in principal amount of the outstanding Notes may direct the time,
method and place of conducting any proceedings for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, provided
that such direction is not in conflict with any rule of law or with the
Indenture. The Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
The Indenture will contain provisions entitling the Trustee, subject to
the duty of the Trustee during the continuance of an Event of Default to act
with the required standard of care, to be indemnified by the Holders of Notes
before proceeding to exercise any right or power under the Indenture at the
request of the Holders of Notes.
No Holder of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless (i) such
Holder shall have previously given to the Trustee written notice of a continuing
Event of Default, (ii) the Holders of at least 25% in aggregate principal amount
of the outstanding Notes shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as Trustee and (iii) the
Trustee shall not have received from the Holders of a majority in aggregate
principal amount of the outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a Holder of a
Note for enforcement of payment of the principal of or interest on such Note on
or after the respective due dates expressed in such Note.
The Indenture will require the Company to file annually with the
Trustee a certificate, executed by two designated officers of the Company,
stating that to their knowledge the Company is not in default under the terms,
provisions and conditions of the Indenture or, if such officers have knowledge
that the Company is in such default, specifying such default.
Amendments and Waivers
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange for the Notes) and any past default or compliance with any provisions
may also be waived with the consent of the Holders of a majority in principal
amount of the Notes then outstanding. However, without the consent of each
Holder of an outstanding Note affected thereby, no amendment may, among other
things, (i) reduce the amount of Notes whose Holders must consent to an
amendment or waiver, (ii) reduce the rate of or extend the time for payment of
interest on any Note, (iii) reduce the principal of or extend the Stated
Maturity of any Note, (iv) reduce the amount payable upon the redemption of any
Note or change the time at which any Note may be redeemed as described under
"-Optional Redemption" above, (v) make any Note payable in a place or in money
other than that stated in the Note, (vi) impair the right of any Holder of the
Notes to receive payment of principal of and interest on such Holder's Notes on
or after the due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's Notes or (vii) make any change in
the amendment or waiver provisions which require each Holder's consent.
Without the consent of any Holder of the Notes, the Company and the
Trustee may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture, to provide for uncertificated
Notes in addition to or in place of certificated Notes (provided that the
uncertificated Notes are issued in registered form for purposes of Section
163(f) of the Code, or in a manner such that the uncertificated Notes are
described in Section 163(f)(2)(B) of the Code), to add guarantees with respect
to the Notes, to secure the Notes, to add to the covenants of the Company for
the benefit of the Holders of the Notes or to surrender any right or power
conferred upon the Company, to make any change that does not adversely affect
the rights of any Holder of the Notes or to comply with any requirement of the
Commission in connection with the qualification of the Indenture under the Trust
Indenture Act.
<PAGE>
The consent of the Holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company
is required to mail to Holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all Holders of the Notes,
or any defect therein, will not impair or affect the validity of the amendment.
Transfer
The Notes will be issued in registered form and will be transferable
only upon the surrender of the Notes being transferred for registration of
transfer. The Company may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge payable in connection with certain
transfers and exchanges.
Defeasance
The Company at any time may terminate all its obligations under the
Notes and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "-Certain Covenants" (other than the covenant described under
"-Certain Covenants-Merger and Consolidation"), the operation of the cross
acceleration provision, the judgement default provision and the bankruptcy
provisions with respect to Significant Subsidiaries described under "-Events of
Default" above and the limitations contained in clauses (c) and (d) under
"-Certain Covenants-Merger and Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option. If the Company exercises
its legal defeasance option, payment of the Notes may not be accelerated because
of an Event of Default with respect thereto. If the Company exercises its
covenant defeasance option, payment of the Notes may not be accelerated because
of an Event of Default specified in clause (iv), (v), (vi) or (vii) (with
respect only to Significant Subsidiaries) under "-Events of Default" above or
because of the failure of the Company to comply with clause (c) or (d) under
"-Certain Covenants-Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must
irrevocably deposit in trust (the "defeasance trust") with the Trustee money or
U.S. Government Obligations for the payment of principal and interest on the
Notes to redemption or maturity, as the case may be, and must comply with
certain other conditions, including delivery to the Trustee of an Opinion of
Counsel to the effect that Holders of the Notes will not recognize income, gain
or loss for federal income tax purposes as a result of such deposit and
defeasance and will be subject to federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred (and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law).
Concerning the Trustee
Harris Trust and Savings Bank is to be the Trustee under the Indenture
and has been appointed by the Company as Registrar and Paying Agent with regard
to the Notes.
The Holders of a majority in principal amount of the outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that if an Event of Default occurs
(and is not cured), the Trustee will be required, in the exercise of its power,
to use the degree of care of a prudent man in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any Holder of
Notes, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense and then
only to the extent required by the terms of the Indenture.
<PAGE>
Governing Law
The Indenture and the Notes will be governed by the internal laws of
the State of New York without reference to principles of conflicts of law.
Certain Definitions
"Asset Sale" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions) by the Company or any Restricted Subsidiary, including any
disposition by means of a merger, consolidation or similar transaction (each
referred to for the purposes of this definition as a "disposition"), of (a) any
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares) or (b) any other assets of the Company or any Restricted
Subsidiary outside of the ordinary course of business of the Company or such
Restricted Subsidiary (other than, in the case of clauses (a) and (b) above, (i)
any disposition by a Restricted Subsidiary to the Company or by the Company or a
Restricted Subsidiary to a Wholly Owned Subsidiary and (ii) any disposition
effected in compliance with the first paragraph of the covenant described under
"-Certain Covenants-Merger and Consolidation").
"Attributable Debt" in respect of a Sale and Leaseback Transaction
means, at any date of determination, (a) if such Sale and Leaseback Transaction
is a Capital Lease Obligation, the amount of Debt represented thereby according
to the definition of "Capital Lease Obligation" and (b) in all other instances,
the present value (discounted at the interest rate borne by the Notes,
compounded annually), of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale and Leaseback
Transaction (including any period for which such lease has been extended).
"Average Life" means, as of any date of determination, with respect to
any Debt or Preferred Stock, the quotient obtained by dividing (a) the sum of
the product of the numbers of years (rounded to the nearest one-twelfth of one
year) from the date of determination to the dates of each successive scheduled
principal payment of such Debt or redemption or similar payment with respect to
such Preferred Stock multiplied by the amount of such payment by (b) the sum of
all such payments.
"Capital Expenditure Debt" means Debt Incurred by any Person to finance
a capital expenditure so long as (a) such capital expenditure is or should be
included as an addition to "Property and Equipment" in accordance with GAAP and
(b) such Debt is Incurred within 180 days of the date such capital expenditure
is made.
"Capital Lease Obligation" means any obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP and the amount of Debt represented by such obligation shall be the
capitalized amount of such obligation determined in accordance with GAAP; and
the Stated Maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty. For purposes of
"-Certain Covenants-Limitation on Liens", a Capital Lease Obligation shall be
deemed secured by a Lien on the Property being leased.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible or exchangeable into such
equity interest.
"Capital Stock Sale Proceeds" means the aggregate Net Cash Proceeds
received by the Company from the issue or sale (other than to a Subsidiary of
the Company or an employee stock ownership plan or trust established by the
Company or any of its Subsidiaries for the benefit of their employees) by the
Company of any class of its Capital Stock (other than Disqualified Stock) after
the Issue Date.
"Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
"Consolidated Interest Coverage Ratio" means, as of any date of
determination, the ratio of (a) the aggregate amount of EBITDA for the most
recent four consecutive fiscal quarters ending at least 45 days prior to such
determination date to (b) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (i) if the Company or any Restricted
Subsidiary has Incurred any Debt since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate the
Consolidated Interest Coverage Ratio is an Incurrence of Debt, or both,
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Debt as if such Debt had been Incurred on
the first day of such period and the discharge of any other Debt repaid,
repurchased, defeased or otherwise discharged with the proceeds of such new Debt
as if such discharge had occurred on the first day of such period, (ii) if since
the beginning of such period the Company or any Restricted Subsidiary shall have
repaid, repurchased, legally defeased or otherwise discharged any Debt with
Capital Stock Sale Proceeds, Consolidated Interest Expense for such period shall
be calculated after giving effect on a pro forma basis to such discharge as if
such discharge had occurred on the first day of such period, (iii) if since the
beginning of such period the Company or any Restricted Subsidiary shall have
made any Asset Sale or if the transaction giving rise to the need to calculate
the Consolidated Interest Coverage Ratio is an Asset Sale, or both, EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the Property which is the subject of such Asset Sale
for such period, or increased by an amount equal to the EBITDA (if negative)
directly attributable thereto for such period, in either case as if such Asset
Sale had occurred on the first day of such period and Consolidated Interest
Expense for such period shall be reduced by an amount equal to the Consolidated
Interest Expense directly attributable to any Debt of the Company or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Restricted Subsidiaries in connection
with such Asset Sale, as if such Asset Sale had occurred on the first day of
such period (or, if the Capital Stock of any Restricted Subsidiary is sold, by
an amount equal to the Consolidated Interest Expense for such period directly
attributable to the Debt of such Restricted Subsidiary to the extent the Company
and its continuing Restricted Subsidiaries are no longer liable for such Debt
after such sale), (iv) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of Property, including any acquisition of Property occurring
in connection with a transaction causing a calculation to be made hereunder,
which constitutes all or substantially all of an operating unit of a business,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto (including the Incurrence of any Debt) as
if such Investment or acquisition occurred on the first day of such period and
(v) if since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into the Company or any Restricted
Subsidiary since the beginning of such period) shall have made any Asset Sale,
Investment or acquisition of Property that would have required an adjustment
pursuant to clause (iii) or (iv) above if made by the Company or a Restricted
Subsidiary during such period, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto as if such
Asset Sale or Investment occurred on the first day of such period. For purposes
of this definition, pro forma calculations shall be determined in good faith by
a responsible financial or accounting Officer of the Company. If any Debt bears
a floating rate of interest and is being given pro forma effect, the interest
expense on such Debt shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Debt if such Interest
Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Restricted Subsidiaries,
plus, to the extent not included in such total interest expense, and to the
extent Incurred by the Company or its Restricted Subsidiaries, (a) interest
expense attributable to capital leases, (b) amortization of debt discount and
debt issuance cost, including commitment fees, (c) capitalized interest, (d)
non-cash interest expense, (e) commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing, (f)
net costs associated with Hedging Obligations (including amortization of fees),
(g) Redeemable Dividends, (h) Preferred Stock dividends in respect of all
<PAGE>
Preferred Stock of Restricted Subsidiaries held by Persons other than the
Company or a Wholly Owned Subsidiary, (i) interest incurred in connection with
Investments in discontinued operations, (j) interest accruing on any Debt of any
other Person to the extent such Debt is Guaranteed by the Company or any
Restricted Subsidiary and (k) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
Company) in connection with Debt Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss)
of the Company and its consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income (a) any net income (loss)
of any Person (other than the Company) if such Person is not a Restricted
Subsidiary, except that (i) subject to the exclusion contained in clause (d)
below, the Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate amount of
cash distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution to a Restricted Subsidiary, to the
limitations contained in clause (c) below) and (ii) the Company's equity in a
net loss of any such Person other than an Unrestricted Subsidiary for such
period shall be included in determining such Consolidated Net Income, (b) any
net income (loss) of any Restricted Subsidiary if such Restricted Subsidiary is
subject to restrictions, directly or indirectly, on the payment of dividends or
the making of distributions, directly or indirectly, to the Company, except that
(i) subject to the exclusion contained in clause (c) below, the Company's equity
in the net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash
distributed by such Restricted Subsidiary during such period to the Company or
another Restricted Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution to another Restricted Subsidiary,
to the limitation contained in this clause) and (ii) the Company's equity in a
net loss of any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income, (c) any gain (but not loss) realized
upon the sale or other disposition of any Property of the Company or any of its
consolidated Subsidiaries (including pursuant to any Sale and Leaseback
Transaction) which is not sold or otherwise disposed of in the ordinary course
of business, (d) any extraordinary gain or loss, (e) the cumulative effect of a
change in accounting principles and (f) any non-cash compensation expense
realized for grants of performance shares, stock options or other stock award to
officers, directors and employees of the Company or any Restricted Subsidiary.
"Consolidated Net Tangible Assets" means, as of any date of
determination, the total amount of assets (less applicable reserves and other
properly deductible items) after deducting (1) all current liabilities
(excluding the amount of those which are by their terms extendable or renewable
at the option of the obligor to a date more than 12 months after the date as of
which the amount is being determined and excluding all intercompany items
between the Company and any Restricted Subsidiary or between Restricted
Subsidiaries), (2) all goodwill, tradenames, trademarks, patents, unamortized
debt discount and expense and other like intangible assets, all as determined in
accordance with GAAP, (3) the excess of cost over fair market value of assets or
businesses acquired, (4) any revaluation or other write-up in book value of
assets subsequent to the last day of the fiscal quarter of the Company
immediately preceding the Issue Date as a result of a change in the method of
valuation in accordance with GAAP, (5) minority interests in consolidated
Subsidiaries held by Persons other than the Company or any Restricted
Subsidiary, (6) treasury stock, (7) cash or securities set aside and held in a
sinking or other analogous fund established for the purpose of redemption or
other retirement of Capital Stock to the extent such obligation is not reflected
in Consolidated Current Liabilities, and (8) Investments in and assets of
Unrestricted Subsidiaries.
"Consolidated Net Worth" means the excess of assets over liabilities of
the Company and its consolidated Subsidiaries, plus Minority Interests, as
determined from time to time in accordance with GAAP.
<PAGE>
"Credit Facility" means, with respect to the Company or any Restricted
Subsidiary, one or more debt or commercial paper facilities with banks or other
institutional lenders (including the New Bank Credit Facility) providing for
revolving credit loans, terms loans, receivables or inventory financing
(including through the sale of receivables or inventory to such lenders or to
special purpose, bankruptcy remote entities formed to borrow from such lenders
against such receivables or inventory) or trade letters of credit.
"Currency Agreement" means, in respect of any Person, any foreign
exchange contract, currency swap agreement, currency option or other similar
agreement or arrangement designed to protect such Person against fluctuations in
currency exchange rates.
"Debt" means, with respect to any Person on any date of determination
(without duplication), (a) the principal of and premium (if any) in respect of
(i) debt of such Person for money borrowed and (ii) debt evidenced by notes,
debentures, bonds or other similar instruments for the payment of which such
Person is responsible or liable; (b) all Capital Lease Obligations of such
Person and all Attributable Debt in respect of Sale and Leaseback Transactions
entered into by such Person; (c) all obligations of such Person issued or
assumed as the deferred purchase price of Property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (d) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in (a) through (c)
above) entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent drawn
upon, such drawing is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit); (e) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends); (f) all obligations of the type
referred to in clauses (a) through (e) of other Persons and all dividends of
other Persons for the payment of which, in either case, such Person is
responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee; (g) all obligations of the type
referred to in clauses (a) through (f) of other Persons secured by any Lien on
any Property of such Person (whether or not such obligation is assumed by such
Person), the amount of such obligation being deemed to be the lesser of the
value of such Property or the amount of the obligation so secured; and (h) to
the extent not otherwise included in this definition, Hedging Obligations of
such Person. The amount of Debt of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, Redeemable
Stock of such Person as to which (i) the maturity, (ii) mandatory redemption or
(iii) redemption, conversion or exchange at the option of the holder thereof
occurs, or may occur, on or prior to the first anniversary of the Stated
Maturity of the Notes; provided, however, that Redeemable Stock of such Person
that would not otherwise be characterized as Disqualified Stock under this
definition shall not constitute Disqualified Stock if such Redeemable Stock is
convertible or exchangeable into Debt solely at the option of the issuer
thereof.
"EBITDA" means, for any period, an amount equal to, for the Company and
its consolidated Restricted Subsidiaries, (a) the sum of Consolidated Net Income
for such period, plus the following to the extent reducing Consolidated Net
Income for such period: (i) the provision for taxes based on income or profits
or utilized in computing net loss, (ii) Consolidated Interest Expense, (iii)
depreciation, (iv) amortization of intangibles and (v) any other non-cash items
(other than any such non-cash item to the extent that it represents an accrual
of or reserve for cash expenditures in any future period), minus (b) all
<PAGE>
non-cash items increasing Consolidated Net Income for such period (other than
any such non-cash item to the extent that it will result in the receipt of cash
payments in any future period). Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
of, a Restricted Subsidiary shall be added to Consolidated Net Income to compute
EBITDA only to the extent (and in the same proportion) that the net income of
such Restricted Subsidiary was included in calculating Consolidated Net Income
and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Restricted
Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934.
"Funded Debt" means all Debt of the Company and its Restricted
Subsidiaries with a Stated Maturity more than one year after, or which is
renewable or extendable at the option of the Company for a period ending more
than one year after, the date as of which Funded Debt is being determined.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
in (i) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the Commission
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the
Commission.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning. The term "Guarantor" shall mean any
Person Guaranteeing any obligation.
"Hedging Obligation" of any Person means any obligation of such Person
pursuant to any Interest Rate Agreement, Currency Exchange Protection Agreement
or any other similar agreement or arrangement.
"Holder" or "Noteholder" means the Person in whose name a Note or an
Exchange Note is registered on the Registrar's books.
"Incur" means, with respect to any Debt or other obligation of any
Person, to create, issue, incur (by merger, conversion, exchange or otherwise),
extend, assume, Guarantee or become liable in respect of such Debt or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Debt or obligation on the balance sheet of such Person (and "Incurrence"
and "Incurred" shall have meanings correlative to the foregoing); provided,
however, that a change in GAAP that results in an obligation of such Person that
exists at such time, and is not theretofore classified as Debt, becoming Debt
shall not be deemed an Incurrence of such Debt; provided further, however, that
solely for purposes of determining compliance with "-Certain
Covenants-Limitation on Debt", amortization of debt discount shall not be deemed
to be the Incurrence of Debt, provided that in the case of Debt sold at a
discount, the amount of such Debt Incurred shall at all times be the aggregate
principal amount at Stated Maturity.
<PAGE>
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such Person against
fluctuations in interest rates.
"Investment" by any Person means any direct or indirect loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person), advance or other
extension of credit or capital contribution (by means of transfers of cash or
other Property to others or payments for Property or services for the account or
use of others, or otherwise) to, or Incurrence of a Guarantee of any obligation
of, or purchase or acquisition of Capital Stock, bonds, notes, debentures or
other securities or evidence of Debt issued by, any other Person. In determining
the amount of any Investment made by transfer of any Property other than cash,
such Property shall be valued at its fair market value at the time of such
Investment.
"Investment Grade Rating" means a rating equal to or higher than Baa3
(or the equivalent) by Moody's and BBB- (or the equivalent) by S&P.
"Investment Grade Status" shall be deemed to have been reached on the
date that the Notes have an Investment Grade Rating from both Rating Agencies.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means, with respect to any Property of any Person, any mortgage
or deed of trust, pledge, security interest, encumbrance, hypothecation,
assignment, deposit arrangement, lien, charge or adverse claim affecting title
or resulting in an encumbrance against Property (including any Capital Lease
Obligation, conditional sale or other title retention agreement or lease in the
nature thereof or any filing or agreement to file a financing statement as
debtor under the Uniform Commercial Code or any similar statute other than to
reflect ownership by another Person of Property leased to such Person under a
lease that is not in the nature of a Capital Lease Obligation, conditional sale
or title retention agreement).
"Minority Interest" means any Capital Stock of a Subsidiary of the
Company that is not owned by the Company or another such Subsidiary.
"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"Net Cash Proceeds" means, with respect to any issuance or sale of
Capital Stock, the cash proceeds of such issuance or sale, net of attorneys'
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Permitted Liens" means:
(a) Liens to secure Debt permitted to be Incurred under clause (b) of
the second paragraph of the covenant described under "-Certain
Covenants-Limitation on Debt", provided that any such Lien may not extend to any
Property of the Company or any Restricted Subsidiary, other than the Property
acquired, constructed or leased with the proceeds of such Debt and any
improvements or accessions to such Property;
(b) Liens for taxes, assessments or governmental charges or levies on
the Property of the Company or any Restricted Subsidiary if the same shall not
at the time be delinquent or thereafter can be paid without penalty, or are
being contested in good faith and by appropriate proceedings promptly instituted
and diligently concluded, provided that any reserve or other appropriate
provision that shall be required in conformity with GAAP shall have been made
therefor;
(c) Liens imposed by law, such as carriers', warehousemen's and
mechanics' Liens on the Property of the Company or any Restricted Subsidiary
arising in the ordinary course of business and securing payment of obligations
which are not more than 60 days past due or are being contested in good faith
and by appropriate proceedings;
<PAGE>
(d) Liens on the Property of the Company or any Restricted Subsidiary
Incurred in the ordinary course of business to secure performance of obligations
with respect to statutory or regulatory requirements, performance or
return-of-money bonds, surety bonds or other obligations of a like nature and
Incurred in a manner consistent with industry practice, in each case which are
not incurred in connection with the borrowing of money, the obtaining of
advances or credit or the payment of the deferred purchase price of Property and
which do not in the aggregate impair in any material respect the use of Property
in the operation of the business of the Company and the Restricted Subsidiaries
taken as a whole;
(e) Liens on Property at the time the Company or any Restricted
Subsidiary acquired such Property, including any acquisition by means of a
merger or consolidation with or into the Company or any Restricted Subsidiary;
provided, however, that any such Lien may not extend to any other Property of
the Company or any Restricted Subsidiary; provided further, however, that such
Liens shall not have been Incurred in anticipation or in connection with the
transaction or series of transactions pursuant to which such Property was
acquired by the Company or any Restricted Subsidiary;
(f) Liens on the Property of a Person at the time such Person becomes a
Restricted Subsidiary; provided, however, that any such Lien may not extend to
any other Property of the Company or any other Restricted Subsidiary which is
not a direct Subsidiary of such Person; provided further, however, that any such
Lien was not Incurred in anticipation of or in connection with the transaction
or series of transactions pursuant to which such Person became a Restricted
Subsidiary;
(g) pledges or deposits by the Company or any Restricted Subsidiary
under workmen's compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids, tenders, contracts
(other than for the payment of Debt) or leases to which the Company or any
Restricted Subsidiary is party, or deposits to secure public or statutory
obligations of the Company, or deposits for the payment of rent, in each case
Incurred in the ordinary course of business;
(h) utility easements, building restrictions and such other
encumbrances or charges against real Property as are of a nature generally
existing with respect to properties of a similar character;
(i) Liens existing on the Issue Date not otherwise described in clauses
(a) through (h) above; or
(j) Liens on the Property of the Company or any Restricted Subsidiary
to secure any Refinancing, in whole or in part, of any Debt secured by Liens
referred to in clause (a), (e), (f) or (i) above; provided, however, that any
such Lien shall be limited to all or part of the same Property that secured the
original Lien (together with improvements and accessions to such Property) and
the aggregate principal amount of Debt that is secured by such Lien shall not be
increased to an amount greater than the sum of (i) the outstanding principal
amount, or, if greater, the committed amount, of the Debt secured by Liens
described under clause (a), (e), (f) or (i) above, as the case may be, at the
time the original Lien became a Permitted Lien under the Indenture and (ii) an
amount necessary to pay any premiums, fees and other expenses incurred by the
Company in connection with such Refinancing.
"Permitted Refinancing Debt" means any Debt that Refinances any other
Debt, including any successive Refinancings, so long as (a) such Debt is in an
aggregate principal amount (or if Incurred with original issue discount, an
aggregate issue price) not in excess of the sum of (i) the aggregate principal
amount (or if Incurred with original issue discount, the aggregate accreted
value) then outstanding of the Debt being Refinanced and (ii) an amount
necessary to pay any fees and expenses, including premiums and defeasance costs,
related to such Refinancing, (b) the Average Life of such Debt is equal to or
greater than the Average Life of the Debt being Refinanced, (c) the Stated
Maturity of such Debt is no earlier than the Stated Maturity of the Debt being
Refinanced and (d) the new Debt shall not be senior in right of payment to the
Debt that is being Refinanced; provided, however, that Permitted Refinancing
Debt shall not include (x) Debt of a Subsidiary that Refinances Debt of the
Company or (y) Debt of the Company or a Restricted Subsidiary that Refinances
Debt of an Unrestricted Subsidiary.
<PAGE>
"Person" means any individual, corporation, partnership, company
(including any limited liability company), joint venture, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over shares of Capital Stock of any other class of such Person.
"principal" of the Notes means the principal amount of the Notes plus
the premium, if any, on the Notes.
"Principal Property" means any Property owned or leased by the Company
or any Subsidiary of the Company, the gross book value of which exceeds one
percent of Consolidated Net Worth.
"Property" means, with respect to any Person, all types of real,
personal, tangible, intangible or mixed property owned by such Person whether or
not included in the most recent consolidated balance sheet of such Person and
its Subsidiaries under GAAP.
"Rating Agencies" mean Moody's and S&P.
"Redeemable Dividend" means, for any dividend with respect to
Redeemable Stock, the quotient of the dividend divided by the difference between
one and the maximum statutory federal income tax rate (expressed as a decimal
number between 1 and 0) then applicable to the issuer of such Redeemable Stock.
"Redeemable Stock" means, with respect to any Person, any Capital Stock
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or otherwise (a) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, (b) is or may
become redeemable or repurchaseable at the option of the holder thereof, in
whole or in part, or (c) is convertible or exchangeable for Debt or Disqualified
Stock.
"Refinance" means, in respect of any Debt, to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to issue other Debt, in
exchange or replacement for, such Debt. "Refinanced" and "Refinancing" shall
have correlative meanings.
"Restricted Subsidiary" means (a) any Subsidiary of the Company after
the Issue Date unless such Subsidiary shall have been designated an Unrestricted
Subsidiary as permitted or required pursuant to the covenant described under
"--Certain Covenants-Designation of Restricted and Unrestricted Subsidiaries"
and (b) an Unrestricted Subsidiary which is redesignated as a Restricted
Subsidiary as permitted pursuant to the covenant described under "--Certain
Covenants--Designation of Restricted and Unrestricted Subsidiaries".
"S&P" means Standard & Poor's Ratings Service or any successor to the
rating agency business thereof.
"Sale and Leaseback Transaction" means any arrangement with any Person
(other than the Company or any Restricted Subsidiary) providing for the leasing
by the Company or a Restricted Subsidiary of any Property owned by the Company
or such Restricted Subsidiary (except for leases for a term of not more than
three years), which property has been or is to be sold or transferred by the
Company or such Restricted Subsidiary to such person on the security of such
Property more than 365 days after the acquisition thereof or the completion of
construction and commencement of full operation thereof.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the Commission.
"Stated Maturity" means, with respect to any security or any
installment of interest thereon, the date specified in such security as the
fixed date on which the principal of such security or such installment of
interest is due and payable.
<PAGE>
"Subordinated Obligation" means any Debt of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect.
"Subsidiary," in respect of any Person, means (i) any Person of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more of the Subsidiaries of that
Person or a combination thereof, and (ii) any partnership, joint venture or
other Person in which such Person or one or more of the Subsidiaries of that
Person or a combination thereof has the power to control by contract or
otherwise the board of directors or equivalent governing body or otherwise
controls such entity.
"Unrestricted Subsidiary" means (a) any Subsidiary of the Company in
existence on the Issue Date that is not a Restricted Subsidiary; (b) any
Subsidiary of an Unrestricted Subsidiary; and (c) any Subsidiary of the Company
that is designated after the Issue Date as an Unrestricted Subsidiary as
permitted pursuant to the covenant described under "--Certain
Covenants-Designation of Restricted and Unrestricted Subsidiaries" and not
thereafter redesignated as a Restricted Subsidiary as permitted pursuant
thereto.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof.
"Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary
all the Voting Stock of which (other than directors' qualifying shares) is at
such time owned by the Company or one or more other Wholly Owned Subsidiaries.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company agreed pursuant to a registration rights agreement (the
"Registration Rights Agreement") with the Initial Purchasers, for the benefit of
the Holders of the Old Notes, that the Company will, at its cost, (a) not later
than 90 days after the date of original issuance of the Old Notes, file a
registration statement (the "Exchange Offer Registration Statement") with the
Commission with respect to a registered offer to exchange the Old Notes for
Exchange Notes having terms substantially identical in all material respects to
the Old Notes (except that the Exchange Notes will not contain terms with
respect to transfer restrictions) and (b) cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act not later than 150
days after the date of original issuance of the Old Notes. Upon the
effectiveness of the Exchange Offer Registration Statement, the Company will
offer the Exchange Notes in exchange for surrender of the Old Notes (the
"Exchange Offer"). The Company will keep the Exchange Offer open for not less
than 30 days (or longer if required by applicable law) after the date notice of
the Exchange Offer is mailed to the Holders of the Old Notes. For each Old Note
surrendered to the Company pursuant to the Exchange Offer, the Holder of such
Old Note will receive an Exchange Note having a principal amount equal to that
of the surrendered Old Note. Interest on each Exchange Note will accrue from the
last interest payment date on which interest was paid on the Old Note
surrendered in exchange therefor or, if no interest has been paid on such Old
Note, from the date of its original issue. Under existing Commission
interpretations, the Exchange Notes would be freely transferable by Holders of
the Exchange Notes other than affiliates of the Company after the Exchange Offer
without further registration under the Securities Act if the Holder of the
Exchange Notes represents that it is acquiring the Exchange Notes in the
ordinary course of its business, that it has no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes and
<PAGE>
that it is not an affiliate of the Company, as such terms are interpreted by the
Commission, provided that broker-dealers ("Participating Broker-Dealers")
receiving Exchange Notes in the Exchange Offer will have a prospectus delivery
requirement with respect to resales of such Exchange Notes. The Commission has
taken the position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to Exchange Notes (other than a
resale of an unsold allotment from the original sale of the Old Notes) with the
prospectus contained in the Exchange Offer Registration Statement. Under the
Registration Rights Agreement, the Company is required to allow Participating
Broker-Dealers and other persons, if any, with similar prospectus delivery
requirements to use the prospectus contained in the Exchange Offer Registration
Statement in connection with the resale of such Exchange Notes.
A Holder of Old Notes (other than certain specified Holders) who wishes
to exchange such Old Notes for Exchange Notes in the Exchange Offer will be
required to represent that any Exchange Notes to be received by it will be
acquired in the ordinary course of its business and that at the time of the
commencement of the Exchange Offer it has no arrangement or understanding with
any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes and that it is not an "affiliate" of the
Company, as defined in Rule 405 of the Securities Act, or if it is an affiliate,
that it will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable.
In the event that (i) applicable interpretations of the staff of the
Commission do not permit the Company to effect such a Exchange Offer, (ii) for
any other reason the Exchange Offer Registration Statement is not declared
effective within 150 days after the date of the original issuance of the Old
Notes or the Exchange Offer is not consummated within 180 days after the
original issuance of the Notes, (iii) the Initial Purchasers so request with
respect to Old Notes not eligible to be exchanged for Exchange Notes in the
Exchange Offer, or (iv) any Holder of Old Notes (other than an Initial
Purchaser) is not eligible to participate in the Exchange Offer or does not
receive freely tradeable Exchange Notes in the Exchange Offer other than by
reason of such Holder being an affiliate of the Company (it being understood
that the requirement that a Participating Broker-Dealer deliver the prospectus
contained in the Exchange Offer Registration Statement in connection with sales
of Exchange Notes shall not result in such Exchange Notes being not "freely
tradeable"), the Company will, at its cost, (a) as promptly as practicable, file
a resale Shelf Registration Statement (the "Shelf Registration Statement")
covering resales of the Old Notes or the Exchange Notes, as the case may be, (b)
cause the Shelf Registration Statement to be declared effective under the
Securities Act, and (c) use its best efforts to keep the Shelf Registration
Statement effective until two years after its effective date. The Company will,
in the event a Shelf Registration Statement is filed, among other things,
provide to each Holder for whom such Shelf Registration Statement was filed
copies of the prospectus which is a part of the Shelf Registration Statement,
notify each such Holder when the Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Old Notes or the Exchange Notes, as the case may be. A Holder
selling such Old Notes or Exchange Notes pursuant to the Shelf Registration
Statement generally would be required to be named as a selling securityholder in
the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such Holder (including
certain indemnification obligations). The Company shall be deemed not to have
used its best efforts to keep the Shelf Registration Statement effective if it
voluntarily takes any action that would result in Holders of securities covered
thereby not being able to offer and sell such securities, unless (i) such action
is required by applicable law or (ii) such action is taken by the Company in
good faith and for valid business reasons (not including avoidance of the
Company's obligations under the Registration Rights Agreement), including the
acquisition or divestiture of assets, so long as the Company promptly thereafter
complies with the requirements of the Registration Rights Agreement to file
certain amendments and other documents, if applicable.
<PAGE>
If (a) on or prior to the 90th day following the date of original
issuance of the Old Notes, neither the Exchange Offer Registration Statement nor
the Shelf Registration Statement has been filed with the SEC, (b) on or prior to
the 150th day following the date of original issuance of the Old Notes, neither
the Exchange Offer Registration Statement nor the Shelf Registration Statement
has been declared effective, (c) on or prior to the 180th day following the date
of original issuance of the Old Notes, neither the Exchange Offer has been
consummated nor the Shelf Registration Statement has been declared effective, or
(d) after either the Exchange Offer Registration Statement or the Shelf
Registration Statement has been declared effective, such Registration Statement
thereafter ceases to be effective or usable (subject to certain exceptions) in
connection with resales of Old Notes or Exchange Notes in accordance with and
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d), a "Registration Default"), Special
Interest will accrue on the principal amount of the Old Notes and the Exchange
Notes (in addition to the stated interest on the Old Notes and the Exchange
Notes) from and including the date on which any such Registration Default shall
occur to but excluding the date on which all Registration Defaults have been
cured. Special Interest will accrue at a rate per annum of 0.25% of the
principal amount of the Notes for each such Registration Default. The aggregate
amount of Special Interest payable pursuant to the above provisions will in no
event exceed 1.00% per annum of the principal amount of the Notes.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the Company.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the principal United States federal
income tax consequences of ownership and disposition of the Notes. This summary
is based on the Internal Revenue Code of 1986, as amended to the date hereof
(the "Code"), administrative pronouncements and rulings, judicial decisions and
existing and proposed Treasury Regulations, changes to any of which subsequent
to the date of this Prospectus may affect the tax consequences described herein
(possibly on a retroactive basis). This summary addresses only purchasers who
purchase the Notes at the "issue price" (as defined below) and hold the Notes as
capital assets within the meaning of Section 1221 of the Code. It does not
discuss all the tax consequences that may be relevant in light of a Holder's
particular circumstances or to Holders subject to special rules, such as certain
financial institutions, insurance companies, dealers in securities and
tax-exempt organizations, or persons holding Notes as a hedge or as part of a
straddle. Persons considering the purchase of Notes should consult their tax
advisors with regard to the application of the United States federal income tax
laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction.
As used herein, the term "United States Holder" means a beneficial
owner of a Note that is (i) for United States federal income tax purposes a
citizen or resident of the United States, (ii) a corporation or other entity
created or organized in or under the laws of the United States or of any State
thereof (including the District of Columbia), or (iii) an estate or trust
described in Section 7701(a)(30) of the Code. The term also includes certain
former citizens and long term residents of the United States.
As used herein, the term "United States Alien Holder" means an owner of
a Note that is, for United States federal income tax purposes, (i) a nonresident
alien individual, (ii) a foreign corporation, or (iii) an estate or trust
described in Section 7701(a)(31) of the Code.
Tax Consequences to United States Holders
Payments of Interest. Because the "issue price" of the Notes (i.e., the
first price to the public (not including bond houses, brokers or similar persons
acting as underwriters, placement agents or wholesalers) at which a substantial
amount of the Notes is sold for cash) was less than the principal amount of the
Notes by only a de minimus amount (within in the meaning of Section 1273(a)(3)
of the Code), the Notes are not expected to be treated as having been issued
with original issue discount. Interest on a Note will be taxable to a United
States Holder as ordinary income at the time it is received or accrued,
depending on the United States Holder's method of accounting for tax purposes.
<PAGE>
Sale, Exchange or Retirement of the Notes. A United States Holder's tax
basis in a Note generally will be its cost. Upon the sale, exchange or
retirement of a Note, a United States Holder will generally recognize capital
gain or loss equal to the difference between the amount realized (not including
any amounts attributable to accrued and unpaid interest which will be taxable as
ordinary income) and the Holder's tax basis in the Note. United States Holders
should consult their tax advisors regarding the taxation of capital gains and
losses (including the effect of the recently enacted tax legislation).
An exchange of Old Notes for Exchange Notes pursuant to the Exchange
Offer will not be treated as an exchange for United States federal income tax
purposes. Accordingly, Holders who exchange their Old Notes for Exchange Notes
will not recognize income, gain or loss for United States federal income tax
purposes. The holding period of an Exchange Note will include the holding period
of the Old Note exchanged and the basis of the Exchange Note will be the same as
the basis of the Old Note immediately before the exchange. Although the matter
is not free from doubt, if any Special Interest becomes payable on a Note, such
Special Interest should be treated in the same manner as stated interest on the
Note.
Backup Withholding and Information Reporting. Certain noncorporate
United States Holders may be subject to backup withholding at a rate of 31% on
payments of principal of, premium and interest on, and the proceeds of
disposition of, a Note. Backup withholding will apply only if the United States
Holder (i) fails to furnish its Taxpayer Identification Number ("TIN"), which,
for an individual, would be the individual's Social Security number, to the
payor responsible for backup withholding, (ii) furnishes an incorrect TIN to
such payor, (iii) is notified by the Internal Revenue Service ("IRS") that it
has failed to report properly payments of interest and dividends, or (iv) under
certain circumstances, fails to certify, under penalty of perjury, that it has
furnished a correct TIN and has not been notified by the IRS that it is subject
to backup withholding for failure to report interest and dividend payments.
United States Holders should consult their tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption if applicable.
Backup withholding is not an additional tax. The amount of any backup
withholding from a payment to a United States Holder will be allowed as a credit
against such Holder's United States federal income tax liability and may entitle
such Holder to a refund, provided that the required information is furnished to
the IRS.
Tax Consequences to United States Alien Holders
Under present United States federal law, and subject to the discussion
below concerning backup withholding:
(a) payment of principal and interest on the Notes by the Company or
any paying agent to any United States Alien Holder will not be subject to United
States federal withholding tax, provided that, in the case of interest, (i) such
Holder does not own, actually or constructively, 10% or more of the total
combined voting power of all classes of stock of the Company entitled to vote
and is not a controlled foreign corporation related, directly or indirectly, to
the Company through stock ownership and (ii) the statement requirement set forth
in Section 871(h) or Section 881(c) of the Code has been satisfied with respect
to the beneficial owner, as discussed below;
(b) a United States Alien Holder of a Note will not be subject to
United States federal income or withholding tax on gain realized on the sale,
exchange or other disposition of such Note, unless (i) such Holder is an
individual who is present in the United States for 183 days or more in the
taxable year of disposition and either (a) such individual has a "tax home" (as
defined in Section 911(d)(3) of the Code) in the United States (unless such gain
is attributable to a fixed place of business in a foreign country maintained by
such individual and has been subject to foreign tax of at least 10%) or (b) the
gain is attributable to an office or other fixed place of business maintained by
such individual in the United States, or (ii) such gain is effectively connected
with the conduct by such Holder of a trade or business in the United States or,
if a tax treaty applies, the gain is attributable to a United States permanent
establishment of the United States Alien Holder; and
<PAGE>
(c) under Section 2105(b) of the United States federal estate tax law,
a Note held by an individual who is not a United States Holder at the time of
his death will not be subject to United States federal estate tax as a result of
such individual's death, provided that the individual does not own, actually or
constructively, 10% or more of the total combined voting power of all classes of
stock of the Company entitled to vote and, at the time of such individual's
death, payments with respect to such Note would not have been effectively
connected to the conduct by such individual of a trade or business in the United
States.
Sections 871(h) and 881(c) of the Code require that, in order to
qualify for the portfolio interest exemption from withholding tax described in
paragraph (a) above, either the beneficial owner of the Note, or a securities
clearing organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution") and that is holding the Note on behalf of such beneficial owner,
must file a statement with the withholding agent to the effect that the
beneficial owner of the Note is not a United States Holder. Under temporary
United States Treasury Regulations (generally applicable for payments to a
beneficial owner of the Note who is not a United States Holder made before
January 1, 1999), such requirement will be fulfilled if the beneficial owner of
a Note certifies on IRS Form W-8, under penalties of perjury, that it is not a
United States Holder and provides its name and address, and any Financial
Institution holding the Note on behalf of the beneficial owner files a statement
with the withholding agent to the effect that it has received such a statement
from the Holder (and furnishes the withholding agent with a copy thereof). For
payments made after December 31, 1998, the certification procedures described
above will fulfill the statement requirement if the withholding agent does not
know, or have reason to know, that the certificate is false.
If a United States Alien Holder of a Note is engaged in a trade or
business in the United States, and if interest on the Note is effectively
connected with the conduct of such trade or business, the United States Alien
Holder will be exempt from the withholding tax discussed in the preceding
paragraph. Unless a tax treaty provides otherwise, such United States Alien
Holders will generally be subject to regular United States income tax on
interest and on any gain realized on the sale, exchange or other disposition of
a Note in the same manner as if it were a United States Holder. See "--Tax
Consequences to United States Holders" above. Such a Holder will be required to
provide to the Company a properly executed IRS Form 4224 (IRS Form W-8, for
payments made after December 31, 1998) in order to claim an exemption from
withholding tax. In addition, if such United States Alien Holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or such
lower rate provided by an applicable treaty) of its effectively connected
earnings and profits for the taxable year, subject to certain adjustments. For
purposes of the branch profits tax, interest on and any gain recognized on the
sale, exchange or other disposition of a Note will be included in the
effectively connected earnings and profits of such United States Alien Holder if
such interest or gain, as the case may be, is effectively connected with the
conduct by the United States Alien Holder of a trade or business in the United
States.
Backup Withholding and Information Reporting. Under current Treasury
Regulations, information reporting and backup withholding at a rate of 31% will
not apply to payments of principal or interest made outside the United States by
the Company or any paying agent thereof on a Note if the certifications required
by Sections 871(h) and 881(c) are received, provided that the Company or such
paying agent, as the case may be, does not have actual knowledge that the payee
is a United States person.
Under current Treasury Regulations, payments on the sale, exchange or
other disposition of a Note made to or through a foreign office of a broker
generally will not be subject to backup withholding. However, if such broker is
a United States person, a controlled foreign corporation for United States tax
purposes, or a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified three-year
period, information reporting will be required unless the broker has in its
records documentary evidence that the beneficial owner is not a United States
person and certain other conditions are met or the beneficial owner otherwise
establishes an exemption. Under Treasury Regulations applicable to payments made
<PAGE>
after December 31, 1998, backup withholding will apply to any payment which such
broker is required to report if such broker has actual knowledge that the payee
is a United States person. Payments to or through the United States office of a
broker will be subject to backup withholding and information reporting unless
the Holder certifies, under penalties of perjury, that it is not a United States
person or otherwise establishes an exemption.
United States Alien Holders of Notes should consult their tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and the
procedure for obtaining such an exemption, if available. Backup withholding is
not an additional tax. Any amounts withheld from a payment to a United States
Alien Holder under the backup withholding rules will be allowed as a credit
against such Holder's United States federal income tax liability and may entitle
such Holder to a refund, provided that the required information is furnished to
the IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECT, INCLUDING POSSIBLE
RETROACTIVE EFFECT, OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
ON OCTOBER 6, 1997, THE IRS ISSUED FINAL REGULATIONS (THE "FINAL
REGULATIONS") THAT WILL AFFECT THE PROCEDURES TO BE FOLLOWED BY A UNITED STATES
ALIEN HOLDER IN ESTABLISHING SUCH UNITED STATES ALIEN HOLDER'S STATUS FOR
PURPOSES OF INFORMATION REPORTING, BACKUP WITHHOLDING, AND CLAIMING A REDUCTION
IN WITHHOLDING BASED ON AN INCOME TAX TREATY. THE FINAL REGULATIONS ARE
GENERALLY EFFECTIVE FOR PAYMENTS MADE AFTER DECEMBER 31, 1998. UNITED STATES
ALIEN HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE EFFECT, IF ANY, OF
THE FINAL REGULATIONS ON THEIR PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, starting on the Exchange Offer Consummation Date and ending on the close
of business on the first anniversary of the Exchange Offer Consummation Date, it
will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
_____________, ______, all dealers effecting transactions in the Exchange Notes
may be required to deliver a prospectus. A broker-dealer that delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).
The Company will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that it will deliver
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
<PAGE>
For a period of one year after the Exchange Offer Consummation Date,
the Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed in the
Registration Rights Agreement to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for the holders of the Old Notes) other
than commissions or concessions of any brokers or dealers and to indemnify the
holders of the Old Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
TRANSFER RESTRICTIONS ON OLD NOTES
Offers and Sales by the Initial Purchasers
The Old Notes were not registered under the Securities Act and may not
be offered or sold in the United States or to, or for the account or benefit of,
United States persons except in accordance with an applicable exemption from the
registration requirements thereof. Accordingly, the Old Notes were offered and
sold only (1) in the United States to QIBs under Rule 144A under the Securities
Act and (2) outside the United States to non-United States persons ("foreign
purchasers") in reliance upon Regulation S under the Securities Act. Each
foreign purchaser that is a purchaser of Old Notes from the Initial Purchasers
(an "Initial Foreign Purchaser") was required to sign a certificate in the form
provided by the Initial Purchasers.
Investor Representations and Restrictions on Resale
Each purchaser of the Old Notes was deemed to have represented and
agreed as follows:
(1) it is acquiring the Old Notes for its own account or for an account
with respect to which it exercises sole investment discretion, and that it or
such account is a QIB or a foreign purchaser outside the United States;
(2) it acknowledges that the Old Notes have not been registered under
the Securities Act and may not be sold except as permitted below;
(3) it understands and agrees (x) that such Old Notes are being offered
only in a transaction not involving any public offering within the meaning of
the Securities Act, and (y) that (A) if within two years after the date of
original issuance of the Old Notes or if within three months after it ceases to
be an affiliate (within the meaning of Rule 144 under the Securities Act) of the
Company, it decides to resell, pledge or otherwise transfer such Old Notes on
which the legend set forth below appears, such Old Notes may be resold, pledged
or transferred only (i) to the Company, (ii) so long as such security is
eligible for resale pursuant to Rule 144A, to a person whom the seller
reasonably believes is a QIB that purchases for its own account or for the
account of a QIB to whom notice is given that the resale, pledge or transfer is
being made in reliance on Rule 144A (as indicated by the box checked by the
transferor on the Certificate of Transfer on the reverse of the Old Note if such
Old Note is not in book-entry form), (iii) in an offshore transaction in
accordance with Regulation S (as indicated by the box checked by the transferor
on the Certificate of Transfer on the reverse of the Old Note if such Old Note
is not in book-entry form), (iv) to an Institutional Accredited Investor, as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act (as indicted
by the box checked by the transferor on the Certificate of Transfer on the
reverse of the Old Note if such Old Note is not in book-entry form), that is
acquiring the Notes for investment purposes and not for distribution, and a
certificate which may be obtained from the Company or the Trustee is delivered
by the transferee to the Company and the Trustee, (v) pursuant to an exemption
from the registration requirements of the Securities Act provided by Rule 144
(if applicable) under the Securities Act, or (vi) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States, (B) the
purchaser will, and each subsequent holder is required to, notify any purchaser
of Old Notes from it of the resale restrictions referred to in (A) above, if
then applicable, and (C) with respect to any transfer of Old Notes by an
Institutional Accredited Investor, such holder will deliver to the Company and
the Trustee such certificates and other information as they may reasonably
require to confirm that the transfer by it complies with the foregoing
restrictions;
<PAGE>
(4) it understands that the notification requirement referred to in (3)
above will be satisfied, in the case only of transfers by physical delivery of
certificated Old Notes other than a Global Note, by virtue of the fact that the
following legend will be placed on the Old Notes unless otherwise agreed to by
the Company:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE
ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS
AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE
DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG
AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS
INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON
THE REVERSE OF THIS SECURITY), (4) TO AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT
(AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE WHICH MAY BE
OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE
COMPANY AND THE TRUSTEE, (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES
ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY
AGREES IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND
OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY
IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF,
BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE
COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING
THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S.
PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING
THE REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE
SECURITIES ACT";
(5) it (i) is able to fend for itself in the transactions contemplated
by the Offering Memorandum; (ii) has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its
prospective investment in the Old Notes, and (iii) has the ability to bear the
economic risks of its prospective investment and can afford the complete loss of
such investment; and
(6) it understands that the Company, the Initial Purchasers and others
will rely upon the truth and accuracy of the foregoing acknowledgments,
representations and agreements and agrees that if any of the acknowledgments,
representations and warranties deemed to have been made by it by its purchase of
the Old Notes are no longer accurate, it shall promptly notify the Company and
the Initial Purchasers. If it is acquiring the Old Notes as a fiduciary or agent
for one or more investor accounts, it represents that it has sole investment
discretion with respect to each such account and it has full power to make the
foregoing acknowledgments, representations and agreements on behalf of such
account.
LEGAL MATTERS
The validity of the issuance of the Exchange Notes offered
hereby will be passed upon for the Company by Barnes & Thornburg, Indianapolis,
Indiana.
<PAGE>
INDEPENDENT AUDITORS
The consolidated financial statements of the Company and its
Subsidiaries as of November 30, 1996 and 1995 and for each of the three years in
the period ended November 30, 1996 included in this Prospectus have been audited
by Ernst & Young LLP, independent auditors, as stated in their report appearing
herein.
The consolidated financial statements relating to Guardsman Products,
Inc. and its subsidiaries, as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1995, which are included in
the Company's Form 8-K dated April 8, 1996 (and amendment thereto) and
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent auditors, as stated in their report included as part
of the same Form 8-K.
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Interim Financial Information (unaudited)
Consolidated Condensed Statements of Income for the nine months ended
August 31, 1997 and 1996........................................................................... F-2
Consolidated Condensed Balance Sheets at August 31, 1997 and November 30, 1996.......................... F-3
Consolidated Condensed Statements of Cash Flows for the nine months ended
August 31, 1997 and 1996........................................................................... F-4
Notes to Consolidated Condensed Financial Statements.................................................... F-5
Year-End Financial Information
Report of Ernst & Young LLP, Independent Auditors....................................................... F-7
Consolidated Statements of Income and Retained Earnings for the years ended
November 30, 1996, 1995 and 1994................................................................... F-8
Consolidated Balance Sheets at November 30, 1996 and 1995............................................... F-9
Consolidated Statements of Cash Flows for the years ended November 30, 1996,
1995 and 1994...................................................................................... F-10
Notes to Consolidated Financial Statements.............................................................. F-11
</TABLE>
<PAGE>
LILLY INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Nine Months Ended
August 31, August 31,
1997 1996
-------- --------
Net sales..................................... $447,302 $355,841
Costs and expenses:
Cost of products sold......................... 278,989 228,118
Selling, general and administrative........... 103,701 76,776
Research and development...................... 14,008 12,547
Restructuring charge (Note D)................. 0 9,607
396,698 327,048
Operating income.............................. 50,604 28,793
Other income (expense):
Interest income and sundry.................... 159 471
Interest expense.............................. (14,781) (9,073)
(14,622) (8,602)
Income before income taxes.................... 35,982 20,191
Income taxes.................................. 16,192 9,077
Net income.................................... $ 19,790 $ 11,114
Cash dividends per share...................... $ .24 $ .24
Average number of shares and equivalent
shares of capital stock
outstanding (Note B)..................... 23,400 23,050
Net income per share (Note B)................. $ .85 $ .48
- ------
See notes to consolidated condensed financial statements.
<PAGE>
LILLY INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
August 31, November 30,
1997 1996
(unaudited)
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents............................................. $ 6,185 $ 6,790
Accounts receivable, less allowances for doubtful accounts
(8/31/97, $2,793; 11/30/96, $2,706)............................... 76,567 84,592
Inventories (Note C).................................................. 46,504 47,546
Other................................................................. 11,880 19,790
Total current assets.............................................. 141,136 158,718
Other assets ............................................................. 24,502 23,749
Intangible assets.......................................................... 248,569 258,811
Property and equipment
Land, buildings and equipment......................................... 134,101 127,538
Allowances for depreciation (deduction)............................... (52,426) (46,956)
Total property and equipment...................................... 81,675 80,582
$495,882 $521,860
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable...................................................... $ 51,958 $ 56,593
Other................................................................. 32,319 35,022
Current portion of long-term debt..................................... 29,645 16,524
Total current liabilities......................................... 113,922 108,139
Long-term debt............................................................. 202,261 245,037
Other liabilities.......................................................... 43,108 46,795
Shareholders' equity
Capital stock:
Class A (limited voting).......................................... 15,341 15,103
Class B (voting).................................................. 300 300
Additional capital.................................................... 78,671 75,433
Retained earnings..................................................... 77,292 62,990
Currency translation adjustments...................................... (1,129) 88
Cost of capital stock in treasury (deduction)......................... (33,884) (32,025)
Total shareholders' equity................................... 136,591 121,889
$495,882 $521,860
- ------
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
LILLY INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
August 31, August 31,
1997 1996
Cash flows from operating activities:
<S> <C> <C>
Net income ......................................................... $ 19,790 $ 11,114
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation...................................................... 6,583 4,618
Amortization of intangibles....................................... 8,669 6,096
Restructuring charge (Note D)..................................... 0 9,607
Deferred income taxes............................................. 1,701 (3,000)
Changes in operating assets and liabilities,
net of effects from
acquired business:
Accounts receivable.......................................... 8,025 (4,238)
Inventories.................................................. 1,042 (5,240)
Accounts payable and accrued expenses........................ (7,338) (521)
Sundry....................................................... (1,589) 3,870
Net cash provided by operating activities.................... 36,883 22,306
Cash flows from investing activities:
Purchases of property and equipment........................................ (9,618) (15,433)
Payment for acquired business.............................................. 0 (235,000)
Sundry .................................................................. 5,656 1,598
Net cash used by investing activities........................ (3,962) (248,835)
Cash flows from financing activities:
Cash dividends paid................................................... (5,491) (5,417)
Proceeds from short-term and long-term borrowings..................... 0 292,000
Principal payments on short-term and long-term borrowings............. (29,655) (71,578)
Sundry................................................................ 1,620 1,013
Net cash provided (used) by financing activities............. (33,526) 216,018
Decrease in cash and cash equivalents...................................... (605) (10,511)
Cash and cash equivalents at beginning of year............................. 6,790 20,260
Cash and cash equivalents at end of period................................. $ 6,185 $ 9,749
- ------
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
LILLY INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
AUGUST 31, 1997
A. Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended November 30, 1996.
B. Share and Per Share Amounts
Equivalent shares of capital stock represent additional shares assumed
issued upon exercise of stock options.
C. Inventories
The principal inventory classifications are summarized as follows (in
thousands):
August 31, November 30,
1997 1996
Finished products............................ $25,540 $25,847
Raw materials................................ 29,040 29,375
54,580 55,222
Less adjustment of certain
inventories to last in,
first out (LIFO) basis.................. 8,076 7,676
$46,504 $47,546
The Company uses the LIFO method in inventory valuation for
approximately 82% of inventories where an actual valuation can be made only at
the end of each year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations must necessarily be based on management's
estimates of expected year-end inventory levels and costs. Since these are
subject to many forces beyond management's control, interim results are subject
to the final year-end LIFO inventory valuation. The Company estimates the annual
adjustment for LIFO and allocates it to quarters based on actual inflation
experienced in a quarter as it relates to anticipated inflation for the year.
D. Restructuring
In 1996 the Company implemented plans for the consolidation of
manufacturing facilities related to the Guardsman acquisition. These plans
include the closure of some Lilly and Guardsman plants and workforce reductions.
It is anticipated these plans will be completed by the first part of fiscal
1998.
<PAGE>
LILLY INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--Continued
(Unaudited)
AUGUST 31, 1997
Costs associated with the planned closure of Lilly facilities and
workforce reductions were recorded in the 1996 second quarter as a restructuring
charge totaling $9,607,000, which reduced net income by $5,284,000 or $.23 per
share. The components of the restructuring charge and amounts paid or charged
against these reserves are as follows (in thousands):
<TABLE>
<CAPTION>
Costs Paid Ending
Provision or Charged Balance
<S> <C> <C> <C>
Facilities, equipment, inventories, and other........ $7,827 $1,151 $6,676
Termination benefits................................. 1,780 824 956
$9,607 $1,975 $7,632
</TABLE>
Costs associated with the planned closure of Guardsman facilities and
workforce reductions were recorded as liabilities in the opening balance sheet
of the combined entity as of the acquisition date. The components of these
liabilities and amounts paid or charged against these reserves are as follows
(in thousands):
<TABLE>
<CAPTION>
Costs Paid Ending
Provision or Charged Balance
<S> <C> <C> <C>
Facilities, equipment, inventories, and other........ $6,532 $3,345 $3,187
Termination benefits................................. 2,476 1,217 1,259
$9,008 $4,562 $4,446
</TABLE>
E. Acquisition
On April 8, 1996 the Company acquired all the outstanding shares of
Guardsman Products, Inc. ("Guardsman") for $235,000,000 in cash. The Company
used $275,000,000 of senior secured credit facilities to finance the
acquisition, pay-off existing debt and to pay related expenses. The acquisition
was recorded using the purchase method and the consolidated financial statements
include the results of operations of Guardsman since the date of acquisition.
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
Lilly Industries, Inc.
We have audited the accompanying consolidated balance sheets of Lilly
Industries, Inc. and subsidiaries as of November 30, 1996 and 1995, and the
related consolidated statements of income and retained earnings and cash flows
for each of the three years in the period ended November 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Lilly
Industries, Inc. and subsidiaries at November 30, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended November 30, 1996, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Indianapolis, Indiana
January 13, 1997
<PAGE>
LILLY INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended November 30,
1996 1995 1994
<S> <C> <C> <C>
Net sales..................................................... $ 508,976 $ 328,345 $ 331,306
Costs and expenses:
Cost of products sold......................................... 321,748 219,899 214,809
Selling, administrative and general........................... 112,361 59,874 61,498
Research and development...................................... 17,294 13,184 12,982
Restructuring charge (Note 3)................................. 9,607 -- --
461,010 292,957 289,289
Operating income.............................................. 47,966 35,388 42,017
Other income (expense):
Interest income and sundry.................................... 638 544 554
Interest expense.............................................. (14,466) (2,158) (2,919)
(13,828) (1,614) (2,365)
Income before income taxes.................................... 34,138 33,774 39,652
Income taxes (Note 7)......................................... 15,362 13,510 16,350
Net income.................................................... 18,776 20,264 23,302
Retained earnings at beginning of year........................ 51,446 38,223 20,970
70,222 58,487 44,272
Deduct dividends paid (1996, $.320 per share;
1995, $.310 per share; 1994, $.267 per share)............ 7,232 7,041 6,049
Retained earnings at end of year.............................. $ 62,990 $ 51,446 $ 38,223
Average number of shares and equivalent shares of.............
capital stock outstanding..................................... 23,200 23,100 23,250
Net income per share.......................................... $ .81 $ .88 $ 1.00
- ------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
LILLY INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
November 30,
1996 1995
ASSETS
Current assets
<S> <C> <C>
Cash and cash equivalents......................................... $ 6,790 $ 20,260
Accounts receivable, less allowances for doubtful accounts
(1996, $2,706; 1995, $2,051) (Note 6)......................... 84,592 40,911
Inventories (Note 4 and 6)........................................ 47,546 15,411
Deferred income taxes............................................. 5,717 --
Other ......................................................... 14,073 349
Total current assets.......................................... 158,718 76,931
Other assets
Goodwill, less amortization (1996, $9,028; 1995, $4,658)......... 228,536 27,390
Other intangibles, less amortization
(1996, $17,271; 1995, $12,544)............................... 30,275 20,011
Deferred income taxes............................................. 12,091 2,370
Sundry ......................................................... 11,658 11,411
Total other assets....................................... 282,560 61,182
Property and equipment (Note 6)........................................
Land.............................................................. 8,396 4,176
Buildings......................................................... 48,087 31,862
Equipment......................................................... 71,056 50,235
Allowances for depreciation (deduction)........................... (46,957) (40,804)
Total property and equipment............................. 80,582 45,469
......................................................... $521,860 $183,582
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable.................................................. $ 56,593 $ 23,982
Salaries and payroll related items................................ 22,681 7,970
Other. ......................................................... 11,281 --
State and local taxes............................................. 269 661
Federal income taxes.............................................. 791 1,784
Current portion of long-term debt (Note 6)........................ 16,524 7,029
Total current liabilities................................ 108,139 41,426
Long-term debt (Note 6)................................................ 245,037 21,200
Other liabilities...................................................... 46,795 11,582
Shareholders' equity (Note 8) Capital stock, $.55 stated value per share:
Class A (limited voting)-27,184 shares issued
(1995, 26,903 shares)................................... 15,103 14,947
Class B (voting)-540 shares issued............................ 300 300
Additional capital..................................................... 75,433 73,450
Retained earnings...................................................... 62,990 51,446
Currency translation adjustments....................................... 88 288
Cost of capital stock in treasury (deduction).......................... (32,025) (31,057)
Total shareholders' equity............................................. 121,889 109,374
$521,860 $183,582
- ------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
LILLY INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended November 30,
1996 1995 1994
Cash flows from operating activities
<S> <C> <C> <C>
Net income ............................................$ 18,776 $ `20,264 $ 23,302
Adjustments to reconcile net income to
net cash provided by operating activities:
Restructuring charge................................. 9,607 -- --
Depreciation......................................... 6,453 4,251 4,637
Amortization of intangibles.......................... 9,097 3,923 4,328
Deferred income taxes................................ 2,094 (70) (1,789)
Changes in operating assets and liabilities
net of effects from acquired business:
Accounts receivable.............................. (5,849) 1,320 (2,295)
Inventories...................................... (7,086) 8,474 (1,158)
Accounts payable and accrued expenses............ 7,825 (9,972) 10,898
Sundry........................................... (3,466) (987) 1,047
Net cash provided by operating activities............ 37,451 27,203 38,970
Cash flows from investing activities
Purchases of property and equipment....................... (19,233) (15,599) (6,693)
Payment for acquired business.............................(235,000) -- --
Sundry.................................................... 4,590 (620) 1,005
Net cash used by investing activities................(249,643) (16,219) (5,688)
Cash flows from financing activities
Dividends paid............................................ (7,232) (7,041) (6,049)
Proceeds from short-term and
long-term borrowings................................. 310,600 -- --
Principal payments on short-term and
long-term borrowings.................................(105,817) (6,888) (9,000)
Purchases of capital stock for treasury................... -- (4,380) --
Sundry.................................................... 1,171 1,004 964
Net cash provided (used) by
financing activities............................. 198,722 (17,305) (14,085)
(Decrease) increase in cash and cash equivalents.......... (13,470) (6,321) 19,197
Cash and cash equivalents at beginning of year............ 20,260 26,581 7,384
Cash and cash equivalents at end of year..................$ 6,790 $ 20,260 $ 26,581
- ------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
LILLY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. Summary of Significant Accounting Policies
Business. Lilly Industries, Inc. and its subsidiaries (the Company) are
principally in the business of formulating, producing and selling industrial
coatings and specialty chemicals to manufacturing companies. The Company's
products include wood coatings for furniture, building products and cabinets;
coil coatings for building products, appliances and transportation equipment;
specialty coatings for a variety of metal products and fiberglass reinforced
products; powder coatings for a variety of metal products; and glass coatings
for mirrors. The Company also sells various household interior care products,
including fabric protectors and furniture polishes.
Consolidation and Use of Estimates. The consolidated financial
statements include the accounts of all subsidiaries after elimination of
intercompany accounts and transactions. Preparation of these statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash Equivalents. Cash equivalents include time deposits and
certificates of deposit with original maturities of three months or less.
Inventories. Inventories in the United States are stated at the lower
of cost, determined by the last-in, first-out (LIFO) method, or market.
Inventories of foreign subsidiaries are stated at the lower of cost, determined
by the first-in, first-out (FIFO) method, or market.
Intangible Assets. Goodwill, which represents the excess of cost over
fair value of net assets of purchased businesses, is amortized by the
straight-line method over periods ranging from 20 to 40 years. Other intangible
assets consist of noncompete agreements, customer lists and technology and are
amortized by the straight-line method over periods ranging from 5 to 20 years.
The Company periodically evaluates the value of intangible assets to determine
if an impairment has occurred. This evaluation is based on various analyses
including reviewing anticipated cash flows.
Property and Equipment. Property and equipment is recorded on the basis
of cost and includes expenditures for new facilities and items which
substantially increase the useful life of existing buildings and equipment.
Depreciation is based on estimated useful lives (ranging from 3 to 40 years) and
computed primarily by the straight-line method.
Interest-Rate Swap Agreements. The Company periodically enters into
interest-rate swap agreements to modify the interest characteristics of its
outstanding debt. Swap agreements involve the exchange of interest payments
based on a variable interest rate for interest payments based on a fixed
interest rate calculated by reference to a notional amount over the life of the
agreement. The notional amount of each swap agreement represents all or a
portion of the principal balance of a specific debt obligation. The differential
to be paid or received is accrued and recognized as an adjustment of interest
expense.
Net Income Per Share. Net income per share is computed on the basis of
the weighted average number of shares outstanding during each year, adjusted for
stock splits and the dilutive effect, if any, of common stock equivalents.
2. Acquisition
Effective April 8, 1996 the Company acquired for $235,000,000 in cash
all the outstanding shares of Guardsman Products, Inc. ("Guardsman"). To finance
the acquisition, the Company obtained
<PAGE>
LILLY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
NOVEMBER 30, 1996
commitments for $300,000,000 of senior secured credit facilities (see Note 6)
and used $275,000,000 of these facilities to fund the initial purchase of
shares, pay-off existing debt and to pay related expenses. The acquisition was
recorded using the purchase method and the consolidated financial statements
include the results of operations of Guardsman since the date of acquisition.
The fair value of net assets acquired include $40,031,000 net working capital,
$50,246,000 noncurrent assets, $213,642,000 intangible assets, $28,549,000
long-term debt, and $40,370,000 noncurrent liabilities. Goodwill is being
amortized by the straight-line method over 40 years.
The following unaudited pro forma consolidated results of operations
for the years ended November 30, 1996 and 1995 are stated as though the
acquisition occurred on December 1, 1994 (in thousands, except per share data):
1996 1995
Net sales............................... $598,722 $578,919
Net income.............................. 20,767 20,287
Net income per share.................... .90 .88
Pro forma results for the year ended November 30, 1996 include a
restructuring charge of $9,607,000 which reduced net income by $5,284,000 or
$.23 per share (see Note 3). Pro forma results for the year ended November 30,
1995 include a restructuring charge of $10,458,000 recorded by Guardsman in 1995
which reduced net income by $5,752,000 or $.25 per share. The pro forma
consolidated results of operations are not necessarily indicative of future
results of operations or actual results of operations that would have occurred
had the purchase been made at December 1, 1994.
3. Restructuring
The Company has adopted and commenced implementation of plans for the
consolidation of manufacturing facilities related to the acquisition of
Guardsman. These plans, which include both Lilly and Guardsman facilities, will
result in the closure of some plants and workforce reductions totaling
approximately 250 employees. Closure costs consist of facility and equipment
valuation adjustments, inventory disposal costs, dismantling and maintenance
costs, and termination benefits. The primary employee groups affected include
manufacturing, selling, administrative and research and development personnel.
It is anticipated these plans will be completed by the end of fiscal 1997.
Costs associated with the planned closure of former Lilly facilities
and related reductions in workforce are reflected as a restructuring charge
totaling $9,607,000, which reduced net income by $5,284,000 or $.23 per share.
The components of the restructuring charge and amounts paid or charged against
these reserves are as follows (in thousands):
<TABLE>
<CAPTION>
Costs Paid Ending
Provision or Charged Balance
Facilities, equipment, inventories,
<S> <C> <C> <C>
and other...................... $7,827 $365 $7,462
Termination benefits............. 1,780 447 1,333
$9,607 $812 $8,795
</TABLE>
Costs associated with the planned closure of former Guardsman facilities and
related reductions in workforce are recorded as liabilities in the opening
balance sheet of the combined entity as of the
<PAGE>
LILLY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
NOVEMBER 30, 1996
acquisition date. The components of these liabilities and amounts paid or
charged against these reserves are as follows (in thousands):
<TABLE>
<CAPTION>
Costs Paid Ending
Provision or Charged Balance
<S> <C> <C> <C>
Facilities, equipment, inventories,
and other...................... $6,532 $1,642 $4,890
Termination benefits............. 2,476 469 2,007
$9,008 $2,111 $6,897
</TABLE>
4. Inventories
The principal inventory classifications at November 30 are summarized as follows
(in thousands):
1996 1995
Finished products............................... $25,847 $11,065
Raw materials................................... 29,375 12,584
55,222 23,649
Less adjustment of certain inventories
to last-in, first-out (LIFO) basis......... 7,676 8,238
$47,546 $15,411
Inventory cost is determined by the LIFO method of inventory valuation
for approximately 82% and 70% of inventories at November 30, 1996 and 1995,
respectively. While management believes the LIFO method results in a better
matching of current costs and revenues, the FIFO method is used to cost
inventories of foreign subsidiaries because foreign statutory requirements
prohibit use of the LIFO method.
During fiscal 1995 inventory quantities were reduced. This reduction
resulted in a liquidation of LIFO inventory layers carried at lower costs which
prevailed in prior years. The effect of this liquidation was to increase
earnings by approximately $600,000.
5. Benefit Plans
The Company maintains defined benefit and defined contribution plans
that cover substantially all employees. Retirement benefits under the defined
benefit plans are based on final monthly compensation and years of service.
Retirement benefits under the defined contribution plans are based on employer
and employee contributions plus earnings to retirement. The plans' assets
consist primarily of common stock, fixed income securities and guaranteed
insurance contracts. In addition, unfunded supplemental executive retirement
plans cover certain employees in which benefits, determined by the Board of
Directors, are payable after retirement over periods ranging from 15 years to
life of the participant.
The provision for defined benefit pension cost is determined using the
projected unit credit actuarial method. The Company's policy is to fund amounts
as are necessary on an actuarial basis to provide assets sufficient to meet the
benefits to be paid to plan members in accordance with the Employee Retirement
Income Security Act of 1974. Amounts contributed to union-sponsored pension
plans are based upon requirements of collective bargaining agreements. Company
contributions to the defined contribution plans are based on a percentage of
employee contributions.
<PAGE>
LILLY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
NOVEMBER 30, 1996
The Guardsman defined benefit pension plans covering substantially all
U.S. employees were amended to freeze years of service at December 31, 1996 and
merged into the defined benefit plan maintained by the Company. Concurrently
with this amendment, these employees became participants in the Company's
defined contribution plans. The impact of the plan merger was recorded in
connection with the Guardsman acquisition. All 1996 amounts disclosed below
reflect the effect of freezing years of service for the Guardsman plans and
their merger into the Lilly plan.
Effective December 1, 1994 the Lilly defined benefit pension plan
covering substantially all U.S. employees was amended to freeze years of service
at November 30, 1994. Concurrently with this amendment, the Company increased
its matching contribution rates to defined contribution plans.
A summary of the components of net pension cost for the defined benefit
plans and amounts charged to expense for the defined contribution plans for the
years ended November 30 follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
Defined benefit plans
<S> <C> <C> <C>
Service cost benefits earned during the period....... $1,733 $ 708 $ 2,109
Interest cost on projected benefit obligation....... 4,594 2,742 2,638
Actual net (gain) loss on plan assets................ (9,056) (8,849) 529
Net amortization and deferral........................ 3,104 5,267 (4,224)
Net pension cost..................................... 375 (132) 1,052
Defined contribution plans........................... 2,219 2,130 759
Pension expense...................................... $2,594 $1,998 $1,811
</TABLE>
The expected long-term rate of return on assets used to compute the defined
benefit plans' pension expense was 9.25% for 1996, 1995 and 1994.
The following table sets forth the funded status and amounts recognized in the
consolidated balance sheets at November 30 for the Company's defined benefit
pension plans (in thousands):
<TABLE>
<CAPTION>
1996 1995
Actuarial present value of benefit obligations:
<S> <C> <C>
Vested............................................................ $58,699 $33,498
Nonvested......................................................... 19,612 3,126
Total accumulated benefit obligations.................................. $78,311 $36,624
Actuarial present value of projected benefit obligations for...........
services rendered to date......................................... $(79,647) $(43,118)
Plan assets at fair value.............................................. 83,186 46,510
Excess of plan assets over projected benefit obligations............... 3,539 3,392
Unrecognized net (gains) losses........................................ (768) 535
Unrecognized prior service cost........................................ 2,794 2,248
Unrecognized transition obligation at December 1, 1985,
net of amortization............................................... (1,337) (1,539)
Net pension asset...................................................... $ 4,228 $ 4,636
</TABLE>
<PAGE>
LILLY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
NOVEMBER 30, 1996
The discount rate and rate of increase in compensation levels used to measure
benefit obligations were 7% and 5%, respectively, for both 1996 and 1995.
Accumulated benefits for supplemental executive retirement plans totaled
approximately $5,144,000 and $2,235,000 at November 30, 1996 and 1995,
respectively.
6. Long-Term Debt
Long-term debt consists of the following as of November 30 (in thousands):
1996 1995
Facility A Term Note............................ $171,500 $ --
Facility B Term Note............................ 49,875 --
Facility C Revolving Note....................... 40,000 --
4.92% unsecured senior notes.................... -- 28,000
Other........................................... 186 229
261,561 28,229
Less current portion............................ 16,524 7,029
$245,037 $21,200
In April 1996 the Company entered into a $300,000,000 credit agreement
("Agreement") with a group of financial institutions to finance the acquisition
of Guardsman and to repay existing debt. The Agreement provides for $175,000,000
and $50,000,000 of borrowings under term notes and $75,000,000 under a revolving
note. Outstanding principal of the term notes is due in quarterly payments which
escalate annually with final payment due November 30, 2003. Interest on the term
notes is payable quarterly. The principal of the revolving note is due May, 2002
and interest is due quarterly. Amounts available under the revolver are limited
to a borrowing base, as defined in the Agreement. Additional amounts available
for borrowing under the revolver totaled $35,000,000 at November 30, 1996.
The notes and revolver bear interest, at the Company's option, at (i) the higher
of the agent bank's prime rate (8.25% at November 30, 1996) or the Federal Funds
rate plus one-half (1/2%) percent, or (ii) the London Interbank Offered Rate;
plus 50 to 225 basis points depending on the Company's Leverage Ratio. A
commitment fee, ranging from .25% to .50%, is payable on the unused portion of
the revolving note. The outstanding notes are secured by the Company's accounts
receivable and real and personal property.
In April, 1996 the Company entered into a forty-four month interest rate swap
agreement with a notional amount of $175,000,000; and in November, 1996, a
twenty-four month interest rate swap agreement with a notional amount of
$50,000,000. These agreements effectively convert a portion of the term notes
from floating rate debt to fixed rate debt with a weighted average rate of 7.64%
at November 30, 1996. The notional amount of the $175,000,000 agreement was
$135,000,000 at November 30, 1996 and reduces ratably on an annual basis to
$50,000,000 in 1999.
Minimum principal payments of long-term debt excluding the revolving note are:
1997-$16,524,000; 1998-$31,141,000; 1999-$31,518,000; 2000-$36,019,000;
2001-$39,020,000; 2002-$35,937,000; 2003-$31,353,000. Interest of $12,746,000,
$2,306,000 and $1,853,000 was paid in fiscal 1996, 1995 and 1994, respectively.
<PAGE>
LILLY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
NOVEMBER 30, 1996
The Company is subject to various debt covenants, including negative
covenants which require the maintenance of certain ratios for maximum leverage,
fixed charge coverage and interest coverage. Additionally, such covenants place
certain restrictions on the Company's ability to engage in mergers and
acquisitions, incur additional indebtedness, acquire or dispose of fixed assets,
and the use of Excess Cash Flow.
7. Income Taxes
Income tax expense for the years ended November 30 is comprised of the following
components (in thousands):
1996 1995 1994
Current expense:
Federal................. $ 7,204 $ 7,953 $12,395
Foreign................. 4,736 3,267 2,944
State................... 1,328 2,360 2,800
13,268 13,580 18,139
Deferred expense (credit):
Federal................. 1,829 -- (1,627)
Foreign................. (119) (70) (162)
State................... 384 -- --
2,094 (70) (1,789)
$15,362 $13,510 $16,350
A reconciliation of the statutory U.S. federal rate to the effective income tax
rate for the years ended November 30 is as follows:
1996 1995 1994
Statutory U.S. federal income tax rate......... 35.0% 35.0% 35.0%
Increase resulting from:
Goodwill....................................... 4.1 2.4 .5
State income taxes, net of federal income
tax benefit............................... 3.3 3.4 3.7
Other items.................................... 2.6 (0.8) 2.0
Effective income tax rate...................... 45.0% 40.0% 41.2%
<PAGE>
LILLY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
NOVEMBER 30, 1996
Deferred income taxes are recorded based upon differences between the financial
statement and tax basis of assets and liabilities. The deferred tax assets and
liabilities recorded on the balance sheet at November 30 are as follows (in
thousands):
1996 1995
Deferred tax assets:
Restructuring and closure reserves............. $ 6,127 $ --
Goodwill....................................... 1,316 1,152
Employee benefits.............................. 4,398 1,520
Accounts receivable, inventory and other....... 15,281 5,927
27,122 8,599
Deferred tax liabilities:
Property and equipment......................... 8,003 3,264
Pension........................................ 1,311 1,630
Intangibles and other.......................... -- 1,335
9,314 6,229
Net deferred tax assets........................ $17,808 $2,370
No provision has been made for U.S. federal income taxes on certain
undistributed earnings of foreign subsidiaries that the Company intends to
permanently invest or that may be remitted tax-free. The total of undistributed
earnings that would be subject to federal income tax if remitted under existing
law is approximately $14,000,000 at November 30, 1996. Determination of the
unrecognized deferred tax liability related to these earnings is not practicable
because of the complexities with its hypothetical calculation. Upon distribution
of these earnings, the Company will be subject to U.S. taxes and withholding
taxes payable to various foreign governments. A credit for foreign taxes already
paid would be available to reduce the U.S. tax liability.
Income taxes of $20,177,000, $16,524,000 and $13,400,000 were paid in
1996, 1995 and 1994, respectively.
8. Capital Stock
Authorized shares of Class A and Class B stock were increased in 1996
from 48,500,000 and 1,500,000 shares, respectively, to 97,000,000 and 3,000,000,
respectively. The limited voting rights of Class A shareholders are equal to
voting rights of Class B shareholders only with regard to voting for merger,
consolidation or dissolution of the Company and voting and electing four
directors of the Company if there are ten or more directors and two directors if
there are nine or fewer directors. With respect to all rights other than voting,
Class A shareholders are the same as Class B shareholders.
The terms of the Class B stock, which is held only by employees,
provide that these shares be exchanged for Class A stock on a share-for-share
basis when the shareholder ceases to be an employee or decides to dispose of the
shares. Accordingly, 3,000,000 shares of authorized Class A stock are reserved
for this purpose.
On January 12, 1996 the Company's Board of Directors ("Board") declared
a dividend of one purchase right for each outstanding share of Class A and Class
B stock. In addition, one right is distributed for each share issued after
January 26, 1996. Upon exercise, each right entitles holders to purchase from
the Company one share of stock at $55 per share, subject to certain adjustments.
<PAGE>
LILLY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
NOVEMBER 30, 1996
The rights become exercisable when a person or group acquires beneficial
ownership of 15 percent or more of Class A stock or becomes the beneficial owner
of an amount of Class A stock (but not less than 10 percent) which the Board
determines to be substantial and not in the Company's best long-term interests
or following the announcement of a tender or exchange offer for 30% or more of
the Class A stock.
In the event a person acquires 15 percent or more of Class A stock, or
is determined by the Board to be a substantial owner whose ownership is not in
the Company's best long-term interests or an acquiring person engages in certain
self-dealing transactions, each holder will have the right to receive that
number of common shares having a market value of two times the exercise price of
the right. At any time after a person becomes an acquiring person, but before
such person acquires 50 percent or more of outstanding Class A stock, the Board
may exchange each right for one common share (subject to adjustment).
In the event the Company is involved in certain business combination
transactions, or 50% or more of the Company's consolidated assets or earning
power are sold, each holder will have the right to receive, upon exercise at the
then-current exercise price of the right, that number of shares of common stock
of the acquiring company having a market value of two times the exercise price
of the right.
The Company may redeem the rights at a price of $.01 per right at any
time prior to the time a person or group becomes an acquiring person as defined
by the rights agreement. The rights expire in January, 2006.
A summary of shares issued and held in treasury follows (in thousands):
<TABLE>
<CAPTION>
Capital Stock
Issued Held in Treasury
Class A Class B Class A Class B
<S> <C> <C> <C> <C>
Balance at November 30, 1993..................... 17,646 360 2,825 170
Class A exchanged for Class B............... -- -- 74 (74)
Class B exchanged for Class A............... -- -- (40) 40
Stock options exercised..................... 161 -- 8 17
Three-for-two stock split................... 8,888 180 1,437 69
Balance at November 30, 1994..................... 26,695 540 4,304 222
Class A exchanged for Class B............... -- -- 78 (78)
Class B exchanged for Class A............... -- -- (8) 8
Acquisition for treasury.................... -- -- 370 --
Stock options exercised..................... 208 -- 10 35
Balance at November 30, 1995..................... 26,903 540 4,754 187
Class A exchanged for Class B............... -- -- 78 (78)
Class B exchanged for Class A............... -- -- (54) 54
Stock options exercised..................... 281 -- 32 28
Balance at November 30, 1996..................... 27,184 540 4,810 191
</TABLE>
<PAGE>
LILLY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
NOVEMBER 30, 1996
Changes in capital stock are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Cost of
Capital Stock Capital
(Stated Amount) Additional Stock in
Class A Class B Capital Treasury
<S> <C> <C> <C> <C>
Balance at November 30, 1993...................... $14,705 $300 $70,635 $25,587
Stock options exercised........................ 126 -- 1,177 500
Disqualifying disposition of stock options..... -- -- 160 --
Balance at November 30, 1994...................... 14,831 300 71,972 26,087
Acquisition for treasury....................... -- -- -- 4,380
Stock options exercised........................ 116 -- 1,376 590
Disqualifying disposition of stock options..... -- -- 102 --
Balance at November 30, 1995...................... 14,947 300 73,450 31,057
Stock options exercised........................ 156 -- 1,828 968
Disqualifying disposition of stock options..... -- -- 155 --
Balance at November 30, 1996...................... $15,103 $300 $75,433 $32,025
</TABLE>
Incentive stock option plans entitle certain directors, officers and
other key employees to buy shares of Class A stock at prices not less than fair
market value on the date of grant. The number of shares reserved and the number
and price per share of options granted are adjusted for subsequent stock
dividends and stock splits. Shares reserved under these plans totaled 1,604,254
at November 30, 1996 of which option grants have been made for 1,210,322 shares
at prices ranging from $5.19 to $17.17. During 1996, 280,962 options were
exercised at prices ranging from $5.01 to $14.33 and 309,336 additional options
were granted. Options to buy 648,000 shares are currently exercisable.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", encourages, but does not require companies to record
compensation expense for grants of stock options and other equity instruments at
fair value. The Statement permits companies to continue to apply APB Opinion 25
and related Interpretations in accounting for its plans. The Company has elected
to continue to apply APB Opinion 25 which will result in no income statement
effect. However, additional disclosures will be required in the financial
statements for the year ending November 30, 1997 to comply with Statement 123.
The Company sponsors an employees' stock purchase plan and defined
contribution plans that allow participants to acquire Class A stock at the
current fair market value. At November 30, 1996, 4,926,000 shares of Class A
stock were reserved for sale under the plans.
<PAGE>
LILLY INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-Continued
NOVEMBER 30, 1996
9. Foreign Operations
United States and foreign operations, which include subsidiaries located in
Canada, the United Kingdom, Germany, Taiwan, Malaysia and China are as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
Net sales to unaffiliated customers:
<S> <C> <C> <C>
United States.................... $423,753 $277,494 $284,826
Foreign.......................... 85,223 50,851 46,480
Consolidated..................... $508,976 $328,345 $331,306
Income before income taxes:...........
United States.................... $ 41,501 $ 25,943 $ 33,340
Foreign.......................... 16,710 9,989 9,231
Interest expense................. (14,466) (2,158) (2,919)
Restructuring charge............. (9,607) -- --
Consolidated..................... $ 34,138 $ 33,774 $ 39,652
Total assets:.........................
United States.................... $463,557 $158,338 $165,182
Foreign.......................... 58,725 25,784 25,572
Eliminations (deductions)........ (422) (540) (502)
Consolidated..................... $521,860 $183,582 $190,252
</TABLE>
10. Quarterly Results of Operations (Unaudited)
Quarterly results of operations are summarized as follows (in thousands, except
per share data):
<TABLE>
<CAPTION>
Quarter Ended
1996 Feb. 29 May 31 Aug. 31 Nov. 30
<S> <C> <C> <C> <C>
Net sales............... $73,271 $131,711 $150,859 $153,135
Gross profit............ 24,061 47,474 56,188 59,505
Net income.............. 3,486 616 7,012 7,662
Net income per share.... .15 .03 .30 .33
Quarter Ended
1995 Feb. 28 May 31 Aug. 31 Nov. 30
Net sales............... $80,447 $85,407 $79,705 $82,786
Gross profit............ 26,880 28,530 25,119 27,917
Net income.............. 4,647 5,808 4,577 5,232
Net income per share.... .20 .25 .20 .23
</TABLE>
<PAGE>
[BACK COVER, LEFT COLUMN]
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus in connection with the offer made hereby, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or any other person. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date as of
which information is given in this Prospectus. This Prospectus does not
constitute an offer or solicitation by anyone in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so or to any person to whom it is
unlawful to make such solicitation.
-----------
Table Of Contents
Page
Available Information........................................................ 4
Information Incorporated by Reference........................................ 4
Forward Looking Statements................................................... 5
Summary...................................................................... 6
Risk Factors................................................................. 16
Private Placement............................................................ 22
Use of Proceeds.............................................................. 22
Capitalization............................................................... 23
Selected Consolidated Financial
Information and Certain Operating
Data...................................................................... 24
Management's Discussion and Analysis
of Results of Operations and
Financial Condition...................................................... 26
Business..................................................................... 29
Management................................................................... 39
Description of Old Debt and New
Bank Credit Facility..................................................... 41
The Exchange Offer........................................................... 43
Description of Notes......................................................... 49
Exchange Offer; Registration Rights.......................................... 69
Certain United States Federal Income
Tax Considerations....................................................... 71
Plan of Distribution......................................................... 74
Transfer Restrictions on Old Notes........................................... 75
Legal Matters................................................................ 77
Independent Auditors......................................................... 77
Index to Financial Statements................................................F-1
Until ____________, 1998 (90 days after the date of this Prospectus), all
dealers effecting transactions in the Exchange Notes, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
<PAGE>
[BACK COVER, RIGHT COLUMN]
LILLY INDUSTRIES, INC.
OFFER TO EXCHANGE
$100,000,000 in aggregate
principal amount of
7 3/4% SENIOR NOTES
DUE 2007, SERIES B
for all $100,000,000 in
aggregate outstanding
principal amount of
7 3/4% SENIOR NOTES
DUE 2007, SERIES A
-------------
PROSPECTUS
-------------
____________, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 21 of the Indiana Business Corporation Law, as amended (the "BCL"),
grants to each Indiana corporation broad powers to indemnify directors,
officers, employees or agents against expenses incurred in certain proceedings
if the conduct in question was found to be in good faith and was reasonably
believed to be in the corporation's best interests. This statute provides,
however, that this indemnification should not be deemed exclusive of any other
indemnification rights provided by the articles of incorporation, by-laws,
resolution or other authorization adopted by a majority vote of the voting
shares then issued and outstanding. Article 10 of the Amended and Restated
Articles of Incorporation of the Registrant and Article 8 of the Amended and
Restated Code of By-Laws of the Registrant state as follows:
ARTICLE 10
INDEMNIFICATION
Section 10.1. Indemnification of Directors. The Corporation shall, to the
extent to which it is empowered to do so by the Act [the BCL], or any other
applicable laws, as from time to time in effect, indemnify any Director who was
or is a party, or is threatened to be made a party, to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative and whether formal or informal (an "Action"), by reason of the
fact that he is or was a Director or who, while serving as such Director, is or
was serving at the request of the Corporation as a director, officer, partner,
trustee, employee or agent (an "Authorized Capacity") of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
whether for profit or not (individually, "Another Entity"), against expenses,
including attorney's fees ("Expenses"), judgments, penalties, fines (including
excise taxes assessed with respect to employee benefit plans) and amounts paid
in settlement actually and reasonably incurred by him in connection with such
Action if such person acted in good faith and in a manner he reasonably
believed, in the case of conduct in his official capacity, was in the best
interests of the Corporation, and in all other cases was not opposed to the best
interests of the Corporation, and, with respect to any criminal Action, he
either had reasonable cause to believe his conduct was lawful or no reasonable
cause to believe his conduct was unlawful. The termination of any Action by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not meet the prescribed standards of conduct.
Section 10.2. Indemnification of Officers, Employees and Agents. The
Corporation may, to the extent to which it is empowered to do so by the Act [the
BCL], or any other applicable laws, as from time to time in effect, indemnify
any person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed Action, by reason of the fact that he is or was
an Officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation in an Authorized Capacity for Another Entity, against
Expenses, judgments, penalties, fines (including excise taxes assessed with
respect to employee benefit plans) and amounts paid in settlement actually and
reasonably incurred by him in connection with such Action if such person acted
in good faith and in a manner he reasonably believed in the case of conduct in
his official capacity was in the best interests of the Corporation, and in all
other cases was not opposed to the best interests of the Corporation, and, with
respect to any criminal Action, he either had reasonable cause to believe his
conduct was lawful or had no reasonable cause to believe his conduct was
unlawful. The termination of any Action, by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, be determinative that the person did not meet the prescribed standards
of conduct.
Section 10.3. Indemnification in Successfully Defended Actions. To the
extent that a Director, Officer, employee or agent of the Corporation has been
successful on the merits or otherwise in the defense of any Action referred to
in Section 10.1 or Section 10.2, or in the defense of any claim, issue or matter
in any such
S-1
<PAGE>
Action, the Corporation shall indemnify him against Expenses actually and
reasonably incurred by him in connection therewith.
Section 10.4. Indemnification Procedure. Unless ordered by a court, any
indemnification of any person under Section 10.1 or Section 10.2 shall be made
by the Corporation only as authorized in the specific case upon a determination
that indemnification of such person is proper in the circumstances because he
met the applicable standards of conduct. Such determination shall be made (a) by
the Board, by a majority vote of a quorum consisting of Directors who are not at
the time parties to the Action involved ("Parties"), or (b) if a quorum cannot
be obtained under Subsection (a), by a majority vote of a Committee duly
designated by the Board (in which designation Directors who are Parties may
participate), consisting solely of two or more Directors who are not at the time
Parties, or (c) by written opinion of special legal counsel (1) selected by the
Board or a Committee in the manner prescribed in Subsections (a) and (b),
respectively, or (2) if a quorum cannot be obtained and a Committee cannot be
designated under Subsections (a) and (b), respectively, selected by a majority
of the full Board, in which selection of Directors who are Parties may
participate, or (d) by the Shareholders who are not at the time Parties, voting
together as a single class; and provided, further, that shares owned by or voted
under the control of Directors who are at the time Parties may not be voted on
the determination. Authorization of indemnification and evaluation as to the
reasonableness of Expenses shall be made in the same manner as the determination
that indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of Expenses shall be made by those entitled under Subsection (c)
to select counsel.
Section 10.5. Good Faith Defined. For purposes of any determination under
Section 10.1, a Director shall be deemed to have acted in good faith and to have
otherwise met the applicable standard of conduct set forth in Section 10.1 if
his action is based on information, opinions, reports, or statements, including
financial statements and other financial data, prepared or presented by (a) one
or more Officers, employees or agents of the Corporation or another enterprise
whom he reasonably believes to be reliable and competent in the matters
presented; (b) legal counsel, public accountants, appraisers or other persons as
to matters he reasonably believes are within the person's professional or expert
competence; or (c) a Committee, or a committee appointed by the Board or by the
board of directors of another enterprise, of which the person is not a member,
if he reasonably believes the Committee or committee, respectively, merits
confidence. The term "another enterprise" as used in this Section 10.5 shall
mean Another Entity of which such Director is or was serving at the request of
the Corporation in an Authorized Capacity. The provisions of this Section 10.5
shall not be deemed to be exclusive or to limit in any way the circumstances in
which a Director may be deemed to have met the applicable standards of conduct
set forth in Section 10.1.
Section 10.6. Payment of Expenses in Advance. Expenses reasonably incurred
in connection with any Action by any Director, Officer, employee or agent may be
paid or reimbursed by the Corporation in advance of the final disposition of
such Action as authorized in the specific case in the same manner described in
Section 10.4 upon receipt of a written affirmation of such Director's,
Officer's, employee's or agent's good faith belief that he has met the standards
of conduct described in Section 10.1 or Section 10.2 and upon receipt of a
written undertaking by or on behalf of such Director, Officer, employee or agent
to repay such amount if it shall ultimately be determined that he did not meet
the applicable standards of conduct and a determination is made under the
procedure set forth in Section 10.4 that the facts then known to those making
the determination would not preclude indemnification under this Article 10. Such
an undertaking must be an unlimited general obligation of the person making it,
but need not be secured and may be accepted by the Corporation without reference
to such person's financial ability to make repayment.
Section 10.7. Rights Not Exclusive. The indemnification provided in this
Article 10(a) shall not be deemed exclusive of any other rights to which a
person seeking indemnification may be entitled under (1) any law, (2) the
By-laws, (3) any resolution of the Board or of the Shareholders, (4) any other
authorization, whenever adopted, after notice, by a majority vote of all shares
entitled to vote thereon, (5) any contract, or (6) the articles of
incorporation, code of by-laws or other governing documents, or any resolution
of or other
S-2
<PAGE>
authorization by the directors, shareholders, partners, trustees, members,
owners or governing body of Another Entity; (b) shall inure to the benefit of
the heirs, executors and administrators of such a person; and (c) shall continue
as to any such person who has ceased to be a Director, Officer, employee, or
agent of the Corporation or to be serving in an Authorized Capacity for Another
Entity.
Section 10.8. Insurance. The Corporation shall have the power to purchase
and maintain insurance on behalf of any person who is or was a Director,
Officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation in an Authorized Capacity of or for Another Entity,
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article 10.
Section 10.9. Vested Right to Indemnification. The right of any person to
indemnification under this Article 10 shall vest at the time of occurrence or
performance of any event, act or omission giving rise to the Action for which
indemnification is sought, and, once vested, shall not later be impaired as a
result of any amendment, repeal, alteration or other modification of any or all
of these provisions. Notwithstanding the foregoing, the indemnification afforded
under this Article 10 shall be applicable to all alleged prior acts or omissions
of any person seeking indemnification hereunder, regardless of the fact that
such alleged prior acts or omissions may have occurred prior to the adoption of
this Article 10. To the extent such prior acts or omissions cannot be deemed to
be covered by this Article 10, the right of any individual to indemnification
shall be governed by the indemnification provisions in effect at the time of
such prior acts or omissions.
Section 10.10. Additional Definitions. For purposes of this Article 10,
references to the "Corporation" shall include any domestic or foreign
predecessor entity of the Corporation in a merger or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
For purposes of this Article 10, serving an employee benefit plan at the
request of the Corporation shall include any service as a Director, Officer,
employee or agent of the Corporation which imposes duties on, or involves
services by such Director, Officer, employee or agent with respect to any
employee benefit plan, its participants, or beneficiaries. A person who acted in
good faith and in a manner he reasonably believed to be in the best interests of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the Corporation"
referred to in this Article 10.
For purposes of this Article 10, "party" includes any individual who is or
was a plaintiff, defendant or respondent in any action, suit or proceeding, or
who is threatened to be made a named defendant or respondent in any action, suit
or proceeding.
For purposes of this Article 10, "official capacity" when used with respect
to a Director shall mean the office of Director of the Corporation; and when
used with respect to an individual other than a Director, shall mean the office
in the Corporation held by the Officer or the employment or agency relationship
undertaken by the employee or agent on behalf of the Corporation. "Official
Capacity" does not include service for any other foreign or domestic corporation
or any partnership, joint venture, trust, employee benefit plan, or other
enterprise, whether for profit or not.
Section 10.11. Payments as a Business Expense. Any payments made to any
indemnified party under this Article 10 or under any other right to
indemnification shall be deemed to be an ordinary and necessary business expense
of the Corporation, and payment thereof shall not subject any person responsible
for the payment, or the Board, to any action for corporate waste or any similar
action.
S-3
<PAGE>
ARTICLE 8
INDEMNIFICATION
Section 8.01. Indemnification of Officers and Employees. The Corporation
shall, to the extent to which it is empowered to do so by the Act [the BCL], or
any other applicable laws, as from time to time in effect, indemnify any Officer
or employee of the Corporation who was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative and whether
formal or informal (an "Action"), by reason of the fact that he is or was an
Officer or employee of the Corporation or who, while serving as such Officer or
employee of the Corporation, is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee or agent (an "Authorized
Capacity") of another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise, whether for profit or not (individually,
"Another Entity"), against expenses, including attorney's fees ("Expenses"),
judgments, penalties, fines (including excise taxes assessed with respect to
employee benefit plans) and amounts paid in settlement actually and reasonably
incurred by him in connection with such Action if such person acted in good
faith and in a manner he reasonably believed, in the case of conduct in his
official capacity, was in the best interests of the Corporation, and in all
other cases, was not opposed to the best interests of the Corporation, and, with
respect to any criminal Action, he either had reasonable cause to believe his
conduct was lawful or no reasonable cause to believe his conduct was unlawful.
The termination of any Action by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not meet the prescribed standards of conduct.
Section 8.02. Indemnification Procedure. Unless ordered by a court, any
indemnification of any person under Section 8.01 shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of such person is proper in the circumstances because he met the
applicable standards of conduct. Such determination shall be made (a) by the
Board, by a majority vote of a quorum consisting of Directors who are not at the
time parties to the Action involved ("Parties"), or (b) if a quorum cannot be
obtained under Clause (a), by a majority vote of a committee duly designated by
the Board (in which designation Directors who are Parties may participate),
consisting solely of two or more Directors who are not at the time Parties, or
(c) by written opinion of special legal counsel (1) selected by the Board or a
committee composed of Directors duly designated by the Board as such (a
"Committee") in the manner prescribed in Clauses (a) or (b), respectively, or
(2) if a quorum cannot be obtained and a Committee cannot be designated under
Clauses (a) and (b), respectively, selected by a majority of the full Board, in
which selection Directors who are Parties may participate, or (d) by the
Shareholders who are not at the times Parties, voting together as a single
class; and provided, further, that shares owned by or voted under the control of
Directors who are at the time Parties may not be voted on the determination.
Authorization of indemnification and evaluation as to the reasonableness of
Expenses shall be made in the same manner as the determination that
indemnification is permissible, except that if the determination is made by
special legal counsel, authorization of indemnification and evaluation as to
reasonableness of Expenses shall be made by those entitled under Clause (c) to
select counsel.
Section 8.03. Good Faith Defined. For purposes of any determination under
Section 8.01, an Officer or employee of the Corporation shall be deemed to have
acted in good faith and to have otherwise met the applicable standard of conduct
set forth in Section 8.01 if his action is based on information, opinions,
reports, or statements, including financial statements and other financial data,
prepared or presented by (a) one or more Officers, employees, or agents of the
Corporation or another enterprise whom he reasonably believes to be reliable and
competent in the matters presented; (b) legal counsel, public accountants,
appraisers or other persons as to matters he reasonably believes are within the
person's professional or expert competence; or (c) a Committee, or a committee
of the board of directors of another enterprise, of which the person is not a
member, if he reasonably believes the Committee or committee, respectively,
merits confidence. The term "another enterprise" as used in this Section 8.03
shall mean Another Entity of which such Officer or employee of the Corporation
is or was serving at the request of the Corporation in an Authorized Capacity.
The provisions of this Section 8.03 shall not be deemed to be exclusive or to
limit in
S-4
<PAGE>
any way the circumstances in which an Officer or employee of the Corporation may
be deemed to have met the applicable standards of conduct set forth in Section
8.01.
Section 8.04. Payment of Expenses in Advance. Expenses reasonably incurred
in connection with any Action by any Officer or employee of the Corporation may
be paid or reimbursed by the Corporation in advance of the final disposition of
such Action as authorized in the specific case in the same manner described in
Section 8.03 upon receipt of a written affirmation of such Officer's or
employee's good faith belief that he has met the standards of conduct described
in Section 8.01 and upon receipt of a written undertaking by or on behalf of
such Officer or employee to repay such amount if it shall ultimately be
determined that he did not meet the applicable standards of conduct and a
determination is made under the procedure set forth in Section 8.03 that the
facts then known to those making the determination would not preclude
indemnification under this Article 8. Such an undertaking must be an unlimited
general obligation of the person making it, but need not be secured and may be
accepted by the Corporation without reference to such person's financial ability
to make repayment.
Section 8.05. Rights Not Exclusive. The indemnification provided in this
Article 8 (a) shall not be deemed exclusive of any other rights to which a
person seeking indemnification may be entitled under (1) any law, (2) the
Articles, (3) any resolution of the Board or of the Shareholders, (4) any other
authorization, whenever adopted, after notice, by a majority vote of all shares
entitled to vote thereon, (5) any contract, or (6) the articles of
incorporation, code of by-laws or other governing documents, or any resolution
of or other authorization by the directors, shareholders, partners, trustees,
members, owners or governing body, of Another Entity; (b) shall inure to the
benefit of the heirs, executors and administrators of such a person; and (c)
shall continue as to any such person who has ceased to be an Officer or employee
of the Corporation or to be serving in an Authorized Capacity for Another
Entity.
Section 8.06. Vested Right to Indemnification. The right of any person to
indemnification under this Article 8 shall vest at the time of occurrence or
performance of any event, act or omission giving rise to the Action for which
indemnification is sought, and, once vested, shall not later be impaired as a
result of any amendment, repeal, alteration or other modification of any or all
of these provisions. Notwithstanding the foregoing, the indemnification afforded
under this Article 8 shall be applicable to all alleged prior acts or omissions
of any person seeking indemnification hereunder, regardless of the fact that
such alleged prior acts or omissions may have occurred prior to the adoption of
this Article 8. To the extent such prior acts or omissions cannot be deemed to
be covered by this Article 8, the right of any individual to indemnification
shall be governed by the indemnification provisions in effect at the time of
such prior acts or omissions.
Section 8.07. Additional Definitions. For purposes of this Article 8,
references to the "Corporation" shall include any domestic or foreign
predecessor entity of the Corporation in a merger or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
For purposes of this Article 8, serving an employee benefit plan at the
request of the Corporation shall include any service as an Officer or employee
of the Corporation which imposes duties on, or involves services by such Officer
or employee with respect to an employee benefit plan, its participants, or
beneficiaries. A person who acted in good faith and in a manner be reasonably
believed to be in the best interests of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not opposed to
the best interest of the Corporation" referred to in this Article 8.
For purposes of this Article 8, "party" includes any individual who is or
was a plaintiff, defendant or respondent in any action, suit or proceeding, or
who is threatened to be made a named defendant or respondent in any action, suit
or proceeding.
For purposes of this Article 8, "official capacity," when used with respect
to an Officer, employee of the Corporation, or agent of the Corporation, shall
mean the office in the Corporation held by the Officer or the employment or
agency relationship undertaken by the employee or agent on behalf of the
Corporation.
S-5
<PAGE>
"Official Capacity" does not include service for any other foreign or domestic
corporation or any partnership, joint venture, trust, employee benefit plan, or
other enterprise, whether for profit or not.
Section 8.08. Payments as a Business Expense. Any payments made to any
indemnified party under this Article 8 or under any other right to
indemnification shall be deemed to be an ordinary and necessary business expense
of the Corporation, and payment thereof shall not subject any person responsible
for the payment, or the Board, to any action for corporate waste or to any
similar action.
Item 21. Exhibits and Financial Statement Schedules.
(a) The exhibits furnished with this Registration Statement are listed
beginning on page E-1.
(b) The following financial statement schedule of the Registrant is
included in this Registration Statement beginning on page S-11:
Item 22. Undertakings.
(1) The undersigned registrant hereby undertakes:
(a) to file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
and
(iii) to include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement; provided, however, that
clauses (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a
post-effective amendment by those clauses is
contained in periodic reports filed with or furnished
to the Commission by the registrant pursuant to
Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by
reference in the registration statement;
(b) that, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof; and
(c) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual
S-6
<PAGE>
report pursuant to section 15(d) of the Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(4) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(5) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not subject of and included in
the registration statement when it became effective.
S-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Indianapolis, State of
Indiana, on December 5, 1997.
LILLY INDUSTRIES, INC.
By: /s/ Douglas W. Huemme
-------------------------------------
Douglas W. Huemme,
Chairman of the Board,
President and Chief Executive Officer
Each person whose signature appears below hereby authorizes John C. Elbin
to file one or more amendments (including post-effective amendments) to the
registration statement which amendments may make such changes in the
registration statement as he deems appropriate, and to file any registration
statement for the same offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933. Each such person hereby appoints
John C. Elbin, as attorney-in-fact, to execute in the name and on the behalf of
each person individually, and in each capacity stated below, any such amendments
to the registration statement and any such registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
------------------- ------------------ ------------
(1) Principal Executive Officer:
/s/ Douglas W. Huemme Chairman of the
---------------------- Board, President and )
Douglas W. Huemme Chief Executive Officer )
)
(2) Principal Financial Officer: )
)
/s/ John C. Elbin )
---------------------- Vice President, Chief )
John C. Elbin Financial Officer )
and Secretary )
)
(3) Principal Accounting Officer: )
)
/s/ Kenneth L. Mills Corporate Accounting
---------------------- Director and )
Kenneth L. Mills Assistant Secretary )
)
(4) The Board of Directors: )
)
/s/ Robert A. Taylor )
---------------------- Director )
Robert A. Taylor )
)
)
---------------------- Director )
William C. Dorris )
)
/s/ James M. Cornelius )
---------------------- Director )
James M. Cornelius ) December 4, 1997
)
/s/ Paul K. Gaston )
---------------------- Director )
Paul K. Gaston )
)
)
---------------------- Director )
Douglas W. Huemme )
)
/s/ Harry Morrison )
---------------------- Director )
Harry Morrison, Ph.D. )
)
/s/ Norma J. Oman )
---------------------- Director )
Norma J. Oman )
)
/s/ John D. Peterson )
---------------------- Director )
John D. Peterson )
S-8
<PAGE>
)
/s/ Thomas E. Reilly Jr. )
---------------------- Director )
Thomas E. Reilly, Jr. ) December 4, 1997
)
/s/ Van P. Smith )
---------------------- Director )
Van P. Smith )
S-9
<PAGE>
STATE OF INDIANA )
) SS:
COUNTY OF MARION )
Before me, a notary public, in and for said County and State personally
appeared Douglas W. Huemme, John C. Elbin, Kenneth L. Mills, Robert A. Taylor,
James M. Cornelius, Paul K. Gaston, Harry Morrison, PH.D., Norma J. Oman, John
D. Peterson, Thomas E. Reilly, Jr. and Van P. Smith, who executed the attached
signature page on December 4, 1997, for the Registration Statement on Form S-4
which included a power of attorney regarding such Registration Statement.
Witness my hand and Notarial Seal this 4th day of December, 1997.
/s/ Diane S. Rizzo
-----------------------------------
Notary Public
Diane S. Rizzo
My Commission Expires: -----------------------------------
(Printed)
- ------------------------------
Residing in County
DIANE S. RIZZO
[NOTARY SEAL] NOTARY PUBLIC STATE OF INDIANA
JOHNSON COUNTY
MY COMMISSION EXP. AUG. 29, 2001
S-10
<PAGE>
VALUATION AND QUALIFYING ACCOUNTS
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ------ ------ ---------------------------------------------- ------ ------
Additions
Description Balance at (1) (2) (3) Deductions- Balance
Beginning Charged to Charged to Acquired in Describe at End of
of Period Costs and Other Accounts Business Period
Expenditures -Describe Combination
<S> <C> <C> <C> <C> <C> <C>
Year ended November 30, 1996:
Reserve and allowances
deducted from asset
accounts:
Allowance for doubtful
accounts receivable $2,050,922 $ 510,826 $ -- $729,307 $585,296 (A) $2,705,759
========== ========== ====== ======== ======== ==========
Year ended November 30, 1995:
Reserves and allowances
deducted from asset
accounts:
Allowance for doubtful
accounts receivable $1,758,769 $ 600,717 $ -- $ -- $308,564 (A) $2,050,922
========== ========== ====== ======== ======== ==========
Year ended November 30, 1994:
Reserves and allowances
deducted from asset
accounts:
Allowance for doubtful
accounts receivable $1,353,042 $ 790,422 $ -- $ -- $384,695 (A) $1,758,769
========== ========== ====== ======== ======== ==========
</TABLE>
Note A - Uncollectible accounts receivable charged off, net of recoveries.
S-11
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page
1 Purchase Agreement, dated November 5, 1997, between Lilly __
Industries, Inc. and Salomon Brothers, Inc., Lehman Brothers,
Inc. and Schroder & Co., Inc.
2 Merger Agreement, dated March 4, 1996, by and among Lilly
Industries, Inc., LP Acquisition Corporation and Guardsman
Products, Inc. This exhibit is incorporated by reference to
Exhibit 2 to the Lilly Industries, Inc.'s Form 8-K Current
Report filed with the SEC on April 22, 1996.
3.1 Restated Articles of Incorporation of Lilly Industries, Inc.,
as amended. This exhibit is incorporated by reference to
Exhibit 3(a) to Lilly Industries, Inc.'s Form 10-K Annual
Report for the fiscal year ended November 30, 1996.
3.2 Restated By-Laws of Lilly Industries, Inc., as amended. This
exhibit is incorporated by reference to Exhibit 3(b) to Lilly
Industries, Inc.'s Form 10-K Annual Report for the fiscal year
ended November 30, 1993.
4.1 Indenture, dated November 10, 1997, between Lilly Industries,
Inc. and Harris Trust and Savings Bank. __
4.2 Credit Agreement, dated October 24, 1997, between Lilly
Industries, Inc., the Lenders Signatory thereto, and NBD __
Bank, N.A. as Agent.
4.3 Rights Agreement, dated January 12, 1996, between Lilly
Industries, Inc. and KeyCorp Shareholder Services, Inc. as
Rights Agent. This exhibit is incorporated by reference to
Exhibit 4 to Lilly Industries, Inc.'s Form 8-A filed with the
SEC on January 23, 1996.
5 Opinion of Barnes & Thornburg. __
10.1 Registration Agreement, dated November 5, 1997, between Lilly
Industries, Inc. and Salomon Brothers, Inc., Lehman __
Brothers, Inc. and Schroder & Co., Inc.
10.2 Form of Exchange Agent Agreement. __
10.3 Lilly Industries, Inc. Unfunded Supplemental Retirement Plan
(as in effect November 29, 1990). This exhibit is incorporated
by reference to Exhibit 10(b) to Lilly Industries, Inc.'s Form
10-K Annual Report for the fiscal year ended November 30, 1990.
10.4 Lilly Industries, Inc. Unfunded Excess Benefit Plan. This
exhibit is incorporated by reference to Exhibit 10(c) to Lilly
Industries, Inc.'s Form 10-K Annual Report for the fiscal year
ended November 30, 1989.
10.5 Lilly Industries, Inc. Second Unfunded Supplemental Retirement
Plan (effective June 4, 1990). This exhibit is incorporated by
reference to Exhibit 10(f) to Lilly Industries, Inc.'s Form
10-K Annual Report for the fiscal year ended November 30, 1990.
10.7 Lilly Industries, Inc. 1991 Director Stock Option Plan. This
exhibit is incorporated by reference to Exhibit 10(i) to Lilly
Industries, Inc.'s Form 10-K Annual Report for the fiscal year
ended November 30, 1991.
<PAGE>
10.8 Lilly Industries, Inc. 1992 Stock Option Plan. This exhibit is
incorporated by reference to Exhibit 10(j) to Lilly Industries,
Inc.'s Form 10-K Annual Report for the fiscal year ended
November 30, 1991. First Amendment to Lilly Industries, Inc.
1992 Stock Option Plan. ____
10.9 Credit Agreement, dated April 8, 1996, between Lilly
Industries, Inc., the Lenders Signatory thereto, NBD Bank,
N.A., as Agent, and Harris Trust and Savings Bank, Comerica
Bank, Mercantile Bank of St. Louis and Bank One, Indianapolis,
N.A., as Co-Agents. This exhibit is incorporated by reference
to Exhibit 4 to Lilly Industries, Inc.'s Form 8-K Current
Report filed with the SEC on April 22, 1996.
10.10 First Amendment to Credit Agreement, dated April 2, 1997,
between Lilly Industries, Inc., the Lenders Signatory thereto,
NBD Bank, N.A., as Agent, and Harris Trust and Savings Bank,
Comerica Bank, Mercantile Bank of St. Louis and Bank One,
Indianapolis, N.A., as Co-Agents. This exhibit is incorporated
by reference to Exhibit 10 to Lilly Industries, Inc.'s Form
10-Q Quarterly Report for the fiscal quarter ended May 31,
1997.
10.11 Lilly Industries, Inc. Executive Retirement Plan (effective as
of January 1, 1996). This exhibit is incorporated by reference
to Exhibit 10(i) to Lilly Industries, Inc.'s Form 10-K Annual
Report for the fiscal year ended November 30, 1996.
10.12 Lilly Industries, Inc. Retirement Plan (effective as of January
1, 1996) and Trust Agreement for Lilly Industries, Inc.
Replacement Plan between Lilly Industries, Inc. and Bankers
Trust Company of Des Moines, dated September 27, 1996. This
exhibit is incorporated by reference to Exhibit 10(j) to Lilly
Industries, Inc.'s Form 10-K Annual Report for the fiscal year
ended November 30, 1996.
10.13 Change in Control Agreement, dated September 26, 1997, by and
between Registrant and Hugh M. Cates. This exhibit is
incorporated by reference to Exhibit 10(1) to Lilly Industries,
Inc.'s Form 10-Q Quarterly Report for the fiscal quarter ended
August 31, 1997.
10.14 Change in Control Agreement, dated September 26, 1997, by and
between Registrant and Larry H. Dalton. This exhibit is
incorporated by reference to Exhibit 10(2) to Lilly Industries,
Inc.'s Form 10-Q Quarterly Report for the fiscal quarter ended
August 31, 1997.
10.15 Change in Control Agreement, dated September 26, 1997, by and
between Registrant and William C. Dorris. This exhibit is
incorporated by reference to Exhibit 10(3) to Lilly Industries,
Inc.'s Form 10-Q Quarterly Report for the fiscal quarter ended
August 31, 1997.
10.16 Change in Control Agreement, dated September 26, 1997, by and
between Registrant and John C. Elbin. This exhibit is
incorporated by reference to Exhibit 10(4) to Lilly Industries,
Inc.'s Form 10-Q Quarterly Report for the fiscal quarter ended
August 31, 1997.
10.17 Change in Control Agreement, dated September 26, 1997, by and
between Registrant and Ned L. Fox. This exhibit is incorporated
by reference to Exhibit 10(5) to Lilly Industries, Inc.'s Form
10-Q Quarterly Report for the fiscal quarter ended August 31,
1997.
10.18 Change in Control Agreement, dated September 26, 1997, by and
between Registrant and Douglas W. Huemme. This exhibit is
incorporated by reference to Exhibit 10(6) to Lilly Industries,
Inc.'s Form 10-Q Quarterly Report for the fiscal quarter ended
August 31, 1997.
<PAGE>
10.19 Change in Control Agreement, dated September 26, 1997, by and
between Registrant and A. Barry Melnkovic. This exhibit is
incorporated by reference to Exhibit 10(7) to Lilly Industries,
Inc.'s Form 10-Q Quarterly Report for the fiscal quarter ended
August 31, 1997.
10.20 Change in Control Agreement, dated September 26, 1997, by and
between Registrant and John H. Million. This exhibit is
incorporated by reference to Exhibit 10(8) to Lilly Industries,
Inc.'s Form 10-Q Quarterly Report for the fiscal quarter ended
August 31, 1997.
10.21 Change in Control Agreement, dated September 26, 1997, by and
between Registrant and Kenneth L. Mills. This exhibit is
incorporated by reference to Exhibit 10(9) to Lilly Industries,
Inc.'s Form 10-Q Quarterly Report for the fiscal quarter ended
August 31, 1997.
10.22 Change in Control Agreement, dated September 26, 1997, by and
between Registrant and Gary D. Missildine. This exhibit is
incorporated by reference to Exhibit 10(10) to Lilly
Industries, Inc.'s Form 10-Q Quarterly Report for the fiscal
quarter ended August 31, 1997.
10.23 Change in Control Agreement, dated September 5, 1997, by and
between Registrant and Robert A. Taylor. This exhibit is
incorporated by reference to Exhibit 10(11) to Lilly
Industries, Inc.'s Form 10-Q Quarterly Report for the fiscal
quarter ended August 31, 1997.
10.24 Change in Control Agreement, dated September 26, 1997, by and
between Registrant and Keith C. Vander Hyde, Jr.. This exhibit
is incorporated by reference to Exhibit 10(12) to Lilly
Industries, Inc.'s Form 10-Q Quarterly Report for the fiscal
quarter ended August 31, 1997.
10.25 Change in Control Agreement, dated September 26, 1997, by and
between Registrant and Jay M. Wiegner. This exhibit is
incorporated by reference to Exhibit 10(13) to Lilly
Industries, Inc.'s Form 10-Q Quarterly Report for the fiscal
quarter ended August 31, 1997.
11 Statements Regarding Computation of Earnings Per Share. __
12 Statements Regarding Computation of Ratios. __
21 List of Subsidiaries. This exhibit is incorporated by reference
to Exhibit 21 to Lilly Industries, Inc.'s Form 10-K Annual
Report for the fiscal year ended November 30, 1996
23.1 Consent of Ernst & Young LLP. __
23.2 Consent of Arthur Andersen LLP. __
24 Power of Attorney (included on pages S-8 through S-9). __
25 Statement of Eligibility of Harris Trust and Savings Bank, as
Trustee, on Form T-1. __
99.1 Letter of Transmittal __
99.2 Notice of Guaranteed Delivery. __
LILLY INDUSTRIES, INC.
$100,000,000
7-3/4% Senior Notes due 2007
PURCHASE AGREEMENT
New York, New York
November 5, 1997
To: SALOMON BROTHERS INC
LEHMAN BROTHERS INC.
SCHRODER & CO. INC.
In care of:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Lilly Industries, Inc., an Indiana corporation (the
"Company"), proposes to issue and sell to you (the "Purchasers"), $100,000,000
aggregate principal amount of its 7-3/4% Senior Notes due 2007 (the
"Securities"). The Securities are to be issued under an indenture (the
"Indenture") dated as of November 10, 1997, between the Company and Harris Trust
and Savings Bank, as trustee (the "Trustee").
The sale of the Securities to you will be made without
registration of the Securities under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemption from the registration
requirements of the Securities Act provided by Section 4(2) thereof. You have
advised the Company that you will make an offering of the Securities purchased
by you hereunder in accordance with Section 4 hereof as soon as you deem
advisable after the execution and delivery of this Agreement.
In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum, dated October 17, 1997 (the
"Preliminary Memorandum"), and a final offering memorandum, dated November 5,
1997 (the "Final Memorandum"). Each of the Preliminary Memorandum and
[NYCORP2:438653]
<PAGE>
the Final Memorandum sets forth certain information concerning the Company and
the Securities. The Company hereby confirms that it has authorized the use of
the Preliminary Memorandum and the Final Memorandum, and any amendment or
supplement thereto, in connection with the offer and sale of the Securities by
the Purchasers. Unless stated to the contrary, all references herein to the
Final Memorandum are to the Final Memorandum at the Execution Time (as defined
below) and are not meant to include any amendment or supplement thereto
subsequent to the Execution Time and any references herein to the terms "amend",
"amendment" or "supplement" with respect to the Final Memorandum shall be deemed
to refer to and include any information filed under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), subsequent to the Execution Time which
is incorporated by reference therein.
The holders of the Securities will be entitled to the benefits of the
Registration Agreement dated the date hereof, between the Company and the
Purchasers (the "Registration Agreement").
Capitalized terms used herein without definition have the respective
meanings assigned to them in the Final Memorandum.
1. Representations and Warranties. The Company represents and
warrants to, and agrees with, the Purchasers as set forth below in this Section
1.
(a) The Preliminary Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any
material fact (other than pricing terms and other financial terms for
the Securities intentionally left blank) necessary to make the
statements therein, in the light of the circum stances under which they
were made, not misleading. The Final Memorandum, at the date hereof,
does not, and at the Closing Date (as defined below) will not (and any
amendment or supplement thereto, at the date thereof and at the Closing
Date, will not), contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that no representation or warranty
is made as to the information contained in or omitted from the
Preliminary Memorandum or the Final Memorandum, or any
<PAGE>
amendment or supplement thereto, in reliance upon and in conformity
with information furnished in writing to the Company by or on behalf of
the Purchasers specifically for inclusion therein, it being understood
that the only such information is that described in Section 8(b)
hereof. All documents incorporated by reference in the Preliminary
Memorandum or the Final Memorandum that were filed under the Exchange
Act on or before the Execution Time complied, and all such documents
that are filed under the Exchange Act after the Execution Time and on
or before the Closing Date will comply, in all material respects with
the applicable requirements of the Exchange Act and the rules
thereunder.
(b) The Company has not taken nor will it take, directly or
indirectly, any action prohibited by Regulation M under the Exchange
Act, in connection with the offering of the Securities.
(c) None of the Company, any of its Affiliates (as defined in
Rule 501(b) of Regulation D under the Securities Act ("Regulation D"))
or any person acting on its or their behalf has (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Securities Act) which is or will be
integrated with the Securities in a manner that would require the
registration of the Securities under the Securities Act or (ii) engaged
in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with any offer or sale of the
Securities in the United States.
(d) The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(e) None of the Company, any of its Affiliates or any person
acting on its or their behalf has engaged in any directed selling
efforts with respect to the Securities, and each of them has complied
with the offering restrictions requirement of Regulation S ("Regulation
S") under the Securities Act. Terms used in this paragraph have the
meanings given to them by Regulation S.
(f) The Company is not an "investment company"
[NYCORP2:438653]
<PAGE>
within the meaning of the Investment Company Act of 1940, as amended
(the "Investment Company Act"), without taking account of any exemption
arising out of the number of holders of the Company's securities.
(g) The Company has full corporate power and authority to
enter into this Agreement, the Registration Agreement, the Indenture
and the Securities and to perform the transactions contemplated hereby
and thereby (the "Transactions"). This Agreement and the Registration
Agreement have been duly authorized, executed and delivered by the
Company. The execution and delivery of the Indenture has been duly
authorized by the Company, and the Indenture, when duly executed and
delivered by the parties thereto, will constitute a valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles of
equity (regardless of whether enforcement is sought in a proceeding at
law or in equity).
(h) The Securities have been duly authorized for issuance and
sale by the Company to the Purchasers, and when duly executed,
authenticated, issued and delivered in accordance with the Indenture
and paid for in accor dance with the terms of this Agreement, the
Securities will constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms and
entitled to the benefits of the Indenture, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(i) The execution, delivery and performance of this Agreement,
the Registration Agreement, the Indenture and the Securities by the
Company and the consummation of the Transactions will not conflict with
or result in a breach or violation of any of the terms and provisions
of, or constitute a default under, (i) the articles of incorporation,
by-laws or other organizational documents of the Company or any of its
Subsidiaries (as defined below), (ii) any material
<PAGE>
statute, rule or regulation applicable to the Company or any Subsidiary
or any order of any governmental agency or body or any court having
jurisdiction over the Company or any Subsidiary or any of their
respective properties, (iii) any agreement or instrument relating to
borrowed money to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound or to which any of their
respective properties is subject or (iv) any other material agreement
or instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound or to which any of their
respective properties is subject. No consent, approval, authorization
or other order of any court, regulatory body, administrative agency or
other governmental body which has not already been obtained is required
for the execution and delivery of this Agreement, the Registration
Agreement, the Indenture or the Securities or for the consummation of
the Transactions, except such as may be required under the blue sky or
securities laws of any jurisdiction in connection with the purchase and
sale of the Securities by the Purchasers and except such as may be
required under the Securities Act with respect to the Registration
Agreement and the transactions contemplated thereunder. The term
"Subsidiary" means each person of which a majority of the voting equity
securities or other interests is owned, directly or indirectly, by the
Company.
(j) The Company is subject to and in full compli ance with the
reporting requirements of Section 13 or Section 15(d) of the Exchange
Act.
(k) The Company has not paid or agreed to pay to any person
any compensation for soliciting another to purchase any securities of
the Company (except as con templated by this Agreement).
(l) The information provided by the Company pur suant to
Section 5(i) hereof will not, at the date thereof, contain any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the cir
cumstances under which they were made, not misleading.
(m) It is not necessary in connection with the offer, sale and
delivery of the Securities in the
<PAGE>
manner contemplated by this Agreement and the Final Memorandum to
register the Securities under the Securities Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act").
(n) The Credit Agreement dated as of October 24, 1997 (the
"Credit Agreement"), among the Company, the lenders listed on Schedule
1 thereto and NBD Bank, N.A., as agent, (including all documents
related thereto), on the terms described in the Final Memorandum, has
been duly executed and delivered by each of the parties thereto and is
in full force and effect.
2. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the
Company agrees to sell to the Purchasers, and the Purchasers agree to purchase
from the Company, severally and not jointly, at a purchase price of 97.468913%
of the principal amount thereof, plus accrued interest, if any, from November
10, 1997, to the Closing Date, the principal amount of Securities set forth
opposite each Purchaser's name in Schedule I hereto.
3. Delivery and Payment. Delivery of and payment for the
Securities shall be made at 10:00 AM, New York City time, on November 10, 1997,
or such later date as the Purchasers may agree or as provided in Section 9
hereof (such date and time of delivery and payment for the Securities being
herein called the "Closing Date"). Delivery of the Securities shall be made to
the Purchasers against payment by the Purchasers of the purchase price thereof
to or upon the order of the Company by wire transfer in Federal (same day) funds
to a U.S. dollar account in New York previously designated by the Company or
such other manner of payment as may be designated by the Company and agreed to
by the Purchasers not less than two business days prior to the Closing Date.
Delivery of the Securities shall be made at the office of Cravath, Swaine &
Moore ("Counsel for the Purchasers"), 825 Eighth Avenue, New York, New York.
Certificates for the Securities shall be registered in such names and in such
denominations as the Purchasers may request not less than two full business days
in advance of the Closing Date.
The Company agrees to have the Securities available for
inspection, checking and packaging by the
<PAGE>
Purchasers in New York, New York, not later than 1:00 PM on the business day
prior to the Closing Date.
4. Offering of Securities. Each Purchaser severally and not
jointly (i) acknowledges that the Securities have not been registered under the
Securities Act and may not be offered or sold except pursuant to, the
registration requirements of the Securities Act or pursuant to an effective
registration statement under the Securities Act and (ii) represents and warrants
to and agrees with the Company that:
(a) It has not offered or sold, and will not offer or sell,
any Securities except (i) to those it reasonably believes to be
qualified institutional buyers (as defined in Rule 144A under the
Securities Act) and that, in connection with each such sale, it has
taken or will take reasonable steps to ensure that the purchaser of
such Securities is aware that such sale is being made in reliance on
Rule 144A or (ii) in accordance with the restrictions set forth in
Exhibit A hereto.
(b) Neither it nor any person acting on its behalf has made or
will make offers or sales of the Securities in the United States by
means of any form of general solicitation or general advertising
(within the meaning of Regulation D) in the United States, except
pursuant to a registered public offering, whether an exchange offer or
shelf registration, as provided in the Registration Agreement.
5. Agreements. The Company agrees with the Purchasers that:
(a) The Company will furnish to the Purchasers, without
charge, as many copies of the Final Memorandum and any supplements or
amendments thereof or thereto as the Purchasers may reasonably request.
The Company will pay the expenses of printing or other production of
all documents relating to the offering.
(b) The Company will not amend or supplement the Final
Memorandum, other than by filing documents under the Exchange Act that
are incorporated by reference therein, without prior consent of the
Purchasers. Prior to the completion of the sale of the Securities by
the Purchasers, the Company will not file any
<PAGE>
document under the Exchange Act which is incorporated by reference in
the Final Memorandum unless the Company has furnished to you a copy for
your review prior to filing and will not file any such document to
which you reasonably and timely object within five days of receipt
thereof.
(c) The Company promptly will advise the Purchasers when,
prior to the completion of the sale of the Securities by the
Purchasers, any document filed under the Exchange Act that is
incorporated by reference in the Final Memorandum shall have been filed
with the Securities and Exchange Commission (the "Commission").
(d) If at any time prior to the completion of the sale of the
Securities by the Purchasers, any event occurs as a result of which the
Final Memorandum, as then amended or supplemented, would include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it
shall be necessary to amend or supplement the Final Memorandum
(including any document incorporated by reference therein that was
filed under the Exchange Act) to comply with the Exchange Act or the
rules thereunder or other applica ble law, the Company promptly will
notify the Purchasers of the same and, subject to paragraph (b) of this
Section 5, will prepare and provide to the Purchasers pursuant to
paragraph (a) of this Section 5 an amendment or supplement which will
correct such statement or omission or effect such compliance, and, in
the case of such an amendment or supplement that is to be filed under
the Exchange Act and that is incorporated by reference in the Final
Memorandum, will file such amendment or supplement with the Commission.
(e) The Company will arrange for the qualifica tion of the
Securities for sale under the laws of such jurisdictions as the
Purchasers may designate and will maintain such qualifications in
effect so long as required for the sale of the Securities. The Company
promptly will advise the Purchasers of the receipt by it of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose.
<PAGE>
(f) The Company will not, and will not permit any of its
Affiliates to, resell any Securities that have been acquired by any of
them.
(g) None of the Company, any of its Affiliates, or any person
acting on its or their behalf will, directly or indirectly, make offers
or sales of any security, or solicit offers to buy any security, under
circumstances that would require the registration of the Securities
under the Securities Act.
(h) None of the Company, any of its Affiliates or any person
acting on its or their behalf will engage in any form of general
solicitation or general advertising (within the meaning of Regulation
D) in connection with any offer or sale of the Securities in the United
States, except pursuant to a registered public offering, whether an
exchange offer or shelf registration, as provided in the Registration
Agreement.
(i) So long as any of the Securities are "restricted
securities" within the meaning of Rule 144(a)(3) under the Securities
Act, the Company will, during any period in which it is not subject to
or in compliance with Section 13 or 15(d) of the Exchange Act, provide
to each holder of such restricted securities and to each prospective
purchaser (as desig nated by such holder) of such restricted
securities, upon the request of such holder or prospective pur chaser,
any information required to be provided by Rule 144A(d)(4) under the
Securities Act. This covenant is intended to be for the benefit of the
holders, and the prospective purchasers designated by such holders,
from time to time of such restricted securities.
(j) None of the Company, any of its Affiliates or any person
acting on its or their behalf will engage in any directed selling
efforts with respect to the Securities except pursuant to a registered
public offering as provided in the Registration Agreement and each of
them will comply with the offering restrictions requirement of
Regulation S. Terms used in this paragraph have the meanings given to
them by Regulation S.
(k) The Company will cooperate with the
<PAGE>
Purchasers and use its best efforts to permit the Securities to be
eligible for clearance and settlement through The Depository Trust
Company.
(l) The Company hereby agrees to permit the Securities to be
designated Portal eligible securities, will pay the requisite fees
related thereto and has been advised by The Portal Market that the
Securities have or will be designated Portal eligible securities in
accordance with the rules and regulations of the National Association
of Securities Dealers, Inc.
(m) The Company will not, until 180 days following the Closing
Date, without the prior written consent of Salomon Brothers Inc, offer,
sell or contract to sell, or otherwise dispose of, directly or
indirectly, or announce the offering of, or file a registration
statement for, any debt securities issued or guaranteed by the Company
(other than (i) the Securities and (ii) pursuant to a registered public
offering as provided in the Registration Agreement). The Company will
not at any time offer, sell, contract to sell or otherwise dispose of,
directly or indirectly, any securities under circumstances where such
offer, sale, contract or disposition would cause the exemption afforded
by Section 4(2) of the Securities Act or the safe harbor of Regulation
S thereunder to cease to be applicable to the offer and sale of the
Securities as contemplated by this Agreement and the Final Memorandum.
(n) The Company will apply the net proceeds from the sale of
the Securities sold by it substantially in accordance with its
statements under the caption "Use of Proceeds" in the Final Memorandum.
6. Conditions to the Obligations of the Purchasers. The
obligations of the Purchasers to purchase the Securities shall be subject to the
accuracy of the representations and warranties on the part of the Company
contained herein at the date and time that this Agreement is executed and
delivered by the parties hereto (the "Execution Time"), and the Closing Date, to
the accuracy of the statements of the Company made in any certificates pursuant
<PAGE>
to the provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) The Company shall have furnished to the Purchasers the
opinion of Barnes & Thornburg, counsel for the Company, dated the
Closing Date, to the effect that:
(i) each of the Company and its domestic Subsidiaries
has been duly incorporated and is validly existing as a
corporation under the laws of the respective jurisdiction in
which it is chartered or organized, with full corporate power
and authority to own its properties and conduct its business
as described in the Final Memorandum, and, based on
certificates from applicable government officials, is duly
qualified to do business as a foreign corporation and is in
good standing under the laws of each jurisdiction which
requires such qualification wherein it owns or leases material
properties or conducts material business other than such
jurisdictions where failure to be so qualified would not,
individually or in the aggregate, be required to be disclosed
or incorporated by reference in the Final Memorandum if the
Final Memorandum were a prospectus included in a registration
statement on Form S-3 under the Securities Act;
(ii) all the outstanding shares of capital stock of
the Company and each domestic Subsidiary have been duly and
validly authorized and issued and are fully paid and
nonassessable, and, except as otherwise set forth in the Final
Memorandum, all outstanding shares of capital stock of any
Subsidiary of the Company are owned by the Company either
directly or through wholly owned Subsidiaries free and clear
of any perfected security interest and, to the best of such
counsel's knowledge, any other security interests, claims or
encumbrances;
(iii) the Company's authorized equity capital
ization is as set forth in the Final Memorandum;
(iv) the information contained in the Final
Memorandum under the headings "Risk Factors-- Environmental
Matters", "Management's Discussion and Analysis of Results of
Operations and Financial Condition--Regulatory Issues",
"Business--Environmental Regulation", "Business-- Legal
Proceedings", "Description of Existing Debt and New Bank
Credit Facility" and "Certain United States Federal Income Tax
Considerations", fairly summarizes the matters therein
described;
(v) the Indenture conforms as to form in all material
respects with the requirements of the Trust Indenture Act and
the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder;
(vi) no consent, approval, authorization or order of,
or filing or registration with, any court or governmental
agency or body is required for the execution, delivery and
performance of this Agreement, the Indenture, the Registration
Agreement and the Securities or for the consummation of the
Transactions, except such as may be required under the blue
sky or securities laws of any jurisdiction in connection with
the purchase and sale of the Securities by the Purchasers and
such other approvals (specified in such opinion) as have been
obtained and except such as may be required under the
Securities Act with respect to the Registration Agreement and
the transactions contemplated thereunder;
(vii) none of the issue and sale of the Securities,
the execution and delivery of this Agreement, the Registration
Agreement or the Indenture, the fulfillment of the terms
hereof or thereof or the consummation of the Transactions will
conflict with, result in a breach or viola tion of, or
constitute a default under any law or the articles or by-laws
of the Company or any Subsidiary or the terms of any indenture
or other agreement or instrument known to such counsel and to
which the Company or any Subsidiary is a party or bound or any
judgment, order or decree known to such counsel to be
applicable to the Company or any Subsidiary of any court,
regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over the Company or any
Subsidiary;
<PAGE>
(viii) the Company has full corporate right, power
and authority to execute and deliver the Indenture, the
Securities, the Registration Agreement and this Agreement and
to perform its respective obligations hereunder and
thereunder; and all corporate action required to be taken for
the due and proper authorization, execution and delivery of
the Indenture, the Securities, the Registration Agreement and
this Agreement and for the consummation of the Transactions
has been duly and validly taken;
(ix) this Agreement and the Registration
Agreement have been duly authorized, executed and
delivered by the Company;
(x) the Indenture has been duly authorized, executed
and delivered by the Company and constitutes a legal, valid
and binding instrument enforceable against the Company in
accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium
and similar laws affecting creditors' rights and remedies
generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in
equity); the Securities are in the form contemplated by the
Indenture and have been duly authorized and executed by the
Company and, when authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by
the Purchasers pursuant to this Agreement, will be duly and
validly issued and outstanding and will constitute legal,
valid and binding obligations of the Company entitled to the
benefits of the Indenture and enforceable in accordance with
their terms, subject to applicable bankruptcy, insol vency,
reorganization, fraudulent conveyance, moratorium and similar
laws affecting creditors' rights and remedies generally and to
general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity);
and the statements set forth under the heading "Description of
Notes" in the Final Memorandum, insofar as such statements
purport to summarize certain provisions of the Securities and
the Indenture, provide a fair summary of such provisions;
<PAGE>
(xi) to the best knowledge of such counsel, there is
no pending or threatened action, suit or proceeding before any
court or governmental agency, authority or body or any
arbitrator involving the Company or any of the Subsidiaries or
to which any of the properties of the Company or any of the
Subsidiaries is subject that would be required to be disclosed
or incorporated by reference in the Final Memorandum if the
Final Memorandum were a prospectus included in a registration
statement on Form S-3 under the Securities Act, which is not
adequately disclosed in the Final Memorandum;
(xii) the Company is not, and after giving effect to the
offering and sale of the Securities and the application of the
net proceeds therefrom, will not be, an "investment company"
within the meaning of the Investment Company Act and the rules
and regulations of the Commission thereunder, without taking
account of any exemp tion arising out of the number of holders
of the Company's securities; and
(xiii) assuming the accuracy of the representa tions
and warranties and compliance with the agreements contained
herein, no registration of the Securities under the Securities
Act is required, and no qualification of the Indenture under
the Trust Indenture Act is necessary, for the offer, sale and
delivery of the Securities in the manner contemplated by this
Agreement.
Such counsel shall also state that they have no
reason to believe that at the Execution Time the Final Memorandum
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading
or that the Final Memorandum includes an untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements therein, in the light of the cir cumstances under which they
were made, not misleading (provided that such counsel shall express no
such belief regarding the financial statements and the notes and
schedules thereto and other financial data contained in the Final
Memorandum).
<PAGE>
In rendering such opinion, such counsel may rely (A)
as to matters involving the application of laws of any jurisdiction
other than the State of New York, the State of Indiana or the United
States, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to
be reliable and who are satisfactory to Counsel for the Purchasers and
(B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and public
officials.
All references in this Section 6(a) to the Final
Memorandum shall be deemed to include any amend ment or supplement
thereto at the Closing Date.
(b) The Company shall have furnished to the Purchasers the
opinion of Harrison, Elwood, special Canadian counsel for the Company,
dated the Closing Date, to the effect that:
(i) each of the Company's Subsidiaries that is
incorporated in Canada has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the respective jurisdiction in which it is chartered
or organized, with full corporate power and authority to own
its properties and conduct its business as described in the
Final Memorandum, and is duly qualified to do business as a
foreign corporation and is in good standing under the laws of
each jurisdiction which requires such qualification wherein it
owns or leases material properties or conducts material
business; and
(ii) all the outstanding shares of capital stock of
each of the Company's Subsidiaries that is incorporated in
Canada have been validly confirmed, ratified and approved as
of the date of such opinion.
(c) The Purchasers shall have received from Counsel for the
Purchasers such opinion or opinions, dated the Closing Date, with
respect to the issuance and sale of the Securities, the Final
Memorandum (as amended or supplemented at the Closing Date) and other
related matters as the Purchasers may reasonably require, and the
Company shall have furnished to such
<PAGE>
counsel such documents as they request for the purpose of enabling them
to pass upon such matters.
(d) The Company shall have furnished to the Purchasers a
certificate of the Company, signed by the Chairman, President and Chief
Executive Officer and the Vice President, Chief Financial Officer and
Secretary of the Company, dated the Closing Date, to the effect that
the signers of such certificate have carefully examined the Final
Memorandum, any amendment or supplement to the Final Memorandum, this
Agreement and the Registration Agreement and that:
(i) the representations and warranties of the Company
in this Agreement and the Registration Agreement are true and
correct in all material respects on and as of the Closing Date
with the same effect as if made on the Closing Date, and the
Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied
hereunder or thereunder at or prior to the Closing Date; and
(ii) since the date of the most recent finan cial
statements included or incorporated by reference in the Final
Memorandum (exclusive of any amendment or supplement thereto),
there has been no material adverse change in the condition
(financial or otherwise), properties, business, results of
operations or prospects of the Company and its subsidiaries,
taken as a whole, whether or not arising from transactions in
the ordinary course of business, except as disclosed in the
Final Memorandum (exclusive of any amendment or supplement
thereto).
(e) At the Execution Time and at the Closing Date, Ernst &
Young LLP shall have furnished to the Purchasers a letter or letters,
dated respectively as of the Execution Time and as of the Closing Date,
in form and substance satisfactory to the Purchasers, con firming that
they are independent accountants within the meaning of the Securities
Act and the Exchange Act and the applicable rules and regulations
thereunder and Rule 101 of the Code of Professional Conduct of the
<PAGE>
American Institute of Certified Public Accountants (the "AICPA") and
stating in effect that:
(i) in their opinion the audited financial statements
and financial statement schedules included or incorporated by
reference in the Final Memorandum and reported on by them
comply in form in all material respects with the applicable
accounting requirements of the Exchange Act and the related
published rules and regulations that would apply to the Final
Memorandum if the Final Memorandum were a prospectus included
in a registration statement on Form S-1 under the Securities
Act;
(ii) based upon (x) their review, in accordance with
standards established under Statement on Auditing Standards
No. 71, of the unaudited interim financial information for the
nine-month period ended August 31, 1997, and as at August 31,
1997, and (y) the procedures detailed in such letter with
respect to the period subsequent to the date of the latest
audited financial statements included in the Final Memorandum,
including the reading of the minutes and inquiries of certain
officials of the Company who have responsibility for the
financial and accounting matters and certain other limited
procedures requested by the Purchasers and described in detail
in such letter, nothing has come to their attention that
causes them to believe that:
(A) any unaudited financial statements of
the Company included or incorporated by reference in
the Final Memorandum do not comply in form in all
material respects with the applicable accounting
requirements of the Securities Act that would apply
to the Final Memorandum if the Final Memorandum were
a prospectus included in a registration statement on
Form S-1 under the Securities Act and with the
published rules and regulations of the Commission
with respect to financial statements included or
incorporated in quarterly reports on Form 10-Q under
the Exchange Act; or that such unaudited financial
statements are not, in all material
<PAGE>
respects, in conformity with generally accepted
accounting principles applied on a basis
substantially consistent with that of the audited
financial statements of the Company included or
incorporated by reference in the Final Memorandum; or
(B) with respect to the period subse quent
to August 31, 1997, there were any changes, at a
specified date not more than five business days prior
to the date of the letter, in the total debt of the
Company and its subsidiaries or capital stock of the
Company or decreases in the stockholders' equity of
the Company or decreases in working capital of the
Company and its subsidiaries, as compared with the
amounts shown on the August 31, 1997, consolidated
balance sheet included or incorporated by reference
in the Final Memorandum, or for the period from
September 1, 1997, to such specified date there were
any decreases, as compared with the corresponding
period in the preceding year in net sales, cost of
products sold, operating income, net income or
EBITDA, as defined in the Final Memorandum, except in
all instances for changes or decreases set forth in
such letter, in which case the letter shall be
accompanied by an explanation by the Company as to
the significance thereof unless said explanation is
not deemed necessary by the Purchasers; or
(C) the information included under the
headings "Selected Consolidated Financial Information
and Certain Operating Data" and "Management's
Discussion and Analysis of Results of Operations and
Financial Condition" is not in conformity with the
disclosure requirements of Regulation S-K that would
apply to the Final Memorandum if the Final Memorandum
were a prospectus included in a registration
statement on Form S-1 under the Securities Act; and
(iii) they have performed certain other speci fied
procedures as a result of which they deter mined that certain
information of an accounting,
<PAGE>
financial or statistical nature (which is limited to
accounting, financial or statistical informa tion derived from
the general accounting records of the Company and its
subsidiaries) set forth or incorporated by reference in the
Final Memorandum, including the information set forth under
the captions "Summary", "Risk Factors", "Use of Proceeds",
"Capitalization" "Selected Consolidated Financial Information
and Certain Operating Data", "Management's Discussion and
Analysis of Results of Operations and Financial Condition",
"Business", "Management", "Description of Existing Debt and
New Bank Credit Facility" and "Description of Notes" in the
Final Memorandum, agrees with the accounting records of the
Company and its subsidiaries, excluding any questions of legal
interpretation.
All references in this Section 6(e) to the Final Memorandum
shall be deemed to include any amendment or supplement thereto at the
date of the letter.
(f) Subsequent to the Execution Time or, if ear lier, the
dates as of which information is given in the Final Memorandum, there
shall not have been (i) any change or decrease specified in the letter
or letters referred to in paragraph (e) of this Section 6 or (ii) any
change, or any development involving a pros pective change, in or
affecting the business or prop erties of the Company and its
Subsidiaries the effect of which, in any case referred to in clause (i)
or (ii) above, is, in the judgment of the Purchasers, so material and
adverse as to make it impractical or inad visable to market the
Securities as contemplated by the Final Memorandum.
(g) Subsequent to the Execution Time, there shall not have
been (i) any decrease in the rating of the Securities or any of the
Company's other debt securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule
436(g) under the Securities Act) or (ii) any notice given of any
intended or potential decrease in any such rating or that such
organization has under surveillance or review (other than any such
notice with positive implications of a possible upgrading) its rating
of the Securities or any of the Company's other debt securities.
<PAGE>
(h) Prior to the Closing Date, the Company shall have
furnished to the Purchasers such further information, certificates and
documents as the Purchasers may reasonably request.
(i) On or prior to the Closing Date, the Company shall have
received funds pursuant to the Credit Agreement in the amounts set
forth in the Final Memorandum.
If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or else
where in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Purchasers and Counsel for the
Purchasers, this Agreement and all obligations of the Purchasers hereunder may
be canceled at, or at any time prior to, the Closing Date by the Purchasers.
Notice of such cancelation shall be given to the Company in writing or by
telephone confirmed in writing.
The documents required to be delivered by this Section 6 will
be delivered at the office of Counsel for the Purchasers, 825 Eighth Avenue, New
York, New York, on the
Closing Date.
7. Reimbursement of Expenses. If the sale of the Securities
provided for herein is not consummated because any condition to the obligations
of the Purchasers set forth in Section 6 hereof is not satisfied, because of any
termination pursuant to Section 10 hereof or because of any refusal, inability
or failure on the part of the Company to perform any agreement herein or comply
with any provision hereof, in each case other than by reason of a default by the
Purchasers, the Company will reimburse the Purchasers upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with the proposed purchase
and sale of the Securities.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Purchaser, each director, officer, employee and
agent of any Purchaser and each other person, if any, who controls any Purchaser
within the meaning of Section 15 of the Securities
<PAGE>
Act or Section 20 of the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Securities Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a mate
rial fact contained in the Preliminary Memorandum, the Final Memorandum or any
information provided by the Company to any holder or prospective purchaser of
Securities pursuant to Section 5(i), or in any amendments thereof or supplements
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made in the Preliminary Memorandum or
the Final Memorandum, or in any amendment thereof or supplement thereto, in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Purchasers specifically for inclusion therein, it
being understood that the only such information is that described in Section
8(b). This indemnity agreement will be in addition to any liability that the
Company may otherwise have.
(b) Each Purchaser severally and not jointly agrees to
indemnify and hold harmless the Company, its directors and officers, and each
other person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity from the Company to the Purchasers, but only
with reference to written information relating to the Purchasers furnished to
the Company by or on behalf of the Purchasers specifically for inclusion in the
Preliminary Memorandum or the Final Memorandum (or in any amendment thereof or
supplement thereto). This indemnity agreement will be in addition to any
liability which the Purchasers may otherwise have. The Company acknowledges that
the statements set forth in the
<PAGE>
last paragraph of the cover page and under the heading "Plan of Distribution" in
the Preliminary Memorandum and the Final Memorandum (or in any amendment or
supplement thereto) constitute the only information furnished in writing by or
on behalf of the Purchasers for inclusion in the Preliminary Memorandum or the
Final Memorandum (or in any amendment thereof or supplement thereto).
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemni fying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indem nified party or parties except as set forth below); pro
vided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indem nified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reason able fees, costs and expenses of such
separate counsel, if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemni fied parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such
<PAGE>
action or (iv) the indemnifying party shall authorize the indemnified party to
employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnifica tion or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemni fied party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Purchasers agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company and the Purchasers
may be subject in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and by the Purchasers on the
other from the offering of the Securities; provided, however, that in no case
shall the Purchasers be responsible for any amount in excess of the purchase
discount or commission applicable to the Securities purchased by such the
Purchasers hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Company and the Purchasers shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
of the Purchasers on the other in connection with the statements or omissions
which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the total net proceeds from the offering of the Securities (before deducting
expenses), and benefits received by the Purchasers shall be deemed to be equal
to the total purchase discounts and commissions, in each case as set forth on
the cover page of the Final Memorandum. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the Company or the Purchasers. The Company and the
Purchasers agree that it would not be just and equitable if contribution were
determined by pro
<PAGE>
rata allocation or any other method of allocation which does not take account of
the equitable considerations referred to above. Notwithstanding the provisions
of this paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls a
Purchaser within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act and each director, officer, employee and agent of a
Purchaser shall have the same rights to contribution as such Purchaser, and each
person who controls the Company within the meaning of either the Securities Act
or the Exchange Act and each officer and director of the Company shall have the
same rights to contribution as the Company, subject in each case to the
applicable terms and conditions of this paragraph (d).
9. Default by a Purchaser. If any one or more Purchasers shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Purchaser hereunder and such failure to purchase shall constitute a default
in the performance of its or their obligations under this Agreement, the
remaining Purchasers shall be obligated severally to take up and pay for (in the
respective proportions which the principal amount of Securities set forth
opposite their names in Schedule I hereto bears to the aggregate principal
amount of Securities set forth opposite the names of all the remaining
Purchaser(s)) the Securities that the defaulting Purchaser or Purchasers agreed
but failed to purchase; provided, however, that in the event that the aggregate
principal amount of Securities that the defaulting Purchaser or Purchasers
agreed but failed to purchase shall exceed 10% of the aggregate principal amount
of Securities set forth in Schedule I hereto, the remaining Purchasers shall
have the right to purchase all, but shall not be under any obligation to
purchase any, of the Securities, and if such non-defaulting Purchasers do not
purchase all the Securities, this Agreement will terminate without liability to
any non-defaulting Purchaser or the Company. In the event of a default by any
Purchaser as set forth in this Section 9, the Closing Date shall be postponed
for such period, not exceeding seven days, as the Purchasers shall determine in
order that the required changes in the Final Memorandum or in any other
documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Purchaser of its liability, if any,
<PAGE>
to the Company or any non-defaulting Purchaser for damages occasioned by its
default hereunder.
10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Purchasers, by notice given to the
Company prior to delivery of and payment for the Securities, if prior to such
time (i) trading in any of the Company's securities shall have been suspended by
the Commission or the New York Stock Exchange or trading in securities generally
on the New York Stock Exchange shall have been suspended or limited or minimum
prices shall have been established on such Exchange, (ii) a banking moratorium
shall have been declared either by Federal or New York State authorities or
(iii) there shall have occurred any outbreak or escalation of hostilities,
declaration by the United States of a national emergency or war or other
calamity or crisis the effect of which on financial markets is such as to make
it, in the judgment of the Purchasers, impracticable or inadvisable to proceed
with the offering or delivery of the Securities as contemplated by the Final
Memorandum.
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Purchasers set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation made by or on behalf of the Purchasers, the Company or any of the
officers, directors, employees, agents or controlling persons referred to in
Section 8 hereof, and will survive delivery of and payment for the Securities.
The provisions of Sections 7 and 8 hereof shall survive the termination or
cancelation of this Agreement.
12. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Purchasers, will be mailed,
delivered or sent by fax and confirmed to them, care of Salomon Brothers Inc, at
Seven World Trade Center, New York, New York, 10048; or, if sent to the Company,
will be mailed, delivered or telegraphed and confirmed to it at 733 South West
Street, Indianapolis, IN 46225, attention: John C. Elbin.
13. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to in
<PAGE>
Section 8 hereof, and, except as expressly set forth in Section 5(i) hereof, no
other person will have any right or obligation hereunder.
14. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO THE CONFLICT OF LAW PROVISIONS THEREOF).
15. Business Day. For purposes of this Agreement, "business
day" means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a
day on which banking institutions in The City of New York, New York are author
ized or obligated by law, executive order or regulation to close.
16. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original, but all such
counterparts will together constitute one and the same instrument.
<PAGE>
If the foregoing is in accordance with your under standing of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this Agreement and your acceptance shall represent a binding agreement
between the Company and the Purchasers.
By: /s/ John C. Elbin
--------------------------
Name: John C. Elbin
Title: Vice President, Chief Financial
Officer and Secretary
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written
SALOMON BROTHERS INC
LEHMAN BROTHERS INC.
SCHRODER & CO. INC.
By: SALOMON BROTHERS INC
By: /s/ E. Thomas Massey
-----------------------
Name: E. Thomas Massey
Title: Associate
<PAGE>
SCHEDULE I
Principal
Amount of
Securities to
Purchasers be Purchased
Salomon Brothers Inc ...................... $ 60,000,000
Lehman Brothers Inc. ...................... 30,000,000
Schroder & Co. Inc. ....................... 10,000,000
------------
Total .......... $100,000,000
[NYCORP2:438653]
<PAGE>
EXHIBIT A
Selling Restrictions for Offers and
Sales outside the United States
(1)(a) The Securities have not been and will not be registered
under the Securities Act and may not be offered or sold within the United States
or to, or for the account or benefit of, U.S. persons except in accordance with
Regulation S or pursuant to an exemption from the registration requirements of
the Securities Act. Each Purchaser represents and agrees that, except as
otherwise permitted by Section 4(a)(i) of the Agreement to which this is an
exhibit, it has offered and sold the Securities, and will offer and sell the
Securities, (i) as part of their distribution at any time and (ii) otherwise
until 40 days after the later of the commencement of the offering and the
Closing Date, only in accordance with Rule 903 of Regulation S. Accordingly,
each Purchaser represents and agrees that neither it, nor any of its affiliates
nor any person acting on its or their behalf has engaged or will engage in any
directed selling efforts with respect to the Securities, and that it and they
have complied and will comply with the offering restrictions requirement of
Regulation S. Each Purchaser agrees that, at or prior to the confirmation of
sale of Securities (other than a sale of Securities pursuant to Section 4(a)(i)
of the Agreement to which this is an Exhibit), it shall have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases Securities from it during the restricted period a
confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been
registered under the U.S. Securities Act of 1933 (the
"Securities Act") and may not be offered or sold within the
United States or to, or for the account or benefit of, U.S.
persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of
the offering and November 10, 1997, except in either case in
accordance with Regulation S, Rule 144A or another available
exemption from registration under the Securities Act. Terms
used above have the meanings given to them by Regulation S."
<PAGE>
(b) Each Purchaser also represents and agrees that it has not
entered and will not enter into any contractual arrangement with any distributor
with respect to the distribution of the Securities, except with its affiliates
or with the prior written consent of the Company.
(c) Terms used in this Exhibit have the meanings given to them
by Regulation S.
(2) Each Purchaser represents and agrees that (i) it has not
offered or sold, and will not offer or sell, in the United Kingdom, by means of
any document, any Securities other than to persons whose ordinary business it is
to buy or sell shares or debentures, whether as principal or as agent (except in
circumstances which do not constitute an offer to the public within the meaning
of the Companies Act 1985 of Great Britain), (ii) it has complied and will
comply with all applicable provisions of the Financial Services Act 1986 of the
United Kingdom with respect to anything done by it in relation to the Securities
in, from or otherwise involving the United Kingdom, and (iii) it has only issued
or passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Securities to a person who is
of a kind described in Article 9(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1988 or is a person to whom the
document may otherwise lawfully be issued or passed on.
INDENTURE
Between
LILLY INDUSTRIES, INC.
and
HARRIS TRUST AND SAVINGS BANK
dated as of
November 10, 1997
-------
7-3/4% Senior Notes Due 2007
TABLE OF CONTENTS
Page
------------------------ -------------------------------------------
ARTICLE I
Definitions and Incorporation by Reference
------------------------ ------------------------------------------
SECTION 1.01. Definitions 1
------------------------ ------------------------------------------
SECTION 1.02. Other Definitions 20
------------------------ ------------------------------------------
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act 20
------------------------ ------------------------------------------
SECTION 1.04 Rules of Construction 20
------------------------ ------------------------------------------
<PAGE>
ARTICLE 2
The Securities
------------------------ ------------------------------------------
SECTION 2.01. Form and Dating 21
------------------------ ------------------------------------------
SECTION 2.02. Execution and Authentication 22
------------------------ ------------------------------------------
SECTION 2.03. Registrar and Paying Agent 22
------------------------ ------------------------------------------
SECTION 2.04. Paying Agent To Hold Money
in Trust 23
------------------------ ------------------------------------------
SECTION 2.05. Securityholder Lists 23
------------------------ ------------------------------------------
SECTION 2.06. Replacement Securities 23
------------------------ ------------------------------------------
SECTION 2.07. Outstanding Securities 24
------------------------ ------------------------------------------
SECTION 2.08. Temporary Securities 24
------------------------ ------------------------------------------
SECTION 2.09. Cancelation 25
------------------------ ------------------------------------------
SECTION 2.10. Defaulted Interest 25
------------------------ ------------------------------------------
SECTION 2.11. CUSIP Numbers 25
------------------------ ------------------------------------------
ARTICLE 3
Redemption
------------------------ ------------------------------------------
SECTION 3.01. Notices to Trustee 25
------------------------ ------------------------------------------
SECTION 3.02. Selection of Securities To Be
Redeemed 26
SECTION 3.03. Notice of Redemption 26
------------------------ ------------------------------------------
SECTION 3.04. Effect of Notice of Redemption 27
------------------------ ------------------------------------------
SECTION 3.05. Deposit of Redemption Price 27
------------------------ ------------------------------------------
SECTION 3.06. Securities Redeemed in Part 27
<PAGE>
ARTICLE 4
Covenants
------------------------ ------------------------------------------
SECTION 4.01. Payment of Securities 28
------------------------ ------------------------------------------
SECTION 4.02. Commission Reports 28
------------------------ ------------------------------------------
SECTION 4.03. Compliance Certificate 28
------------------------ ------------------------------------------
SECTION 4.04. Further Instruments and Acts 29
------------------------ ------------------------------------------
SECTION 4.05. Corporate Existence 29
------------------------ ------------------------------------------
SECTION 4.06. Limitation on Debt 29
------------------------ ------------------------------------------
SECTION 4.07. Limitation on Liens 30
------------------------ ------------------------------------------
SECTION 4.08. Limitation on Sale and Leaseback 30
Transactions
------------------------ ------------------------------------------
SECTION 4.09. Exempted Debt 30
------------------------ ------------------------------------------
SECTION 4.10. Designation of Restricted and
Unrestricted Subsidiaries 31
------------------------ ------------------------------------------
ARTICLE 5
Successor Company
------------------------ ------------------------------------------
SECTION 5.01. When Company May Merge or Transfer
Assets 32
------------------------ ------------------------------------------
SECTION 5.02. Successor Substituted 33
------------------------ ------------------------------------------
ARTICLE 6
Defaults and Remedies
------------------------ ------------------------------------------
SECTION 6.01. Events of Default 33
------------------------ ------------------------------------------
SECTION 6.02. Acceleration 35
------------------------ ------------------------------------------
SECTION 6.03. Other Remedies 36
SECTION 6.04. Waiver of Past Defaults 36
------------------------ ------------------------------------------
SECTION 6.05. Control by Majority 36
------------------------ ------------------------------------------
SECTION 6.06. Limitation on Suits 37
------------------------ ------------------------------------------
SECTION 6.07. Rights of Holders To Receive Payment 37
------------------------ ------------------------------------------
SECTION 6.08. Collection Suit by Trustee 37
------------------------ ------------------------------------------
SECTION 6.09. Trustee May File Proofs of Claim 38
------------------------ ------------------------------------------
SECTION 6.10. Priorities 38
------------------------ ------------------------------------------
SECTION 6.11. Undertaking for Costs 38
------------------------ ------------------------------------------
SECTION 6.12. Waiver of Stay or Extension Laws 39
<PAGE>
ARTICLE 7
Trustee
------------------------ ------------------------------------------
SECTION 7.01. Duties of Trustee 39
------------------------ ------------------------------------------
SECTION 7.02. Rights of Trustee 40
------------------------ ------------------------------------------
SECTION 7.03. Individual Rights of Trustee 41
------------------------ ------------------------------------------
SECTION 7.04. Trustee's Disclaimer 41
------------------------ ------------------------------------------
SECTION 7.05. Notice of Defaults 41
------------------------ ------------------------------------------
SECTION 7.06. Reports by Trustee to Holders 42
------------------------ ------------------------------------------
SECTION 7.07. Compensation and Indemnity 42
------------------------ ------------------------------------------
SECTION 7.08. Replacement of Trustee 43
------------------------ ------------------------------------------
SECTION 7.09. Successor Trustee by Merger 44
------------------------ ------------------------------------------
SECTION 7.10. Eligibility; Disqualification 44
------------------------ ------------------------------------------
SECTION 7.11. Preferential Collection of Claims Against
Company
44
------------------------ ------------------------------------------
ARTICLE 8
Discharge of Indenture; Defeasance
------------------------ ------------------------------------------
SECTION 8.01. Discharge of Liability on Securities;
Defeasance
45
SECTION 8.02. Conditions to Defeasance 46
------------------------ ------------------------------------------
SECTION 8.03. Application of Trust Money 47
------------------------ ------------------------------------------
SECTION 8.04. Repayment to Company 47
------------------------ ------------------------------------------
SECTION 8.05. Indemnity for Government
Obligations 47
------------------------ ------------------------------------------
SECTION 8.06. Reinstatement 48
------------------------ ------------------------------------------
<PAGE>
ARTICLE 9
Amendments
------------------------ ------------------------------------------
SECTION 9.01. Without Consent of Holders 48
------------------------ ------------------------------------------
SECTION 9.02. With Consent of Holders 49
------------------------ ------------------------------------------
SECTION 9.03. Compliance with Trust Indenture Act 50
------------------------ ------------------------------------------
SECTION 9.04. Revocation and Effect of Consents
and Waivers 50
------------------------ -------------------------------------------
SECTION 9.05. Notation on or Exchange of
Securities 50
------------------------ -------------------------------------------
SECTION 9.06. Trustee To Sign Amendments 51
------------------------ -------------------------------------------
SECTION 9.07. Payment for Consent 51
ARTICLE 10
Miscellaneous
------------------------ -------------------------------------------
SECTION 10.01. Trust Indenture Act Controls 51
------------------------ -------------------------------------------
SECTION 10.02. Notices 52
------------------------ -------------------------------------------
SECTION 10.03. Communication by Holders with Other
Holders 52
------------------------ -------------------------------------------
SECTION 10.04. Certificate and Opinion as to Conditions
Precedent 52
------------------------ -------------------------------------------
SECTION 10.05. Statements Required in Certificate or
Opinion 53
------------------------ -------------------------------------------
SECTION 10.06. When Securities Disregarded 53
------------------------ -------------------------------------------
SECTION 10.07. Rules by Trustee, Paying Agent and
Registrar 54
------------------------ -------------------------------------------
SECTION 10.08. Legal Holidays 54
------------------------ -------------------------------------------
SECTION 10.09. Governing Law 54
------------------------ -------------------------------------------
SECTION 10.10. No Recourse Against Others 54
------------------------ -------------------------------------------
SECTION 10.11. Successors 54
------------------------ -------------------------------------------
SECTION 10.12. Multiple Originals 54
SECTION 10.13. Table of Contents; Headings 55
<PAGE>
Appendix A
Provisions
Relating to
Initial
Securities,
Exchange Securities and Private Exchange
Securities
Exhibit 1 to
Form of Initial
Security
Appendix A
Exhibit A
Form of
Exchange
Security or
Private
Exchange
Security
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(b) 7.08; 7.10
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.05
(b) 10.03
(c) 10.03
313(a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 10.02
(d) 7.06
314(a) 4.02; 4.03;
10.02
(b) N.A.
(c)(1) 10.04
(c)(2) 10.04
(c)(3) N.A.
(d) N.A.
(e) 10.05
(f) 4.03
315(a) 7.01
(b) 7.05; 10.02
(c) 7.01
(d) 7.01
(e) 6.11
316(a)(last sentence)
10.06
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
317(a)(1) 6.08
(a)(2) 6.09
(b) 2.04
318(a) 10.01
<PAGE>
N.A. Means Not Applicable.
--------------------
Note: This
Cross-Reference Table
shall not, for any
purposes, be deemed to
be part of this
Indenture.
<PAGE>
INDENTURE dated as of November 10, 1997, between LILLY
INDUSTRIES, INC., an Indiana corporation (the "Company"),
and HARRIS TRUST AND SAVINGS BANK, an Illinois banking
association (the "Trustee").
Each party agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders of the
Company's 7-3/4% Senior Notes Due 2007 (the "Initial Securities") and,
if and when issued pursuant to a registered exchange for Initial
Securities, the Company's 7-3/4% Senior Notes Due 2007 (the "Exchange
Securities") and, if and when issued pursuant to a private exchange for
Initial Securities, the Company's 7-3/4% Senior Notes Due 2007 (the
"Private Exchange Securities", together with the Exchange Securities
and the Initial Securities, the "Securities"):
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions.
"Affiliate" means another Person directly or
indirectly controlling or controlled by or under direct or indirect
common control with such first Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of Voting Stock
or by contract or otherwise.
"Asset Sale" means any sale, lease, transfer,
issuance or other disposition (or series of related sales, leases,
transfers, issuances or dispositions) by the Company or any Restricted
Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction (each referred to for the purposes
of this definition as a "disposition"), of (a) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying
shares) or (b) any other assets of the Company or any Restricted
Subsidiary outside of the ordinary course of business of the Company or
such Restricted Subsidiary (other than, in the case of clauses (a) and
(b) above, (i) any disposition by a Restricted Subsidiary to the
Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary and (ii) any disposition effected in compliance with Section
5.01.
<PAGE>
"Attributable Debt" in respect of a Sale and
Leaseback Transaction means, at any date of determination, (a) if such
Sale and Leaseback Transaction is a Capital Lease Obligation, the
amount of Debt represented thereby according to the definition of
"Capital Lease Obligation" and (b) in all other instances, the present
value (discounted at the interest rate borne by the Securities,
compounded annually), of the total obligations of the lessee for rental
payments during the remaining term of the lease included in such Sale
and Leaseback Transaction (including any period for which such lease
has been extended).
"Average Life" means, as of any date of
determination, with respect to any Debt or Preferred Stock, the
quotient obtained by dividing (a) the sum of the product of the numbers
of years (rounded to the nearest one-twelfth of one year) from the date
of determination to the dates of each successive scheduled principal
payment of such Debt or redemption or similar payment with respect to
such Preferred Stock multiplied by the amount of such payment by (b)
the sum of all such payments.
"Board of Directors" means the Board of Directors of
the Company or any committee thereof duly authorized to act on behalf
of such Board.
"Board Resolution" means a copy of a resolution
certified by the Secretary or an Assistant Secretary of the Company to
have been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification.
"Business Day" means each day which is not a Legal
Holiday.
"Capital Expenditure Debt" means Debt Incurred by any
Person to finance a capital expenditure so long as (a) such capital
expenditure is or should be included as an addition to "Property and
Equipment" in accordance with GAAP and (b) such Debt is Incurred within
180 days of the date such capital expenditure is made.
"Capital Stock" of any Person means any and all
shares, interests, rights to purchase, warrants, options,
participations or other equivalents of or interests in (however
designated) equity of such Person, including any Preferred Stock, but
excluding any debt securities convertible or exchangeable into such
equity interest.
"Capital Stock Sale Proceeds" means the aggregate Net
Cash Proceeds received by the Company from the issue or sale (other
than to a Subsidiary of the Company or an employee stock ownership plan
or trust established by the Company or any of its Subsidiaries for the
benefit of their employees) by the Company of any class of its Capital
Stock (other than Disqualified Stock) after the Issue Date.
"Capitalized Lease Obligation" means any obligation
under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP and the amount of Debt
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity
thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such
lease may be terminated by the lessee without payment of a penalty. For
purposes of Section 4.07, a Capital Lease Obligation shall be deemed
secured by a Lien on the Property being leased.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Commission" means the Securities and Exchange
Commission.
"Company" means the party named as such in this
Indenture until a successor replaces it and, thereafter, means the
successor and, for purposes of any provision contained herein and
required by the TIA, each other obligor on the indenture securities.
<PAGE>
"Consolidated Interest Coverage Ratio" means, as of
any date of determination, the ratio of (a) the aggregate amount of
EBITDA for the most recent four consecutive fiscal quarters ending at
least 45 days prior to such determination date to (b) Consolidated
Interest Expense for such four fiscal quarters; provided, however, that
(i) if the Company or any Restricted Subsidiary has Incurred any Debt
since the beginning of such period that remains outstanding or if the
transaction giving rise to the need to calculate the Consolidated
Interest Coverage Ratio is an Incurrence of Debt, or both, Consolidated
Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Debt as if such Debt had been
Incurred on the first day of such period and the discharge of any other
Debt repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Debt as if such discharge had occurred on the
first day of such period, (ii) if since the beginning of such period
the Company or any Restricted Subsidiary shall have repaid,
repurchased, legally defeased or otherwise discharged any Debt with
Capital Stock Sale Proceeds, Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to
such discharge as if such discharge had occurred on the first day of
such period, (iii) if since the beginning of such period the Company or
any Restricted Subsidiary shall have made any Asset Sale or if the
transaction giving rise to the need to calculate the Consolidated
Interest Coverage Ratio is an Asset Sale, or both, EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive)
directly attributable to the Property which is the subject of such
Asset Sale for such period, or increased by an amount equal to the
EBITDA (if negative) directly attributable thereto for such period, in
either case as if such Asset Sale had occurred on the first day of such
period and Consolidated Interest Expense for such period shall be
reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Debt of the Company or any Restricted
Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Restricted Subsidiaries in
connection with such Asset Sale, as if such Asset Sale had occurred on
the first day of such period (or, if the Capital Stock of any
Restricted Subsidiary is sold, by an amount equal to the Consolidated
Interest Expense for such period directly attributable to the Debt of
such Restricted Subsidiary to the extent the Company and its continuing
Restricted Subsidiaries are no longer liable for such Debt after such
sale), (iv) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person which becomes a
Restricted Subsidiary) or an acquisition of Property, including any
acquisition of Property occurring in connection with a transaction
causing a calculation to be made hereunder, which constitutes all or
substantially all of an operating unit of a business, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Debt)
as if such Investment or acquisition occurred on the first day of such
period and (v) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into
the Company or any Restricted Subsidiary since the beginning of such
period) shall have made any Asset Sale, Investment or acquisition of
Property that would have required an adjustment pursuant to clause
(iii) or (iv) above if made by the Company or a Restricted Subsidiary
during such period, EBITDA and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto as if
such Asset Sale or Investment occurred on the first day of such period.
For purposes of this definition, pro forma calculations shall be
determined in good faith by a responsible financial or accounting
Officer. If any Debt bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Debt shall be
calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire period (taking into account any
Interest Rate Agreement applicable to such Debt if such Interest Rate
Agreement has a remaining term in excess of 12 months).
<PAGE>
"Consolidated Interest Expense" means, for any
period, the total interest expense of the Company and its consolidated
Restricted Subsidiaries, plus, to the extent not included in such total
interest expense, and to the extent Incurred by the Company or its
Restricted Subsidiaries, (a) interest expense attributable to capital
leases, (b) amortization of debt discount and debt issuance cost,
including commitment fees, (c) capitalized interest, (d) non-cash
interest expense, (e) commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance
financing, (f) net costs associated with Hedging Obligations (including
amortization of fees), (g) Redeemable Dividends, (h) Preferred Stock
dividends in respect of all Preferred Stock of Restricted Subsidiaries
held by Persons other than the Company or a Wholly Owned Subsidiary,
(i) interest incurred in connection with Investments in discontinued
operations, (j) interest accruing on any Debt of any other Person to
the extent such Debt is Guaranteed by the Company or any Restricted
Subsidiary and (k) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are
used by such plan or trust to pay interest or fees to any Person (other
than the Company) in connection with Debt Incurred by such plan or
trust.
"Consolidated Net Income" means, for any period, the
net income (loss) of the Company and its consolidated Subsidiaries;
provided, however, that there shall not be included in such
Consolidated Net Income (a) any net income (loss) of any Person (other
than the Company) if such Person is not a Restricted Subsidiary, except
that (i) subject to the exclusion contained in clause (d) below, the
Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate
amount of cash distributed by such Person during such period to the
Company or a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a
Restricted Subsidiary, to the limitations contained in clause (c)
below) and (ii) the Company's equity in a net loss of any such Person
other than an Unrestricted Subsidiary for such period shall be included
in determining such Consolidated Net Income, (b) any net income (loss)
of any Restricted Subsidiary if such Restricted Subsidiary is subject
to restrictions, directly or indirectly, on the payment of dividends or
the making of distributions, directly or indirectly, to the Company,
except that (i) subject to the exclusion contained in clause (c) below,
the Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash distributed by such
Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend or other distribution (subject, in
the case of a dividend or other distribution to another Restricted
Subsidiary, to the limitation contained in this clause) and (ii) the
Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net
Income, (c) any gain (but not loss) realized upon the sale or other
disposition of any Property of the Company or any of its consolidated
Subsidiaries (including pursuant to any Sale and Leaseback Transaction)
which is not sold or otherwise disposed of in the ordinary course of
business, (d) any extraordinary gain or loss, (e) the cumulative effect
of a change in accounting principles and (f) any non-cash compensation
expense realized for grants of performance shares, stock options or
other stock award to officers, directors and employees of the Company
or any Restricted Subsidiary.
"Consolidated Net Tangible Assets" means, as of any
date of determination, the total amount of assets (less applicable
reserves and other properly deductible items) after deducting (1) all
current liabilities (excluding the amount of those which are by their
terms extendable or renewable at the option of the obligor to a date
more than 12 months after the date as of which the amount is being
determined and excluding all intercompany items between the Company and
any Restricted Subsidiary or between Restricted Subsidiaries), (2) all
goodwill, tradenames, trademarks, patents, unamortized debt discount
and expense and other like intangible assets, all as determined in
<PAGE>
accordance with GAAP, (3) the excess of cost over fair market value of
assets or businesses acquired, (4) any revaluation or other write-up in
book value of assets subsequent to the last day of the fiscal quarter
of the Company immediately preceding the Issue Date as a result of a
change in the method of valuation in accordance with GAAP, (5) minority
interests in consolidated Subsidiaries held by Persons other than the
Company or any Restricted Subsidiary, (6) treasury stock, (7) cash or
securities set aside and held in a sinking or other analogous fund
established for the purpose of redemption or other retirement of
Capital Stock to the extent such obligation is not reflected in
Consolidated Current Liabilities, and (8) Investments in and assets of
Unrestricted Subsidiaries.
"Consolidated Net Worth" means the excess of assets
over liabilities of the Company and its consolidated Subsidiaries, plus
Minority Interests, as determined from time to time in accordance with
GAAP.
"Credit Facility" means, with respect to the Company
or any Restricted Subsidiary, one or more debt or commercial paper
facilities with banks or other institutional lenders (including the New
Bank Credit Facility) providing for revolving credit loans, terms
loans, receivables or inventory financing (including through the sale
of receivables or inventory to such lenders or to special purpose,
bankruptcy remote entities formed to borrow from such lenders against
such receivables or inventory) or trade letters of credit.
"Currency Agreement" means in respect of any Person,
any foreign exchange contract, currency swap agreement, currency option
or other similar agreement or arrangement designed to protect such
Person against fluctuations in currency exchange rates.
"Debt" means, with respect to any Person on any date
of determination (without duplication), (a) the principal of and
premium (if any) in respect of (i) debt of such Person for money
borrowed and (ii) debt evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible
or liable; (b) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale and Leaseback Transactions entered
into by such Person; (c) all obligations of such Person issued or
assumed as the deferred purchase price of Property, all conditional
sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (d) all
obligations of such Person for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in (a) through (c) above)
entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third
Business Day following receipt by such Person of a demand for
reimbursement following payment on the letter of credit); (e) the
amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends); (f) all obligations of
the type referred to in clauses (a) through (e) of other Persons and
all dividends of other Persons for the payment of which, in either
case, such Person is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, including by means of any Guarantee;
(g) all obligations of the type referred to in clauses (a) through (f)
of other Persons secured by any Lien on any Property of such Person
(whether or not such obligation is assumed by such Person), the amount
of such obligation being deemed to be the lesser of the value of such
Property or the amount of the obligation so secured; and (h) to the
extent not otherwise included in this definition, Hedging Obligations
of such Person. The amount of Debt of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations
as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent
obligations at such date.
<PAGE>
"Default" means any event which is, or after notice
or passage of time or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any
Person, Redeemable Stock of such Person as to which (i) the maturity,
(ii) mandatory redemption or (iii) redemption, conversion or exchange
at the option of the holder thereof occurs, or may occur, on or prior
to the first anniversary of the Stated Maturity of the Securities;
provided, however, that Redeemable Stock of such Person that would not
otherwise be characterized as Disqualified Stock under this definition
shall not constitute Disqualified Stock if such Redeemable Stock is
convertible or exchangeable into Debt solely at the option of the
issuer thereof.
"EBITDA" means, for any period, an amount equal to,
for the Company and its consolidated Restricted Subsidiaries, (a) the
sum of Consolidated Net Income for such period, plus the following to
the extent reducing Consolidated Net Income for such period: (i) the
provision for taxes based on income or profits or utilized in computing
net loss, (ii) Consolidated Interest Expense, (iii) depreciation, (iv)
amortization of intangibles and (v) any other non-cash items (other
than any such non-cash item to the extent that it represents an accrual
of or reserve for cash expenditures in any future period), minus (b)
all non-cash items increasing Consolidated Net Income for such period
(other than any such non-cash item to the extent that it will result in
the receipt of cash payments in any future period). Notwithstanding the
foregoing, the provision for taxes based on the income or profits of,
and the depreciation and amortization of, a Restricted Subsidiary shall
be added to Consolidated Net Income to compute EBITDA only to the
extent (and in the same proportion) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Net
Income and only if a corresponding amount would be permitted at the
date of determination to be dividended to the Company by such
Restricted Subsidiary without prior approval (that has not been
obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or
its stockholders.
"Exchange Act" means the Securities Exchange Act of
1934.
"Funded Debt" means all Debt of the Company and its
Restricted Subsidiaries with a Stated Maturity more than one year
after, or which is renewable or extendable at the option of the Company
for a period ending more than one year after, the date as of which
Funded Debt is being determined.
"GAAP" means generally accepted accounting principles
in the United States of America as in effect as of the Issue Date,
including those set forth in (i) the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified
Public Accountants, (ii) statements and pronouncements of the Financial
Accounting Standards Board, (iii) such other statements by such other
entity as approved by a significant segment of the accounting
profession and (iv) the rules and regulations of the Commission
governing the inclusion of financial statements (including pro forma
financial statements) in periodic reports required to be filed pursuant
to Section 13 of the Exchange Act, including opinions and
pronouncements in staff accounting bulletins and similar written
statements from the accounting staff of the Commission.
"Guarantee" means any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any Debt
of any other Person and any obligation, direct or indirect, contingent
or otherwise, of such Person (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt of such other
Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or
services, to take-or-pay or to maintain financial statement conditions
<PAGE>
or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee against loss in respect thereof (in whole or
in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb has a corresponding
meaning. The term "Guarantor" shall mean any Person Guaranteeing any
obligation.
"Hedging Obligation" of any Person means any
obligation of such Person pursuant to any Interest Rate Agreement,
Currency Exchange Protection Agreement or any other similar agreement
or arrangement.
"Holder" or "Securityholder" means the Person in
whose name a Security is registered on the Registrar's books.
"Incur" means, with respect to any Debt or other
obligation of any Person, to create, issue, incur (by merger,
conversion, exchange or otherwise), extend, assume, Guarantee or become
liable in respect of such Debt or other obligation or the recording, as
required pursuant to GAAP or otherwise, of any such Debt or obligation
on the balance sheet of such Person (and "Incurrence" and "Incurred"
shall have meanings correlative to the foregoing); provided, however,
that a change in GAAP that results in an obligation of such Person that
exists at such time, and is not theretofore classified as Debt,
becoming Debt shall not be deemed an Incurrence of such Debt; provided
further, however, that solely for purposes of determining compliance
with Section 4.06, amortization of debt discount shall not be deemed to
be the Incurrence of Debt, provided that in the case of Debt sold at a
discount, the amount of such Debt Incurred shall at all times be the
aggregate principal amount at Stated Maturity.
"Indenture" means this Indenture as amended or
supplemented from time to time.
"Interest Rate Agreement" means, for any Person, any
interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement or other similar agreement or arrangement
designed to protect such Person against fluctuations in interest rates.
"Investment" by any Person means any direct or
indirect loan (other than advances to customers in the ordinary course
of business that are recorded as accounts receivable on the balance
sheet of such Person), advance or other extension of credit or capital
contribution (by means of transfers of cash or other Property to others
or payments for Property or services for the account or use of others,
or otherwise) to, or Incurrence of a Guarantee of any obligation of, or
purchase or acquisition of Capital Stock, bonds, notes, debentures or
other securities or evidence of Debt issued by, any other Person. In
determining the amount of any Investment made by transfer of any
Property other than cash, such Property shall be valued at its fair
market value at the time of such Investment.
"Investment Grade Rating" means a rating equal to or
higher than Baa3 (or the equivalent) by Moody's and BBB- (or the
equivalent) by S&P.
"Investment Grade Status" shall be deemed to have
been reached on the date that the Securities have an Investment Grade
Rating from both Rating Agencies.
"Issue Date" means the date on which the Initial
Securities are originally issued.
"Lien" means, with respect to any Property of any
Person, any mortgage or deed of trust, pledge, security interest,
encumbrance, hypothecation, assignment, deposit arrangement, lien,
charge or adverse claim affecting title or resulting in an encumbrance
against Property (including any Capital Lease Obligation, conditional
sale or other title retention agreement or lease in the nature thereof
<PAGE>
or any filing or agreement to file a financing statement as debtor
under the Uniform Commercial Code or any similar statute other than to
reflect ownership by another Person of Property leased to such Person
under a lease that is not in the nature of a Capital Lease Obligation,
conditional sale or title retention agreement).
"Minority Interest" means any Capital Stock of a
Subsidiary of the Company that is not owned by the Company or another
such Subsidiary.
"Moody's" means Moody's Investors Service, Inc. or
any successor to the rating agency business thereof.
"Net Cash Proceeds" means, with respect to any
issuance or sale of Capital Stock, the cash proceeds of such issuance
or sale, net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage,
consultant and other fees actually incurred in connection with such
issuance or sale and net of taxes paid or payable as a result thereof.
"Officer" means the Chairman of the Board, the
President, any Vice President, the Treasurer, the Secretary, the
Corporate Finance Director or the Corporate Accounting Director of the
Company.
"Officers' Certificate" means a certificate signed by
two Officers.
"Opinion of Counsel" means a written opinion from
legal counsel who is acceptable to the Trustee. The counsel may be an
employee of or counsel to the Company or the Trustee.
"Permitted Debt" means:
(a) Debt of the Company under the Credit Facility,
provided that the aggregate principal amount of all such Debt
under the Credit Facility, together with all Permitted
Refinancing Debt Incurred in respect of Debt previously
Incurred pursuant to this clause (a), at any one time
outstanding shall not exceed the greater of (i) $175,000,000
and (ii) the sum of amounts equal to (x) 65% of the book value
of the inventory of the Company and the Restricted
Subsidiaries and (y) 85% of the book value of the accounts
receivables of the Company and the Restricted Subsidiaries, in
each case as of the end of the most recent fiscal quarter of
the Company ending at least 45 prior to the date of
determination;
(b) Capital Expenditure Debt, provided that (i) the
aggregate principal amount of such Debt does not exceed the
fair market value (on the date of the Incurrence thereof) of
the Property acquired, constructed or leased and (ii) the
aggregate principal amount of all Debt Incurred pursuant to
this clause (b), together with all Permitted Refinancing Debt
Incurred in respect of Debt previously Incurred pursuant to
this clause (b), during any calendar year does not exceed
$25,000,000 (the "Base Amount"), provided that, to the extent
not all the Base Amount is utilized to Incur such Debt in such
year, up to 50% of such Base Amount may be carried forward to
the immediately subsequent year, provided further that any
such carried-forward amount shall not be carried forward
beyond such immediately subsequent year and, with respect to
such immediately subsequent year, shall be utilized only after
all the Base Amount for such year has been utilized;
(c) Debt of the Company owing to and held by any
Wholly Owned Subsidiary and Debt of a Restricted Subsidiary
owing to and held by the Company or any Wholly Owned
Subsidiary; provided, however, that any subsequent issue or
transfer of Capital Stock or other event that results in any
<PAGE>
such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of any such Debt (except
to the Company or a Wholly Owned Subsidiary) shall be deemed,
in each case, to constitute the Incurrence of such Debt by the
issuer thereof;
(d) Debt of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Restricted
Subsidiary was acquired by the Company or otherwise became a
Restricted Subsidiary (other than Debt Incurred as
consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the
transaction or series of transactions pursuant to which such
Restricted Subsidiary became a Subsidiary of the Company or
was otherwise acquired by the Company), provided that at the
time such Restricted Subsidiary was acquired by the Company or
otherwise became a Restricted Subsidiary and after giving pro
forma effect to the Incurrence of such Debt, the Company would
have been able to Incur $1.00 of additional Debt pursuant to
clause (i) of Section 4.06(a);
(e) Debt under Interest Rate Agreements entered into
by the Company or a Restricted Subsidiary for the purpose of
limiting interest rate risk in the ordinary course of the
financial management of the Company or such Restricted
Subsidiary and not for speculative purposes, provided that the
obligations under such agreements are directly related to
payment obligations on Debt otherwise permitted by the terms
of Section 4.06;
(f) Debt under Currency Agreements entered into by
the Company or a Restricted Subsidiary for the purpose of
limiting currency exchange rate risks directly related to
transactions entered into by the Company or such Restricted
Subsidiary in the ordinary course of business and not for
speculative purposes;
(g) Debt in connection with one or more standby
letters of credit or performance bonds issued by the Company
in the ordinary course of business or pursuant to
self-insurance obligations and not in connection with the
borrowing of money or the obtaining of advances or credit;
(h) Debt outstanding on the Issue Date not otherwise
described in clauses (a) through (g) above;
(i) Debt (other than Debt permitted by clause (i) or
(ii) of Section 4.06(a) or the other clauses of this
paragraph) in an aggregate principal amount outstanding at any
one time not to exceed $45,000,000; and
(j) Debt under a local currency credit facility
entered into to finance the acquisition of the foreign company
contemplated by the letter of intent dated August 28, 1997,
between the Company and the other parties thereto, provided
that the aggregate principal amount outstanding, together with
all Permitted Refinancing Debt Incurred in respect of Debt
previously Incurred pursuant to this clause (j), at any one
time not to exceed $15,000,000; and
(k) Permitted Refinancing Debt Incurred in respect of
Debt Incurred pursuant to clause (i) or (ii) of Section
4.06(a) and clauses (a), (b), (d), (h) and (j) of this
paragraph, subject, in the case of clauses (a), (b) and (j) of
this paragraph, to the limitations set forth in the respective
provisos thereto.
<PAGE>
"Permitted Liens" means:
(a) Liens to secure Debt permitted to be Incurred
under clause (b) of the definition of the term "Permitted
Debt", provided that any such Lien may not extend to any
Property of the Company or any Restricted Subsidiary, other
than the Property acquired, constructed or leased with the
proceeds of such Debt and any improvements or accessions to
such Property;
(b) Liens for taxes, assessments or governmental
charges or levies on the Property of the Company or any
Restricted Subsidiary if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are
being contested in good faith and by appropriate proceedings
promptly instituted and diligently concluded, provided that
any reserve or other appropriate provision that shall be
required in conformity with GAAP shall have been made
therefor;
(c) Liens imposed by law, such as carriers',
warehousemen's and mechanics' Liens on the Property of the
Company or any Restricted Subsidiary arising in the ordinary
course of business and securing payment of obligations which
are not more than 60 days past due or are being contested in
good faith and by appropriate proceedings;
(d) Liens on the Property of the Company or any
Restricted Subsidiary Incurred in the ordinary course of
business to secure performance of obligations with respect to
statutory or regulatory requirements, performance or
return-of-money bonds, surety bonds or other obligations of a
like nature and Incurred in a manner consistent with industry
practice, in each case which are not incurred in connection
with the borrowing of money, the obtaining of advances or
credit or the payment of the deferred purchase price of
Property and which do not in the aggregate impair in any
material respect the use of Property in the operation of the
business of the Company and the Restricted Subsidiaries taken
as a whole;
(e) Liens on Property at the time the Company or any
Restricted Subsidiary acquired such Property, including any
acquisition by means of a merger or consolidation with or into
the Company or any Restricted Subsidiary; provided, however,
that any such Lien may not extend to any other Property of the
Company or any Restricted Subsidiary; provided further,
however, that such Liens shall not have been Incurred in
anticipation or in connection with the transaction or series
of transactions pursuant to which such Property was acquired
by the Company or any Restricted Subsidiary;
(f) Liens on the Property of a Person at the time
such Person becomes a Restricted Subsidiary; provided,
however, that any such Lien may not extend to any other
Property of the Company or any other Restricted Subsidiary
which is not a direct Subsidiary of such Person; provided
further, however, that any such Lien was not Incurred in
anticipation of or in connection with the transaction or
series of transactions pursuant to which such Person became a
Restricted Subsidiary;
(g) pledges or deposits by the Company or any
Restricted Subsidiary under workmen's compensation laws,
unemployment insurance laws or similar legislation, or good
faith deposits in connection with bids, tenders, contracts
(other than for the payment of Debt) or leases to which the
Company or any Restricted Subsidiary is party, or deposits to
secure public or statutory obligations of the Company, or
deposits for the payment of rent, in each case Incurred in the
ordinary course of business;
<PAGE>
(h) utility easements, building restrictions and such
other encumbrances or charges against real Property as are of
a nature generally existing with respect to properties of a
similar character;
(i) Liens existing on the Issue Date not otherwise
described in clauses (a) through (h) above; or
(j) Liens on the Property of the Company or any
Restricted Subsidiary to secure any Refinancing, in whole or
in part, of any Debt secured by Liens referred to in clause
(a), (e), (f) or (i) above; provided, however, that any such
Lien shall be limited to all or part of the same Property that
secured the original Lien (together with improvements and
accessions to such Property) and the aggregate principal
amount of Debt that is secured by such Lien shall not be
increased to an amount greater than the sum of (i) the
outstanding principal amount, or, if greater, the committed
amount, of the Debt secured by Liens described under clause
(a), (e), (f) or (i) above, as the case may be, at the time
the original Lien became a Permitted Lien under the Indenture
and (ii) an amount necessary to pay any premiums, fees and
other expenses incurred by the Company in connection with such
Refinancing.
"Permitted Refinancing Debt" means any Debt that
Refinances any other Debt, including any successive Refinancings, so
long as (a) such Debt is in an aggregate principal amount (or if
Incurred with original issue discount, an aggregate issue price) not in
excess of the sum of (i) the aggregate principal amount (or if Incurred
with original issue discount, the aggregate accreted value) then
outstanding of the Debt being Refinanced and (ii) an amount necessary
to pay any fees and expenses, including premiums and defeasance costs,
related to such Refinancing, (b) the Average Life of such Debt is equal
to or greater than the Average Life of the Debt being Refinanced, (c)
the Stated Maturity of such Debt is no earlier than the Stated Maturity
of the Debt being Refinanced and (d) the new Debt shall not be senior
in right of payment to the Debt that is being Refinanced; provided,
however, that Permitted Refinancing Debt shall not include (x) Debt of
a Subsidiary that Refinances Debt of the Company or (y) Debt of the
Company or a Restricted Subsidiary that Refinances Debt of an
Unrestricted Subsidiary.
"Person" means any individual, corporation,
partnership, company (including any limited liability company), joint
venture, trust, unincorporated organization, government or any agency
or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of
any Person, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends or
distributions, or as to the distribution of assets upon any voluntary
or involuntary liquidation or dissolution of such Person, over Capital
Stock of any other class of such Person.
"principal" of the Securities means the principal
amount of the Securities plus the premium, if any, on the Securities.
"Principal Property" means any Property owned or
leased by the Company or any Subsidiary of the Company, the gross book
value of which exceeds one percent of Consolidated Net Worth.
"Property" means, with respect to any Person, all
types of real, personal, tangible, intangible or mixed property owned
by such Person whether or not included in the most recent consolidated
balance sheet of such Person and its Subsidiaries under GAAP.
<PAGE>
"Rating Agencies" mean Moody's and S&P.
"Redeemable Dividend" means, for any dividend with
respect to Redeemable Stock, the quotient of the dividend divided by
the difference between one and the maximum statutory federal income tax
rate (expressed as a decimal number between 1 and 0) then applicable to
the issuer of such Redeemable Stock.
"Redeemable Stock" means, with respect to any Person,
any Capital Stock that by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable) or
otherwise (a) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (b) is or may become redeemable
or repurchaseable at the option of the holder thereof, in whole or in
part, or (c) is convertible or exchangeable for Debt or Disqualified
Stock.
"Refinance" means, in respect of any Debt, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or
retire, or to issue other Debt, in exchange or replacement for, such
Debt. "Refinanced" and "Refinancing" shall have correlative meanings.
"Restricted Subsidiary" means (a) any Subsidiary of
the Company after the Issue Date unless such Subsidiary shall have been
designated an Unrestricted Subsidiary as permitted or required pursuant
to Section 4.10 and (b) an Unrestricted Subsidiary which is
redesignated as a Restricted Subsidiary as permitted pursuant to
Section 4.10.
"S&P" means Standard & Poor's Ratings Service or any
successor to the rating agency business thereof.
"Sale and Leaseback Transaction" means any
arrangement with any Person (other than the Company or any Restricted
Subsidiary) providing for the leasing by the Company or a Restricted
Subsidiary of any Property owned by the Company or such Restricted
Subsidiary (except for leases for a term of not more than three years),
which property has been or is to be sold or transferred by the Company
or such Restricted Subsidiary to such person on the security of such
Property more than 365 days after the acquisition thereof or the
completion of construction and commencement of full operation thereof.
"Securities" means the Securities issued under this
Indenture.
"Significant Subsidiary" means any Subsidiary that
would be a "Significant Subsidiary" of the Company within the meaning
of Rule 1-02 under Regulation S-X promulgated by the Commission.
"Stated Maturity" means, with respect to any security
or any installment of interest thereon, the date specified in such
security as the fixed date on which the principal (or, for purposes of
Section 6.01(a), the premium, if any) of such security or such
installment of interest is due and payable.
"Subordinated Obligation" means any Debt of the
Company (whether outstanding on the Issue Date or thereafter Incurred)
which is subordinate or junior in right of payment to the Securities
pursuant to a written agreement to that effect.
"Subsidiary", in respect of any Person, means (i) any
Person of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more of the Subsidiaries of that Person or a
combination thereof, and (ii) any partnership, joint venture or other
Person in which such Person or one or more of the Subsidiaries of that
Person or a combination thereof has the power to control by contract or
otherwise the board of directors or equivalent governing body or
otherwise controls such entity.
<PAGE>
"TIA" means the Trust Indenture Act of 1939
(15 U.S.C.ss.ss. 77aaa-77bbbb) as in effect on the date of this
Indenture.
"Trustee" means the party named as such in this
Indenture until a successor replaces it and, thereafter, means the
successor.
"Trust Officer" means the Chairman of the Board, the
President or any other officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (a) any Subsidiary of
the Company in existence on the Issue Date that is not a Restricted
Subsidiary; (b) any Subsidiary of an Unrestricted Subsidiary; and (c)
any Subsidiary of the Company that is designated after the Issue Date
as an Unrestricted Subsidiary as permitted pursuant to Section 4.10 and
not thereafter redesignated as a Restricted Subsidiary as permitted
pursuant thereto.
"U.S. Government Obligations" means direct
obligations (or certificates representing an ownership interest in such
obligations) of the United States of America (including any agency or
instrumentality thereof) for the payment of which the full faith and
credit of the United States of America is pledged and which are not
callable at the issuer's option.
"Voting Stock" of a corporation means all classes of
Capital Stock of such corporation then outstanding and normally
entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means, at any time, a
Restricted Subsidiary all the Voting Stock of which (other than
directors' qualifying shares) is at such time owned by the Company or
one or more other Wholly Owned Subsidiaries.
SECTION 1.02. Other Definitions.
Defined in
Term Section
"Bankruptcy Law" .......................6.01
"covenant defeasance option" ...........8.01(b)
"Custodian" ............................6.01
"Exchange Securities"...................Preamble
"Event of Default" .....................6.01
"Initial Securities"....................Preamble
"legal defeasance option" ..............8.01(b)
"Legal Holiday" ........................10.08
"Paying Agent" .........................2.03
"Private Exchange Securities"...........Preamble
"Registrar".............................2.03
"Securities"............................Preamble
<PAGE>
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act. This Indenture is subject to the mandatory provisions of
the TIA which are incorporated by reference in and made a part of this
Indenture. The following TIA terms have the following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Securityholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee"
means the Trustee; and
"obligor" on the indenture securities means the
Company and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute or
defined by Commission rule have the meanings assigned to them by such
definitions.
SECTION 1.04. Rules of Construction. Unless the
context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and
words in the plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be
subordinate or junior to secured Indebtedness merely by virtue
of its nature as unsecured Indebtedness;
(7) the principal amount of any noninterest bearing
or other discount security at any date shall be the principal
amount thereof that would be shown on a balance sheet of the
issuer dated such date prepared in accordance with GAAP; and
(8) the greater of the principal amount of any
Preferred Stock shall be (i) the maximum liquidation value of
such Preferred Stock or (ii) the maximum mandatory redemption
or mandatory repurchase price with respect to such Preferred
Stock, whichever is greater.
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating. Provisions relating to
the Initial Securities, the Private Exchange Securities and the
Exchange Securities are set forth in Appendix A which is hereby
incorporated in and expressly made part of this Indenture. The Initial
Securities and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit 1 to Appendix A which is hereby
incorporated in and expressly made a part of this Indenture. The
Exchange Securities, the Private Exchange Securities and the Trustee's
certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of
this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which
the Company is subject, if any, or usage, provided that any such
<PAGE>
notation, legend or endorsement is in a form acceptable to the Company.
Each Security shall be dated the date of its authentication. The terms
of the Securities set forth in Exhibit 1 to Appendix A and Exhibit A
are part of the terms of this Indenture.
SECTION 2.02. Execution and Authentication. Two
Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be impressed, affixed,
imprinted or reproduced on the Securities and may be in facsimile form.
If an Officer whose signature is on a Security no
longer holds that office at the time the Trustee authenticates the
Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized
officer of the Trustee manually signs the certificate of authentication
on the Security. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
The Trustee shall authenticate and deliver Securities
for original issue upon a written order of the Company signed by two
Officers or by an Officer and either an Assistant Treasurer or an
Assistant Secretary of the Company. Such order shall specify the amount
of the Securities to be authenticated and the date on which the
original issue of Securities is to be authenticated. The aggregate
principal amount of Securities outstanding at any time may not exceed
that amount except as provided in Section 2.07.
The Trustee may appoint an authenticating agent
reasonably acceptable to the Company to authenticate the Securities.
Unless limited by the terms of such appointment, an authenticating
agent may authenticate Securities whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same
rights as any Registrar, Paying Agent or agent for service of notices
and demands.
SECTION 2.03. Registrar and Paying Agent. The Company
shall maintain an office or agency where Securities may be presented
for registration of transfer or for exchange (the "Registrar") and an
office or agency where Securities may be presented for payment (the
"Paying Agent"). The Registrar shall keep a register of the Securities
and of their transfer and exchange. The Company may have one or more
co-registrars and one or more additional paying agents. The term
"Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency
agreement with any Registrar, Paying Agent or co-registrar not a party
to this Indenture, which shall incorporate the terms of the TIA. The
agreement shall implement the provisions of this Indenture that relate
to such agent. The Company shall notify the Trustee of the name and
address of any such agent. If the Company fails to maintain a Registrar
or Paying Agent, the Trustee shall act as such and shall be entitled to
appropriate compensation therefor pursuant to Section 7.07. The Company
or any of its domestically incorporated Wholly Owned Subsidiaries may
act as Paying Agent, Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as
Registrar and Paying Agent in connection with the Securities.
SECTION 2.04. Paying Agent To Hold Money in Trust.
Prior to each due date of the principal and interest on any Security,
the Company shall deposit with the Paying Agent a sum sufficient to pay
such principal and interest when so becoming due. The Company shall
require each Paying Agent (other than the Trustee) to agree in writing
that the Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities and shall
notify the Trustee of any default by the Company in making any such
payment. If the Company or a Wholly Owned Subsidiary acts as Paying
<PAGE>
Agent, it shall segregate the money held by it as Paying Agent and hold
it as a separate trust fund. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee and to account
for any funds disbursed by the Paying Agent. Upon complying with this
Section, the Paying Agent shall have no further liability for the money
delivered to the Trustee.
SECTION 2.05. Securityholder Lists. The Trustee shall
preserve in as current a form as is reasonably practicable the most
recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee, in writing at least five Business Days before
each interest payment date and at such other times as the Trustee may
request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of
Securityholders.
SECTION 2.06. Replacement Securities. If a mutilated
Security is surrendered to the Registrar or if the Holder of a Security
claims that such Security has been lost, destroyed or wrongfully taken,
the Company shall issue and the Trustee shall authenticate a
replacement Security if the requirements of Section 8-405 of the
Uniform Commercial Code are met and the Holder satisfies any other
reasonable requirements of the Trustee. If required by the Trustee or
the Company, such Holder shall furnish an indemnity bond sufficient in
the judgment of the Company and the Trustee to protect the Company, the
Trustee, the Paying Agent, the Registrar and any co-registrar from any
loss which any of them may suffer if a Security is replaced. The
Company and the Trustee may charge the Holder for their expenses in
replacing a Security.
Every replacement Security is an additional
obligation of the Company.
SECTION 2.07. Outstanding Securities. Securities
outstanding at any time are all Securities authenticated by the Trustee
except for those canceled by it, those delivered to it for cancelation
and those described in this Section as not outstanding. A Security does
not cease to be outstanding because the Company or an Affiliate of the
Company holds the Security.
If a Security is replaced pursuant to Section 2.06,
it ceases to be outstanding unless the Trustee and the Company receive
proof satisfactory to them that the replaced Security is held by a bona
fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date or maturity date
money sufficient to pay all principal and interest payable on that date
with respect to the Securities (or portions thereof) to be redeemed or
maturing, as the case may be, and the Paying Agent is not prohibited
from paying such money to the Securityholders on that date pursuant to
the terms of this Indenture, then on and after that date such
Securities (or portions thereof) cease to be outstanding and interest
on them ceases to accrue.
SECTION 2.08. Temporary Securities. Until definitive
Securities are ready for delivery, the Company may prepare and the
Trustee shall authenticate temporary Securities. Temporary Securities
shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate definitive Securities and deliver them
in exchange for temporary Securities.
SECTION 2.09. Cancelation. The Company at any time
may deliver Securities to the Trustee for cancelation. The Registrar
and the Paying Agent shall forward to the Trustee any Securities
surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel and destroy (subject to the
<PAGE>
record retention requirements of the Exchange Act) all Securities
surrendered for registration of transfer, exchange, payment or
cancelation and deliver a certificate of such destruction to the
Company unless the Company directs the Trustee to deliver canceled
Securities to the Company. The Company may not issue new Securities to
replace Securities it has redeemed, paid or delivered to the Trustee
for cancelation.
SECTION 2.10. Defaulted Interest. If the Company
defaults in a payment of interest on the Securities, the Company shall
pay defaulted interest (plus interest on such defaulted interest to the
extent lawful) in any lawful manner. The Company may pay the defaulted
interest to the persons who are Securityholders on a subsequent special
record date. The Company shall fix or cause to be fixed any such
special record date and payment date to the reasonable satisfaction of
the Trustee and shall promptly mail to each Securityholder a notice
that states the special record date, the payment date and the amount of
defaulted interest to be paid.
SECTION 2.11. CUSIP Numbers. The Company in issuing
the Securities may use "CUSIP" numbers (if then generally in use) and,
if so, the Trustee shall use "CUSIP" numbers in notices of redemption
as a convenience to Holders; provided, however, that any such notice
may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any
notice of a redemption and that reliance may be placed only on the
other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such
numbers.
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee. If the Company
elects to redeem Securities pursuant to paragraph 5 of the Securities,
it shall notify the Trustee in writing of the redemption date, the
principal amount of Securities to be redeemed and that such redemption
is being made pursuant to paragraph 5 of the Securities.
The Company shall give each notice to the Trustee
provided for in this Section at least 60 days before the redemption
date unless the Trustee consents to a shorter period. Such notice shall
be accompanied by an Officers' Certificate and an Opinion of Counsel
from the Company to the effect that such redemption will comply with
the conditions herein.
SECTION 3.02. Selection of Securities To Be Redeemed.
If fewer than all the Securities are to be redeemed at any time,
selection of Securities for redemption may be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which the Securities are listed, or, if the
Securities are not so listed, on a pro rata basis, by lot or by such
other method that the Trustee shall deem fair and appropriate. The
Trustee shall make the selection from outstanding Securities not
previously called for redemption. The Trustee may select for redemption
portions of the principal of Securities that have denominations larger
than $1,000. Securities and portions of them the Trustee selects shall
be in amounts of $1,000 or a whole multiple of $1,000. Provisions of
this Indenture that apply to Securities called for redemption also
apply to portions of Securities called for redemption. The Trustee
shall notify the Company promptly of the Securities or portions of
Securities to be redeemed.
SECTION 3.03. Notice of Redemption. At least 30 days
but not more than 60 days before a date for redemption of Securities,
the Company shall mail a notice of redemption by first-class mail to
each Holder of Securities to be redeemed.
<PAGE>
The notice shall identify the Securities to be
redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are
to be redeemed, the identification and principal amounts of the
particular Securities to be redeemed;
(6) that, unless the Company defaults in making such
redemption payment or the Paying Agent is prohibited from
making such payment pursuant to the terms of this Indenture,
interest on Securities (or portion thereof) called for
redemption ceases to accrue on and after the redemption date;
and
(7) that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed in
such notice or printed on the Securities.
At the Company's request, the Trustee shall give the
notice of redemption in the Company's name and at the Company's
expense. In such event, the Company shall provide the Trustee with the
information required by this Section. The notice of redemption may omit
the redemption price, provided that the calculation thereof is set
forth in such notice. The redemption price, as so calculated, shall be
set forth in an Officers' Certificate delivered to the Trustee no later
than two Business Days prior to the applicable redemption date.
SECTION 3.04. Effect of Notice of Redemption. Once
notice of redemption is mailed, Securities called for redemption become
due and payable on the redemption date and at the redemption price
stated in the notice. Upon surrender to the Paying Agent, such
Securities shall be paid at the redemption price stated in the notice,
plus accrued interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due
on the relevant interest payment date that is on or prior to the date
of redemption). Failure to give notice or any defect in the notice to
any Holder shall not affect the validity of the notice to any other
Holder.
SECTION 3.05. Deposit of Redemption Price. Prior to
the redemption date, the Company shall deposit with the Paying Agent
(or, if the Company or a Wholly Owned Subsidiary is the Paying Agent,
shall segregate and hold in trust) money sufficient to pay the
redemption price of and accrued interest (subject to the right of
Holders of record on the relevant record date to receive interest due
on the relevant interest payment date that is on or prior to the date
of redemption) on all Securities to be redeemed on that date other than
Securities or portions of Securities called for redemption which have
been delivered by the Company to the Trustee for cancelation.
SECTION 3.06. Securities Redeemed in Part. Upon
surrender of a Security that is redeemed in part, the Company shall
execute and the Trustee shall authenticate for the Holder (at the
Company's expense) a new Security equal in principal amount to the
unredeemed portion of the Security surrendered.
<PAGE>
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities. The Company
shall promptly pay the principal of and interest on the Securities on
the dates and in the manner provided in the Securities and in this
Indenture. Principal and interest shall be considered paid on the date
due if on such date the Trustee or the Paying Agent holds in accordance
with this Indenture money sufficient to pay all principal and interest
then due and the Trustee or the Paying Agent, as the case may be, is
not prohibited from paying such money to the Securityholders on that
date pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal
at the rate specified therefor in the Securities, and it shall pay
interest on overdue installments of interest at the same rate to the
extent lawful.
SECTION 4.02. Commission Reports. The Company shall
provide the Trustee and Securityholders, within 15 days after it files
them with the Commission, copies of its annual report and the
information, documents and other reports which the Company is required
to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act. Notwithstanding that the Company may not be required to
remain subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, the Company shall continue to file with the
Commission and provide the Trustee and Securityholders with such annual
reports and such information, documents and other reports as are
specified in Sections 13 and 15(d) of the Exchange Act and applicable
to a U.S. corporation subject to such Sections, such information,
documents and reports to be so filed and provided at the times
specified for the filing of such information, documents and reports
under such Sections.
The Company also shall comply with the other provisions of TIA ss.
314(a).
SECTION 4.03. Compliance Certificate. The Company
shall deliver to the Trustee within 120 days after the end of each
fiscal year of the Company an Officers' Certificate stating that in the
course of the performance by the signers of their duties as Officers of
the Company they would normally have knowledge of any Default and
whether or not the signers know of any Default that occurred during
such period. If they do, the certificate shall describe the Default,
its status and what action the Company is taking or proposes to take
with respect thereto. The Company also shall comply with TIA ss.
314(a)(4).
SECTION 4.04. Further Instruments and Acts. Upon
request of the Trustee, the Company shall execute and deliver such
further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this
Indenture.
SECTION 4.05. Corporate Existence. Subject to the
provisions of Article 5, the Company will do or cause to be done all
things necessary to and will cause each of its Subsidiaries to preserve
and keep in full force and effect its corporate existence, material
rights (charter and statutory) and franchises of the Company and each
of its Subsidiaries; provided, however, that the Company shall not be
required to preserve any such material right or franchise or the
corporate existence of any of its Subsidiaries if (a) the preservation
thereof is no longer desirable in the conduct of the business of the
Company or such Subsidiary and (b) the loss thereof is not
disadvantageous in any material respect to the Holders of the
Securities.
<PAGE>
SECTION 4.06. Limitation on Debt. (a) The Company
shall not, and shall not permit any Restricted Subsidiary to, Incur,
directly or indirectly, any Debt unless, after giving pro forma effect
to the application of the proceeds thereof, no Default or Event of
Default would occur as a consequence of such Incurrence or be
continuing following such Incurrence and either such Debt is (i) Debt
of the Company, provided that, after giving pro forma effect to the
Incurrence of such Debt and the application of the proceeds thereof,
the Consolidated Interest Coverage Ratio would be greater than 2.00 to
1.00, (ii) Debt of the Company evidenced by the Securities or (iii)
Permitted Debt of the Company or any Restricted Subsidiary.
(b) Notwithstanding Section 4.06(a), the Company
shall not Incur any Permitted Debt if the proceeds thereof are used,
directly or indirectly, to Refinance any Subordinated Obligations
unless such Debt shall be subordinated to the Securities to at least
the same extent as such Subordinated Obligations.
(c) After the Company has reached Investment Grade
Status, and notwithstanding that the Company may later cease to have an
Investment Grade Rating from either or both of the Rating Agencies, the
Company and the Restricted Subsidiaries shall be released from their
obligations to comply with this Section 4.06. The Company shall notify
the Trustee when it reaches Investment Grade Status.
SECTION 4.07. Limitation on Liens. The Company shall
not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, Incur or otherwise cause or suffer to
exist or become effective any Liens of any kind upon any Principal
Property or any Capital Stock or Debt of any Restricted Subsidiary
(whether such Principal Property, Capital Stock or Debt are now owned
or hereafter acquired), or any interest therein or any increase or
profits therefrom, unless all payments due under the Indenture and the
Securities are secured on an equal and ratable basis with (or prior to)
the obligations so secured, except in the case of Permitted Liens or as
provided under Section 4.09.
SECTION 4.08. Limitation on Sale and Leaseback
Transactions. Except as provided under Section 4.09, the Company shall
not, and shall not permit any Restricted Subsidiaries to, enter into
any Sale and Leaseback Transaction with respect to any Principal
Property unless either (i) the Company or such Restricted Subsidiary
would be entitled, pursuant to the provisions of this Indenture, to
Incur Debt secured by a Lien on the Property to be leased in an amount
equal to the Attributable Debt with respect to such transaction without
equally and ratably securing the Securities, or (ii) the Company,
within 180 days after the effective date of such transaction, applies
to the voluntary retirement of its Funded Debt an amount equal to the
value of such transaction, defined as the greater of the net proceeds
of the sale of the Property leased in such transaction or the fair
value, in the opinion of the Board of Directors, of the leased Property
at the time such transaction was entered into.
SECTION 4.09. Exempted Debt. Notwithstanding the
provisions contained in Sections 4.07 and 4.08, the Company and its
Restricted Subsidiaries may issue, assume or guarantee Debt which would
otherwise be subject to the limitation of Section 4.07, without
securing the Securities, or may enter into Sale and Leaseback
Transactions which would otherwise be subject to the limitation of
Section 4.08, without retiring Funded Debt, or enter into a combination
of such transactions, if the sum of (i) the principal amount of such
Debt or Attributable Debt in respect of such Sale and Leaseback
Transaction, as the case may be, and (ii) the principal amount of all
other such Debt and Attributable Debt in respect of Sale and Leaseback
Transactions then outstanding, does not exceed 15% of the Consolidated
Net Tangible Assets of the Company and its Restricted Subsidiaries as
shown in the consolidated balance sheet of the Company as of the end of
the most recent fiscal quarter ending at least 45 days prior to the
date of determination.
<PAGE>
SECTION 4.10. Designation of Restricted and
Unrestricted Subsidiaries. The Board of Directors may designate any
Subsidiary of the Company to be an Unrestricted Subsidiary if (a) the
Subsidiary to be so designated does not own any Capital Stock or Debt
of, or own or hold any Lien on any Property of, the Company or any
other Restricted Subsidiary, (b) the Subsidiary to be so designated is
not obligated under any Debt, Lien or other obligation that, if in
default, would result (with the passage of time or notice or otherwise)
in a default on any Debt of the Company or of any Restricted Subsidiary
and (c) either (i) the Subsidiary to be so designated has total assets
of $1,000 or less or (ii) such designation is effective immediately
upon such entity becoming a Subsidiary of the Company. Unless so
designated as an Unrestricted Subsidiary, any Person that becomes a
Subsidiary of the Company will be classified as a Restricted
Subsidiary; provided, however, that such Subsidiary shall not be
designated a Restricted Subsidiary and shall be automatically
classified as an Unrestricted Subsidiary if (A) such Subsidiary is a
Subsidiary of a Restricted Subsidiary (other than a Wholly Owned
Subsidiary) or (B) either of the requirements set forth in clauses (x)
and (y) of the immediately following paragraph will not be satisfied
after giving pro forma effect to such classification. Except as
provided in the first sentence of this paragraph, no Restricted
Subsidiary may be redesignated as an Unrestricted Subsidiary.
The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary if, immediately after giving
pro forma effect to such designation, (x) subject to Section 4.06(c),
the Company could Incur at least $1.00 of additional Debt pursuant to
clause (i) of Section 4.06(a) and (y) no Default or Event of Default
shall have occurred and be continuing or would result therefrom.
Any such designation or redesignation by the Board of
Directors will be evidenced to the Trustee by filing with the Trustee a
Board Resolution giving effect to such designation or redesignation and
an Officers' Certificate (a) certifying that such designation or
redesignation complies with the foregoing provisions and (b) giving the
effective date of such designation or redesignation, such filing with
the Trustee to occur within 45 days after the end of the fiscal quarter
of the Company in which such designation or redesignation is made (or,
in the case of a designation or redesignation made during the last
fiscal quarter of the Company's fiscal year, within 90 days after the
end of such fiscal year).
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer
Assets. The Company shall not consolidate or amalgamate with or merge
into any other Person or convey, transfer, lease or otherwise dispose
of its Property substantially as an entirety to any Person, and the
Company shall not permit any Person to consolidate with or merge into
the Company or convey, transfer or lease its Property substantially as
an entirety to the Company, unless:
(1) in case the Company shall consolidate or
amalgamate with or merge into another Person or convey,
transfer, lease or otherwise dispose of its Property
substantially as an entirety to any Person, the Person formed
by such consolidation or into which the Company is merged or
the Person which acquires by conveyance or transfer, or which
leases, the Property of the Company substantially as an
entirety shall be a corporation, partnership or trust, shall
be organized and validly existing under the laws of the United
States of America, any State thereof or the District of
Columbia and shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment
of the principal of and interest on all the Securities and the
performance or observance of every covenant of this Indenture
on the part of the Company to be performed or observed;
<PAGE>
(2) immediately before and after giving effect to
such transaction on a pro forma basis, no Default shall have
happened and be continuing; and
(3) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, amalgamation, merger, conveyance,
transfer, lease or other disposition and, if a supplemental
indenture is required in connection with such transaction,
such supplemental indenture comply with this Article and that
all conditions precedent herein provided for relating to such
transaction have been complied with.
SECTION 5.02. Successor Substituted. Upon any
consolidation or amalgamation by the Company with, or merger of the
Company into, any other Person or any conveyance, transfer, lease or
other disposition of the Property of the Company substantially as an
entirety in accordance with Section 5.01, the successor Person formed
by such consolidation or amalgamation or into which the Company is
merged or to which such conveyance, transfer, lease or disposition is
made shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under this Indenture with the same
effect as if such successor Person had been named as the Company
herein, and thereafter, except in the case of a conveyance, transfer,
lease or disposition, the predecessor Person shall be released from its
obligations and covenants under this Indenture and the Securities.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. "Event of Default",
wherever used herein, means any one of the following events (whatever
the reason for any such Event of Default and whether it is voluntary or
involuntary or is effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) the Company defaults in the payment of any
interest upon any Security when it becomes due and payable,
and continuance of such default for a period of 30 days; or
(2) the Company defaults in the payment of the
principal of any Security at its Stated Maturity; or
(3) the Company fails to comply with Article 5; or
(4) default in the performance, or breach, of any
covenant or warranty of the Company in this Indenture (other
than a covenant or warranty addressed in clauses (1), (2) or
(3)), and continuance of such default or breach for a period
of 60 days after there has been given, by registered or
certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the outstanding Securities a
written notice specifying such default or breach and requiring
it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(5) acceleration of, or failure by the Company or any
Restricted Subsidiary to pay when due, the principal of any
Debt for money borrowed of the Company or any Restricted
Subsidiary having an aggregate principal amount at the time in
excess of $10,000,000 or its foreign currency equivalent at
such time, if such acceleration is not annulled, or such Debt
is not discharged, by the end of a period of 10 days after
there shall have been given, by registered or certified mail,
to the Company by the Trustee or to the Company and the
<PAGE>
Trustee by the Holders of at least 25% in aggregate principal
amount of the outstanding Securities a written notice
specifying such default and requiring the Company to cause
such indebtedness to be discharged or cause such acceleration
to be rescinded or annulled and stating that such notice is a
"Notice of Default" hereunder; or
(6) any judgement or judgements for the payment of
money in an uninsured aggregate amount in excess of
$10,000,000 or its foreign currency equivalent at the time
shall be rendered against the Company or any Restricted
Subsidiary and shall not be waived, satisfied or discharged
for any period of 30 consecutive days during which a stay of
enforcement shall be in effect; or
(7) the Company or any Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for
relief against it in an involuntary case;
(C) consents to the appointment of a
Custodian of it or for any substantial part of its Property;
or
(D) makes a general assignment for the
benefit of its creditors;
or takes any comparable action under any foreign laws relating
to insolvency; or
(8) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Significant Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or
any Significant Subsidiary or for any substantial part
of its Property;
(C) orders the winding up or liquidation of
the Company or any Significant Subsidiary; or
(D) grants any similar relief under any
foreign laws;
and in each such case the order or decree remains unstayed
and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, United
States Code, or any similar Federal or state law for the relief of
debtors. The term "Custodian" means any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy Law.
SECTION 6.02. Acceleration. If an Event of Default
(other than an Event of Default specified in Section 6.01(7) or 6.01(8)
with respect to the Company) occurs and is continuing, the Trustee by
notice to the Company, or the Holders of at least 25% in aggregate
principal amount of the outstanding Securities by notice to the Company
and the Trustee, may declare the principal of the Securities to be due
and payable. Upon such a declaration, such principal shall be due and
payable immediately. If an Event of Default specified in Section
6.01(7) or 6.01(8) occurs with respect to the Company, the principal of
the Securities shall automatically and without any action by the
Trustee or any Holder, become immediately due and payable.
<PAGE>
At any time after such a declaration of acceleration
has been made and before a judgment or decree for payment of the money
due has been obtained by the Trustee as hereinafter in this Article 6
provided, the Holders of a majority in principal amount of the
outstanding Securities, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
the rescission would not conflict with any judgment or decree and if
all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because
of the acceleration. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
SECTION 6.03. Other Remedies. If an Event of Default
occurs and is continuing, the Trustee may pursue any available remedy
to collect the payment of principal of or interest on the Securities or
to enforce the performance of any provision of the Securities or this
Indenture.
The Trustee may maintain a proceeding even if it does
not possess any of the Securities or does not produce any of them in
the proceeding. A delay or omission by the Trustee or any
Securityholder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver
of or acquiescence in the Event of Default. No remedy is exclusive of
any other remedy. All available remedies are cumulative.
SECTION 6.04. Waiver of Past Defaults. The Holders of
a majority in aggregate principal amount of the Securities by notice to
the Trustee may waive an existing Default and its consequences except
(i) a Default in the payment of the principal of or interest on a
Security or (ii) a Default in respect of a provision that under Section
9.02 cannot be amended without the consent of each Securityholder
affected. When a Default is waived, it is deemed cured, but no such
waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. Control by Majority. The Holders of a
majority in aggregate principal amount of the outstanding Securities
may direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or of exercising any trust or power
conferred on the Trustee with respect to the Securities. However, the
Trustee may refuse to follow any direction that conflicts with law or
this Indenture or, subject to Section 7.01, that the Trustee determines
is unduly prejudicial to the rights of other Securityholders or would
involve the Trustee in personal liability; provided, however, that the
Trustee may take any other action deemed proper by the Trustee that is
not inconsistent with such direction. Prior to taking any action
hereunder, the Trustee shall be entitled to reasonable indemnity
against all losses and expenses caused by taking or not taking such
action.
SECTION 6.06. Limitation on Suits. A Securityholder
may not pursue any remedy with respect to this
Indenture or the Securities unless:
(1) such Holder shall have previously given to the
Trustee written notice of a continuing Event of Default;
(2) the Holders of at least 25% in aggregate
principal amount of the Securities then outstanding shall have
made a written request, and such Holder of or Holders shall
have offered reasonable indemnity, to the Trustee to pursue
such proceeding as trustee; and
(3) the Trustee has failed to institute such
proceeding and has not received from the Holders of at least a
majority in aggregate principal amount of the Securities
outstanding a direction inconsistent with such request, within
60 days after such notice, request and offer.
<PAGE>
The foregoing limitations on the pursuit of remedies
by a Securityholder shall not apply to a suit instituted by a Holder of
Securities for the enforcement of payment of the principal of or
interest on such Security on or after the applicable due date specified
in such Security. A Securityholder may not use this Indenture to
prejudice the rights of another Securityholder or to obtain a
preference or priority over another Securityholder.
SECTION 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on the
Securities held by such Holder, on or after the respective due dates
expressed in this Securities, or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event
of Default specified in Section 6.01(1) or (2) occurs and is
continuing, the Trustee may recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount
then due and owing (together with interest on any unpaid interest to
the extent lawful) and the amounts provided for in Section 7.07.
SECTION 6.09. Trustee May File Proofs of Claim. The
Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the
Trustee and the Securityholders allowed in any judicial proceedings
relative to the Company, its creditors or its property and, unless
prohibited by law or applicable regulations, may vote on behalf of the
Holders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the
Trustee and, in the event that the Trustee shall consent to the making
of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and its counsel, and any other
amounts due the Trustee under Section 7.07.
SECTION 6.10. Priorities. If the Trustee collects
any money or property pursuant to this Article 6, it shall pay out the
money or property in the following order:
FIRST: to the Trustee for amounts due under
Section 7.07;
SECOND: to Securityholders for amounts due and unpaid
on the Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Securities for principal and interest,
respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date
for any payment to Securityholders pursuant to this Section. At least
15 days before such record date, the Company shall mail to each
Securityholder and the Trustee a notice that states the record date,
the payment date and amount to be paid.
SECTION 6.11. Undertaking for Costs. In any suit for
the enforcement of any right or remedy under this Indenture or in any
suit against the Trustee for any action taken or omitted by it as
Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a
suit by Holders of more than 10% in aggregate principal amount of the
outstanding Securities.
<PAGE>
SECTION 6.12. Waiver of Stay or Extension Laws. The
Company (to the extent it may lawfully do so) shall not at any time
insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer
and permit the execution of every such power as though no such law had
been enacted.
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee. (a) If an Event of
Default has occurred and is continuing, the Trustee shall exercise the
rights and powers vested in it by this Indenture and use the same
degree of care and skill in their exercise as a prudent Person would
exercise or use under the circumstances in the conduct of such Person's
own affairs.
(b) Except during the continuance of an Event of
Default:
(1) the Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act or its
own wilful misconduct, except that:
(1) this paragraph does not limit the effect of
paragraph (b) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(3) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section
6.05.
(d) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b) and (c) of
this Section.
(e) The Trustee shall not be liable for interest on
any money received by it except as the Trustee may agree in writing
with the Company.
(f) Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
<PAGE>
(g) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds to believe that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
(h) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to the
Trustee shall be subject to the provisions of this Section and to the
provisions of the TIA.
SECTION 7.02. Rights of Trustee. (a) The Trustee may
rely on any document believed by it to be genuine and to have been
signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting,
it may require an Officers' Certificate or an Opinion of Counsel. The
Trustee shall not be liable for any action it takes or omits to take in
good faith in reliance on the Officers' Certificate or Opinion of
Counsel.
(c) The Trustee may act through agents and shall not
be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith which it believes to be authorized
or within its rights or powers; provided, however, that the Trustee's
conduct does not constitute wilful misconduct or negligence.
(e) The Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters relating to
this Indenture and the Securities shall be full and complete
authorization and protection from liability in respect to any action
taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
SECTION 7.03. Individual Rights of Trustee. The
Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee.
Any Paying Agent, Registrar or co-registrar may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall
not be responsible for and makes no representation as to the validity
or adequacy of this Indenture or the Securities, it shall not be
accountable for the Company's use of the proceeds from the Securities,
and it shall not be responsible for any statement of the Company in
this Indenture or in any document issued in connection with the sale of
the Securities or in the Securities other than the Trustee's
certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default occurs
and is continuing and if it is known to the Trustee, the Trustee shall
mail to each Securityholder notice of the Default within 90 days after
it occurs. Except in the case of a Default in payment of principal of
or interest on any Security, the Trustee may withhold the notice if and
so long as a committee of its Trust Officers in good faith determines
that withholding the notice is in the interests of Securityholders.
SECTION 7.06. Reports by Trustee to Holders. As
promptly as practicable after each May 15 beginning with May 15, 1998,
and in any event prior to July 15 in each year, the Trustee shall mail
to each Securityholder a brief report dated as of May 15 each year that
complies with TIA ss. 313(a), if and to the extent required by said
subsection. The Trustee also shall comply with TIA ss. 313(b).
<PAGE>
A copy of each report at the time of its mailing to
Securityholders shall be filed with the Commission and each stock
exchange (if any) on which the Securities are listed. The Company
agrees to notify promptly the Trustee whenever the Securities become
listed on any stock exchange and of any delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Company
shall pay to the Trustee from time to time reasonable compensation for
its services. The Trustee's compensation shall not be limited by any
law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket
expenses incurred or made by it, including costs of collection, in
addition to the compensation for its services. Such expenses shall
include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. The
Company shall indemnify the Trustee against any and all loss, liability
or expense (including attorneys' fees) incurred by it in connection
with the acceptance and administration of this trust and the
performance of its duties hereunder. The Trustee shall notify the
Company promptly of any claim for which it may seek indemnity. Failure
by the Trustee to so notify the Company shall not relieve the Company
of its obligations hereunder. The Company shall defend the claim and
the Trustee may have separate counsel and the Company shall pay the
fees and expenses of such counsel. The Company need not reimburse any
expense or indemnify against any loss, liability or expense incurred by
the Trustee through the Trustee's own wilful misconduct, negligence or
bad faith.
To secure the Company's payment obligations in this
Section, the Trustee shall have a lien prior to the Securities on all
money or property held or collected by the Trustee other than money or
property held in trust to pay principal of and interest on particular
Securities.
The Company's payment obligations pursuant to this
Section shall survive the discharge of this Indenture. When the Trustee
incurs expenses after the occurrence of a Default specified in Section
6.01(7) or (8), the expenses are intended to constitute expenses of
administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may
resign at any time by so notifying the Company. The Holders of a
majority in aggregate principal amount of the outstanding Securities
may remove the Trustee by so notifying the Trustee and may appoint a
successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge
of the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of
acting.
If the Trustee resigns or is removed by the Company
or by the Holders of a majority in aggregate principal amount of the
outstanding Securities and such Holders do not reasonably promptly
appoint a successor Trustee, or if a vacancy exists in the office of
Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written
acceptance of its appointment to the retiring Trustee and to the
Company. Thereupon the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to
<PAGE>
Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the
lien provided for in Section 7.07.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the retiring
Trustee or the Holders of 10% in aggregate principal amount of the
outstanding Securities may petition any court of competent jurisdiction
for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee
pursuant to this Section, the Company's obligations under Section 7.07
shall continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger. If the
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or
transferee corporation or banking association without any further act
shall be the successor Trustee.
In case at the time such successor or successors by
merger, conversion or consolidation to the Trustee shall succeed to the
trusts created by this Indenture any of the Securities shall have been
authenticated but not delivered, any such successor to the Trustee may
adopt the certificate of authentication of any predecessor trustee, and
deliver such Securities so authenticated; and in case at that time any
of the Securities shall not have been authenticated, any such successor
to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full
force which it is anywhere in the Securities or in this Indenture
provided that the certificate of the Trustee shall have.
SECTION 7.10. Eligibility; Disqualification. The
Trustee shall at all times satisfy the requirements of TIA ss. 310(a).
The Trustee shall have a combined capital and surplus of at least
$50,000,000 as set forth in its most recent published annual report of
condition. The Trustee shall comply with TIA ss. 310(b), subject to the
penultimate paragraph thereof; provided, however, that there shall be
excluded from the operation of TIA ss. 310(b)(1) any indenture or
indentures under which other securities or certificates of interest or
participation in other securities of the Company are outstanding if the
requirements for such exclusion set forth in TIA ss. 310(b)(1) are met.
SECTION 7.11. Preferential Collection of Claims
Against Company. The Trustee shall comply with TIA ss. 311(a),
excluding any creditor relationship listed in TIA ss. 311(b). A Trustee
who has resigned or been removed shall be subject to TIA ss. 311(a) to
the extent indicated.
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance. (a) When (i) the Company delivers to the Trustee all
outstanding Securities (other than Securities replaced pursuant to
Section 2.07) for cancelation or (ii) all outstanding Securities have
become due and payable, whether at maturity or as a result of the
mailing of a notice of redemption pursuant to Article 3, and the
Company irrevocably deposits with the Trustee funds sufficient to pay
at maturity or upon redemption all outstanding Securities, including
interest thereon to maturity or such redemption date (other than
Securities replaced pursuant to Section 2.07), and if in either case
<PAGE>
the Company pays all other sums payable hereunder by the Company, then
this Indenture shall, subject to Sections 8.01(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and
discharge of this Indenture on demand of the Company accompanied by an
Officers' Certificate and an Opinion of Counsel and at the cost and
expense of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company
at any time may terminate (i) all its obligations under the Securities
and this Indenture ("legal defeasance option") or (ii) its obligations
under Sections 4.02, 4.06, 4.07, 4.08, 4.09 and 4.10 and the operation
of Sections 6.01(4) (to the extent relating to such other Sections),
6.01(5), 6.01(6), 6.01(7) and 6.01(8) (but, in the case of Sections
6.01(7) and (8), with respect only to Significant Subsidiaries) and its
obligations under Sections 5.01(2) and 5.01(3) and the related
operation of Section 6.01(3) ("covenant defeasance option"). The
Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option,
payment of the Securities may not be accelerated because of an Event of
Default. If the Company exercises its covenant defeasance option,
payment of the Securities may not be accelerated because of an Event of
Default specified in Sections 6.01(3) and 6.01(4) (with respect to the
provisions of Articles 4 and 5 referred to in the immediately preceding
paragraph) and Sections 6.01(5), 6.01(6), 6.01(7) and 6.01(8) (but, in
the case of Sections 6.01(7) and (8), with respect only to Significant
Subsidiaries).
Upon satisfaction of the conditions set forth herein
and upon request of the Company, the Trustee shall acknowledge in
writing the discharge of those obligations that the Company terminates.
(c) Notwithstanding Sections 8.01(a) and (b), the
Company's obligations in Sections 2.03, 2.04, 2.05, 2.06,
2.07, 7.07, 7.08, 8.05 and 8.06 and Appendix A shall survive
until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.07 and 8.05 shall survive.
SECTION 8.02. Conditions to Defeasance. The Company
may exercise its legal defeasance option or its covenant defeasance
option only if:
(1) the Company irrevocably deposits in trust with
the Trustee money or U.S. Government Obligations for the
payment of principal of and interest on the Securities to
maturity or redemption, as the case may be;
(2) the Company delivers to the Trustee a certificate
from a nationally recognized firm of independent accountants
expressing their opinion that the payments of principal and
interest when due and without reinvestment on the deposited
U.S. Government Obligations plus any deposited money without
investment will provide cash at such times and in such amounts
as will be sufficient to pay principal and interest when due
on all the Securities to maturity or redemption, as the case
may be;
(3) 123 days pass after the deposit is made and
during the 123-day period no Default specified in Section
6.01(7) or (8) with respect to the Company occurs which is
continuing at the end of the period;
(4) the deposit does not constitute a default under
any other agreement binding on the Company;
(5) the Company delivers to the Trustee an Opinion of
Counsel to the effect that the trust resulting from the
deposit does not constitute, or is qualified as, a regulated
investment company under the Investment Company Act of 1940;
<PAGE>
(6) in the case of the legal defeasance option, the
Company shall have delivered to the Trustee an Opinion of
Counsel stating that (i) the Company has received from, or
there has been published by, the Internal Revenue Service a
ruling, or (ii) since the date of this Indenture there has
been a change in the applicable Federal income tax law, in
either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Securityholders will not
recognize income, gain or loss for Federal income tax purposes
as a result of such defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance had
not occurred;
(7) in the case of the covenant defeasance option,
the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the Securityholders will not
recognize income, gain or loss for Federal income tax purposes
as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such covenant
defeasance had not occurred; and
(8) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent to the defeasance and discharge of the
Securities as contemplated by this Article 8 have been
complied with.
Before or after a deposit, the Company may make
arrangements satisfactory to the Trustee for the redemption of
Securities at a future date in accordance with Article 3.
SECTION 8.03. Application of Trust Money. The Trustee
shall hold in trust money or U.S. Government Obligations deposited with
it pursuant to this Article 8. It shall apply the deposited money and
the money from U.S. Government Obligations through the Paying Agent and
in accordance with this Indenture to the payment of principal of and
interest on the Securities.
SECTION 8.04. Repayment to Company. The Trustee and
the Paying Agent shall promptly turn over to the Company upon request
any excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the
Trustee and the Paying Agent shall pay to the Company upon request any
money held by them for the payment of principal or interest that
remains unclaimed for two years, and, thereafter, Securityholders
entitled to the money must look to the Company for payment as general
creditors.
SECTION 8.05. Indemnity for Government Obligations.
The Company shall pay and shall indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against deposited U.S.
Government Obligations or the principal and interest received on such
U.S. Government Obligations.
SECTION 8.06. Reinstatement. If the Trustee or Paying
Agent is unable to apply any money or U.S. Government Obligations in
accordance with this Article 8 by reason of any legal proceeding or by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be
revived and reinstated as though no deposit had occurred pursuant to
this Article 8 until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in
accordance with this Article 8; provided, however, that, if the Company
has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive
such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
<PAGE>
ARTICLE 9
Amendments
SECTION 9.01. Without Consent of Holders. The Company
and the Trustee may amend this Indenture or the Securities without
notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in
addition to or in place of certificated Securities; provided,
however, that the uncertificated Securities are issued in
registered form for purposes of Section 163(f) of the Code or
in a manner such that the uncertificated Securities are
described in Section 163(f)(2)(B) of the Code;
(4) to add guarantees with respect to the Securities,
or to secure the Securities;
(5) to add to the covenants of the Company for the
benefit of the Holders or to surrender any right or power
herein conferred upon the Company;
(6) to comply with any requirements of the Commission
in connection with qualifying, or maintaining the
qualification of, this Indenture under the TIA; or
(7) to make any change that does not adversely affect
the rights of any Securityholder.
After an amendment under this Section becomes
effective, the Company shall mail to Securityholders a notice briefly
describing such amendment. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the
validity of an amendment under this Section.
SECTION 9.02. With Consent of Holders. The Company
and the Trustee may amend this Indenture or the Securities without
notice to any Securityholder but with the written consent of the
Holders of at least a majority in aggregate principal amount of the
outstanding Securities. However, without the consent of each
Securityholder affected thereby, an amendment or waiver may not:
(1) reduce the amount of Securities whose Holders
must consent to an amendment or waiver;
(2) reduce the rate of or extend the time for payment
of interest on any Security;
(3) reduce the principal of or extend the Stated
Maturity of any Security;
(4) reduce the amount payable upon the redemption of
any Security or change the time at which any Security may be
redeemed in accordance with Article 3;
(5) make any Security payable in a place or in money
other than that stated in the Security;
(6) impair the right of any Holder to receive payment
of principal of and interest on such Holder's Securities on or
after the due dates therefor or to institute suit for
enforcement of any payment on or with respect to such Holder's
Securities; or
<PAGE>
(7) make any change in Section 6.04 or 6.07 or the
second sentence of this Section.
It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent approves
the substance thereof.
After an amendment under this Section becomes
effective, the Company shall mail to Securityholders a notice briefly
describing such amendment. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the
validity of an amendment under this Section.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities shall comply with
the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents and
Waivers. A consent to an amendment or a waiver by a Holder of a
Security shall bind the Holder and every subsequent Holder of that
Security or portion of the Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent or waiver
is not made on the Security. However, any such Holder or subsequent
Holder may revoke the consent or waiver as to such Holder's Security or
portion of the Security if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective.
After an amendment or waiver becomes effective, it shall bind every
Securityholder. An amendment or waiver becomes effective upon the
execution of such amendment or waiver by the Trustee.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Securityholders entitled
to give their consent or take any other action described above or
required or permitted to be taken pursuant to this Indenture. If a
record date is fixed, then notwithstanding the immediately preceding
paragraph, those Persons who were Securityholders at such record date
(or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given
or to take any such action, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or
effective for more than 120 days after such record date.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment changes the terms of a Security, the Trustee may
require the Holder of the Security to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Security regarding the
changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new Security
that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of
such amendment.
SECTION 9.06. Trustee To Sign Amendments. The Trustee
shall sign any amendment authorized pursuant to this Article 9 if such
amendment does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may but need not
sign it. In signing such amendment the Trustee shall be entitled to
receive indemnity reasonably satisfactory to it and to receive, and
(subject to Section 7.01) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture.
SECTION 9.07. Payment for Consent. Neither the
Company nor any Affiliate of the Company shall, directly or indirectly,
pay or cause to be paid any consideration, whether by way of interest,
fee or otherwise, to any Holder for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of this Indenture
or the Securities unless such consideration is offered to be paid to
all Holders that so consent, waive or agree to amend in the time frame
set forth in solicitation documents relating to such consent, waiver or
agreement.
<PAGE>
ARTICLE 10
Miscellaneous
SECTION 10.01. Trust Indenture Act Controls. If any
provision of this Indenture limits, qualifies or conflicts with another
provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
SECTION 10.02. Notices. Any notice or communication
shall be in writing and delivered in person or mailed by first-class
mail or sent by facsimile (with a hard copy delivered in person or by
mail promptly thereafter) addressed as follows:
if to the Company:
Lilly Industries, Inc.
733 South West Street
Indianapolis, IN 46225
Fax: (317) 687-6710
Attention: John C. Elbin
if to the Trustee:
Harris Trust and Savings Bank
111 West Monroe, Floor 6W
Chicago, IL 60603
Attention: Corporate Trust Department
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a
Securityholder shall be mailed to the Securityholder at the
Securityholder's address as it appears on the registration books of the
Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a
Securityholder or any defect in it shall not affect its sufficiency
with respect to other Securityholders. If a notice or communication is
mailed in the manner provided above, it is duly given, whether or not
the addressee receives it.
SECTION 10.03. Communication by Holders with Other
Holders. Securityholders may communicate pursuant to TIA ss. 312(b)
with other Securityholders with respect to their rights under this
Indenture or the Securities. The Company, the Trustee, the Registrar
and anyone else shall have the protection of TIA ss. 312(c).
SECTION 10.04. Certificate and Opinion as to
Conditions Precedent. Upon any request or application by the Company to
the Trustee to take or refrain from taking any action under this
Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee stating that, in the
opinion of the signers, all conditions precedent, if any,
provided for in this Indenture relating to the proposed action
have been complied with; and
(2) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee stating that, in the
opinion of such counsel, all such conditions precedent have
been complied with.
<PAGE>
SECTION 10.05. Statements Required in Certificate or
Opinion. Each certificate or opinion with respect to compliance with a
covenant or condition provided for in this Indenture shall include:
(1) a statement that the individual making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such
individual, he has made such examination or investigation as
is necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been complied
with; and
(4) a statement as to whether or not, in the opinion
of such individual, such covenant or condition has been
complied with.
SECTION 10.06. When Securities Disregarded. In
determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent,
Securities owned by the Company or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control
with the Company shall be disregarded and deemed not to be outstanding,
except that, for the purpose of determining whether the Trustee shall
be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities
outstanding at the time shall be considered in any such determination.
SECTION 10.07. Rules by Trustee, Paying Agent and
Registrar. The Trustee may make reasonable rules for action by or a
meeting of Securityholders. The Registrar, any co-registrar the Paying
Agent may make reasonable rules for their functions.
SECTION 10.08. Legal Holidays. A "Legal Holiday" is a
Saturday, a Sunday or a day on which banking institutions are not
required to be open in the State of New York. If a payment date is a
Legal Holiday, payment shall be made on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening
period. If a regular record date is a Legal Holiday, the record date
shall not be affected.
SECTION 10.09. Governing Law. THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 10.10. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company shall not
have any liability for any obligations of the Company under the
Securities or this Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. By accepting a
Security, each Securityholder shall waive and release all such
liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 10.11. Successors. All agreements of the Company in
this Indenture and the Securities shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 10.12. Multiple Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an
original, but all of them together represent the same agreement. One
signed copy is enough to prove this Indenture.
<PAGE>
SECTION 10.13. Table of Contents; Headings. The table of
contents, cross-reference sheet and headings of the Articles and
Sections of this Indenture have been inserted for convenience of
reference only, are not intended to be considered a part hereof and
shall not modify or restrict any of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
LILLY INDUSTRIES, INC.,
by /s/ John C. Elbin
Name: John C. Elbin
Title: Vice President, Chief Financial
Officer and Secretary
HARRIS TRUST AND SAVINGS BANK,
by /s/ J. Bartolini
Name: J. Bartolini
Title: Vice President
<PAGE>
PROVISIONS RELATING TO INITIAL SECURITIES,
EXCHANGE SECURITIES
AND PRIVATE EXCHANGE SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix A the following terms shall
have the meanings indicated below:
"Definitive Security" means a certificated Initial
Security or, to the extent required by applicable law, a Private
Exchange Security, bearing the restricted securities legend set forth
in Section 2.3(d).
"Depository" means The Depository Trust Company, its
nominees and their respective successors.
"Exchange Securities" means the 7-3/4% Senior Notes
Due 2007 to be issued pursuant to this Indenture in connection with a
Registered Exchange Offer pursuant to the Registration Agreement.
"IAI" means an institutional "accredited investor" as
described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Initial Purchasers" means Salomon Brothers Inc,
Lehman Brothers Inc. and Schroder & Co. Inc.
"Initial Securities" means the 7-3/4% Senior Notes
Due 2007, issued under this Indenture on or about the date hereof.
"New Securities" shall have the meaning set forth in
Section 1 of the Registration Agreement.
<PAGE>
"Private Exchange" means the offer by the Company,
pursuant to Section 2(f) of the Registration Agreement, to the Initial
Purchasers to issue and deliver to each Initial Purchaser, in exchange
for the Initial Securities held by the Initial Purchaser as part of its
initial distribution, a like aggregate principal amount of Private
Exchange.
"Private Exchange Securities" means those New
Securities to be issued pursuant to this Indenture in connection with a
Private Exchange pursuant to the Registration Agreement.
"Purchase Agreement" means the Purchase Agreement
dated November 5, 1997, between the Company and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as
defined in Rule 144A.
"Registered Exchange Offer" means the offer by the
Company, pursuant to the Registration Agreement, to certain Holders of
Initial Securities, to issue and deliver to such Holders, in exchange
for the Initial Securities, a like aggregate principal amount of
Exchange Securities registered under the Securities Act.
"Registration Agreement" means the Registration
Agreement dated November 5, 1997, between the Company and the Initial
Purchasers.
"Securities" means the Initial Securities, the
Exchange Securities and the Private Exchange Securities, treated as a
single class.
"Securities Act" means the Securities Act of 1933.
"Securities Custodian" means the custodian with
respect to a Global Security (as appointed by the Depository), or any
successor person thereto who shall initially be the Trustee.
"Shelf Registration Statement" means the registration
statement issued by the Company, in connection with the offer and sale
of Initial Securities or Private Exchange Securities, pursuant to the
Registration Agreement.
"Transfer Restricted Securities" means Definitive
Securities and any other Securities that bear or are required to bear
the legend set forth in Section 2.3(d) hereto.
1.2 Other Definitions
Defined in
Term Section:
"Agent Members"2.1(b)
"Global Security"2.1(a)
"Regulation S"2.1(a)
"Rule 144A"2.1(a)
2. The Securities.
2.1 Form and Dating.
The Initial Securities are being offered and sold by
the Company pursuant to the Purchase Agreement. The Initial Securities
will be resold, initially only to QIBs in reliance on Rule 144A under
the Securities Act ("Rule 144A"), and in reliance on Regulation S under
the Securities Act ("Regulation S"). Initial Securities may thereafter
be transferred to, among others, QIBs, purchasers in reliance on
Regulation S and IAIs.
<PAGE>
(a) Global Securities. Initial Securities shall be
issued initially in the form of one or more permanent global Securities
in definitive, fully registered form without interest coupons with the
global securities legend and restricted securities legend set forth in
Exhibit 1 hereto (each, a "Global Security"), which shall be deposited
on behalf of the purchasers of the Initial Securities represented
thereby with the Securities Custodian, and registered in the name of
the Depository or a nominee of the Depository, duly executed by the
Company and authenticated by the Trustee as provided in this Indenture.
The aggregate principal amount of the Global Securities may from time
to time be increased or decreased by adjustments made on the records of
the Trustee and the Depository or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b) shall
apply only to a Global Security deposited with or on behalf of
the Depository.
The Company shall execute and the Trustee shall, in
accordance with this Section 2.1(b) and pursuant to an order of the
Company, authenticate and deliver initially one or more Global
Securities that (a) shall be registered in the name of the Depository
for such Global Security or Global Securities or the nominee of such
Depository and (b) shall be delivered by the Trustee to such Depository
or pursuant to such Depository's instructions or held by the Trustee as
Securities Custodian.
Members of, or participants in, the Depository
("Agent Members") shall have no rights under this Indenture with
respect to any Global Security held on their behalf by the Depository
or by the Trustee as the Securities Custodian or under such Global
Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any
agent of the Company or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the
operation of customary practices of such Depository governing the
exercise of the rights of a holder of a beneficial interest in any
Global Security.
(c) Definitive Securities. Except as provided in
Section 2.3 or 2.4, owners of beneficial interests in Global
Securities will not be entitled to receive physical delivery
of certificated Securities.
2.2 Authentication. The Trustee shall authenticate and
deliver: (1) Initial Securities for original issue in an aggregate
principal amount of $100,000,000 and (2) Exchange Securities or Private
Exchange Securities for issue only in a Registered Exchange Offer or a
Private Exchange, respectively, pursuant to the Registration Agreement,
for a like principal amount of Initial Securities, in each case upon a
written order of the Company signed by two Officers or by an Officer
and either an Assistant Treasurer or an Assistant Secretary of the
Company. Such order shall specify the amount of the Securities to be
authenticated and the date on which the original issue of Securities is
to be authenticated and whether the Securities are to be Initial
Securities, Exchange Securities or Private Exchange Securities. The
aggregate principal amount of Securities outstanding at any time may
not exceed $100,000,000 except as provided in Section 2.07 of this
Indenture.
2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive
Securities. When Definitive Securities are presented to the Registrar or a
co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
<PAGE>
(y) to exchange such Definitive Securities for an equal
principal amount of Definitive Securities of other authorized
denominations, the Registrar or co-registrar shall register the
transfer or make the exchange as requested if its reasonable
requirements for such transaction are met; provided, however, that the
Definitive Securities surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably satisfactory
to the Company and the Registrar or co-registrar, duly
executed by the Holder thereof or his attorney duly authorized
in writing; and
(ii) are being transferred or exchanged pursuant to
an effective registration statement under the Securities Act,
pursuant to Section 2.3(b) or pursuant to clause (A), (B) or
(C) below, and are accompanied by the following additional
information and documents, as applicable:
(A) if such Definitive Securities are being
delivered to the Registrar by a Holder for
registration in the name of such Holder, without
transfer, a certification from such Holder to that
effect; or
(B) if such Definitive Securities are being
transferred to the Company, a certification to that
effect; or
(C) if such Definitive Securities are being
transferred (x) pursuant to an exemption from
registration in accordance with Rule 144 under the
Securities Act; or (y) in reliance on another
exemption from the registration requirements of the
Securities Act: (i) a certification to that effect
and (ii) if the Company so requests, an opinion of
counsel or other evidence reasonably satisfactory to
it as to the compliance with the restrictions set
forth in the legend set forth in Section 2.3(d)(i).
(b) Restrictions on Transfer of a Definitive Security
for a Beneficial Interest in a Global Security. A Definitive Security
may not be exchanged for a beneficial interest in a Global Security
except upon satisfaction of the requirements set forth below. Upon
receipt by the Trustee of a Definitive Security, duly endorsed or
accompanied by appropriate instruments of transfer, in form
satisfactory to the Trustee, together with:
(i) certification that such Definitive Security is
being transferred (A) to a QIB in accordance with Rule 144A,
(B) to an IAI that has furnished to the Trustee a signed
letter or (C) outside the United States in an offshore
transaction within the meaning of Regulation S and in
compliance with Rule 904 under the Securities Act; and
(ii) written instructions directing the Trustee to make,
or to direct the Securities Custodian to make, an adjustment
on its books and records with respect to such Global Security
to reflect an increase in the aggregate principal amount of
the Securities represented by the Global Security, such
instructions to contain information regarding the Depositary
account to be credited with such increase,
then the Trustee shall cancel such Definitive Security and cause, or
direct the Securities Custodian to cause, in accordance with the
standing instructions and procedures existing between the Depository
and the Securities Custodian, the aggregate principal amount of
Securities represented by the Global Security to be increased by the
aggregate principal amount of the Definitive Security to be exchanged
and shall credit or cause to be credited to the account of the Person
<PAGE>
specified in such instructions a beneficial interest in the Global
Security equal to the principal amount of the Definitive Security so
canceled. If no Global Securities are then outstanding and the Global
Security has not been previously exchanged pursuant to Section 2.4, the
Company shall issue and the Trustee shall authenticate, upon written
order of the Company in the form of an Officers' Certificate, a new
Global Security in the appropriate principal amount.
(c) Transfer and Exchange of Global Securities. (i)
The transfer and exchange of Global Securities or beneficial interests
therein shall be effected through the Depository, in accordance with
this Indenture (including applicable restrictions on transfer set forth
herein, if any) and the procedures of the Depository therefor. A
transferor of a beneficial interest in a Global Security shall deliver
a written order given in accordance with the Depository's procedures
containing information regarding the participant account of the
Depository to be credited with a beneficial interest in the Global
Security and such account shall be credited in accordance with such
instructions with a beneficial interest in the Global Security and the
account of the Person making the transfer shall be debited by an amount
equal to the beneficial interest in the Global Security being
transferred. In the case of a transfer of a beneficial interest in a
Global Security to an IAI, the transferee must furnish a signed letter
to the Trustee containing certain representations and agreements (the
form of which letter can be obtained from the Trustee or the Company).
(ii) If the proposed transfer is a transfer of a
beneficial interest in one Global Security to a beneficial
interest in another Global Security, the Registrar shall
reflect on its books and records the date and an increase in
the principal amount of the Global Security to which such
interest is being transferred in an amount equal to the
principal amount of the interest to be so transferred, and the
Registrar shall reflect on its books and records the date and
a corresponding decrease in the principal amount of Global
Security from which such interest is being transferred.
(iii) Notwithstanding any other provisions of this
Appendix A (other than the provisions set forth in Section
2.4), a Global Security may not be transferred except as a
whole by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee
of the Depository or by the Depository or any such nominee to
a successor Depository or a nominee of such successor
Depository.
(iv) In the event that a Global Security is exchanged
for Securities in definitive registered form pursuant to
Section 2.4, prior to the consummation of a Registered
Exchange Offer or the effectiveness of a Shelf Registration
Statement with respect to such Securities, such Securities may
be exchanged only in accordance with such procedures as are
substantially consistent with the provisions of this Section
2.3 (including the certification requirements set forth on the
reverse of the Initial Securities intended to ensure that such
transfers comply with Rule 144A, Regulation S or such other
exemption from registration under the Securities Act, as the
case may be) and such other procedures as may from time to
time be adopted by the Company.
(d) Legend.
(i) Except as permitted by the following paragraphs
(ii), (iii), (iv), (v) and (vi), each Security certificate
evidencing the Global Securities and the Definitive Securities
(and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the
following form:
<PAGE>
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT
THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF
THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY
HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF
THE COMPANY AT ANY TIME DURING THE THREE MONTHS
PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE
OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY
THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE
OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN
AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION
S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX
CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY
THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE
REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION, AND A CERTIFICATE WHICH MAY BE OBTAINED
FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (5)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE)
UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN
INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS
SECURITY AGREES IT WILL FURNISH TO THE COMPANY AND
THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION
AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY
TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE
FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR
THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
OR (2) AN INSTITUTION THAT IS AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING
THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT
SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OF
RULE 902 UNDER) REGULATION S UNDER THE SECURITIES
ACT."
Each Definitive Security will also bear the following
additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL
DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH
CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS."
<PAGE>
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer Restricted
Security represented by a Global Security) pursuant to Rule
144 under the Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Definitive Security, the Registrar
shall permit the Holder thereof to exchange such
Transfer Restricted Security for a Definitive
Security that does not bear the legends set forth
above and rescind any restriction on the transfer of
such Transfer Restricted Security; and
(B) in the case of any Transfer Restricted
Security that is represented by a Global Security,
the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a
Definitive Security that does not bear the legends
set forth above and rescind any restriction on the
transfer of such Transfer Restricted Security, in
either case,
if the Holder certifies in writing to the Registrar that its
request for such exchange was made in reliance on Rule 144
(such certification to be in the form set forth on the reverse
of the Initial Security).
(iii) After a transfer of any Initial Securities or
Private Exchange Securities during the period of the
effectiveness of a Shelf Registration Statement with respect
to such Initial Securities or Private Exchange Securities, as
the case may be, all requirements pertaining to legends on
such Initial Security or such Private Exchange Security will
cease to apply, the requirements requiring that any such
Initial Security or such Private Exchange Security issued to
certain Holders be issued in global form will cease to apply,
and a certificated or global Initial Security or Private
Exchange Security without legends will be available to the
transferee of the Holder of such Initial Securities or Private
Exchange Securities upon exchange of such transferring
Holder's certificated Initial Security or Private Exchange
Security.
(iv) Upon the consummation of a Registered Exchange
Offer with respect to the Initial Securities pursuant to which
certain Holders of such Initial Securities are offered
Exchange Securities in exchange for their Initial Securities,
all requirements pertaining to such Initial Securities that
Initial Securities be issued in global form will cease to
apply and certificated Initial Securities with the restricted
securities legend set forth in Exhibit 1 hereto will be
available to Holders of such Initial Securities that do not
exchange their Initial Securities, and Exchange Securities in
certificated or global form will be available to Holders that
exchange such Initial Securities in such Registered Exchange
Offer or such other applicable exemption from registration
under the Securities Act.
(v) Upon the consummation of a Private Exchange with
respect to the Initial Securities pursuant to which Holders of
such Initial Securities are offered Private Exchange
Securities in exchange for their Initial Securities, all
requirements pertaining to such Initial Securities that
Initial Securities issued to certain Holders be issued in
global form will continue to apply, and Private Exchange
Securities in global form with, to the extent required by
applicable law, the Restricted Securities Legend set forth in
Exhibit 1 hereto will be available to Holders that exchange
such Initial Securities in such Private Exchange.
<PAGE>
(vi) Upon a sale or transfer of any Initial Security
acquired pursuant to Regulation S, all requirements pertaining
to legends on such Initial Security will cease to apply, the
requirements requiring any such Initial Security be issued in
global form will cease to apply, and an Initial Security in
certificated or global form without the Restricted Security
Legend will be available to the transferee of the Holder of
such Initial Securities.
(e) Cancelation or Adjustment of Global Security. At
such time as all beneficial interests in a Global Security have either
been exchanged for certificated or Definitive Securities, redeemed,
repurchased or canceled, such Global Security shall be returned by the
Depository to the Trustee for cancelation or retained and canceled by
the Trustee. At any time prior to such cancelation, if any beneficial
interest in a Global Security is exchanged for certificated or
Definitive Securities, redeemed, repurchased or canceled, the principal
amount of Securities represented by such Global Security shall be
reduced and an adjustment shall be made on the books and records of the
Trustee (if it is then the Securities Custodian for such Global
Security) with respect to such Global Security, by the Trustee or the
Securities Custodian, to reflect such reduction.
(f) Obligations with Respect to Transfers and
Exchanges of Securities.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee shall
authenticate certificated Securities, Definitive Securities
and Global Securities at the Registrar's or co-registrar's
request.
(ii) No service charge shall be made for any
registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any transfer tax,
assessments, or similar governmental charge payable in
connection therewith (other than any such transfer taxes,
assessments or similar governmental charge payable upon
exchange or transfer pursuant to Sections 3.06 and 9.05).
(iii) The Registrar or co-registrar shall not be
required to register the transfer of or exchange of any
Security for a period beginning 15 days before the mailing of
a notice of redemption or 15 days before an interest payment
date.
(iv) Prior to the due presentation for registration
of transfer of any Security, the Company, the Trustee, the
Paying Agent, the Registrar or any co-registrar may deem and
treat the person in whose name a Security is registered as the
absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for
all other purposes whatsoever, whether or not such Security is
overdue, and none of the Company, the Trustee, the Paying
Agent, the Registrar or any co-registrar shall be affected by
notice to the contrary.
(v) All Securities issued upon any transfer or
exchange pursuant to the terms of this Indenture shall
evidence the same debt and shall be entitled to the same
benefits under this Indenture as the Securities surrendered
upon such transfer or exchange.
(g) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or
obligation to any beneficial owner of a Global Security, a
member of, or a participant in the Depository or any other
Person with respect to the accuracy of the records of the
Depository or its nominee or of any participant or member
<PAGE>
thereof, with respect to any ownership interest in the
Securities or with respect to the delivery to any participant,
member, beneficial owner or other Person (other than the
Depository) of any notice (including any notice of redemption)
or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the
Holders and all payments to be made to Holders under the
Securities shall be given or made only to the registered
Holders (which shall be the Depository or its nominee in the
case of a Global Security). The rights of beneficial owners in
any Global Security shall be exercised only through the
Depository subject to the applicable rules and procedures of
the Depository. The Trustee may rely and shall be fully
protected in relying upon information furnished by the
Depository with respect to its members, participants and any
beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Indenture or under
applicable law with respect to any transfer of any interest in
any Security (including any transfers between or among
Depository participants, members or beneficial owners in any
Global Security) other than to require delivery of such
certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly
required by, the terms of this Indenture, and to examine the
same to determine substantial compliance as to form with the
express requirements hereof.
2.4 Certificated Securities.
(a) A Global Security deposited with the Depository
or with the Trustee as Securities Custodian pursuant to Section 2.1
shall be transferred to the beneficial owners thereof in the form of
certificated Securities in an aggregate principal amount equal to the
principal amount of such Global Security, in exchange for such Global
Security, only if such transfer complies with Section 2.3 and (i) the
Depository notifies the Company that it is unwilling or unable to
continue as Depository for such Global Security or if at any time such
Depository ceases to be a "clearing agency" registered under the
Exchange Act and a successor depositary is not appointed by the Company
within 90 days of such notice, or (ii) an Event of Default has occurred
and is continuing or (iii) the Company, in its sole discretion,
notifies the Trustee in writing that it elects to cause the issuance of
certificated Securities under this Indenture.
(b) Any Global Security that is transferable to the
beneficial owners thereof pursuant to this Section 2.4 shall be
surrendered by the Depository to the Trustee located in the Borough of
Manhattan, The City of New York, to be so transferred, in whole or from
time to time in part, without charge, and the Trustee shall
authenticate and deliver, upon such transfer of each portion of such
Global Security, an equal aggregate principal amount of certificated
Securities of authorized denominations. Any portion of a Global
Security transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any
integral multiple thereof and registered in such names as the
Depository shall direct. Any certificated Initial Security delivered in
exchange for an interest in the Global Security shall, except as
otherwise provided by Section 2.3(d), bear the restricted securities
legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the
registered Holder of a Global Security may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
<PAGE>
(d) In the event of the occurrence of either of the
events specified in Section 2.4(a)(i), (ii) or (iii), the Company will
promptly make available to the Trustee a reasonable supply of
certificated Securities in definitive, fully registered form without
interest coupons.
EXHIBIT 1 TO APPENDIX A
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO
ON THE REVERSE HEREOF.
[Restricted Securities Legend]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE
COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF
(OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN
AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING
THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN
OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT (AS INDICATED BY
THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE
REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR
INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE WHICH
MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE
TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (5) PURSUANT TO AN EXEMPTION
<PAGE>
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF
APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS
SECURITY AGREES IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH
CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO
CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE
FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY,
REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS
HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION
OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OF
RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT.
[IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL
DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM
THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.] No.
$100,000,000 CUSIP No.:
7-3/4% Senior Notes Due 2007
LILLY INDUSTRIES, INC., an Indiana corporation,
promises to pay to CEDE & CO., or registered assigns, the principal sum
set forth in the Schedule of Increases and Decreases in Global Security
on December 1, 2007.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15.
Additional provisions of this Security are set forth
on the other side of this Security.
<PAGE>
LILLY INDUSTRIES, INC.,
by
-----------------------
-----------------------
[CORPORATE SEAL]
Dated: November 10, 1997
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
HARRIS TRUST AND
SAVINGS BANK,
as Trustee, certifies that this
is one of the Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
7-3/4% Senior Note Due 2007
1. Interest
(a) LILLY INDUSTRIES, INC. an Indiana corporation
(such corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the "Company"), promises
to pay interest on the principal amount of this Security at the rate
per annum shown above. The Company will pay interest semiannually on
June 1 and December 1 of each year. Interest on the Securities will
accrue from the most recent date to which interest has been paid or, if
no interest has been paid, from November 10, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. The
Company shall pay interest on overdue principal at the rate borne by
the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
(b) The holder of this Security is entitled to the
benefits of the Registration Agreement dated November 5, 1997, between
the Company and the Purchasers named therein (the "Registration
Agreement"). Capitalized terms used in this paragraph (b) but not
defined herein have the meanings assigned to them in the Registration
Agreement. In the event that (i) neither the Exchange Offer
Registration Statement nor the Shelf Registration Statement has been
filed with the Commission on or prior to the 90th day following the
date of the original issuance of the Securities, (ii) neither the
Exchange Offer Registration Statement nor the Shelf Registration
Statement has been declared effective on or prior to the 150th day
following the date of the original issuance of the Securities, (iii)
neither the Registered Exchange Offer has been consummated nor the
Shelf Registration Statement has been declared effective on or prior to
the 180th day following the date of the original issuance of the
Securities, or (iv) after either the Exchange Offer Registration
Statement or the Shelf Registration Statement has been declared
<PAGE>
effective, such Registration Statement thereafter ceases to be
effective or usable in connection with resales of the Securities at any
time that the Company is obligated to maintain the effectiveness
thereof pursuant to the Registration Agreement (each such event
referred to in clauses (i) through (iv) above being referred to herein
as a "Registration Default"), interest (the "Special Interest") shall
accrue (in addition to stated interest on the Securities) from and
including the date on which the first such Registration Default shall
occur to but excluding the date on which all Registration Defaults have
been cured, at a rate per annum equal to 0.25% of the principal amount
of the Securities; provided, however, that such rate per annum shall
increase by 0.25% per annum for each such Registration Default unless
and until all Registration Defaults have been cured; provided further,
however, that in no event shall the Special Interest accrue at a rate
in excess of 1.00% per annum. The Special Interest will be payable in
cash semiannually in arrears each June 1 and December 1.
2. Method of Payment
The Company will pay interest on the Securities
(except defaulted interest) to the Persons who are registered holders
of Securities at the close of business on the May 15 or November 15
next preceding the interest payment date even if Securities are
canceled after the record date and on or before the interest payment
date. Holders must surrender Securities to a Paying Agent to collect
principal payments. The Company will pay principal and interest in
money of the United States of America that at the time of payment is
legal tender for payment of public and private debts. Payments in
respect of the Securities represented by a Global Security (including
principal, premium and interest) will be made by wire transfer of
immediately available funds to the accounts specified by The Depository
Trust Company. The Company will make all payments in respect of a
certificated Security (including principal, premium and interest) by
mailing a check to the registered address of each Holder thereof;
provided, however, that payments on the Securities may also be made, in
the case of a Holder of at least $1,000,000 aggregate principal amount
of Securities, by wire transfer to a U.S. dollar account maintained by
the payee with a bank in the United States if such Holder elects
payment by wire transfer by giving written notice to the Trustee or the
Paying Agent to such effect designating such account no later than 30
days immediately preceding the relevant due date for payment (or such
other date as the Trustee may accept in its discretion).
3. Paying Agent and Registrar
Initially, Harris Trust and Savings Bank, an Illinois
banking association (the "Trustee"), will act as Paying Agent and
Registrar. The Company may appoint and change any Paying Agent,
Registrar or co-registrar without notice. The Company or any of its
domestically incorporated Wholly Owned Subsidiaries may act as Paying
Agent, Registrar, co-registrar or transfer agent.
4. Indenture
The Company issued the Securities under an Indenture
dated as of November 10, 1997 (the "Indenture"), between the Company
and the Trustee. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in
effect on the date of the Indenture (the "TIA"). Terms defined in the
Indenture and not defined herein have the meanings ascribed thereto in
the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the TIA for a
statement of those terms.
<PAGE>
The Securities are general unsecured obligations of
the Company limited to $100,000,000 aggregate principal amount (subject
to Section 2.07 of the Indenture). This Security is one of the Initial
Securities referred to in the Indenture issued in an aggregate
principal amount of $100,000,000. The Securities include the Initial
Securities and any Private Exchange Securities or Exchange Securities
issued in exchange for Initial Securities. The Initial Securities, the
Private Exchange Securities and the Exchange Securities are treated as
a single class of securities under the Indenture.
The Company will not, and will not permit any
Restricted Subsidiary to, Incur, directly or indirectly, any Debt
unless, after giving pro forma effect to the application of the
proceeds thereof, no Default or Event of Default would occur as a
consequence of such Incurrence or be continuing following such
Incurrence and either such Debt pro forma is (a) Debt of the Company,
provided that, after giving pro forma effect to the Incurrence of such
Debt and the application of the proceeds thereof, the Consolidated
Interest Coverage Ratio would be greater than 2.00 to 1.00, (b) Debt of
the Company evidenced by the Securities or (c) Permitted Debt of the
Company or any Restricted Subsidiary. The foregoing covenant will be
applicable to the Company and the Restricted Subsidiaries unless the
Company reaches Investment Grade Status. After the Company has reached
Investment Grade Status, and notwithstanding that the Company may later
cease to have an Investment Grade Rating from either or both of the
Rating Agencies, the Company and the Restricted Subsidiaries will be
released from their obligations to comply with the foregoing covenant.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, Incur or
otherwise cause or suffer to exist or become effective any Liens of any
kind upon any Principal Property or any Capital Stock or Debt of any
Restricted Subsidiary (whether such Principal Property, Capital Stock
or Debt are now owned or hereafter acquired), or any interest therein
or any increase or profits therefrom, unless all payments due under the
Indenture and the Securities are secured on an equal and ratable basis
with (or prior to) the obligations so secured, except for Permitted
Liens or as provided in the second to the last paragraph of this
Section 4.
The Company will not, and will not permit any
Restricted Subsidiaries to, enter into any Sale and Leaseback
Transaction with respect to any Principal Property unless either (a)
the Company or such Restricted Subsidiary would be entitled, pursuant
to the provisions of the Indenture, to Incur Debt secured by a Lien on
the Property to be leased in an amount equal to the Attributable Debt
with respect to such transaction without equally and ratably securing
the Securities, or (b) the Company, within 180 days after the effective
date of such transaction, applies to the voluntary retirement of its
Funded Debt an amount equal to the value of such transaction, defined
as the greater of the net proceeds of the sale of the Property leased
in such transaction or the fair value, in the opinion of the Board of
Directors, of the leased Property at the time such transaction was
entered into.
Notwithstanding the foregoing limitations on Liens
and Sale and Leaseback Transactions, the Company and its Restricted
Subsidiaries may issue, assume or guarantee Debt secured by a Lien
without securing the Securities, or may enter into Sale and Leaseback
Transactions without retiring Funded Debt, or enter into a combination
of such transactions, if the sum of (x) the principal amount of such
Debt or the Attributable Debt in respect of such Sale and Leaseback
Transaction, as the case may be, and (y) the principal amount of all
other such Debt and all other Attributable Debt in respect of Sale and
Leaseback Transactions then outstanding, does not exceed 15% of the
Consolidated Net Tangible Assets of the Company and its Restricted
Subsidiaries as shown in the consolidated balance sheet of the Company
as of the end of the most recent fiscal quarter ending at least 45 days
prior to the date of determination.
<PAGE>
The Company, without the consent of the Holders of
any of the outstanding Securities, may consolidate or amalgamate with
or merge into any other Person or convey, transfer, lease or otherwise
dispose of its Property substantially as an entirety to any Person or
may permit any Person to consolidate or amalgamate with or merge into,
or convey, transfer, lease or otherwise dispose of its Property
substantially as an entirety to, the Company; provided, however, that
(a) the successor, transferee or lessee is organized under the laws of
any United States jurisdiction; (b) the successor, transferee or
lessee, if other than the Company, expressly assumes the Company's
obligations under the Indenture and the Securities by means of a
supplemental indenture entered into with the Trustee; (c) immediately
before and after giving effect to the transaction on a pro forma basis,
no Default shall have occurred and be continuing; and (d) certain other
conditions are met. Under any consolidation or amalgamation by the
Company with, or merger by the Company into, any other Person or any
conveyance, transfer, lease or other disposition of the Property of the
Company substantially as an entirety as described in the preceding
sentence, the successor resulting from such consolidation or
amalgamation or into which the Company is merged or the transferee or
lessee to which such conveyance, transfer, lease or disposition is
made, will succeed to, and be substituted for, and may exercise every
right and power of, the Company under the Indenture, and thereafter,
except in the case of a conveyance, transfer, lease or disposition, the
predecessor (if still in existence) will be released from its
obligations and covenants under the Indenture and the Securities.
5. Optional Redemption
The Securities will be redeemable, at the option of
the Company, in whole or in part at any time or from time to time, upon
not less than 30 and not more than 60 days' notice as provided in the
Indenture, on any date prior to maturity (the "Redemption Date") at a
redemption price equal to 100% of the principal amount of the
Securities to be redeemed plus accrued interest to the Redemption Date
(subject to the right of Holders of record on the relevant record date
to receive interest due on an interest payment date that is on or prior
to the Redemption Date) plus a Make-Whole Premium, if any (the
"Redemption Price"). In no event will the Redemption Price ever be less
than 100% of the principal amount of the Securities plus accrued
interest to the Redemption Date.
The amount of the Make-Whole Premium with respect to
any Security (or portion thereof) to be redeemed will be equal to the
excess, if any, of:
(1) the sum of the present values, calculated as of
the Redemption Date, of:
(a) each interest payment that, but for such
redemption, would have been payable on the
Security (or portion thereof) being redeemed
on each interest payment date occurring
after the Redemption Date (excluding any
accrued interest for the period prior to the
Redemption Date); and
(b) the principal amount that, but for such
redemption, would have been payable at the
final maturity of the Security (or portion
thereof) being redeemed;
over
(2) the principal amount of the Security (or portion
thereof) being redeemed.
<PAGE>
The present values of interest and principal payments
referred to in clause (i) above will be determined in accordance with
generally accepted principles of financial analysis. Such present
values will be calculated by discounting the amount of each payment of
interest or principal from the date that each such payment would have
been payable, but for the redemption, to the Redemption Date at a
discount rate equal to the Treasury Yield (as defined below) plus 50
basis points.
The Make-Whole Premium will be calculated by an
independent investment banking institution of national standing
appointed by the Company; provided, that if the Company fails to make
such appointment at least 45 Business Days prior to the Redemption
Date, or if the institution so appointed is unwilling or unable to make
such calculation, such calculation will be made by Salomon Brothers Inc
or, if such firm is unwilling or unable to make such calculation, by an
independent investment banking institution of national standing
appointed by the Trustee (in any such case, an "Independent Investment
Banker").
For purposes of determining the Make-Whole Premium,
"Treasury Yield" means a rate of interest per annum equal to the weekly
average yield to maturity of United States Treasury Notes that have a
constant maturity that corresponds to the remaining term to maturity of
the Securities, calculated to the nearest 1/12th of a year (the
"Remaining Term"). The Treasury Yield will be determined as of the
third Business Day immediately preceding the applicable Redemption
Date.
The weekly average yields of United States Treasury
Notes will be determined by reference to the most recent statistical
release published by the Federal Reserve Bank of New York and
designated "H.15(519) Selected Interest Rates" or any successor release
(the "H.15 Statistical Release"). If the H.15 Statistical Release sets
forth a weekly average yield for United States Treasury Notes having a
constant maturity that is the same as the Remaining Term, then the
Treasury Yield will be equal to such weekly average yield. In all other
cases, the Treasury Yield will be calculated by interpolation, on a
straight-line basis, between the weekly average yields on the United
States Treasury Notes that have a constant maturity closest to and
greater than the Remaining Term and the United States Treasury Notes
that have a constant maturity closest to and less than the Remaining
Term (in each case as set forth in the H.15 Statistical Release). Any
weekly average yields so calculated by interpolation will be rounded to
the nearest 1/100th of 1%, with any figure of 1/200th of 1% or above
being rounded upward. If weekly average yields for United States
Treasury Notes are not available in the H.15 Statistical Release or
otherwise, then the Treasury Yield will be calculated by interpolation
of comparable rates selected by the Independent Investment Banker.
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class
mail at least 30 days but not more than 60 days before the redemption
date to each Holder of Securities to be redeemed at his or her
registered address. Securities in denominations larger than $1,000 may
be redeemed in part but only in whole multiples of $1,000. If money
sufficient to pay the redemption price of and accrued interest on all
Securities (or portions thereof) to be redeemed on the redemption date
is deposited with the Paying Agent on or before the redemption date and
certain other conditions are satisfied, on and after such date interest
ceases to accrue on such Securities (or such portions thereof) called
for redemption.
<PAGE>
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons
in denominations of $1,000 and whole multiples of $1,000. A Holder may
transfer or exchange Securities in accordance with the Indenture. Upon
any transfer or exchange, the Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes required by law or permitted by
the Indenture. The Registrar need not register the transfer of or
exchange any Securities selected for redemption (except, in the case of
a Security to be redeemed in part, the portion of the Security not to
be redeemed) or to transfer or exchange any Securities for a period of
15 days prior to a selection of Securities to be redeemed or 15 days
before an interest payment date.
9. Persons Deemed Owners
The registered Holder of this Security may be treated
as the owner of it for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest
remains unclaimed for two years, the Trustee or Paying Agent shall pay
the money back to the Company at its request unless an abandoned
property law designates another Person. After any such payment, Holders
entitled to the money must look only to the Company and not to the
Trustee for payment.
11. Discharge and Defeasance
Subject to certain conditions, the Company at any
time may terminate some of or all its obligations under the Securities
and the Indenture if the Company deposits with the Trustee money or
U.S. Government Obligations for the payment of principal and interest
on the Securities to redemption or maturity, as the case may be.
12. Amendment, Waiver
Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Securities may be amended without
prior notice to any Securityholder but with the written consent of the
Holders of at least a majority in aggregate principal amount of the
outstanding Securities and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Holders of at
least a majority in principal amount of the outstanding Securities.
Subject to certain exceptions set forth in the Indenture, without the
consent of any Securityholder, the Company and the Trustee may amend
the Indenture or the Securities (i) to cure any ambiguity, omission,
defect or inconsistency, (ii) to comply with Article 5 of the
Indenture, (iii) to provide for uncertificated Securities in addition
to or in place of certificated Securities, (iv) to add guarantees with
respect to the Securities or to secure the Securities, (v) to add to
the covenants of the Company for the benefit of the Holders of the
Securities or to surrender any right power conferred upon the Company,
(vi) to comply with any requirement of the Commission in connection
with qualifying the Indenture under the TIA, or (vii) to make any
change that does not adversely affect the rights of any Securityholder.
<PAGE>
13. Defaults and Remedies
If an Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the
Securities, subject to certain limitations, may declare all the
Securities to be immediately due and payable. Certain events of
bankruptcy or insolvency of the Company are Events of Default which
shall result in the Securities being immediately due and payable upon
the occurrence of such Events of Default without any further act of the
Trustee or any Holder.
Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may refuse
to enforce the Indenture or the Securities unless it receives
reasonable indemnity or security. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the outstanding
Securities may direct the Trustee in its exercise of any trust or power
under the Indenture. The Holders of a majority in aggregate principal
amount of the outstanding Securities, by written notice to the Trustee
and the Company, may rescind any declaration of acceleration and its
consequences if the rescission would not conflict with any judgment or
decree, and if all existing Events of Default have been cured or waived
except nonpayment of principal or interest that has become due solely
because of the acceleration.
14. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA,
the Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may
otherwise deal with and collect obligations owed to it by the Company
or its Affiliates and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee.
15. No Recourse Against Others
A director, officer, employee or stockholder, as
such, of the Company shall not have any liability for any obligations
of the Company under the Securities or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
16. Authentication
This Security shall not be valid until an authorized
signatory of the Trustee (or an authenticating agent) manually signs
the certificate of authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as TEN COM (=tenants in common),
TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with
rights of survivorship and not as tenants in common), CUST
(=custodian), and U/G/M/A (=Uniform Gift to Minors Act).
18. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
<PAGE>
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company
has caused CUSIP numbers to be printed on the Securities and has
directed the Trustee to use CUSIP numbers in notices of redemption as a
convenience to Securityholders. No representation is made as to the
accuracy of such numbers either as printed on the Securities or as
contained in any notice of redemption and reliance may be placed only
on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon
written request and without charge to the Securityholder a copy of the
Indenture which has in it the text of this Security.
-------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint
as agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
--------------------------------------------------------------
Date: ________________ Your Signature: _______________________
--------------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
In connection with any transfer of any of the Securities evidenced by
this certificate occurring prior to the expiration of the period
referred to in Rule 144(k) under the Securities Act of 1933 after the
later of the date of original issuance of such Securities and the last
date, if any, on which such Securities were owned by the Company or any
Affiliate of the Company, the undersigned confirms that such Securities
are being transferred in accordance with its terms:
<PAGE>
CHECK ONE BOX BELOW
(1) G to the Company; or
(2) G pursuant to an effective registration
statement under the Securities Act of 1933; or
(3) G inside the United States to a "qualified
institutional buyer" (as defined in Rule
144A under the Securities Act of 1933) that
purchases for its own account or for the
account of a qualified institutional buyer
to whom notice is given that such transfer
is being made in reliance on Rule 144A, in
each case pursuant to and in compliance with
Rule 144A under the Securities Act of 1933;
or
(4) G inside the United States to an
institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7)
of Regulation D under the Securities Act of
1933) that has furnished to the Trustee a
signed letter containing certain
representations and agreements (the form of
which letter can be obtained from the
Trustee or the Company); or
(5) G outside the United States in an offshore
transaction within the meaning of Regulation
S under the Securities Act in compliance
with Rule 904 under the Securities Act of
1933; or
(6) G pursuant to another available exemption from
registration provided by Rule 144 under the
Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Securities evidenced by this certificate
in the name of any person other than the registered holder
thereof; provided, however, that if box (4), (5) or (6) is
checked, the Trustee may require, prior to registering any
such transfer of the Securities, such legal opinions,
certifications and other information as the Company has
reasonably requested to confirm that such transfer is being
made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities
Act of 1933.
Your Signature
Signature Guarantee:
Date: Signature must be guaranteed by a participant in a recognized
signature guaranty medallion program or other signature guarantor
acceptable to the Trustee
Signature of Signature Guarantee
<PAGE>
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ________________ _______________________________
NOTICE: To be executed by
an executive officer
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The initial principal amount of this Global Security is $[ ].
The following increases or decreases in this Global Security have been made:
<TABLE>
<CAPTION>
Date of Amount of decrease Amount of increase Principal amount of Signature of
Exchange in Principal Amount in Principal Amount this Global Security authorized officer
of this Global of this Global following such of Trustee or
Security Security decrease or increase Securities Custodian
<S> <C> <C> <C> <C> <C> <C>
--------------- ----------------- ------------------ ------------------ ------------------
</TABLE>
<PAGE>
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY]
*/
**/
No.:$100,000,000
CUSIP No.:
7-3/4% Senior Notes Due 2007
LILLY INDUSTRIES, INC., an Indiana corporation,
promises to pay to , or
registered assigns, the principal sum of 100,000,000
Dollars on December 1, 2007.
Interest Payment
Dates: June 1 and December 1.
Record
Dates: May 15 and November 15.
*/ [If the Security is to be issued in global form add the Global
Securities Legend from Exhibit 1 to Appendix A and the attachment
from such Exhibit 1 captioned "[TO BE ATTACHED TO GLOBAL SECURITIES]
- SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY".]
<PAGE>
**/ [If the Security is a Private Exchange Security issued in a
Private Exchange to an Initial Purchaser holding an unsold portion of
its initial allotment, add, to the extent required by applicable law,
the Restricted Securities Legend from Exhibit 1 to Appendix A and
replace the Assignment Form included in this Exhibit A with the
Assignment Form included in such Exhibit 1.]
Additional provisions of this Security are set forth on the other
side of this Security.
LILLY INDUSTRIES, INC.,
by
--------------------------
--------------------------
[CORPORATE
SEAL]
Dated: November 10, 1997
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
HARRIS TRUST AND SAVINGS BANK, as Trustee, certifies that this is one
of the Securities referred to in the Indenture.
by
------------------------
Authorized
Signatory
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY]
7-3/4% Senior Note Due 2007
1. Interest
LILLY INDUSTRIES INC., an Indiana corporation (such corporation, and
its successors and assigns under the Indenture hereinafter referred
to, being herein called the "Company"), promises to pay interest on
the principal amount of this Security at the rate per annum shown
above[; provided however, that if a Registration Default (as defined
in the Registration Agreement) occurs, interest will accrue on this
Security at a rate of 0.25% per annum from and including the date on
which any such Registration Default shall occur to but excluding the
date on which all Registration Defaults have been cured] ***/. The
Company will pay interest semiannually on June 1 and December 1 of
each year. Interest on the Securities will accrue from the most
recent date to which interest has been paid or, if no interest has
been paid, from November 10, 1997. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. The Company shall
pay interest on overdue principal at the rate borne by the Securities
plus 1% per annum, and it shall pay interest on overdue installments
of interest at the same rate to the extent lawful.
---------------
***/ Insert if at the time of issuance of the Exchange Security or
Private Exchange Security (as the case may be) neither the Registered
Exchange Offer has been consummated nor a Shelf Registration
Statement has been declared effective in accordance with the
Registration Agreement.
2. Method of Payment
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at
the close of business on the May 15 or November 15 next preceding the
interest payment date even if Securities are canceled after the
record date and on or before the interest payment date. Holders must
surrender Securities to a Paying Agent to collect principal payments.
The Company will pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of
public and private debts. Payments in respect of the Securities
represented by a Global Security (including principal, premium and
interest) will be made by wire transfer of immediately available
funds to the accounts specified by The Depository Trust Company. The
Company will make all payments in respect of a certificated Security
(including principal, premium and interest) by mailing a check to the
registered address of each Holder thereof; provided, however, that
payments on the Securities may also be made, in the case of a Holder
of at least $1,000,000 aggregate principal amount of Securities, by
wire transfer to a U.S. dollar account maintained by the payee with a
bank in the United States if such Holder elects payment by wire
transfer giving written notice to the Trustee or the Paying Agent to
such effect designating such account no later than 30 days
immediately preceding the relevant due date for payment (or such
other date as the Trustee may accept in its discretion).
<PAGE>
3. Paying Agent and Registrar
Initially, Harris Trust and Savings Bank, an Illinois Banking
Association, (the "Trustee"), will act as Paying Agent and Registrar.
The Company may appoint and change any Paying Agent, Registrar or
co-registrar without notice. The Company or any of its domestically
incorporated Wholly Owned Subsidiaries may act as Paying Agent,
Registrar, co-registrar or transfer agent.
4. Indenture
The Company issued the Securities under an Indenture dated as of
November 10, 1997 ("Indenture"), between the Company and the Trustee.
The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture
Act of 1939 (15 U.S.C. ss.ss. 77aaa-77bbbb) as in effect on the date
of the Indenture (the "Act"). Terms defined in the Indenture and not
defined herein have the meanings ascribed thereto in the Indenture.
The Securities are subject to all such terms, and Securityholders are
referred to the Indenture and the Act for a statement of those terms.
The Securities are general unsecured obligations of the Company
limited to $100,000,000 aggregate principal amount (subject to
Section 2.07 of the Indenture). This Security is one of the Exchange
Securities or Private Exchange Securities referred to in the
Indenture issued in exchange for Initial Securities. The Initial
Securities were issued in an aggregate principal amount of
$100,000,000. The Initial Securities, the Exchange Securities and the
Private Exchange Securities are treated as a single class of
securities under the Indenture.
The Company will not, and will not permit any Restricted Subsidiary
to, Incur, directly or indirectly, any Debt unless, after giving pro
forma effect to the application of the proceeds thereof, no Default
or Event of Default would occur as a consequence of such Incurrence
or be continuing following such Incurrence and either such Debt is
(a) Debt of the Company, provided that, after giving proforma effect
to the Incurrence of such Debt and the application of the proceeds
thereof, the Consolidated Interest Coverage Ratio would be greater
than 2.00 to 1.00, (b) Debt of the Company evidenced by the
Securities or (c) Permitted Debt of the Company or any Restricted
Subsidiary. The foregoing covenant will be applicable to the Company
and the Restricted Subsidiaries unless the Company reaches Investment
Grade Status. After the Company has reached Investment Grade Status,
and notwithstanding that the Company may later cease to have an
Investment Grade Rating from either or both of the Rating Agencies,
the Company and the Restricted Subsidiaries will be released from
their obligations to comply with the foregoing covenant.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, Incur or otherwise
cause or suffer to exist or become effective any Liens of any kind
upon any Principal Property or any Capital Stock or Debt of any
Restricted Subsidiary (whether such Principal Property, Capital Stock
or Debt are now owned or hereafter acquired), or any interest therein
or any increase or profits therefrom, unless all payments due under
the Indenture and the Securities are secured on an equal and ratable
basis with (or prior to) the obligations so secured, except for
Permitted Liens or as provided in the second to the last paragraph of
this Section 4.
The Company will not, and will not permit any Restricted Subsidiaries
to, enter into any Sale and Leaseback Transaction with respect to any
Principal Property unless either (a) the Company or such Restricted
<PAGE>
Subsidiary would be entitled, pursuant to the provisions of the
Indenture, to Incur Debt secured by a Lien on the Property to be
leased in an amount equal to the Attributable Debt with respect to
such transaction without equally and ratably securing the Securities,
or (b) the Company, within 180 days after the effective date of such
transaction, applies to the voluntary retirement of its Funded Debt
an amount equal to the value of such transaction, defined as the
greater of the net proceeds of the sale of the Property leased in
such transaction or the fair value, in the opinion of the Board of
Directors, of the leased Property at the time such transaction was
entered into.
Notwithstanding the foregoing limitations on Liens and Sale and
Leaseback Transactions, the Company and its Restricted Subsidiaries
may issue, assume or guarantee Debt secured by a Lien without
securing the Securities, or may enter into Sale and Leaseback
Transactions without retiring Funded Debt, or enter into a
combination of such transactions, if the sum of (x) the principal
amount of such Debt or the Attributable Debt in respect of such Sale
and Leaseback Transaction, as the case may be, and (y) the principal
amount of all other such Debt and all other Attributable Debt in
respect of Sale and Leaseback Transactions then outstanding, does not
exceed 15% of the Consolidated Net Tangible Assets of the Company and
its Restricted Subsidiaries as shown in the consolidated balance
sheet of the Company as of the end of the most recent fiscal quarter
ending at least 45 days prior to the date of determination.
The Company, without the consent of the Holders of any of the
outstanding Securities, may consolidate or amalgamate with or merge
into any other Person or convey, transfer, lease or otherwise dispose
of its Property substantially as an entirety to any Person or may
permit any Person to consolidate or amalgamate with or merge into, or
convey, transfer, lease or otherwise dispose of its Property
substantially as an entirety to, the Company; provided, however, that
(a) the successor, transferee or lessee is organized under the laws
of any United States jurisdiction; (b) the successor, transferee or
lessee, if other than the Company, expressly assumes the Company's
obligations under the Indenture and the Securities by means of a
supplemental indenture entered into with the Trustee; (c) immediately
before and after giving effect to the transaction on a pro forma
basis, no Default shall have occurred and be continuing; and (d)
certain other conditions are met. Under any consolidation or
amalgamation by the Company with, or merger by the Company into, any
other Person or any conveyance, transfer, lease or other disposition
of the Property of the Company substantially as an entirety as
described in the preceding sentence, the successor resulting from
such consolidation or amalgamation or into which the Company is
merged or the transferee or lessee to which such conveyance,
transfer, lease or disposition is made, will succeed to, and be
substituted for, and may exercise every right and power of, the
Company under the Indenture, and thereafter, except in the case of a
conveyance, transfer, lease or disposition, the predecessor (if still
in existence) will be released from its obligations and covenants
under the Indenture and the Securities.
5. Optional Redemption
The Securities will be redeemable, at the option of the Company, in
whole or in part at any time or from time to time, upon not less than
30 and not more than 60 days' notice as provided in the Indenture, on
any date prior to maturity (the "Redemption Date") at a redemption
price equal to 100% of the principal amount of the Securities to be
redeemed plus accrued interest to the Redemption Date (subject to the
right of Holders of record on the relevant record date to receive
interest due on an interest payment date that is on or prior to the
Redemption Date) plus a Make-Whole Premium, if any (the "Redemption
Price"). In no event will the Redemption Price ever be less than 100%
of the principal amount of the Securities plus accrued interest to
the Redemption Date.
<PAGE>
The amount of the Make-Whole Premium with respect to any Security (or
portion thereof) to be redeemed will be equal to the excess, if any,
of:
(1) the sum of the present values, calculated as
of the Redemption Date, of:
(a) each interest payment that, but for such
redemption, would have been payable on the Security
(or portion thereof) being redeemed on each
interest payment date occurring after the
Redemption Date (excluding any accrued interest for
the period prior to the Redemption Date); and
(b) the principal amount that, but for such
redemption, would have been payable at the final
maturity of the Security (or portion thereof) being
redeemed;
over
(2) the principal amount of the Security
(or portion thereof) being redeemed.
The present values of interest and principal payments referred to in
clause (i) above will be determined in accordance with generally
accepted principles of financial analysis. Such present values will
be calculated by discounting the amount of each payment of interest
or principal from the date that each such payment would have been
payable, but for the redemption, to the Redemption Date at a discount
rate equal to the Treasury Yield (as defined below) plus 50 basis
points.
The Make-Whole Premium will be calculated by an independent
investment banking institution of national standing appointed by the
Company; provided, that if the Company fails to make such appointment
at least 45 Business Days prior to the Redemption Date, or if the
institution so appointed is unwilling or unable to make such
calculation, such calculation will be made by Salomon Brothers Inc
or, if such firm is unwilling or unable to make such calculation, by
an independent investment banking institution of national standing
appointed by the Trustee (in any such case, an "Independent
Investment Banker").
For purposes of determining the Make-Whole Premium, "Treasury Yield"
means a rate of interest per annum equal to the weekly average yield
to maturity of United States Treasury Notes that have a constant
maturity that corresponds to the remaining term to maturity of the
Securities, calculated to the nearest 1/12th of a year (the
"Remaining Term"). The Treasury Yield will be determined as of the
third Business Day immediately preceding the applicable Redemption
Date.
The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent statistical release
published by the Federal Reserve Bank of New York and designated
"H.15(519) Selected Interest Rates" or any successor release (the
"H.15 Statistical Release"). If the H.15 Statistical Release sets
forth a weekly average yield for United States Treasury Notes having
a constant maturity that is the same as the Remaining Term, then the
Treasury Yield will be equal to such weekly average yield. In all
other cases, the Treasury Yield will be calculated by interpolation,
on a straight-line basis, between the weekly average yields on the
<PAGE>
United States Treasury Notes that have a constant maturity closest to
and greater than the Remaining Term and the United States Treasury
Notes that have a constant maturity closest to and less than the
Remaining Term (in each case as set forth in the H.15 Statistical
Release). Any weekly average yields so calculated by interpolation
will be rounded to the nearest 1/100th of 1%, with any figure of
1/200th of 1% or above being rounded upward. If weekly average yields
for United States Treasury Notes are not available in the H.15
Statistical Release or otherwise, then the Treasury Yield will be
calculated by interpolation of comparable rates selected by the
Independent Investment Banker.
6. Sinking Fund
The Securities are not subject to any sinking fund.
7. Notice of Redemption
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his or her registered address.
Securities in denominations larger than $1,000 may be redeemed in
part but only in whole multiples of $1,000. If money sufficient to
pay the redemption price of and accrued interest on all Securities
(or portions thereof) to be redeemed on the redemption date is
deposited with the Paying Agent on or before the redemption date and
certain other conditions are satisfied, on and after such date
interest ceases to accrue on such Securities (or such portions
thereof) called for redemption.
8. Denominations; Transfer; Exchange
The Securities are in registered form without coupons in
denominations of $1,000 and whole multiples of $1,000. A Holder may
transfer or exchange Securities in accordance with the Indenture.
Upon any transfer or exchange, the Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes required by
law or permitted by the Indenture. The Registrar need not register
the transfer of or exchange any Securities selected for redemption
(except, in the case of a Security to be redeemed in part, the
portion of the Security not to be redeemed) or to transfer or
exchange any Securities for a period of 15 days prior to a selection
of Securities to be redeemed or 15 days before an interest payment
date.
9. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner of
it for all purposes.
10. Unclaimed Money
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back
to the Company at its request unless an abandoned property law
designates another Person. After any such payment, Holders entitled
to the money must look only to the Company and not to the Trustee for
payment.
<PAGE>
11. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some of or all its obligations under the Securities and the Indenture
if the Company deposits with the Trustee money or U.S. Government
Obligations for the payment of principal and interest on the
Securities to redemption or maturity, as the case may be.
12. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended without prior notice to
any Securityholder but with the written consent of the Holders of at
least a majority in aggregate principal amount of the outstanding
Securities and (ii) any default or noncompliance with any provision
may be waived with the written consent of the Holders of at least a
majority in principal amount of the outstanding Securities. Subject
to certain exceptions set forth in the Indenture, without the consent
of any Securityholder, the Company and the Trustee may amend the
Indenture or the Securities (i) to cure any ambiguity, omission,
defect or inconsistency, (ii) to comply with Article 5 of the
Indenture, (iii) to provide for uncertificated Securities in addition
to or in place of certificated Securities, (iv) to add guarantees
with respect to the Securities or to secure the Securities, (v) to
add to the covenants of the Company for the benefit of the Holders of
the Securities or to surrender any right power conferred upon the
Company, (vi) to comply with any requirement of the Commission in
connection with qualifying the Indenture under the TIA, or (vii) to
make any change that does not adversely affect the rights of any
Securityholder.
13. Defaults and Remedies
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Securities,
subject to certain limitations, may declare all the Securities to be
immediately due and payable. Certain events of bankruptcy or
insolvency of the Company are Events of Default which shall result in
the Securities being immediately due and payable upon the occurrence
of such Events of Default without any further act of the Trustee or
any Holder.
Securityholders may not enforce the Indenture or the Securities
except as provided in the Indenture. The Trustee may refuse to
enforce the Indenture or the Securities unless it receives reasonable
indemnity or security. Subject to certain limitations, Holders of a
majority in aggregate principal amount of the outstanding Securities
may direct the Trustee in its exercise of any trust or power under
the Indenture. The Holders of a majority in aggregate principal
amount of the outstanding Securities, by written notice to the
Trustee and the Company, may rescind any declaration of acceleration
and its consequences if the rescission would not conflict with any
judgment or decree, and if all existing Events of Default have been
cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration.
14. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become
the owner or pledgee of Securities and may otherwise deal with and
collect obligations owed to it by the Company or its Affiliates and
<PAGE>
may otherwise deal with the Company or its Affiliates with the same
rights it would have if it were not Trustee.
15. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the Company
shall not have any liability for any obligations of the Company under
the Securities or the Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. By accepting a
Security, each Securityholder waives and releases all such liability.
The waiver and release are part of the consideration for the issue of
the Securities.
16. Authentication
This Security shall not be valid until an authorized
signatory of the Trustee (or an authenticating
agent) manually signs the certificate of
authentication on the other side of this Security.
17. Abbreviations
Customary abbreviations may be used in the name of a Securityholder
or an assignee, such as TEN COM (=tenants in common), TEN ENT
(=tenants by the entireties), JT TEN (=joint tenants with rights of
survivorship and not as tenants in common), CUST (=custodian), and
U/G/M/A (=Uniform Gift to Minors Act).
18. Governing Law
THIS SECURITY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK
BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
19. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities and has directed the Trustee
to use CUSIP numbers in notices of redemption as a convenience to
Securityholders. No representation is made as to the accuracy of such
numbers either as printed on the Securities or as contained in any
notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
The Company will furnish to any Securityholder upon written request
and without charge to the Securityholder a copy of the Indenture
which has in it the text of this Security.
------------------------------------------------------------
ASSIGNMENT
FORM
To assign this Security, fill in the form below:
<PAGE>
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint as agent to transfer
this Security on the books of the Company.
The agent may substitute another to act for him.
------------------------------------------------------------
Date:
--------------
Your
Signature:
-----------------------
-----------------------------------------------------------
Sign exactly as your name appears on the other side of this Security.
CREDIT AGREEMENT
among
LILLY INDUSTRIES, INC.
an Indiana corporation
the Lenders Signatory Hereto
and
NBD BANK, N.A., as Agent
Dated as of October 24, 1997
<PAGE>
TABLE OF CONTENTS
Page
PREAMBLE.......................................................................1
RECITALS.......................................................................1
SECTION 1 Definitions....................................................1
1.1. Defined Terms..................................................1
1.2. Rules of Construction.........................................16
1.3. Accounting Terms..............................................16
SECTION 2 Credit........................................................16
2.1. Commitments...................................................16
2.1.1. Revolving Loans.............................16
2.1.2. Cash Management Line........................17
2.1.3. Ratable Loans/Mandatory Funding.............17
2.2. Interest......................................................18
2.2.1. Revolving Loans.............................18
2.2.2. Cash Management Line........................18
2.2.3. General/Default Rate........................18
2.3. Payments of Principal and Interest............................18
2.3.1. Revolving Loans.............................18
2.3.2. Cash Management Line........................19
2.3.3. Optional Prepayment.........................19
2.3.4. Taxes.......................................20
2.3.5. Method of Payment...........................21
2.3.6. Business Day................................21
2.4. Method of Advance.............................................21
2.4.1. Revolving Loans.............................21
2.4.2. Cash Management Line........................22
2.4.3. General.....................................22
2.5. Procedures for Electing the Fixed Rate Option.................23
2.6. Fees..........................................................24
2.6.1. Commitment Fee..............................24
2.6.2 Initial Facility Fees.......................24
2.6.3. Agent Fees..................................24
2.6.4 Letter of Credit Fees.......................24
2.6.5. General.....................................24
2.7. Reductions in Revolving Loan Commitment.......................24
2.8. Non-Receipt of Funds by the Agent.............................25
2.8.1. From the Lenders............................25
2.8.2. From Borrower...............................25
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<PAGE>
2.9. Issuance of Letters of Credit.................................25
2.10. Letters of Credit Participation...............................27
2.11. Compensation for Letters of Credit............................28
2.11.1. Letter of Credit Facility Fee...............28
2.11.2. Letter of Credit Fronting Fees..............28
2.12. Reimbursement of Letters of Credit............................28
2.13. Lending Installations.........................................29
2.14. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions.........................................29
2.15. Use of Proceeds...............................................30
SECTION 3 Change in Circumstances.......................................30
3.1. Yield Protection..............................................30
3.2. Changes in Capital Adequacy Regulations.......................31
3.3. Availability of Types of Advances.............................31
3.4. Funding Indemnification.......................................31
3.5. Lender Statements; Survival of Indemnity......................32
SECTION 4 Representations and Warranties................................32
4.1. Due Organization..............................................32
4.2. Due Qualification.............................................33
4.3. Corporate Power...............................................33
4.4. Corporate Authority...........................................33
4.5. Financial Statements..........................................33
4.6. No Material Adverse Change....................................33
4.7. Subsidiaries..................................................33
4.8. Binding Obligations...........................................33
4.9. Marketable Title..............................................34
4.10. Indebtedness..................................................34
4.11. Default.......................................................34
4.12. Tax Returns...................................................34
4.13. Litigation....................................................34
4.14. ERISA.........................................................34
4.15. Full Disclosure...............................................35
4.16. Contingent Obligations........................................35
4.17. Licenses......................................................35
4.18. Compliance with Law...........................................35
4.19. Force Majeure.................................................35
4.20. Margin Stock..................................................35
4.21. Approvals.....................................................35
4.22. Insolvency; Financial Condition...............................35
4.23. Regulation....................................................36
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<PAGE>
4.24. Environmental Matters.........................................36
4.25. General.......................................................38
SECTION 5 Covenants.....................................................38
5.1. Affirmative Covenants.........................................38
5.1.1. Financial Reporting.........................38
5.1.2. Good Standing...............................39
5.1.3. Taxes, Etc..................................40
5.1.4. Maintain Properties.........................40
5.1.5. Insurance...................................40
5.1.6. Books and Records...........................40
5.1.7. Reports.....................................40
5.1.8. Licenses....................................41
5.1.9. Conduct of Business.........................41
5.1.10. Compliance with Laws........................41
5.1.11. Trade Accounts..............................41
5.1.12. Use of Proceeds.............................41
5.1.13. Loan Payments...............................41
5.1.14. Environmental Covenant......................41
5.1.15. Change Name and Place of Business...........42
5.1.16. Adjusted Consolidated Net Worth.............42
5.1.17. Leverage Ratio..............................42
5.1.18. Fixed Charge Coverage Ratio.................42
5.2. Negative Covenants............................................42
5.2.1. Dispose of Property.........................42
5.2.2. Liens and Encumbrances......................43
5.2.3. Indebtedness................................43
5.2.4. Investments and Acquisitions................43
5.2.5. Contingent Obligations......................45
5.2.6. Mergers and Consolidations..................45
5.2.7. New Subsidiaries............................45
5.2.8. Accounting Policies.........................45
5.2.9. Change of Business..........................45
5.2.10. Benefit Plans...............................45
5.2.11. Affiliates..................................45
5.2.12. Sale and Leaseback..........................45
5.2.13. Operating Leases; Rentals...................45
5.2.14. Dividends, Etc..............................45
5.2.15. Restrictive Agreements......................46
SECTION 6 Conditions Precedent to Loans.................................46
6.1. Conditions to Initial Advance.................................46
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<PAGE>
6.1.1. Secretary's Certificates....................46
6.1.2. Insurance...................................47
6.1.3. Loan Documents..............................47
6.1.4. Opinion of Counsel..........................47
6.1.5. UCC Searches................................47
6.1.6. Litigation..................................47
6.1.7. Solvency Certificate........................47
6.1.8. Environmental Matters.......................47
6.1.9. Existing Facilities.........................47
6.1.10. Legal.......................................48
6.1.11. Regulations.................................48
6.1.12. No Default; No Material Adverse Change......48
6.1.13. Commitment Fees and Expenses................48
6.1.14. Senior Notes................................48
6.1.15. Money Transfer Instructions.................48
6.1.16. Additional Documentation....................48
6.2. Conditions to Subsequent Advances.............................48
6.2.1. No Default..................................48
6.2.2. Representations and Warranties..............49
6.2.3. Legal Matters...............................49
6.2.4. Expenses....................................49
6.3. General.......................................................49
SECTION 7 Default.......................................................49
SECTION 8 Remedy........................................................51
8.1. Acceleration..................................................51
8.2. Deposit to Secure Reimbursement Obligations...................52
8.3. Subrogation...................................................52
8.4. Preservation of Rights........................................52
SECTION 9 The Agent.....................................................52
9.1. Appointment...................................................52
9.2. Powers........................................................53
9.3. Exculpatory Provisions........................................53
9.4. Reliance by Agent.............................................53
9.5. Non-Reliance on Agent and Other Lenders.......................53
9.6. Employment of Agents and Counsel..............................54
9.7. Reliance on Documents; Counsel................................54
9.8. Defaults; Notices.............................................54
9.9. Rights as Lender..............................................54
9.10. Agent's Indemnification and Reimbursement.....................55
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<PAGE>
9.11. Successor Agent...............................................55
SECTION 10 Benefit of Agreement; Assignments;
Participations.............................56
10.1. Successors and Assigns........................................56
10.2. Participations................................................56
10.2.1. Permitted Participations; Effect............56
10.2.2. Voting Rights...............................56
10.2.3. Benefit of Setoff...........................57
10.3. Assignments...................................................57
10.3.1. Permitted Assignments.......................57
10.3.2. Effect; Effective Date......................57
10.4. Registered Notes..............................................58
10.5. Dissemination of Information..................................58
10.6. Tax Treatment.................................................59
SECTION 11 General Provisions..........................59
11.1. Waivers and Amendments........................................59
11.2. Set-off by Lenders............................................59
11.3. Survival......................................................60
11.4. Governmental Regulation.......................................60
11.5. Taxes.........................................................60
11.6. Choice of Law.................................................60
11.7. Headings......................................................60
11.8. Entire Agreement..............................................60
11.9. Expenses......................................................60
11.10. Indemnification...............................................61
11.11. Confidentiality...............................................61
11.12. Notice........................................................61
11.13. Counterparts..................................................62
11.14. Incorporation by Reference...................................62
11.15. No Joint Venture..............................................62
11.16. Severability..................................................62
11.17. Waiver of Set-off by Borrower.................................62
11.18. Lenders Not Controlling Borrower..............................62
11.19. Foreign Lender Withholding Tax................................62
11.20. Replacement of Lenders........................................63
11.21 Relationship of Parties.......................................63
11.22. Several Obligations; Benefits of this Agreement...............64
11.23. Agreement Effective............................................64
-v-
<PAGE>
SECTION 12 Ratable Payments............................64
SECTION 13 Waiver of Jury Trial........................64
-vi-
<PAGE>
SCHEDULES
Schedule 1 - Lenders
Schedule 4.7 - Subsidiaries
Schedule 4.10
and 5.2.3 - Indebtedness
Schedule 4.13 - Litigation
Schedule 4.16
and 5.2.5 - Contingent Obligations
Schedule 5.2.2 - Permitted Liens
EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit A-1 - Form of Registered Note
Exhibit B - Form of Credit Note
Exhibit C - Compliance Certificate
Exhibit D - Money Transfer Instructions
Exhibit E - Assignment Agreement
-vii-
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 24th day of October, 1997, is
among LILLY INDUSTRIES, INC., an Indiana corporation (the "Borrower"), the
Lenders party hereto from time to time as listed on Schedule 1 hereto, NBD BANK,
N.A., a national banking association, as agent for the Lenders hereunder (in
such capacity, the "Agent"). The parties agree as follows:
SECTION 1
Definitions
1.1. Defined Terms. As used herein:
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which
Borrower or any of its Subsidiaries (a) acquires any going business or all or
substantially all of the assets of any Person, whether through purchase of
assets, merger or otherwise, or (b) directly or indirectly acquires (in one
transaction or as a result of the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
ownership interests of a partnership or limited liability company.
"Adjusted Consolidated Net Worth" means Borrower's Consolidated Net
Worth, excluding from such calculation any non-cash foreign currency translation
adjustment as reflected from time to time on the consolidated balance sheet of
Borrower and its Subsidiaries.
"Advance" means a borrowing hereunder (or conversion or continuation
thereof) consisting of the aggregate amount of the several Loans made on the
same Borrowing Date (or date of conversion or continuation) by the Lenders to
Borrower of the same.
"Affiliate" means, as to any Person, any other Person (a) directly or
indirectly through one or more intermediaries, controlling, controlled by, or
under common control with, such Person, and (b) that directly or indirectly owns
more than Ten Percent (10%) of any class of the voting securities or capital
stock of or equity interests in such Person. A Person shall be deemed to control
another Person if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" means NBD Bank, N.A., in its capacity as agent for the Lenders
hereunder, and any successor Agent appointed pursuant to this Agreement.
-1-
<PAGE>
"Agreement" means this First Amended and Restated Credit Agreement, as
amended or modified and in effect from time to time.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the greater of (a) the Prime Rate for such day, or (b) the sum of the
Federal Funds Effective Rate for such day plus One-Half Percent (1/2%).
"ABR Advance" mean an advance which bears interest at the Alternate
Base Rate.
"ABR Loan" means a Loan which bears interest at the Alternate Base
Rate.
"Applicable Commitment Fee" means the fee payable to the Agent for the
pro rata benefit of the Lenders, which fee shall be based on the Leverage Ratio
in accordance with the table set forth below. The Leverage Ratio shall be
determined by the Agent (which determination if made in good faith shall be
conclusive absent manifest error) based on the audited and unaudited Financial
Statements delivered by Borrower pursuant to Sections 5.1.1 (a) and (b). The
adjustment, if any, to the Applicable Commitment Fee shall be effective
beginning on the fifth Business Day after the delivery of such Financial
Statements. In the event that Borrower shall at any time fail to furnish to the
Agent in timely fashion the Financial Statements required to be delivered
pursuant to Sections 5.1.1(a) or (b), together with the Compliance Certificate
to be delivered with respect thereto, the Applicable Commitment Fee for Level 1
shall apply until such time as such Financial Statements and Compliance
Certificate are so delivered.
Leverage Ratio Applicable Commitment Fee
Greater than But less than
or equal to
Level 1 3.0 --- 0.25%
Level 2 2.5 3.0 0.25%
Level 3 2.0 2.5 0.20%
Level 4 1.5 2.0 0.175%
Level 5 --- 1.5 0.15%
"Applicable Margin" means the incremental margin to be paid by Borrower
on Loans hereunder, which margin shall be based on the Leverage Ratio in
accordance with the table set forth below. The Leverage Ratio shall be
determined by the Agent (which determination if made in good faith shall be
conclusive absent manifest error) based on the audited and unaudited Financial
Statements delivered by Borrower pursuant to Sections 5.1.1 (a) and (b). The
adjustment, if any, to the Applicable Margin shall be effective beginning on the
fifth Business Day after the delivery of such Financial Statements. In the event
that Borrower shall at any time fail to furnish to the Agent in timely fashion
the Financial Statements required to be delivered pursuant to Sections 5.1.1(a)
or (b), together with the Compliance Certificate to be delivered with respect
thereto, the Applicable Margin
-2-
<PAGE>
for Level 1 shall apply until such time as such Financial Statements and
Compliance Certificate are so delivered.
<TABLE>
<CAPTION>
Leverage Ratio Applicable Margin
But less than
Greater than or equal to ABR Loans Eurodollar
Loans
<S> <C> <C> <C> <C>
Level 1 3.0 --- 0% 1.00%
Level 2 2.5 3.0 0% 0.75%
Level 3 2.0 2.5 0% 0.625%
Level 4 1.5 2.0 0% 0.50%
Level 5 --- 1.5 0% 0.40%
</TABLE>
"Authorized Officer" means the President, Vice President and Chief
Financial Officer, Corporate Accounting Director, and Corporate Finance Director
or such other officer of Borrower imbued with authority, as evidenced by
certified resolutions of Borrower's Board of Directors, to perform as an
Authorized Officer under this Agreement.
"Benefitted Lender " shall have the meaning ascribed thereto in Section
12.3.
"Borrower" shall have the meaning ascribed in the preamble to this
Agreement.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Business Day" means (a) with respect to any borrowing, payment or rate
selection of an Eurodollar Loan, a day (other than a Saturday or Sunday) on
which banks generally are open in Indianapolis, New York and Chicago for the
conduct of substantially all of their commercial lending activities and on which
dealings in United States dollars are carried on in the London interbank market,
and (b) for all other purposes, a day (other than a Saturday or Sunday) on which
banks generally are open in Indianapolis for the conduct of substantially all of
their commercial lending activities.
"Capital Expenditures" means, without duplication, any expenditures for
any purchase or other acquisition of any asset which would be classified as a
fixed or capital asset on a Consolidated balance sheet of Borrower and its
Subsidiaries prepared in accordance with GAAP.
"Capitalized Lease" means any lease of Property which would be
capitalized on a balance sheet of a Person prepared in accordance with GAAP.
-3-
<PAGE>
"Capitalized Lease Obligations" means the aggregate amount of the
obligations of a Person under Capitalized Leases which would be shown as
liabilities on a balance sheet of such Person prepared in accordance with GAAP.
"Cash Management Line" means the unsecured cash management line of
credit in the maximum principal amount of Fifteen Million Dollars ($15,000,000)
provided by NBD to Borrower, governed by this Agreement, including any renewal
or extension thereof.
"Cash Management Line Advance" means Advances under the Cash Management
Line.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List under CERCLA.
"Change in Control" means (a) the acquisition by any Person, or two or
more Persons acting in concert, of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of thirty-three and one-third percent (33- 1/3%) or more
of the outstanding shares of Class A common stock of Borrower, or (b) the
occurrence during any period of twelve (12) consecutive months, commencing
before or after the date of this Agreement, individuals who on the first day of
such period were directors of Borrower (together with any replacement or
additional directors who were nominated or elected by a majority of directors
then in office) cease to constitute a majority of the Board of Directors of
Borrower.
"Changes " shall have the meaning ascribed thereto in Section 2.14.
"Closing Date" means the date of the initial Advance hereunder.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, for each Lender, such Lender's Revolving Loan
Commitment and such other commitments that may be provided in this Agreement or
as set forth in any Notice of Assignment relating to any assignment that has
become effective pursuant to Section 10, as such amount may be modified from
time to time pursuant to the terms hereof.
"Compliance Certificate" means a Compliance Certificate, in the form of
Exhibit C hereto, duly completed, executed and delivered by the chief executive
officer or chief financial officer of Borrower from time to time pursuant to
Section 5.1.1 reflecting and certifying the calculations necessary to determine
compliance with this Agreement and further certifying that there exists no
Default or Unmatured Default under the Loan Documents, or if any Default or
Unmatured Default exists, stating the nature and status thereof.
-4-
<PAGE>
"Consolidated" means a calculation or a determination for a Person and
its Subsidiaries made in accordance with GAAP, including principles of
consolidation.
"Consolidated Net Worth" means the excess of Borrower's Consolidated
Total Assets over Borrower's Consolidated Total Liabilities, each determined in
accordance with GAAP and as shown on the Financial Statements.
"Consolidated Total Assets" means the total assets of Borrower and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP and as
shown on the Financial Statements.
"Consolidated Total Liabilities" means the total liabilities of
Borrower and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP and as shown on the Financial Statements.
"Consolidated Subsidiary" means any Subsidiary of Borrower which would
be consolidated on Borrower's Consolidated balance sheet in accordance with
GAAP.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement or take-or-pay contract; provided, however, notwithstanding the above,
that the following shall not constitute a Contingent Obligation of Borrower or
any of its Subsidiaries: (a) any guarantee, comfort letter or similar
accommodation provided by Borrower or any of its Subsidiaries to or for the
benefit of Borrower or any of its Consolidated Subsidiaries, (b) any
indemnification obligations of Borrower or any of its Subsidiaries in respect of
the officers, directors or employees of Borrower or such Subsidiaries, (c) any
contractual indemnification for breaches of obligations of Borrower or any of
its Subsidiaries created pursuant to documents executed in connection with any
acquisition or merger transaction, and (d) any contractual indemnification for
breaches of obligations of Borrower or any of its Subsidiaries pursuant to
contracts or agreements entered into in the ordinary course of business to which
Borrower or any of its Subsidiaries are a party.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Credit Note" means the Credit Note (Cash Management Line) in
substantially the form of Exhibit B hereto, duly executed by Borrower to NBD to
evidence Advances under the Cash Management Line, including any amendment,
modification, renewal, extension or replacement thereof.
-5-
<PAGE>
"Default" means an event described in Section 7.
"Dollars" and/or "$" means lawful money of the United States of
America.
"EBITDA" means, with respect to Borrower and its Subsidiaries
determined on a Consolidated basis, the sum of (a) Net Income, plus (b) to the
extent deducted in determining Net Income, income taxes paid or accrued, minus
(c) extraordinary gains, plus (d) extraordinary losses, plus (e) interest
expense, minus (f) interest income, plus (g) to the extent deducted in
determining Net Income, depreciation, amortization and other non-cash charges;
in each instance determined for the trailing four (4) quarter period ending on
the date of determination.
"Effective Date" means the date all of the conditions precedent set
forth in Section 6.1 have been fulfilled to the satisfaction of the Agent or
otherwise waived in writing by the Lenders.
"Eligible Assignee" means a commercial bank, financial institution or
other "accredited investor," as defined in Regulation D of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.
"Environmental Laws" means all provisions of laws, statutes,
ordinances, rules, regulations, permits, licenses, judgments, writs,
injunctions, decrees, orders, awards and standards promulgated by any
Governmental Authority concerning the protection of, or regulation of the
discharge of substances into, the environment or concerning the health or safety
of persons with respect to environmental hazards, and includes, without
limitation, the Hazardous Materials Transportation Act, 42 U.S.C. ss.1801 et
seq., the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986,
42 U.S.C. ss.ss.9601 et seq., the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and the Solid and Hazardous Waste
Amendments of 1984, 42 U.S.C. ss.ss.6901 et seq., the Federal Water Pollution
Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. ss.ss.1251 et
seq., the Clean Air Act of 1966, as amended, 42 U.S.C. ss.ss.7401 et seq., the
Toxic Substances Control Act of 1976, 15 U.S.C. ss.ss.2601 et seq., the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. ss.7401 et seq., the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss.ss.651 et
seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
ss.ss.11001 et seq., the National Environmental Policy Act of 1975, 42 U.S.C.
ss.ss.4321 et seq., the Safe Drinking Water Act of 1974, as amended, 42 U.S.C.
ss.ss.300(f) et seq., and any similar or implementing state law, and all
amendments, rules, and regulations promulgated thereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"ERISA Affiliate" means a Person which, together with another Person,
would be treated as a single employer under ERISA.
-6-
<PAGE>
"Eurodollar Advance" means an Advance which bears interest by reference
to the Eurodollar Rate.
"Eurodollar Base Rate" means, for the relevant Eurodollar Interest
Period, the applicable London interbank offered rate for deposits in U.S.
dollars appearing on Telerate Page 3750 as of 11:00 a.m. (London time) two
Business Days prior to the first day of such Eurodollar Interest Period, and
having a maturity approximately equal to such Eurodollar Interest Period. If no
London interbank offered rate of such maturity then appears on Telerate Page
3750, then the Eurodollar Base Rate shall be equal to the London interbank
offered rate for deposits in U.S. dollars maturing immediately before or
immediately after such maturity, whichever is higher, as determined by the Agent
from Telerate Page 3750. If Telerate Page 3750 is not available, the applicable
Eurodollar Base Rate for the relevant Eurodollar Interest Period shall be the
rate determined by the Agent to be the arithmetic average of the rates reported
to the Agent by each Reference Lender as the rate at which each Reference Lender
offers to place deposits in U.S. dollars with first-class banks in the London
interbank market at approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Eurodollar Interest Period, in the approximate
amount of such Reference Lender's relevant Eurodollar Loan and having a maturity
approximately equal to such Eurodollar Interest Period. If any Reference Lender
fails to provide such quotation to the Agent, then the Agent shall determine the
Eurodollar Base Rate on the basis of the quotations of the remaining Reference
Lender(s).
"Eurodollar Interest Period" means, with respect to a Eurodollar
Advance, a period of one, two, three or six months commencing on a Business Day
selected by Borrower pursuant to this Agreement. Such Eurodollar Interest Period
shall end on the day which corresponds numerically to such date one, two, three
or six months thereafter, provided, however, that if there is no such
numerically corresponding day in such next, second, third, or sixth succeeding
month, such Eurodollar Interest Period shall end on the last Business Day of
such next, second, third or sixth succeeding month. If a Eurodollar Interest
Period would otherwise end on a day which is not a Business Day, such Eurodollar
Interest Period shall end on the next succeeding Business Day, provided,
however, that if said next succeeding Business Day falls in a new calendar
month, such Eurodollar Interest Period shall end on the immediately preceding
Business Day.
"Eurodollar Loan" means a Loan which bears interest by reference to the
Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Eurodollar Interest Period, the quotient of (a) the Eurodollar Base
Rate applicable to such Eurodollar Interest Period, divided by (b) one minus the
Reserve Requirement (expressed as a decimal) applicable to such Eurodollar
Interest Period.
"Facilities" means the Revolving Loans, the Cash Management Line, the
Letters of Credit, and any other credit facility provided by the Lenders from
time to time pursuant to this Agreement.
"Facility Termination Date" means October 24, 2002.
-7-
<PAGE>
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the Fed Effective rate appearing on Telerate Page 15 for such
day. If Telerate Page 15 is not available, the applicable Federal Funds
Effective Rate shall be the rate per annum equal to the consensus (or if no
consensus exists, the arithmetic average) of the rates at which reserves are
offered by first-class banks to other first-class banks (at approximately 10:00
a.m. Chicago time) on such day (or if such day is not a Business Day, on the
immediately preceding Business Day) on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers,
received by the Agent from three Federal funds brokers of recognized standing
selected by the Agent it its sole discretion; such interest rate to be rounded
up, if necessary, to the nearest whole multiple of One One-Hundredth of One
Percent (1/100th of 1%).
"Fee Letter" means that certain letter agreement issued by the Agent,
and First Chicago Capital Markets, Inc. dated September 30, 1997, accepted by
Borrower on October 3, 1997.
"Financial Contract" of a Person means (a) any exchange-traded or
over-the-counter futures, forward, swap or option contract or other financial
instrument with similar characteristics, (b) any agreements, devices or
arrangements providing for payments related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to, interest rate
exchange agreements, forward currency exchange agreements, interest rate cap or
collar protection agreements, forward rate currency or interest rate options, or
(c) to the extent not otherwise included in the foregoing, any Rate Hedging
Agreement.
"Financial Statements" means, as the context may require, (a) the
Consolidated balance sheet of Borrower and its Subsidiaries as of May 31, 1997,
and their Consolidated statements of income and cash flows for the period then
ended, and/or (b) the similar Consolidated (and consolidating) Financial
Statements for Borrower and its Subsidiaries furnished from time to time
pursuant to Section 5.1.1; in all cases, together with any accompanying notes to
such Financial Statements, and any other documents or data furnished in
connection therewith.
"Fixed Charge Coverage Ratio" means, with respect to Borrower and its
Subsidiaries determined on a Consolidated basis, the ratio of (a)(i) EBITDA
minus (ii) Capital Expenditures, to (b) the sum of (i) interest expense, plus
(ii) scheduled principal payments in respect of Indebtedness paid in such
period, plus (iii) taxes paid, plus (iv) Rentals, plus (v) dividends paid in
such period, all as determined on the last day of each fiscal quarter of
Borrower by reference to the Financial Statements; in each instance determined
for the trailing four (4) quarter period ending on the date of determination.
"Fixed Rate Option" means the option of Borrower to have the interest
on any Advance determined by reference to the Eurodollar Rate.
"Fixed Rate Option Notice" shall have the meaning ascribed thereto in
Section 2.5(b).
-8-
<PAGE>
"Foreign Subsidiaries" means all Subsidiaries of Borrower which are
organized or incorporated outside the United States of America including any
United States territories or possessions.
"GAAP" means generally accepted accounting principles in the United
States of America in effect from time to time as promulgated by the Financial
Standards Accounting Board and recognized and interpreted by the American
Institute of Certified Public Accountants.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of, or pertaining
to, government, including, without limiting the generality of the foregoing, any
agency, body, commission, court or department thereof, whether federal, state,
local or foreign.
"Hazardous Materials" means (a) any "hazardous substance," as defined
by CERCLA, (b) any "hazardous waste," as defined by the Resource Conservation
and Recovery Act, as amended, (c) any petroleum product, or (d) any pollutant or
contaminant or hazardous, dangerous or toxic chemical, material or substance
within the meaning of any other federal, state or local law, regulation,
ordinance or requirement (including consent decrees and administrative orders)
relating to, or imposing liability or standards of conduct concerning, any
hazardous, toxic or dangerous waste, substance or material, all as amended or
hereafter amended.
"Indebtedness" of a Person means such Person's (a) obligations for
borrowed money, (b) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (c)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from Property now or hereafter owned or acquired by such
Person, (d) obligations which are evidenced by notes, acceptances, or other
instruments, (e) Capitalized Lease Obligations, (f) Contingent Obligations, (g)
reimbursement or other obligations in connection with letters of credit, (h)
obligations in connection with Sale and Leaseback Transactions, (i) any Net
Mark-To-Market Exposure of Rate Hedging Agreements or other Financial Contracts,
and (j) any other transaction which is the functional equivalent of, or takes
the place of borrowing, but which would not constitute a liability on a balance
sheet of such Person prepared in accordance with GAAP.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade) or contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities owned by such
Person; any deposit accounts and certificate of deposit owned by such Person;
and structured notes, derivative financial instruments and other similar
instruments or contracts owned by such Person.
-9-
<PAGE>
"Lenders" means the financial institution listed on Schedule 1 of this
Agreement, and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent,
any office, branch, Subsidiary or Affiliate of such Lender or the Agent.
"Letter of Credit Application" or "Application" means an Application
for Standby Letter of Credit, in the form prescribed by NBD, duly executed by
Borrower in favor of NBD, from time to time, to govern a Letter of Credit issued
pursuant to this Agreement, as any such Application may be amended from time to
time.
"Letters of Credit" means standby letters of credit now or hereafter
issued by NBD from time to time at the request of, and for the account of,
Borrower issued pursuant to this Agreement.
"Leverage Ratio" means, with respect to Borrower and its Subsidiaries
determined on a Consolidated basis, the ratio of (a) total Indebtedness
(exclusive of any Net Mark-to-Market Exposure of Rate Hedging Agreements or
other Financial Contracts), to (b) EBITDA, all as determined on the last day of
each fiscal quarter of Borrower by reference to the Financial Statements.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment for the purpose of security, deposit arrangement for
the purpose of security, encumbrance or preference, priority or other security
agreement of any kind or nature whatsoever (including, without limitation, the
interest of a vendor or lessor under any conditional sale, Capitalized Lease or
other title retention agreement).
"Loan Documents" means, this Agreement, the Notes, any Letter of Credit
Applications, and any other documents or instruments now or hereafter executed
and delivered by or on behalf of Borrower to any Lender or the Agent in order to
evidence, govern or secure the Obligations.
"Loan" means with respect to a Lender, such Lender's loan made pursuant
to Section 2 ( or any conversion or continuation thereof).
"Mandatory Funding" shall have the meaning ascribed thereto in Section
2.1.3.
"Material Adverse Effect" means any event, circumstance or condition
that could reasonably be expected to have a material adverse effect on (a) the
business, operations, financial condition, Properties or prospects of Borrower
and its Subsidiaries taken as a whole, (b) the ability of Borrower to perform
Obligations, (c) the validity or enforceability of any of the Loan Documents, or
any material provision thereof or any transaction contemplated thereby, or (d)
the rights and remedies of the Lenders and the Agent under any of the Loan
Documents.
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<PAGE>
"Multi-employer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which Borrower or any member of
the Controlled Group is a party to which more than one employer is obligated to
make contributions.
"NBD" means NBD Bank, N.A., a national banking association, having its
principal offices in Indianapolis, Indiana, in its individual capacity, and its
successors.
"Net Income" means, for any period, the net income of Borrower and its
Consolidated Subsidiaries after deductions for income taxes, determined on a
Consolidated basis in accordance with GAAP and as shown on the Financial
Statements.
"Net Mark-to-Market Exposure" of a Person means, as of any date of
determination, the excess (if any) of all unrealized losses over all unrealized
profits of such Person arising from Rate Hedging Agreements, where "unrealized
losses" means the fair market value of the cost to such Person of replacing such
Rate Hedging Agreement as of the date of determination (assuming the Rate
Hedging Agreement were to be terminated as of that date), and "unrealized
profits" means the fair market value of the gain to such Person of replacing
such Rate Hedging Agreement as of the date of determination (assuming such Rate
Hedging Agreement were to be terminated as of that date).
"Non U.S. Lender" means any Lender (including each Purchaser) that is
not (a) a citizen or resident of the United States of America, (b) a
corporation, partnership or other entity created or organized in or under the
laws of the United States of America or any state thereof, or (c) any estate or
trust that is subject to United States Federal Income taxation regardless of the
source of its income.
"Notes" means, collectively, the Revolving Credit Notes and the Credit
Note.
"Notice of Assignment" shall have the meaning ascribed in Section
10.3.2.
"Obligations" means all of the unpaid principal amount of, and accrued
interest on, the Notes, actual and contingent reimbursement obligations under
Letters of Credit, the Commitment Fees, Agent fees, Letter of Credit fees,
obligations of Borrower to a Lender or an Affiliate of a Lender or the Agent in
respect of any Rate Hedging Obligations with respect to Rate Hedging Agreements
entered into with a Lender or the Agent at a time such Lender or such Agent was
a party to this Agreement, notwithstanding such Lender or Agent later ceases to
be a party to this Agreement, all other obligations, indemnities, reimbursements
and liabilities of Borrower to the Lenders or to any Lender or to the Agent or
any indemnified party hereunder in connection with the Facilities of every type
and description, direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, or otherwise arising under the Loan
Documents whether or not contemplated by Borrower or the Lenders as of the date
hereof, including, without limitation, all reasonable costs of collection and
enforcement of any and all thereof, including reasonable attorneys' fees.
-11-
<PAGE>
"Offering Letter" means that certain letter issued by First Chicago
Capital Markets, Inc. to the Lenders dated September 19, 1997, and acknowledged
by Borrower on October 10, 1997.
"Operating Lease" of a Person means any lease of Property (other than a
Capitalized Lease) by such Person as lessee which has an original term
(including any required renewals and any renewals effective at the option of the
lessor) of one year or more.
"Participants" shall have the meaning ascribed thereto in Section
10.2.1.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to ERISA, or any successor thereto.
"Permissible Increment" means (a) with respect to Revolving Loan
Advances, a minimum principal amount of Five Million Dollars ($5,000,000) and
minimum increments of One Million Dollars ($1,000,000) above Five Million
Dollars ($5,000,000), and (b) with respect to Cash Management Line Advances, a
minimum principal amount of One Hundred Thousand Dollars ($100,000) and minimum
increments of Ten Thousand Dollars ($10,000) above One Hundred Thousand Dollars
($100,000).
"Permitted Liens" shall have the meaning ascribed thereto in Section
5.2.2.
"Person" means any natural person, corporation, firm, joint venture,
general or limited partnership, limited liability company, association,
enterprise, trust or other entity or organization, or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which Borrower or any member of the Controlled Group may have any
liability.
"Plan Assets" shall have the meaning ascribed in ERISA.
"Prime Rate" means the variable per annum rate of interest established
and quoted by NBD from time to time as its "prime rate," as adjusted on the
effective date of each change in such established and quoted rate; provided that
such prime rate shall not necessarily be representative of the rate of interest
actually charged by NBD on any loan or class of loans.
"Property" of a Person means any and all Property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"Pro Rata Share" means, as to any Lender, when used with reference to
an aggregate or total amount, an amount equal to the product of (a) such
aggregate or total amount, multiplied by (b) a fraction, the numerator of which
shall be the sum of such Lender's Revolving Loan Commitment (or, if the
Revolving Loan Commitments have been terminated, the sum of such Lender's
outstanding
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<PAGE>
Revolving Loan and share of the face amount of outstanding Letters of Credit)
and the denominator of which shall be the sum of the total Revolving Loan
Commitments (or, if the Revolving Loan Commitments have been terminated, the sum
of the total outstanding Revolving Loan Advances and the aggregate face amount
of outstanding Letters of Credit).
"Purchasers" shall have the meaning ascribed thereto in Section 10.3.1.
"Rate Hedging Agreement" means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts and warrants.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all Rate
Hedging Agreements, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Hedging Agreement.
"Reference Lenders" means NBD Bank, N.A., Harris Trust and Savings Bank
and Bank One, Indiana, N.A.
"Register" shall have the meaning ascribed thereto in Section 10.4.
"Registered Note" shall mean promissory notes that have been issued in
registered form as provided by Section 10.4.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to the extension of credit by banks for the purpose of purchasing or
carrying margin stock applicable to member banks of the Federal Reserve System.
"Rentals" of a Person means the aggregate fixed amounts payable by such
Person under any lease of Property having an original term (including any
required renewals or any renewals at the option of the lessor or lessee) of one
year or more.
"Replaced Lender" and "Replacement Lender" shall have the respective
meanings ascribed thereto in Section 11.20.
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"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within thirty (30)
days of the occurrence of such event, provided, however, that a failure to meet
the minimum funding standard of Section 412 of the Code and of Section 302 of
ERISA shall be a Reportable Event regardless of the issuance of any such waiver
of the notice requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least
Fifty-One Percent (51%) of the Revolving Loan Commitments, or if the Revolving
Loan Commitments have been terminated, the outstanding Advances.
"Reserve Requirement" means, as to any Eurodollar Loan for any
Eurodollar Interest Period, the daily average of the stated maximum rate
(expressed as a decimal) at which reserves, including any marginal,
supplemental, or emergency reserves, are required to be maintained during such
Eurodollar Interest Period under Regulation D by member banks of the Federal
Reserve System against "Eurocurrency liabilities" (as such term is used in
Regulation D), but without the benefit or credit of any prorations, exemptions,
or offsets that might otherwise be available from time to time under Regulation
D. Without limiting the generality or effect of the foregoing, the Reserve
Requirement shall reflect any reserves required to be maintained by the Lenders
against (a) any category of liabilities that includes deposits by reference to
which the Eurodollar Rate is to be determined, or (b) any extensions of credit
or other assets of any category that includes Eurodollar Loans.
"Revolving Loan" means, with respect to a Lender, such Lender's portion
of the outstanding Revolving Loan Advances made by such Lender to Borrower
pursuant to its respective Revolving Loan Commitment, including any extensions
or renewals thereof.
"Revolving Loan Advances" means an Advance under the Revolving Loan
Commitment.
"Revolving Loan Commitment" means, for each Lender, the obligation of
such Lender to make Revolving Loans not exceeding the amount set forth opposite
such Lender's name on Schedule 1 hereto as such Lender's Revolving Loan
Commitment or as set forth in any Notice of Assignment relating to any
assignment that has become effective pursuant to Section 10.3.2, as such amount
may be modified from time to time pursuant to the terms hereof, and "Revolving
Loan Commitments" means the sum of each Lender's Revolving Loan Commitment.
"Revolving Credit Notes" means the Revolving Credit Notes, each
substantially in the form of Exhibit A hereto, duly executed by Borrower to the
respective Lenders to evidence the Revolving Loans, including any and all
renewals, extensions, replacements and modifications thereof.
"Risk-Based Capital Guidelines" shall have the meaning ascribed thereto
in Section 3.2.
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"Sale and Leaseback Transaction" means any sale or other transfer of
Property by any Person with the intent to lease such Property as lessee.
"Senior Notes" means Borrower's unsecured promissory notes to be issued
in a principal amount not less than Seventy-Five Million Dollars ($75,000,000)
and not exceeding One Hundred Million Dollars ($100,000,000), having a maturity
of not less than ten (10) years and requiring payments of interest only (but not
principal) until maturity, including any and all replacements, refundings,
refinancings, extensions, or renewals thereof or permitted additions thereto.
"Single Employer Plan" means a Plan maintained by Borrower or any
member of the Controlled Group for employees of Borrower or any member of the
Controlled Group.
"Subsidiary" of a Person means (a) any corporation more than Fifty
Percent (50%) of the outstanding securities having ordinary voting power of
which shall at the time be owned or controlled, directly or indirectly, by such
Person or by one or more of its Subsidiaries or by such Person and one or more
of its Subsidiaries, or (b) any partnership, limited liability company,
association, joint venture or similar business organization more than Fifty
Percent (50%) of the ownership interests having ordinary voting power of which
shall at the time be so owned or controlled. Unless otherwise expressly
provided, all references herein to a "Subsidiary" shall mean a Subsidiary of
Borrower.
"Substantial Portion" means, with respect to the Property of Borrower
and its Subsidiaries, Property which as at the date of determination (a)
represents more than Ten Percent (10%) of the Consolidated Total Assets of
Borrower and its Subsidiaries determined in accordance with GAAP by reference to
the then most recent Financial Statements, or (b) is responsible for more than
Ten Percent (10%) of the Consolidated net sales or of the Consolidated Net
Income of Borrower and its Subsidiaries determined in accordance with GAAP for
the four fiscal quarter period ending on the date of the then most recent
Financial Statements.
"Telerate" means, when used in connection with any designated page and
the Eurodollar Base Rate and/or the Federal Funds Effective Rate, the display
page so designated on the Dow Jones Telerate Service (or such other page as may
replace that page on that service, or such other service as may be nominated as
the information vendor) for the purpose of displaying rates or prices comparable
to the Eurodollar Base Rate and/or the Federal Funds Effective Rate.
"Transferee" shall have the meaning ascribed thereto in Section 10.4.
"Type" means, with respect to any Advance, its nature as an ABR Advance
or Eurodollar Advance.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such
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Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plans using PBGC actuarial assumptions for single
employer plan terminations.
"Unmatured Default" means any event which with notice, or lapse of time
or both, would constitute a Default.
"U.S. Subsidiaries" means all Subsidiaries of Borrower which are
organized or incorporated within the United States of America or within any
United States territories or possessions.
"Wholly-Owned Subsidiary" of a Person means (a) any Subsidiary, all of
the outstanding voting securities (other than director's qualifying shares) of
which shall at the time be owned or controlled, directly or indirectly, by such
Person or one or more Wholly-Owned Subsidiaries of such Person, or (b) any
partnership, limited liability company, association, joint venture or similar
business organization, One Hundred Percent (100%) of the ownership interests
having ordinary voting power of which shall at the time be so owned or
controlled.
1.2. Rules of Construction. The foregoing definitions shall be equally
applicable to both the singular and plural forms of the defined terms and shall
be construed accordingly. Use of the terms "herein," "hereof" and "hereunder"
shall be deemed references to this Agreement in its entirety and not to the
Section clause in which such term appears. References to "Sections" and
"subsections" shall be to Sections and subsections, respectively, of this
Agreement unless otherwise specifically provided.
1.3. Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with those applied
in the preparation of the Financial Statements.
SECTION 2
Credit
2.1. Commitments.
2.1.1. Revolving Loans. Subject to the terms and conditions of
this Agreement, from and after the Effective Date and prior to the
Facility Termination Date, each Lender severally agrees to make
Revolving Loans to Borrower from time to time in amounts not to exceed
in the aggregate at any one time outstanding the amount of its
Revolving Loan Commitment. No requested Revolving Loan Advance shall
cause the aggregate outstanding principal balance of the Revolving Loan
Advances plus the aggregate outstanding principal balance of the Cash
Management Line Advances plus outstanding Letters of Credit and
unreimbursed drawings thereunder to exceed the Revolving Loan
Commitments. Subject to the terms of this Agreement, Borrower may
borrow, repay and reborrow at any time prior to
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the Facility Termination Date. The Revolving Loan Commitments to lend
hereunder shall expire on the Facility Termination Date. The Revolving
Loans made by the Lenders pursuant hereto shall be evidenced by the
Revolving Credit Notes.
2.1.2. Cash Management Line. Subject to the terms and
conditions of this Agreement, from and after the Effective Date and
prior to the Facility Termination Date, NBD shall make the Cash
Management Line available to Borrower in a maximum principal amount
equal to the lesser of (a) the unborrowed portion of its Revolving Loan
Commitment, or (b) Fifteen Million Dollars ($15,000,000). No requested
Advance shall cause the aggregate outstanding principal balance of the
Cash Management Line Advances to exceed Fifteen Million Dollars
($15,000,000) and no requested Advance shall cause the aggregate
outstanding principal balance of the Cash Management Line Advances plus
the aggregate outstanding principal balance of the Revolving Loan
Advances plus outstanding Letters of Credit and unreimbursed drawings
thereunder to exceed the Revolving Loan Commitments. Prior to the
Facility Termination Date, Borrower may borrow, prepay and reborrow
such available amount under the Cash Management Line from time to time,
all in accordance with the terms and conditions hereof. Advances under
the Cash Management Line shall be evidenced by the Credit Note.
2.1.3. Ratable Loans/Mandatory Funding. With respect to the
Revolving Loan Commitments, each Advance thereunder shall consist of
Revolving Loans made from the several Lenders in accordance with their
respective Pro Rata Share. On any Business Day, NBD may, in its sole
discretion, give notice to the Lenders that the outstanding principal
balance of the Cash Management Line shall be funded with a Revolving
Loan Advance (provided that such notice shall be deemed to have been
automatically given upon the occurrence of a Default under Section 7(f)
or (g) hereof), in which case an Advance under the Revolving Loan
Commitments constituting an ABR Loan (each such Advance being referred
to herein as a "Mandatory Funding") shall be made on the immediately
succeeding Business Day by all Lenders according to each Lender's Pro
Rata Share of the Revolving Loan Commitments, and the proceeds thereof
shall be applied directly to NBD to repay such outstanding Cash
Management Line Advances. Each Lender hereby irrevocably agrees to make
such Revolving Loans, pursuant to each Mandatory Funding in the amount
and in the manner specified in the preceding sentence and on the date
specified to it by NBD notwithstanding: (a) that the amount of the
Mandatory Funding may not be in a Permissible Increment; (b) whether
any conditions specified in Section 6 hereof are then satisfied; (c)
the date of such Mandatory Funding; and (d) any reduction in the total
Revolving Loan Commitment after any such Advances under the Cash
Management Line were made. In the event that any Mandatory Funding
cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code in respect of Borrower), each
Lender hereby agrees that it shall forthwith purchase from NBD (without
recourse or warranty) such assignment of the outstanding Advances under
the Cash Management Line as shall be necessary to cause such Lenders to
share in such Advances ratably based upon their respective Revolving
Loan
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Commitments, provided that all interest payable on such Advances shall
be for the account of NBD until the date the respective assignment is
purchased and, to the extent attributable to the purchased assignment,
shall be payable to the Lender purchasing same from and after such date
of purchase.
2.2. Interest.
2.2.1. Revolving Loans. Prior to maturity or Default, the
principal amount of the Revolving Loans outstanding from time to time
shall bear interest at a rate per annum equal to the Alternate Base
Rate plus the Applicable Margin, except that at the option of Borrower,
exercised as provided in Section 2.5, interest may accrue prior to
maturity on any Permissible Increment of outstanding Advances of the
Revolving Loans at a per annum rate equal to the Eurodollar Rate plus
the Applicable Margin. At the expiration of the Eurodollar Interest
Period on such Permissible Increment, unless, in each case, Borrower
selects the Fixed Rate Option as provided in Section 2.5, interest
shall again accrue at the Alternate Base Rate plus the Applicable
Margin.
2.2.2. Cash Management Line. Prior to maturity or Default,
outstanding Advances under the Cash Management Line from time to time
shall bear interest at a rate per annum equal to the Alternate Base
Rate.
2.2.3. General/Default Rate. Interest shall be due and payable
for the exact number of days principal is outstanding and shall be
calculated on the basis of a three hundred sixty (360) day year. Any
change in the interest rates occasioned by a change in the Alternate
Base Rate shall be effective on the same day as the change in the
Alternate Base Rate. After the maturity of any Facility, whether by
acceleration or otherwise, and while and so long as there shall exist
any uncured Default, the Required Lenders may, at their option, by
notice to Borrower and the Agent (which notice may be revoked at the
option of the Required Lenders notwithstanding any provision of Section
11.1 requiring unanimous consent of the Lenders to changes in interest
rates), declare that each Revolving Loan Advance shall bear interest at
a rate per annum equal to the otherwise applicable rate plus Two
Percent (2%) per annum. If any Advance under the Cash Management Line
is not paid at maturity, whether by acceleration or otherwise, or
during the continuance of a Default, NBD may, at its option, by notice
to Borrower and the Agent (which notice may be revoked at its option
notwithstanding any provision of Section 11.1 requiring unanimous
consent of the Lenders to changes in interest rates), declare that each
Cash Management Line Advance shall bear interest at a rate per annum
equal to the otherwise applicable rate plus Two Percent (2%) per annum.
2.3. Payments of Principal and Interest.
2.3.1. Revolving Loans. Interest only on the outstanding
Advances of the Revolving Loans from time to time shall be due and
payable throughout the term of the Revolving Loan Commitment (a) on the
last day of each fiscal quarter of Borrower with
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respect to each ABR Loan, and (b) on the last day of an applicable
Eurodollar Interest Period with respect to each Eurodollar Loan and, in
the case of an Eurodollar Interest Period greater than three (3)
months, at three (3) month intervals after the first day of such
Eurodollar Interest Period. Any outstanding Advances and all other
unpaid Obligations, together with all accrued and unpaid interest
thereon, and all fees and charges payable in connection therewith,
shall be paid in full on the Facility Termination Date.
2.3.2. Cash Management Line. Interest only on the outstanding
balance of the Cash Management Line Advances from time to time shall be
due and payable throughout the term of the Cash Management Line on the
last day of each fiscal quarter of Borrower. From time to time,
Borrower shall make principal payments in respect of the Cash
Management Line in an amount sufficient so that the outstanding
principal balance of Cash Management Line Advances plus the outstanding
balance of the Revolving Loan Advances plus outstanding Letters of
Credit and unreimbursed drawings thereunder do not exceed the aggregate
Revolving Loan Commitments. Any Cash Management Line Advances, together
with all accrued and unpaid interest thereon, and all fees and charges
payable in connection therewith, shall be paid in full on the Facility
Termination Date.
2.3.3. Optional Prepayment.
(a) Except as provided in, and subject to, Section 2.5 and 3.4
with respect to Eurodollar Advances, Borrower may from time to time,
(i) upon one Business Day notice to the Agent, without penalty or
premium, prepay in full all outstanding Revolving Loan Advances
constituting ABR Advances and, if paid on the last day of the
applicable Eurodollar Interest Period, Eurodollar Advances, or, prepay
in partial prepayment in a minimum aggregate amount of One Million
Dollars ($1,000,000) or any integral multiple of One Million Dollars
($1,000,000) in excess thereof, any portion of the outstanding
Revolving Loan Advances constituting ABR Advances or, if paid on the
last day of the applicable Eurodollar Interest Period, Eurodollar
Advances, and (ii) upon three Business Days notice to the Agent,
without penalty or premium, prepay in full all outstanding Revolving
Loan Advances constituting Eurodollar Advances if paid on any day other
than the last day of the applicable Eurodollar Interest Period, or,
prepay in partial prepayment in a minimum aggregate amount of Five
Million Dollars ($5,000,000) or any integral multiple of One Million
Dollars ($1,000,000) in excess thereof, any portion of the outstanding
Revolving Loan Advances constituting Eurodollar Advances if paid on any
day other than the last day of the applicable Eurodollar Interest
Period.
(b) Borrower may from time to time, upon one Business Day
prior notice to NBD, without penalty or premium, prepay in full all
outstanding Cash Management Line Advances, or, prepay in partial
prepayment in a minimum aggregate amount of One Hundred Thousand
Dollars ($100,000) or any integral multiple of Ten Thousand Dollars
($10,000) in excess thereof, any portion of the outstanding Cash
Management Line Advances.
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<PAGE>
2.3.4. Taxes.
(a) All payments by Borrower under this Agreement or the Notes
shall be made free and clear of, and without deduction or withholding
for, any present or future income, stamp or other taxes, levies,
duties, imposts, charges or fees or any related penalties, interest or
other liabilities ("Taxes"). If any Taxes are required to be deducted
or withheld from any amount payable to the Agent or any Lender under
this Agreement or the Notes, Borrower shall pay additional amounts so
that the amount received by the Agent or such Lender after the
deduction of such Taxes (including Taxes on such additional amounts)
equals the amount that the Agent or such Lender would have received if
no Taxes had been deducted. Borrower shall pay to the appropriate
taxing authority all Taxes required to be deducted or withheld. Within
thirty (30) days after paying any such Taxes, Borrower shall deliver to
the Agent the original or a certified copy of the receipt for such
payment. Borrower shall not be required to pay additional amounts to
the Agent or a Lender on account of any Taxes, including, but not
limited to, income taxes, imposed solely by reason of (i) a present or
past connection between such person and the jurisdiction imposing such
Taxes (except a connection arising solely from the execution, delivery,
performance, enforcement of or the receipt of payments under this
Agreement or the Notes) or (ii) a failure of such Person to comply with
the requirements of subsection (b).
(b) Any Agent and each Lender that is not incorporated under
the laws of the United States of America or a state thereof shall:
(i) deliver to Borrower by the date when the
Agent or the Lender becomes a party to this Agreement (A)(1)
two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 certifying that such Agent or Lender
is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States
federal income taxes and (2) a duly completed United States
Internal Revenue Service Form W-8 or W-9 certifying that such
Agent or Lender is entitled to an exemption from United States
backup withholding tax or (B) in the case of an Agent or
Lender not treated as a bank for regulatory, tax or other
legal purposes in any jurisdiction, (1) a certificate under
penalties of perjury that such Agent or Lender is not (x) a
bank, a shareholder of Borrower or a controlled foreign
corporation related to Borrower for purposes of section
881(c)(3) of the Code or (y) a conduit entity within the
meaning of United States Treasury Regulations section 1.881-3
and (2) a duly completed Internal Revenue Service Form W-8;
(ii) deliver to Borrower a renewed form or
certificate (or applicable successor) upon reasonable request
of Borrower unless such Agent or Lender is not entitled to
deliver a renewed form or certificate due to change in
applicable law or in the interpretation or administration of
applicable law; and
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<PAGE>
(iii) deliver to Borrower a further form or
certificate (or applicable successor) upon the occurrence of
any event requiring a change in a form or certificate
previously delivered and notify Borrower upon the occurrence
of any event requiring the withdrawal of a form or
certification previously delivered.
(c) Borrower shall indemnify the Agent and each Lender against
any Taxes imposed on (and any related expenses reasonably incurred by)
the Agent or such Lender on account of the execution, delivery,
performance or enforcement of or the receipt of payments under this
Agreement or the Notes other than Taxes imposed solely by reason of
either cause specified in the last sentence of subsection (a). Borrower
also shall pay and indemnify the Agent and each Lender against any
stamp or other documentary, excise or property taxes or similar levies,
imposts, or charges (or any related liability) arising from the
execution, delivery, registration, performance or enforcement of this
Agreement or the Notes.
2.3.5. Method of Payment. All payments of principal and
interest hereunder shall be made by Borrower to the Agent at its main
office in Indianapolis, Indiana by 12:00 Noon (Indianapolis time) on
the date when due, and shall be applied pro rata among the Lenders in
accordance with their respective Pro Rata Shares. Each payment timely
delivered to the Agent for the account of any Lender shall be delivered
by the Agent for the account of any Lender no later than 2:00 P.M.
(Indianapolis time) on the same day.
2.3.6. Business Day. If any payment Obligation becomes due and
payable on a date other than a Business Day, the maturity of such
Obligation shall be extended to the next succeeding Business Day, and
interest shall be payable during such extension of maturity.
2.4. Method of Advance.
2.4.1. Revolving Loans. As Borrower desires to obtain
Revolving Loans, Borrower shall give the Agent notice of Borrower's
request to borrow pursuant to the Revolving Loan Commitments by not
later than 11:00 A.M. (Indianapolis time), on the proposed Business Day
of borrowing, subject to Section 2.5 with respect to Eurodollar
Advances. Such request may be made orally by an Authorized Officer, or
upon a request transmitted to the Agent by telex, facsimile machine or
other form of written electronic communication signed by an Authorized
Officer, and, once received by the Agent, shall be irrevocable. The
Agent may rely, without further inquiry, on all such requests which
shall have been received by it in good faith by any Person reasonably
believed to be an Authorized Officer. The Agent may require telephonic
or other oral requests to be followed immediately by a written request.
Each request shall, in and of itself, constitute a representation and
warranty that the conditions precedent to such Advance as set forth in
Sections 6.2.1 and 6.2.2 have been satisfied as of, and after giving
effect to, such Advance and that the requested Advance shall not cause
the principal balance of the Revolving Loans to exceed the aggregate
Revolving Loan Commitments. The Agent shall notify the Lenders of
Borrower's intent to borrow by 12:00 P.M. (Indianapolis time) on the
proposed Business Day of borrowing,
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<PAGE>
subject to Section 2.5 with respect to Eurodollar Advances. Each
Advance under the Revolving Loan Commitments shall consist of Revolving
Loans made by the several Lenders ratably in the proportions that their
Revolving Loan Commitments bear to the aggregate of the Revolving Loan
Commitments. By 2:00 P.M. (Indianapolis time) on each such borrowing
date, each Lender shall advance its portion of such Revolving Loan
Advance by making available to the Agent, either by wire transfer to
the Agent's main office in Indianapolis, Indiana, or by deposit to any
correspondent account which Agent may maintain with that Lender, the
amount to be advanced by such Lender. Borrower hereby authorizes the
disbursement of such Revolving Loans (other than Revolving Loans made
by payment of Letters of Credit) by deposit to the account of Borrower
with NBD, and NBD, as Agent, shall, by 2:30 P.M. (Indianapolis time) on
the date received, credit the amount so received from each Lender to
the account of Borrower with NBD. The aggregate principal amount of
Revolving Loans (other than Revolving Loans made by payment of Letters
of Credit) made on any borrowing date shall be in Permissible
Increments.
2.4.2. Cash Management Line. As Borrower desires to obtain
Advances under the Cash Management Line hereunder, Borrower shall give
the Agent and NBD notice thereof by not later than 11:00 a.m.
(Indianapolis time), on the proposed Business Day of borrowing. Each
request once received by NBD shall be irrevocable. Such notice may be
made orally by an Authorized Officer, or upon a request transmitted to
the Agent and NBD by telex, facsimile machine or other form of written
electronic communication and signed by an Authorized Officer. The Agent
and NBD may rely, without further inquiry, on all such requests which
shall have been received by it in good faith by anyone reasonably
believed to be an Authorized Officer. NBD may require telephonic or
other oral requests to be followed immediately by a written request.
Each request shall in and of itself constitute a representation and
warranty that no Default or Unmatured Default has occurred and is
continuing or would result from the making of the requested Advance,
that the requested Advance shall not cause the principal balance of the
Cash Management Line Advances to exceed Fifteen Million Dollars
($15,000,000) and that the requested Advance shall not cause the
outstanding principal balance of the Cash Management Line plus the
outstanding balance of the Revolving Loan Advances plus outstanding
Letters of Credit and unreimbursed drawings thereunder to exceed the
aggregate Revolving Loan Commitments. By 2:00 p.m. (Indianapolis time)
on each such borrowing date, NBD agrees to make its Advance under the
Cash Management Line to Borrower by deposit to the account of Borrower
with NBD. The aggregate principal amount of Cash Management Line made
on any borrowing date shall be in Permissible Increments.
2.4.3. General. All Advances by the Lenders and payments by
Borrower shall be recorded by the Agent and may be recorded by the
Lenders on its or their books and records, and the principal amount
outstanding from time to time, plus interest payable thereon shall be
determined from such books and records. The books and records of the
Agent and/or the Lenders as to such matters shall be presumed correct
absent manifest error.
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2.5. Procedures for Electing the Fixed Rate Option. The Fixed Rate
Option may be elected only in accordance with the following procedures and
subject to the other conditions contained in this Agreement:
(a) Unless the Required Lenders otherwise agree, no Fixed Rate
Option may be elected or renewed at any time a Default or Unmatured
Default exists.
(b) Borrower shall give the Agent irrevocable notice (a "Fixed
Rate Option Notice") of its election or renewal of a Fixed Rate Option
prior to 11:00 A.M. (Indianapolis time) not less than three Business
Days, prior to the commencement of the applicable Eurodollar Interest
Period therefor specifying (i) Borrowing Date which shall be a Business
Day, (ii) the amount of the Advance elected or renewed which amount
shall be in a Permissible Increment, and (iii) the duration of the
Eurodollar Interest Period selected to apply thereto. The Agent shall
promptly notify the Lenders whenever a new Fixed Rate Option is
selected by Borrower.
(c) An election of a Fixed Rate Option may be communicated by
telephone or by telex, facsimile machine or other form of written
electronic communication, or by a writing delivered to the Agent.
Borrower shall confirm in writing any election communicated by
telephone. The Agent shall be entitled to rely on any verbal
communication of the election of the Fixed Rate Option Notice which is
received by a designated employee of the Agent from anyone reasonably
believed in good faith by such employee to be authorized.
(d) Not more than eight (8) Eurodollar Interest Periods may be
selected at any one time to apply to outstanding Advances.
(e) If at the time of any voluntary or mandatory prepayment of
any portion of the principal of any Loan, interest accrues at both the
Fixed Rate Option and with reference to the Alternate Base Rate on
portions of a Loan or Loans, then any prepayment of principal will be
applied first to the portion of a Loan or Loans on which interest
accrues with reference to the Alternate Base Rate and next to the
portion or portions at which interest accrues at a Fixed Rate Option.
(f) In addition to the compensation required by Section 3,
Borrower shall indemnify each Lender (on a net basis) against any loss
or expense (including loss of margin) which any Lender has sustained or
incurred as a consequence of any attempt by Borrower to revoke
(expressly, by later inconsistent notices or otherwise) in whole or in
part any notice stated herein to be irrevocable (the Agent having, in
its sole discretion, the option (i) to give effect to such attempted
revocation and obtain indemnity under this Section, or (ii) to treat
such attempted revocation as having no force or effect, as if never
made). Calculation of all amounts payable to a Lender under this
Section shall be made as though such Lender had actually funded its
relevant Eurodollar Loan through the purchase of a deposit bearing
interest at the Eurodollar Rate in an amount equal to the amount of
such Eurodollar Loan and having
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a maturity comparable to the relevant Interest Period; provided,
however, that each Lender may fund each of its Eurodollar Loans in any
manner it sees fit, and the foregoing assumption shall be utilized only
for the calculation of amounts payable under this Section. If any
Lender sustains or incurs any such loss or expense it shall notify
Borrower of the amount determined in good faith by such Lender (which
determination shall be presumed to be correct) to be necessary to
indemnify such Lender for such loss or expense. Such amount shall be
due and payable by Borrower to such Lender ten (10) Business Days after
such notice is given.
2.6. Fees.
2.6.1. Commitment Fee. Borrower shall pay to the Agent, for
the pro rata benefit of the Lenders, the Applicable Commitment Fee on
the average daily unused portion of the aggregate Revolving Loan
Commitments from the Effective Date to and including the Facility
Termination Date, payable quarterly in arrears on the last day of each
August, November, February and May, and on the Facility Termination
Date. The Applicable Commitment Fee shall be calculated on the basis of
a three hundred sixty (360) day year.
2.6.2 Initial Facility Fees. Borrower shall pay to the Agent,
for the benefit of the Lenders, the initial facility fees in accordance
with the Offering Letter.
2.6.3. Agent Fees. Borrower shall pay to the Agent an annual
administrative fee in accordance with the Fee Letter.
2.6.4 Letter of Credit Fees. Borrower shall pay fees in
respect of the Letters of Credit as more fully provided in Section
2.11.
2.6.5. General. The compensation provided in this Section
shall be in consideration of the services of the Lenders in connection
with the Facilities and shall be in addition to any other fee, charge,
payment or expense required to be borne by Borrower under the Loan
Documents or in any other separate agreement between Borrower and the
Agent.
2.7. Reductions in Revolving Loan Commitment. Borrower shall have the
right to terminate or reduce the aggregate amount of the Revolving Loan
Commitment, provided that (a) Borrower shall give at least three Business Days'
prior written notice to the Agent and the Lenders of each such termination or
reduction, (b) each partial reduction shall be in Permissible Increments, (c)
each partial reduction shall apply to the Lenders ratably with respect to their
Revolving Loan Commitment, (d) the Revolving Loan Commitment shall not be
reduced to an amount less than the outstanding principal balance of the
Revolving Loan Advances plus the aggregate principal amount of the outstanding
Cash Management Line Advances plus the amount of any outstanding Letters of
Credit and unreimbursed drawings thereunder, and (e) the Revolving Loan
Commitment, once terminated or reduced, may not be reinstated without the prior
written approval of all the Lenders.
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2.8. Non-Receipt of Funds by the Agent.
2.8.1. From the Lenders. Unless the Agent shall have received
notice from a Lender by 2:00 P.M. (Indianapolis time) on a proposed
Business Day on which such Lender is to provide funds to the Agent for
a Loan to be made by such Lender that such Lender will not make
available to the Agent such funds, the Agent may assume that such
Lender has made such funds available to the Agent on the date of such
Loan in accordance with this Agreement, and the Agent, in its sole
discretion, may, but shall not be obligated to, in reliance upon such
assumption, make available to Borrower on such date a corresponding
amount. If and to the extent such Lender has not made such funds
available to the Agent (and provided such Lender was given timely
notice in accordance with this Agreement), and the Agent has made such
corresponding amount available to Borrower, such Lender agrees to repay
to the Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made
available to Borrower, at a rate per annum equal to the Federal Funds
Effective Rate, and if such Lender fails to repay the Agent for more
than three Business Days, such amount shall bear interest at a rate per
annum equal to the Federal Funds Effective Rate plus Two Percent (2%).
If such Lender shall repay to the Agent such corresponding amount, such
amount so repaid shall constitute such Lender's Loan for purposes of
this Agreement. If such Lender does not pay such corresponding amount
forthwith upon the Agent's demand therefor, the Agent shall promptly
notify Borrower, and Borrower shall immediately pay such corresponding
amount to the Agent with interest thereon, for each day from the date
such amount is made available to Borrower until the date such amount is
repaid to the Agent, at the rate of interest applicable at the time to
the relevant Loan. If Borrower repays such corresponding amount, the
Lender shall no longer be obligated to make such payment.
2.8.2. From Borrower. Unless the Agent shall have received
notice from Borrower prior to the date on which any payment is due to
the Lenders hereunder that Borrower will not make such payment in full,
the Agent may assume that Borrower has made such payment in full to the
Agent on such date, and the Agent, in its sole discretion, may, but
shall not be obligated to, in reliance upon such assumption, cause to
be distributed to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent Borrower has not made
such payment in full to the Agent, and without limiting the Obligation
of Borrower to make such payment, each Lender shall repay to the Agent
forthwith on demand such amount distributed to such Lender together
with interest thereon, for each day from the date such amount is
distributed to such Lender until the date the Agent recovers such
amount at a rate per annum equal to the Federal Funds Effective Rate,
and if such Lender fails to repay the Agent for more than three
Business Days, such amount shall bear interest at a rate per annum
equal to the Federal Funds Effective Rate plus Two Percent (2%).
2.9. Issuance of Letters of Credit. Subject to the terms and conditions
hereof, NBD agrees, upon proper Application, to issue on behalf of the Lenders
from time to time prior to the
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Facility Termination Date, Letters of Credit for the account of Borrower. The
Letters of Credit shall have an expiration date not later than the earlier of
(a) one year from the date of issuance or (b) five days before the expiration of
the Facility Termination Date. The aggregate of the Letters of Credit
outstanding plus the aggregate amount of unreimbursed drawings under the Letters
of Credit shall not exceed Ten Million Dollars ($10,000,000). The amount of any
Letter of Credit outstanding at any time for all purposes hereof shall be the
maximum amount which could be drawn thereunder under any circumstances from and
after the date of determination. Each Letter of Credit issued pursuant to this
Agreement and each unreimbursed drawing thereunder shall count against and
reduce the Revolving Loan Commitments by the amount of such Letter of Credit
outstanding unless and until such Letter of Credit expires by its terms or
otherwise terminates or the amount of a drawing thereunder is reimbursed, in
which event the Revolving Loan Commitments shall be reinstated by the amount of
such Letter of Credit or the amount of such reimbursement, as the case may be.
Each such Letter of Credit shall be issued pursuant to a Letter of Credit
Application and shall conform to the general requirements of NBD for the
issuance of such credits, as to form and substance, shall be subject to the
Uniform Customs and Practices for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500 and shall be a letter of
credit which NBD may lawfully issue. Each payment of a Letter of Credit by NBD
shall be reimbursed by Advances under the Revolving Loan Commitments evidenced
by the Revolving Credit Notes. If and to the extent a drawing is at any time
made under any Letter of Credit, NBD shall notify Borrower, the Agent and the
other Lenders of such draw and Borrower agrees to pay to NBD immediately and
unconditionally upon demand for reimbursement, in lawful money of the United
States, an amount equal to each amount which shall be so drawn, together with
interest from the date of such drawing to and including the date such payment is
reimbursed to NBD or converted to Revolving Loans as provided herein. Until
demand for reimbursement, such interest shall be calculated at a variable rate
per annum equal to the Alternate Base Rate plus the Applicable Margin for ABR
Loans, and interest shall be calculated after such demand at a variable rate per
annum equal to the Alternate Base Rate plus the Applicable Margin for ABR Loans
plus Two Percent (2%). All such interest shall be calculated on the basis that
an entire year's interest is earned in three hundred sixty (360) days. In the
event that a drawing under any Letter of Credit is not reimbursed by Borrower by
11:00 A.M. (Indianapolis time) on the first Business Day after such drawing, NBD
shall promptly notify the Agent and the other Lenders by 12:00 Noon
(Indianapolis time) that Advances under the Revolving Loan Commitments are
required to reimburse NBD. Borrower hereby irrevocably authorizes the Lenders to
refinance, without notice to Borrower, the reimbursement Obligation of Borrower
arising out of any such drawing into Revolving Loans, evidenced by the Revolving
Credit Notes and for all purposes under, on and subject to the terms and
conditions of this Agreement, but without regard to the conditions precedent to
making an Advance under the Revolving Loan Commitments or to any requirement of
this Agreement that each Revolving Loan be in a minimum amount or multiple;
provided, however, that an Advance under the Revolving Loan Commitments in spite
of Borrower's failure to satisfy any conditions precedent to making an Advance
shall not constitute a waiver of any Default by the Lenders. This Agreement and
the other Loan Documents shall supersede any terms of any Letter of Credit
Applications or other documents which are irreconcilably inconsistent with the
terms hereof or thereof. By 2:00 P.M. (Indianapolis time) on the date the
Lenders have received notice that Advances under the Revolving Loan Commitments
are required to reimburse NBD for
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draws under the Letters of Credit, each Lender severally agrees to make its
portion of the Revolving Loan then being made by making available to the Agent,
either by wire transfer to the Agent's main office in Indianapolis, Indiana, or
by deposit to any correspondent account which the Agent may maintain with that
Lender, the amount to be advanced by such Lender. By 2:30 P.M. (Indianapolis
time) on such date, the Agent shall reimburse NBD, but only from funds received
by the Agent, the amount paid on Letters of Credit that date, either by wire
transfer or by deposit to NBD's correspondent account with the Agent (or as
otherwise agreed between NBD and the Agent).
2.10. Letters of Credit Participation. For administrative convenience,
NBD shall issue the Letters of Credit for the account of Borrower pursuant to
the arrangements set forth herein, and, the outstanding portion of each Letter
of Credit shall be deemed to utilize a Pro Rata Share of the Revolving Loan
Commitment of each Lender. Each Lender severally agrees to participate in each
Letter of Credit according to its Pro Rata Share of the Revolving Loan
Commitments. Each Lender's participation shall be funded by funding its Pro Rata
Share of the Revolving Loan Commitments upon any drawing under any Letter of
Credit not reimbursed the same day as a drawing thereunder by Borrower by 2:00
P.M. (Indianapolis time) by making such funds available to the Agent in
accordance with Sections 2.4.1 and 2.9; and thereupon, each such Lender shall be
entitled to, and NBD or the Agent, as applicable, shall remit to each such
Lender, their respective Pro Rata Share of any amounts (including any interest
thereon) received by NBD or the Agent, as applicable, in reimbursement of such
drawing. NBD shall furnish to such Lenders, each time any Letter of Credit
either is issued or drawn under (whether in whole or in part), (i) a
participation certificate showing the aggregate amount of NBD's Letters of
Credit issued and unexpired or unfunded and the amount of their respective Pro
Rata Share thereof, and (ii) such other information with respect to the Letters
of Credit as any Lender may reasonably request from time to time. The
obligations of the Lenders to fund their respective Pro Rata Share of a
Revolving Loan for reimbursement of a draw under a Letter of Credit shall be
irrevocable and not subject to counterclaim, set-off or other defense or any
other qualification or exception whatsoever and shall be made in accordance with
the terms and conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances (other than in the case
of gross negligence or wilful misconduct of NBD):
(a) Any lack of validity or enforceability of this Agreement
or any of the other Loan Documents;
(b) The existence of any claim, set-off, defense or other
right which Borrower may have at any time against a beneficiary named
in the Letter of Credit, any transferee of the Letter of Credit (or any
Person for whom any such transferee may be acting), the Agent, NBD as
the Letter of Credit issuer, any Lender, or other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
underlying transaction between Borrower and the beneficiary named in
any such Letter of Credit);
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(c) Any draft, certificate or other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(d) The surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan
Documents; or
(e) The occurrence of any Default or Unmatured Default.
2.11. Compensation for Letters of Credit.
2.11.1. Letter of Credit Facility Fee. Borrower shall pay to
NBD, for the ratable benefit of the Lenders in accordance with their
Revolving Loan Commitments, a Letter of Credit facility fee at a per
annum rate equal to the Applicable Margin for Eurodollar Loans on the
average daily undrawn amount of all Letters of Credit outstanding
hereunder, such fee to be calculated on the basis of a three hundred
sixty (360) day year and to be paid in arrears on the last day of each
August, November, February and May and on the Facility Termination
Date.
2.11.2. Letter of Credit Fronting Fees. In addition to the
Letter of Credit facility fees, Borrower shall pay to NBD, for NBD's
own account a Letter of Credit fronting fee in the amount set forth in
the Fee Letter, as well as NBD's reasonable and customary costs of
issuing, servicing and negotiating draws under letters of credit.
2.12. Reimbursement of Letters of Credit. The obligation of Borrower to
reimburse any drawing under any Letter of Credit shall be absolute,
unconditional and irrevocable and shall be paid and performed strictly in
accordance with the terms of this Agreement under all circumstances, whatsoever,
including, without limitation, the following:
(a) Any lack of validity or enforceability of any Letter of
Credit, or any Loan Document;
(b) Any amendment or waiver of or consent to departure from
the terms of any Letter of Credit, or any Loan Document;
(c) The existence of any claim, set-off, defense or other
right which Borrower may have at any time against the beneficiary or
any Letter of Credit, any transferee of any Letter of Credit, the
Lenders or any other Person, whether in connection with the Loan
Documents, such Letter of Credit, or any unrelated transaction;
(d) Any statement, draft or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
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(e) The surrender or impairment of any security for the
performance or observance of the terms of the Loan Documents or such
Letter of Credit; or
(f) Any circumstance, happening or admission whatsoever,
whether or not similar to any of the foregoing, including, without
limitation, those matters described below.
The parties benefitted by any Letter of Credit shall be deemed to be the agents
of Borrower, and except as expressly set forth herein, Borrower assumes all
risks for their acts, omissions, or misrepresentations. Neither NBD nor any of
its Affiliates or correspondents shall be responsible for the validity,
sufficiency, truthfulness or genuineness of any document required to draw under
any Letter of Credit even if such document should in fact prove to be in any and
all respects invalid, insufficient, fraudulent or forged, provided only that the
document appears on its face to be in accordance with the terms of the Letter of
Credit. NBD, its Affiliates and correspondents shall not be responsible for any
failure of any draft to bear reference or adequate reference to the applicable
Letter of Credit or for the failure of any Person to note the amount of any
draft on any Letter of Credit or to surrender or take up any Letter of Credit,
each of which provisions may be waived by NBD, or for any errors, omissions,
interruptions, or delays in transmission or delivery of any messages or
documents. Without limiting the generality of the foregoing, Borrower agrees
that any action taken by NBD or any of its Affiliates or correspondents under or
in connection with any Letter of Credit shall be binding upon Borrower and shall
not put NBD or any such Affiliates or correspondents under any such resulting
liability to Borrower. NBD shall not be liable for action or failure to take
action under or in connection with any Letter of Credit except for any such
action or failure to take action which constitutes gross negligence or wilful
misconduct. NBD shall not be liable for consequential damages in connection with
any Letter of Credit. NBD is expressly hereby authorized to honor any request
for payment which is made under or in compliance with the terms of any Letter of
Credit without regard to, and without any duty on its part to inquire into, the
existence of any disputes or controversies between Borrower and any beneficiary
of any Letter of Credit or any other Person or into respective rights, duties or
liabilities of any of them or whether any facts or occurrences represented in
any of the documents presented under any Letter of Credit are true and correct.
No Person, other than the parties hereto, shall have any rights of any nature
under this Agreement or by reason hereof. In no event shall NBD's reliance and
payment against documents presented under a Letter of Credit appearing on its
face to substantially comply with the terms thereof be deemed to constitute
gross negligence or wilful misconduct.
2.13. Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Notes shall be deemed held by each Lender for
the benefit of such Lending Installation. Each Lender may, by written or telex
notice to the Agent and Borrower, designate a Lending Installation through which
Loans will be made by it and for whose account Loan payments are to be made.
2.14. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Agent will notify
each Lender of the contents of each Revolving
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Loan Commitment reduction notice, notice of Borrower's request to Borrower under
the Revolving Loan Commitments, Fixed Rate Option Notice, and repayment notice
received by it hereunder. The Agent will notify each Lender of the interest rate
applicable to each Eurodollar Advance promptly upon determination of such
interest rate and will give each Lender prompt notice of each change in the
Alternate Base Rate. If necessary, each Reference Lender agrees to furnish
timely information for the purpose of determining the Eurodollar Rate.
2.15. Use of Proceeds. The proceeds of Advances under the Revolving
Loan Commitments and the Cash Management Line shall be advanced by Borrower to
fund Acquisitions, for general working capital purposes of Borrower and its
Subsidiaries, and for other proper corporate purposes of Borrower not prohibited
by this Agreement.
SECTION 3
Change in Circumstances
3.1. Yield Protection. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law), or any interpretation, or the compliance of any
Lender therewith,
(a) Subjects any Lender or any applicable Lending Installation
to any tax, duty, charge or withholding on or from payments due from
Borrower (excluding federal taxation of the overall net or gross income
of any Lender or applicable Lending Installation), or changes the basis
of taxation of payments to any Lender in respect of its Facilities,
Loans or other amounts due it hereunder, or
(b) Imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation (other
than reserves and assessments taken into account in determining the
interest rate applicable to Eurodollar Advances), or
(c) Imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending Installation
of making, funding or maintaining Facilities or Loans or reduces any
amount receivable by any Lender or any applicable Lending Installation
in connection with Facilities or Loans, or requires any Lender or any
applicable Lending Installation to make any payment calculated by
reference to the amount of Facilities or Loans held or interest
received by it, by an amount deemed material by such Lender,
then, within fifteen (15) days of demand by such Lender, Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender reasonably determines is attributable to making,
funding and maintaining its Facilities and its Commitment.
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3.2. Changes in Capital Adequacy Regulations. If a Lender reasonably
determines the amount of capital required or expected to be maintained by such
Lender, any Lending Installation of such Lender or any corporation controlling
such Lender is increased as a result of a Change, then, within fifteen (15) days
of demand by such Lender, Borrower shall pay such Lender the amount necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender reasonably determines is attributable to
this Agreement, its Facilities, Loans or its obligation to make Loans hereunder
(after taking into account such Lender's policies as to capital adequacy).
"Change" means (a) any change after the date of this Agreement in the Risk-Based
Capital Guidelines or (b) any adoption of or change in any other law,
governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law) after the
date of this Agreement which affects the amount of capital required or expected
to be maintained by any Lender or any Lending Installation or any corporation
controlling any Lender. "Risk-Based Capital Guidelines" means (aa) the
risk-based capital guidelines in effect in the United States on the date of this
Agreement, including transition rules, and (bb) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
3.3. Availability of Types of Advances. If any Lender reasonably
determines that maintenance of its Eurodollar Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation, or directive,
whether or not having the force of law, or if the Required Lenders reasonably
determine that (a) deposits of a Type and maturity appropriate to match fund
Eurodollar Advances are not available, or (b) the interest rate applicable to a
Type of Advance does not accurately reflect the cost of making or maintaining
such Advance, then the Agent shall suspend the availability of the affected Type
of Advance and require any Eurodollar Advances of the affected Type to be
repaid.
3.4. Funding Indemnification. If any payment (whether mandatory or
optional) of an Eurodollar Advance occurs on a date which is not the last day of
the applicable Eurodollar Interest Period, whether because of acceleration,
prepayment or otherwise, or an Eurodollar Advance is not made on the date
specified by Borrower for any reason other than default by the Lenders, Borrower
will indemnify each Lender for any loss or cost incurred by it resulting
therefrom, including, without limitation, any loss or cost in liquidating or
employing deposits acquired to fund or maintain the Eurodollar Advance.
Calculation of all amounts payable to a Lender under this Section 3.4 shall be
made as though such Lender had actually funded its relevant Eurodollar Loan
through the purchase of a deposit bearing interest at the Eurodollar Rate in an
amount equal to the amount of such Eurodollar Loan and having a maturity
comparable to the relevant Interest Period; provided, however, that each Lender
may fund each of its Eurodollar Loans in any manner it sees fit, and the
foregoing assumption shall be utilized only for the calculation of amounts
payable under this Section 3.4. In the event of a prepayment, the calculation of
the cost owed to the Lenders under this Section 3.4 would be calculated using
the following formula:
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Cost = PA x (OCF-RR) x D
360
where PA is the principal amount prepaid, OCF is the original Eurodollar Rate
applicable to such prepayment, RR is the rate of interest that would accrue on
United States Treasury obligations selected by the Agent having a maturity
similar to the time remaining until expiration of the applicable Eurodollar
Interest Period that is subject to the prepayment, and D is the number of days
remaining in the applicable Eurodollar Interest Period that is subject to the
prepayment. In the event OCF minus RR results in a negative number, the cost to
be paid by Borrower would be zero.
3.5. Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans to reduce any liability of Borrower to such
Lender under Sections 3.1 and 3.2 or to avoid the unavailability of a Type of
Advance under Section 3.3, so long as such designation is not, at the discretion
of such Lender, disadvantageous to such Lender. Each Lender shall deliver a
written statement of such Lender to Borrower (with a copy to the Agent) as to
the amount due, if any, under Section 3.1, 3.2 and/or 3.4. Such written
statement shall set forth in reasonable detail the calculations upon which such
Lender determined such amount and shall be final, conclusive and binding on
Borrower in the absence of manifest error. Determination of amounts payable
under such Sections in connection with a Eurodollar Loan shall be calculated as
though each Lender funded its Eurodollar Loan through the purchase of a deposit
of the type and maturity corresponding to the deposit used as a reference in
determining the Eurodollar Rate applicable to such Loan, whether in fact that is
the case or not. Unless otherwise provided herein, the amount specified in the
written statement of any Lender shall be payable on demand after receipt by
Borrower of such written statement. The Obligations of Borrower under Sections
3.1, 3.2 and 3.4 shall survive payment of all other Obligations and termination
of this Agreement.
SECTION 4
Representations and Warranties
In order to induce the Lenders to enter into this Agreement and to make
Loans pursuant to their Revolving Loan Commitments and the Cash Management Line,
and to induce NBD to issue Letters of Credit, Borrower represents and warrants
to NBD, the Agent and the Lenders, which representations and warranties will
survive the delivery of the Notes, the establishment of the Facilities, the
making of Loans and the issuance of Letters of Credit that:
4.1. Due Organization. Borrower and each Subsidiary is a corporation
duly organized, validly existing and, if applicable, in good standing under and
by virtue of the laws of its state of incorporation.
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4.2. Due Qualification. Borrower and each Subsidiary is qualified, in
good standing and authorized to do business as a foreign corporation in such
other states wherein the failure to so qualify could have a Material Adverse
Effect.
4.3. Corporate Power. Borrower possesses the requisite power to enter
into the Loan Documents, to borrow under the Loan Documents, to execute and
deliver the Loan Documents and to perform its obligations thereunder.
4.4. Corporate Authority. Borrower has taken the necessary corporate
action to authorize the execution and delivery of the Loan Documents and the
borrowings under the Loan Documents, and none of the provisions of the Loan
Documents violates, breaches, contravenes, conflicts with, or causes a default
under any provision of the articles of incorporation or the by-laws or
regulations of Borrower or any provision of any existing note, bond, mortgage,
debenture, indenture, trust, license, lease, instrument, decree, order,
judgment, or agreement to which Borrower is a party or by which it or its assets
may be bound or affected, the breach or default of which, singly or in the
aggregate, could have a Material Adverse Effect.
4.5. Financial Statements. The Financial Statements were prepared in
accordance with GAAP consistent with prior years, unless specifically otherwise
noted thereon, and present fairly the Consolidated financial condition of
Borrower and its Consolidated Subsidiaries, as of the dates thereof and the
results of their respective Consolidated operations for the periods then ended
(except, in the case of interim Financial Statements, for normal year-end
adjustments and for the absence of footnotes).
4.6. No Material Adverse Change. The Financial Statements disclose all
known or contingent material liabilities, whether direct or indirect, fixed or
contingent, liquidated or unliquidated, asserted or unasserted, matured or
unmatured, of Borrower and their respective Subsidiaries as of the dates thereof
in accordance with GAAP (except, in the case of interim Financial Statements,
for normal year-end adjustments and for the absence of footnotes), and since
such dates, there has been no material adverse change in the business,
operations, financial condition, Properties or prospects of Borrower and its
Subsidiaries, taken as a whole.
4.7. Subsidiaries. Except as set forth on Schedule 4.7 hereto, Borrower
has no Subsidiaries. There are no restrictions on Borrower or any of its
Subsidiaries which prohibit or otherwise restrict the transfer of cash or other
assets from any Subsidiary of Borrower to Borrower, other than prohibitions or
restrictions existing under or by reason of this Agreement and applicable law.
4.8. Binding Obligations. Each of the Loan Documents, upon execution
and delivery, will constitute a legal, valid and binding obligation of Borrower
enforceable against Borrower in accordance with its terms, except as the same
may be limited by reorganization, bankruptcy, insolvency, moratorium or other
laws affecting generally the enforcement of creditors' rights.
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4.9. Marketable Title. Borrower and each Subsidiary has good and
marketable title to all of its real property and good title to all of its other
properties and assets shown on the Financial Statements, except such properties
or assets as have been disposed of since the date of such Financial Statements
in the ordinary course of business. Except for Permitted Liens, none of the
assets of Borrower and its Subsidiaries are subject to any mortgage, pledge,
security interest, title retention lien or other encumbrance. Except to evidence
Permitted Liens, no financing statement or similar instrument which names
Borrower or its Subsidiaries as debtor or relates to any of its property, has
been filed in any state or other jurisdiction and remains unreleased, and
Borrower has not signed any financing statement or similar instrument or
security agreement authorizing the secured party thereunder to file any such
financing statement or similar instrument.
4.10. Indebtedness. Except as shown on the Financial Statements, except
trade debt incurred in the ordinary course of business since the date of the
Financial Statements, and except as shown on Schedule 4.10 hereto, neither
Borrower nor any of its Subsidiaries has any Indebtedness.
4.11. Default. Neither Borrower nor any of its Subsidiaries has
committed or suffered to exist any default or any circumstance which with
notice, lapse of time, or both, would constitute a default under the terms and
conditions of any trust, debenture, indenture, note, bond, instrument, mortgage,
lease, agreement, order, decree, or judgment to which Borrower or such
Subsidiary is a party or by which it or its assets may be bound or affected,
which default(s), singly or in the aggregate, could have a Material Adverse
Effect.
4.12. Tax Returns. All tax returns or reports of Borrower and its
Subsidiaries required by law have been filed, and all taxes, assessments,
contributions, fees and other governmental charges (other than those presently
payable without penalty or interest and those currently being contested in good
faith and against which adequate reserves have been established) upon Borrower,
its Subsidiaries or their assets, Properties or income, which are payable, have
been paid. The United States income tax returns of Borrower and its Subsidiaries
have been audited by the Internal Revenue Service through the fiscal year ended
November 30, 1993.
4.13. Litigation. Except as set forth on Schedule 4.13 hereto, no
litigation or proceeding of any Governmental Authority or other Person is
presently pending or, to Borrower's knowledge, threatened, nor has any claim
been asserted, against Borrower or any of its Subsidiaries which, in the
reasonable judgment of Borrower, singly or in the aggregate, could have a
Material Adverse Effect.
4.14. ERISA. Borrower, each Subsidiary and each ERISA Affiliate of
either is in compliance in all material respects with all applicable provisions
of ERISA, and none of such Persons has incurred any material liability to the
PBGC. No Reportable Event, has occurred under, nor has there occurred any
complete or partial withdrawal from, nor has there occurred any other event
which would constitute grounds for termination of or the appointment of a
trustee to administer any Plan (including any Multi-employer Plan) maintained
for employees of Borrower, any Subsidiary or any ERISA Affiliate of either.
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4.15. Full Disclosure. No information, exhibit, memorandum, or report
(excluding estimated future operating results) furnished by Borrower to the
Lenders in connection with the negotiation of the Facilities contains any
material misstatement of fact, or omits to state any fact necessary to make the
statements contained therein not materially misleading, and all estimated future
operating results, if furnished, were prepared on the basis of assumptions,
data, information, tests or other conditions believed to be valid or accurate or
to exist at the time such estimates were prepared and furnished. To the
knowledge of Borrower and its Subsidiaries, there presently exists no fact or
circumstance relative to Borrower or any Subsidiary, whether or not disclosed,
which, singly or in the aggregate, is presently anticipated to have a Material
Adverse Effect.
4.16. Contingent Obligations. Except for the endorsements of Borrower
and its Subsidiaries of negotiable instruments for deposit or collection in the
ordinary course of business and except as set forth on Schedule 4.16 hereto,
neither Borrower nor any of its Subsidiaries is a party to any Contingent
Obligations.
4.17. Licenses. Borrower and each Subsidiary possesses such franchises,
licenses, permits, patents, copyrights, trademarks, and consents of appropriate
Governmental Authorities as are necessary to own its Properties and to carry on
its business, except where the failure to possess the same, singly or in the
aggregate, could not have a Material Adverse Effect.
4.18. Compliance with Law. Borrower and each Subsidiary is in
compliance in all material respects with all applicable requirements of law and
of all Governmental Authorities, noncompliance with which, singly or in the
aggregate, could have a Material Adverse Effect.
4.19. Force Majeure. Neither the business nor the Properties of
Borrower or any Subsidiary are presently affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty that,
singly or in the aggregate, could have a Material Adverse Effect.
4.20. Margin Stock. (a) Neither Borrower nor any of its Subsidiaries is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations G, T, U or X of the
Board of Governors of the Federal Reserve System), and (b) no part of the
proceeds of the Facilities will be used for the purpose of purchasing or
carrying margin stock, as above defined.
4.21. Approvals. No authorization, consent, approval or any form of
exemption of any Governmental Authority not obtained is required in connection
with the issuance, execution or performance of any Loan Documents by Borrower.
4.22. Insolvency; Financial Condition. Neither Borrower nor any of its
Subsidiaries is "insolvent" within the meaning of that term as defined in the
Federal Bankruptcy Code, and Borrower and each Subsidiary is able to pay its
debts as they mature. Neither Borrower nor any of its Subsidiaries is entering
into the arrangements contemplated hereby with actual intent to hinder, delay or
defraud either present or future creditors. As of the initial funding of the
Facilities, on a pro forma
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basis: (a) the present fair salable value of the respective assets of each of
Borrower and its Subsidiaries will exceed its respective liabilities, (b)
neither Borrower nor any of its Subsidiaries has incurred or intends to, or
believes that it will, incur liabilities beyond its ability to pay such
liabilities as they mature, and (c) each of Borrower and its Subsidiaries will
have sufficient capital with which to conduct its present and proposed business
and the Property of Borrower and its Subsidiaries does not constitute
unreasonably small capital with which to conduct its present or proposed
business.
4.23. Regulation. Neither Borrower nor any of its Subsidiaries is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or a "holding company" or an "affiliate of a holding company" or a
"subsidiary of a holding company" within the meanings of the Public Utility
Holding Company Act of 1935, as amended.
4.24. Environmental Matters. In the ordinary course of its business,
Borrower conducts an ongoing review of the effect of Environmental Laws on the
business, operations and Properties of Borrower and its Subsidiaries, in the
course of which it identifies and evaluates associated liabilities and costs
(including any capital or operating expenditures required for clean-up or
closure of Properties presently owned or operated, any capital or operating
expenditures required to achieve or maintain compliance with environmental
protection standards imposed by Environmental Laws or as a condition of any
license, permit or contract, any related constraints on operating activities,
including any periodic or permanent shutdown of any facility or reduction in the
level of or change in the nature of operations conducted thereat and any actual
or potential liabilities to third parties, including employees, and any related
costs and expenses). On the basis of this review, Borrower has reasonably
concluded that, except as disclosed in writing by Borrower to the Lenders and
the Agent as of the Closing Date, to the best of its knowledge after due inquiry
(provided that clause (e) below is not subject to any such knowledge
qualification except as specifically provided in clause (e)):
(a) All facilities and Property (including underlying
groundwater) owned, leased or operated by Borrower or any Subsidiary
have been, and continue to be, owned, leased or operated by Borrower or
any Subsidiary in compliance with all applicable Environmental Laws,
noncompliance with which could not, singly or, in the aggregate, have a
Material Adverse Effect;
(b) There have been no past unresolved, and there are no
pending or threatened,
(i) claims, complaints, notices or inquiries, to,
or requests for information received by, Borrower or any
Subsidiary with respect to any alleged violation of any
Environmental Law, that, singly or in the aggregate, have or
may reasonably be expected to have a Material Adverse Effect,
or
(ii) claims, complaints, notices or inquiries to,
or requests for information received by, Borrower or any
Subsidiary regarding potential liability under any
Environmental Law or under any common law theories relating to
operations or the condition of any facilities or Property by
Borrower or any
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Subsidiary that, singly or in the aggregate, have, or may
reasonably be expected to have a Material Adverse Effect.
(c) There have been no releases of Hazardous Materials, at, on
or under any Property now or previously owned or leased by Borrower or
any Subsidiary that, singly or in the aggregate, have, or may
reasonably be expected to have, a Material Adverse Effect;
(d) Borrower and each Subsidiary have been issued and are in
compliance with all permits, certificates, approvals, licenses and
other authorizations relating to environmental matters and necessary
for their businesses, the noncompliance with which could not, singly or
in the aggregate, have a Material Adverse Effect;
(e) No Property now or previously owned, leased or operated by
Borrower or any Subsidiary is listed or, to the best knowledge of
Borrower, proposed for listing on the National Priorities List pursuant
to CERCLA (or any similar Environmental Law) or on the CERCLIS or on
any other federal or state list of sites requiring investigation or
clean-up, to the extent that any such listing, singly or in the
aggregate, may have, or may reasonably be expected to have, a Material
Adverse Effect;
(f) There are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under any Property
now or previously owned, leased or operated by Borrower or any
Subsidiary that, singly or in the aggregate, have, or may reasonably be
expected to have, a Material Adverse Effect;
(g) None of Borrower or any Subsidiary has directly
transported or directly arranged for the transportation of any
Hazardous Material to any location (i) which is listed or proposed for
listing on the National Priorities List pursuant to CERCLA (or any
similar Environmental Law) or on the CERCLIS or on any federal or state
list, to the extent that any such listing, singly or in the aggregate,
may have, or may reasonably be expected to have, a Material Adverse
Effect, or (ii) which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims
against Borrower or such Subsidiary for any remedial work, damage to
natural resources or personal injury, including claims under any
Environmental Law, to the extent that such claims, singly or in the
aggregate, may have, or may reasonably be expected to have, a Material
Adverse Effect;
(h) There are no polychlorinated biphenyl, radioactive
materials or friable asbestos present at any Property now or previously
owned or leased by Borrower or any Subsidiary that, singly or in the
aggregate, have, or may reasonably be expected to have, a Material
Adverse Effect; and
(i) No condition exists at, on or under any Property now or
previously owned or leased by Borrower or any Subsidiary which, with
the passage of time, or the giving of notice or both, would give rise
to material liability under any Environmental Law that, singly or in
the aggregate have, or may reasonably be expected to have, a Material
Adverse Effect.
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4.25. General. All statements contained in any certificate or Financial
Statement delivered by or on behalf of Borrower or any Subsidiary to the Lenders
under or in connection with any Loan Document shall constitute representations
and warranties made by Borrower hereunder.
SECTION 5
Covenants
5.1. Affirmative Covenants. Until the Obligations are paid in full, and
so long as any Commitment is outstanding, unless the Required Lenders shall
otherwise consent in writing, Borrower will:
5.1.1. Financial Reporting. Furnish the Lenders:
(a) As soon as practicable, but in any event
within ninety (90) days after the end of each fiscal year of
Borrower, Consolidated and consolidating Financial Statements
of Borrower and its Consolidated Subsidiaries, such
Consolidated Financial Statements to have been certified after
audit by certified public accountants acceptable to the
Required Lenders, including a balance sheet and statements of
income, retained earnings and cash flows, together with the
accompanying notes to such Financial Statements, all prepared
in accordance with GAAP on a Consolidated and consolidating
basis consistent with prior periods, unless specifically
otherwise noted thereon, and accompanied by (i) the
unqualified opinion of such accountants that such Consolidated
Financial Statements present fairly the Consolidated financial
position of Borrower and its Consolidated Subsidiaries as of
the date thereof and the results of their Consolidated
operations for the fiscal year then ended, (ii) the management
letter of such accountants describing any deficiencies in the
internal controls or other matters of significance discovered
during the course of the audit, (iii) a certificate of such
accountants to the effect that, in the course of their
examination, they have obtained no knowledge of any Default or
Unmatured Default, or if, in the opinion of such accountants,
any Default or Unmatured Default shall exist, stating the
nature and status thereof, and (iv) a Compliance Certificate
duly completed and signed by the chief executive officer or
chief financial officer of Borrower;
(b) As soon as practicable, but in any event
within forty-five (45) days after the end of each of
Borrower's first three (3) fiscal quarters, similar unaudited
Consolidated Financial Statements of Borrower and its
Consolidated Subsidiaries as of the end of such quarter and
the results of their operations for the portion of the fiscal
year then elapsed, all prepared in accordance with GAAP on a
Consolidated basis consistent with prior periods (except for
normal year-end adjustments and for the absence of footnotes),
unless specifically otherwise noted thereon, and
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accompanied by a Compliance Certificate duly completed and
signed by the chief executive officer or chief financial
officer of Borrower;
(c) As soon as practicable, but in any event
within five Business Days after Borrower becomes aware
thereof, a written statement signed by the chief executive or
chief financial officer of Borrower as to the occurrence of
any Default or Unmatured Default stating the specific nature
thereof, Borrower's intended action to cure the same and the
time period in which such cure is to occur;
(d) As soon as practicable, but in any event
within ten (10) Business Days after Borrower becomes aware
thereof, a written statement describing any litigation
instituted by or against Borrower which, in the reasonable
judgment of Borrower, singly or in the aggregate, could have a
Material Adverse Effect;
(e) As soon as practicable, but in any event
within ten (10) Business Days after Borrower becomes aware
thereof, a written statement signed by the chief executive
officer or the chief financial officer of Borrower describing
any Reportable Event which has occurred with respect to any
Plan and the action which Borrower proposes to take with
respect thereto; and within two hundred seventy (270) days
after the close of each fiscal year, a statement of the
Unfunded Liabilities of each Single Employer Plan, certified
as correct by an actuary enrolled under ERISA;
(f) As soon as practicable, but in any event
within ten (10) Business Days after the filing with the
Securities and Exchange Commission, or any successor thereto,
or any state securities Governmental Authority, copies of all
registration statements and all periodic and special reports
required or permitted to be filed under federal or state
securities laws and regulations;
(g) As soon as practicable, but in any event
within ten (10) Business Days after receipt by Borrower, a
copy of any notice, complaint, Lien, inquiry or claim (i) to
the effect that Borrower or any of its Subsidiaries is or may
be liable to any Person as a result of the release by
Borrower, any of its Subsidiaries, or any other Person of any
Hazardous Material into the environment, or (ii) alleging any
violation of any Environmental Law by Borrower or any of its
Subsidiaries, which, in either case, singly or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect; and
(h) Such other information as the Agent or any of
the Lenders may from time to time reasonably request,
including, without limitation, such information or
certifications to evidence compliance with Section 5.1.14.
5.1.2. Good Standing. Maintain, and cause each Subsidiary to
maintain, its corporate existence, good standing (if applicable), and
right to do business in its jurisdiction of incorporation and all
requisite authority to conduct its business in each jurisdiction in
which
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such business is conducted, except where the failure to do so, singly
or in the aggregate, could have a Material Adverse Effect and except as
permitted by Section 5.2.6.
5.1.3. Taxes, Etc. Pay and discharge, and cause each
Subsidiary to pay and discharge, all taxes, assessments, judgments,
orders, and governmental charges or levies imposed upon it or on its
income or profits or upon its Property prior to the date on which
penalties attach thereto and all lawful claims which, if unpaid, may
become a Lien or charge upon the Property of Borrower or any
Subsidiary, provided that neither Borrower nor any of its Subsidiaries
shall be required to pay any tax, assessment, charge, judgment, order,
levy or claim, if such payment is being contested diligently, in good
faith, and by appropriate proceedings which will prevent foreclosure or
levy upon its Property and adequate reserves against such liability
have been established.
5.1.4. Maintain Properties. Maintain, and cause each
Subsidiary to maintain, all Properties and assets used by, or useful
to, Borrower or such Subsidiary in the ordinary course of its business
in good working order and condition and suitable for the purpose for
which it is intended, and from time to time, make any necessary repairs
and replacements.
5.1.5. Insurance. Maintain, and cause each Subsidiary to
maintain, with financially sound and reputable insurance companies
rated not less than "A-" by A.M. Best Company, insurance on all their
Property in such amounts and covering such risks as is consistent with
sound business practice, and Borrower shall furnish any Lender upon
request full information as to the insurance carried.
5.1.6. Books and Records. Keep, and cause each Subsidiary to
keep, proper books of account in which full, true and correct entries
will be made of all dealings and transactions of, and in relation to,
the business and affairs of Borrower and its Subsidiaries, and, at all
reasonable times, and as often as the Lenders may request, permit
authorized representatives of the Lenders to (a) have access to the
premises and Properties of Borrower and its Subsidiaries and to the
records relating to the operations of Borrower and its Subsidiaries,
(b) make copies of or excerpts from such records, (c) discuss the
affairs, finances and accounts of Borrower and its Subsidiaries with
and be advised as to the same by the chief executive and financial
officers of Borrower and each Subsidiary, and (d) audit and inspect
such books, records, accounts, memoranda and correspondence at all
reasonable times, to make such abstracts and copies thereof as the
Lenders may deem necessary, and to furnish copies of all such
information to any proposed Purchaser or Participant, provided,
however, that Borrower's Obligation to reimburse the Agent and the
Lenders for costs and expenses associated with performance of periodic
audits of the records of Borrower and its Subsidiaries by the Agent's
auditors shall be limited to one audit visit per year, unless unusual
and adverse circumstances require, in the reasonable opinion of the
Agent, more frequent visits.
5.1.7. Reports. File, and cause each Subsidiary to file, as
appropriate, on a timely basis, annual reports, operating records and
any other reports or filings required to be made
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with any Governmental Authority, except where the failure to make any
such filing, singly or in the aggregate, could not have a Material
Adverse Effect.
5.1.8. Licenses. Maintain, and cause each Subsidiary to
maintain, in full force and effect all operating permits, licenses,
franchises, and rights used by it in the ordinary course of business,
except where the failure to maintain the same, singly or in the
aggregate, could not have a Material Adverse Effect.
5.1.9. Conduct of Business. Carry on and conduct, and cause
each Subsidiary to carry on and conduct, its business in substantially
the same manner and in substantially the same fields of enterprise as
currently conducted.
5.1.10. Compliance with Laws. Comply, and cause each
Subsidiary to comply, in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards
to which Borrower or such Subsidiary may be subject, including, without
limitation, ERISA and all Environmental Laws, except where such
noncompliance, singly or in the aggregate, could not have a Material
Adverse Effect.
5.1.11. Trade Accounts. Pay all trade accounts in accordance
with past custom and industry practice.
5.1.12. Use of Proceeds. Use the proceeds of the Facilities
solely for the purposes herein described.
5.1.13. Loan Payments. Duly and punctually pay or cause to be
paid principal and interest on the Facilities in lawful money of the
United States at the time and places and in the manner specified herein
according to the stated terms hereof.
5.1.14. Environmental Covenant. (a) Use, operate and maintain
all of its Properties in compliance with all applicable Environmental
Laws, keep or acquire all necessary permits, approvals, certificates,
licenses and other authorizations relating to environmental matters in
effect and remain in compliance therewith, and handle all Hazardous
Materials in compliance with all applicable Environmental Laws, except
where the failure to do any of the foregoing, singly or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect, (b) use its reasonable best efforts to have dismissed with
prejudice, within ninety (90) days after filing thereof, any actions or
proceedings against Borrower or any of its Subsidiaries relating to
compliance with Environmental Laws which, in the reasonable opinion of
the Agent, singly or in the aggregate, could have a Material Adverse
Effect, and (c) diligently pursue cure of any material underlying
environmental problem which forms the basis of any claim, complaint,
notice, Lien, inquiry, proceeding or action referred to in Section
5.1.1(g). If Borrower or any Subsidiary is notified of any event
described in Section 5.1.1(g), Borrower shall, upon the request of
Required Lenders, establish appropriate reserves against such potential
liabilities and engage a firm or firms of engineers or environmental
consultants appropriately qualified to determine
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as quickly as practical the extent of contamination and the potential
financial liability of Borrower or any of its Subsidiaries with respect
thereto, and the Lenders shall be provided with a copy of any report
prepared by such firm or by any Governmental Authority as to such
matters as soon as any such report becomes available to Borrower or any
Subsidiary. The selection of any engineers or environmental consultants
engaged pursuant to the requirements of this Section shall be subject
to the approval of the Required Lenders, which approval shall not be
unreasonably withheld or delayed.
5.1.15. Change Name and Place of Business. Provide the Agent
not less than sixty (60) days written notice prior to changing its
corporate name or principal place of business.
5.1.16. Adjusted Consolidated Net Worth. Maintain at all times
Adjusted Consolidated Net Worth of not less One Hundred Ten Million
Dollars ($110,000,000) as of August 31, 1997, and thereafter increasing
effective as of the last day of each fiscal year by an amount equal to
Fifty Percent (50%) of Net Income (without reduction for any net
losses) for such fiscal year.
5.1.17. Leverage Ratio. Maintain its Leverage Ratio of not
greater than (a) 3.25 to 1.0 at all times through and including
November 29, 1998, (b) 3.0 to 1.0 as of November 30, 1998 and at all
times through and including November 29, 1999, and (c) 2.5 to 1.0 as of
November 30, 1999 and at all times thereafter.
5.1.18. Fixed Charge Coverage Ratio. Maintain a Fixed Charge
Coverage Ratio of not less than (a) 1.20 to 1.0 at all times through
and including November 29, 1999, and (b) 1.25 to 1.0 as of November 30,
1999 and at all times thereafter.
5.2. Negative Covenants. Until the Obligations are paid in full, and so
long as any Commitment is outstanding, unless the Required Lenders shall
otherwise consent in writing, Borrower will not, and will not permit any
Subsidiary to:
5.2.1. Dispose of Property. Sell, transfer, lease or otherwise
dispose of its assets (including, without limitation, stock in any
Subsidiary), Properties, or business, or discount, with or without
recourse, any of its accounts or notes receivable, except (a) sales
from Inventory in the ordinary course of business, (b) dispositions of
fixed assets no longer used or useful in the operation of its business,
provided, (i) any such disposition is for cash and for fair value, (ii)
at the time of such disposition there exists no Default or Unmatured
Default and no Default or Unmatured Default would be occasioned
thereby, and (iii) the aggregate net after-tax sale proceeds from such
dispositions do not exceed Fifteen Million Dollars ($15,000,000) during
any fiscal year, (c) transfers to or from Wholly-Owned Subsidiaries of
Borrower, (d) the issuance of stock constituting directors' qualifying
shares in Foreign Subsidiaries, (e) the sale or factoring of accounts
receivable, and (f) such other dispositions of Property, which when
coupled with dispositions of fixed assets pursuant to clause (b) above,
do not exceed, in the aggregate, Twenty-Two Million Five Hundred
Thousand Dollars ($22,500,000) during any fiscal year.
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5.2.2. Liens and Encumbrances. Create or suffer to exist any
Lien in, of or on any of its Property, except (a) Liens for taxes or
assessments which are not yet due, Liens for taxes or assessments or
Liens of judgments which are being contested, appealed or reviewed in
good faith by appropriate proceedings which prevent foreclosure of any
such Lien or levy of execution thereunder and against which Liens, if
any, adequate insurance or reserves have been provided, (b) pledges or
deposits to secure payment of workers' compensation obligations and
deposits or indemnities to secure public or statutory obligations or
for similar purposes, (c) any Liens and other security interests in
favor of the Lenders and/or the Agent under the Loan Documents, (d)
Liens imposed by law, such as carrier's, warehousemen's and mechanics'
Liens and other similar Liens arising in the ordinary course of
business which secure payment of obligations not more than sixty (60)
days past due, (e) utility easements, building restrictions, zoning
ordinances and such other encumbrances or charges against real property
as are of a nature generally existing with respect to Properties of a
similar character and which do not in any material way affect the
marketability of the same or interfere with the use thereof in the
business of a Person, (f) lessors' interests under Capitalized Leases,
(g) Liens created in the ordinary course of Borrower's or a
Subsidiary's business which constitute purchase money security
interests encumbering only the Property acquired by Borrower or its
Subsidiary and the Proceeds thereof, and securing only the purchase
price thereof, and (h) those further encumbrances (if any) shown on
Schedule 5.2.2 hereto (collectively, "Permitted Liens").
5.2.3. Indebtedness. Create, incur, assume or suffer to exist
any Indebtedness, except (a) that in existence as of the date hereof
and disclosed in the Financial Statements, (b) trade accounts and
normal business accruals payable in the ordinary course of business,
(c) Indebtedness to the Lenders pursuant to the Loan Documents, (d)
Indebtedness arising under Rate Hedging Agreements, (e) Indebtedness to
Borrower or any Wholly-Owned Subsidiary of Borrower, (f) other
Indebtedness of Borrower and its Subsidiaries not exceeding in the
aggregate (i) One Hundred Thirty Million Dollars ($130,000,000)
outstanding at any time through November 29, 1999, and (ii) One Hundred
Fifty Million Dollars ($150,000,000) outstanding at any time as of
November 30, 1999 and thereafter, provided that, for purposes of
funding an Acquisition, the amounts specified in (i) and (ii) hereof
shall be increased, up to an additional aggregate amount of One Hundred
Million Dollars ($100,000,000), by an amount equal to the amount of
equity capital raised by Borrower in the preceding 12-month period from
the date of determination, and (g) as set forth on Schedule 5.2.3
hereto.
5.2.4. Investments and Acquisitions. Make or suffer to exist
any Investment (including, without limitation, Investments in
Subsidiaries), or commitments therefor, or create any Subsidiary or
remain a partner in any partnership or joint venture, or make any
Acquisition of any Person, except:
(a) short-term obligations of, or fully guaranteed by, the
United States of America,
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(b) commercial paper rated in one of the two highest rating
categories of either Standard & Poor's Ratings Services, a division of
McGraw Hill Companies, Inc. or Moody's Investors Service, Inc.,
(c) demand deposit accounts maintained in the ordinary course
of business,
(d) certificates of deposit issued by, and time deposits with,
commercial banks having its outstanding indebtedness then rated "A-" or
higher by Standard & Poor's Ratings Services, a division of McGraw Hill
Companies, Inc. or "A3" or higher by Moody's Investors Service, Inc.,
(e) existing Investments in Subsidiaries and other Investments
in existence on the date hereof,
(f) as permitted by Section 5.2.7,
(g) the currently planned single Acquisition by a Subsidiary
of Borrower not exceeding a total purchase price (including the
assumption of Indebtedness) of Fifteen Million Dollars ($15,000,000),
provided no Default or Unmatured Default has occurred and is continuing
at the time of such Acquisition or will result or occur after
consummation of such Acquisition, and
(h) Other Acquisitions, provided (i) no Default or Unmatured
Default has occurred and is continuing at the time of an Acquisition or
will result or occur after consummation of such Acquisition, (ii)
Borrower provides satisfactory written evidence to the Agent and the
Lenders that it is in compliance with the covenants contained in
Section 5 both immediately before and after giving effect to
consummation of the subject Acquisition, and further provides a
satisfactory pro forma Compliance Certificate showing compliance with
all financial covenants on a consolidated basis for Borrower, its
Subsidiaries and the target business or entity to be acquired for the
preceding 12-month period after giving effect to the proposed terms of
such Acquisition, (iii) the entity or business acquired is in the
substantially same line of business as Borrower or its Subsidiaries or
reasonably related thereto, (iv) in the event of a merger to which
Borrower is a party, Borrower is the surviving entity, (v) subject to
(vi) below, the aggregate cash portion of the total purchase price
(including the assumption of Indebtedness) for all Acquisitions
(including after giving effect to the subject Acquisition) consummated
in the preceding 12-month period from the date of determination is not
greater than Fifty Million Dollars ($50,000,000), (vi) to the extent
the total purchase price (including the assumption of Indebtedness),
whenever due, of an Acquisition would exceed Fifty Million Dollars
($50,000,000) in the aggregate for all Acquisitions (including after
giving effect to the subject Acquisition) consummated in the preceding
12-month period from the date of determination, Borrower must provide
satisfactory evidence to the Agent and the Lenders that not less than
Fifty Percent (50%) of such excess amount will be funded by Borrower's
issuance of stock or from the proceeds of an equity offering, and (vii)
the total aggregate purchase price (including the assumption of
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Indebtedness) for all Acquisitions (including the subject Acquisition)
consummated after the date hereof does not exceed Two Hundred Fifty
Million Dollars ($250,000,000).
5.2.5. Contingent Obligations. Assume, guarantee, suffer to
exist or otherwise become liable for any Contingent Obligations, except
(a) for endorsements by Borrower and its Subsidiaries of negotiable
instruments for deposit or collection in the ordinary course of
business, and (b) as permitted by Section 5.2.3 and as set forth on
Schedule 5.2.5 hereto.
5.2.6. Mergers and Consolidations. Merge or consolidate with
any other Person, except (a) a Subsidiary may merge into Borrower or a
Wholly-Owned Subsidiary, and (b) as permitted by Section 5.2.4.
5.2.7. New Subsidiaries. Create any new Subsidiary, except
Borrower may create (but not acquire except pursuant to Section 5.2.4)
Subsidiaries in substantially the same lines of business as currently
conducted by Borrower or any of its Subsidiaries.
5.2.8. Accounting Policies. Change its fiscal year or any of
its significant accounting policies, except to the extent necessary to
comply with GAAP.
5.2.9. Change of Business. Make any material change in the
nature of its business as carried on at the date of this Agreement.
5.2.10. Benefit Plans. Permit any Reportable Event under, or
any partial or complete withdrawal from, or any other condition to
exist in connection with any Plan which might constitute grounds for
the PBGC to institute proceedings to have the Plan terminated or a
trustee appointed to administer the Plan; or engage in, or permit to
exist or occur any other condition, event or transaction with respect
to any Plan which, singly or in the aggregate, could have a Material
Adverse Effect.
5.2.11. Affiliates. Enter into any transaction (including,
without limitation, the purchase or sale of any Property or service)
with, or make any payment or transfer to, any Affiliate except in the
ordinary course of business and pursuant to the reasonable requirements
of Borrower's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to Borrower or such Subsidiary than
Borrower or such Subsidiary would obtain in a comparable arms-length
transaction.
5.2.12. Sale and Leaseback. Enter into any Sale and Leaseback
Transaction.
5.2.13. Operating Leases; Rentals. Enter into or remain liable
upon any Operating Lease, except for Operating Leases with annual
Rentals aggregating to not more than Ten Million Dollars ($10,000,000).
5.2.14. Dividends, Etc. (a) Declare or pay any dividend in
cash or other Property (other than a dividend payable solely in the
form of common stock of Borrower or a dividend
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payable by any Subsidiary to Borrower), if, at the time of such
declaration or payment, (i) there shall have occurred and then be
continuing any Default hereunder, or (ii) the payment of such dividend
(assuming, in the case of a declaration, that the payment of such
dividend were made immediately upon such declaration) would cause a
Default hereunder; nor (b) redeem, repurchase, or otherwise acquire or
retire any of the capital stock of Borrower at any time outstanding.
5.2.15. Restrictive Agreements. Enter into any agreement
(excluding any restrictions existing under the Loan Documents)
prohibiting (a) the (i) creation or assumption of any Lien upon its
Property, except as provided in the documents governing the Senior
Notes, or (ii) ability of Borrower to amend or otherwise modify this
Agreement or any other Loan Document, except the Lenders acknowledge
that the documents governing the Senior Notes restrict Borrower's
ability to incur Indebtedness beyond certain limits as provided
therein; or (b) the ability of any Subsidiary to make any payments,
directly or indirectly, to Borrower by way of dividends, advances,
repayments of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or
indirectly, to Borrower, except as provided in subsection (c) of the
definition of "Permitted Debt" as defined in the documents governing
the Senior Notes.
SECTION 6
Conditions Precedent to Loans
6.1. Conditions to Initial Advance. The obligation of the
Lenders to make the initial Advance under the Facilities (including the
issuance of a Letter of Credit) is subject to each of the following
conditions precedent:
6.1.1. Secretary's Certificates. Borrower shall have furnished
to the Agent (with sufficient copies for the Lenders), and the Agent
shall have determined satisfactory in all respects, certificates, each
dated as of the date of the initial Advance hereunder, signed by the
Secretary or an Assistant Secretary of Borrower, respectively,
certifying, in each case and as the case may be, as true, accurate and
complete, and attaching (a) copies of Borrower's articles or
certificate of incorporation (which shall bear the recent certification
by the appropriate Secretary of State), (b) copies of Borrower's code
of by-laws or regulations, as amended, (c) original certificates of
existence and/or good standing issued as of a recent date by the
Secretaries of State of the respective states of incorporation, of
Borrower, (d) original certificates issued by the appropriate
Secretaries of State as of a recent date evidencing the qualification
by Borrower to do business as a foreign corporation in each
jurisdiction in which Borrower conducts business, (e) copies of
resolutions adopted, respectively, by the Boards of Directors of
Borrower appropriately authorizing the transactions contemplated hereby
and specifying the names and capacities of those Persons authorized to
execute the Loan
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Documents, as the case may be, and (f) the incumbency and genuine
signatures of each officer of Borrower, authorized to sign the Loan
Documents. (The Lenders shall be entitled to rely upon such
certificates until informed in writing of any change by Borrower.)
6.1.2. Insurance. Borrower shall have furnished to the Agent
evidence of the insurance required by this Agreement in a form
reasonably satisfactory to the Agent.
6.1.3. Loan Documents. Each of the Loan Documents shall have
been executed and delivered by Borrower to the Agent.
6.1.4. Opinion of Counsel. The Agent shall have received a
favorable written opinion of counsel to Borrower, dated of even date
herewith, in form and substance acceptable to the Lenders.
6.1.5. UCC Searches. The Agent shall have received
satisfactory return after search in accordance with the Uniform
Commercial Code or other applicable law in such governmental offices as
the Agent shall have deemed appropriate.
6.1.6. Litigation. No injunction or temporary restraining
order which, in the judgment of the Agent or the Required Lenders,
would prohibit the making of the Loans; and no litigation has been
filed which, singly or in the aggregate, could reasonably be expected
to have a Material Adverse Effect on Borrower and its Subsidiaries,
taken as a whole.
6.1.7. Solvency Certificate. The Agent shall have received a
certificate from the chief financial officer of Borrower in a form
reasonably satisfactory to the Agent supporting the conclusions that,
Borrower and its Subsidiaries, on a Consolidated basis, are solvent and
will be solvent subsequent to incurring the Indebtedness, will be able
to pay their debts and liabilities as they become due, and will not be
left with unreasonably small capital with which to engage in their
businesses.
6.1.8. Environmental Matters. If requested by the Agent, the
Agent shall have received updates of past environmental audits
furnished to the Agent, in form, substance and scope satisfactory to
the Required Lenders, which updates shall not disclose any condition
which, with the passage of time, or the giving of notice or both, would
give rise to any liability that, singly or in the aggregate, could have
a Material Adverse Effect and shall not otherwise disclose that
Borrower is in violation of Environmental Laws, noncompliance with
which could, singly or in the aggregate, have a Material Adverse
Effect.
6.1.9. Existing Facilities. Concurrently with the initial
Advance under the Facilities, Borrower shall have prepaid and repaid
all outstanding obligations under that certain Credit Agreement as of
April 8, 1996, as amended, among Borrower, the Agent and the lenders
party thereto, and any existing commitments of such lenders shall have
been terminated to the satisfaction of the Agent.
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6.1.10. Legal. All legal (including tax implications) and
regulatory matters relative to the Loans shall be satisfactory to the
Required Lenders.
6.1.11. Regulations. Borrower shall have complied with all
applicable requirements of Regulations G, T, U, and X of the Board of
Governors of the Federal Reserve System.
6.1.12. No Default; No Material Adverse Change. The Agent
shall have received a certificate signed by the chief executive officer
or chief financial officer of Borrower stating that on the Closing Date
(a) no Default or Unmatured Default has occurred and is continuing, and
(b) no material adverse change in the business, condition (financial or
otherwise), operations, performance, properties, or prospects of
Borrower and its Subsidiaries, taken as a whole, since August 31, 1997
has occurred.
6.1.13. Commitment Fees and Expenses. The fees described in
Section 2.6 shall have been paid by Borrower, and Borrower shall have
reimbursed the Agent for all reasonable legal fees and other expenses
of the Agent in connection with the Facilities.
6.1.14. Senior Notes. The terms and conditions of the Senior
Notes shall be consistent with those described in Borrower's
preliminary offering materials and the Lenders shall have received (a)
copies of the documents governing the Senior Notes, and (b) a
certificate signed by an Authorized Officer of Borrower stating that
the terms and conditions set forth in the final documents governing the
Senior Notes are not materially different than the terms and conditions
described in such preliminary offering materials. In addition, Borrower
shall have received the proceeds from the issuance of the Senior Notes.
6.1.15. Money Transfer Instructions. Borrower has furnished to
the Agent (with sufficient copies for the Lenders) written money
transfer instructions, in substantially the form of Exhibit D hereto,
addressed to the Agent and signed by an Authorized Officer, together
with such other related money transfer authorizations as the Agent may
have reasonably requested.
6.1.16. Additional Documentation. The Agent shall have
received such other documents, instruments, financing statements,
assignments, waivers, certificates, reaffirmations, consents and
opinions as the Agent may reasonably request.
6.2. Conditions to Subsequent Advances. The obligation of the
Lenders to make each subsequent Advance or for NBD to issue any Letter
of Credit under the Facilities is subject to each of the following
conditions precedent:
6.2.1. No Default. No Default or Unmatured Default shall have
occurred and be continuing.
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6.2.2. Representations and Warranties. Each representation and
warranty contained in Section 4 shall be true and correct in all
material respects as of the date of such Advance, except to the extent
any such representation or warranty relates solely to an earlier date.
6.2.3. Legal Matters. All legal matters incident to the making
of such Advance shall be reasonably satisfactory to the Agent and its
counsel.
6.2.4. Expenses. Borrower shall have reimbursed the Agent for
all legal fees and other reasonable expenses incurred by the Agent in
connection with the Facilities.
6.3. General. Each request for an Advance under the Facilities
shall constitute a representation and warranty by Borrower that the
applicable conditions contained in this Section 6 have been satisfied.
SECTION 7
Default
The occurrence of any of the following events shall be deemed a Default
hereunder:
(a) Any representation or warranty made by or on behalf of
Borrower to the Lenders or the Agent under or in connection with any
Loan Document, shall be false in any material respect as of the date on
which made;
(b) Borrower fails to make any payment of principal of, or
interest on, any of the Notes when due, or any fee or other payment
Obligation within five days after the same becomes due;
(c) The breach by Borrower of any of the covenants contained
in Sections 5.1.1 through 5.1.16 (other than Sections 5.1.1(c) and
5.1.13) which breach remains uncured for a period which is the earlier
of twenty (20) days after the occurrence thereof or ten (10) days after
written notice to Borrower from the Agent or a Lender; or the breach by
Borrower of any other covenant contained in Section 5;
(d) The breach by Borrower of any other terms or provisions of
the Loan Documents (other than a breach which constitutes a Default
under Section 7(a), (b) or (c) above) not cured within thirty (30) days
after written notice from the Agent or a Lender to Borrower specifying
such breach;
(e) The failure of Borrower or any of its Subsidiaries to pay
any other Indebtedness aggregating in excess of Ten Million Dollars
($10,000,000) when due or within any applicable grace or cure period,
or the default by Borrower or any of its Subsidiaries in
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the performance of any other term, provision or condition contained in
any agreement under which any such Indebtedness was created or is
governed, the effect of which is to permit the holder or holders of
such Indebtedness to cause such Indebtedness to become due prior to its
stated maturity, unless such default is waived in writing by the holder
or holders of such Indebtedness; or any such Indebtedness shall be
validly declared to be due and payable or required to be prepaid (other
than by a regularly scheduled payment) prior to the stated maturity
thereof;
(f) Borrower shall (i) have an order for relief entered with
respect to it under the Federal Bankruptcy Code, (ii) not pay, or admit
in writing its inability to pay, its debts generally as they become
due, (iii) make an assignment for the benefit of creditors, (iv) apply
for, seek, consent to, or acquiesce in the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or
any Substantial Portion of its Property, (v) institute any proceeding
seeking an order for relief under the Federal Bankruptcy Code or
seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail
to file an answer or other pleading denying the material allegations of
any such proceeding filed against it, or (vi) suspend operations as
currently conducted or discontinue doing business as an ongoing
concern;
(g) Without the application, approval or consent of Borrower,
a receiver, trustee, examiner, liquidator or similar official shall be
appointed for Borrower or any Substantial Portion of its Property, or a
proceeding described in item (f) shall be instituted against Borrower
and such appointment continues undischarged or such proceeding
continues undismissed or unstayed for a period of sixty (60)
consecutive days;
(h) Any Governmental Authority shall condemn, seize or
otherwise appropriate, or take custody or control of all or any
Substantial Portion of the Property of Borrower;
(i) Borrower or any Subsidiary shall fail within thirty (30)
days to pay, bond or otherwise discharge any judgment or order for the
payment of money which when aggregated with all other such outstanding
judgments or orders exceeds Five Million Dollars ($5,000,000) and which
is not stayed on appeal or otherwise appropriately contested in good
faith, or any attachment, levy or garnishment is issued against any
Property of Borrower or such Subsidiary;
(j) The Unfunded Liabilities of all Single Employer Plans
shall exceed Five Million Dollars ($5,000,000) in the aggregate or any
Reportable Event shall occur in connection with any Plan;
(k) Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multi-employer Plan that it has
incurred withdrawal liability to
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such Multi-employer Plan in an amount which, when aggregated with all
other amounts required to be paid to Multi-employer Plans by Borrower
or any other member of the Controlled Group as withdrawal liability
(determined as of the date of such notification), exceeds Five Million
Dollars ($5,000,000);
(l) Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multi-employer Plan that such
Multi-employer Plan is in reorganization or is being terminated, within
the meaning of Title IV of ERISA, if as a result of such reorganization
or termination the aggregate annual contributions of Borrower and the
other members of the Controlled Group (taken as a whole) to all
Multi-employer Plans which are then in reorganization or being
terminated have been or will be increased over the amounts contributed
to such Multi-employer Plans for the respective plan years of each such
Multi-employer Plan immediately preceding the plan year in which the
reorganization or termination occurs by an amount exceeding Five
Million Dollars ($5,000,000);
(m) If there occurs a Change in Control; or
(n) any Loan Document shall fail to remain in full force or
effect or any action shall be taken to discontinue or assert the
invalidity or unenforceability of any Loan Document.
SECTION 8
Remedy
8.1. Acceleration. If any Default described in Section 7 (f) or Section
7 (g), occurs, the Commitments and all obligations of the Lenders to make, renew
or convert Advances of the Facilities, to accept drafts or to issue Letters of
Credit hereunder shall automatically terminate and the Obligations (including,
without limitation, the Obligation to deposit with the Agent a sum equal to the
aggregate face amount of the outstanding Letters of Credit pursuant to Section
8.2) shall immediately become due and payable without any election or action on
the part of any Lender or the Agent. If any other Default occurs, then upon the
declaration of the Required Lenders or the Agent at the direction of the
Required Lenders, the obligations of the Lenders to make, renew or convert
Advances of the Facilities, to accept drafts and to issue Letters of Credit
under this Agreement shall terminate, and the Obligations (including, without
limitation, the Obligation to deposit with the Agent a sum equal to the
aggregate face amount of the outstanding Letters of Credit pursuant to Section
8.2) shall immediately become due and payable. In either event, the Obligations
shall become immediately due and payable without presentment, demand, protest or
notice of any kind, all of which Borrower hereby expressly waives. The remedies
of the Lenders specified in this Agreement and the other Loan Documents shall
not be exclusive, and the Lenders may avail themselves of any of the remedies
provided by law as well as any equitable remedies available to the Lenders, and
each and every remedy shall be cumulative and concurrent and shall be in
addition to every other remedy now or hereafter existing at law or in equity.
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8.2. Deposit to Secure Reimbursement Obligations. When any Default has
occurred and is continuing, the Required Lenders or the Agent at the direction
of the Required Lenders may demand that Borrower immediately pay to the Agent an
amount equal to the aggregate outstanding amount of the Letters of Credit, and
Borrower shall immediately upon any such demand make such payment. Borrower
hereby irrevocably grants to the Agent for the benefit of the Lenders a security
interest in all funds deposited to the credit of or in transit to any deposit
account or fund established pursuant to this Section 8.2, including, without
limitation, any investment of such fund. Borrower hereby acknowledges and agrees
that the Agent and NBD would not have an adequate remedy at law for failure by
Borrower to honor any demand made under this Section 8.2 and that the Agent and
NBD shall have the right to require Borrower specifically to perform its
undertakings in this Section 8.2 whether or not any draws have been made under
any Letter of Credit. In the event the Agent or NBD makes a demand pursuant to
this Section 8.2, and Borrower makes the payment demanded, the Agent agrees to
invest the amount of such payment for the account of Borrower and at Borrower's
risk and direction in Qualified Investments.
8.3. Subrogation. NBD shall, to the extent of any payments made by NBD
under any Letter of Credit, be subrogated to all rights of the beneficiary of
such Letter of Credit as to all obligations of Borrower and its Subsidiaries
with respect to which such payment shall have been made by NBD.
8.4. Preservation of Rights. No delay or omission of the Agent or any
Lender to exercise any power or right under the Loan Documents shall impair such
power or right or be construed to be a waiver of any Default or an acquiescence
therein, and any single or partial exercise of any power or right shall not
preclude other or further exercise thereof or the exercise of any other power or
right. No Advance hereunder shall constitute a waiver of any of the conditions
of any Lender's obligation to make further Advances, nor, in the event Borrower
is unable to satisfy any such condition, shall a waiver of such condition in any
one instance have the effect of precluding any Lender from thereafter declaring
such inability to be a Default hereunder. No course of dealings shall be binding
upon the Agent or any Lender.
SECTION 9
The Agent
9.1. Appointment. Each of the Lenders hereby designates and appoints
NBD as the Agent of such Lender under the Loan Documents, and each such Lender
authorizes NBD to act as the contractual representative of such Lender with the
rights and duties expressly set forth herein and in the other Loan Documents.
The duties of the Agent shall be administrative in nature, and the Agent shall
not have a fiduciary relationship in respect of any Lender by reason of this
Agreement, and the Agent shall not be deemed to have assumed any obligation
toward, or relationship or agency or trust with or for, Borrower. The provisions
of this Section 9 are solely for the benefit of the Agent and the Lenders, and
Borrower shall not have any rights as a third party beneficiary of any of the
provisions hereof.
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9.2. Powers. The Agent shall have and may exercise such powers
hereunder and under the other Loan Documents as are specifically delegated to
the Agent by the terms hereof and thereby, together with such powers as are
reasonably incidental thereto. The Agent shall have no implied duties to the
Lenders or any obligation to the Lenders to take any action hereunder or
thereunder, except any action specifically provided by this Agreement or the
other Loan Documents to be taken by the Agent. The Agent shall take such action
or refrain from taking such action as is directed by the Required Lenders, or,
if this Agreement or the Loan Documents requires that such direction shall be
given by all of the Lenders, then by all the Lenders.
9.3. Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees or agents shall be liable for any action taken or omitted
to be taken by it under or in connection with this Agreement or the other Loan
Documents except for its own gross negligence or willful misconduct, or be
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by Borrower or any Subsidiary or any officer
thereof contained in this Agreement or in any certificate, report, statement or
other document referred to or provided for in, or received by the Agent or any
of the Lenders under or in connection with this Agreement or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any of the other Loan Documents or for any failure of Borrower to
perform the Obligations. The Agent shall not be under any obligation to any of
the Lenders to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or the conditions of, this Agreement. The
Agent shall be fully justified in failing or refusing to take any action
hereunder or under the other Loan Documents unless it shall first be indemnified
to its satisfaction by the Lenders pro rata against any and all liability and
expense which may be incurred by it or by reason of taking or continuing to take
any such action.
9.4. Reliance by Agent. The Agent shall in all cases be fully protected
in acting, or refraining from acting, hereunder or under the other Loan
Documents in accordance with written instructions signed by the Required Lenders
or by each of the affected Lenders pursuant to Section 11.1, and such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all the Lenders and on all holders of the Notes. The Lenders
acknowledge that the Agent is under no duty to take any discretionary action
permitted to be taken by it pursuant to the provisions of this Agreement or any
other Loan Document unless it shall be requested in writing to do so by the
Required Lenders or by each of the affected Lenders pursuant to Section 11.1.
The Agent may deem and treat the payee of any Note as the owner thereof for all
purposes hereof unless and until a written notice of the assignment or transfer
thereof shall have been filed with the Agent. Any requests, authority or consent
of any Person, who at the time of making such request or giving such authority
or consent is the holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
9.5. Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees or agents has made any representations or warranties to it and that no
act by the Agent hereinafter taken, including, without limitation, any review of
the affairs of Borrower, shall be deemed to constitute any representation or
warranty by the Agent to any of the Lenders. Each Lender represents to the Agent
that it has, independently and
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without reliance upon the Agent or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, financial condition and credit-worthiness of
Borrower and made its own decision to make its Commitments and Advances and
enter into this Agreement. Each Lender also represents that it will
independently and without reliance upon the Agent or the other Lenders, and
based upon such documents and information as it may deem appropriate at the
time, continue to make its own credit analysis and decisions in taking or not
taking action under this Agreement. The Agent makes no representation or
warranty of any kind with respect to the validity, enforceability, legality or
sufficiency of the Loan Documents or any of the other documents referred to or
contemplated herein or therein.
9.6. Employment of Agents and Counsel. The Agent may execute any of its
duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
9.7. Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.
9.8. Defaults; Notices. The Agent shall not be deemed to have knowledge
of the occurrence of any Default or Unmatured Default unless the Agent has
received written notice from a Lender or Borrower specifying such Default or
Unmatured Default and stating that such notice is a "Notice of Default." In the
event that the Agent receives such a notice, the Agent shall promptly give
written notice thereof to the Lenders. Any time a Lender has actual knowledge of
the occurrence of any Default or Unmatured Default, such Lender shall promptly
give written notice thereof to the Agent. The Agent shall take such action with
respect to a Default or a Unmatured Default as shall be reasonably directed in
writing by the Required Lenders or all the Lenders, as applicable, provided,
however, that, unless and until the Agent shall have received such direction,
the Agent may take such action, or refrain from taking such action with respect
thereto, as it shall deem advisable in the best interests of the Lenders. The
Agent shall have no obligation to impose or collect the Default rate of interest
as provided in Section 2.2.3 unless and until instructed in writing by the
Required Lenders, which written instruction shall include the Required Lenders'
determination of the date of Default and the amount of interest due and payable
by Borrower.
9.9. Rights as Lender. The Agent shall have the same rights and powers
hereunder as any Lender and may exercise the same as though it were not the
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
requires, include the Agent in its individual capacity. The Agent may accept
deposits from, lend money to, and generally engage in any kind of banking or
trust business with Borrower, as if it were not the Agent. Borrower hereby
authorizes the Agent, as
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the Agent may elect in its sole discretion, to discuss with, and furnish to, the
Lenders or for a proper business purpose or to any other Person having an
interest in the Obligations (whether as a guarantor, pledgor, Participant,
Purchaser or otherwise) all Financial Statements, audit reports and other
information pertaining to Borrower or any Subsidiary whether such information
was provided by Borrower or such Subsidiary or prepared or obtained by the
Agent, provided that the Agent shall require the recipient of any such
information to comply with the confidentiality provisions of Section 11.11.
Neither the Agent nor any of its employees, officers, directors or agents makes
any representation or warranty regarding any audit reports or other analysis of
Borrower's or any Subsidiary's condition which the Agent may elect to
distribute, whether such information was provided by Borrower or any Subsidiary
or prepared or obtained by the Agent, nor shall the Agent or any of its
employees, officers, directors or agents be liable to any Person receiving a
copy of such reports or analysis for any inaccuracy or omission contained
therein or relating thereto.
9.10. Agent's Indemnification and Reimbursement. The Lenders agree to
indemnify and to reimburse the Agent (to the extent not reimbursed by or on
behalf of Borrower) according to their Pro Rata Shares, from and against all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed upon, incurred by, or asserted against the Agent in any way relating to
or arising out of this Agreement or the other Loan Documents or any action taken
or omitted by the Agent under this Agreement or the other Loan Documents,
provided that no Lender shall be liable for any portion of the foregoing
resulting from the Agent's gross negligence or willful misconduct. Without
limiting the foregoing, each Lender agrees to indemnify and reimburse the Agent
(to the extent not reimbursed by or on behalf of Borrower) promptly upon demand
for its Pro Rata Share of (a) any expenses for which the Agent is entitled to
reimbursement by Borrower hereunder, and (b) any out-of-pocket expenses
(including, without limitation, fees and disbursements of counsel) incurred by
the Agent on behalf of the Lenders in connection with the preparation,
administration or enforcement of, or legal advice in respect of, its rights or
responsibilities under this Agreement.
9.11. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and Borrower and may be removed at any
time with or without cause by the Required Lenders. Upon any such resignation or
removal, the Required Lenders shall have the right to appoint, on behalf of
Borrower and the Lenders, a successor Agent. If no successor Agent shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Agent's notice of
resignation, then the retiring Agent may appoint, on behalf of Borrower and the
Lenders, a successor Agent. Such successor Agent shall be a commercial bank
having capital and retained earnings of at least Two Hundred Million Dollars
($200,000,000). Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to, and become
vested with, all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 9 shall continue in effect for its benefit
with respect to any actions taken or omitted to be taken by it while it was
acting as the Agent hereunder.
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SECTION 10
Benefit of Agreement; Assignments; Participations
10.1. Successors and Assigns. Each Lender will accept the Notes as
evidence of loans made in the ordinary course of its commercial banking or
investing business. The terms and provisions of the Loan Documents shall be
binding upon and inure to the benefit of Borrower and the Lenders and their
respective successors and assigns, except that (a) Borrower shall not have the
right to assign its rights or obligations under the Loan Documents, and (b) any
assignment by any Lender must be made in compliance with Section 10.3.
Notwithstanding clause (b) of this Section, any Lender may at any time, without
the consent of Borrower or the Agent, assign all or any portion of its rights
under this Agreement and its Notes to a Federal Reserve Bank; provided, however,
that no such assignment to a Federal Reserve Bank shall release the transferor
Lender from its obligations hereunder. The Agent may treat the payee of any Note
as the owner thereof for all purposes hereof unless and until such payee
complies with Section 10.3 in the case of an assignment thereof or, in the case
of any other transfer, a written notice of the transfer is filed with the Agent.
Any assignee or transferor of a Note agrees by acceptance thereof to be bound by
all the terms and provisions of the Loan Documents. Any request, authority or
consent of any Person, who at the time of making such request or giving such
authority or consent is the holder of any Note, shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note or of any Note or
Notes issued in exchange therefor.
10.2. Participations.
10.2.1. Permitted Participations; Effect. Any Lender may, in
the ordinary course of its business and in accordance with applicable
law, at any time sell to one or more Eligible Assignees
("Participants") participating interests in any Loan owing to such
Lender, any Note held by such Lender, any Commitment of such Lender or
any other interest of such Lender under the Loan Documents. In the
event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, such
Lender shall remain the holder of any such Note for all purposes under
the Loan Documents, all amounts payable by Borrower under this
Agreement shall be determined as if such Lender had not sold such
participating interests, and Borrower and the Agent shall continue to
deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Loan Documents.
10.2.2. Voting Rights. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other
than any amendment, modification or waiver with respect to any Facility
in which such Participant has an interest which forgives principal,
interest or fees or reduces the interest rate or fees payable with
respect to any such Facility, postpones any date fixed for any
regularly-scheduled payment of principal of, or interest or fees on,
any such Facility, releases any guarantor of any such Facility or
releases any Substantial Portion of collateral, if any, securing any
such Facility.
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10.2.3. Benefit of Set-off. Borrower agrees that each
Participant shall be deemed to have the right of set-off provided in
Section 11.2 in respect of its participating interest in amounts owing
under the Loan Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under the
Loan Documents, provided that each Lender shall retain the right of
set-off provided in Section 11.2 with respect to the amount of
participating interests sold to each Participant. The Lenders agree to
share with each Participant, and each Participant, by exercising the
right of set-off provided in Section 11.2, agrees to share with each
Lender, any amount received pursuant to the exercise of its right of
set-off, such amounts to be shared in accordance with Section 11.2 as
if each Participant were a Lender.
10.3. Assignments.
10.3.1. Permitted Assignments. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any
time assign to one or more Eligible Assignees ("Purchasers") all or any
part of its Loans, rights and obligations under the Loan Documents, and
such assignments need not be pro rata among the Facilities. Such
assignment shall be made pursuant to an Assignment Agreement
substantially in the form of Exhibit E hereto or in such other form as
may be agreed to by the parties thereto. The consent of Borrower and
the Agent (which consents shall not be unreasonably withheld or
delayed) shall be required prior to an assignment becoming effective
with respect to a Purchaser which is not a Lender or an Affiliate
thereof, and each such assignment to a Purchaser which is not a Lender
or an Affiliate thereof shall transfer an interest in the Facilities of
not less than the lesser of (a) Five Million Dollars ($5,000,000), or
(b) the then remaining amount of such Lender's Loans and Commitments);
provided, however, that if a Default has occurred and is continuing,
the consent of Borrower shall not be required.
10.3.2. Effect; Effective Date. Upon (a) delivery to the Agent
of a notice of assignment, substantially in the form of Exhibit I to
Exhibit E hereto (a "Notice of Assignment"), together with any consents
required by Section 10.3.1, (b) acceptance and recording of the Notice
of Assignment by the Agent in accordance with Section 10.4, and (c)
payment of a Three Thousand Five Hundred Dollar ($3,500) fee to the
Agent for processing such assignment, such assignment shall become
effective on the effective date specified in such Notice of Assignment.
Notwithstanding anything to the contrary contained herein, no
assignment of any Loan evidenced by a Registered Note shall be
effective unless and until the assignment is recorded in the Register.
The Notice of Assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to make the
purchase of the Commitment and Loans under the applicable assignment
agreement are Plan Assets and that the rights and interests of the
Purchaser in and under the Loan Documents will not be Plan Assets. On
and after the effective date of such assignment, such Purchaser shall
for all purposes be a Lender party to this Agreement and any other Loan
Document executed by the Lenders and shall have all the rights and
obligations of a Lender under the Loan Documents, to the same extent as
if it were an original party hereto, and no further consent or action
by Borrower, the Lenders or the Agent shall be required to release the
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transferor Lender with respect to the percentage of the Commitment and
Loans assigned to such Purchaser. Upon the consummation of any
assignment to a Purchaser pursuant to this Section, Schedule 1 shall be
deemed modified to reflect the Commitments of the Purchaser and of the
existing Lenders, and the transferor Lender, the Agent and Borrower
shall make appropriate arrangements so the replacement Notes are issued
to such transferor Lender, and new Notes or, as appropriate,
replacement Notes, are issued to such Purchaser, in each case in
principal amounts reflecting their Commitment, as adjusted pursuant to
such assignment.
10.4. Registered Notes.
(a) Any Non-U.S. Lender that could become completely exempt
from withholding of any taxes in respect of payment of any interest due
to such Non-U.S. Lender under this Agreement if the Notes held by such
Lender were in registered form for United States federal income tax
purposes may request Borrower (through the Agent), and Borrower agrees
(i) to exchange for any Notes held by such Lender, or (ii) to issue to
such Lender by the date it becomes a Lender, promissory note(s)
registered as provided in clause (b) of this Section 10.4 (each, a
"Registered Note," to be in substantially the form of Exhibit A-1
hereto, as applicable). Registered Notes may not be exchanged for Notes
that are not Registered Notes.
(b) Borrower shall maintain, or cause to be maintained, a
register (the "Register") which, at the request of Borrower, shall be
kept at no extra charge to Borrower by the Agent, acting for this
purpose solely as agent of Borrower, at the address to which notices to
the Agent are to be sent hereunder, on which it enters the name of the
registered owner of each Loan evidenced by a Registered Note.
(c) A Registered Note and the Loan evidenced thereby may be
assigned or otherwise transferred in whole or in part pursuant to
Section 10.3 only by registration of such assignment or transfer of
such Registered Note and the Loan evidenced thereby on the Register
(and each Registered Note shall expressly so provide). Any assignment
or transfer of all or part of a Loan and the Registered Note evidencing
the same shall be recorded on the Register only upon surrender for
registration of assignment or transfer of the Registered Note
evidencing such Loan; duly endorsed by (or accompanied by a written
instrument of assignment or transfer duly executed by) the holder of
such Registered Note and thereupon one or more new Registered Notes in
the same aggregate principal amount shall be issued to the Purchaser
and, if applicable, to the assignor Lender. The entries in the Register
shall be conclusive and Borrower, the Agent, and the Lenders shall
treat the Person in whose name such Loan(s) and the Registered Notes(s)
evidencing the same are registered as the owner thereof for the purpose
of receiving all payments thereon and for all other purposes,
notwithstanding any notice to the contrary. The Register shall be
available for inspection by Borrower and any Lender at any reasonable
time upon reasonable prior notice.
10.5. Dissemination of Information. Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by
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operation of law (each a "Transferee") and any prospective Transferee any and
all information in such Lender's possession concerning the credit-worthiness of
Borrower and its Subsidiaries; provided that each Transferee and prospective
Transferee agrees to be bound by Section 11.11.
10.6. Tax Treatment. If any interest in any Loan Documents is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Sections 2.3.4(b) and 11.19.
SECTION 11
General Provisions
11.1. Waivers and Amendments. No delay or omission of the Lenders to
exercise any right under the Loan Documents shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and any
single or partial exercise of any such right shall not preclude other or further
exercise thereof or the exercise of any other right. No waiver, amendment or
other variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by Borrower, the Required
Lenders (or the Agent with the written consent of the Required Lenders), and, to
the extent any rights or duties of the Agent may be affected thereby, the Agent;
provided, however, that no waiver, amendment, modification, consent or other
variation shall, without the prior written consent of each Lender affected
thereby, (a) authorize or permit the extension of time for paying the principal
of, or interest on, any Obligations (including, without limitation, payments due
under Section 2.3.1), or any fees payable hereunder or thereunder, or any change
in, or forgiveness or reduction of, the principal amount thereof or the rate of
interest or fees thereon (other than as a result of waiving the applicability of
any increase in the applicable interest rate upon Default or maturity) or
increase the amount of any Lender's Commitment hereunder, (b) amend (i) the
definition of Required Lenders or the percentage of Lenders required to take or
approve any action hereunder, or (ii) the provisions of this Section or Sections
7 or 8.1, (c) release a Substantial Portion of collateral, if any, subject to
any Loan Document, or (d) waive, amend, or modify any other provision of the
Loan Documents which creates an Obligation on the part of Borrower to indemnify
the Agent or any Lender or to pay money to the Agent or any Lender. Any such
waiver, amendment, modification or consent shall be effective only in the
specific instance and for the specific purpose for which given.
11.2. Set-off by Lenders. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of a Default, each Lender is hereby authorized
at any time or from time to time, without presentment, demand, protest or other
notice of any kind to Borrower or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and apply any and all
deposits (general or special) and any other Indebtedness at any time held or
owing by such Lender (including, without limitation, by branches and agencies of
such Lender wherever located) to, or for the credit or the account of, Borrower
against and on account of the Obligations to such Lender, including, without
limitation,
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all interests in Obligations of Borrower purchased by such Lender pursuant to
Section 10.2.3, and all other claims of any nature or description arising out of
or connected with this Agreement or any other Loan, irrespective of whether or
not such Lender shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
11.3. Survival. All representations, warranties and indemnities made by
Borrower in the Loan Documents shall survive delivery of the Notes, the
establishment of the Facilities, the making of Loans and the termination of the
Commitments.
11.4. Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, the Lenders shall not be obligated to extend
credit to Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
11.5. Taxes. Any taxes (excluding taxation of the overall net income of
the Agent or any Lender) payable or ruled payable by any Governmental Authority
in respect of the Loan Documents shall be paid by Borrower, together with
interest and penalties, if any.
11.6. Choice of Law. The Loan Documents (other than those containing a
contrary express choice of law provision) and the rights and obligations of the
parties thereunder and hereunder shall be governed by, and construed and
interpreted in accordance with the laws of the State of Indiana (but giving
effect to federal laws applicable to national banks), notwithstanding the fact
that Indiana conflict of law rules might otherwise require the substantive rules
of law of another jurisdiction to apply. Borrower hereby consents to the
jurisdiction of any state or federal court located within Marion County,
Indiana. All service of process may be made by messenger, certified mail, return
receipt requested or by registered mail directed to Borrower at the addresses
indicated aside its signature to this Agreement, and Borrower otherwise waives
personal service of any and all process made upon Borrower. Borrower waives any
objection which Borrower may have to any proceeding commenced in a federal or
state court located within Marion County, Indiana, based upon improper venue or
forum non conveniens. Nothing contained in this Section shall affect the right
of the Lenders to serve legal process in any other manner permitted by law or to
bring any action or proceeding against Borrower or its Property in the courts of
any other jurisdiction.
11.7. Headings. Section headings in the Loan Documents are for
convenience of reference only and shall not govern the interpretation of any of
the provisions of the Loan Documents.
11.8. Entire Agreement. The Loan Documents embody the entire agreement
and understanding among Borrower, the Agent and the Lenders and supersede all
prior agreements and understandings between Borrower, the Agent and the Lenders
relating to the subject matter thereof.
11.9. Expenses. Borrower shall reimburse the Agent for any and all
reasonable costs, charges and out-of-pocket expenses (including attorneys' and
paralegals' fees and time charges of attorneys and paralegals for the Agent,
which attorneys may be employees of the Agent or its Affiliates), paid or
incurred by the Agent in connection with the preparation, review, execution,
delivery, amendment, modification and administration of the Facilities and/or
the Loan Documents,
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which costs, charges and expenses shall be due and payable whether or not the
Effective Date occurs. Borrower shall reimburse the Agent and the Lenders for
any and all reasonable costs, charges and out-of-pocket expenses (including
attorneys' and paralegals' fees and time charges of attorneys and paralegals for
the Agent and the Lenders, which attorneys may be employees of the Agent or the
Lenders or their Affiliates), paid or incurred by the Agent and/or the Lenders
in connection with the collection and enforcement of the Facilities and/or the
Loan Documents. The Lenders may pay or deduct from the Loan proceeds any of such
expenses, and any proceeds so applied shall be deemed to be Advances under this
Agreement evidenced by the Notes, and shall bear interest at the Alternate Base
Rate plus the Applicable Margin for ABR Loans. The obligations of Borrower under
this Section shall survive the termination of this Agreement.
11.10. Indemnification. Borrower agrees to indemnify the Lenders, and
their successors and assigns (including any purchaser of a participation in the
Facilities), and their respective directors, officers and employees, against all
losses, claims, costs, damages, liabilities and expenses, including, without
limitation, all expenses of litigation or preparation therefor (a "Loss"), which
any of them may pay or incur in connection with or arising out of, or related to
the Loan Documents, the transactions contemplated hereby, or the direct or
indirect application or proposed application of the proceeds of the Facilities
hereunder, except to the extent they are determined by a court of competent
jurisdiction in a final and non-appealable order to have resulted from the gross
negligence or willful misconduct of the party seeking indemnification. The
obligations of Borrower under this Section shall survive the termination of this
Agreement.
11.11. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from Borrower pursuant to this Agreement in
confidence, except for disclosure (a) to its Affiliates and to other Lenders and
their respective Affiliates, (b) to legal counsel, accountants, and other
professional advisors to that Lender or to a Transferee, (c) to regulatory
officials, (d) to any Person as requested pursuant to, or as required by, law,
regulation, or legal process, (e) to any Person as deemed reasonably necessary
by such Lender or the Agent to prosecute or defend any legal proceeding to which
that Lender or the Agent is a party, and (f) permitted by Section 10.5.
11.12. Notice. Any notice required or permitted to be given under this
Agreement may be, and shall be deemed effective if made in writing and delivered
to the recipient's address, telex number or facsimile number addressed to
Borrower at the address specified opposite its signature below, or if addressed
to the Agent or the Lenders at the addresses indicated on Schedule 1 hereto, by
any of the following means: (a) hand delivery, (b) United States first class
mail, postage prepaid, (c) registered or certified mail, postage prepaid, with
return receipt requested, (d) by a reputable rapid delivery service, or (e) by
telegraph, telex, or facsimile when delivered to the appropriate office for
transmission, charges prepaid, with request for assurance of receipt in a manner
typical with respect to communication of that type. Notice made in accordance
with this Section shall be deemed given (aa) upon receipt if delivered by hand
or wire transmission, (bb) three Business Days after mailing if mailed by first
class, registered or certified mail, or (cc) one Business Day after deposit with
an overnight courier service if delivered by overnight courier; provided that
notices to the Agent under Section 2 shall not be effective until received.
Borrower, the Agent and the Lenders may each change
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the address for service of notice upon it by a notice in writing to the other
parties hereto in accordance with this Section 11.12.
11.13. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart.
11.14. Incorporation by Reference. All Exhibits and Schedules hereto
are incorporated herein by this reference. Each of the other Loan Documents
shall be made subject to all of the terms, covenants, conditions, obligations,
stipulations and agreements contained in this Agreement to the same extent and
effect as if fully set forth therein, and this Agreement is made subject to all
of the terms, covenants, conditions, obligations, stipulations and agreements
contained in the other Loan Documents to the same extent and effect as if fully
set forth therein. The provisions of this Agreement, including, without
limitation, provisions relating to maintenance of insurance, are in addition to,
and not a limitation upon, the requirements of any other Loan Document.
11.15. No Joint Venture. Notwithstanding anything to the contrary
herein contained or implied, the Lenders, by this Agreement, or by any action
pursuant hereto, shall not be deemed to be a partner of, or a joint venturer
with, Borrower or one another, and Borrower hereby indemnifies and agrees to
defend and hold the Lenders harmless, including the payment of reasonable
attorneys' fees, from any Loss resulting from any judicial construction of the
parties' relationship as such.
11.16. Severability. In the event any provision of this Agreement or
any of the Loan Documents shall be held invalid or unenforceable by any court of
competent jurisdiction, such holding shall not affect the validity,
enforceability or legality of the remaining provisions hereof or thereof, all of
which shall continue unaffected and unimpaired thereby.
11.17. Waiver of Set-off by Borrower. Borrower agrees that it will not
exercise, and it will not permit any Subsidiary to exercise, any right of
set-off on any of the Obligations or under any Note or assert any claim for,
reduction or credit against any of the Notes except when actual payment has been
made.
11.18. Lenders Not Controlling Borrower. None of the covenants or other
provisions contained in the Loan Documents shall be deemed to give the Lenders
the rights or power to exercise control over the affairs and/or management of
Borrower or any Subsidiary, the power of the Lenders being limited to the right
to exercise the remedies provided in the Loan Documents; provided, however, that
if the Lenders become the owners of any stock or other equity interest in any
Person, whether through foreclosure or otherwise, the Lenders shall be entitled
(subject to requirements of law) to exercise such legal rights as it may have by
virtue of being the owner of such stock or other equity interest in such Person.
11.19. Foreign Lender Withholding Tax. Each Lender that is not a U.S.
Person agrees that it will deliver to each of Borrower and the Agent at least
five Business Days prior to the first date on which interest or fees are payable
hereunder (or in the case of a Purchaser, on or prior to the date
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such Purchaser becomes a Lender) for the account of any Lender (a)(1) two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Lender is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of any United
States federal income taxes, and (2) a duly completed United States Internal
Revenue Service Form W-8 or W-9 certifying that such Lender is entitled to an
exemption from United States backup withholding tax, or (b), in the case of a
Lender not treated as a bank for regulatory, tax or other legal purposes in any
jurisdiction, (1) a certificate signed under penalties of perjury that such
Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code or
a "conduit entity" within the meaning of United States Treasury Regulations
Section 1.881-3, and (2) a duly completed Internal Revenue Service Form W-8.
Each Lender which so delivers a Form 1001, 4224 or W-8 further undertakes to
deliver to each of Borrower and the Agent two additional copies of such form (or
a successor form) on or before the date that such form expires (currently, three
successive calendar years for Form 1001 and one calendar year for Form 4224) or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent forms so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by Borrower or the Agent, in
each case certifying, in the case of a Form 1001 or 4224, that such Lender is
entitled to receive payments under this Agreement and the Notes without
deduction or withholding of any United States federal income taxes and, in the
case of a Form W-8, if such Lender is entitled to receive payments of interest
under this Agreement and the Notes without deduction or withholding of any
United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender advises Borrower
and the Agent that it is not capable of receiving payments without any deduction
or withholding of United States federal income tax.
11.20. Replacement of Lenders. Upon a Lender charging to Borrower
increased costs in excess of those being generally charged by the other Lenders,
Borrower shall have the right, in accordance with the requirements of Section
10.3, if no Default will exist after giving effect to such replacement, to
replace such Lender (the "Replaced Lender") with an Eligible Assignee or
Eligible Assignees (collectively, the "Replacement Lender"), reasonably
acceptable to the Agent, provided that (a) at the time of any replacement
pursuant to this Section, the Replacement Lender shall enter into one or more
Assignment Agreements pursuant to which the Replacement Lender shall acquire all
the Commitments and outstanding Loans of, and in each case participation in
Letters of Credit by, the Replaced Lender and, in connection therewith, shall
pay to the Replaced Lender in respect thereof an amount equal to the sum of (i)
an amount equal to the principal of, and all accrued interest on, all
outstanding Loans of the Replaced Lender, plus (ii) an amount equal to all
accrued, but theretofore unpaid, fees owing to the Replaced Lender, and (b) all
Obligations of Borrower owing to the Replaced Lender (other than those
specifically described in clause (a)(i) above in respect of which the assignment
purchase price has been, or is concurrently being, paid) shall be paid in full
to such Replaced Lender concurrently with such replacement.
11.21 Relationship of Parties. The relationship between Borrower and
the Lenders and the Agent shall be solely that of borrower and lender. Neither
the Agent nor any Lender shall have any
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fiduciary responsibilities to Borrower. Neither the Agent nor any Lender
undertakes any responsibility to Borrower to review or inform Borrower of any
matter in connection with any phase of Borrower's business or operations.
11.22 Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns.
11.23. Agreement Effective. This Agreement shall be effective when it
has been executed by Borrower, the Agent and the Lenders, provided the Lenders
shall have no obligation under this Agreement until the Effective Date. In the
event the Effective Date has not occurred by November 30, 1997, or such later
date as agreed in writing by the Lenders, this Agreement shall terminate.
SECTION 12
Ratable Payments
If any Lender, whether by set off or otherwise, has payment made to it
upon its Loans (other than payments received pursuant to Section 3.1, 3.2 or
3.4) in a greater proportion than that received by any other Lender in terms of
its Pro Rata Share, such Lender agrees, promptly upon demand, to purchase a
portion of the Loans held by the other Lenders so that after such purchase each
Lender will hold its ratable proportion of Loans after taking into effect the
aforementioned payment and purchase. If any Lender, whether in connection with
set off or amounts which might be subject to set off or otherwise, receives
collateral or other protection for its Obligations or such amounts which may be
subject to set off, such Lender agrees, promptly upon demand, to take such
action necessary such that all Lenders share in the benefits of such collateral
ratably in proportion to their Loans. In case any such payment is disturbed by
legal process, or otherwise, appropriate further adjustments shall be made.
SECTION 13
Waiver of Jury Trial
THE LENDERS, THE AGENT AND BORROWER, AFTER CONSULTING, OR HAVING HAD THE
OPPORTUNITY TO CONSULT, WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING,
STATEMENTS
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(WHETHER ORAL OR WRITTEN), OR ACTIONS OF ANY OF THEM. NEITHER A LENDER, THE
AGENT NOR BORROWER SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE
DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY EITHER THE
LENDERS, THE AGENT OR BORROWER EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY THE
LENDERS, THE AGENT AND BORROWER.
IN WITNESS WHEREOF, Borrower, the Lenders and the Agent have caused this
Agreement to be executed by their respective officers duly authorized as of the
day and year first above written.
[This space intentionally left blank]
-65-
<PAGE>
SIGNATURE PAGE OF
LILLY INDUSTRIES, INC.
TO
CREDIT AGREEMENT
LILLY INDUSTRIES, INC.
By: /s/ John C. Elbin
John C. Elbin, Chief Financial Officer
and Secretary
Address:
733 South West Street
Indianapolis, IN 46225
Attention: John C. Elbin
Facsimile: 317-687-6710
-66-
<PAGE>
SIGNATURE PAGE OF
NBD BANK, N.A.,
TO
CREDIT AGREEMENT
NBD BANK, N.A.,
individually and as Agent
By: /s/ Dennis L. Bassett
-------------------------------
Dennis L. Bassett
Its: Senior Vice President
-67-
<PAGE>
SIGNATURE PAGE OF
FIRST UNION NATIONAL BANK
TO
CREDIT AGREEMENT
FIRST UNION NATIONAL BANK
By: /s/ Mark M. Harden
Mark M. Harden
Its: Vice President
-68-
<PAGE>
SIGNATURE PAGE OF
DRESDNER BANK AG-NEW YORK
AND GRAND CAYMAN BRANCHES
TO
CREDIT AGREEMENT
DRESDNER BANK AG - NEW YORK
AND GRAND CAYMAN BRANCHES
By: /s/ Lawrence E. Jones /s/ Michael E. Terry
Its: Vice President Assistant Vice President
-69-
<PAGE>
SIGNATURE PAGE OF
NATIONAL CITY BANK OF INDIANA
TO
CREDIT AGREEMENT
NATIONAL CITY BANK OF INDIANA
By: /s/ Frank B. Meltzer
Frank B. Meltzer, Vice President and
Senior Lending Officer
-70-
<PAGE>
SIGNATURE PAGE OF
KEYBANK NATIONAL ASSOCIATION
TO
CREDIT AGREEMENT
KEYBANK NATIONAL ASSOCIATION
By: /s/ Frank J. Jancar
Its: Vice President
-71-
<PAGE>
SIGNATURE PAGE OF
HARRIS TRUST AND SAVINGS BANK
TO
CREDIT AGREEMENT
HARRIS TRUST AND SAVINGS BANK
By: /s/ Peter Krawchuk
Peter Krawchuk
Its: Vice President
-72-
<PAGE>
SIGNATURE PAGE OF
BANK ONE, INDIANA, N.A.
TO
CREDIT AGREEMENT
BANK ONE, INDIANA, N.A.
By: /s/ Bruce D. Si
Its: Vice President
-73-
<PAGE>
Schedule 1-Lenders
Lenders Revolving Loan
And Addresses Commitment
NBD Bank, N.A. $ 35,000,000
One Indiana Square
Third Floor
Indianapolis, IN 46266
Attn: Dennis Bassett
Fax: 317-266-6042
Bank One, Indiana, N.A. $ 25,000,000
111 Monument Circle
Suite 1921
Indianapolis, IN 46277
Attn: Brian Smith
Fax: (317) 321-8079
First Union National Bank $ 25,000,000
One First Union Center, TW-5
301 S. College Street
Charlotte, NC 28288
Attn: Stephen D. Johnson
Fax: (704) 374-2802
Harris Trust and Savings Bank $ 25,000,000
111 West Monroe, 10-West
Chicago, IL 60603
Attn: Peter Krawchuk
Fax: (312) 461-5225
KeyBank National Association $ 25,000,000
127 Public Square
Mail Station OH-01-27-0606
Cleveland, OH 44114
Attn: Frank Jancar
Fax: (216) 689-4981
National City Bank of Indiana $ 25,000,000
101 W. Washington St., Ste. 200E
Indianapolis, IN 46255
Attn: Frank B. Meltzer
Fax: (317) 267-8899
-74-
<PAGE>
Lenders Revolving Loan
And Addresses Commitment
Dresdner Bank AG - New York $ 15,000,000
and Grand Cayman Branches
75 Wall Street
New York, New York 10005
Attn: Michael Terry
Fax: (212) 429-2192
$ 175,000,000
-75-
<PAGE>
SCHEDULE 4.10 AND 5.2.3
INDEBTEDNESS
The Borrower incorporates Schedule 5.2.2 by reference into Schedules
4.10 and 5.2.3.
An existing bank credit facility to be paid off with Loan proceeds.
A 10-year economic development note relating to the State of Kentucky.
The principal amount of the note is $186,000 and the lender is National
City Bank.
-viii-
<PAGE>
SCHEDULE 4.7
SUBSIDIARIES
LILLY INDUSTRIES, INC.
<TABLE>
<CAPTION>
Jurisdiction
Percent of
Investment In Owned By Ownership Organization
<S> <C> <C> <C>
Lilly Industries (USA), Inc. Lilly Industries, Inc. 100% Indiana
Lilly Industries (Far East), Lilly Industries, Inc. 100% Taiwan
Ltd.
Lilly Industries, Inc. Lilly Industries, Inc. 100% Ontario,
(Canada) Canada
Lilly Industries (Asia) Lilly Industries, Inc. 100% Hong Kong
Limited
Lilly Industries (Malaysia) Lilly Industries, Inc. 100% Malaysia
Sdn.Bhd.
Lilly (Ireland), Ltd. Lilly Industries, Inc. 100% Ireland
Lilly Industries (Cornwall) Lilly Industries (USA), Inc. 100% Ontario,
Limited Canada
London Laboratories Lilly Industries (USA), Inc. 100% Ontario,
Limited Canada
London Laboratories Lilly Industries (USA), Inc. 100% Germany
GmbH
Guardsman UK Limited Lilly Industries (USA), Inc. 100% United
Kingdom
GCI Insurance Company, Lilly Industries (USA), Inc. 100% Bermuda
Limited
Guardsman Chemicals Lilly Industries (USA), Inc. 100% U.S. Virgin
International Inc. Islands
Dongguan Lilly Paint Lilly Industries (Asia) 100% Peoples
Industries Ltd. Limited Republic of
China
</TABLE>
<PAGE>
SCHEDULE 4.10 AND 5.2.3
INDEBTEDNESS
The Borrower incorporates Schedule 5.2.2 by reference into Schedules
4.10 and 5.2.3.
An existing bank credit facility to be paid off with Loan proceeds.
A 10-year economic development note relating to the State of Kentucky.
The principal amount of the note is $186,000 and the lender is National
City Bank.
<PAGE>
SCHEDULE 4.13
LITIGATION
None.
<PAGE>
SCHEDULE 4.16 AND 5.2.5
CONTINGENT OBLIGATIONS
Lilly Industries, Inc. guarantees the lease of an aircraft by LR
Aviation, Inc. Lilly Industries, Inc. owns 50% of the capital stock of LR
Aviation, Inc.
<PAGE>
SCHEDULE 5.2.2
PERMITTED LIENS
None
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$ Date: October , 1997
------------------------------- ------
Indianapolis, Indiana
FOR VALUE RECEIVED, LILLY INDUSTRIES, INC., an Indiana corporation
("Borrower"), hereby promises to pay without setoff or counterclaim to the order
of
(the "Lender"), or its assigns, at the main office of NBD BANK, N.A.
(the "Agent"), as Agent under the Agreement (hereinafter defined) in the City of
Indianapolis, Indiana, or at such other place as the holder hereof may designate
in writing, the principal sum of Dollars ($ ), or the aggregate unpaid principal
amount
of all Revolving Loans made by the Lender to the Borrower pursuant to Section 2
of the Agreement, in lawful money of the United States of America and in
immediately available funds, together with interest on the unpaid principal
balance existing from time to time at the per annum rates and on the dates set
forth in the Agreement. The Borrower shall pay the principal and accrued and
unpaid interest on the Revolving Loans in full on the Facility Termination Date,
and shall make such mandatory payments as are required to be made under the
terms of Section 2 of the Agreement.
The Lender shall, and is hereby authorized to, record on any schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Revolving Loan under this Note and the date and
amount of each principal payment hereunder.
This Note is issued pursuant to, is entitled to the benefit of, and is
subject to the provisions of that certain Credit Agreement dated as of even date
herewith among Borrower, the lenders party thereto, including the Lender and NBD
Bank, N.A., as the Agent for the Lenders (as the same may be amended from time
to time, the "Agreement"), to which Agreement reference is hereby made for a
statement of the terms and conditions governing this Note, including, without
limitation, the terms and conditions under which this Note may be prepaid or its
maturity date accelerated. Capitalized terms used herein and not otherwise
defined herein are used with the meanings attributed to them in the Agreement.
Subject to any applicable grace or cure period set forth in the
Agreement, if Borrower fails to make the payment of any installment of principal
or interest, as provided in the Agreement, or upon the occurrence of any other
Default, then in any of such events, or at any time thereafter prior to such
Default being cured, the entire principal balance of this Note, and all accrued
and unpaid interest thereon, irrespective of the maturity date specified herein
or in the Agreement, together with reasonable attorneys' fees and other costs
incurred in collecting or enforcing payment or performance
Page 1 of a Note containing Two Pages, dated October , 1997 from LILLY
INDUSTRIES, INC. to .
<PAGE>
hereof and with interest from the date of Default on the unpaid principal
balance hereof at the Default rate specified in Section 2.2 of the Agreement,
shall, at the election of the Required Lenders (except as otherwise provided for
automatic acceleration on the occurrence of certain Defaults specified in the
Agreement), and without relief from valuation and appraisement laws, become
immediately due and payable.
Borrower and all endorsers, guarantors, sureties, accommodation parties
hereof and all other parties liable or to become liable for all or any part of
this indebtedness, severally waive demand, presentment for payment, notice of
dishonor, protest and notice of protest and expressly agree that this Note and
any payment coming due under it may be extended or otherwise modified from time
to time without in any way affecting their liability hereunder.
Notice of acceptance of this Note by the Lender is hereby waived.
BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE OR
ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS NOTE OR
ANY COURSE OF CONDUCT, DEALING, STATEMENTS, WHETHER ORAL OR WRITTEN, OR ACTIONS
OF BORROWER OR ANY OF THE LENDERS. BORROWER SHALL NOT SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY THE LENDERS EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY BORROWER,
THE LENDER AND THE OTHER LENDERS.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first hereinabove written.
LILLY INDUSTRIES, INC.
By:
Its:
Page 2 of a Note containing Two Pages, dated October , 1997 from LILLY
INDUSTRIES, INC. to .
<PAGE>
SCHEDULE OF REVOLVING LOANS
AND PAYMENTS OF PRINCIPAL
BORROWER: LILLY INDUSTRIES, INC.
NOTE DATED: OCTOBER , 1997
<TABLE>
<CAPTION>
Principal Maturity
Amount Type of Interest Amount of Unpaid
Date of Loan of Loan Period Principal Repaid Balance Maturity
- ---- ------- ------- ------ ---------------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Page 3 of a Note containing Two Pages, dated October , 1997 from LILLY
INDUSTRIES, INC. to .
<PAGE>
EXHIBIT A-1
REVOLVING REGISTERED CREDIT NOTE
$ Date: October , 1997
------------------------------- ------
Indianapolis, Indiana
FOR VALUE RECEIVED, LILLY INDUSTRIES, INC., an Indiana corporation
("Borrower"), hereby promises to pay without setoff or counterclaim to the order
of
(the "Lender"), or its assigns, at the main office of NBD BANK, N.A.
(the "Agent"), as Agent under the Agreement (hereinafter defined) in the City of
Indianapolis, Indiana, or at such other place as the holder hereof may designate
in writing, the principal sum of Dollars ($ ), or the aggregate unpaid principal
amount
of all Revolving Loans made by the Lender to the Borrower pursuant to Section 2
of the Agreement, in lawful money of the United States of America and in
immediately available funds, together with interest on the unpaid principal
balance existing from time to time at the per annum rates and on the dates set
forth in the Agreement. The Borrower shall pay the principal and accrued and
unpaid interest on the Revolving Loans in full on the Facility Termination Date,
and shall make such mandatory payments as are required to be made under the
terms of Section 2 of the Agreement.
The Lender shall, and is hereby authorized to, record on any schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Revolving Loan under this Note and the date and
amount of each principal payment hereunder.
This Note is issued pursuant to, is entitled to the benefit of, and is
subject to the provisions of that certain Credit Agreement dated as of even date
herewith among Borrower, the lenders party thereto, including the Lender and NBD
Bank, N.A., as the Agent for the Lenders (as the same may be amended from time
to time, the "Agreement"), to which Agreement reference is hereby made for a
statement of the terms and conditions governing this Note, including, without
limitation, the terms and conditions under which this Note may be prepaid or its
maturity date accelerated. Capitalized terms used herein and not otherwise
defined herein are used with the meanings attributed to them in the Agreement.
Subject to any applicable grace or cure period set forth in the
Agreement, if Borrower fails to make the payment of any installment of principal
or interest, as provided in the Agreement, or upon the occurrence of any other
Default, then in any of such events, or at any time thereafter prior to such
Default being cured, the entire principal balance of this Note, and all accrued
and unpaid interest thereon, irrespective of the maturity date specified herein
or in the Agreement, together with reasonable attorneys' fees and other costs
incurred in collecting or enforcing payment or performance
Page 1 of a Note containing Three Pages, dated October , 1997 from LILLY
INDUSTRIES, INC. to .
<PAGE>
hereof and with interest from the date of Default on the unpaid principal
balance hereof at the Default rate specified in Section 2.2 of the Agreement,
shall, at the election of the Required Lenders (except as otherwise provided for
automatic acceleration on the occurrence of certain Defaults specified in the
Agreement), and without relief from valuation and appraisement laws, become
immediately due and payable.
Borrower and all endorsers, guarantors, sureties, accommodation parties
hereof and all other parties liable or to become liable for all or any part of
this indebtedness, severally waive demand, presentment for payment, notice of
dishonor, protest and notice of protest and expressly agree that this Note and
any payment coming due under it may be extended or otherwise modified from time
to time without in any way affecting their liability hereunder.
Notice of acceptance of this Note by the Lender is hereby waived.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE
CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN
ACCORDANCE WITH THE REGISTRATION AND OTHER PROVISIONS OF SUBSECTION 10.4 OF THE
CREDIT AGREEMENT.
BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT
WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE
OR ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS NOTE
OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS, WHETHER ORAL OR WRITTEN, OR
ACTIONS OF BORROWER OR ANY OF THE LENDERS. BORROWER SHALL NOT SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS
BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY THE LENDERS EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY
BORROWER, THE LENDER AND THE OTHER LENDERS.
Page 2 of a Note containing Three Pages, dated October , 1997 from LILLY
INDUSTRIES, INC. to .
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first hereinabove written.
LILLY INDUSTRIES, INC.
By:
Its:
Page 3 of a Note containing Three Pages, dated October , 1997 from LILLY
INDUSTRIES, INC. to .
<PAGE>
SCHEDULE OF REVOLVING LOANS
AND PAYMENTS OF PRINCIPAL
BORROWER: LILLY INDUSTRIES, INC.
NOTE DATED: OCTOBER , 1997
<TABLE>
<CAPTION>
Principal Maturity
Amount Type of Interest Amount of Unpaid
Date of Loan of Loan Period Principal Repaid Balance Maturity
- ---- ------- ------- ------ ---------------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Page 4 of a Note containing Three Pages, dated October , 1997 from LILLY
INDUSTRIES, INC. to .
<PAGE>
EXHIBIT B
CREDIT NOTE
(Cash Management Line)
$15,000,000.00 Dated: October 24, 1997
Indianapolis, Indiana
FOR VALUE RECEIVED, LILLY INDUSTRIES, INC., an Indiana corporation (the
"Borrower"), hereby promises to pay without setoff or counterclaim to the order
of NBD BANK, N.A., a national banking association ("NBD"), or its assigns, at
its principal office at Indianapolis, Indiana, or at such other place as the
holder hereof may designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal sum of Fifteen Million
Dollars ($15,000,000), or so much thereof as may be advanced and outstanding
from time to time, together with interest on the unpaid principal balance
existing from time to time at the per annum rates and on the dates set forth in
the Agreement (hereinafter defined). The Borrower shall pay the principal and
accrued and unpaid interest on this Note in full on the Facility Termination
Date, and shall make such mandatory payments as are required to be made under
the terms of Section 2 of the Agreement.
NBD shall, and is hereby authorized to, record on any schedule attached
hereto, or to otherwise record in accordance with its usual practice, the date
and amount of each Advance under this Note and the date and amount of each
principal payment hereunder.
This Note is issued pursuant to, is entitled to the benefit of, and is
subject to the provisions of that certain Credit Agreement of even date herewith
among Borrower, the lenders party thereto, and NBD, individually and as Agent
(as the same may be amended from time to time, the "Agreement"), to which
Agreement reference is hereby made for a statement of the terms and conditions
governing this Note, including, without limitation, the terms and conditions
under which this Note may be prepaid or its maturity date accelerated.
Capitalized terms used herein and not otherwise defined herein are used with the
meanings attributed to them in the Agreement.
Subject to any applicable grace or cure period set forth in the
Agreement, if Borrower fails to make the payment of any installment of principal
or interest, as provided in the Agreement, when due, or upon the occurrence of
any other Default, then in any of such events, or at any time thereafter prior
to such Default being cured, the entire principal balance of this Note, and all
accrued and unpaid interest thereon, irrespective of the maturity date specified
herein, together with reasonable attorneys' fees and other costs incurred in
collecting or enforcing payment or performance hereof and with
Page 1 of a Note containing Two Pages dated October 24, 1997 from LILLY
INDUSTRIES, INC. to NBD BANK, N.A.
<PAGE>
interest from the date of Default on the unpaid principal balance hereof at the
Default rate specified in Section 2.2 of the Agreement, shall, at the election
of NBD (except as otherwise provided for automatic acceleration on the
occurrence of certain Defaults specified in the Agreement), and without relief
from valuation and appraisement laws, become immediately due and payable.
Borrower and all endorsers, guarantors, sureties, accommodation parties
hereof and all other parties liable or to become liable for all or any part of
this indebtedness, severally waive demand, presentment for payment, notice of
dishonor, protest and notice of protest and expressly agree that this Note and
any payment coming due under it may be extended or otherwise modified from time
to time without in any way affecting their liability hereunder.
Notice of acceptance of this Note by NBD is hereby waived.
BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT
WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS NOTE
OR ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS NOTE
OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS, WHETHER ORAL OR WRITTEN, OR
ACTIONS OF BORROWER OR NBD. BORROWER SHALL NOT SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH
ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY NBD EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY BORROWER AND NBD.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first hereinabove written.
LILLY INDUSTRIES, INC.
By:
John C. Elbin, Chief Financial
Officer and Secretary
Page 2 of a Note containing Two Pages dated October 24, 1997 from LILLY
INDUSTRIES, INC. to NBD BANK, N.A.
Page 2 of a Note containing Two Pages dated October 24, 1997 from LILLY
INDUSTRIES, INC. to NBD BANK, N.A.
<PAGE>
SCHEDULE OF ADVANCES UNDER CASH MANAGEMENT LINE
AND PAYMENTS OF PRINCIPAL
BORROWER: LILLY INDUSTRIES, INC.
NOTE DATED: OCTOBER 24, 1997
<TABLE>
<CAPTION>
Principal Maturity
Amount Type of Interest Amount of Unpaid
Date of Advance of Advance Period Principal Repaid Balance Maturity
- ---- ---------- ---------- ------ ---------------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
Page 3 of a Note containing Two Pages dated October 24, 1997 from LILLY
INDUSTRIES, INC. to NBD BANK, N.A.
<PAGE>
EXHIBIT C
COMPLIANCE CERTIFICATE
To: The Lenders Parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain
Credit Agreement dated as of October , 1997 (as amended, modified, renewed or
extended from time to time, the "Agreement") among Lilly Industries, Inc. (the
"Borrower"), the Lenders party thereto and NBD Bank, N.A., as Agent for the
Lenders. Unless otherwise defined herein, capitalized terms used in this
Compliance Certificate have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected Chief Financial Officer of Borrower;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of Borrower and its Subsidiaries during the accounting period
covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which constitutes
a Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below;
4. Schedule I attached hereto sets forth financial data and
computations evidencing Borrower's compliance with certain covenants of the
Agreement, all of which data (in all material respects) and such computations
are true, complete and correct;
5. Schedule II attached hereto sets forth the determination of the
Applicable Commitment Fee and the Applicable Margin to be effective on the Fifth
(5th) Business Day following the delivery hereof;
6. Schedule III attached hereto sets forth the various reports and
deliveries which are required under the Credit Agreement and the other Loan
Documents and the status of compliance; and
-1-
<PAGE>
Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which Borrower has taken, is taking, or proposes to take
with respect to each such condition or event:
The foregoing certifications, together with the computations set forth
in Schedule I and Schedule II hereto and the financial statements delivered with
this Certificate in support hereof, are made and delivered this day of , .
LILLY INDUSTRIES, INC.
By:
Its:
-2-
<PAGE>
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of _________, with
Provisions of and of
the Agreement
-3-
<PAGE>
SCHEDULE II TO COMPLIANCE CERTIFICATE
Determination of the Applicable Commitment Fee
and the Applicable Margin
-4-
<PAGE>
SCHEDULE III TO COMPLIANCE CERTIFICATE
Reports and Deliveries
-5-
<PAGE>
EXHIBIT D
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To NBD Bank, N.A.
as Agent (the "Agent") under the Credit Agreement
Described Below.
Re: Credit Agreement, dated October 24, 1997 (as the same may be amended or
modified, the "Credit Agreement"), among Lilly Industries, Inc. (the
"Borrower"), the Lenders named therein and the Agent. Capitalized terms
used herein and not otherwise defined herein shall have the meanings
assigned thereto in the Credit Agreement.
The Agent is specifically authorized and directed to act upon the
following standing money transfer instructions with respect to the proceeds of
Advances or other extensions of credit from time to time until receipt by the
Agent of a specific written revocation of such instructions by the Borrower,
provided, however, that the Agent may otherwise transfer funds as hereafter
directed in writing by the Borrower in accordance with Section 11.12 of the
Credit Agreement or based on any telephonic notice made in accordance with
Section 2.4.1 of the Credit Agreement.
Facility Identification Number(s):
Customer/Account Name
Transfer Funds To
For Account No.
Reference/Attention To
Authorized Officer (Customer Representative) Date
(Please Print) Signature
Bank Officer Name Date
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
<PAGE>
EXHIBIT E
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
(the
"Assignor") and (the "Assignee") is dated as of , .
The parties hereto agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit Agreement
(which, as it may be amended, modified, renewed or extended from time to time is
herein called the "Credit Agreement") described in Item 1 of Schedule 1 attached
hereto ("Schedule 1"). Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement relating to the facilities listed in Item 3 of
Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans, if
the applicable Commitment has been terminated) purchased by the Assignee
hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
1 or two Business Days (or such shorter period agreed to by the Agent) after a
Notice of Assignment substantially in the form of Exhibit I attached hereto has
been delivered to the Agent. Such Notice of Assignment must include any consents
required to be delivered to the Agent by Section 10.4 of the Credit Agreement.
In no event will the Effective Date occur if the payments required to be made by
the Assignee to the Assignor on the Effective Date under Sections 4 and 5 hereof
are not made on the proposed Effective Date. The Assignor will notify the
Assignee of the proposed Effective Date no later than the Business Day prior to
the proposed Effective Date. As of the Effective Date, (a) the Assignee shall
have the rights and obligations of a Lender under the Loan Documents with
respect to the rights and obligations assigned to the Assignee hereunder, and
(b) the Assignor shall relinquish its rights and be released from its
corresponding obligations under the Loan Documents with respect to the rights
and obligations assigned to the Assignee hereunder.
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
shall be entitled to receive from the Agent all payments of principal, interest
and fees with respect to the interest assigned hereby. The Assignee shall
advance funds directly to the Agent with respect to all Loans and reimbursement
payments made on or after the Effective Date with respect to the interest
assigned hereby. [In consideration for the sale and assignment of Loans
hereunder, (a) the Assignee shall pay the Assignor, on the Effective Date, an
amount equal to the principal amount of the portion
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<PAGE>
of all Eurodollar Loans assigned to the Assignee hereunder, and (b) with respect
to each ABR Loan made by the Assignor and assigned to the Assignee hereunder
which is outstanding on the Effective Date, (i) on the last day of the Interest
Period therefor, or (ii) on such earlier date agreed to by the Assignor and the
Assignee, or (iii) on the date on which any such ABR Loan either becomes due (by
acceleration or otherwise) or is prepaid (the date as described in the foregoing
clauses (i), (ii) or (iii) being hereinafter referred to as the "Payment Date"),
the Assignee shall pay the Assignor an amount equal to the principal amount of
the portion of such ABR Loan assigned to the Assignee which is outstanding on
the Payment Date. If the Assignor and the Assignee agree that the Payment Date
for such ABR Loan shall be the Effective Date, they shall agree to the interest
rate applicable to the portion of such Loan assigned hereunder for the period
from the Effective Date to the end of the existing Interest Period applicable to
such ABR Loan (the "Agreed Interest Rate") and any interest received by the
Assignee in excess of the Agreed Interest Rate shall be remitted to the
Assignor. In the event interest for the period from the Effective Date to, but
not including, the Payment Date is not paid by Borrower with respect to any ABR
Loan sold by the Assignor to the Assignee hereunder, the Assignee shall pay to
the Assignor interest for such period on the portion of such ABR Loan sold by
the Assignor to the Assignee hereunder at the applicable rate provided by the
Credit Agreement. In the event a prepayment of any ABR Loan which is existing on
the Payment Date and assigned by the Assignor to the Assignee hereunder occurs
after the Payment Date but before the end of the Interest Period applicable to
such ABR Loan, the Assignee shall remit to the Assignor the excess of the
prepayment penalty paid with respect to the portion of such ABR Loan assigned to
the Assignee hereunder over the amount which would have been paid if such
prepayment penalty was calculated based on the Agreed Interest Rate. The
Assignee will also promptly remit to the Assignor (y) any principal payments
received from the Agent with respect to ABR Loans prior to the Payment Date, and
(z) any amounts of interest on Loans and fees received from the Agent which
relate to the portion of the Loans assigned to the Assignee hereunder for
periods prior to the Effective Date, in the case of Eurodollar Loans or fees, or
the Payment Date, in the case of ABR Loans, and not previously paid by the
Assignee to the Assignor.]* In the event that either party hereto receives any
payment to which the other party hereto is entitled under this Assignment
Agreement, then the party receiving such amount shall promptly remit it to the
other party hereto.
*Each Assignor may insert its standard payment provisions in lieu of the payment
terms included in this Exhibit.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the Assignor
a fee on each day on which a payment of interest or [commitment] fees is made
under the Credit Agreement with respect to the amounts assigned to the Assignee
hereunder (other than a payment of interest or commitment fees for the period
prior to the Effective Date or, in the case of ABR Loans, the Payment Date,
which the Assignee is obligated to deliver to the Assignor pursuant to Section 4
hereof). The amount of such fee shall be the difference between (a) the interest
or fee, as applicable, paid with respect to the amounts assigned to the Assignee
hereunder, and (b) the interest or fee, as applicable, which would have been
paid with respect to the amounts assigned to the Assignee hereunder if each
interest rate was of 1% less than the interest rate paid by Borrower or if the
commitment fee was of 1% less than the commitment fee paid by Borrower, as
applicable.
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<PAGE>
In addition, the Assignee agrees to pay % of the recordation fee required to be
paid to the Agent in connection with this Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE
ASSIGNOR'S LIABILITY. The Assignor represents and warrants that it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim created by the Assignor. It
is understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor nor
any of its officers, directors, employees, agents or attorneys shall be
responsible for (a) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collect ability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of Borrower or any guarantor, (b) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (c) the financial condition or creditworthiness of Borrower or
any guarantor, (d) the performance of or compliance with any of the terms or
provisions of any of the Loan Documents, (e) inspecting any of the Property,
books or records of Borrower, (f) the validity, enforceability, perfection,
priority, condition, value or sufficiency of any collateral securing or
purporting to secure the Loans, or (g) any mistake, error of judgment, or action
taken or omitted to be taken in connection with the Loans or the Loan Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (a) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (b) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Lender and based on such documents and information at it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Documents, (c) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto, (d) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender, (e) agrees that
its payment instructions and notice instructions are as set forth in the
attachment to Schedule 1, (f) confirms that none of the funds, monies, assets or
other consideration being used to make the purchase and assumption hereunder are
"plan assets" as defined under ERISA and that its rights, benefits and interests
in and under the Loan Documents will not be "plan assets" under ERISA, [(g)
confirms that it is an Eligible Transferee,]* [and (h) attaches the forms
prescribed by the Internal Revenue Service of the United States certifying that
the Assignee is entitled to receive payments under the Loan Documents without
deduction or withholding of any United States federal income taxes].**
*to be inserted if required by the Credit Agreement.
**to be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof.
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys'
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<PAGE>
fees) and liabilities incurred by the Assignor in connection with or arising in
any manner from the Assignee's non-performance of the obligations assumed under
this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee shall
have the right pursuant to Section 10.3.1 of the Credit Agreement to assign the
rights which are assigned to the Assignee hereunder to any entity or person,
provided that (a) any such subsequent assignment does not violate any of the
terms and conditions of the Loan Documents or any law, rule, regulation, order,
writ, judgment, injunction or decree and that any consent required under the
terms of the Loan Documents has been obtained, and (b) unless the prior written
consent of the Assignor is obtained, the Assignee is not thereby released from
its obligations to the Assignor hereunder, if any remain unsatisfied, including,
without limitation, its obligations under Sections 4, 5 and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the
aggregate Commitment occurs between the date of this Assignment Agreement and
the Effective Date, the percentage interest specified in Item 3 of Schedule 1
shall remain the same, but the dollar amount purchased shall be recalculated
based on the reduced aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice
of Assignment embody the entire agreement and understanding between the parties
hereto and supersede all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Indiana.
13. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment to Schedule 1.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
"ASSIGNOR"
By:
Title:
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<PAGE>
"ASSIGNEE"
By:
Title:
-5-
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
2. Date of Assignment Agreement: , 19
3. Amounts (As of date of Item 2 above):
Revolving Credit Loans
a. Total of Commitments
(Loans)* under
Credit Agreement $
b. Assignee's Percentage
of each Facility purchased
under the Assignment
Agreement** %
c. Amount of Assigned Share in
each Facility purchased under
the Assignment
Agreement $
4. Assignee's Aggregate (Loan
Amount)** Commitment Amount
Purchased Hereunder: $
5. Proposed Effective Date:
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
Title: Title:
* If a Commitment has been terminated, insert outstanding Loans in place
of Commitment
** Percentage taken to 10 decimal places
-6-
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must include
notice address for the Assignor and the Assignee
-7-
<PAGE>
EXHIBIT I
to Assignment Agreement
NOTICE
OF ASSIGNMENT
, 19
To: [NAME OF BORROWER]*
[NAME OF AGENT]
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit Agreement") described
in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered to
****[Borrower and]**** the Agent pursuant to Section 10.3.2 of the Credit
Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of , 19 (the "Assignment"), pursuant to which, among other
things, the Assignor has sold, assigned, delegated and transferred to the
Assignee, and the Assignee has purchased, accepted and assumed from the Assignor
the percentage interest specified in Item 3 of Schedule 1 of all outstandings,
rights and obligations under the Credit Agreement relating to the facilities
listed in Item 3 of Schedule 1. The Effective Date of the Assignment shall be
the later of the date specified in Item 5 of Schedule 1 or two Business Days (or
such shorter period as agreed to by the Agent) after this Notice of Assignment
and any consents and fees required by Sections 10.3.1 and 10.3.2 of the Credit
Agreement have been delivered to the Agent, provided that the Effective Date
shall not occur if any condition precedent agreed to by the Assignor and the
Assignee has not been satisfied.
*To be included only if consent must be obtained from Borrower pursuant to
Section 10.3.1 of the Credit Agreement.
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<PAGE>
4. The Assignor and the Assignee hereby give to Borrower and the Agent
notice of the assignment and delegation referred to herein. The Assignor will
confer with the Agent before the date specified in Item 5 of Schedule 1 to
determine if the Assignment Agreement will become effective on such date
pursuant to Section 3 hereof, and will confer with the Agent to determine the
Effective Date pursuant to Section 3 hereof if it occurs thereafter. The
Assignor shall notify the Agent if the Assignment Agreement does not become
effective on any proposed Effective Date as a result of the failure to satisfy
the conditions precedent agreed to by the Assignor and the Assignee.
At the request of the Agent, the Assignor will give the Agent written
confirmation of the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or before the
Effective Date the processing fee of $3,500 required by Section 10.3.2 of the
Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and the
Assignee request and direct that the Agent prepare and cause Borrower to execute
and deliver new Notes or, as appropriate, replacements notes, to the Assignor
and the Assignee. The Assignor and, if applicable, the Assignee each agree to
deliver to the Agent the original Note received by it from Borrower upon its
receipt of a new Note in the appropriate amount.
7. The Assignee advises the Agent that notice and payment instructions
are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the funds,
monies, assets or other consideration being used to make the purchase pursuant
to the Assignment are "plan assets" as defined under ERISA and that its rights,
benefits, and interests in and under the Loan Documents will not be "plan
assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under the Loan
Documents in accordance with the terms thereof. The Assignee acknowledges that
the Agent has no duty to supply information with respect to Borrower or the Loan
Documents to the Assignee until the Assignee becomes a party to the Credit
Agreement.*
*May be eliminated if Assignee is a party to the Credit Agreement prior to the
Effective Date.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By: By:
Title: Title:
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<PAGE>
ACKNOWLEDGED [AND CONSENTED TO] ACKNOWLEDGED [AND CONSENTED TO]
BY [NAME OF AGENT] BY [NAME OF BORROWER]
By: By:
Title: Title:
[Attach photocopy of Schedule 1 to Assignment]
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December 4, 1997
Board of Directors
Lilly Industries, Inc.
733 South West Street
Indianapolis, Indiana 46225
Gentlemen:
You have requested our opinion in connection with the Form S-4
Registration Statement, including amendments thereto (the "Registration
Statement"), to be filed by Lilly Industries, Inc., an Indiana corporation (the
"Corporation"), with respect to the Corporation's offer to exchange $100,000,000
in aggregate principal amount of 7 3/4% Senior Notes due 2007, Series B (the
"Series B Notes") for all $100,000,000 in aggregate outstanding principal amount
of 7 3/4% Senior Notes due 2007, Series A (the "Series A Notes" and,
collectively with the Series B Notes, the "Notes"). We have examined such
records and documents and have made such investigation of law as we have deemed
necessary in the circumstances.
Based on that examination and investigation, it is our opinion that the
Series B Notes have been duly authorized and, when issued and exchanged for the
Series A Notes in accordance with the Exchange Offer described in the Prospectus
included in the Registration Statement, will be validly issued and binding
obligations of the Corporation.
The foregoing opinion is limited to the application of the internal
laws of the State of Indiana and applicable federal law, and no opinion is
expressed herein as to any matter governed by the laws of any other
jurisdiction.
We consent to the use of our name under the caption "Legal Matters" in
the Prospectus included in the Registration Statement and to the filing of this
opinion as Exhibit 5 to the Registration Statement.
Very truly yours,
/s/ Barnes & Thornburg
BARNES & THORNBURG
LILLY INDUSTRIES, INC.
$100,000,000
7-3/4% Senior Notes due 2007
REGISTRATION AGREEMENT
New York, New York
November 5, 1997
To: SALOMON BROTHERS INC
LEHMAN BROTHERS INC.
SCHRODER & CO. INC.
In care of:
Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Lilly Industries, Inc., an Indiana corporation (the
"Company"), proposes to issue and sell to certain purchasers (the "Purchasers"),
upon the terms set forth in a purchase agreement dated the date hereof (the
"Purchase Agreement"), $100,000,000 aggregate principal amount of its 7-3/4%
Senior Notes due 2007 (the "Securities") (the "Initial Placement"). As an
inducement to the Purchasers to enter into the Purchase Agreement and in
satisfaction of a condition to your obligations thereunder, the Company agrees
with you, (i) for your benefit and the benefit of the other Purchasers and (ii)
for the benefit of the holders from time to time of the Securities (including
you and the other Purchasers) (each of the foregoing a "Holder" and together the
"Holders"), as follows:
1. Definitions. Capitalized terms used herein without definition shall
have their respective meanings set forth in the Purchase Agreement. As used in
this Agreement, the following capitalized defined terms shall have the following
meanings:
"Act" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person which,
directly or indirectly, is in control
<PAGE>
of, is controlled by, or is under common control with, such specified person.
For purposes of this definition, control of a person means the power, direct or
indirect, to direct or cause the direction of the management and policies of
such person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exchange Offer Registration Period" means the one-year period
following the consummation of the Registered Exchange Offer, exclusive of any
period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" means a registration
statement of the Company on an appropriate form under the Act with respect to
the Registered Exchange Offer, all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchanging Dealer" means any Holder (which may include the
Purchasers) which is a broker-dealer electing to exchange Securities acquired
for its own account as a result of market-making activities or other trading
activities for New Securities.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the Indenture relating to the Securities and
the New Securities dated as of November 10, 1997, between the Company and Harris
Trust and Savings Bank, as trustee, as the same may be amended from time to time
in accordance with the terms thereof.
"Initial Placement" has the meaning set forth in the preamble
hereto.
"Majority Holders" means the Holders of a majority of the
aggregate principal amount of securities registered under a Registration
Statement.
<PAGE>
"Managing Underwriters" means the investment banker or
investment bankers and manager or managers that shall administer an underwritten
offering.
"New Securities" means debt securities of the Company
identical in all material respects to the Securities (except that the interest
rate step-up provisions and the transfer restrictions will be modified or
eliminated, as appropriate), to be issued under the Indenture.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or the New Securities, covered by such
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"Registered Exchange Offer" means the proposed offer to the
Holders to issue and deliver to such Holders, in exchange for the Securities, a
like principal amount of the New Securities.
"Registration Securities" has the meaning set forth in Section
3(a) hereof.
"Registration Statement" means any Exchange Offer Registration
Statement or Shelf Registration Statement that covers any of the Securities or
the New Securities pursuant to the provisions of this Agreement, all amendments
and supplements to such registration statement, including, without limitation,
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Securities" has the meaning set forth in the preamble hereto.
"Shelf Registration" means a registration effected pursuant to
Section 3 hereof.
"Shelf Registration Period" has the meaning set forth in
Section 3(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof which
covers some of or all the Securities or New Securities, as applicable, on an
<PAGE>
appropriate form under Rule 415 under the Act, or any similar rule that may be
adopted by the Commission, all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Trustee" means the trustee with respect to the Securities and
the New Securities under the Indenture.
"underwriter" means any underwriter of securities in
connection with an offering thereof under a Shelf Registration Statement.
2. Registered Exchange Offer; Resales of New Securities by
Exchanging Dealers; Private Exchange. (a) The Company shall prepare and, not
later than 90 days after the date of the original issuance of the Securities,
shall file with the Commission the Exchange Offer Registration Statement with
respect to the Registered Exchange Offer. The Company shall cause the Exchange
Offer Registration Statement to become effective under the Act within 150 days
after the date of the original issuance of the Securities.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer, it
being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for New Securities (assuming that such Holder is
not an affiliate of the Company within the meaning of the Act, acquires the New
Securities in the ordinary course of such Holder's business and has no
arrangements with any person to participate in the distribution of the New
Securities) to trade such New Securities from and after their receipt without
any limitations or restrictions under the Act and without material restrictions
under the securities laws of a substantial proportion of the several states of
the United States.
(c) In connection with the Registered Exchange Offer, the
Company shall:
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) keep the Registered Exchange Offer open for not less than
30 days and not more than 45 days after
<PAGE>
the date notice thereof is mailed to the Holders (or longer if
required by applicable law);
(iii) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York; and
(iv) comply in all respects with all applicable laws.
(d) As soon as practicable after the close of the Registered
Exchange Offer, the Company shall:
(i) accept for exchange all Securities tendered and not
validly withdrawn pursuant to the Registered Exchange Offer;
(ii) deliver to the Trustee for cancelation all Securities so
accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver
to each Holder of Securities, New Securities equal in principal amount
to the Securities of such Holder so accepted for exchange.
(e) The Purchasers and the Company acknowledge that, pursuant
to current interpretations by the Commission's staff of Section 5 of the Act,
and in the absence of an applicable exemption therefrom, each Exchanging Dealer
is required to deliver a Prospectus in connection with a sale of any New
Securities received by such Exchanging Dealer pursuant to the Registered
Exchange Offer in exchange for Securities acquired for its own account as a
result of market-making activities or other trading activities. Accordingly, the
Company shall:
(i) include the information set forth in Annex A hereto on the
cover of the Exchange Offer Registration Statement, in Annex B hereto
in the forepart of the Exchange Offer Registration Statement in a
section setting forth details of the Exchange Offer, in Annex C hereto
in the underwriting or plan of distribution section of the Prospectus
forming a part of the Exchange Offer Registration Statement, and in
Annex D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer
Registration Statement continuously effective under the Act during the
Exchange Offer Registration Period for delivery by Exchanging Dealers
in connection
<PAGE>
with sales of New Securities received pursuant to the
Registered Exchange Offer, as contemplated by Section 4(h)
below.
(f) In the event that any Purchaser determines that it is not
eligible to participate in the Registered Exchange Offer with respect to the
exchange of Securities constituting any portion of an unsold allotment, at the
request of such Purchaser, the Company shall issue and deliver to such Purchaser
or the party purchasing New Securities registered under a Shelf Registration
Statement as contemplated by Section 3 hereof from such Purchaser, in exchange
for such Securities, a like principal amount of New Securities. The Company
shall seek to cause the CUSIP Service Bureau to issue the same CUSIP number for
such New Securities as for New Securities issued pursuant to the Registered
Exchange Offer.
3. Shelf Registration. If, (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to effect
the Registered Exchange Offer as contemplated by Section 2 hereof, or (ii) for
any other reason the Exchange Offer Registration Statement is not declared
effective within 150 days after the Closing Date or the Registered Exchange
Offer is not consummated within 180 days after the Closing Date, or (iii) any
Purchaser so requests with respect to Securities (or any New Securities received
pursuant to Section 2(f)) not eligible to be exchanged for New Securities in a
Registered Exchange Offer or, in the case of any Purchaser that participates in
any Registered Exchange Offer, such Purchaser does not receive freely tradable
New Securities, or (iv) any Holder (other than a Purchaser) is not eligible to
participate in the Registered Exchange Offer or (v) in the case of any such
Holder that participates in the Registered Exchange Offer, such Holder does not
receive freely tradable New Securities in exchange for tendered securities,
other than by reason of such Holder being an affiliate of the Company within the
meaning of the Act (it being understood that, for purposes of this Section 3,
(x) the requirement that a Purchaser deliver a Prospectus containing the
information required by Items 507 and/or 508 of Regulation S-K under the Act in
connection with sales of New Securities acquired in exchange for such Securities
shall result in such New Securities being not "freely tradeable" but (y) the
requirement that an Exchanging Dealer deliver a Prospectus in connection with
sales of New Securities acquired in the Registered Exchange Offer in exchange
for Securities acquired as a result of market-making activities or other trading
activities shall not
<PAGE>
result in such New Securities being not "freely tradeable"), the following
provisions shall apply:
(a) The Company shall as promptly as practicable (but in no
event more than 30 days after so required or requested pursuant to this Section
3), file with the Commission and thereafter shall cause to be declared effective
under the Act a Shelf Registration Statement relating to the offer and sale of
the Securities or the New Securities, as applicable, by the Holders from time to
time in accordance with the methods of distribution elected by such Holders and
set forth in such Shelf Registration Statement (such Securities or New
Securities, as applicable, to be sold by such Holders under such Shelf
Registration Statement being referred to herein as "Registration Securities");
provided, however, that, with respect to New Securities received by a Purchaser
in exchange for Securities constituting any portion of an unsold allotment, the
Company may, if permitted by current interpretations by the Commission's staff,
file a post-effective amendment to the Exchange Offer Registration Statement
containing the information required by Regulation S-K Items 507 and/or 508, as
applicable, in satisfaction of its obligations under this paragraph (a) with
respect thereto, and any such Exchange Offer Registration Statement, as so
amended, shall be referred to herein as, and governed by the provisions herein
applicable to, a Shelf Registration Statement.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the Prospectus
forming part thereof to be usable by Holders for a period of two years from the
date the Shelf Registration Statement is declared effective by the Commission or
such shorter period that will terminate when all the Securities or New
Securities, as applicable, covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement (in any such case, such period
being called the "Shelf Registration Period"). The Company shall be deemed not
to have used its best efforts to keep the Shelf Registration Statement effective
during the Shelf Registration Period if it voluntarily takes any action that
would result in Holders of securities covered thereby not being able to offer
and sell such securities during that period, unless (i) such action is required
by applicable law or (ii) such action is taken by the Company in good faith and
for valid business reasons (not including avoidance of the Company's obligation
hereunder), including the acquisition or divestiture of assets, so long as the
Company promptly thereafter complies with the requirements of Section 4(k)
hereof, if applicable.
<PAGE>
4. Registration Procedures. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to you, prior to the filing
thereof with the Commission, a copy of any Shelf Registration Statement
and any Exchange Offer Registration Statement, each amendment thereof
and each amendment or supplement, if any, to the Prospectus included
therein and shall use its best efforts to reflect in each such
document, when so filed with the Commission, such comments as you or
any Holder reasonably may propose.
(b) The Company shall ensure that (i) any Registration
Statement and any amendment thereto and any Prospectus forming part
thereof and any amendment or supplement thereto complies in all
material respects with the Act and the rules and regulations
thereunder, (ii) any Registration Statement and any amendment thereto
does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and
(iii) any Prospectus forming part of any Registration Statement, and
any amendment or supplement to such Prospectus, does not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) (1) The Company shall advise you and, in the case of a
Shelf Registration Statement, the Holders of securities covered
thereby, and, if requested by you or any such Holder, confirm such
advice in writing:
(i) when a Registration Statement and any amendment
thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective; and
(ii) of any request by the Commission for amendments
or supplements to the Registration Statement or the Prospectus
included therein or for additional information.
(2) The Company shall advise you and, in the case of a Shelf
Registration Statement, the Holders of
<PAGE>
securities covered thereby, and, in the case of an Exchange Offer
Registration Statement, any Exchanging Dealer which has provided in
writing to the Company a telephone or facsimile number and address for
notices, and, if requested by you or any such Holder or Exchanging
Dealer, confirm such advice in writing:
(i) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that
purpose;
(ii) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the securities included therein for sale in
any jurisdiction or the initiation or threatening of any
proceeding for such purpose; and
(iii) of the happening of any event that
requires the making of any changes in the Registration
Statement or the Prospectus so that, as of such date, the
statements therein are not misleading and do not omit to state
a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in
the light of the circumstances under which they were made) not
misleading (which advice shall be accompanied by an
instruction to suspend the use of the Prospectus until the
requisite changes have been made).
(d) The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of any
Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of securities
included within the coverage of any Shelf Registration Statement,
without charge, at least one copy of such Shelf Registration Statement
and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing,
any documents incorporated by reference therein and all exhibits
thereto (including those incorporated by reference therein).
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of securities included within the coverage of
any Shelf Registration Statement, without charge, as many copies
<PAGE>
of the Prospectus (including each preliminary Prospectus) included in
such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and the Company consents
to the use of the Prospectus or any amendment or supplement thereto by
each of the selling Holders of securities in connection with the
offering and sale of the securities covered by the Prospectus or any
amendment or supplement thereto.
(g) The Company shall furnish to each Exchanging Dealer which
so requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules and, if the Exchanging
Dealer so requests in writing, any documents incorporated by reference
therein and all exhibits thereto (including those incorporated by
reference therein).
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as
many copies of the Prospectus included in such Exchange Offer
Registration Statement and any amendment or supplement thereto as such
Exchanging Dealer may reasonably request for delivery by such
Exchanging Dealer in connection with a sale of New Securities received
by it pursuant to the Registered Exchange Offer; and the Company
consents to the use of the Prospectus or any amendment or supplement
thereto by any such Exchanging Dealer, as aforesaid.
(i) Prior to the Registered Exchange Offer or any other
offering of securities pursuant to any Registration Statement, the
Company shall register or qualify or cooperate with the Holders of
securities included therein and their respective counsel in connection
with the registration or qualification of such securities for offer and
sale under the securities or blue sky laws of such jurisdictions as any
such Holder reasonably requests in writing and do any and all other
acts or things necessary or advisable to enable the offer and sale in
such jurisdictions of the securities covered by such Registration
Statement; provided, however, that the Company will not be required to
qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to
general service of process or to taxation in any such jurisdiction
where it is not then so subject.
<PAGE>
(j) The Company shall cooperate with the Holders of Securities
to facilitate the timely preparation and delivery of certificates
representing Securities to be sold pursuant to any Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as Holders may request prior to sales of
securities pursuant to such Registration Statement.
(k) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) above, the Company shall promptly prepare a post-effective
amendment to any Registration Statement or an amendment or supplement
to the related Prospectus or file any other required document so that,
as thereafter delivered to purchasers of the securities included
therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(l) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the
Securities or New Securities, as the case may be, registered under such
Registration Statement, and provide the Trustee with printed
certificates for such Securities or New Securities, in a form, if
requested by the applicable Holder or Holder's Counsel, eligible for
deposit with The Depository Trust Company or any successor thereto
under the Indenture.
(m) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission to the extent and so
long as they are applicable to the Registered Exchange Offer or the
Shelf Registration and will make generally available to its security
holders a consolidated earnings statement (which need not be audited)
covering a twelve-month period commencing after the effective date of
the Registration Statement and ending not later than 15 months
thereafter, as soon as practicable after the end of such period, which
consolidated earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act.
(n) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, on or prior to the
effective date of any Shelf Registration Statement or Exchange Offer
Registration Statement.
<PAGE>
(o) The Company may require each Holder of securities to be
sold pursuant to any Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of
such securities as the Company may from time to time reasonably require
for inclusion in such Registration Statement.
(p) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf
Registration Statement, such information as the Managing Underwriters
and Majority Holders reasonably agree should be included therein and
shall make all required filings of such Prospectus supplement or
post-effective amendment as soon as notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the
Company shall enter into such agreements (including underwriting
agreements) and take all other appropriate actions in order to expedite
or facilitate the registration or the disposition of the Securities,
and in connection therewith, if an underwriting agreement is entered
into, cause the same to contain indemnification provisions and
procedures no less favorable than those set forth in Section 6 hereof
(or such other provisions and procedures acceptable to the Majority
Holders and the Managing Underwriters, if any), with respect to all
parties to be indemnified pursuant to Section 6 hereof from Holders of
Securities to the Company.
(r) In the case of any Shelf Registration Statement, the
Company shall (i) make reasonably available for inspection by the
Holders of securities to be registered thereunder, any underwriter
participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by the
Holders or any such underwriter all relevant financial and other
records, pertinent corporate documents and properties of the Company
and its subsidiaries; (ii) cause the Company's officers, directors and
employees to supply all relevant information reasonably requested by
the Holders or any such underwriter, attorney, accountant or agent in
connection with any such Registration Statement as is customary for
similar due diligence examinations; provided, however, that any
information that is designated in writing by the Company, in good
faith, as confidential at the time of delivery of such
<PAGE>
information shall be kept confidential by the Holders or any such
underwriter, attorney, accountant or agent, unless such disclosure is
made in connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a
third party without an accompanying obligation of confidentiality;
(iii) make such representations and warranties to the Holders of
securities registered thereunder and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters
in primary underwritten offerings; (iv) obtain opinions of counsel to
the Company (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the Managing Underwriters, if any)
addressed to each selling Holder and the underwriters, if any, covering
such matters as are customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters; (v) obtain "cold comfort"
letters (or, in the case of any person that does not satisfy the
conditions for receipt of a "cold comfort" letter specified in
Statement on Auditing Standards No. 72, an "agreed-upon procedures"
letter) and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each selling Holder of securities registered
thereunder and the underwriters, if any, in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with primary underwritten offerings; and (vi) deliver such
documents and certificates as may be reasonably requested by the
Majority Holders and the Managing Underwriters, if any, including those
to evidence compliance with Section 4(k) and with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company. The foregoing actions set forth in clauses
(iii), (iv), (v) and (vi) of this Section 4(r) shall be performed (A)
on the effective date of such Registration Statement and each
post-effective amendment thereto and (B) at each closing under any
underwriting or similar agreement as and to the extent required
thereunder.
(s) In the case of any Exchange Offer Registration Statement,
the Company shall (i) make
<PAGE>
reasonably available for inspection by each Purchaser, and any
attorney, accountant or other agent retained by such Purchaser, all
relevant financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries; (ii) cause the
Company's officers, directors and employees to supply all relevant
information reasonably requested by such Purchaser or any such
attorney, accountant or agent in connection with any such Registration
Statement as is customary for similar due diligence examinations;
provided, however, that any information that is designated in writing
by the Company, in good faith, as confidential at the time of delivery
of such information shall be kept confidential by such Purchaser or any
such attorney, accountant or agent, unless such disclosure is made in
connection with a court proceeding or required by law, or such
information becomes available to the public generally or through a
third party without an accompanying obligation of confidentiality;
(iii) make such representations and warranties to such Purchaser, in
form, substance and scope as are customarily made by issuers to
underwriters in primary underwritten offerings; (iv) obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to such Purchaser and its
counsel), addressed to such Purchaser, covering such matters as are
customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such Purchaser or
its counsel; (v) obtain "cold comfort" letters and updates thereof from
the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required
to be, included in the Registration Statement), addressed to such
Purchaser, in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
primary underwritten offerings, or if requested by such Purchaser or
its counsel in lieu of a "cold comfort" letter, an agreed-upon
procedures letter under Statement on Auditing Standards No. 35,
covering matters requested by such Purchaser or its counsel; and (vi)
deliver such documents and certificates as may be reasonably requested
by such Purchaser or its counsel, including those to evidence
compliance with Section 4(k) and with conditions customarily contained
in underwriting agreements. The foregoing actions set
<PAGE>
forth in clauses (iii), (iv), (v) and (vi) of this Section 4(s) shall
be performed (A) at the close of the Registered Exchange Offer and (B)
on the effective date of any post-effective amendment to the Exchange
Offer Registration Statement.
5. Registration Expenses. The Company shall bear all expenses
incurred in connection with the performance of its obligations under Sections 2,
3 and 4 hereof and, in the event of any Shelf Registration Statement, will
reimburse the Holders for the reasonable fees and disbursements of one firm or
counsel (in addition to one local counsel in each relevant jurisdiction)
designated by the Majority Holders to act as counsel for the Holders in
connection therewith ("Holders' Counsel"), and, in the case of any Exchange
Offer Registration Statement, will reimburse the Purchasers for the reasonable
fees and disbursements of counsel acting in connection therewith.
6. Indemnification and Contribution. (a) In connection with
any Registration Statement, the Company agrees to indemnify and hold harmless
each Holder of securities covered thereby (including each Purchaser and, with
respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each
Exchanging Dealer), the directors, officers, employees and agents of each such
Holder and each other person, if any, who controls any such Holder within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act against any
and all losses, claims, damages or liabilities, joint or several, to which they
or any of them may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement as
originally filed or in any amendment thereof, or in any preliminary Prospectus
or Prospectus, or in any amendment thereof or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any case to the extent that any such loss, claim, damage or liability arises out
of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
<PAGE>
with written information furnished to the Company by or on behalf of any such
Holder specifically for inclusion therein. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
The Company also agrees to indemnify or contribute to Losses
(as defined below) of, as provided in Section 6(d), any underwriters of
Securities registered under a Shelf Registration Statement, their officers,
directors, employees and agents and each person who controls such underwriters
on substantially the same basis as that of the indemnification of the Purchasers
and the selling Holders provided in this Section 6(a) and shall, if requested by
any Holder, enter into an underwriting agreement reflecting such agreement, as
provided in Section 4(q) hereof.
(b) Each Holder of securities covered by a Registration
Statement (including each Purchaser and, with respect to any Prospectus delivery
as contemplated in Section 4(h) hereof, each Exchanging Dealer) severally and
not jointly agrees to indemnify and hold harmless the Company, each of its
directors and officers and each other person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from the Company to each such Holder,
but only with reference to written information relating to such Holder furnished
to the Company by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees
<PAGE>
and expenses of any separate counsel retained by the indem nified party or
parties except as set forth below); provided, however, that such counsel shall
be satisfactory to the indemnified party. Notwithstanding the indemnifying
party's election to appoint counsel to represent the indemnified party in an
action, the indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the reasonable
fees, costs and expenses of such separate counsel (and local counsel) if (i) the
use of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, (iii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of the institution of
such action or (iv) the indemnifying party shall authorize the indemnified party
to employ separate counsel at the expense of the indemnifying party. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement and the
Registration Statement which resulted in such Losses; provided, however, that in
no case
<PAGE>
shall any Purchaser or any subsequent Holder of any Security or New Security be
responsible, in the aggregate, for any amount in excess of the purchase discount
or commission applicable to such Security, or in the case of a New Security,
applicable to the Security which was exchangeable into such New Security, as set
forth on the cover page of the Final Memorandum, nor shall any underwriter be
responsible for any amount in excess of the underwriting discount or commission
applicable to the securities purchased by such underwriter under the
Registration Statement which resulted in such Losses. If the allocation provided
by the immediately preceding sentence is unavailable for any reason, the
indemnifying party and the indemnified party shall contribute in such proportion
as is appropriate to reflect not only such relative benefits but also the
relative fault of such indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the sum of (x)
the total net proceeds from the Initial Placement (before deducting expenses) as
set forth on the cover page of the Final Memorandum and (y) the total amount of
additional interest which the Company was not required to pay as a result of
registering the securities covered by the Registration Statement which resulted
in such Losses. Benefits received by the Purchasers shall be deemed to be equal
to the total purchase discounts and commissions as set forth on the cover page
of the Final Memorandum, and benefits received by any other Holders shall be
deemed to be equal to the value of receiving Securities or New Securities, as
applicable, registered under the Act. Benefits received by any underwriter shall
be deemed to be equal to the total underwriting discounts and commissions, as
set forth on the cover page of the Prospectus forming a part of the Registration
Statement which resulted in such Losses. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the indemnifying party, on the one hand, or by the
indemnified party, on the other hand. The parties agree that it would not be
just and equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 6, each person who controls a Holder within the meaning of
<PAGE>
either the Act or the Exchange Act and each director, officer, employee and
agent of such Holder shall have the same rights to contribution as such Holder,
and each person who controls the Company within the meaning of either the Act or
the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the Company shall have the same
rights to contribution as the Company, subject in each case to the applicable
terms and conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force
and effect, regardless of any investigation made by or on behalf of any Holder,
the Company or any underwriter or any of the officers, directors or controlling
persons referred to in this Section 6, and will survive the sale by a Holder of
securities covered by a Registration Statement.
7. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders herein or otherwise conflicts with the provisions
hereof.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then outstanding aggregate
principal amount of Securities (or, after the consummation of any Exchange Offer
in accordance with Section 2 hereof, of New Securities); provided that, with
respect to any matter that directly or indirectly affects the rights of any
Purchaser hereunder, the Company shall obtain the written consent of each such
Purchaser against which such amendment, qualification, supplement, waiver or
consent is to be effective. Notwithstanding the foregoing (except the foregoing
proviso), a waiver or consent to departure from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by the
Majority Holders, determined on the basis of securities being sold rather than
registered under such Registration Statement.
<PAGE>
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given
by such Holder to the Company in accordance with the
provisions of this Section 7(c), which address initially is,
with respect to each Holder, the address of such Holder
maintained by the registrar under the Indenture, with a copy
in like manner to Salomon Brothers Inc by fax (212-783-2823)
and confirmed by mail to it at Seven World Trade Center, New
York, New York 10048;
(2) if to you, initially at the address set
forth in the Purchase Agreement; and
(3) if to the Company, initially at its
address set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have
been duly given when received.
The Purchasers or the Company by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company or subsequent Holders of Securities and/or New Securities. The
Company hereby agrees to extend the benefits of this Agreement to any Holder of
Securities and/or New Securities and any such Holder may specifically enforce
the provisions of this Agreement as if an original party hereto.
(e) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL
<PAGE>
LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS
THEREOF).
(h) Severability. In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all the rights and privileges of the
parties shall be enforceable to the fullest extent permitted by law.
(i) Securities Held by the Company, etc. Whenever the consent
or approval of Holders of a specified percentage of principal amount of
Securities or New Securities is required hereunder, Securities or New
Securities, as applicable, held by the Company or its Affiliates (other than
subsequent Holders of Securities or New Securities if such subsequent Holders
are deemed to be Affiliates solely by reason of their holdings of such
Securities or New Securities) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
<PAGE>
Please confirm that the foregoing correctly sets forth the
agreement between the Company and you.
Very truly yours,
LILLY INDUSTRIES, INC.
By: /s/ John C. Elbin
--------------------------
Name: John C. Elbin
Title: Vice President, Chief Financial
Officer and Secretary
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written
SALOMON BROTHERS INC
LEHMAN BROTHERS INC.
SCHRODER & CO. INC.
By: SALOMON BROTHERS INC
By: /s/ E. Thomas Massey
-----------------------
Name: E. Thomas Massey
Title: Associate
<PAGE>
ANNEX A
Each broker-dealer that receives New Securities for its own account pursuant to
the Registered Exchange Offer must acknowledge that it will deliver a prospectus
in connection with any resale of such New Securities. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Act. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of New
Securities received in exchange for Securities where such New Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Company has agreed that, starting on the date hereof
(the "Expiration Date") and ending on the close of business on the first
anniversary of the Expiration Date, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives New Securities for its own account in exchange
for Securities, where such Securities were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Securities. The
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, starting on the Expiration Date and ending on the close of business on the
first anniversary following the Expiration Date, it will make this Prospectus,
as amended or supplemented, available to any broker-dealer for use in connection
with any such resale. In addition, until , 199 , all dealers effecting
transactions in the Exchange Securities may be required to deliver a
prospectus.*/
The Company will not receive any proceeds from any sale of New
Securities by broker-dealers. New Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Securities. Any broker-dealer that resells New Securities that were received by
it for its own account pursuant to the Registered Exchange Offer and any broker
or dealer that participates in a distribution of such New Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit of any such resale of New Securities and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Act. The Letter of Transmittal states that by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Act.
- --------
*/ In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
For a period of one year after the Expiration Date, the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Act.
[If applicable, add information required by Regulation S-K
Items 507 and/or 508.]
<PAGE>
ANNEX D
Rider A
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
-------------------------------------------
Rider B
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New
Securities. If the undersigned is a broker-dealer that will receive New
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Act.
Date
Harris Trust and Savings Bank
12th Floor
311 West Monroe Street
Chicago, Illinois 60690
Ladies and Gentlemen:
______________, a Delaware corporation, (the "Company") hereby appoints
Harris Trust and Savings Bank ("Harris Trust") to act as exchange agent (the
"Exchange Agent") in connection with an exchange offer by the Company to
exchange an aggregate principal amount of up to $____________ of its
____________________________ (the "New Notes"), which have been registered
under the Securities Act of 1933, as amended, for a like principal amount of
its outstanding _______________________ (the "Old Notes"). The terms and
conditions of the exchange offer are set forth in a Prospectus, dated
______________, 1996 (as the same may be amended or supplemented from time to
time, the "Prospectus"), and in the related Letter of Transmittal, which
together constitute the "Exchange Offer. " Capitalized terms used herein and
not defined shall have the respective meanings ascribed thereto in the
Prospectus.
On the basis of the representations, warranties and agreements of the
Company and Harris Trust contained herein and subject to the terms and
conditions hereof, the following sets forth the agreement between the Company
and Harris Trust as Exchange Agent for the Exchange Offer:
1. Appointment and Duties as Exchange Agent.
(a) The Company hereby authorizes Harris Trust to act as
Exchange Agent in connection with the Exchange Offer and Harris Trust agrees
to act as Exchange Agent in connection with the Exchange Offer. As Exchange
Agent, Harris Trust will perform those services as are outlined herein or
which are customarily performed by an exchange agent in connection with an
exchange offer of like nature, including, but not limited to, accepting
tenders of the Old Notes, assisting the Company in the preparation of the
documentation necessary to effect the transactions herein contemplated
(without assuming responsibility for such documentation, unless such
information has been furnished to the Company in writing by Harris Trust).
<PAGE>
(b) The Company acknowledges and agrees that Harris Trust
has been retained pursuant to this Agreement to act solely as Exchange Agent
in connection with the Exchange Offer, and in such capacity, Harris Trust
shall perform such duties as are outlined herein and which are specifically
set forth in the section of the Prospectus captioned "The Exchange Offer" and
in the Letter of Transmittal; provided, however, that in no way will Harris
Trust's general duty to act in good faith and without gross negligence or
willful misconduct be discharged by the foregoing.
(c) Harris Trust will examine each of the Letters of
Transmittal (or electronic instructions transmitted by the Depository Trust
Corporation (the "DTC Transmissions") and certificates for the Old Notes and
any other documents delivered or mailed to Harris Trust by or for holders of
the Old Notes (or any Book-Entry Confirmations (as set forth in the
Prospectus) received by Harris Trust with respect to the Old Notes), to
ascertain whether: (i) the Letters of Transmittal and any such other
documents are duly executed and properly completed in accordance with the
instructions set forth therein (or that the DTC Transmission contains the
proper information required to be set forth therein) and (ii) the Old Notes
have otherwise been properly tendered (or that the Book-Entry Confirmations
are in due and proper form and contain the information required to be set
forth therein). In each case where the Letters of Transmittal or any other
documents have been improperly completed or executed (or the DTC
Transmissions are not in due and proper form or omit certain information) or
certificates for the Old Notes are not in proper form for transfer (or the
Book-Entry Confirmations are not in due and proper form or omit certain
information) or some other irregularity in connection with the tender or
acceptance of the Old Notes exists, Harris Trust will endeavor, subject to
the terms and conditions of the Exchange Offer, to advise the tendering
holders of Old Notes of the irregularity and to take any other action as may
be necessary or advisable to cause such irregularity to be corrected.
Notwithstanding the above, Harris Trust shall not be under any duty to give
any notification of any irregularities in tenders or incur any liability for
failure to give any such notification.
(d) With the approval of the President, any Senior Vice
President, any Executive Vice President, any Vice President or the Treasurer
or any Assistant Treasurer of the Company (such approval, if given orally, to
be confirmed in writing) or any other party designated by any such officer,
Harris Trust is authorized to waive any irregularities in connection with any
tender of the Old Notes pursuant to the Exchange Offer.
(e) Tenders of the Old Notes may be made only as set forth
in the Letter of Transmittal and in the section of the Prospectus captioned
"The Exchange Offer" and the Old Notes shall be considered properly tendered
only when tendered in accordance with such procedures set forth therein.
Notwithstanding the provisions of this paragraph, the Old Notes which the
President, any Senior Vice President, any Executive Vice President, any Vice
President or the Treasurer, any Assistant Treasurer or any other designated
officer of
- -2-
<PAGE>
the Company, shall approve (such approval, if given orally, to be confirmed in
writing) as having been properly tendered shall be considered to be properly
tendered.
(f) Harris Trust shall advise the Company with respect to any
Old Notes received as soon as possible after 5:00 p.m., New York City time, on
the Expiration Date and accept its instructions with respect to disposition of
such Old Notes.
(g) Harris Trust shall (i) ensure that each Letter of
Transmittal and, if required pursuant to the terms of the Exchange Offer, the
related Old Notes or a bond power are duly executed (with signatures guaranteed
where required) by the appropriate parties in accordance with the terms of the
Exchange Offer; (ii) in those instances where the person executing the Letter
of Transmittal (as indicated on the Letter of Transmittal) is acting in a
fiduciary or a representative capacity, ensure that proper evidence of his or
her authority so to act is submitted; (iii) in those instances where the Old
Notes are tendered by persons other than the registered holder of such Old
Notes, ensure that customary transfer requirements, including any applicable
transfer taxes, and the requirements imposed by the transfer restrictions on
the Old Notes (including any applicable requirements for certifications, legal
opinions or other information) are fulfilled; (iv) ensure that the Old Notes
tendered in part are tendered in principal amounts of $1,000 and integral
multiples thereof; and (v) deliver certificates for the Old Notes tendered in
part to the transfer agent for split-up and shall return any untendered Old
Notes or Old Notes which have not been accepted by the Company to the holders
of such Old Notes (or in the case of Old Notes tendered by book-entry transfer,
such non-exchanged Old Notes will be credited to an account maintained with the
Book-Entry Transfer Facility) promptly after the expiration or termination of
the Exchange Offer.
(h) Upon acceptance by the Company of any Old Notes duly
tendered pursuant to the Exchange Offer (such acceptance if given orally, to be
confirmed in writing), Harris Trust will cause the New Notes in exchange
therefor to be issued as promptly as possible (subject to receipt from the
Company of appropriate certificates under the related Indenture) and Harris
Trust will deliver such New Notes on behalf of the Company at the rate of
$1,000 principal amount of New Notes for each $1,000 principal amount of the
Old Notes tendered as promptly as possible after acceptance by the Company of
the Old Notes for exchange and notice (such notice if given orally, to be
confirmed in writing) of such acceptance by the Company; provided, however,
that in all cases, the Old Notes tendered pursuant to the Exchange Offer will
be exchanged only after timely receipt by Harris Trust of certificates for such
Old Notes (or a Book-Entry Confirmation), a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees and any other required documents (or a properly completed
DTC Transmission). Unless otherwise instructed by the Company, Harris Trust
shall issue the New Notes only in denominations of $1,000 or any integral
multiple thereof.
- -3-
<PAGE>
(i) Tenders pursuant to the Exchange Offer are irrevocable,
except that, subject to the terms and the conditions set forth in the
Prospectus and the Letter of Transmittal, the Old Notes tendered pursuant to
the Exchange Offer may be withdrawn at any time on or prior to the Expiration
Date in accordance with the terms of the Exchange Offer.
(j) Notice of any decision by the Company not to exchange
any Old Notes tendered shall be given by the Company either orally (if given
orally, to be confirmed in writing) or in a written notice to Harris Trust.
(k) If, pursuant to the Exchange Offer, the Company does
not accept for exchange all or part of the Old Notes tendered because of an
invalid tender, the occurrence of certain other events set forth in the
Prospectus under the caption "The Exchange Offer -Certain Conditions to the
Exchange Offer" or otherwise, Harris Trust shall, upon notice from the
Company (such notice if given orally, to be confirmed in writing), promptly
after the expiration or termination of the Exchange Offer return such
certificates for unaccepted Old Notes (or effect appropriate Book-Entry
Confirmations), together with any related required documents and the Letters
of Transmittal (or DTC Transmissions) relating thereto that are in Harris
Trust's possession, to the persons who deposited such certificates.
(1) Certificates for reissued Old Notes, unaccepted Old
Notes or New Notes shall be forwarded by (a) first-class certified mail,
return receipt requested under a blanket surety bond obtained by Harris
Trust protecting Harris Trust and the Company from loss or liability arising
out of the non-receipt or non-delivery of such certificates or (b) by
registered mail insured by Harris Trust separately for the replacement value
of each such certificate.
(m) Harris Trust is not authorized to pay or offer to pay
any concessions, commissions or solicitation fees to any broker, dealer,
commercial bank, trust company or other nominee or to engage or use any
person to solicit tenders.
(n) As Exchange Agent, Harris Trust:
(i) shall have no duties or obligations other than
those specifically set forth in the Prospectus, the Letter of
Transmittal or herein or as may be subsequently agreed to in
writing;
(ii) will make no representations and will have no
responsibilities as to the validity, value or genuineness of
any of the certificates for the Old Notes deposited pursuant
to the Exchange Offer, and will not be required to and will
make no representation as to the validity, value or
genuineness of the Exchange Offer; provided, however, that in
no
-4-
<PAGE>
way will Harris Trust's general duty to act in good faith and without gross
negligence or willful misconduct be limited by the foregoing;
(iii) shall not be obligated to take any legal action
hereunder which might in Harris Trust's reasonable judgment
involve any expense or liability, unless Harris Trust shall
have been furnished with reasonable indemnity;
(iv) may reasonably rely on and shall be protected in
acting in reliance upon any certificate, instrument, opinion,
notice, letter, telegram or other document or security
delivered to Harris Trust and reasonably believed by Harris
Trust to be genuine and to have been signed by the proper
party or parties;
(v) may reasonably act upon any tender, statement,
request, comment, agreement or other instrument whatsoever not
only as to its due execution and validity and effectiveness of
its provisions, but also as to the truth and accuracy of any
information contained therein, which Harris Trust believes in
good faith to be genuine and to have been signed or
represented by a proper person or persons acting in a
fiduciary or representative capacity (so long as proper
evidence of such fiduciary's or representative's authority so
to act is submitted to Harris Trust) and Harris Trust examines
and reasonably concludes that such evidence properly
establishes such authority;
(vi) may rely on and shall be protected in acting
upon written or oral instructions from the President, any
Senior Vice President, any Executive Vice President, any Vice
President, the Treasurer, any Assistant Treasurer or any other
designated officer of the Company;
(vii) may consult with its own counsel with respect
to any questions relating to Harris Trust's duties and
responsibilities and the written opinion of such counsel shall
be full and complete authorization and protection in respect
of any action taken, suffered or omitted to be taken by Harris
Trust hereunder in good faith and in accordance with the
written opinion of such counsel; and
(viii) shall not advise any person tendering Old
Notes pursuant to the Exchange Offer as to whether to tender
or refrain from tendering all or any portion of its Old Notes
or as to the market value, decline or appreciation in market
value of any Old Notes that may or may not occur as a result
of the Exchange Offer or as to the market value of the New
Notes.
(o) Harris Trust shall take such action as may from time to
time be requested by the Company (and such other action as Harris Trust may
reasonably deem appropriate) to furnish copies of the Prospectus, Letter of
Transmittal and the Notice of Guaranteed Delivery or such other forms as may
be approved from time to time by the
-5-
<PAGE>
Company, to all persons requesting such documents and to accept and comply
with telephone requests for information relating to the Exchange Offer,
provided that such information shall relate only to the procedures for
tendering into (or withdrawing from) the Exchange Offer. The Company will
furnish you with copies of such documents at your request.
(p) Harris Trust shall advise orally and promptly
thereafter confirm in writing to the Company and such other person or
persons as the Company may request, daily (and more frequently during the
week immediately preceding the Expiration Date and if otherwise reasonably
requested) up to and including the Expiration Date, the aggregate principal
amount of the Old Notes which have been duly tendered pursuant to and in
compliance with the terms of the Exchange Offer and the items received by
Harris Trust pursuant to the Exchange Offer and this Agreement, separately
reporting and giving cumulative totals as to items properly received and
items improperly received. In addition, Harris Trust will also provide, and
cooperate in making available to the Company, or any such other person or
persons upon request (such request if made orally, to be confirmed in
writing) made from time to time, such other information as the Company may
reasonably request. Such cooperation shall include, without limitation, the
granting by Harris Trust to the Company, and such person or persons as the
Company may request, access to those persons on Harris Trust's staff who are
responsible for receiving tenders, in order to ensure that immediately prior
to the Expiration Date the Company shall have received adequate information
in sufficient detail to enable the Company to decide whether to extend the
Exchange Offer. Harris Trust shall prepare a final list of all persons whose
tenders were accepted, the aggregate principal amount of the Old Notes
tendered, the aggregate principal amount of the Old Notes accepted and
deliver said list to the Company.
(q) Letters of Transmittal, Book-Entry Confirmations, DTC
Transmissions and Notices of Guaranteed Delivery shall be stamped by Harris
Trust as to the date and the time of receipt thereof and shall be preserved
by Harris Trust for a period of time at least equal to the period of time
Harris Trust preserves other records pertaining to the transfer of
securities, or one year, whichever is longer, and thereafter shall be
delivered by Harris Trust to the Company. Harris Trust shall dispose of
unused Letters of Transmittal and other surplus materials by returning them
to the Company.
(r) Harris Trust hereby expressly waives any lien,
encumbrance or right of set-off whatsoever that Harris Trust may have with
respect to funds deposited with it for the payment of transfer taxes by
reasons of amounts, if any, borrowed by the Company, or any of its
subsidiaries or affiliates pursuant to any loan or credit agreement with
Harris Trust or for compensation owed to Harris Trust hereunder or for any
other matter.
-6-
<PAGE>
2. Compensation.
In consideration of Harris Trust's acceptance of the
appointment set forth in Paragraph 1 above, the Company agrees to (i) pay
Harris Trust a fee for all services rendered under the foregoing appointment of
$3,500 and (ii) reimburse Harris Trust for any reasonable out-of-pocket
expenses incurred as Exchange Agent in performing the services described
herein; provided, however, that Harris Trust shall not be entitled to
reimbursement for the fees or disbursements of its legal counsel without the
prior written consent of the Company.
3. Indemnification.
(a) The Company hereby agrees to protect, defend, indemnify
and hold harmless Harris Trust against and from any and all costs, losses,
liabilities, expenses (including reasonable counsel fees and disbursements) and
claims imposed upon or asserted against Harris Trust on account of any action
taken or omitted to be taken by Harris Trust in connection with its acceptance
of or performance of its duties under this Agreement and the documents related
thereto as well as the reasonable costs and expenses of defending itself
against any claim or liability arising out of or relating to this Agreement and
the documents related thereto. This indemnification shall survive the release,
discharge, termination, and/or satisfaction of this Agreement. Anything in this
Agreement to the contrary notwithstanding, the Company shall not be liable for
indemnification or otherwise for any loss, liability, cost or expense to the
extent arising out of Harris Trust's bad faith, gross negligence or willful
misconduct. In no case shall the Company be liable under this indemnification
agreement with respect to any claim against Harris Trust unless the Company
shall be notified by Harris Trust, by letter, of the written assertion of a
claim against Harris Trust or of any other action commenced against Harris
Trust, reasonably promptly after Harris Trust shall have received any such
written assertion or shall have been served with a summons in connection
therewith. The Company shall be entitled to participate at its own expense in
the defense of any such claim or other action, and, if the Company so elects,
the Company may assume the defense of any pending or threatened action against
Harris Trust in respect of which indemnification may be sought hereunder, in
which case the Company shall not thereafter be responsible for the fees and
disbursements of legal counsel for Harris Trust under this paragraph; provided
that the Company shall not be entitled to assume the defense of any such action
if the named parties to such action include both the Company and Harris Trust
and representation of both parties by the same legal counsel would, in the
written opinion of counsel for Harris Trust, be inappropriate due to actual or
potential conflicting interests between them. It is understood that the Company
shall not be liable under this paragraph for the fees and disbursements of more
than one legal counsel for Harris Trust. In the event that the Company shall
assume the defense of any such suit, the Company shall not therewith be liable
for the fees and expenses of any counsel retained by Harris Trust.
-7-
<PAGE>
(b) Harris Trust agrees that, without the prior written
consent of the Company (which consent shall not be unreasonably withheld), it
will not settle, compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding in respect of which
indemnification could be sought in accordance with the indemnification
provision of this Agreement (whether or not Harris Trust or the Company or
any of its directors, officers and controlling persons is an actual or
potential party to such claim, action or proceeding).
4. Tax Information.
(a) Harris Trust shall arrange to comply with all
requirements under the tax laws of the United States, including those
relating to missing Tax Identification Numbers, and shall file any
appropriate reports with the Internal Revenue Service. The Company
understands that Harris Trust is required, in certain instances, to deduct
31% with respect to interest paid on the New Notes and proceeds from the
sale, exchange, redemption or retirement of the New Notes from holders of the
New Notes who have not supplied their correct Taxpayer Identification Number
or required certification. Such funds will be turned over by Harris Trust to
the Internal Revenue Service.
(b) Harris Trust shall notify the Company of the amount of
any transfer taxes payable in respect of the exchange of the Old Notes and,
upon receipt of written approval from the Company shall deliver or cause to
be delivered, in a timely manner, to each governmental authority to which any
transfer taxes are payable in respect of the exchange of the Old Notes, a
check in the amount of all transfer taxes so payable, and the Company shall
reimburse Harris Trust for the amount of any and all transfer taxes payable
in respect of the exchange of the Old Notes; provided, however, that Harris
Trust shall reimburse the Company for amounts refunded to it in respect of
its payment of any such transfer taxes, at such time as such refund is
received by Harris Trust.
5. Governing Law.
This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the laws of another jurisdiction would be required
thereby.
6. Notices.
Any communication or notice provided for hereunder shall be
in writing and shall be given (and shall be deemed to have been given upon
receipt) by delivery in person, telecopy, or overnight delivery or by
registered or certified mail (postage prepaid, return receipt requested) to
the applicable party at the addresses indicated below:
-8-
<PAGE>
If to Harris Trust:
311 West Monroe Street
12th Floor
Chicago, Illinois 60690
Telecopier No.: (312) 461-3525
Attention: Judy Bartolini, Vice President
If to the Company:
Address
City, State Zip Code
Telecopier No.: ( ) -
Attention: Name and Title
or, as to each party, at such other address as shall be designated by such
party in a written notice complying as to delivery with the terms of this
Section.
7. Parties in Interest.
This Agreement shall be binding upon and inure solely to the
benefit of each party hereto and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement. Without limitation to the foregoing, the parties hereto expressly
agree that no holder of the Old Notes or the New Notes shall have any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
8. Counterparts; Severability.
This Agreement may be executed in one or more counterparts,
and by different parties hereto on separate counterparts, each of which when
so executed shall be deemed an original, and all of such counterparts shall
together constitute one and the same agreement. If any term or other provision
of this Agreement or the application thereof is invalid, illegal or incapable
of being enforced by any rule of law, or public policy, all other provisions
of this Agreement shall nevertheless remain in full force and effect so long
as the economic or legal substance of the agreements contained herein is not
affected in any manner adverse to any party. Upon such determination that any
term or provision or the application thereof is invalid, illegal or
unenforceable, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible
-9-
<PAGE>
in a mutually acceptable manner in order that the agreements contained herein
may be performed as originally contemplated to the fullest extent possible.
9. Headings.
The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
10. Entire Agreement: Amendment.
This Agreement constitutes the entire understanding of the
parties hereto with respect to the subject matter hereof. This Agreement may
not be amended or modified nor may any provision hereof be waived except in
writing signed by each party to be bound thereby.
11. Termination.
This Agreement shall terminate upon the earlier of (a) the
90th day following the expiration, withdrawal, or termination of the Exchange
Offer, (b) the close of business on the date of actual receipt of written
notice by Harris Trust from the Company stating that this Agreement is
terminated, (c) one year following the date of this Agreement, or (d) the
time and date on which this Agreement shall be terminated by mutual consent
of the parties hereto.
12. Miscellaneous.
Harris Trust hereby acknowledges receipt of the Prospectus
and the Letter of Transmittal and the Notice of Guaranteed Delivery and
further acknowledges that it has examined each of them. Any inconsistency
between this Agreement, on the one hand, and the Prospectus and the Letter of
Transmittal and the Notice of Guaranteed Delivery (as they may be amended or
supplemented from time to time), on the other hand, shall be resolved in
favor of the latter three documents, except with respect to the duties,
liabilities and indemnification of Harris Trust as Exchange Agent which shall
be controlled by this Agreement.
-10-
<PAGE>
Kindly indicate your willingness to act as Exchange Agent
and Harris Trust's acceptance of the foregoing provisions by signing in the
space provided below for that purpose and returning to the Company a copy of
this Agreement so signed, whereupon this Agreement and Harris Trust's
acceptance shall constitute a binding agreement between Harris Trust and the
Company.
Very truly yours,
Company Name
By: Name:
Title:
Accepted and agreed to as of the date first written above:
HARRIS TRUST AND SAVINGS BANK
By: Name:
Title:
-11-
First Amendment to
Lilly Industries, Inc.
1992 STOCK OPTION PLAN
1. Paragraph 4 of the Lilly Industries, Inc. ("Lilly") 1992 Stock Option
Plan (the "Stock Option Plan") is amended and restated in its entirety to read
as follows:
4. Stock Subject to the Plan. There shall be reserved for issuance
upon the exercise of options granted under the Plan two million seven
hundred seventy one thousand eight hundred seventy five (2,771,875) shares
of Class A Stock, without par value, of the Corporation, which may be
authorized but unissued shares of the Corporation. Subject to Section 7
hereof, the shares for which options may be granted under the Plan shall
not exceed that number. If any option shall expire or terminate for any
reason without having exercised in full, the unpurchased shares subject
thereto shall (unless the Plan shall have terminated) become available for
other options under the Plan.
2. This First Amendment to the Stock Option Plan shall become effective
when it shall have been approved by the requisite vote of the holders of the
Class A Stock and Class B Stock as set forth in the Proxy Statement of Lilly for
its annual meeting of shareholders to be held on April 24, 1997.
3. All other terms and provisions of the Plan shall remain in full force
and effect.
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
LILLY INDUSTRIES, INC. AND SUBSIDIARIES
(In thousands, except per share data)
Year Ended November 30
1996 1995 1994
Primary:
Average shares outstanding - -
Note A 22,600 22,677 22,660
Net Income $18,776 $20,264 $23,302
Net Income per common share - -
Note A $0.83 $0.89 $1.03
======= ======= =======
Average shares outstanding - -
Note A 22,600 22,677 22,660
Dilutive stock options based
on treasury stock method
using average market
price - - Note A 500 409 571
------- ------- -------
23,100 23,086 23,231
======= ======= =======
Net Income $18,776 $20,264 $23,302
Net Income per common
and common equivalent
share - - Note A $0.81 $0.88 $1.00
======= ======= =======
Fully diluted:
Average shares outstanding - -
Note A 22,600 22,677 22,660
Dilutive stock options based
on treasury stock method
using the higher of year end,
quarter end or average market
price - - Note A 600 423 590
------- ------- -------
23,200 23,100 23,250
======= ======= =======
Net Income $18,776 $20,264 $23,302
Net Income per common
and common equivalent
share - - Note A $.81 $0.88 $1.00
======= ======= =======
Note A - - Amounts have been adjusted to recognize the effect of all stock
splits and stock dividends through November 30, 1996.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- ----------------------
August 31 August 31 August 31 August 31
1997 1996 1997 1996
---------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 23,000 22,650 22,900 22,600
Net income $ 7,679 $ 7,012 $19,790 $11,114
Net income per common share $ 0.33 $ 0.31 $ 0.86 $ 0.49
======= ======= ======= =======
Average shares outstanding 23,000 22,650 22,900 22,600
Dilutive stock options based
on treasury stock method
using average market
price 400 400 500 400
------- ------- ------- -------
23,400 23,050 23,400 23,000
Net income $ 7,679 $ 7,012 $19,790 $11,114
Net income per common
and common equivalent
share $ 0.33 $ 0.30 $ 0.85 $ 0.48
======= ======= ======= =======
Fully diluted:
Average shares outstanding 23,000 22,650 22,900 22,600
Dilutive stock options based
on the treasury stock
method using the higher
of quarter end or average
market price 400 450 500 450
------- ------- ------- -------
23,400 23,100 23,400 23,050
Net income $ 7,679 $ 7,012 $19,790 $11,114
Net income per common
and common equivalent
share $ 0.33 $ 0.30 $ 0.85 $ 0.48
======= ======= ======= =======
</TABLE>
LILLY INDUSTRIES, INC. AND SUBSIDIARIES EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
<TABLE>
<CAPTION>
Twelve
months
ended Nine months ended Year ended November 30
8/31/97 8/31/97 8/31/96 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income $69,777 $50,604 $28,793 $47,966 $35,388 $42,017 $29,570 $22,838
Interest income and sundry 326 159 471 638 544 554 294 731
Amortization of debt expense 1,079 773 510 816 0 0 0 0
Interest component of rent 2,100 1,575 1,125 1,500 475 400 580 618
------- ------- ------- ------- ------- ------- ------- -------
Total adjusted earnings $73,282 $53,111 $30,899 $50,920 $36,407 $42,971 $30,444 $24,187
======= ======= ======= ======= ======= ======= ======= =======
Amortization of debt expense $ 1,079 $ 773 $ 510 $ 816 $ 0 $ 0 $ 0 $ 0
Interest component of rent 2,100 1,575 1,125 1,500 475 400 580 618
Interest expense 20,174 14,781 9,073 14,466 2,158 2,919 1,925 1,662
------- ------- ------- ------- ------- ------- ------- -------
Total fixed charges $23,353 $17,129 $10,708 $16,782 $ 2,633 $ 3,319 $ 2,505 $ 2,280
======= ======= ======= ======= ======= ======= ======= =======
Ratio of earnings to
fixed charges 3.14 3.10 2.89 3.03 13.83 12.95 12.15 10.61
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Information and Certain Operating Data" and "Independent
Auditors" and to the use of our report dated January 13, 1997 with respect to
the consolidated financial statements and schedule as of and for each of the
three years in the period ended November 30, 1996, included in the Registration
Statement (Form S-4, No. _______) and related Prospectus of Lilly Industries,
Inc. for the registration of its 7 3/4% Senior Notes due 2007, Series B.
/s/Ernst & Young LLP
Ernst & Young LLP
Indianapolis, Indiana
December 5, 1997
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated January 25, 1996
(except with respect to the matter discussed in Note 15, as to which the date is
March 4, 1996) included in Lilly Industries, Inc.'s previously filed Form 8-K,
dated April 8, 1996(and amendment thereto) and to all references to our Firm
included in this Registration Statement.
/s/ Arthur Andersen LLP
Grand Rapids, Michigan
December 5, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as
Trustee
Check if an Application to Determine
Eligibility of a Trustee Pursuant to Section
305(b)(2) _______________
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
Illinois 23-1614034
(I.R.S. Employer
(State of Incorporation) Identification No.)
111 West Monroe Street, Chicago, Illinois 60603
(Address of principal executive offices)
Daniel G. Donovan, Harris Trust and Savings Bank,
111 West Monroe Street, Chicago, Illinois, 60603
312-461-2908
(Name, address and telephone number for agent for service)
LILLY INDUSTRIES, INC.
(Name of Obligor)
Indiana 35-0471010
(I.R.S. Employer
(State of Incorporation) Identification No.)
733 South West Street
Indianapolis, IN 46225
(Address of principal executive offices)
7 3/4% Senior Notes Due 2007
(Title of indenture securities)
<PAGE>
1. GENERAL INFORMATION. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164
West Jackson Boulevard, Chicago, Illinois; Federal Deposit
Insurance Corporation, Washington, D.C.; The Board of
Governors of the Federal Reserve System,Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
Harris Trust and Savings Bank is authorized to exercise
corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee,
describe each such affiliation.
The Obligor is not an affiliate of the Trustee.
3. thru 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee as now in
effect which includes the authority of the trustee to commence
business and to exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972
between Harris Trust and Savings Bank, HTS Bank and Harris
Bankcorp, Inc. which constitutes the articles of association
of the Trustee as now in effect and includes the authority of
the Trustee to commence business and to exercise corporate
trust powers was filed in connection with the Registration
Statement of Louisville Gas and Electric Company, File No.
2-44295, and is incorporated herein by reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in
connection with the Registration Statement of Commercial
Federal Corporation, File No. 333-20711, and is incorporated
herein by reference.
3. The consents of the Trustee required by Section 321(b) of the
Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its
supervising or examining authority.
(included as Exhibit B on page 3 of this statement)
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 2nd day of December 1997.
HARRIS TRUST AND SAVINGS BANK
By: /s/ DGDonovan
D. G. Donovan
Assistant Vice President
EXHIBIT A
The consents of the Trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that
reports of examinations of said trustee by Federal and State authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
HARRIS TRUST AND SAVINGS BANK
By: /s/ DGDonovan
D.G. Donovan
Assistant Vice President
2
<PAGE>
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of September 30, 1997, as published in accordance with
a call made by the State Banking Authority and by the Federal Reserve Bank of
the Seventh Reserve District.
[HARRIS LOGO] HARRIS BANK
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on September 30, 1997, a state banking institution organized and
operating under the banking laws of this State and a member of the Federal
Reserve System. Published in accordance with a call made by the Commissioner of
Banks and Trust Companies of the State of Illinois and by the Federal Reserve
Bank of this District.
Bank's Transit Number 71000288
<TABLE>
<CAPTION>
THOUSANDS
ASSETS OF DOLLARS
<S> <C> <C>
Cash and balances due from depository institutions:
Non-interest bearing balances and currency and coin............ $1,188,709
Interest bearingbalances....................................... $550,173
Securities:..................................................................
a. Held-to-maturity securities $0
b. Available-for-sale securities $3,685,983
Federal funds sold and securities purchased under agreements to resell i $396,400
Loans and lease financing receivables:
Loans and leases, net of unearned income....................... $8,401,048
LESS: Allowance for loan and lease losses..................... $107,180
----------
Loans and leases, net of unearned income, allowance, and reserve
(item 4.a minus 4.b)........................................... $8,293,868
Assets held in trading accounts............................................. $98,368
Premises and fixed assets (including capitalized leases).................... $213,612
Other real estate owned..................................................... $778
Investments in unconsolidated subsidiaries and associated companies......... $86
Customer's liability to this bank on acceptances outstanding............... $41,205
Intangible assets........................................................... $283,839
Other assets................................................................ $603,886
-----------
TOTAL ASSETS $15,356,907
===========
</TABLE>
3
<PAGE>
LIABILITIES
<TABLE>
<CAPTION>
Deposits:
<S> <C> <C>
In domestic offices ..................................................................... $ 8,374,055
Non-interest bearing ........................................................... $ 2,770,029
Interest bearing ............................................................... $ 5,604,026
In foreign offices, Edge and Agreement subsidiaries, and IBF's .......................... $ 1,991,659
Non-interest bearing
Interest bearing ............................................................... $ 1,964,295
Federal funds purchased and securities sold under agreements to repurchase in domestic offices
of the bank and of its Edge and Agreement subsidiaries, and in IBF's:
Federal funds purchased.& securites sold under agreements to repurchase ................. $ 2,549,328
Trading Liabilities .......................................................................... 62,186
Other borrowed money: ........................................................................ $ 630,911
a. With remaining maturity of one year or less .............................................. $ 0
b. With remaining maturity of more than one year
Bank's liability on acceptances executed and outstanding ..................................... $ 41,205
Subordinated notes and debentures ............................................................ $ 325,000
Other liabilities ............................................................................ $ 132,188
------------
TOTAL LIABILITIES ............................................................................ $ 14,106,532
============
EQUITY CAPITAL
Common stock ................................................................................. $ 100,000
Surplus ...................................................................................... $ 600,853
a. Undivided profits and capital reserves ................................................... $ 553,257
b. Net unrealized holding gains (losses) on available-for-sale securities ................... ($ 3,735)
------------
TOTAL EQUITY CAPITAL ......................................................................... $ 1,250,375
============
Total liabilities, limited-life preferred stock, and equity capital .......................... $ 15,356,907
============
</TABLE>
I, Pamela Piarowski, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
PAMELA PIAROWSKI
10/29/97
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and, to the best of our
knowledge and belief, has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.
EDWARD W. LYMAN,
ALAN G. McNALLY,
JAMES J. GLASSER
Directors.
4
LILLY INDUSTRIES, INC.
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
7 3/4% SENIOR NOTES DUE 2007, SERIES A
IN EXCHANGE FOR
7 3/4% SENIOR NOTES DUE 2007, SERIES B
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
______________, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE BUSINESS DAY PRIOR TO THE EXPIRATION
DATE.
DELIVER TO THE EXCHANGE AGENT:
HARRIS TRUST AND SAVINGS BANK
<TABLE>
<CAPTION>
Facsimile By Hand/ By Registered or
Transmission Number Overnight Delivery Certified Mail
<S> <C> <C>
(For Eligible Institutions Only) Harris Trust and Savings Bank Harris Trust and Savings Bank
(212) 701-7636 c/o Harris Trust Company c/o Harris Trust Company
of New York of New York
Confirm Receipt of 88 Pine Street P.O. Box 1010
Facsimile by Telephone: 19th Floor Wall Street Station
(212) 701-7624 New York, NY 10005 New York, NY 10268-1010
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
-1-
<PAGE>
The undersigned hereby acknowledges receipt and review of the
Prospectus, dated _______________, 1998 (the "Prospectus"), of Lilly Industries,
Inc., an Indiana corporation (the "Company"), and this Letter of Transmittal
(the "Letter of Transmittal"), which together describe the Company's offer (the
"Exchange Offer") to exchange its 7 3/4% Senior Notes due 2007, Series B (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a Registration Statement of which
the Prospectus is a part, for a like principal amount of its issued and
outstanding 7 3/4% Senior Notes due 2007, Series A (the "Old Notes").
Capitalized terms used but not defined herein have the respective meaning given
to them in the Prospectus.
The Company reserves the right, at any time or from time to time, to
extend the Exchange Offer at its discretion, in which event the term "Expiration
Date" shall mean the latest date to which the Exchange Offer is extended. The
Company shall notify the holders of the Old Notes of any extension by oral or
written notice and will mail to the record holders of Old Notes an announcement
thereof, each prior to 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a holder of Old Notes if
original Old Notes, if available, are to be forwarded herewith or an Agent's
Message is to be used if delivery of Old Notes is to be made by book-entry
transfer to the account maintained by the Exchange Agent at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in the Prospectus under the caption "The Exchange Offer---Procedures for
Tendering" and "--- Book-Entry Transfer." Holders of Old Notes whose Old Notes
are not immediately available, or who are unable to deliver their Old Notes and
all other documents required by this Letter of Transmittal to the Exchange Agent
on or prior to the Expiration Date, or who are unable to complete the procedure
for book-entry transfer on a timely basis, must tender their Old Notes according
to the guaranteed delivery procedures set forth in the Prospectus under the
caption "The Exchange Offer--- Guaranteed Delivery Procedures." See Instruction
2. Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
The term "holder" with respect to the Exchange Offer means any person
in whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
-2-
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates.
If the space below is inadequate, list the registered numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES TENDERED
<S> <C> <C> <C> <C>
(1) (2) (3) (4)
Aggregate
Principal
Name(s) and Address(es) of Registered Amount
Holder(s) of Old Note(s), exactly as name(s) Old Note Represented Principal
appear(s) on Old Note Certificate(s) Registration by Amount
(Please fill in, if blank) Number(s) * Certificate(s) Tendered **
- --------------------------------------------------------------------------------------------------------------------
================== ================== ==================
================== ================== ==================
================== ================== ==================
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, any tendering holder of Old Notes will be
deemed to have tendered the entire aggregate principal amount
represented by such Old Notes. All tenders must be in integral
multiples of $1,000.
-3-
<PAGE>
o CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
o CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK- ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY
ELIGIBLE INSTITUTIONS ONLY):
Name of Tendering Institution
-----------------------------------------------------------------------
Account Number
-----------------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------------------------
o CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE
FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Old Note(s)
-----------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-----------------------------------------------------------------------
Window Ticket Number (if available)
-----------------------------------------------------------------------
Name of Eligible Institution which Guaranteed Delivery
-----------------------------------------------------------------------
Account Number (if delivered by book-entry transfer)
-----------------------------------------------------------------------
o CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name
-----------------------------------------------------------------------
Address
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-4-
<PAGE>
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company for exchange the principal amount of
Old Notes indicated above. Subject to and effective upon the acceptance for
exchange of the principal amount of Old Notes tendered in accordance with this
Letter of Transmittal, the undersigned hereby exchanges, assigns and transfers
to the Company all right, title and interest in and to the Old Notes tendered
for exchange hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent the agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of the Company in
connection with the Exchange Offer) with respect to the tendered Old Notes with
full power of substitution to (i) deliver such Old Notes, or transfer ownership
of such Old Notes on the account books maintained by the Book-Entry Transfer
Facility, to the Company and deliver all accompanying evidences of transfer and
authenticity, and (ii) present such Old Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of beneficial
ownership of such Old Notes, all in accordance with the terms of the Exchange
Offer. The power of attorney granted in this paragraph shall be deemed to be
irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the Exchange Notes issuable upon the exchange of
such tendered Old Notes, and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim, when the same are accepted
for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made
in reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the "SEC"),
including Exxon Capital Holdings Corporation, SEC No-Action Letter (available
April 13, 1988), Morgan Stanley & Co. Inc., SEC No-Action Letter (available June
5, 1991) (the "Morgan Stanley Letter") and Mary Kay Cosmetics, Inc., SEC
No-Action Letter (available June 5, 1991), that the Exchange Notes issued in
exchange for the Old Notes pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than (i) a
broker-dealer who purchased Old Notes exchanged for such Exchange Notes directly
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holders' business and such holders are not participating in, and
have no arrangement with any person to participate in, the distribution of such
Exchange Notes. The undersigned specifically represent(s) to the Company that
(i) any Exchange Notes acquired in exchange for Old Notes tendered hereby are
being acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not the undersigned, (ii) the undersigned is not
participating in, and has no arrangement with any person to participate in, the
distribution of Exchange Notes, and (iii) neither the undersigned nor any such
other person is an "affiliate" (as defined in Rule 405 under the Securities Act)
of the Company or a broker-dealer tendering Old Notes acquired directly from the
Company for its own account.
-5-
<PAGE>
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned or the person receiving the Exchange Notes is
a broker-dealer that is receiving Exchange Notes for its own account in exchange
for Old Notes that were acquired as a result of market-making activities or
other trading activities, the undersigned acknowledges that it or such other
person will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned or such other person will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. The undersigned
acknowledges that if the undersigned is participating in the Exchange Offer for
the purpose of distributing the Exchange Notes (i) the undersigned cannot rely
on the position of the staff of the SEC in the Morgan Stanley Letter and similar
SEC no-action letters, and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction of the Exchange
Notes, in which case the registration statement must contain the selling
security holder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the SEC, and (ii) a broker-dealer that delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Registration Rights Agreement (including certain
indemnification rights and obligations).
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Old Notes
tendered hereby, including the transfer of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed to
have accepted for exchange validly tendered Old Notes when, as and if the
Company gives oral or written notice thereof to the Exchange Agent. Any tendered
Old Notes that are not accepted for exchange pursuant to the Exchange Offer for
any reason will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Old Notes pursuant to the procedures described under the caption "The
Exchange Offer---Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated under "Special Issuance Instructions,"
please issue the Exchange Notes issued in exchange for the Old Notes accepted
for exchange and return any Old Notes not tendered or not exchanged in the
name(s) of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail or deliver the Exchange Notes issued in
exchange for the Old Notes accepted for exchange and any Old Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s). In the event that
both "Special Issuance Instructions" and "Special
-6-
<PAGE>
Delivery Instructions" are completed, please issue the Exchange Notes issued in
exchange for the Old Notes accepted for exchange in the name(s) of, and return
any Old Notes not tendered or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Old Notes from the name of the registered holder(s) thereof if the Company
does not accept for exchange any of the Old Notes so tendered for exchange.
<TABLE>
<CAPTION>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 5 and 6) (See Instructions 5 and 6)
<S> <C> <C>
To be completed ONLY if Old Notes in a To be completed ONLY if Old Notes in a
principal amount not tendered, or Exchange principal amount not tendered, or Exchange
Notes issued in exchange for Old Notes Notes issued in exchange for Old Notes
accepted for exchange, are to be issued in the accepted for exchange, are to be mailed or
name of someone other than the undersigned. delivered to someone other than the
undersigned, or to the undersigned at an
address other than the address shown below
Issue to: the undersigned's signature.
Name Mail or delivered to:
(Please Print)
Name
Address (Please Print)
Address
(Include Zip Code)
(Include Zip Code)
(Tax Identification or Social Security No.)
======================================================= ======================================================
</TABLE>
-7-
<PAGE>
IMPORTANT
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(Complete Accompanying Substitute Form W-9 Below)
SIGN HERE
- --------------------------------------------------------------------------------
(Signature(s) of Registered Holder(s) of Old Notes)
- --------------------------------------------------------------------------------
(Signature(s) of Registered Holder(s) of Old Notes)
Date: _______________, 1998
(The above lines must be signed by the registered holder(s) of Old Notes as
name(s) appear(s) on the Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by a properly completed bond
power from the registered holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Old Notes to which this Letter of Transmittal
relate are held of record by two or more joint holders, then all such holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) unless waived by the Company,
submit evidence satisfactory to the Company of such person's authority so to
act. See Instruction 5 regarding the completion of this Letter of Transmittal,
printed below.)
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity (full title)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No. (___)
- --------------------------------------------------------------------------------
Tax Identification or Social Security Nos.
- --------------------------------------------------------------------------------
(Please complete Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
(Signature(s) must be guaranteed if required by Instruction 5)
Signature(s) Guaranteed by an Eligible Institution:
- --------------------------------------------------------------------------------
(Authorized Signature)
Dated
- --------------------------------------------------------------------------------
Name and Title
- --------------------------------------------------------------------------------
(Please Print)
Name of Firm
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No. (___)
- --------------------------------------------------------------------------------
================================================================================
-8-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Notes or Book-Entry
Confirmations. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or Agent's Message or facsimile hereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. The method of delivery of the tendered Old Notes,
this Letter of Transmittal and all other required documents to the Exchange
Agent is at the election and risk of the holder and, except as otherwise
provided below, the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. Instead of delivery by mail, it is recommended
that the holder use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure delivery to the Exchange Agent
before the Expiration Date. No Letter of Transmittal or Old Notes should be sent
to the Company.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Notes and whose Old Notes are not immediately available or who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date or who cannot complete
the procedure for book-entry transfer on a timely basis and deliver an Agent's
Message, must tender their Old Notes according to the guaranteed delivery
procedures set forth in the Prospectus. Pursuant to such procedures: (1) such
tender must be made by or through a firm which is a member of a registered
national securities exchange or of the National Association of Securities
Dealers Inc., a commercial bank or a trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have received from
the Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting
forth the name and address of the holder of the Old Notes, the registration
number(s) of such Old Notes and the total principal amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that,
within three business days after the Expiration Date, this Letter of Transmittal
(or facsimile hereof) together with the Old Notes in proper form for transfer
(or a Book-Entry Confirmation) and any other documents required hereby, must be
deposited by the Eligible Institution with the Exchange Agent within three
business days after the Expiration Date; and (iii) the certificates for all
physically tendered shares of Old Notes, in proper form for transfer (or
Book-Entry Confirmation, as the case may be) and all other documents required
hereby are received by the Exchange Agent within three business days after the
Expiration Date.
Any holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a Notice
of Guaranteed Delivery will be sent to holders who wish to tender their Old
Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer---Guaranteed Delivery Procedures" section of
the Prospectus.
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<PAGE>
3. Tender by Holder. Only a holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such holder's name or obtain a properly completed bond power from the
registered holder.
4. Partial Tenders. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering holder should fill in the principal amount
tendered in the fourth column of the box entitled "Description of Old Notes
Tendered" above. The entire principal amount of Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
If the entire principal amount of all Old Notes is not tendered, then Old Notes
for the principal amount of Old Notes not tendered and Exchange Notes issued in
exchange for any Old Notes accepted will be sent to the holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, promptly after the Old Notes are accepted for
exchange.
5. Signatures on this Letter of Transmittal; Bond Powers and
Endorsements; Medallion Guarantee of Signatures. If this Letter of Transmittal
(or facsimile hereof) is signed by the record holder(s) of the Old Notes
tendered hereby, the signature must correspond with the name(s) as written on
the face of the Old Notes without alteration, enlargement or any change
whatsoever. If this Letter of Transmittal (or facsimile hereof) is signed by a
participant in the Book-Entry Transfer Facility, the signature must correspond
with the name as it appears on the security position listing as the holder of
the Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered holder or holders of Old Notes listed and tendered hereby and the
Exchange Notes issued in exchange therefor are to be issued (or any untendered
principal amount of Old Notes is to be reissued) to the registered holder, the
said holder need not and should not endorse any tendered Old Notes, nor provide
a separate bond power. In any other case, such holder must either properly
endorse the Old Notes tendered or transmit a properly completed separate bond
power with this Letter of Transmittal, with the signatures on the endorsement or
bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a
person other than the registered holder or holders of any Old Notes listed, such
Old Notes must be endorsed or accompanied by appropriate bond powers, in each
case signed as the name of the registered holder or holders appears on the Old
Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority to act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal
(or facsimile hereof) is signed by the registered holder(s) of the Old Notes
tendered herein (or by a participant in the
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<PAGE>
Book-Entry Transfer Facility whose name appears on a security position listing
as the owner of the tendered Old Notes) and the Exchange Notes are to be issued
directly to such registered holder(s) (or, if signed by a participant in the
Book-Entry Transfer Facility, deposited to such participant's account at such
Book-Entry Transfer Facility) and neither the box entitled "Special Issuance
Instructions" nor the box entitled "Special Delivery Instructions" has been
completed, or (ii) such Old Notes are tendered for the account of an Eligible
Institution. In all other cases, all signatures on this Letter of Transmittal
(or facsimile hereof) must be guaranteed by an Eligible Institution.
6. Special Issuance and Delivery Instructions. Tendering holders should
indicate, in the applicable box or boxes, the name and address (or account at
the Book-Entry Transfer Facility) to which Exchange Notes or substitute Old
Notes for principal amounts not tendered or not accepted for exchange are to be
issued or sent, if different from the name and address of the person signing
this Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated.
7. Transfer Taxes. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered hereby, or if tendered Old Notes are registered in the name of any
person other than the person signing this Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Old Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with this Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. Validity of Tenders. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of tendered
Old Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Old Notes not properly tendered or any Old Notes the
Company's acceptance of which would, in the opinion of the Company or its
counsel, be unlawful. The Company also reserves the absolute right to waive any
conditions of the Exchange Offer or defects or irregularities in tenders as to
particular Old Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including this Letter of Transmittal and the instructions
hereto) shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Neither the Company, the Exchange Agent nor
any person shall be under any duty to give notification of defects or
irregularities with regard to tenders of Old Notes nor shall any of them incur
any liability for failure to give such notification.
9. Waiver of Conditions. The Company reserves the absolute right to
waive, in whole or part, any of the conditions to the Exchange Offer set forth
in the Prospectus.
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<PAGE>
10. No Conditional Tender. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal will
be accepted.
11. Mutilated, Lost, Stolen or Destroyed Old Notes. Any holder whose
Old Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
12. Requests for Assistance or Additional Copies. Requests for
assistance or for additional copies of the Prospectus or this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover page of this Letter of Transmittal. Holders may
also contact their broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Exchange Offer.
13. Withdrawal. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer---Withdrawal of Tenders."
14. Important tax Information; Tax Identification Number; Substitute
form W-9. Federal income tax law requires that a holder of any Old Notes which
are accepted for exchange must provide the Company (as payor), through the
Exchange Agent, with its correct taxpayer identification number ("TIN"), which,
in the case of a holder who is an individual is his or her social security
number. If the Company is not provided with the correct TIN, the holder may be
subject to a $50 penalty imposed by the Internal Revenue Service. (If
withholding results in an overpayment of taxes, a refund may be obtained).
Certain holders (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. A foreign individual may qualify as an exempt recipient by
submitting to the Exchange Agent a properly completed Internal Revenue Service
Form W-8 (which the Exchange Agent will provide upon request) signed under
penalty of perjury, attesting to the holder's exempt status. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number of Substitute Form W-9" for information on which TIN to
report.
If backup withholding applies, the Company is required to withhold 31%
of any payment made to the holder of Old Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligations regarding backup
withholding.
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<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH THE OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER OR IN ORIGINAL
HARD COPY FORM) MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, PRIOR TO THE
EXPIRATION DATE.
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<PAGE>
SEE "GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9"
FOR ADDITIONAL INSTRUCTIONS.
SUBSTITUTE FORM W-9
PAYOR'S NAME: Harris Trust and Savings Bank
<TABLE>
<CAPTION>
==============================================================================================================
<S> <C> <C>
SUBSTITUTE Part I - PLEASE PROVIDE YOUR Social Security Number or
FORM W-9 TIN IN THE BOX AT RIGHT AND Employer Identification
CERTIFY BY SIGNING AND DATING Number
Payor's Request for BELOW: (If Awaiting TIN write
Taxpayer Identification ------------------------------------ "Applied for")
Number (TIN) NAME (Please Print)
------------------------------
Department of the Treasury Part II - For Payees NOT
Internal Revenue Service ADDRESS subject to backup withholding,
see the "Guidelines for
Certification of Taxpayer
CITY STATE ZIP CODE Identification Number on
Substitute Form W-9" below and
complete as instructed
therein.
==============================================================================================================
</TABLE>
Part III - Certification: - Under the penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because: (a) I am exempt
from backup withholding, or (b) I have not been notified by the
Internal Revenue Service ("IRS") that I am subject to backup
withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject
to backup withholding.
SIGNATURE DATE , 1997
Certification Instructions - You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). Also see instructions in the
enclosed Guidelines.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WRITE "APPLIED FOR"
IN PART I OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within sixty (60) days, 31%
of all reportable payments made to me thereafter will be withheld until I
provide a number.
__________________________________ ____________________________________, 1997
Signature Date
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
"GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS.
<PAGE>
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.
Purpose of Form. A person who is required to file an information return
with the Internal Revenue Service ("IRS") must obtain your correct taxpayer
identification number ("TIN") to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, or contributions you made to an IRA. Use Form W-9 to furnish
your correct TIN to the requester (the person asking you to furnish your TIN)
and, when applicable, (1) to certify that the TIN you are furnishing is correct
(or that you are waiting for a number to be issued), (2) to certify that you are
not subject to backup withholding, and (3) to claim exemption from backup
withholding if you are an exempt payee. Furnishing your correct TIN and making
the appropriate certifications will prevent certain payments from being subject
to backup withholding.
Note: IF A REQUESTER GIVES YOU A FORM OTHER THAN W-9 TO REQUEST YOUR
TIN, YOU MUST USE THE REQUESTER'S FORM.
How To Obtain a TIN. If you do not have a TIN, apply for one immediately.
To apply, get Form SS-5, Application for a Social Security Card (for
Individuals), from your local office of the Social Security Administration, or
Form SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in the
space for the TIN in Part 1, sign and date the form, and give it to the
requester. Generally, you will then have 60 days to obtain a TIN and furnish it
to the requester. If the requester does not receive your TIN within 60 days,
backup withholding, if applicable, will begin and continue until you furnish
your TIN to the requester. For reportable interest or dividend payments, the
payor must exercise one of the following options concerning backup withholding
during this 60-day period. Under option (1), a payor must backup withhold on any
withdrawals you make from your account after 7 business days after the requester
receives this form back from you. Under option (2), the payor must backup
withhold on any reportable interest or dividend payments made to your account,
regardless of whether you make any withdrawals. The backup withholding under
option (2) must begin no later than 7 business days after the requester receives
this form back. Under option (2), the payor is required to refund the amounts
withheld if your certified TIN is received within the 60-day period and you were
not subject to backup withholding during that period.
Note: WRITING "APPLIED FOR" ON THE FORM MEANS THAT YOU HAVE ALREADY APPLIED
FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR FUTURE.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
What Is Backup Withholding? -- Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee compensation, and certain payments
from fishing boat operators, but do not include real estate transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
(1) You do not furnish your TIN to the requester, or
(2) The IRS notifies the requester that you furnished an incorrect TIN, or
(3) You are notified by the IRS that you are subject to backup withholding
because you failed to report all your interest and dividends on your tax return
(for reportable interest and dividends only), or
(4) You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts opened
after 1983 only), or
(5) You do not certify your TIN.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and payments are
exempt from backup withholding and information reporting. See Payees and
Payments Exempt From Backup Withholding, below, and Exempt Payees and Payments
under Signing the Certification, below, if you are an exempt payee.
Payees and Payments Exempt From Backup Withholding. The following is a list
of payees exempt from backup withholding and for which no information reporting
is required. For interest and dividends, all listed payees are exempt except as
listed in item (2). For broker transactions, payees listed in items (1) and (13)
and a person registered under the Investment Advisers Act of 1940 who regularly
acts as a broker are exempt. Payments subject to reporting under sections 6041
and 6041A are generally exempt from backup withholding only if made to payees
described in items (1) through (7), except a corporation that provides medical
and health care services or bills and collects payments for such services is not
exempt from backup withholding or information reporting. Only payees described
in items (2) through (6) are exempt from backup withholding for barter exchange
transactions and patronage dividends.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), an IRA, or a
custodial account under section 402(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States,
or any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the
United States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10)A real estate investment trust.
(11)An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12)A common trust fund operated by a bank under section 584(a).
(13)A financial institution.
(14)A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporation Secretaries,
Inc., Nominee List.
(15)A trust exempt from tax under section 664 or described in section 4947.
Payments of dividend and patronage dividends generally not subject to
backup withholding include the following:
o Payments to nonresident aliens subject to withholding under section
1441.
o Payments to partnerships not engaged in a trade or business in the
United States and that have at least one nonresident partner.
o Payments of patronage dividends not paid in money.
o Payments made by certain foreign organizations.
o Section 404(k) payments made by an ESOP.
Payments of interest generally not subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals.
Note: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR
MORE AND IS PAID IN THE COURSE OF THE PAYER'S TRADE OR BUSINESS AND YOU HAVE NOT
PROVIDED YOUR CORRECT TIN TO THE PAYER.
o Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
o Payments described in section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Mortgage interest paid to you.
Other types of payments generally not subject to backup withholding inlcude:
o Wages.
o Distributions from a pension, annuity, profit-sharing or stock bonus
plan, or an IRA.
o Distributions from an owner-employee plan.
o Certain surrenders of life insurance contracts.
o Gambling winnings, if withholding is required under section 3402(q).
However, if withholding is not required under section 3402(q), backup
withholding applies if the payee fails to furnish a TIN.
o Real estate transactions reportable under section 6045.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A, and 6050N, and the regulations under those sections.
Penalties
Failure To Furnish TIN. If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
Civil Penalty for False Information With Respect to Withholding. If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
Criminal Penalty for Falsifying Information. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
Misuse of TINs. If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
Specific Instructions
Name -- If you are an individual, you must generally provide the name shown
on your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card, and your new last name.
If you are a sole proprietor, you must furnish your individual name and
either your SSN or EIN. You may also enter your business name or "doing business
as" name on the business name line. Enter your name(s) as shown on your social
security card and/or as it was used to apply for your EIN on Form SS-4.
Signing the "Part III -- Certification" on the Substitute Form W-9
(1) Interest, Dividend, and Barter Exchange Accounts Opened Before 1984 and
Broker Accounts Considered Active During 1983 -- You are required to furnish
your correct TIN, but you are not required to sign the certification.
(2) Interest, Dividend, Broker, and Barter Exchange Accounts Opened After
1983 and Broker Accounts Considered Inactive During 1983 -- Your must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
(3) Real Estate Transactions. You must sign the certification. You may
cross out item 2 of the certification.
(4) Other Payments. You are required to furnish your correct TIN, but you
are not required to sign the certification unless you have been notified of an
incorrect TIN. Other payments include payments made in the course of the
requester's trade or business for rents, royalties, goods (other than bills for
merchandise), medical and health care services, payments to a nonemployee for
services (including attorney and accounting fees), and payments to certain
fishing boat crew members.
(5) Mortgage Interest Paid by You, Acquisition or Abandonment of Secured
Property, or IRA Contributions. You are required to furnish your correct TIN,
but you are not required to sign the certification.
(6) Exempt Payees and Payments. If you are exempt from backup withholding,
you should complete this form to avoid possible erroneous backup withholding.
Enter your correct TIN in Part I, wright "EXEMPT" in the block in Part II, and
sign and date the form. If you are a nonresident alien or foreign entity not
subject to backup withholding, give the requester a complete Form W-8,
Certificate of Foreign Status.
(7) TIN "Applied for." Follow the instructions under How To Obtain a TIN,
on page 1, and sign and date this form.
Signature: For a joint account, only the person whose TIN is shown in Part
I should sign.
Privacy Act Notice: Section 6109 requires you to furnish your correct TIN
to persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, or contributions you made to an
IRA. The IRS uses the numbers for identification purposes and to help verify the
accuracy of your tax return. You must provide your TIN whether or not you are
required to file a tax return. Payers must generally withhold 31% of taxable
interest, dividends, and certain other payments to a payee who does not furnish
a TIN to a payor. Certain penalties may also apply.
What Name and Number to Give the Requester
For this type of account: Give name and SSN of:
1. Individual The individual
2. Two or more individuals The actual owner of
(joint account) the account or,
if combined
funds, the first individual
on the account [1]
3. Custodian account of a minor The minor [2]
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-trustee [1]
trust (grantor is also trustee)
b.So-called trust account that is The actual owner [1]
not a legal or valid trust under
state law
5. Sole proprietorship The owner[3]
For this type of account: Give name and EIN of:
6. Sole proprietorship The owner[3]
7. A valid trust, estate, or Legal entity[4]
pension trust
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a state or local
government, school district,
or prison) that receives agricultural
program payments.
[1] List first and circle the name of the person whose number you furnish
[2] Circle the minor's name and furnish the minor's SSN.
[3] You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your SSN or EIN.
[4] List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated in the account title.)
NOTE:If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
NOTICE OF GUARANTEED DELIVERY
TO BE USED IN CONNECTION WITH
LILLY INDUSTRIES, INC.
Offer to Exchange
$1,000 Principal Amount of its
7 3/4% Senior Notes Due 2007, Series A
for Each Outstanding
$1,000 Principal Amount of its
7 3/4% Senior Notes Due 2007, Series B
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of Lilly Industries, Inc., an Indiana corporation (the
"Company"), made pursuant to the Prospectus, dated __________, 1997 (the
"Prospectus"), if certificates for the outstanding 7 3/4 Senior Notes Due 2007,
Series A (the "Old Notes") are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Exchange Agent prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. Such form may
be delivered or transmitted by telegram, telex, facsimile transmission, mail or
hand delivery to Harris Trust And Savings Bank (the "Exchange Agent") as set
forth below.
Capitalized terms not defined herein are defined in the Prospectus.
DELIVER TO THE EXCHANGE AGENT:
HARRIS TRUST AND SAVINGS BANK
<TABLE>
<CAPTION>
Facsimile By Hand/ By Registered or
Transmission Number Overnight Delivery Certified Mail
<S> <C> <C>
(For Eligible Institutions Only) Harris Trust and Savings Bank Harris Trust and Savings Bank
(212) 701-7636 c/o Harris Trust Company c/o Harris Trust Company
of New York of New York
Confirm Receipt of 88 Pine Street P.O. Box 1010
Facsimile by Telephone: 19th Floor Wall Street Station
(212) 701-7624 New York, NY 10005 New York, NY 10268-1010
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
NOTICE OF GUARANTEED DELIVERY SHOULD BE READ CAREFULLY BEFORE THIS NOTICE OF
GUARANTEED DELIVERY COMPLETED.
This form is not to be used to guarantee signatures. If a signature on
a Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, the signature guarantee must appear in the
applicable space provided in the signature box in the Letter of Transmittal.
-1-
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus, the
undersigned hereby tenders to the Company the principal amount of Old Notes set
forth below, pursuant to the guaranteed delivery procedure described in "The
Exchange Offer---Guaranteed Delivery Procedures" section of the Prospectus.
<TABLE>
<CAPTION>
==================================================================================================================
Certificate Number(s) (if known)
of Old Notes
or Account Number at the Book-Entry Facility and Aggregate Principal Aggregate Principal
Name of Tendering Institution * Amount Represented Amount Tendered **
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
</TABLE>
* If Old Notes will be delivered to the Book-Entry Transfer Facility,
provide the account number and name of the tendering institution.
** Unless otherwise indicated, any tendering holder of Old Notes will be
deemed to have tendered the entire aggregate principal amount
represented by such Old Notes. All tenders must be in integral
multiples of $1,000.
-2-
<PAGE>
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
SIGN HERE
- --------------------------------------------------------------------------------
(Signature(s) of Registered Holder(s) of Old Notes)
- --------------------------------------------------------------------------------
(Signature(s) of Registered Holder(s) of Old Notes)
Date: _______________, 1998
(The above lines must be signed by the registered holder(s) of Old Notes as
name(s) appear(s) on the Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by a properly completed bond
power from the registered holder(s), a copy of which must be transmitted with
this Notice of Guaranteed Delivery. If Old Notes to which this Notice of
Guaranteed Delivery relate are held of record by two or more joint holders, then
all such holders must sign this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
then such person must (i) set forth his or her full title below and (ii) unless
waived by the Company, submit evidence satisfactory to the Company of such
person's authority so to act.)
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print)
Capacity (full title)
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No. (___)
- --------------------------------------------------------------------------------
Tax Identification or Social Security Nos.
- --------------------------------------------------------------------------------
(Please complete Substitute Form W-9 included in the Letter of Transmittal)
GUARANTEE OF SIGNATURE(S)
(Signature(s) must be guaranteed if required by Instruction 5
of the Letter of Transmittal)
Signature(s) Guaranteed by an Eligible Institution:
- --------------------------------------------------------------------------------
(Authorized Signature)
Dated
- --------------------------------------------------------------------------------
Name and Title
- --------------------------------------------------------------------------------
(Please Print)
Name of Firm
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone No. (___)
- --------------------------------------------------------------------------------
================================================================================
-3-
<PAGE>
GUARANTEE
(Not to be used for signature guarantees)
The undersigned, a financial institution (including most banks, savings
and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchanges Medallion Program, hereby
guarantees that the undersigned will deliver to the Exchange Agent the
certificates representing the Old Notes being tendered hereby in proper form for
transfer or confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at Book-Entry Transfer Facility pursuant to the
procedures for book-entry transfer set forth in the Prospectus, in either case,
together with one or more properly completed and duly executed Letters of
Transmittal (or facsimiles thereof) or Agent's Message in lieu thereof and any
other documents required by the Letter of Transmittal within three New York
Stock Exchange trading days after the date of execution of this Notice of
Guaranteed Delivery.
Name of Firm:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Area Code & Telephone No.:
- --------------------------------------------------------------------------------
Authorized Signature:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
(Please Type or Print)
Title:
- --------------------------------------------------------------------------------
Date: , 1998
- --------------------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES OF OLD
NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED LETTER OF
TRANSMITTAL.
-4-
