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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST , 1998
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
AQUA-CHEM, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 3443 39-1900496
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Number)
Code Number)
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7800 NORTH 113TH STREET
P.O. BOX 421
MILWAUKEE, WISCONSIN, 53201
(414) 359-0600
(Address, including zip code, and telephone number, including area code, of
Registrants' principal executive offices)
JEFFREY A. MILLER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AQUA-CHEM, INC.
7800 NORTH 113TH STREET
P.O. BOX 421
MILWAUKEE, WISCONSIN, 53201
(414) 359-0600
(Address, including zip code, and telephone number, including area code, of
agent for service of process)
Please address a copy of all communications to:
ANDREW J. GUZIKOWSKI, ESQ.
WHYTE HIRSCHBOECK DUDEK S.C.
111 EAST WISCONSIN AVENUE
SUITE 2100
MILWAUKEE, WISCONSIN 53202
(414) 273-2100
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon 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. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
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11 1/4% Senior Subordinated Notes
Due 2008(1)..................... $125,000,000(2) Par Par $36,875.00
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1. To be offered to the public in exchange for the Registrant's existing 11 1/4%
Senior Subordinated Notes Due 2008.
2. Estimated pursuant to Rule 457(c) under the Securities Act of 1933 solely for
purposes of calculating the registration fee.
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Aqua-Chem, Inc.
Cross Reference Sheet pursuant to Item 501(b) of
Regulation S-K showing the location in the Prospectus of
the responses to the Items
of Part I of Form S-4
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Located under Caption in
S-4 Item No. and Description Prospectus
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A. Information About the Transaction:
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus........................................ Outside front cover page
2. Inside Front and Outside Back Cover
Pages of Prospectus............................... Inside front cover page;
"Available Information;"
"Incorporation of Certain
Information by Reference;" "Table
of Contents"
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information....................................... "Summary;" "Risk Factors;"
Schedule: Computation of Ratio of
Earnings to Fixed Charges
4. Terms of the Transaction.......................... "The Exchange Offer;" "Description
of the Notes"
5. Pro Forma Financial Information................... "Summary;" "Unaudited Pro Forma Financial
Data"
6. Material Contacts with Company
Being Acquired.................................... NOT APPLICABLE
7. Additional Information Required for
Re-offering by Persons and Parties
Deemed to be Underwriters......................... NOT APPLICABLE
8. Interests of Named Experts and
Counsel........................................... "Certain Relationships and Related
Transactions;" "Legal Matters"
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Cross-Reference - 1
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Located under Caption in
S-4 Item No. and Description Prospectus
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9. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities................................... "Certain Relationships and Related
Transactions"
B. Information About the Registrant:
10. Information with Respect to S-3
Registrants................................... NOT APPLICABLE
11. Incorporation of Certain
Information by Reference...................... NOT APPLICABLE
12. Information with Respect to S-2 or
S-3 Registrants............................... NOT APPLICABLE
13. Incorporation of Certain
Information by Reference...................... NOT APPLICABLE
14. Information with Respect to
Registrants Other Than S-2 or S-3
Registrants................................... "Summary;" "Capitalization;" "Selected
Consolidated Financial Data;"
"Management's Discussion and
Analysis of Financial Condition
and Results of Operations of Aqua-
Chem;" "Management's Discussion
and Analysis of Financial
Condition and Results of
Operations of NDC;" "Business of
the Company;" "Management;"
"Certain Relationships and Related
Transactions;" "Capital Stock and
Principal Stockholders;"
"Description of Certain
Indebtedness;" "Independent Auditors;"
"Index to Financial Statements" and
the audited consolidated and unaudited
consolidated condensed financial
statements to which such index
refers
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Cross-Reference - 2
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<CAPTION>
Located under Caption in
S-4 Item No. and Description Prospectus
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C. Information About the Company Being Acquired:
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
D. VOTING AND MANAGEMENT INFORMATION:
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......................................... "Management;" "Certain
Relationships and Related
Transactions;" "Capital Stock and
Principal Stockholders;" "Legal
Matters"
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Cross-Reference - 3
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PROSPECTUS
[AQUA-CHEM LOGO]
AQUA-CHEM, INC.
OFFER TO EXCHANGE 11 1/4% SENIOR NOTES DUE 2008 FOR ANY AND ALL EXISTING NOTES
(AS DEFINED) AS DESCRIBED HEREIN. WITHDRAWAL RIGHTS WITH RESPECT TO THE EXCHANGE
OFFER (AS DEFINED) ARE EXPECTED TO EXPIRE AT THE EXPIRATION OF THE EXCHANGE
OFFER.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998, UNLESS EXTENDED.
Aqua-Chem, Inc., a Delaware corporation (the "Company"), hereby offers (the
"Exchange Offer"), upon the terms and subject to the conditions set forth in
this prospectus (the "Prospectus") and the accompanying letter of transmittal
(the "Letter of Transmittal"), to exchange up to $125,000,000 aggregate
principal amount of its 11 1/4% Senior Subordinated Notes Due 2008 (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 is a part, for a like principal amount of its
outstanding 11 1/4% Senior Subordinated Notes Due 2008 (the "Existing Notes"
and, together with the Exchange Notes, the "Notes"). The Existing Notes were
originally issued in a transaction that was exempt from registration under the
Securities Act (the "Private Offering") and since such issuance have been resold
to (i) qualified institutional buyers ("QIBs") in reliance on, and subject to
the restrictions imposed pursuant to, Rule 144A under the Securities Act ("Rule
144A") and (ii) non-U.S. persons outside the United States of America in
accordance with Regulation S under the Securities Act ("Regulation S"). The
terms of the Exchange Notes are identical in all material respects to the terms
of the Existing Notes that are to be exchanged therefor, except that the
Exchange Notes have been registered under the Securities Act and will not bear
legends restricting the transferability thereof, certain registration rights
relating to the Existing Notes will terminate upon completion of the Exchange
Offer, and, if the Exchange Offer is not consummated by December 21, 1998,
additional interest will accrue at the rate of 0.50% per annum until but not
including the date the Exchange Offer is consummated. See "Description of the
Notes" and "The Exchange Offer." For federal income tax purposes, an exchange
made pursuant to the Exchange Offer should not constitute a taxable exchange.
See "The Exchange Offer -- Certain Effects of the Exchange Offer."
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission" or "SEC"), as set forth in no-action letters issued
to third parties, the Company believes the Exchange Notes issued pursuant to the
Exchange Offer may be offered for resale, resold and otherwise transferred by
holders thereof (other than any such holder 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, such holders are not engaged in and do not
intend to engage in, a distribution of such Exchange Notes and such holders have
no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. However, the Commission has not considered
the Exchange Offer in the context of a no-action letter and therefore there can
be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other circumstances.
SEE "RISK FACTORS" ON PAGE 15 FOR A DESCRIPTION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER AND AN INVESTMENT IN
THE EXCHANGE NOTES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE 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> 6
Each holder of Existing Notes that desires to participate in the Exchange
Offer, other than a broker-dealer, must acknowledge that it is not engaged in,
and does not intend to engage in, a distribution of Exchange Notes and has no
arrangement or understanding to participate in a distribution of Exchange Notes.
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. 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 Existing Notes where such Existing Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, for a period of 180 days
after the Expiration Date (as defined herein), it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"The Exchange Offer" and "Plan of Distribution."
EXCEPT AS DESCRIBED IN THE PRECEDING PARAGRAPH, THIS PROSPECTUS MAY NOT BE
USED FOR AN OFFER TO RESELL, A RESALE OR ANY OTHER RETRANSFER OF EXCHANGE NOTES.
The Exchange Offer is not conditioned upon any minimum number of Existing
Notes being tendered. The Exchange Offer will expire at 5:00 p.m., New York City
time, on , 1998, unless extended (the "Expiration Date"). Subject to
the terms and conditions of the Exchange Offer, including the reservation of
certain rights by the Company and the right of holders of Existing Notes to
withdraw tenders prior to the acceptance thereof, Existing Notes validly
tendered prior to the Expiration Date will be accepted on or promptly after the
Expiration Date. Exchange Notes to be issued in exchange for properly tendered
Existing Notes will be mailed by the Exchange Agent (as defined) promptly after
the acceptance thereof. In the event the Company terminates the Exchange Offer
and does not accept for exchange any Existing Notes, the Company will promptly
return the Existing Notes to the holders thereof. See "The Exchange Offer."
The Notes will mature on July 1, 2008. Interest on the Notes will be
payable semiannually on January 1 and July 1 of each year, commencing January 1,
1999. The Existing Notes are not, and the Exchange Notes will not be, redeemable
at the option of the Company, prior to July 1, 2003, except that, until July 1,
2001, the Company may redeem, at its option, up to an aggregate of 20% of the
original principal amount of the Notes with the net cash proceeds of one or more
Public Equity Offerings (as defined) at a redemption price equal to 111.25% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
date of redemption; provided, however, that at least $100.0 million principal
amount of the Notes originally issued remains outstanding immediately after any
such redemption. On or after July 1, 2003, the Notes may be redeemed at the
option of the Company, in whole or in part, at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, to the date of redemption.
Upon a Change of Control (as defined), each holder of Notes will have the right
to require the Company to purchase all or a portion of such holder's Notes at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase. See "Description of the
Notes -- Optional Redemption" and "-- Change of Control."
The Existing Notes are, and the Exchange Notes will be, general unsecured
senior subordinated obligations of the Company and subordinate in right of
payment to all existing and future Senior Indebtedness (as defined) of the
Company. The Existing Notes rank, and the Exchange Notes will rank, pari passu
in right of payment to all existing and future Senior Subordinated Indebtedness
(as defined) of the Company and senior to any future subordinated indebtedness
of the Company.
As of June 30, 1998, the Company had no outstanding Senior Indebtedness,
and $45.0 million of borrowing availability under the Company's credit facility
entered into with Comerica Bank as of June 23, 1998 (the "New Credit Facility"),
which, when borrowed, will be Senior Indebtedness, and will be secured by
substantially all of the assets of the Company.
There has not previously been any public market for the Existing Notes or
the Exchange Notes. The Company does not intend to list the Exchange Notes on
any securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors -- Absence of a Public Market for
the Notes; Volatility; Restrictions on Resale." Moreover, to the extent that
Existing Notes are tendered and accepted in the
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<PAGE> 7
Exchange Offer, the trading market, if any, for untendered and tendered but
unaccepted Existing Notes could be adversely affected.
The Company will not receive any proceeds from the Exchange Offer, but will
bear certain offering expenses pursuant to the Registration Rights Agreement,
dated June 18, 1998 (the "Registration Agreement"), among the Company and the
Initial Purchasers (as defined) of the Existing Notes. The Exchange Offer is
intended to satisfy certain of the Company' obligations under the Registration
Agreement, including the obligation to register the Existing Notes under the
Securities Act. See "The Exchange Offer -- Registration Agreement." Upon the
completion of the Exchange Offer, certain special rights under the Registration
Agreement will terminate with respect to Existing Notes, and holders of Exchange
Notes will not be entitled to such rights. See "The Exchange
Offer -- Termination of Certain Rights." No dealer manager is being utilized in
connection with the Exchange Offer.
------------------------
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements other than statements
of historical facts included in this Prospectus, including, without limitation,
such statements under "Summary," "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Aqua-Chem," "Business of the
Company," "Management's Discussion and Analysis of Financial Condition and
Results of Operations of NDC," and located elsewhere herein, regarding the
financial position and capital expenditures of the Company are forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Important factors that could
cause actual results to differ materially from such expectations ("Cautionary
Statements") are disclosed in this Prospectus, including, without limitation, in
conjunction with the forward-looking statements included in this Prospectus
and/or under "Risk Factors." All subsequent written or oral forward-looking
statements attributable to the Company or persons acting on behalf of the
Company are expressly qualified in their entirety by the Cautionary Statements.
------------------------
The industry size and growth, market share and competitive position data
contained in this Prospectus are based on internal, industry and other sources
that are believed to be reliable. Such data are inherently imprecise, but the
Company believes that such data are generally indicative of industry size and
growth and the Company's relative market share and competitive position.
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SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the historical and pro
forma financial statements contained elsewhere in this Prospectus. Unless the
context requires otherwise, as used in this Prospectus: (i) "Aqua-Chem" refers
to Aqua-Chem, Inc., a Delaware corporation, and its predecessors and
subsidiaries on a historical basis prior to the Acquisition; (ii) "NDC" refers
to National Dynamics Corporation, a Nebraska corporation, and its predecessors
on a historical basis prior to the Acquisition; (iii) "Acquisition" refers to
the acquisition of substantially all of the assets of NDC by Aqua-Chem which was
consummated on June 23, 1998; (iv) "Company" refers to the combined businesses
of Aqua-Chem and NDC following the Acquisition; (v) "Management Buy-Out" refers
to the July 31, 1997 acquisition of Aqua-Chem by certain members of its
management and Whitney Equity Partners, L.P.; and (vi) "twelve months ended
December 31, 1997" refers to Aqua-Chem's seven-month period ended July 31, 1997
and its five-month period ended December 31, 1997 on a combined basis (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Aqua-Chem").
THE COMPANY
The Company is the world's leading manufacturer of commercial and
industrial boilers, burners, related equipment and aftermarket parts. The
Company believes that in the U.S. market for each of its three principal boiler
product lines it enjoys the #1 or #2 market position. In addition, management
believes that the Company has the largest installed base of boilers in the world
(estimated at over 80,000 boilers), which facilitates the Company's sale of
higher margin aftermarket parts. Management attributes the Company's leading
market positions to its extensive global distribution network, well-recognized
Cleaver-Brooks and Nebraska Boiler brand names, and its reputation for providing
high-quality, energy-efficient, low-emission boilers with a demonstrated record
of safety and durability.
The Company is also a world leader in the design and production of water
purification and treatment products and systems sold under the Aqua-Chem brand
name for selected commercial, government, military, and industrial applications.
On a pro forma basis for the twelve months ended December 31, 1997, the Company
generated net sales and Adjusted EBITDA (as defined) of $250.5 million and $26.8
million, respectively, of which approximately 82% and 90%, respectively, were
attributable to the Company's boiler business and related product lines.
COMPETITIVE STRENGTHS
The Company believes it has a strong competitive position attributable to a
number of factors, including the following:
Leading Market Positions and Recognized Brands. The Company believes it has
the #1 or #2 market position in North America in each of its three principal
boiler product lines and the largest installed base of commercial and industrial
boilers in the industry. The Company believes that its Cleaver-Brooks and
Nebraska Boiler products (manufactured by the Company's Cleaver-Brooks Division
("Cleaver-Brooks") and National Dynamics Division ("National Dynamics"),
respectively) enjoy industry-leading brand recognition, as well as estimated
combined market shares of approximately 25% to 85%.
Extensive Global Boiler Distribution Network. Management believes that the
Company has the most extensive global distribution network for commercial and
industrial boilers, with 50 sales representatives in North America and 43
independent international sales representatives representing Cleaver-Brooks
product lines, and an additional 46 independent sales representatives in North
America who represent Nebraska Boiler product lines. The Company enjoys
longstanding relationships with its sales representatives, many of whom have
sold the Company's products for more than 25 years, and the majority of whom do
not sell competing products.
Large Installed Product Base. The Company has an installed base estimated
at over 80,000 boilers. The Company believes that this large installed product
base provides a significant competitive advantage in obtaining orders to
refurbish, repair or replace boilers, principally because customers tend to
purchase equipment and parts from the original supplier. The installed product
base also provides the Company with a
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<PAGE> 9
recurring source of demand for aftermarket boiler parts, which generally carry
higher margins than new boilers. Aftermarket parts accounted for approximately
20% of Cleaver-Brooks' net sales for the twelve months ended December 31, 1997,
as compared with approximately 3% of NDC's net sales for fiscal 1997. Management
intends to implement initiatives to increase the sale of aftermarket parts to
existing Nebraska Boiler customers.
Diverse Customer Base. The Company sells its products to over 2,000
customers annually in a wide variety of industries with no significant customer
concentration. The Company believes that its broad, diverse customer base
mitigates its exposure to economic dislocations in any particular industry or
geographic region.
Commitment to Quality and Service. The Company believes that its strong
customer relationships result from its demonstrated commitment to provide
high-quality, energy-efficient, low-emission products with a demonstrated record
of safety and durability. The Company employs a staff of highly-trained
engineers and constantly strives to improve product quality. Although its
customers vary from year to year, the Company believes that a substantial
portion of annual net sales are generally to repeat customers, such as Ford,
Cargill, Coca-Cola, Weyerhaeuser, Anheuser-Busch, Baxter Healthcare,
Ralston-Purina, Hewlett-Packard, Georgia Pacific, Chrysler-Jeep, Wrigley,
Sheraton, IBM, and NASA.
Experienced Management Team with Significant Equity Ownership. Led by
Chairman and CEO Jeffrey A. Miller, the Company has an experienced senior
management team with strong manufacturing, marketing, and general management
skills and significant equity ownership. A group consisting primarily of senior
management collectively owns 49% of the common equity of the Company, including
34% owned by Mr. Miller.
BUSINESS STRATEGY
The Company intends to enhance its leading market positions and to increase
net sales and profitability by pursuing the following business strategies:
Achieve Integration of NDC. Management is focused on achieving the
successful integration of NDC and believes that there are numerous opportunities
to achieve annual cost savings and synergies totaling over $3.1 million as a
result of the combination of Aqua-Chem and NDC. See "-- Acquisition Rationale"
and "Unaudited Pro Forma Financial Data."
Leverage Leading Market Positions. Management believes it can grow its core
boiler business by capitalizing on the Company's leading market positions to
increase net sales and profitability by, among other things: (i) leveraging its
extensive global distribution network, brand recognition, and longstanding
customer relationships to sell new and enhanced products through established
channels; and (ii) taking increased advantage of its large installed base of
equipment to generate incremental sales of replacement products and higher
margin aftermarket parts.
Continue to Improve Manufacturing Efficiency. Senior management is
instilling a culture of continuous improvement intended to make the Company a
world-class manufacturer. Due in part to the implementation of a variety of
modern manufacturing practices, Aqua-Chem improved its gross profit margin from
approximately 19% for fiscal 1995 to approximately 27% for the twelve months
ended December 31, 1997. These new manufacturing practices, which have been
implemented at certain of the Company's manufacturing facilities, have improved
throughput, reduced production cycle times and inventory levels, and improved
the Company's ability to respond to customer needs. Management believes that it
can further improve manufacturing efficiency and reduce production costs by
continuing to implement these processes on a Company-wide basis.
Enhance and Extend Product Lines. Historically, Aqua-Chem has established
its leading market positions by enhancing its principal products and by
designing and developing new and complementary products. Management believes
that pursuing this strategy will generate continued growth within its core
product lines. The Acquisition also expands Aqua-Chem's product offerings and
improves its overall market position. The Company will continue to evaluate
opportunities to expand product lines, increase market shares, and develop
complementary products internally and through selective strategic acquisitions.
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<PAGE> 10
Increase International Penetration. Overseas markets are generally expected
to experience greater long-term growth than the U.S. market, and the Company
intends to leverage its strong global distribution network and focus on further
penetrating international markets, including Central and South America, Europe,
the Middle East, Russia, China and other Asian markets. In addition to directly
marketing its products to international customers, the Company will market its
products to domestic customers that are developing foreign production
facilities.
THE ACQUISITION
On June 23, 1998, Aqua-Chem completed the acquisition of substantially all
of the assets of National Dynamics Corporation ("NDC") for a purchase price of
$47.0 million plus the assumption of certain liabilities and subject to certain
post-closing adjustments. The Company used a portion of the proceeds of the
Private Offering to finance the Acquisition. See "The Exchange Offer -- Use of
Proceeds" and "The Acquisition." Since the consummation of the Acquisition, the
former business of NDC has been operated as the Company's National Dynamics
Division. There can be no assurance that the expected benefits of the
Acquisition will be realized. See "Risk Factors -- Realization of the Benefits
of the Acquisition."
ACQUISITION RATIONALE
Cleaver-Brooks sells firetube boilers, commercial and industrial watertube
boilers, and related boiler room accessories and aftermarket parts. National
Dynamics' principal product line is industrial watertube boilers with larger
capacities than those manufactured by Cleaver-Brooks. The Acquisition creates
the largest global manufacturer of industrial watertube boilers and will provide
the Company with (i) a broader, more diverse product portfolio and an enhanced
market position; (ii) significant cost savings and operating efficiencies; (iii)
increased aftermarket parts sales opportunities; and (iv) the ability to
leverage its extensive sales and distribution channels.
Enhanced Product Portfolio and Market Position. With the Acquisition, the
Company has become the #1 global producer of industrial watertube boilers, with
the broadest product line available in the market. In addition to producing
boilers with higher capacities than Cleaver-Brooks boilers, National Dynamics
manufactures boilers that incorporate certain design features not available from
Cleaver-Brooks. For example, National Dynamics offers an "O" design boiler,
which is used primarily in the rental boiler industry, a customer base
Cleaver-Brooks does not currently focus on.
Cost Savings and Operating Efficiencies. Management believes that the
Company can achieve annual cost savings of more than $3.1 million by (i) closing
a redundant manufacturing facility; (ii) rationalizing duplicative corporate,
general and administrative functions; (iii) in-sourcing certain components
currently procured from third parties that either Cleaver-Brooks or National
Dynamics already produces; and (iv) realizing additional advantages resulting
from increased scale (e.g., enhanced purchasing power). See "-- Summary
Unaudited Pro Forma Financial Data" and "Unaudited Pro Forma Financial Data."
Penetration of Aftermarket Parts Market. In recent years aftermarket boiler
parts and accessories have accounted for approximately 20% of Cleaver-Brooks'
net sales as compared to approximately 3% of NDC's net sales. Aqua-Chem
attributes its relative success in selling aftermarket parts to management's
focus on this higher margin business and its policy of requiring sales
representatives to stock and sell Cleaver-Brooks brand parts. By extending these
practices to National Dynamics' business, management expects to increase the
Company's penetration of aftermarket parts sales among the installed base of
Nebraska Boiler customers.
Sales and Distribution Leverage. Cleaver-Brooks has the most extensive
global distribution network in the boiler industry, with international sales
accounting for approximately 23% of its total net sales for the twelve months
ended December 31, 1997. Although NDC had an effective domestic distribution
system, international sales only accounted for approximately 12% of NDC's total
fiscal 1997 net sales due, in part, to its lack of an effective international
distribution system. Management intends to sell Nebraska Boiler products through
Cleaver-Brooks' established international distribution network to increase the
Company's overseas sales.
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<PAGE> 11
RECENT HISTORY
The 1994 and 1996 Restructurings. Prior to recruiting Jeffrey A. Miller as
Chief Executive Officer in July 1996, Aqua-Chem had undertaken two separate
restructurings. In December 1994, Aqua-Chem announced a plan (the "1994
Restructuring") to consolidate its boiler manufacturing operations. Aqua-Chem
closed its high-cost facility in Lebanon, Pennsylvania in the first half of 1995
and consolidated its large firetube boiler production in its Thomasville,
Georgia plant and its smaller firetube boiler production in its Stratford,
Ontario facility. Manufacturing costs were initially higher than anticipated as
these facilities absorbed the increased production and due to additional
training costs for new employees required to handle the increase in volume;
however, in 1996 Aqua-Chem began to resolve these issues, and manufacturing
efficiency improved accordingly. In November 1995, Aqua-Chem hired Mr. Miller's
predecessor, who initiated a second restructuring program in 1996 (the "1996
Restructuring") that was designed to dramatically reduce Aqua-Chem's cost
structure. The 1996 Restructuring consisted principally of across-the-board
reductions in salaried personnel and other selling, general and administrative
expenses.
Recruitment of Jeffrey A. Miller as CEO. The 1996 Restructuring achieved a
reduction of selling, general and administrative expenses; however, Aqua-Chem's
board of directors determined that its business was being adversely affected
and, consequently, the board recruited Mr. Miller as Chief Executive Officer in
July 1996. Mr. Miller has over 20 years of experience in a broad range of
positions managing manufacturing companies, including 19 years in numerous
managerial and executive positions with The General Electric Company. Eschewing
short-term approaches to increasing profits, Mr. Miller began implementing a
long-term strategy designed to improve competitiveness, productivity and
quality, increase manufacturing efficiency, and leverage Aqua-Chem's market
positions. Mr. Miller has recruited certain new senior managers and introduced
more focused and innovative management, manufacturing and purchasing practices.
The 1998 Restructuring. The Company has determined that it will close its
Greenville, Mississippi manufacturing facility and relocate the manufacturing
operations currently located there to other Company facilities, including the
Lincoln, Nebraska facility acquired from NDC as part of the Acquisition (the
"1998 Restructuring"). A portion of the anticipated $3.1 million of annual cost
savings discussed under "--Acquisition Rationale -- Cost Savings and Operating
Efficiencies" are attributable to the 1998 Restructuring. The Company has
reached an agreement with the union representing production workers at the
Greenville facility with respect to the closure of that facility and severance
and other benefits payable to union workers displaced as a result. The Company
is currently in the planning stages of transferring production to other
facilities. This process is expected to be completed within approximately one
year, at which time the Greenville plant will be closed.
COMPANY OWNERSHIP
On July 31, 1997, Aqua-Chem management, led by Chairman and CEO Jeffrey A.
Miller, and Whitney Equity Partners, L.P. (a fund managed by J. H. Whitney &
Co.) acquired Aqua-Chem (the "Management Buy-Out") from its former owners, a
French conglomerate that owned 80% of Aqua-Chem and a privately held company
that owned 20%. As of the date of this Prospectus, all of the common equity of
the Company is held by Rush Creek LLC ("Rush Creek"), a holding company whose
only asset is the capital stock of the Company. Through Rush Creek, Whitney
Equity Partners L.P. and Jeffrey A. Miller own approximately 51% and 34%,
respectively, of the common equity of the Company, with the remainder owned
primarily by certain other members of senior management. See "Capital Stock and
Principal Stockholders." J. H. Whitney & Co., founded by Jock Whitney in 1946,
is a private equity investment firm headquartered in Stamford, Connecticut.
RISK FACTORS
Before exchanging Existing Notes for the Exchange Notes offered hereby,
holders of Existing Notes should consider carefully the factors described in
"Risk Factors" and all other information set forth in this Prospectus.
4
<PAGE> 12
SUMMARY OF TERMS OF THE EXCHANGE OFFER
Registration Agreement..... The Existing Notes were sold by the Company on June
23, 1998 (the "Issue Date") to Credit Suisse First
Boston Corporation and Bear, Stearns & Co. Inc.
(the "Initial Purchasers"), which resold the
Existing Notes to certain QIBs in reliance on Rule
144A and to certain non-U.S. persons in accordance
with Regulation S. In connection therewith, the
Company executed and delivered, for the benefit of
the holders of the Existing Notes, the Registration
Agreement providing for, among other things, the
Exchange Offer. See "The Exchange
Offer -- Registration Agreement" and "Plan of
Distribution."
The Exchange Offer......... The Company is offering to exchange up to
$125,000,000 aggregate principal amount of Exchange
Notes for a like principal amount of Existing
Notes. The Company will issue the Exchange Notes on
the earliest practicable date following the
Expiration Date.
Based on interpretations by the staff of the
Commission, as set forth in several no-action
letters issued to third parties, the Company
believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Existing Notes
may be offered for resale, resold and otherwise
transferred by any holder thereof (other than any
such holder 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 that such holder is not engaged in, and does
not intend to engage in, a distribution of such
Exchange Notes and has no arrangement or
understanding with any person to participate in the
distribution of such Exchange Notes. The
Commission, however, has not considered the
Exchange Offer in the context of a no-action letter
and there can be no assurance that the staff of the
Commission would make a similar determination with
respect to the Exchange Offer as in such other
circumstances.
Each broker-dealer that receives Exchange Notes for
its own account in exchange for Existing Notes
pursuant to the Exchange Offer must acknowledge
that such Existing Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities and that it
will deliver a prospectus in connection with any
resale of such Exchange Notes. 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 Existing Notes where such
Existing Notes were acquired by such broker-dealer
as a result of market-making activities or other
trading activities. The Company has agreed that,
for a period of 180 days after the Expiration Date,
it will make this Prospectus available to any
broker-dealer (which may include the Initial
Purchasers) that elects to exchange Existing Notes,
acquired for its own account as a result of
market-making activities or other trading
activities, for Exchange Notes (collectively,
"Participating Broker-Dealers") for use in
connection with any such resale. See "Plan of
Distribution."
5
<PAGE> 13
Each holder of Existing Notes that desires to
participate in the Exchange Offer, other than a
broker-dealer, must acknowledge that it is not
engaged in, and does not intend to engage in, a
distribution of Exchange Notes and has no
arrangement or understanding to participate in a
distribution of Exchange Notes. See "The Exchange
Offer" and "Plan of Distribution."
Expiration Date............ The Exchange Offer will expire at 5:00 p.m. New
York City time, on , 1998, unless the
Exchange Offer is extended by the Company in its
sole discretion, in which case the term "Expiration
Date" means the latest date and time to which the
Exchange Offer is extended.
Accrued Interest on the
Exchange Notes and Existing
Notes...................... Holders of Existing Notes that are accepted for
exchange will not receive any accrued interest
thereon. However, each Exchange Note will bear
interest from the most recent date on which
interest has been paid on the corresponding
Existing Note, or, if no interest has been paid,
from June 23, 1998.
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See
"The Exchange Offer -- Conditions." The Exchange
Offer is not conditioned upon any minimum aggregate
principal amount of Existing Notes being tendered
for exchange.
Withdrawal Rights.......... Subject to the conditions set forth herein, tenders
of Existing Notes may be withdrawn prior to 5:00
p.m., New York City time, on the Expiration Date.
See "The Exchange Offer -- Withdrawal Rights."
Acceptance of Existing
Notes
and Delivery of Exchange
Notes...................... Subject to the terms and conditions of the Exchange
Offer, including the reservation of rights by the
Company, the Company will accept for exchange any
and all Existing Notes that are properly tendered
in the Exchange Offer, and not withdrawn, prior to
5:00 p.m., New York City time, on the Expiration
Date. Subject to such terms and conditions, the
Exchange Notes issued pursuant to the Exchange
Offer will be delivered on the earliest practicable
date following the Expiration Date. Any Existing
Notes not accepted for exchange for any reason will
be returned without cost to the tendering holder
thereof promptly after the Expiration Date. See
"The Exchange Offer -- Acceptance of Tenders."
Certain Federal Income Tax
Consequences............... For federal income tax purposes, the exchange of an
Existing Note for a Exchange Note should not
constitute a taxable exchange by its holder.
Accordingly, the holders should not recognize any
taxable gain or loss upon such exchange. See "The
Exchange Offer -- Certain Effects of the Exchange
Offer."
Untendered Existing
Notes...................... Holders of Existing Notes who do not tender their
Existing Notes in the Exchange Offer or whose
Existing Notes are not accepted for exchange will
continue to hold such Existing Notes and will be
entitled to all the rights and preferences and will
be subject to the limitations applicable thereto
under the Indenture (as defined), except for any
such rights, preferences or limitations which, by
their terms, terminate or cease to be
6
<PAGE> 14
effective as a result of this Exchange Offer. All
untendered and tendered but unaccepted Existing
Notes will continue to be subject to certain
restrictions on transfer provided therein. See
"Risk Factors -- Consequences of Failure to
Exchange." To the extent that Existing Notes are
tendered and accepted in the Exchange Offer, the
trading market, if any, for untendered and tendered
but unaccepted Existing Notes could be adversely
affected. See "Risk Factors -- Absence of a Public
Market for the Notes; Volatility; Restrictions on
Resale" and "The Exchange Offer -- Certain Effects
of the Exchange Offer."
Broker-Dealers............. Each broker-dealer that receives Exchange Notes for
its own account in exchange for Existing Notes,
where such Existing 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."
Exchange Agent/Trustee..... United States Trust Company of New York is serving
as Exchange Agent (the "Exchange Agent") in
connection with the Exchange Offer and as Trustee
("Trustee") under the Indenture (as defined).
SUMMARY OF TERMS OF THE EXCHANGE NOTES
The terms of the Exchange Notes and the Existing Notes are identical in all
material respects, except for certain transfer restrictions and registration
rights relating to the Existing Notes and except that, if the Exchange Offer is
not consummated by December 21, 1998, additional interest will accrue at the
rate of 0.50% per annum until but not including the date the Exchange Offer is
consummated.
Indenture.................. The Existing Notes were, and the Exchange Notes
will be, issued pursuant to an indenture dated as
of June 23, 1998 between the Company and the
Trustee (the "Indenture").
Exchange Notes............. $125,000,000 in aggregate principal amount of
11 1/4% Senior Subordinated Notes Due 2008 of
Aqua-Chem, Inc. which have been registered under
the Securities Act.
Maturity Date.............. July 1, 2008.
Interest Payment Dates..... Each January 1 and July 1, commencing January 1,
1999.
Ranking; Guarantees........ The Existing Notes are, and the Exchange Notes will
be, general unsecured senior subordinated
obligations of the Company and subordinate in right
of payment to all existing and future Senior
Indebtedness (as defined) of the Company. The
Existing Notes rank, and the Exchange Notes will
rank, pari passu in right of payment to all
existing and future Senior Subordinated
Indebtedness (as defined) of the Company and senior
to any future subordinated indebtedness of the
Company.
Optional Redemption........ The Existing Notes are not, and the Exchange Notes
will not be, redeemable at the option of the
Company, prior to July 1, 2003, except that, until
July 1, 2001, the Company may redeem, at its
option, up to an aggregate of 20% of the original
principal amount of the Notes with the net cash
proceeds of one or more Public Equity Offerings (as
defined) at a redemption price equal to 111.25% of
the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption;
provided, however, that at least $100.0 million
principal amount of the Notes originally issued
remains outstanding immediately after any such
redemption. On or after July 1, 2003, the Notes may
be redeemed at the
7
<PAGE> 15
option of the Company, in whole or in part, at the
redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the date of
redemption. See "Description of the
Notes -- Optional Redemption."
Change of Control.......... Upon a Change of Control (as defined), each holder
of Notes will have the right to require the Company
to purchase all or a portion of such holder's Notes
at a purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest,
if any, to the date of purchase. In the event of a
Change of Control, there can be no assurance that
the Company will have the financial resources or be
permitted under the terms of its other indebtedness
to purchase the Notes. See "Description of the
Notes -- Change of Control."
Certain Covenants.......... The Indenture contains certain covenants that,
among other things, limit (i) the incurrence of
additional Indebtedness (as defined) by the Company
and its Restricted Subsidiaries; (ii) the payment
of dividends and other restricted payments by the
Company and its Restricted Subsidiaries; (iii) the
creation of restrictions on distributions from
Restricted Subsidiaries, (iv) asset sales; (v)
transactions with affiliates; (vi) sales or
issuances of Restricted Subsidiary capital stock,
and (vii) mergers and consolidations; provided,
however, that all these limitations and
prohibitions are subject to a number of important
qualifications and exceptions. See "Risk
Factors -- Restrictive Debt Covenants" and
"Description of the Notes -- Certain Covenants."
Registration Rights........ The Company has filed a registration statement on
Form S-4 (together with any amendments thereto, the
"Registration Statement") with respect to the
Exchange Offer made hereby, and has agreed to use
its best efforts to cause the Registration
Statement to become effective on or prior to
November 21, 1998. In the event that any changes in
law or the applicable interpretations of the staff
of the Commission do not permit the Company to
effect the Exchange Offer made hereby, if the
Registration Statement is not declared effective on
or prior to December 21, 1998, if the Exchange
Offer is not consummated on or prior to January 20,
1999 for any reason attributable to actions or
inactions of the Company, or under certain other
circumstances, the Company will, as promptly as
practicable, file with the Commission a shelf
registration statement with respect to the resale
of the Existing Notes (the "Shelf Registration
Statement"), use its best efforts to cause such
Shelf Registration Statement to become effective
generally within 30 days after the date on which
the Company is required to file the Shelf
Registration Statement, and to keep the Shelf
Registration Statement effective until three years
after the effective date thereof (or until one year
after such effective date if the Shelf Registration
Statement is filed at the request of an Initial
Purchaser). Upon consummation of the Exchange
Offer, the Company generally will have no further
obligation to register the Existing Notes. See "The
Exchange Offer -- Registration Agreement" and
"-- Termination of Certain Rights."
Termination of Certain
Rights..................... Holders of Exchange Notes will not be entitled to
certain rights under the Registration Agreement,
including the right to require the Company to file
a registration statement with respect to the
Exchange Notes, and to file a Shelf Registration
Statement, except in certain limited circumstances.
See "The Exchange Offer -- Termination of Certain
Rights."
8
<PAGE> 16
Absence of a Public Market
for the Exchange Notes..... The Exchange Notes will be new securities for which
there currently is no market. Although the Initial
Purchasers have informed the Company that they
currently intend to make a market in 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 Exchange Notes. The Company does not
intend to apply for listing of the Exchange Notes
on any securities exchange or seek the admission
thereof to trading on The Nasdaq Stock Market. See
"Risk Factors -- Absence of Public Market for the
Notes; Volatility; Restrictions on Resale."
Use of Proceeds............ The Company will not receive any proceeds from the
Exchange Offer. The net proceeds to the Company
from the sale of the Existing Notes were used: (i)
to pay the purchase price of the Acquisition; (ii)
to repay the Company's Outstanding Indebtedness (as
defined); (iii) to retire a portion of the
Company's Series A Preferred Stock; (iv) to pay
accumulated interest and dividends, fees and
expenses associated with the Transactions (as
defined) (other than the Management Buy-Out); and
(v) for general corporate purposes. See "The
Exchange Offer -- Use of Proceeds."
For further information regarding the Exchange Notes, see "Description of
the Notes."
9
<PAGE> 17
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following table sets forth the summary unaudited pro forma financial
information for the Company. This information is derived from the Unaudited Pro
Forma Financial Data appearing elsewhere in this Prospectus that gives effect to
the Private Offering, the Acquisition, the Management Buy-Out, the repayment of
Aqua-Chem's Outstanding Indebtedness (as defined), the execution of the New
Credit Facility, the retirement of a portion of Aqua-Chem's Series A Preferred
Stock, and the payment of accrued interest and dividends, fees and expenses in
connection with the foregoing (collectively, the "Transactions"). See "The
Exchange Offer -- Use of Proceeds."
The pro forma statement of operations data and other financial data for the
twelve months ended December 31, 1997 and the six months ended June 30, 1998
give effect to the Transactions as if the Transactions had occurred on January
1, 1997. The balance sheet data as of June 30, 1998 represents actual, rather
than pro forma, data. The summary unaudited pro forma financial data is
presented for comparative and informational purposes only and is not necessarily
indicative of future results or of the results that would have been obtained had
the Transactions assumed therein actually been completed on the dates indicated.
The pro forma data presented below should be read in conjunction with the
"Unaudited Pro Forma Financial Data" and the financial statements of Aqua-Chem
and of NDC included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................... $250,451 $ 98,495
Cost of goods sold.......................................... 186,913 73,701
-------- --------
Gross margin................................................ 63,538 24,794
Selling, general and administrative expenses................ 45,612 21,245
Restructuring charges....................................... -- 4,720
-------- --------
Operating income (loss)..................................... 17,926 (1,171)
OTHER FINANCIAL DATA:
EBITDA(a)................................................... $ 24,451 $ 1,554
Adjusted EBITDA(b).......................................... 26,751 7,424
Depreciation and amortization............................... 5,838 2,725
Capital expenditures........................................ 4,811 1,422
Cash interest expense(c).................................... 14,063 7,032
Ratio of total debt to Adjusted EBITDA(b)(d)................ 4.7x --(e)
Ratio of Adjusted EBITDA to cash interest expense(b)(c)..... 1.9x --(e)
Ratio of earnings to fixed charges(f)....................... 1.3x --(g)
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets................................................ $175,734
Total debt.................................................. 125,000
Stockholders' deficit....................................... (1,611)
</TABLE>
- ------------------------------------
(a) EBITDA is defined as operating income before depreciation and amortization
and, for the twelve months ended December 31, 1997, excludes $687 of
non-cash purchase accounting adjustments to cost of goods sold related to
writing up inventory to fair market value at the time of the Management
Buy-Out. While EBITDA is not intended to represent cash flow from operations
as defined by generally accepted accounting principles ("GAAP") and should
not be considered as an indicator of operating performance or an alternative
to cash flow (as measured by GAAP) as a measure of liquidity, it is included
herein to provide additional information with respect to the ability of the
Company to meet its future debt service, capital expenditures and working
capital requirements. The Company's measure of EBITDA may not be comparable
to similarly titled measures of other companies.
10
<PAGE> 18
(b) Adjusted EBITDA for the periods presented is EBITDA, excluding restructuring
charges plus anticipated cost savings arising from: (i) the Company's
closure of its Greenville, Mississippi facility pursuant to the 1998
Restructuring and (ii) the in-sourcing of certain boiler components
currently procured from third parties that either Cleaver-Brooks or National
Dynamics already produces, as set forth below:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- -------------
<S> <C> <C>
EBITDA................................................. $24,451 $1,554
Restructuring charges (i)............................ -- 4,720
Facility rationalization (ii)........................ 1,800 900(iii)
In-sourcing of certain components (iv)............... 500 250(iii)
------- ------
Adjusted EBITDA........................................ $26,751 $7,424
======= ======
</TABLE>
- ------------------------------------
(i) For the six months ended June 30, 1998, consists of $3,021 to write
down the value of certain fixed assets and inventory, $1,460 of
employee termination benefits and $239 of other costs. The Company
anticipates capital expenditures of approximately $1,500 within the
year following the closure of the Greenville facility to accommodate
increased production levels at other manufacturing facilities.
(ii) Consists of estimated annual cash savings of approximately $1,800
attributable to the rationalization of approximately 35 employees
engaged in general management, administrative and indirect
manufacturing functions.
(iii) Estimated cost savings for the pro forma six months ended June 30,
1998 consist of one-half of the estimated annual cost savings for the
twelve months ended December 31, 1997.
(iv) Consists of estimated annual cash savings of approximately $500
attributable to the in-sourcing of burners produced by Cleaver-Brooks
that will be incorporated into certain Nebraska Boiler industrial
watertube boilers and certain fabricated components produced by
National Dynamics that will be incorporated into Cleaver-Brooks
boilers.
(c) Calculated using an interest rate of 11.25% per annum on the Notes excluding
non-cash amortization of deferred financing costs.
(d) The ratio of total debt to Adjusted EBITDA is calculated using actual total
debt as of June 30, 1998, which management believes would have approximated
pro forma total debt as of December 31, 1997 had a pro forma balance sheet
been prepared as of such date, and Adjusted EBITDA for the twelve months
ended December 31, 1997.
(e) Due to the seasonal nature of the Company's business, the ratios of Adjusted
EBITDA to cash interest expense and total debt to Adjusted EBITDA for the
six months ended June 30, 1998 are not accurate representations of full year
results.
(f) For purposes of calculating the ratio of earnings to fixed charges, earnings
represent income (loss) before taxes, extraordinary item and fixed charges.
Fixed charges consist of the total of (i) interest, whether expensed or
capitalized, and (ii) amortization of debt expense and discount or premium
relating to any indebtedness, whether expensed or capitalized.
(g) Earnings would have been inadequate to cover fixed charges by $7,790 for the
six months ended June 30, 1998.
11
<PAGE> 19
SUMMARY HISTORICAL FINANCIAL DATA OF AQUA-CHEM
The following summary historical financial data of Aqua-Chem as of and for
each of the fiscal years ended December 31, 1995 and 1996, the twelve months
ended December 31, 1997, and the six months ended June 30, 1997 and 1998 has
been derived from the consolidated financial statements of Aqua-Chem. The
summary historical financial data for the twelve months ended December 31, 1997
is derived by combining the financial results of Aqua-Chem for the seven-month
period from January 1, 1997 through July 31, 1997 (while under prior ownership)
and the five-month period from August 1, 1997 through December 31, 1997
(following the Management Buy-Out), including purchase accounting adjustments
for the Management Buy-Out (see Note (a) to the Unaudited Pro Forma Consolidated
Statements of Operations for the year ended December 31, 1997 under "Unaudited
Pro Forma Financial Data"). The financial data for Aqua-Chem before and after
the Management Buy-Out is not comparable in all material respects. This summary
historical financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Aqua-Chem" and the consolidated financial statements of Aqua-Chem included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, TWELVE MONTHS ENDED JUNE 30,
------------------- DECEMBER 31, -------------------
1995 1996 1997 1997 1998
-------- -------- -------------------- ------- --------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $183,368 $199,552 $191,159 $83,211 $ 76,222
Cost of goods sold.............. 148,650 153,446 139,989 62,087 55,930
-------- -------- -------- ------- --------
Gross margin.................... 34,718 46,106 51,170 21,124 20,292
Selling, general and
administrative expenses....... 37,772 34,446 39,394 18,069 17,446
Restructuring charges(a)........ 4,593 5,038 -- -- 4,720
-------- -------- -------- ------- --------
Operating income (loss)......... $ (7,647) $ 6,622 $ 11,776 $ 3,055 $ (1,874)
OTHER FINANCIAL DATA:
EBITDA(b)....................... $ (4,494) $ 9,606 $ 15,437 $ 4,778 $ 28
Adjusted EBITDA(c).............. 99 14,644 15,437 4,778 4,748
Depreciation and amortization... 3,153 2,984 2,974 1,723 1,902
Gross profit margin............. 18.9% 23.1% 26.8% 25.4% 26.6%
Capital expenditures............ $ 4,867 $ 2,789 $ 3,392 $ 1,097 $ 1,023
Ratio of earnings to fixed
charges(d).................... --(e) 4.2x 3.4x 5.6x --(e)
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets.................... $101,381 $101,000 $124,661 $97,008 $175,734
Total debt...................... 18,636 20,128 59,691 20,198 125,000
Stockholders' equity
(deficit)..................... 36,636 39,960 3,638 41,653 (1,611)
</TABLE>
- ------------------------------------
(a) For 1995, reflects restructuring charges required to complete the 1994
Restructuring. For 1996, reflects restructuring charges required to complete
the 1996 Restructuring. For the six months ended June 30, 1998, reflects
restructuring charges to complete the 1998 Restructuring. For further
information on such restructurings, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Aqua-Chem,"
Note (3) to the consolidated financial statements of Aqua-Chem and Note (7)
to the consolidated condensed interim financial statements of Aqua-Chem, all
included elsewhere in this Prospectus.
(b) EBITDA is defined as operating income before depreciation and amortization
and, for the twelve months ended December 31, 1997, excludes $687 of
non-cash purchase accounting adjustments to cost of goods sold related to
writing up inventory to fair market value at the time of the Management
Buy-Out. While EBITDA is not intended to represent cash flow from operations
as defined by GAAP and should not be considered as an indicator of operating
performance or an alternative to cash flow (as measured by
12
<PAGE> 20
GAAP) as a measure of liquidity, management believes it provides additional
information with respect to the ability of a company to meet its future debt
service, capital expenditures and working capital requirements. The measure of
EBITDA presented above may not be comparable to similarly titled measures
of other companies.
(c) Adjusted EBITDA for the periods presented is defined as EBITDA excluding
restructuring charges.
(d) For purposes of calculating the ratio of earnings to fixed charges, earnings
represent income (loss) before taxes, extraordinary item and fixed charges.
Fixed charges consist of the total of (i) interest, whether expensed or
capitalized; (ii) amortization of debt expense and discount or premium
relating to any indebtedness, whether expensed or capitalized.
(e) Earnings were inadequate to cover fixed charges by $6,265 and $4,779 for the
year ended December 31, 1995 and the six months ended June 30, 1998,
respectively.
13
<PAGE> 21
SUMMARY HISTORICAL FINANCIAL DATA OF NDC
The following summary historical financial data of NDC as of and for each
of the fiscal years ended October 31, 1995, 1996 and 1997, and for the five
months ended March 31, 1997 and 1998 have been derived from the financial
statements of NDC. This summary historical financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of NDC" and the financial statements of NDC included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED FIVE MONTHS ENDED
OCTOBER 31, MARCH 31,
--------------------------- -----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................................... $49,717 $54,853 $59,292 $21,722 $25,561
Cost of goods sold............................. 40,916 43,461 45,862 17,150 19,973
------- ------- ------- ------- -------
Gross margin................................... 8,801 11,392 13,430 4,572 5,588
Selling, general and administrative expenses... 6,601 5,516 5,815 1,888 2,472
------- ------- ------- ------- -------
Operating income............................... 2,200 5,876 7,615 2,684 3,116
OTHER FINANCIAL DATA:
EBITDA(a)...................................... $ 2,650 $ 6,339 $ 8,112 $ 2,877 $ 3,316
Gross profit margin............................ 17.7% 20.8% 22.7% 21.0% 21.9%
Depreciation................................... $ 450 $ 463 $ 497 $ 193 $ 200
Capital expenditures........................... 1,758 571 1,419 262 222
Ratio of earnings to fixed charges(b).......... 16.6x 138.9x 43.3x 39.5x 57.8x
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets................................... $23,600 $22,144 $25,991 $22,166 $24,076
Total debt..................................... 2,441 1,472 1,422 -- --
Stockholders' equity........................... 8,335 10,887 14,665 13,207 16,918
</TABLE>
- ------------------------------------
(a) EBITDA is defined as operating income before depreciation and amortization.
While EBITDA is not intended to represent cash flow from operations as
defined by GAAP and should not be considered as an indicator of operating
performance or an alternative to cash flow (as measured by GAAP) as a
measure of liquidity, management believes it provides additional information
with respect to the ability of a company to meet its future debt service,
capital expenditures and working capital requirements. The measure of EBITDA
presented above may not be comparable to similarly titled measures of other
companies.
(b) For purposes of calculating the ratio of earnings to fixed charges, earnings
represent income before taxes and fixed charges. Fixed charges consist of
the total of (i) interest, whether expensed or capitalized; and (ii)
amortization of debt expense and discount or premium relating to any
indebtedness, whether expensed or capitalized.
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<PAGE> 22
RISK FACTORS
HOLDERS OF EXISTING NOTES SHOULD CONSIDER CAREFULLY ALL OF THE INFORMATION
SET FORTH IN THIS PROSPECTUS AND, IN PARTICULAR, SHOULD EVALUATE THE FOLLOWING
RISKS BEFORE TENDERING THEIR EXISTING NOTES IN THE EXCHANGE OFFER, ALTHOUGH THE
RISK FACTORS SET FORTH BELOW ARE GENERALLY APPLICABLE TO THE EXISTING NOTES AS
WELL AS THE EXCHANGE NOTES.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Existing Notes who do not exchange them for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to certain
restrictions on transfer of such Existing Notes. In general, the Existing Notes
may not be reoffered or resold by their holders except pursuant to an effective
registration statement under the Securities Act or pursuant to an applicable
exemption from such registration, and the Existing Notes are legended to so
restrict their transfer. Based on interpretations by the staff of the SEC, as
set forth in no-action letters issued to third parties, the Company believes
that each holder (other than any holder who is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) who duly exchanges
Existing Notes for Exchange Notes in the Exchange Offer will receive Exchange
Notes that are freely transferable under the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
that such holder is not engaged in, and does not intend to engage in, a
distribution of such Exchange Notes and has no arrangement or understanding with
any person to participate in the distribution of such Exchange Notes. By
tendering Existing Notes and executing the Letter of Transmittal, the holder
thereof shall represent and agree that (i) it is neither an affiliate of the
Company nor a broker-dealer tendering Existing Notes acquired directly from the
Company for its own account, (ii) it acquired the Exchange Notes in the ordinary
course of its business and (iii) it is not engaged in, and does not intend to
engage in, a distribution of the Exchange Notes and it has no arrangement or
understanding to participate in a distribution of Exchange Notes. The SEC,
however, has not considered the Exchange Offer in the context of a no-action
letter, and therefore there can be no assurance that the staff of the SEC would
make a similar determination with respect to the Exchange Offer as in such other
circumstances. Holders of Existing Notes who participate in such Exchange Offer
should be aware, however, that, except in the case of certain broker-dealers as
described below, if they accept Exchange Notes in the Exchange Offer for the
purpose of engaging in secondary resales, such Exchange Notes may not be
publicly reoffered or resold without complying with the registration and
prospectus delivery requirements of the Securities Act. The same registration
and prospectus delivery requirements would apply to any holder who is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act. Each broker-dealer that receives Exchange Notes for its own account in
exchange for Existing Notes, where such Existing 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 "The Exchange Offer" and "Plan of
Distribution."
The Existing Notes may be sold without registration under the Securities
Act pursuant to the restrictions set forth in Rule 144A or Regulation S.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE THE NOTES
As a result of the Private Offering, the Company has substantial
indebtedness and significant debt service obligations. At June 30, 1998 the
Company had total long-term indebtedness, including current maturities, of
$125.0 million, as well as undrawn borrowing availability under the New Credit
Facility of $45.0 million. The Indenture permits the Company to incur additional
indebtedness, including secured indebtedness, subject to certain limitations.
See "The Exchange Offer -- Use of Proceeds," "Capitalization," "Description of
Certain Indebtedness," and "Description of the Notes -- Certain Covenants."
The Company's high degree of leverage could have important consequences to
holders of the Notes, including, without limitation: (i) a substantial portion
of the Company's cash flow from operations will be committed to the payment of
principal and interest on its indebtedness, thereby reducing the funds available
to the Company for its operations and other purposes; (ii) the Company's ability
to obtain additional financing in the future for working capital expenditures,
acquisitions or other purposes may be limited; (iii) a substantial
15
<PAGE> 23
decrease in net operating cash flows or an increase in expenses could make it
difficult for the Company to meet its debt service requirements and force it to
modify its operations; (iv) the Company may be more highly leveraged than its
competitors, which may place it at a competitive disadvantage; (v) certain
indebtedness under the New Credit Facility is at variable rates of interest,
which will cause the Company to be vulnerable to increases in interest rates;
and (vi) all of the indebtedness outstanding under the New Credit Facility is
secured by substantially all the assets of the Company and becomes due prior to
the time the principal on the Notes becomes due. See "Description of Certain
Indebtedness" and "Description of the Notes."
The Company's ability to make scheduled payments of the principal of, or to
pay interest on, or to refinance its indebtedness (including the Notes) will
depend on the Company's future performance, which to a certain extent will be
subject to economic, financial, competitive and other factors beyond its
control. Based upon the Company's current operations and anticipated growth,
management believes that future cash flow from operations, together with the
Company's available borrowings under the New Credit Facility, will be adequate
to meet its anticipated requirements for capital expenditures, interest payments
and scheduled principal payments. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Aqua-Chem -- Liquidity and
Capital Resources." There can be no assurance, however, that the Company's
business will continue to generate sufficient cash flow from operations in the
future to service its indebtedness and make necessary capital expenditures. If
it is unable to do so, the Company may be required to refinance all or a portion
of its indebtedness, including the Notes, to sell assets or to obtain additional
financing. There can be no assurance that any such refinancing would be
possible, that any assets could be sold (or, if sold, of the timing of such
sales and the amount of proceeds realized therefrom) or that additional
financing could be obtained.
IMPLEMENTATION OF BUSINESS STRATEGY
The Company intends to continue the implementation of its business
strategy, elements of which are to improve manufacturing efficiency and make
strategic acquisitions. The Company's ability to successfully implement its
business strategy is subject to a number of factors, many of which are beyond
the control of the Company. There can be no assurance that the Company will be
able to continue to successfully implement its business strategy following the
Offering and a failure to successfully implement its business strategy may have
a material adverse effect on the Company's results of operations. See
"Summary -- Business Strategy."
Realizing the full benefits of any acquisition may require the integration
of one or more of the acquired company's administrative, finance, manufacturing,
engineering, sales, or marketing functions with those of the Company and the
implementation of appropriate operations, financial and management systems and
controls in order to capture anticipated efficiencies, manufacturing
improvements and cost reductions. These efforts would require substantial
attention from the Company's management team. The diversion of management
attention, as well as any other difficulties which may be encountered in such a
transition and integration process, could have a material adverse impact on the
revenue and operating results of the Company. There can be no assurance that the
Company will be able to realize the potential benefits of any such acquisition.
If any such acquisition is completed, the failure to achieve a substantial
portion of the anticipated benefits could have a material adverse impact on the
Company.
CYCLICAL NATURE OF INDUSTRY; POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
The Company's business is cyclical in nature and sensitive to changes in
general economic conditions, including the rate of expansion and new
construction by its customers, and the associated demand for new boilers. The
Company's customers are in turn influenced by a variety of factors beyond the
Company's control, including interest rates, currency exchange rates, and
general economic conditions throughout the world. The Company believes that this
cyclicality is mitigated by increased demand for replacement boiler units and
parts during periods of economic difficulty, when customers often elect to
repair existing boilers rather than purchase new ones or forego new construction
but nevertheless choose to renovate existing buildings which may involve boiler
replacement. Notwithstanding the foregoing, the Company has experienced, and in
the future could experience, reduced net sales and margins, which may affect the
Company's ability to satisfy its debt service obligations, including payments on
the Notes, on a timely basis. The Company's boiler business is also seasonal in
nature and net sales and operating results may fluctuate significantly from
quarter to quarter.
16
<PAGE> 24
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations of Aqua-Chem" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations of NDC."
Given the magnitude of certain of the Company's water purification and
treatment projects, one or a limited number of projects may account for a
substantial portion of net sales in any particular period. Although the Company
recognizes net sales on a percentage-of-completion basis for new projects, the
timing of one or a small number of contracts in any particular period may
nevertheless affect operating results. Although a majority of the projects
undertaken by the Company on a percentage of completion basis have been
profitable historically, the profitability of these projects can vary from
original estimates. In addition, net sales and gross margin may fluctuate
depending upon the size and the requirements of the particular contracts entered
into in that period. As a result of these and other factors, the Company may
experience significant fluctuations in net sales and operating results in future
periods. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Aqua-Chem."
REALIZATION OF BENEFITS OF THE ACQUISITION
On June 23, 1998, Aqua-Chem completed the purchase of substantially all of
the assets of NDC. Management has estimated that cost savings and other benefits
can be achieved as a result of the Acquisition. The estimates of potential cost
savings and other benefits are forward-looking statements that are inherently
uncertain, and actual results could differ materially from those anticipated.
All of these forward-looking statements are based on estimates and assumptions
made by management, which although believed to be reasonable, are inherently
uncertain and difficult to predict; therefore, undue reliance should not be
placed upon such estimates.
Full realization of the potential benefits and savings of the Acquisition
will be dependent upon a variety of factors, including (i) rationalization of
manufacturing facilities; (ii) retention of a substantial portion of NDC's
sales; and (iii) successful application of Aqua-Chem's modern manufacturing
practices to increase efficiency in the production of NDC products. Any material
delays or unexpected costs incurred in connection with the integration of
Aqua-Chem and NDC could have a material adverse effect on the Company and its
results of operations, liquidity and financial condition.
The Company has no previous experience acquiring or integrating a business
as large as NDC, and the successful integration of Aqua-Chem and NDC will
require substantial attention from the Company's management team. The diversion
of management's attention, as well as any other difficulties which may be
encountered in the transition and integration process, could have a material
adverse effect on the revenue and operating results of the Company. There can be
no assurance that the Company will be able to integrate the operations of
Aqua-Chem and NDC successfully or the extent to which the Company will be able
to realize the potential benefits of the Acquisition or the timing of any such
benefits. Failure to achieve a substantial portion of these benefits within the
time frame expected by the Company could have a material adverse effect on the
Company, including its ability to make payments on the Notes. See "Unaudited Pro
Forma Financial Data" and "The Acquisition."
RESTRICTIVE DEBT COVENANTS
The terms of the New Credit Facility and the Indenture contain numerous
covenants that limit the discretion of management with respect to certain
business matters and place significant restrictions on, among other things, the
ability of the Company to incur additional indebtedness, to create liens or
other encumbrances, to make certain payments or investments, loans and
guarantees and to sell or otherwise dispose of assets and merge or consolidate
with another entity. See "Description of Certain Indebtedness" and "Description
of the Notes -- Certain Covenants." The New Credit Facility also contains a
number of financial covenants that require the Company to maintain certain
financial ratios (including a fixed charge coverage ratio and a funded debt to
EBITDA ratio) and tests (including maintenance of the Company's net worth at a
specified level). A breach of any of these covenants or the inability of the
Company to comply with the required financial ratios could result in an event of
default under the New Credit Facility or under the Indenture. In the event of
any such default, depending on the actions taken by the lenders under the New
Credit Facility, the Company could be prohibited from making any payments of
principal or interest on the
17
<PAGE> 25
Notes. In addition, the lenders under the New Credit Facility could elect to
declare all amounts borrowed thereunder, together with accrued interest, to be
due and payable. If the Company were unable to repay such borrowings, such
lenders could proceed against their collateral. If the indebtedness under the
New Credit Facility were to be accelerated, there can be no assurance that the
assets of the Company would be sufficient to repay such indebtedness and the
Notes in full. See "-- Ranking of the Notes," "Description of Certain
Indebtedness" and "Description of the Notes -- Ranking."
RANKING OF THE NOTES
The indebtedness evidenced by the Existing Notes is, and by the Exchange
Notes will be, general unsecured senior subordinated obligations of the Company,
subordinated in right of payment to all Senior Indebtedness of the Company,
including all indebtedness under the New Credit Facility. As of June 30, 1998,
the Company had no outstanding Senior Indebtedness; however, the Company had
approximately $45.0 million of borrowing availability under the New Credit
Facility, all of which, when borrowed, will be Senior Indebtedness, and will be
secured by substantially all the assets of the Company. The Indenture and the
New Credit Facility permit the Company to incur additional Senior Indebtedness
in the future, subject to certain conditions. Moreover, the Indenture does not
limit the Company's ability to secure Senior Indebtedness.
In the event of the bankruptcy, administration, insolvency, liquidation,
reorganization, dissolution or other winding-up of the Company or upon a default
in payment with respect to, or the acceleration of, any Senior Indebtedness, the
lenders under the New Credit Facility and any other creditors who are holders of
Senior Indebtedness must be paid in full before any holder of Notes may be paid.
Accordingly, there may be insufficient assets remaining after such payments to
pay principal of or interest on the Notes. In addition, the subordination
provisions of the Indenture provide that no cash payments may be made with
respect to the Notes during the continuance of a payment default under certain
Senior Indebtedness of the Company. Furthermore, if certain nonpayment defaults
exist with respect to certain Senior Indebtedness, the holders of such Senior
Indebtedness would be able to prevent payments on the Notes for certain periods
of time. See "Description of the Notes -- Ranking."
INTERNATIONAL EXPANSION
The Company currently sells its products internationally primarily through
export from the United States and through foreign manufacturing operations in
Canada and Mexico. During the twelve months ended December 31, 1997, $50
million, or approximately 26%, of Aqua-Chem's net sales were generated outside
the United States. The Company typically transacts international sales and
exports in U.S. dollars which insulates the Company from certain risks
associated with currency fluctuations.
The Company's strategy to increase export sales will depend on numerous
factors which are beyond its control, including its ability to develop or
acquire additional manufacturing and distribution capabilities outside the
United States. In addition, international expansion may increase the Company's
exposure to certain risks inherent in doing business outside the United States,
such as currency exchange rate fluctuations, restrictions on the repatriation of
profits or dividends, export duties and quotas, domestic and foreign customs and
tariffs, compliance with foreign codes and standards, labor unrest, political
risks and potentially adverse tax consequences. There can be no assurance that
these factors would not have a material adverse effect on the Company or its
international operations or sales. See "Summary -- Business Strategy -- Increase
International Penetration."
CONTROL BY PRINCIPAL SHAREHOLDER
All of the Common Stock and Series C Preferred Stock of the Company is
owned by Rush Creek, of which 51% of the Common Stock and 63% of the Series C
Preferred Stock is allocated to the capital account of Whitney Equity Partners,
L.P. (a fund managed by J. H. Whitney & Co.). See "Capital Stock and Principal
Stockholders" and "Management." Through Rush Creek, Whitney Equity Partners,
L.P. will have the ability to control the management and affairs of the Company
and there may be circumstances under which its interests as a stockholder may
differ from the interests of holders of the Notes.
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<PAGE> 26
COMPETITION
The Company operates in a highly competitive environment. It competes
directly and indirectly with other manufacturers of industrial and commercial
boilers and water desalination and process evaporation systems, as well as with
manufacturers of parts and components for all of the foregoing. Some of the
Company's competitors are larger, have greater financial resources, and may be
less leveraged than the Company. There can be no assurance that the Company will
be able to compete successfully with its competitors or that competitive
pressures faced by the Company will not materially and adversely affect its
business, operating results or financial condition. See "Business of the
Company -- Boiler Market," "-- Cleaver-Brooks Division -- Sales, Marketing and
Customers," "-- National Dynamics Division -- Sales, Marketing and Customers,"
and "-- Water Technologies Division -- Sales, Marketing and Customers."
PRICES OF RAW MATERIALS AND COMPONENT PARTS
The principal raw materials in most of the Company's products are steel,
standard alloys and refractory materials, as well as controls, pumps, motors and
various other component parts. The prices for such raw materials are influenced
by numerous factors beyond the control of the Company, including general
economic conditions, competition, labor costs, import duties and other trade
restrictions and currency exchange rates. Changing prices for such raw materials
may cause the Company's results of operations to fluctuate significantly.
Although the Company has never experienced a material shortage of raw materials,
a large, rapid increase in the price of raw materials could have a material
adverse effect on the Company's operating margins unless and until the increased
cost can be passed along to customers. See "Business of the Company --
Cleaver-Brooks Division -- Raw Materials and Suppliers," "-- National Dynamics
Division -- Raw Materials and Suppliers," and "-- Water Technologies
Division -- Raw Materials and Suppliers."
DEPENDENCE ON KEY PERSONNEL
The Company's success will depend largely on the efforts and abilities of
its executive officers, in particular Mr. Miller, and certain other key
employees, and there can be no assurance that the Company will be able to retain
all such officers and employees. The failure of such key personnel to remain
active in the Company's management could have a material adverse effect on the
Company's operations. See "Management."
ENVIRONMENTAL AND RELATED MATTERS
The Company's operations and properties are subject to foreign, federal,
state and local laws and regulations relating to the use, storage, handling,
generation, transportation, treatment, emission, discharge, disposal and
remediation of, and exposure to, hazardous and non-hazardous substances,
materials and wastes. The Company's operations also are subject to laws and
regulations governing employee health and safety. The nature of the Company's
current and former operations exposes it to the risk of liabilities or claims
with respect to environmental matters, including on-site and off-site releases
and emissions of hazardous substances, materials and wastes. There can be no
assurance that the Company will not incur material costs in connection with such
liabilities or claims. In addition, changes in existing laws or regulations, or
the discovery of additional environmental liabilities associated with the
Company's current or former operations, could have a material adverse effect on
the Company's business, results of operations, or financial condition. See
"Business of the Company -- Environmental and Related Matters."
PRODUCT LIABILITY LITIGATION
The Company has been named as one of a number of defendants in
approximately 5,900 lawsuits (of which approximately 3,600 are still pending)
alleging personal injury arising from exposure to asbestos-containing materials
allegedly contained in certain boilers manufactured by the Company or its
subsidiaries in the past. Although the Company has successfully resolved the
vast majority of closed cases without payment, is vigorously defending the open
suits, believes that substantially all of the open cases are without merit,
believes it has adequate insurance to pay all costs and liabilities in
connection with such claims, and believes that the ongoing costs and liabilities
associated with current and future asbestos-related litigation will not have
19
<PAGE> 27
a material adverse effect on the Company's business, results of operation, or
financial condition, there can be no assurances to this effect. See "Business of
the Company -- Legal Proceedings."
LABOR RELATIONS
As of June 30, 1998, the Company had approximately 1,445 active employees,
of whom approximately 30% were represented by various unions. There can be no
assurance that additional employees not currently represented by unions will not
elect to be so represented in the future. The Company's agreements with its
unions expire on January 1, 1999 at its facilities in Mexico; on June 5, 2000 in
Stratford, Ontario; on January 19, 2001 in Monroe, Wisconsin and on November 1,
1999 in Lincoln, Nebraska. There can be no assurance that such agreements will
be renewed when they expire or that the Company will not experience strikes,
work stoppages or other situations. In the last five years, Aqua-Chem has not
experienced any strikes or other work stoppages; however, in 1994, NDC employees
represented by the International Boilermakers Union went on strike for six weeks
in connection with a dispute over employee contributions for health benefits.
The Company has reached an agreement with the Union representing production
workers at its Greenville, Mississippi facility regarding the transfer of
production from, and the closing of, that facility. Although management believes
that its relations with its employees are satisfactory, a dispute between the
Company and its employees could have a material adverse effect on the Company.
See "Business of the Company -- Properties and Employees."
FRAUDULENT CONVEYANCE CONSIDERATIONS
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or void the Notes (and
payments of principal and/or interest in respect thereof could be voided and
recovered) in favor of other existing or future creditors of the Company.
Proceeds of the Private Offering were used, in part, to repay certain
senior and subordinated debt of the Company. If a court in a lawsuit brought by
an unpaid creditor or representative of creditors, such as a trustee in
bankruptcy or the Company, as a debtor-in-possession, were to find under
relevant federal or state fraudulent conveyance statutes that the Company did
not receive fair consideration or reasonably equivalent value for issuing the
Notes, as the case may be, and that, at the time of such incurrence, the Company
(i) was insolvent; (ii) was rendered insolvent by reason of such incurrence or
grant; (iii) was engaged or about to engage in a business or transaction for
which the assets remaining with the Company, as the case may be, constituted
unreasonably small capital; or (iv) intended to incur, or believed or reasonably
should have believed that it would incur, debts beyond its ability to pay such
debts as they become due, then such court, subject to applicable statutes of
limitation, could void the Notes, subordinate the Notes to other indebtedness of
the Company, or take other action detrimental to the holders of the Notes.
The measure of insolvency for these purposes will depend upon the governing
law of the relevant jurisdiction. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than the fair value of all of that company's property or if the present
fair salable value of that company's assets is less than the amount that will be
required to pay its probable liability on its existing debts as they become
absolute and matured. Moreover, regardless of solvency, a court could void an
incurrence of indebtedness, 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 the indebtedness, including the Notes, to
the claims of all existing and future creditors on similar grounds.
There can be no assurance as to what standard a court would apply in order
to determine whether the Company was "insolvent" upon consummation of the sale
of the Notes or that, regardless of the method of valuation, a court would not
determine that the Company was insolvent as a result of the foregoing.
Based upon financial and other information currently available to it,
management of the Company believes that the Notes are being incurred for proper
purposes and in good faith. The Company believes that it (i) is solvent and will
continue to be solvent after issuing the Notes, (ii) will have sufficient
capital for carrying on the business it intends to conduct after such issuance,
and (iii) will be able to pay its debts as they become due. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Aqua-Chem -- Liquidity and Capital Resources" and "Management's Discussion and
Analysis of
20
<PAGE> 28
Financial Condition and Results of Operations of NDC." There can be no
assurance, however, that a court would concur with such beliefs and positions.
PURCHASE OF NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, the Company is required, subject to certain
conditions, to offer to purchase all outstanding Notes at 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase. The source of funds for any such purchase would be the Company's
available cash or cash generated from other sources, including borrowings, sales
of assets, sales of equity or funds provided by a new controlling person. A
Change of Control likely would constitute an event of default under the New
Credit Facility that would permit the lenders to accelerate the debt under the
New Credit Facility. In such event, the Company likely would attempt to
refinance the indebtedness outstanding under the New Credit Facility and the
Notes. There can be no assurance that sufficient funds will be available at the
time of any Change of Control to make any required purchases of Notes tendered
and to repay indebtedness under the New Credit Facility. See "Description of
Certain Indebtedness" and "Description of the Notes -- Change of Control."
ABSENCE OF A PUBLIC MARKET FOR THE NOTES; VOLATILITY; RESTRICTIONS ON RESALE
The Exchange Notes are being offered to the holders of Existing Notes. The
Existing Notes were originally issued on the Issue Date to the Initial
Purchasers pursuant to Section 4(2) of the Securities Act. The Company has been
advised that the Existing Notes subsequently have been resold to (i) qualified
institutional buyers as defined in Rule 144A ("Qualified Institutional Buyers"
or "QIBs") in reliance on, and subject to the restrictions imposed pursuant to,
Rule 144A, and (ii) certain non-U.S. persons outside the United States of
America in accordance with Regulation S. The Existing Notes beneficially owned
by Qualified Institutional Buyers are eligible for trading in the Private
Offering, Resale and Trading through Automated Linkages ("PORTAL") Market, which
is the National Association of Securities Dealers' screen-based automated market
for trading of securities eligible for resale under Rule 144A.
To the extent that Existing Notes are tendered and accepted in the Exchange
Offer, the trading market for the remaining untendered or tendered but not
accepted Existing Notes could be adversely affected. The Exchange Notes will
constitute a new issue of securities, have no established trading market and may
not be widely distributed. Although the Initial Purchasers have informed the
Company that they currently intend to make a market in the Exchange Notes, they
are not obligated to do so and may discontinue market making at any time without
notice. The Company does not intend to list the Notes on any national securities
exchange or to seek the admission thereof to trading in The Nasdaq Stock Market.
Accordingly, there can be no assurance as to the development or liquidity of any
market for either Exchange Notes or the Existing Notes. If a market does
develop, the Notes may trade at a discount from their principal amount, and the
price of the Notes may fluctuate depending on many factors including, but not
limited to, prevailing interest rates, the Company's operating results and the
market for similar securities, and liquidity may therefore be limited. If a
market for the Notes does not develop, purchasers may be unable to resell such
securities for an extended period of time, if at all.
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<PAGE> 29
THE EXCHANGE OFFER
GENERAL
The Existing Notes were originally sold by the Company on June 23, 1998 to
the Initial Purchasers pursuant to a purchase agreement dated June 18, 1998 (the
"Purchase Agreement"). The Initial Purchasers subsequently resold the Existing
Notes to QIBs in reliance on Rule 144A and to non-U.S. persons in accordance
with Regulation S.
The Company hereby offers, upon the terms and conditions set forth herein
and in the related Letter of Transmittal, to exchange Exchange Notes for a like
principal amount of outstanding Existing Notes. An aggregate of $125 million
principal amount of Existing Notes are outstanding. The Exchange Offer is not
conditioned upon any minimum principal amount of Existing Notes being tendered.
REGISTRATION AGREEMENT
As a condition to the Purchase Agreement, the Company agreed pursuant to
the Registration Rights Agreement with the Initial Purchasers dated as of June
18, 1998 (the "Registration Agreement"), for the benefit of the holders of the
Existing Notes, that the Company will, at its cost, (i) within 45 days after the
date of original issue of the Existing Notes, file a registration statement (the
"Exchange Offer Registration Statement") with the SEC with respect to a
registered offer to exchange the Existing Notes for the Exchange Notes that will
be issued under the Indenture in the same aggregate principal amount and having
terms substantially identical in all material respects to the Existing Notes
(except that the Exchange Notes will not contain terms with respect to transfer
restrictions) and (ii) use its best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act within
150 days after the date of original issue of the Existing Notes. Upon the
effectiveness of the Exchange Offer Registration Statement, the Company will
offer the Exchange Notes in exchange for surrender of the Existing Notes. 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 Existing Notes. For each Existing Note surrendered
to the Company pursuant to the Exchange Offer, the holder of such Existing Note
will receive an Exchange Note having a principal amount equal to that of the
surrendered Existing Note. Interest on each Exchange Note will accrue from the
last interest payment date on which interest was paid on the Existing Note
surrendered in exchange thereof or, if no interest has been paid on such
Existing Note, from the date of its original issue.
If the Company effects the Exchange Offer, it will be entitled to close the
Exchange Offer 30 days after the commencement thereof provided that it has
accepted all Existing Notes theretofore validly tendered in accordance with the
terms of the Exchange Offer.
In the event that applicable interpretations of the staff of the SEC do not
permit the Company to effect a registered Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 180 days of the date of the
Registration Agreement, or if the Initial Purchasers so request with respect to
Existing Notes not eligible to be exchanged for Exchange Notes in the Exchange
Offer, or if any holder of Existing Notes is not eligible to participate in the
Exchange Offer or does not receive freely tradeable Exchange Notes in the
Exchange Offer, the Company will, at its cost, (a) as promptly as practicable,
file a shelf registration statement (a "Shelf Registration Statement") covering
resales of the Existing Notes or the Exchange Notes, as the case may be, (b) use
its best efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act and (c) keep the Shelf Registration Statement
effective until the time when the Existing Notes covered by the Shelf
Registration Statement can be sold pursuant to Rule 144 without any limitations
under clauses (c), (e), (f) and (h) of Rule 144. 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
Existing Notes or the Exchange Notes, as the case may be. A holder selling such
Existing Notes or Exchange Notes pursuant to the Shelf Registration Statement
generally would be required to be named as a selling security holder 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
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<PAGE> 30
with such sales and will be bound by the provisions of the Registration
Agreement which are applicable to such holder (including certain indemnification
obligations).
Pursuant to the Registration Agreement, if (i) by August 7, 1998, neither
the Exchange Offer Registration Statement nor the Shelf Registration Statement
has been filed with the SEC; (ii) by December 21, 1998, the Exchange Offer is
not consummated and, if applicable, the Shelf Registration Statement is not
declared effective; or (iii) after either the Exchange Offer Registration
Statement or the Shelf Registration Statement is declared effective, such
Registration Statement thereafter ceases to be effective or usable (subject to
certain exceptions) in connection with resales of Existing Notes or Exchange
Notes in accordance with and during the periods specified in the Registration
Agreement (each such event referred to in clauses (i) through (iii) a
"Registration Default"), additional interest will accrue on the applicable
Existing Notes and the Exchange Notes at the rate of 0.50% 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. Such
interest is payable in addition to any other interest payable from time to time
with respect to the Existing Notes and the Exchange Notes.
The Company's purpose in making the Exchange Offer is to comply with the
Registration Agreement and to avoid the payment of additional interest which the
Company would incur if the Exchange Offer were not duly and timely consummated.
The full terms of the Company's obligations with respect to the Exchange Offer
are set forth in the Registration Agreement which has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part. The summary
herein of certain provisions of the Registration 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 Agreement, a copy of which is available
from the Company upon request.
CERTAIN EFFECTS OF THE EXCHANGE OFFER
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, the Company believes that the
Exchange Offer will provide holders of Existing Notes with Exchange Notes that
will generally be freely transferable by holders thereof (other than any holder
who is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), who may offer for resale, resell or otherwise transfer such
Exchange Notes without complying with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of each such holder's business and such holders are not
engaged in, and do not intend to engage in, a distribution of such Exchange
Notes and have no arrangement or understanding with any person to participate in
a distribution of such Exchange Notes, provided, further 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 SEC 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
Existing Notes) with the prospectus contained in the Exchange Offer Registration
Statement. Each broker-dealer that receives Exchange Notes for its own account
in exchange for Existing Notes, where such Existing 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." Under the
Registration 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. The Company has
not sought, and does not intend to seek, a no-action letter from the Commission
with respect to the effects of the Exchange Offer.
The Existing Notes that are not exchanged for Exchange Notes pursuant to
the Exchange Offer will remain restricted securities under the Securities Act.
Accordingly, such Existing Notes may be resold only (i) to the Company, (ii)
pursuant to a registration statement that has been declared effective under the
Securities Act, (iii) for so long as the Existing Notes are eligible for resale
pursuant to Rule 144A, to a person reasonably believed to be a QIB that
purchases for its own account or for the account of a QIB to whom notice is
given that the transfer is being made in reliance on Rule 144A, (iv) pursuant to
offers and sales to non-U.S. persons that occur outside the United States within
the meaning of Regulation S, (v) to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
23
<PAGE> 31
Act and referred to in this Prospectus as an "Institutional Accredited
Investor") that is acquiring the security for its own account or for the account
of such an Institutional Accredited Investor for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act or (vi) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject in
each of the foregoing cases (a) to any requirement of law that the disposition
of its property or the property of such investor account or accounts be at all
times within its or their control and (b) to compliance with any applicable
state or other securities laws. After the Exchange Offer is completed, holders
of Existing Notes will not have certain registration rights under the
Registration Agreement. See "-- Termination of Certain Rights."
Because the Exchange Offer is for any and all Existing Notes, the number of
Existing Notes tendered and exchanged in the Exchange Offer will reduce the
principal amount of Existing Notes outstanding. As a result, the liquidity of
any remaining Existing Notes may be substantially reduced. The Existing Notes
beneficially owned by QIBs are currently eligible for sale pursuant to Rule 144A
through PORTAL. Because the Company anticipates that most holders of Existing
Notes will elect to exchange such Existing Notes for Exchange Notes due to the
absence of restrictions on the resale of Exchange Notes under the Securities
Act, the Company anticipates that the liquidity of the market for any Existing
Notes remaining after the consummation of the Exchange Offer may be
substantially limited.
The exchange of an Existing Note for an Exchange Note should not constitute
a taxable exchange of the Existing Note if the interest rate on the Exchange
Note is equal to the interest rate on the Existing Note. Although there is no
definitive guidance on the issue, even if the interest rate on the Exchange Note
is not equal to the interest rate on the Existing Note because Additional
Interest is payable on the Existing Note but not on the Exchange Note, the
exchange should not constitute a taxable exchange of the Existing Note. See
"Certain United States Federal Income Tax Considerations."
EXPIRATION AND EXTENSION
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, unless extended by the Company. The Exchange Offer may be extended by
oral or written notice from the Company to the Exchange Agent at any time or
from time to time, on or prior to the date then fixed for the expiration of the
Exchange Offer. The term "Expiration Date" means 5:00 p.m., New York City time,
on , 1998, unless the Company, in its sole discretion, notifies the
Exchange Agent that the period of the Exchange Offer has been extended, in which
case the term "Expiration Date" means the latest time and date on which the
Exchange Offer, as so extended, will expire. Notwithstanding any extension of
the Exchange Offer, if the Exchange Offer is not consummated by December 21,
1998, additional interest will accrue. Public announcement of any extension of
the Exchange Offer will be timely made by the Company, but, unless otherwise
required by law or regulation, the Company will not have any obligation to
communicate such public announcement other than by making a release to the Dow
Jones News Service.
ACCRUED INTEREST
Holders of Existing Notes that are accepted for exchange will not receive
any accrued interest thereon. However, each Exchange Note will bear interest
from the most recent date on which interest has been paid on the corresponding
Existing Note, or, if no interest has been paid, from June 23, 1998.
CONDITIONS
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to cause the
issuance of Exchange Notes in respect of any validly tendered Existing Notes not
accepted and, prior to the acceptance of tendered Existing Notes, may terminate
the Exchange Offer (by oral or written notice to the Exchange Agent and by
timely public announcement communicated, unless otherwise required by applicable
law or regulation, by making a release to the Dow Jones News Service) or,
subject to compliance with the applicable rules of the Commission, delay the
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<PAGE> 32
acceptance of the tendered Existing Notes, if any material change occurs which
is likely to affect the Exchange Offer, including, but not limited to, the
following:
(i) there shall occur (a) any general suspension of or general
limitation on prices for, or trading in, securities on any national
securities exchange or in the over-the-counter market, (b) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company to complete the transactions contemplated by the
Exchange Offer, (c) a declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States or any limitation by
any governmental agency or authority which adversely affects the extension
of credit or (d) a commencement of a war, armed hostilities or other
similar international calamity directly or indirectly involving the United
States, or, in the case of any of the foregoing existing at the time of the
commencement of the Exchange Offer, a material acceleration or worsening
thereof;
(ii) any statute, rule or regulation shall have been proposed or
enacted, or any action shall have been taken or proposed to be taken by any
governmental authority which, in the sole judgment of the Company, would or
might prohibit, restrict or delay completion of the Exchange Offer;
(iii) there shall be instituted or threatened any action or proceeding
before any court or governmental agency challenging the Exchange Offer or
otherwise directly or indirectly relating to the Exchange Offer;
(iv) there shall occur any development in any pending action or
proceeding which, in the sole judgment of the Company, would or might
prohibit, restrict or delay consummation of the Exchange Offer;
(v) there exists, in the sole judgment of the Company, any actual or
threatened legal impediment (including a default or prospective default
under an agreement, indenture or other instrument or obligation to which
the Company is a party or by which it is bound) to the completion of the
Exchange Offer; or
(vi) prior to the completion of the Exchange Offer, the Company
determines there has been a change in law or applicable interpretation
thereof by the staff of the Commission such that the Exchange Notes that
would be received by holders in the Exchange Offer in exchange for Existing
Notes would not be transferable, upon receipt, by each such holder (other
than a holder that is an affiliate of the Company, a holder who acquires
the Exchange Notes outside the ordinary course of such holder's business, a
holder who is engaged in or intends to engage in a distribution of such
Exchange Notes or a holder who has arrangements or understandings with any
person to participate in the Exchange Offer for the purpose of distributing
the Exchange Notes) without restriction under the Securities Act.
Subject to the obligations under the Registration Agreement to use its best
efforts to complete the Exchange Offer, the Company expressly reserves the
right, at any time prior to the acceptance of tendered Existing Notes, to
terminate the Exchange Offer and not accept for exchange any Existing Notes upon
the occurrence of any of the foregoing conditions. In addition, the Company may
amend the Exchange Offer at any time prior to the acceptance of tendered
Existing Notes if any of the conditions set forth above occur. Moreover,
regardless of whether any of the foregoing conditions has occurred, the Company
reserves the right, in its reasonable discretion, to amend the Exchange Offer in
any manner prior to the acceptance of tendered Existing Notes, although it has
no current intention to do so.
The Company reserves the right to waive any condition or otherwise amend
the Exchange Offer prior to the acceptance of tendered Existing Notes. If any
amendment by the Company of the Exchange Offer or waiver by the Company of any
condition thereto constitutes a material change in the information previously
disclosed to the holders of Existing Notes, the Company will, in accordance with
the applicable rules of the Commission, promptly disseminate disclosure of such
change in a manner reasonably calculated to inform such holders of such change.
If it is necessary to permit an adequate dissemination of information regarding
such material change, the Company will extend the Exchange Offer to permit an
adequate time for holders of Existing Notes to consider the additional
information.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company, in whole
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<PAGE> 33
or in part, at any time and from time to time in its sole discretion. Any
determination made by the Company concerning an event, development or
circumstance described or referred to above will be final and binding on all
parties to the Exchange Offer.
In addition, the Company will not accept for exchange any Existing Notes
tendered, and no Exchange Notes will be issued in exchange for any such Existing
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended.
If the event referred to in clause (vi), above, shall occur, the Company
shall be under no continuing obligation under the Registration Agreement to
complete the Exchange Offer, but in lieu thereof will be obligated to file and
use its best efforts to secure and maintain the effectiveness under the
Securities Act of a "shelf" registration statement providing for the resale of
Existing Notes.
HOW TO TENDER
A holder of Existing Notes may tender Existing Notes by (i) properly
completing and signing the Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to the Letter of Transmittal shall be deemed to
include a facsimile thereof), having their signatures guaranteed if required,
and delivering the same, together with the Existing Notes being tendered (or a
confirmation of an appropriate book-entry transfer), to the Exchange Agent on or
prior to the Expiration Date, or (ii) requesting a broker, dealer, bank, trust
company or other nominee to effect the transaction for such holder prior to the
Expiration Date.
Exchange Notes will not be issued in the name of a person other than that
of a registered holder of the Existing Notes appearing on the Note register.
The Exchange Agent will establish an account with respect to the Existing
Notes at The Depository Trust Company ("DTC" or the "Depository") for purposes
of the Exchange Offer promptly after the date of this Prospectus, and any
financial institution which is a participant in DTC may make book-entry delivery
of the Existing Notes by causing DTC to transfer such Existing Notes into the
Exchange Agent's account in accordance with DTC's procedure for such transfer.
Although delivery of Existing Notes may be effected through book-entry transfer
into the Exchange Agent's account at DTC, the Letter of Transmittal, with any
required signature guarantees and any other required documents, must in any case
be transmitted to and received by the Exchange Agent on or prior to the
Expiration Date at the address set forth below under "-- Exchange Agent," or the
guaranteed delivery procedure described below must be complied with. Delivery of
documents to DTC does not constitute delivery to the Exchange Agent. See
"-- Exchanging Book-Entry Notes."
THE METHOD OF DELIVERY OF EXISTING NOTES AND ALL OTHER DOCUMENTS, INCLUDING
DELIVERY THROUGH DTC, IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE USED,
AND PROPER INSURANCE BE OBTAINED.
If a holder desires to tender Existing Notes pursuant to the Exchange Offer
and such holder's Existing Notes are not immediately available or time will not
permit all of the above documents to reach the Exchange Agent prior to the
Expiration Date, or such holder cannot complete the procedure of book-entry
transfer on a timely basis, such tender may be effected if the following
conditions are satisfied:
(i) such tenders are made by or through an eligible guarantor
institution which is a member of one of the following Signature Guarantee
Programs: The Securities Transfer Agents Medallion Program (STAMP); The New
York Stock Exchange's Medallion Signature Program (MSP) and The Stock
Exchanges Medallion Program (SEMP) (each, an "Eligible Institution");
(ii) a properly completed and duly executed notice of guaranteed
delivery ("Notice of Guaranteed Delivery"), in substantially the form
provided by the Company, is received by the Exchange Agent as provided
below on or prior to the Expiration Date; and
(iii) the Existing Notes, in proper form for transfer (or confirmation
of book-entry transfer of such Existing Notes into the Exchange Agent's
account at the Depository as described above), together with a properly
completed and duly executed Letter of Transmittal and all other documents
required by the
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<PAGE> 34
Letter of Transmittal, are received by the Exchange Agent within five New
York Stock Exchange, Inc. trading days after the date of execution of such
Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Exchange Agent and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery.
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 Existing
Notes (or a timely confirmation received of a book-entry transfer of Existing
Notes into the Exchange Agent's account at DTC) or a Notice of Guaranteed
Delivery from an Eligible Institution is received by the Exchange Agent.
Issuances of Exchange Notes in exchange for Existing 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 Existing Notes (or a timely confirmation received of a
book-entry transfer of Existing Notes into the Exchange Agent's account at DTC)
to the Exchange Agent or confirmation of the Book-Entry Transfer Facility
Automated Tender Offer Program ("ATOP") procedures set forth below. See
"-- Exchanging Book-Entry Notes."
Partial tenders of Existing Notes may be made only if (i) the principal
amount tendered is equal to $1,000 or an integral multiple thereof and (ii) the
remaining untendered portion of such Existing Notes is in a principal amount of
$250,000, or any integral multiple of $1,000 in excess of such amount. Holders
tendering less than the entire principal amount of any Existing Note they hold
in accordance with the foregoing restrictions must appropriately indicate such
fact on the Letter of Transmittal accompanying the tendered Existing Note.
With respect to tenders of Existing Notes, the Company reserves full
discretion to determine whether the documentation is complete and generally to
determine all questions as to tenders, including the date of receipt of a
tender, the propriety of execution of any document, and any other questions as
to the validity, form, eligibility or acceptability of any tender. The Company
reserves the right to reject any tender not in proper form or otherwise not
valid or the acceptance of exchange of which, in the opinion of the Company's
counsel, may be unlawful or to waive any irregularities or conditions, and the
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions on the Letter of Transmittal) will be final. The
Company shall not be obligated to give notice of any defects or irregularities
in tenders and shall not incur any liability for failure to give any such
notice. The Exchange Agent may, but shall not be obligated to, give notice of
any irregularities or defects in tenders, and shall not incur any liability for
any failure to give any such notice. Existing Notes shall not be deemed to have
been duly or validly tendered unless and until all defects and irregularities
have been cured or waived. All improperly tendered Existing Notes, as well as
Existing Notes in excess of the principal amount tendered for exchange, will be
returned (unless irregularities and defects are timely cured or waived), without
cost to the tendering holder (or, in the case of Existing Notes delivered by
book-entry transfer within DTC, will be credited to the account maintained
within DTC by the participant in DTC which delivered such shares), promptly
after the Expiration Date.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Existing Notes, such Existing Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders appear on the
Existing Notes.
If the Letter of Transmittal or any Existing Notes or powers of attorney
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, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
EXCHANGING BOOK-ENTRY NOTES
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in the DTC may utilize ATOP to tender Existing Notes.
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<PAGE> 35
Any DTC participant may make book-entry delivery of Existing Notes by
causing DTC to transfer such Existing Notes into the Exchange Agent's account in
accordance with DTC's ATOP procedures for transfer. However, the exchange for
the Existing Notes so tendered will only be made after timely confirmation (a
"Book-Entry Confirmation") of such book-entry transfer of Existing Notes into
the Exchange Agent's account, and timely receipt by the Exchange Agent of an
Agent's Message (as defined) and any other documents required by the Letter of
Transmittal. The term "Agent's Message" means a message, transmitted by the DTC
and received by the Exchange Agent and forming part of a Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
a participant tendering Existing Notes that 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.
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.
By tendering Existing Notes and executing the Letter of Transmittal, the
holder thereof shall represent and agree that (i) it is neither an affiliate of
the Company nor a broker-dealer tendering Existing Notes acquired directly from
the Company for its own account, (ii) it acquired the Exchange Notes in the
ordinary course of its business and (iii) it is not engaged in, and does not
intend to engage in, a distribution of the Exchange Notes and it has no
arrangement or understanding to participate in a distribution of Exchange Notes.
Holders of Existing Notes who participate in the Exchange Offer should be aware
that, except in the case of certain broker-dealers as described below, if they
accept the Exchange Offer for the purpose of participating in a distribution of
the Exchange Notes, they cannot rely on such interpretations by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act. A holder of Existing Notes (other than
certain specified holders) who wishes to exchange such Existing 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.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Existing Notes, where such Existing 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 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.
Existing Notes tendered in exchange for Exchange Notes (or a timely
confirmation of a book-entry transfer of such Existing Notes into the Exchange
Agent's account at DTC) must be received by the Exchange Agent, with the Letter
of Transmittal and any other required documents, by 5:00 p.m., New York City
time, on or prior to , 1998, unless extended, or within the time
periods set forth above in "-- How to Tender" pursuant to a Notice of Guaranteed
Delivery from an Eligible Institution. The party tendering the Existing Notes
for exchange (the "Tendering Holder") shall be deemed to have sold, assigned and
transferred the Existing Notes to the Exchange Agent, as agent of the Company,
and irrevocably constituted and appointed the Exchange Agent as the Tendering
Holder's agent and attorney-in-fact to cause the Existing Notes to be
transferred and exchanged. The Tendering Holder shall also warrant that it has
full power and authority to tender, exchange, sell, assign, and transfer the
Existing Notes and to acquire the Exchange Notes issuable upon the exchange of
such tendered Existing Notes, that the Exchange Agent, as agent of the Company,
will acquire good and unencumbered title to the tendered Existing Notes, free
and clear of all liens, restrictions, charges and encumbrances, and that the
Existing Notes tendered for exchange are not subject to any adverse claims when
accepted by the Exchange Agent, as agent of the Company. The Tendering Holder
shall also warrant that it will, upon request, execute and deliver any
additional documents
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<PAGE> 36
deemed by the Company or the Exchange Agent to be necessary or desirable to
complete the exchange, sale, assignment and transfer of the Existing Notes. All
authority conferred or agreed to be conferred in the Letter of Transmittal by
the Tendering Holder will survive the death or incapacity of the Tendering
Holder and any obligation of the Tendering Holder shall be binding upon the
heirs, executors, administrators, personal representatives, trustees in
bankruptcy, legal representatives, successors and assigns of such Tendering
Holder.
Signature(s) on the Letter of Transmittal will be required to be guaranteed
as set forth above in "-- How to Tender." All questions as to the validity,
form, eligibility (including time of receipt) and acceptability of any tender
will be determined by the Company, in its sole discretion, and such
determination will be final and binding. Unless waived by the Company,
irregularities and defects must be cured by the Expiration Date.
WITHDRAWAL RIGHTS
All tenders of Existing Notes may be withdrawn at any time prior to the
Expiration Date. To be effective, a notice of withdrawal must be timely received
by the Exchange Agent at the address set forth below under "-- Exchange Agent."
Any notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered the Existing Notes to be withdrawn. If the
Existing Notes have been physically delivered to the Exchange Agent, the
Tendering Holder must also submit the serial number shown on the particular
Existing Notes to be withdrawn. If the Existing Notes have been delivered
pursuant to the book-entry procedures set forth above under "-- How to Tender,"
any notice of withdrawal must specify the name and number of the participant's
account at the Depository to be credited with the withdrawn Existing Notes. The
Exchange Agent will return the properly withdrawn Existing Notes as soon as
practicable following receipt of the notice of withdrawal. All questions as to
the validity, including time of receipt, of notices and withdrawals will be
determined by the Company, and such determination will be final and binding on
all parties.
ACCEPTANCE OF TENDERS
Subject to the terms and conditions of the Exchange Offer, including the
reservation of certain rights by the Company, Existing Notes tendered (either
physically or through book-entry delivery as described in "-- How to Tender")
with a properly executed Letter of Transmittal and all other required
documentation, and not withdrawn, will be accepted on or promptly after the
Expiration Date. At the option of the holder of an Exchange Note, such Exchange
Note may be held in the form of either (i) a certificated Exchange Note or (ii)
a beneficial interest in one or more of the Global Notes (as defined).
Beneficial interests in the Global Notes will be shown on, and transfers thereof
will be effected only through, records maintained by the Depository and its
participants. Subject to the terms and conditions of the Exchange Offer,
certificated Exchange Notes to be issued in exchange for properly tendered
Existing Notes will be mailed by the Exchange Agent promptly after the
acceptance of such tendered Existing Notes and the Exchange Notes to be issued
in the form of Global Notes will be deposited with the Depository promptly after
acceptance of the related tendered Existing Notes. Acceptance of tendered
Existing Notes will be effected by the delivery of a notice to that effect by
the Company to the Exchange Agent. Subject to the applicable rules of the
Commission, the Company, however, reserves the right, prior to the acceptance of
tendered Existing Notes, to delay acceptance of tendered Existing Notes upon the
occurrence of any of the conditions set forth above under the caption
"-- Conditions." The Company confirms that its reservation of the right to delay
acceptance of tendered Existing Notes is subject to the provisions of Rule
14e-1(c) under the Exchange Act, which requires that a tender offeror pay the
consideration offered or return the tendered securities promptly after the
termination or withdrawal of a tender offer.
Although the Company does not currently intend to do so, if it modifies the
terms of the Exchange Offer, such modified terms will be available to all
holders of Existing Notes, whether or not their Existing Notes have been
tendered prior to such modification. Any material modification will be disclosed
in accordance with the applicable rules of the Commission and, if required, the
Exchange Offer will be extended to permit holders of Existing Notes adequate
time to consider such modification.
The tender of Existing Notes pursuant to any one of the procedures set
forth in "-- How to Tender" will constitute an agreement between the Tendering
Holder and the Company upon the terms and subject to the conditions of the
Exchange Offer.
29
<PAGE> 37
EXCHANGE AGENT
United States Trust Company of New York has agreed to provide certain
services as Exchange Agent for the Exchange Offer. Tendering Holders who require
assistance should contact the Exchange Agent. Letters of Transmittal and any
inquiries with respect to the Exchange Offer must be addressed to the Exchange
Agent as follows:
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission By Hand up to 4:30 p.m.:
Number:
United States Trust (212) 780-0592 United States Trust Company
Company of New York (For Eligible Institutions of New York
P.O. Box 844 Only) 111 Broadway
Cooper Station Lower Level
New York, New York Confirm by Telephone: New York, New York 10006
10276-0844 (800) 548-6565 Attn: Corporate Trust
Attn: Corporate Trust Services
Services
(Registered or Certified Mail
Recommended)
By Overnight Courier:
United States Trust Company
of New York
770 Broadway -- 13th Floor
New York, New York 10003
Attn: Corporate Trust
Services
</TABLE>
DELIVERY TO OTHER THAN THE ADDRESS SET FORTH ABOVE OR FACSIMILE
TRANSMISSION TO OTHER THAN THE FACSIMILE TRANSMISSION NUMBER SET FORTH ABOVE
WILL NOT CONSTITUTE VALID DELIVERY.
SOLICITATION OF TENDERS; EXPENSES
Except as described above under "-- Exchange Agent," the Company has not
retained any agent in connection with the Exchange Offer and will not make any
payments to brokers, dealers or other persons for soliciting or recommending
acceptances of the Exchange Offer. The Company, will, however, reimburse the
Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company will 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 and related documents to the beneficial
owners of the Existing Notes and in handling or forwarding tenders for their
customers.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the transfer
of Existing Notes to it or its order pursuant to the Exchange Offer. If,
however, Exchange Notes and/or substitute Existing Notes not exchanged 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 Existing Notes tendered, or if tendered
Existing 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 transfer of Existing Notes to the Company or its order
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered holder or any other person) 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.
ACCOUNTING TREATMENT
The carrying value of the Existing Notes is expected to become the carrying
value of the Exchange Notes at the time of the Exchange Offer. Accordingly, no
gain or loss for accounting purposes will be recognized. The expenses of the
Exchange Offer will be amortized over the term of the Exchange Notes.
30
<PAGE> 38
TERMINATION OF CERTAIN RIGHTS
Holders of the Exchange Notes will not be entitled to certain special
rights under the Registration Agreement, which rights will terminate when the
Exchange Offer is completed. Pursuant to the Registration Agreement, the
Exchange Offer shall be deemed to be "completed" upon the occurrence of (i) the
filing and effectiveness under the Securities Act of a registration statement
relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the
maintenance of such registration statement continuously effective for a period
of not less than 30 days after notice has been sent to holders of Existing Notes
and (iii) the delivery by the Company in exchange for all Existing Notes that
have been duly tendered and not validly withdrawn on or prior to the Expiration
Date of Exchange Notes transferable by each holder thereof (other than a holder
that is an affiliate of the Company within the meaning of Rule 405 under the
Securities Act, a broker-dealer tendering Existing Notes acquired directly from
the Company for its own account, a holder who acquires the Exchange Notes
outside the ordinary course of such holder's business or a holder who is engaged
in or who intends to engage in a distribution of the Exchange Notes or who has
arrangements or understandings with any person to participate in the Exchange
Offer for the purpose of distributing the Exchange Notes) without restrictions
under the Securities Act. The rights that will terminate include the right to
require the Company (i) to file with the Commission, and use its best efforts to
cause to become effective under the Securities Act, a registration statement
with respect to the Exchange Notes and (ii) other than in certain limited
circumstances, to file with the Commission, use its best efforts to cause to
become effective under the Securities Act and keep continuously effective for a
period of up to three years a "shelf" registration statement providing for the
registration of, and the sale on a continuous or delayed basis by the holders
of, Existing Notes.
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Company's
obligations under the Registration Agreement. 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 Existing Notes in like principal amount,
the form and terms of which are identical in all material respects to the form
and terms of the Exchange Notes, except as otherwise described herein. The
Existing 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 increase in the indebtedness of the Company.
The proceeds to the Company for the sale of the Existing Notes were
approximately $121.3 million, net of Initial Purchasers' discount. The net
proceeds to the Company from the sale of the Existing Notes were used as
follows: (i) approximately $47.9 million was used to pay the purchase price of
the Acquisition and related expenses; (ii) approximately $63.9 million was used
to repay the Company's existing revolving credit facility and term loan
facility, existing subordinated debt, and an existing note payable
(collectively, the "Outstanding Indebtedness"); (iii) approximately $3.3 million
was used to retire a portion of the Company's Series A Preferred Stock; (iv)
approximately $1.3 million was used to pay fees and expenses of the Private
Offering; and (v) approximately $4.9 million was used for general corporate
purposes.
31
<PAGE> 39
CAPITALIZATION
The following table sets forth, as of June 30, 1998, the consolidated
capitalization of the Company. The information set forth below should be read in
conjunction with the consolidated financial statements of Aqua-Chem included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------
(DOLLARS IN THOUSANDS)
<S> <C>
Cash and cash equivalents................................... $ 9,300
========
Long-term debt:
New Credit Facility(a).................................... $ --
The Notes................................................. 125,000
--------
Total debt............................................. 125,000
Preferred stock............................................. 4,704
Stockholders' deficit....................................... (1,611)
--------
Total capitalization................................. $128,093
========
</TABLE>
- ------------------------------------
(a) Consists of a $45,000 revolving facility, none of which was drawn at June
30, 1998. See "Description of Certain Indebtedness."
32
<PAGE> 40
UNAUDITED PRO FORMA FINANCIAL DATA
The unaudited pro forma financial data include the unaudited pro forma
consolidated statements of operations of the Company for the twelve months ended
December 31, 1997, and the six months ended June 30, 1998 (the "Pro Forma
Statements of Operations"). The Pro Forma Statements of Operations for the
twelve months ended December 31, 1997 have been prepared using NDC's results for
the fiscal year ended October 31, 1997. The Pro Forma Statements of Operations
for the six months ended June 30, 1998 have been prepared using NDC's historical
results for the period from January 1, 1998 through June 23, 1998, the date the
Acquisition was consummated (the operations of the Company's National Dynamics
Division, consisting of the former business of NDC, for the period June 24,
1998, to June 30, 1998, are not included in Aqua-Chem's historical results for
the six months ended June 30, 1998, as management has determined the impact is
not material to the Company's Consolidated Statement of Operations). The results
of NDC's operations for the year ended October 31, 1997 are not necessarily
indicative of the results of NDC's operations for the twelve months ended
December 31, 1997. The pro-forma and actual results of operations for any
interim period are not necessarily indicative of the results for an entire year.
The Pro Forma Statements of Operations give effect to the Transactions as if
they had occurred on January 1, 1997.
The Company is implementing a business plan designed to achieve certain
synergies and costs savings arising from (i) the Company's closure of its
Greenville, Mississippi facility; and (ii) the in-sourcing of certain boiler
components currently procured from third parties that either Cleaver-Brooks or
National Dynamics already produces. See Note (b) to the table under
"Summary -- Summary Unaudited Pro Forma Financial Data." The Pro Forma
Statements of Operations do not include these cost savings or the cost of
achieving these cost savings.
The Acquisition will be accounted for by the purchase method of accounting.
Under purchase accounting, the total purchase price will be allocated to the
tangible and intangible assets and liabilities acquired based upon their
respective fair values as of the closing of the Acquisition based on valuations
and studies which are not yet available. A preliminary allocation of the
purchase price has been made to major categories of assets and liabilities in
the Pro Forma Financial Statements based on available information. The final
allocation of purchase price and resulting effect on income from operations may
differ significantly from the pro forma amounts included herein. On or prior to
August 22, 1998, a balance sheet will be prepared for NDC as of the date of the
closing of the Acquisition, on which the post-closing purchase price adjustments
will be based. Management does not expect that differences between the
preliminary and final purchase price allocation will have a material impact on
the Company's financial position or results of operations.
The Pro Forma Financial Statements are based on certain estimates and
assumptions made by the management of the Company as to the combined operations
of Aqua-Chem and NDC which the Company believes to be reasonable. The Pro Forma
Financial Statements do not purport to be indicative of the results of
operations or financial position of Aqua-Chem and NDC that actually would have
been obtained had the Transactions been completed as of the assumed dates, or to
project the results of operations or financial position of the Company for any
future date or period.
The Pro Forma Financial Statements should be read in conjunction with the
financial statements of Aqua-Chem and of NDC included elsewhere in this
Prospectus. See also "Risk Factors -- Realization of Benefits of the
Acquisition," "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Aqua-Chem," and "Management's Discussion and Analysis
of Financial Condition and Results of Operations of NDC."
33
<PAGE> 41
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
PRO FORMA HISTORICAL --------------------------
AQUA-CHEM(A) NDC ACQUISITION OFFERING PRO FORMA
------------ ---------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net sales........................... $191,159 $59,292 $ -- $ -- $250,451
Cost of goods sold.................. 140,950 45,862 101(b) -- 186,913
-------- ------- -------- -------- --------
Gross margin...................... 50,209 13,430 (101) -- 63,538
Selling, general and administrative
expenses.......................... 39,602 5,815 195(b) -- 45,612
-------- ------- -------- -------- --------
Operating income.................... 10,607 7,615 (296) -- 17,926
Other income (expenses):
Interest income................... 459 242 -- -- 701
Interest expense.................. (5,745) (183) 183(c) (8,823)(d) (14,568)
Other............................. 445 54 -- -- 499
-------- ------- -------- -------- --------
(4,841) 113 183 (8,823) (13,368)
Income before income taxes, minority
interest and extraordinary item... 5,766 7,728 (113) (8,823) 4,558
Income tax expense (benefit)........ 2,289 -- 3,023(e) (3,502)(e) 1,810
Minority interest in earnings of
consolidated subsidiary........... 345 -- -- -- 345
-------- ------- -------- -------- --------
Net income before extraordinary
item.............................. 3,132 7,728 (3,136) (5,321) 2,403
Extraordinary item, net of tax...... -- -- -- (1,485)(f) (1,485)
-------- ------- -------- -------- --------
Net income.......................... 3,132 7,728 (3,136) (6,806) 918
Preferred stock dividends........... (619) -- -- 209(g) (410)
-------- ------- -------- -------- --------
Net income applicable to common..... $ 2,513 $ 7,728 $ (3,136) $ (6,597) $ 508
======== ======= ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA(h)......................... $ 15,539 $ 8,112 $ 800 $ -- $ 24,451
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Operations.
34
<PAGE> 42
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS
------------------- ----------------------------
AQUA-CHEM NDC ACQUISITION OFFERING PRO FORMA
--------- ------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net sales............................ $76,222 $22,273 $ -- $ -- $98,495
Cost of goods sold................... 55,930 17,721 50(b) -- 73,701
------- ------- ----- ------- -------
Gross margin.................... 20,292 4,552 (50) -- 24,794
Selling, general and administrative
expenses........................... 17,446 3,450 349(b) -- 21,245
Restructuring charges................ 4,720 -- -- -- 4,720
------- ------- ----- ------- -------
Operating income (loss).............. (1,874) 1,102 (399) -- (1,171)
Other income (expenses):
Interest income................. 209 572 -- -- 781
Interest expense................ (3,004) (78) 78(c) (4,280)(d) (7,284)
Other........................... 26 (6) -- -- 20
------- ------- ----- ------- -------
(2,769) 488 78 (4,280) (6,483)
Income (loss) before income taxes,
minority interest and extraordinary
item............................... (4,643) 1,590 (321) (4,280) (7,654)
Income tax expense (benefit)......... (1,448) -- 504(e) (2,095)(e) (3,039)
Minority interest in earnings of
consolidated subsidiary............ 136 -- -- -- 136
------- ------- ----- ------- -------
Net income (loss) before
extraordinary item................. (3,331) 1,590 (825) (2,185) (4,751)
Extraordinary item, net of tax
benefit............................ 1,260 -- -- (1,260)(f) --
------- ------- ----- ------- -------
Net income (loss).................... (4,591) 1,590 (825) (925) (4,751)
Preferred stock dividends............ (310) -- -- 90(g) (220)
------- ------- ----- ------- -------
Net income (loss) applicable to
common............................. $(4,901) $ 1,590 $(825) $ (835) $(4,971)
======= ======= ===== ======= =======
OTHER FINANCIAL DATA:
EBITDA(h).......................... $ 28 $ 1,376 $ 150 $ -- $ 1,554
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Operations.
35
<PAGE> 43
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(a) Represents Aqua-Chem's Statement of Operations for the period January 1,
1997 to July 31, 1997, prepared using Aqua-Chem's historical basis of
accounting and Aqua-Chem's Statement of Operations for the period August 1,
1997 to December 31, 1997, prepared under a new basis of accounting that
reflects the fair values of assets acquired and liabilities assumed, the
related financing cost and all debt incurred in connection with the
Management Buy-Out, on a combined basis, adjusted as follows:
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------- PRO FORMA
SEVEN MONTHS FIVE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDED ENDED ENDED MANAGEMENT ENDED
JULY 31, DECEMBER 31, DECEMBER 31, BUY-OUT DECEMBER 31,
1997 1997 1997 ADJUSTMENTS 1997
------------ ------------ ------------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............................. $99,618 $91,541 $191,159 $ -- $191,159
Cost of goods sold.................... 73,656 66,333 139,989 961(i) 140,950
------- ------- -------- ------- --------
Gross margin........................ 25,962 25,208 51,170 (961) 50,209
Selling, general and administrative
expenses............................ 22,258 17,136 39,394 208(i) 39,602
------- ------- -------- ------- --------
Operating income...................... 3,704 8,072 11,776 (1,169) 10,607
Other income (expenses):
Interest income..................... 450 202 652 (193)(ii) 459
Interest expense.................... (753) (2,559) (3,312) (2,433)(iii) (5,745)
Other............................... (955) 57 (898) 1,343(iv) 445
------- ------- -------- ------- --------
(1,258) (2,300) (3,558) (1,283) (4,841)
Income before income taxes and
minority interest................... 2,446 5,772 8,218 (2,452) 5,766
Income tax expense.................... 421 2,289 2,710 (421)(v) 2,289
Minority interest in earnings of
consolidated subsidiary............. 171 174 345 -- 345
------- ------- -------- ------- --------
Net income............................ 1,854 3,309 5,163 (2,031) 3,132
Preferred stock dividends............. -- (260) (260) (359)(vi) (619)
------- ------- -------- ------- --------
Net income applicable to common....... $ 1,854 $ 3,049 $ 4,903 $(2,390) $ 2,513
======= ======= ======== ======= ========
</TABLE>
--------------------------------------------------
<TABLE>
<S> <C> <C>
(i) Reflects the historical results of operations of Aqua-Chem adjusted
for the period from January 1, 1997 to the Management Buy-Out date as
follows:
</TABLE>
<TABLE>
<CAPTION>
COST OF SELLING, GENERAL
GOODS SOLD AND ADMINISTRATIVE
---------- ------------------
<S> <C> <C> <C>
Additional depreciation expense due to the
recording of fixed assets at fair market
value........................................ $961 $290
Reduction of postretirement benefits expense
due to the recognition of the full
accumulated postretirement benefit
liability.................................... -- (102)
Amortization of intangible assets resulting
from the Management Buy-Out (40 year
amortization)................................ -- 20
---- ----
$961 $208
==== ====
</TABLE>
<TABLE>
<S> <C> <C>
(ii) Reflects a reduction of interest income for $6,600 of cash used in
the Management Buy-Out at a rate of 5.0%.
(iii) Reflects additional interest expense determined as follows:
Amortization of deferred financing costs.................... $ 333
Existing subordinated debt ($21,000 @ 10.5%)................ 2,205
Existing revolving credit facility ($5,000 @ 8.0%).......... 400
Existing term loan facility ($40,000 @ 8.0%)................ 3,200
Less: interest on various payments totaling $6,000 against
the existing debt........................................... (393)
-------
5,745
Less: historical interest expense........................... (3,312)
-------
$ 2,433
=======
</TABLE>
36
<PAGE> 44
<TABLE>
<S> <C> <C>
(iv) Reflects the following adjustments:
Elimination of certain payments to management from the
Management Buy-Out.......................................... $ 1,291
Elimination of amortization of deferred financing for debt
retired in conjunction with the Management Buy-Out.......... 52
-------
$ 1,343
=======
(v) Reflects the pro forma tax effects of all adjustments using
Aqua-Chem's consolidated effective tax rate for the applicable
period. See Note 10 to Aqua-Chem's consolidated financial statements
for a reconciliation from the statutory tax rate to the effective tax
rate.
(vi) Reflects additional dividends and original issue discount
amortization for the preferred stock.
</TABLE>
(b) Reflects the historical results of operations of NDC, adjusted as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
------------------------------ ------------------------------
SELLING, SELLING,
COST OF GOODS GENERAL AND COST OF GOODS GENERAL AND
SOLD ADMINISTRATIVE SOLD ADMINISTRATIVE
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Additional depreciation expense due to
the recording of fixed assets at
fair market value................... $181 $ 45 $ 90 $ 23
Additional depreciation expense due to
the recording of fixed assets at the
Company's lives..................... 120 30 60 16
Amortization of intangible assets
resulting from the Acquisition (40
year amortization).................. -- 720 -- 360
Reduction of insurance premiums....... (200) -- (100) --
Elimination of employment costs of
former owners (net of estimated
costs of replacing management)...... -- (600) -- (50)
---- ----- ---- ----
$101 $ 195 $ 50 $349
==== ===== ==== ====
</TABLE>
(c) Reflects the elimination of interest expense on NDC's short term borrowings
that would not be required.
(d) Reflects additional interest expense resulting from the Private Offering as
follows:
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------- ----------
<S> <C> <C>
The Notes................................................... $14,063 $ 7,032
Amortization of deferred financing fees associated with the
Private Offering.......................................... 505 252
------- -------
14,568 7,284
Less historical interest expense............................ (5,745) (3,004)
------- -------
$ 8,823 $ 4,280
======= =======
</TABLE>
(e) Reflects the pro forma tax effects of all adjustments using Aqua-Chem's
effective tax rate for the applicable period. See Note 10 to Aqua-Chem's
consolidated financial statements for a reconciliation from the statutory
tax rate to the effective tax rate.
(f) Reflects the write-off of the deferred financing fees and original issue
discount associated with the Management Buy-Out due to the early retirement
of the existing subordinated debt, net of tax benefit.
37
<PAGE> 45
(g) Reflects a reduction of preferred stock dividends and original issue
discount due to a $3,000 redemption of Series A Preferred Stock.
(h) EBITDA is defined as operating income before depreciation and amortization
and, in 1997, excludes $687 of non-cash purchase accounting adjustments to
cost of goods sold related to writing up inventory to fair market value at
the time of the Management Buy-Out. While EBITDA is not intended to
represent cash flow from operations as defined by GAAP and should not be
considered as an indicator of operating performance or an alternative to
cash flow (as measured by GAAP) as a measure of liquidity, it is included
herein to provide additional information with respect to the ability of the
Company to meet its future debt service, capital expenditures and working
capital requirements. The Company's measure of EBITDA may not be comparable
to similarly titled measures of other companies.
38
<PAGE> 46
SELECTED FINANCIAL DATA OF AQUA-CHEM
The following table sets forth selected historical financial data of
Aqua-Chem as of and for: (i) each of the two years ended December 31, 1996 and
1995, derived from the consolidated financial statements of Aqua-Chem, which
have been audited by KPMG Peat Marwick LLP, Milwaukee, Wisconsin and are
included elsewhere in this Prospectus; (ii) each of the years ended December 31,
1994 and 1993, derived from the consolidated financial statements of Aqua-Chem,
which have been audited by KPMG Peat Marwick LLP, Milwaukee, Wisconsin but are
not included in this Prospectus; (iii) the seven-month period ended July 31,
1997 and the five-month period ended December 31, 1997, derived from the
consolidated financial statements of Aqua-Chem, which have been audited by
Arthur Andersen LLP, Milwaukee, Wisconsin, and are included elsewhere in this
Prospectus; and (iv) the six month periods ended June 30, 1997 and 1998, derived
from the unaudited financial statements of Aqua-Chem included elsewhere in this
Prospectus, which include all adjustments that management considers necessary to
present fairly the financial results for these interim periods, all of which
were of a normal recurring nature. The results of operations for such interim
periods are not necessarily indicative of results to be expected for the full
year. This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Aqua-Chem" and the
consolidated financial statements of Aqua-Chem included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SEVEN
FISCAL YEAR ENDED MONTHS FIVE MONTHS SIX MONTHS ENDED
DECEMBER 31, ENDED ENDED JUNE 30,
-------------------------------------------- JULY 31, DECEMBER 31, -------------------
1993 1994 1995 1996 1997(A) 1997(A) 1997(A) 1998
-------- -------- -------- -------- -------- ------------ ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................... $184,254 $187,486 $183,368 $199,552 $ 99,618 $ 91,541 $83,211 $ 76,222
Cost of goods sold............. 139,980 144,490 148,650 153,446 73,656 66,333 62,087 55,930
-------- -------- -------- -------- -------- -------- ------- --------
Gross margin................. 44,274 42,996 34,718 46,106 25,962 25,208 21,124 20,292
Selling, general and
administrative expenses...... 39,080 40,981 37,772 34,446 22,258 17,136 18,069 17,446
Restructuring charges(b)....... -- 9,011 4,593 5,038 -- -- -- 4,720
-------- -------- -------- -------- -------- -------- ------- --------
Operating income (loss)...... 5,194 (6,996) (7,647) 6,622 3,704 8,072 3,055 (1,874)
Other income (expense):
Interest income.............. 301 252 358 464 450 202 390 209
Interest expense............. (1,075) (1,200) (1,663) (1,448) (753) (2,559) (597) (3,004)
Other income (expense)....... 734 639 2,635 (806) (955) 57 22 26
-------- -------- -------- -------- -------- -------- ------- --------
Earnings (loss) before income
taxes, minority interest and
extraordinary item........... 5,154 (7,305) (6,317) 4,832 2,446 5,772 2,870 (4,643)
Income tax expense (benefit)... 2,191 (2,806) 189 507 421 2,289 494 (1,448)
Minority interest in earnings
(loss) of consolidated
subsidiary................... 211 179 (52) 231 171 174 136 136
-------- -------- -------- -------- -------- -------- ------- --------
Net income (loss) before
extraordinary item........... 2,752 (4,678) (6,454) 4,094 1,854 3,309 2,240 (3,331)
Extraordinary item, net of
tax.......................... -- -- -- -- -- -- -- 1,260
-------- -------- -------- -------- -------- -------- ------- --------
Net income (loss)............ $ 2,752 $ (4,678) $ (6,454) $ 4,094 $ 1,854 $ 3,309 $ 2,240 $ (4,591)
======== ======== ======== ======== ======== ======== ======= ========
OTHER FINANCIAL DATA:
EBITDA(c)...................... $ 9,310 $ (3,028) $ (4,494) $ 9,606 $ 5,394 $ 10,043 $ 4,778 $ 28
Adjusted EBITDA(d)............. 9,310 5,983 99 14,644 5,394 10,043 4,778 4,748
Gross profit margin............ 24.0% 22.9% 18.9% 23.1% 26.1% 27.5% 25.4% 26.6%
Total depreciation and
amortization................. $ 4,116 $ 3,968 $ 3,153 $ 2,984 $ 1,690 $ 1,284 $ 1,723 $ 1,902
Capital expenditures........... 4,832 1,594 4,867 2,789 2,195 1,197 1,097 1,023
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets................... $109,744 $104,133 $101,381 $101,000 $ -- $124,661 $97,008 $175,734
Total debt..................... 19,296 18,098 18,636 20,128 -- 59,691 20,198 125,000
Redeemable preferred stock..... -- -- -- -- -- 7,365 -- --
Stockholders' equity
(deficit).................... 46,738 42,254 36,636 39,960 -- 3,638 41,653 (1,611)
</TABLE>
- ------------------------------------
(a) On July 31, 1997, Aqua-Chem management and its shareholders acquired
Aqua-Chem in the Management Buy-Out, which was treated as a purchase. As a
result, all periods presented prior to August 1, 1997 were prepared using
Aqua-Chem's historical basis of accounting. All periods presented subsequent
to July 31, 1997 reflect the fair values of the assets acquired and
liabilities assumed in the Management Buy-Out.
(b) For 1994 and 1995, reflects restructuring charges required to complete the
1994 Restructuring. For 1996, reflects restructuring charges required to
complete the 1996 Restructuring. For the six months ended June 30, 1998,
reflects restructuring charges to complete the 1998 Restructuring. For
further information on such restructurings, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Aqua-Chem,"
Note (3) to the consolidated financial statements of Aqua-Chem and Note (7)
to the consolidated condensed interim financial statements of Aqua-Chem, all
included elsewhere in this Prospectus.
39
<PAGE> 47
(c) EBITDA is defined as operating income (loss) before depreciation and
amortization and, in the five months ended December 31, 1997, excludes $687
of non-cash purchase accounting adjustments related to the Management
Buy-Out. While EBITDA is not intended to represent cash flow from operations
as defined by GAAP and should not be considered as an indicator of operating
performance or an alternative to cash flow (as measured by GAAP) as a
measure of liquidity, management believes it provides additional information
with respect to the ability of a company to meet its future debt service,
capital expenditures and working capital requirements. The measure of EBITDA
presented above may not be comparable to similarly titled measures of other
companies.
(d) Adjusted EBITDA for the periods presented is defined as EBITDA excluding
restructuring charges.
40
<PAGE> 48
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF AQUA-CHEM
The following discussion should be read in conjunction with, and is
qualified in its entirety by reference to the consolidated financial statements
of Aqua-Chem appearing elsewhere in this Prospectus. For information regarding
the pro forma financial condition of Aqua-Chem, see "Unaudited Pro Forma
Financial Data" and " -- Liquidity and Capital Resources."
The Management Buy-Out occurred on July 31, 1997. The financial results of
Aqua-Chem for all periods prior to July 31, 1997 reflect the operations of
Aqua-Chem under its prior owners. The consolidated financial statements for the
period from August 1, 1997 to December 31, 1997 reflect the financial results of
Aqua-Chem under a new basis of accounting that reflects the fair values of
assets acquired and liabilities assumed, the related financing costs, and all
debt incurred in connection with the Management Buy-Out. Accordingly, the
financial information for Aqua-Chem before and after the Management Buy-Out are
not directly comparable. The information relating to Aqua-Chem's twelve months
ended December 31, 1997 is derived by combining the financial results of
Aqua-Chem for the period January 1, 1997 through July 31, 1997 (while under
prior ownership) and for the period from August 1, 1997 through December 31,
1997 (following the Management Buy-Out), including purchase accounting
adjustments for the Management Buy-Out. See footnote (a) to the Notes to
Unaudited Pro Forma Consolidated Statements of Operations under "Unaudited Pro
Forma Financial Data."
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
to net sales of certain items included in Aqua-Chem's statement of operations.
<TABLE>
<CAPTION>
TWELVE
FISCAL YEAR ENDED MONTHS SIX MONTHS ENDED
DECEMBER 31, ENDED JUNE 30,
------------------- DECEMBER 31, -------------------
1995 1996 1997 1997 1998
----- ----- ------------ ----- -----
<S> <C> <C> <C> <C> <C>
Net sales................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.......................... 81.1 76.9 73.2 74.6 73.4
----- ----- ----- ----- -----
Gross margin........................... 18.9 23.1 26.8 25.4 26.6
Selling, general and administrative
expenses.................................. 20.6 17.3 20.6 21.7 22.9
Restructuring charges....................... 2.5 2.5 -- -- 6.2
----- ----- ----- ----- -----
Operating income (loss)................ (4.2)% 3.3% 6.2% 3.7% (2.5)%
===== ===== ===== ===== =====
</TABLE>
41
<PAGE> 49
Composition of net sales for Cleaver-Brooks and Water Technologies for the
periods indicated is listed below.
<TABLE>
<CAPTION>
TWELVE
FISCAL YEAR ENDED MONTHS SIX MONTHS ENDED
DECEMBER 31, ENDED JUNE 30,
------------------- DECEMBER 31, -----------------
1995 1996 1997 1997 1998
------ ------ ------------ ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales:
Cleaver-Brooks.............................. $144.7 $155.6 $154.9 $67.9 $58.3
Water Technologies.......................... 38.7 44.0 36.3 15.3 17.9
------ ------ ------ ----- -----
Total............................... $183.4 $199.6 $191.2 $83.2 $76.2
====== ====== ====== ===== =====
</TABLE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net Sales. Net sales for the six month period ended June 30, 1998 declined
$7.0 million to $76.2 million from $83.2 million. Net sales of Cleaver-Brooks
declined $9.6 million (14.1%). Approximately 41% of the decrease resulted from
the sale of the contract machining business in the fourth quarter of 1997 with
the remainder attributable to soft orders during the second half of 1997 through
the first quarter of 1998. Water Technologies sales increased $2.6 million
(17.0%) during the same time period primarily due to a large land-based water
desalination project.
Gross Margin. Gross margin declined $0.8 million (3.9%) to $20.3 million
from $21.1 million for the same period in 1997. The gross margin percentage
increased 1.2% to 26.6% due to margin improvements on a large contract and on
parts at Water Technologies and due to certain cost reductions at Cleaver-Brooks
which were facilitated by improvements in management of the facilities.
Selling, General and Administrative Expenses. Selling, general and
administrative expense declined $0.6 million (3.4%) to $17.4 million.
Commissions to independent representatives and to internal sales personnel were
$0.5 million lower in the current period due to the reduced sales volume while
post retiree health care costs declined $0.3 million as a result of recognition
of the transition obligation at the time of the Management Buy Out.
Restructuring Charges. A restructuring charge of $4.7 million was recorded
in the current period as a result of the Board of Directors' approval of the
1998 Restructuring. The provision included $3.0 million to write down the value
of certain fixed assets and inventory, $1.5 million for employee severance and
additional workers compensation-related costs and $0.2 million for other related
costs.
Operating Income. For the reasons set forth above, operating income
decreased $4.9 million to a loss of $1.9 million. Excluding the $4.7 million
restructuring charge, operating income decreased $0.3 million to $2.8 million
compared to $3.1 million for the six months ended June 30, 1997.
TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net Sales. Net sales declined $8.4 million (4.2%) in 1997 to $191.2 million
from $199.6 million in 1996. Net sales attributable to Cleaver-Brooks were
relatively flat at $154.9 million in 1997, primarily due to a decline of $5.5
million in sales to the Asia Pacific region and $2.0 million in reduced sales
resulting from the sale of two small product lines, offset by continued strong
domestic demand for firetube boilers. Net sales attributable to Water
Technologies decreased $7.7 million (17.5%) to $36.3 million in 1997, primarily
due to the deferral of certain significant orders for water purification and
treatment systems during the period, partially offset by increased demand for
distillation systems for pharmaceutical and offshore oil applications.
Gross Margin. Gross margin increased $5.1 million (11.0%) in 1997 to $51.2
million from $46.1 million in 1996 despite a 4.2% decline in net sales. Gross
margin as a percentage of net sales improved to 26.8% in 1997 from 23.1% in 1996
due to (i) improved manufacturing efficiencies at Aqua-Chem's Thomasville boiler
42
<PAGE> 50
plant, (ii) improvements in the product mix, (iii) the completion of a large,
unprofitable water purification and treatment project in 1996 and (iv) the
in-sourcing of certain key boiler components.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $39.4 million in 1997, an increase of $5.0 million
(14.4%) from $34.4 million in 1996. Selling, general and administrative expenses
as a percentage of net sales was 20.6% in 1997 as compared with 17.3% in 1996.
This increase was due primarily to a $1.0 million increase in information
systems spending and increased travel expenditures related to Aqua-Chem's sales
and marketing efforts as such expenditures returned to normalized levels
following their curtailment in 1996.
Restructuring Charges. Aqua-Chem did not record any restructuring charges
in 1997 as compared with $5.0 million in 1996 related to the 1996 Restructuring.
Operating Income. For the reasons set forth above, operating income
increased $5.2 million (77.8%) in 1997 to $11.8 million from $6.6 million in
1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net Sales. Net sales increased $16.2 million (8.8%) in 1996 to $199.6
million from $183.4 million in 1995. Excluding the impact of product lines or
businesses sold during 1995 and 1996, net sales increased $20.2 million (11.8%)
in 1996. This increase was primarily attributable to (i) significantly improved
throughput at the Thomasville facility, which allowed Aqua-Chem to reduce a
backlog of boiler orders that had grown substantially in the second half of
1995; (ii) improved pricing; and (iii) higher sales to the U.S. Navy by Water
Technologies. Net sales attributable to Cleaver-Brooks increased $10.9 million
(7.5%) in 1996 to $155.6 million. During 1996, significant improvements were
made to the Thomasville plant which assumed production of large firetube boilers
during 1995. Additional training, opening a component shop and a tube mill, and
various improvements in quality allowed Cleaver-Brooks to reduce the backlog of
boiler orders which accumulated during late 1995 as a result of the combination
of strong order activity and production inefficiencies associated with the
transition of production from Lebanon to Thomasville and Stratford. Net sales
attributable to Water Technologies increased $5.3 million (13.9%) in 1996 to
$44.0 million, primarily due to increased U.S. Navy volume resulting from
progress on large percentage of completion contracts and a large land-based
water desalination project.
Gross Margin. Gross margin increased $11.4 million (32.8%) to $46.1 million
in 1996 from $34.7 million in 1995. Gross margin as a percentage of net sales
improved to 23.1% in 1996 from 18.9% in 1995 primarily due to (i) smaller losses
attributed to a certain large water purification and treatment contract, (ii)
improved pricing, (iii) manufacturing efficiencies at Aqua-Chem's Thomasville
facility, and (iv) the in-sourcing of certain components in Thomasville that
previously had been purchased from third party vendors. Additionally, the
improvement in the gross margin was impacted by greater operating leverage as
Aqua-Chem spread more volume over its fixed cost base.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $3.4 million (8.8%) to $34.4 million in 1996
from $37.8 million in 1995 primarily due to the impact of the 1996
Restructuring. Selling, general and administrative expense as a percentage of
net sales was 17.3% in 1996 as compared with 20.6% in 1995.
Restructuring Charges. Restructuring charges were $5.0 million in 1996 as
compared with $4.6 million in 1995.
Operating Income. For the reasons set forth above, operating income
increased $14.2 million in 1996 to $6.6 million from a loss of $7.6 million in
1995.
LIQUIDITY AND CAPITAL RESOURCES
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Cash used in operating activities was $10.3 million for the six months
ended June 30, 1998 compared to $1.8 million of cash provided by operating
activities for the same period in 1997. The decrease of $12.1 million
43
<PAGE> 51
is due primarily to a build of inventory of $4.1 million, $2.3 million of
additional interest expense due to the increased debt levels resulting from the
Management Buy-Out and a decrease in accrued expenses of $7.5 million, which
includes $2.6 million in litigation settlement payments, $2.3 million in
increased performance related incentives and $2.0 of income tax payments.
Cash used in investing activities was $48.9 million for the six months
ended June 30, 1998 compared to a net of $0.0 million for the same period in
1997. The current period included $47.9 million for the purchase of National
Dynamics Corporation and capital expenditures of $1.0 million. The prior year
period included $1.4 million of proceeds from the collection of notes receivable
offset by $1.1 million of capital expenditures and $0.3 million of additions to
intangible assets.
Cash provided by financing activities was $56.6 million for the six months
ended June 30, 1998 compared to $0.1 million for the same period in 1997. The
current period included $125.0 million of proceeds from the issuance of the
Existing Notes and advances under the Revolving Credit Facility and repayments
of senior and subordinated debt and preferred stock of $66.3 million in
conjunction with the Private Offering. The increase is also offset by deferred
financing costs of $5.1 million related to the issuance of the Existing Notes in
the current period.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Cash provided by operating activities was $14.2 million for the twelve
months ended December 31, 1997 compared to $8.1 million for the same period in
1996. The increase of $6.1 million was attributable primarily to changes in
billings in excess of revenues which increased principally due to progress
billings on large contracts. Accrued expenses and other current liabilities also
increased over the prior year as a result of performance related incentives.
Less cash was generated by reductions in inventory during the twelve months
ended December 31, 1997 than in the prior year. For the fiscal year ended
December 31, 1995, cash used in operating activities was $1.6 million.
Cash used in investing activities was $51.6 million in the twelve months
ended December 31, 1997 compared to $1.0 million in 1996 and $0.9 million in
1995. The current period included $52.1 million for the Management Buy-Out.
Capital expenditures for the current period were $3.4 million as compared to
$2.8 million in fiscal 1996 and $4.9 million in fiscal 1995. These expenditures
relate to ongoing maintenance and upgrades to Aqua-Chem's manufacturing
equipment and facilities and to certain replacement software systems. During the
most recent twelve months, Aqua-Chem invested $0.7 million in new mainframe
financial systems to replace aging systems. In 1995, Aqua-Chem spent $1.4
million for certain building additions and equipment upgrades at its Thomasville
facility, in part to accommodate the transfer of production from its Lebanon
facility.
Cash provided by financing activities was $40.7 million in the twelve
months ended December 31, 1997 compared to $1.5 million in 1996 and $0.5 million
in 1995. The twelve months ended December 31, 1997 included $65.6 million in
proceeds from debt issued in connection with the Management Buy-Out and
repayments of $26.1 million, of which $20.0 million related to repayment of debt
outstanding at the time of the Management Buy-Out and $6.0 million related to
repayment of debt incurred as a result of the Management Buy-Out.
The Company intends to fund future working capital, capital expenditures
and debt service requirements through cash flows generated from operating
activities and from borrowings under the New Credit Facility. The New Credit
Facility provides $45.0 million of borrowing availability and is secured by
substantially all assets of the Company. See "Description of Certain
Indebtedness." The Company expects to make approximately $1.5 million of capital
expenditures related to the proposed closure of its Greenville facility and $0.5
million to $1.0 million for certain equipment at National Dynamics. Apart from
these items, the Company believes that its manufacturing facilities and computer
software and hardware are generally adequate to meet projected needs.
Management believes that cash generated from operating activities together
with borrowing availability under the New Credit Facility will be adequate to
cover the Company's working capital, debt service and
44
<PAGE> 52
capital expenditure requirements. The Company may, however, consider other
options available to it in connection with funding future working capital and
capital expenditure needs, including the issuance of additional debt and the
issuance of equity securities.
YEAR 2000
The Company has assessed and continues to assess the impact of the year
2000 issue on its operations, including the development of cost estimates for
and the extent of programming changes required to address this issue. The
Company is also assessing the impact of this issue with its key vendors and
suppliers. Although final cost estimates have yet to be determined management
anticipates that the Company will be required to modify significant portions of
its software so that it will function properly in the year 2000. Since 1996
Aqua-Chem has been executing an information technologies upgrade plan. This plan
includes leasing a new mainframe computer at an annual cost of $0.6 million, and
the expansion of, and improvements to, its networks and other hardware totaling
$0.2 million. Additionally, Aqua-Chem has spent $1.5 million on new financial
systems, of which $1.3 million has been capitalized. An additional benefit of
upgrading and/or replacing older technology and systems is that management
believes that the new hardware and software are year 2000 compliant. Preliminary
estimates of the total costs remaining to be incurred prior to 2000 range from
$0.2 million to $0.3 million. Maintenance or modification costs will be expensed
as incurred, while the costs of new software will be capitalized and amortized
over the software's useful life.
45
<PAGE> 53
SELECTED FINANCIAL DATA OF NDC
The following table sets forth selected historical financial data of NDC as
of and for each of fiscal years ended October 31, 1995, 1996 and 1997 and the
five-month periods ended March 31, 1997 and 1998. The historical financial data
under the captions Statement of Operations Data, Other Financial Data and
Balance Sheet Data for the fiscal years ended October 31, 1995 through 1997 have
been derived from the financial statements of NDC, which have been audited by
KPMG Peat Marwick LLP, Omaha, Nebraska, and are included elsewhere in this
Prospectus. The historical financial data for the five-month periods ended March
31, 1997 and 1998 have been derived from the unaudited condensed financial
statements of NDC included in this Prospectus, which include all adjustments
that management considers necessary to present fairly the financial results for
this interim period, all of which were of a normal recurring nature. The results
of operations for the five-month periods are not necessarily indicative of
results to be expected for the full year. This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of NDC" and the financial statements of NDC included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FIVE MONTHS ENDED
OCTOBER 31, MARCH 31,
----------------------------- ------------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................... $49,717 $54,853 $59,292 $21,722 $25,561
Cost of goods sold........................... 40,916 43,461 45,862 17,150 19,973
------- ------- ------- ------- -------
Gross margin.............................. 8,801 11,392 13,430 4,572 5,588
Selling, general and administrative
expenses.................................. 6,601 5,516 5,815 1,888 2,472
------- ------- ------- ------- -------
Operating income.......................... 2,200 5,876 7,615 2,684 3,116
Other income (expense):
Interest income........................... 55 22 242 291 344
Interest expense.......................... (135) (43) (183) (76) (61)
Other income (expense).................... (2) 42 54 21 54
------- ------- ------- ------- -------
Earnings before income taxes.............. 2,118 5,897 7,728 2,920 3,453
Income tax expense........................ -- -- -- -- --
------- ------- ------- ------- -------
Net earnings......................... $ 2,118 $ 5,897 $ 7,728 $ 2,920 $ 3,453
======= ======= ======= ======= =======
OTHER FINANCIAL DATA:
EBITDA (a)................................... $ 2,650 $ 6,339 $ 8,112 $ 2,877 $ 3,316
Gross profit margin.......................... 17.7% 20.8% 22.7% 21.0% 21.9%
Total depreciation........................... $ 450 $ 463 $ 497 $ 193 $ 200
Capital expenditures......................... 1,758 571 1,419 262 222
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets................................. $23,600 $22,144 $25,991 $22,166 $24,076
Total debt................................... 2,441 1,472 1,422 -- --
Stockholders' equity......................... 8,335 10,887 14,665 13,207 16,918
</TABLE>
- ------------------------------------
(a) EBITDA is defined as operating income before depreciation and amortization.
While EBITDA is not intended to represent cash flow from operations as
defined by GAAP and should not be considered as an indicator of operating
performance or an alternative to cash flow (as measured by GAAP) as a
measure of liquidity, management believes it provides additional information
with respect to the ability of a company to meet its future debt service,
capital expenditures and working capital requirements. The measure of EBITDA
presented above may not be comparable to similarly titled measures of other
companies.
46
<PAGE> 54
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF NDC
The following discussion relates to the historical business, financial
condition and results of operations of NDC prior to the consummation of the
Acquisition on June 23, 1998.
OVERVIEW
NDC designed, manufactured and sold industrial watertube boilers, waste
heat recovery systems and related components for industrial and commercial
applications. In addition, NDC manufactured standard and customized fabricated
steel products.
Net Sales. Industrial watertube boilers, waste heat recovery systems and
related components accounted for substantially all of NDC's net sales for the
fiscal years ended October 31, 1997, 1996 and 1995, respectively. Less than 10%
of net sales were attributable to other products.
Cost of Goods Sold. The principal elements of NDC's cost of goods sold were
raw materials, component parts, engineering and manufacturing overhead, direct
labor and related start-up and warranty expenses. NDC's major raw materials
varied by plant but included steel, tubes and various manufactured and purchased
component parts. Raw materials and component parts represented approximately 62%
of NDC's total cost of goods sold for fiscal 1997.
NDC's gross margin improved from 17.7% in fiscal 1995 to 22.7% in fiscal
1997. This increase in gross margin was primarily attributed to an increase in
volume at the Gonzales, Texas manufacturing facility, which was acquired in
1995, as well as improved pricing in the industrial watertube and waste heat
recovery product lines.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses declined from 13.3% of net sales in fiscal 1995 to 9.8%
in fiscal 1997 primarily due to a 19.3% increase in sales volume during the
period and associated operating efficiencies.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
to net sales of certain items included in NDC's statement of earnings.
<TABLE>
<CAPTION>
FIVE MONTHS ENDED
FISCAL YEAR ENDED OCTOBER 31, MARCH 31,
----------------------------- ------------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales............................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Gross margin.......................................... 17.7 20.8 22.7 21.0 21.9
Selling, general and administrative expenses.......... 13.3 10.1 9.8 8.7 9.7
------ ------ ------ ------ ------
Total operating income................................ 4.4% 10.7% 12.8% 12.3% 12.2%
====== ====== ====== ====== ======
</TABLE>
FIVE MONTHS ENDED MARCH 31, 1998 COMPARED FIVE MONTHS ENDED MARCH 31, 1997
Net Sales. Net sales increased $3.9 million (17.7%) to $25.6 million in
1998 from $21.7 million in 1997 primarily due to increased volume of waste heat
recovery systems.
Gross Margin. Gross margin increased $1.0 million (22.2%) to $5.6 million
in 1998 compared to $4.6 million in 1997 and improved to 21.9% of net sales from
21.0% in the prior year. This improvement was primarily attributable to a more
favorable product mix as NDC sold more waste heat recovery systems with higher
gross margins.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.6 million to $2.5 million in 1998 (9.7% of
net sales) compared to $1.9 million (8.7% of net sales) in 1997.
47
<PAGE> 55
Operating Income. Operating income increased to $3.1 million in 1998 from
$2.7 million in 1997 due to the preceding factors.
YEAR ENDED OCTOBER 31, 1997 COMPARED TO YEAR ENDED OCTOBER 31, 1996
Net Sales. Net sales increased $4.4 million (8.1%) to $59.3 million from
$54.9 million in 1996 primarily due to volume increases in waste heat recovery
systems and from increased volume of fabricated boiler and waste heat recovery
components, partially offset by a modest decline in industrial watertube boiler
net sales from fiscal 1996's historically strong levels.
Gross Margin. Gross margin increased $2.0 million (17.9%) to $13.4 million
in 1997 from $11.4 million in 1996. As a percentage of net sales, gross margins
improved to 22.7% in 1997 from 20.8% in 1996 primarily due to an improved mix of
product sales, operating leverage associated with NDC's overall increase in net
sales and volume, and modest price increases.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $5.5 million in 1996 (10.1% of net sales)
to $5.8 million in 1997 (9.8% of net sales), primarily due to the increase in
net sales.
Operating Income. As a result of the foregoing factors, operating income
increased $1.7 million to $7.6 million in 1997 from $5.9 million in 1996.
YEAR ENDED OCTOBER 31, 1996 COMPARED TO YEAR ENDED OCTOBER 31, 1995
Net Sales. Net sales increased $5.2 million (10.3%) to $54.9 million in
1996 from $49.7 million in 1995. The increase was primarily due to strong sales
of industrial watertube boilers as the overall market improved, partially offset
by a decline in waste heat recovery volume due to the completion of two large
jobs in 1995. NDC also increased sales of fabricated components to other waste
heat recovery manufacturers in 1996.
Gross Margin. Gross margin increased $2.6 million (29.4%) to $11.4 million
in 1996 compared to $8.8 million in 1995. As a percentage of net sales, gross
margin improved to 20.8% in 1996 from 17.7% in 1995, primarily due to the
increase in net sales and increased utilization of the Gonzales facility.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses declined $1.1 million to $5.5 million in 1996 from $6.6
million in 1995, primarily due to a decline in bad debt expense and salaries,
offset by an increase due to the increase in sales.
Operating Income. As a result of the foregoing factors, operating income
increased $3.7 million (168.2%) to $5.9 million in 1996 from $2.2 million in
1995.
YEAR 2000
NDC has assessed and continues to assess the impact of the year 2000 issue
on its operations. Although ultimate costs cannot yet be estimated, management
does not expect to incur significant costs in order to become year 2000
compliant.
48
<PAGE> 56
BUSINESS OF THE COMPANY
HISTORY
Founded in 1929 as the John C. Cleaver Company and later known as
Cleaver-Brooks, the Company began as an innovative manufacturer of small,
portable boilers that were packaged and fully assembled. Cleaver-Brooks, which
continues to operate as a division of the Company, eventually became, and for
over 20 years has been, the world's largest manufacturer of commercial and
industrial boilers, burners, related boiler-room equipment and aftermarket
parts. Cleaver-Brooks began manufacturing steam-powered water purification
stills in the early 1940's in response to a military request for a portable
system capable of purifying unfit drinking water. This business, which currently
operates as the Company's Water Technologies division, has become a leading
manufacturer of innovative water treatment products and systems for a variety of
commercial, government, military and industrial applications. The Company
completed the acquisition of substantially all of the assets of NDC on June 23,
1998 and now conducts NDC's former operations through its National Dynamics
Division.
BOILER MARKET
Boilers burn a variety of fuels to provide: (i) hot water for residential,
commercial, institutional and industrial uses; (ii) hot water or low-pressure
steam for use in circulatory heating systems; and (iii) process steam for a wide
variety of industrial applications and to drive turbines for the generation of
electricity. The boiler market can generally be segmented according to boiler
capacity and end use. Residential boilers are the smallest, followed by
commercial boilers, industrial boilers, and utility boilers, which are the
largest. Boiler capacities generally are measured in British Thermal Units
("BTU") or boiler horsepower ("BHP") output for smaller boilers, and in pounds
of steam per hour ("PPH") for larger boilers. One BHP equals 33,472 BTU per
hour, which in turn produces approximately 28 to 35 PPH, depending on pressure
and feedwater temperature.
Commercial boilers generally range from 15 BHP (or approximately 500,000
BTU per hour) up to 250 BHP and are used in apartment buildings, hotels, office
buildings, schools, hospitals, and government buildings primarily to provide hot
water or low-pressure steam for circulatory heating systems, and, to a lesser
extent, for potable hot water. Commercial boilers range in price between $15,000
and $50,000.
Industrial boilers, with capacities from approximately 250 BHP to over
250,000 PPH, are larger, more powerful and more expensive than commercial
boilers, and are generally used to provide high-pressure process steam for
industrial applications, such as driving steam-operated presses, mill equipment
or machine tools, sterilizing equipment and products, and processing chemicals,
foods, beverages, and other products. Industrial boilers are used in a broad
range of industries including paper, chemicals, electronics, pharmaceutical,
textiles, automotive, and heavy machinery. Industrial boilers range in price
between $50,000 and $1 million.
Based on industry sources, the annual worldwide market for boilers of all
types is estimated to be in excess of $1 billion, of which approximately $400
million is attributable to the North American commercial and industrial boiler
market.
CLEAVER-BROOKS DIVISION
The Company's Cleaver-Brooks Division ("Cleaver-Brooks") is the world's
largest manufacturer of commercial and industrial boilers. It has an estimated
installed base of approximately 80,000 boilers that remain in use and believes
it has the #1 or #2 market position in each of its principal product lines. The
division's products include firetube and watertube boilers, burners, and
combustion and emission controls, boiler room accessories, and aftermarket
parts. Management believes that Cleaver-Brooks' reputation for providing
high-quality, energy-efficient, low-emission boilers and ancillary equipment
with a demonstrated record of safety and durability often enables it to command
a premium price for its products from its diverse customer base. Cleaver-Brooks
accounted for approximately 81% ($154.9 million) of Aqua-Chem's net sales, and
an even higher percentage of EBITDA, for the twelve months ended December 31,
1997.
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<PAGE> 57
PRODUCTS
Cleaver-Brooks manufactures two types of boilers, firetube and watertube,
for commercial and industrial applications. Most Cleaver-Brooks boilers can
operate on multiple fuel options using both natural gas and fuel oil.
Cleaver-Brooks primarily manufactures "packaged" boilers, which are shipped
fully assembled and require minimum on-site installation, and also manufactures
a limited number of boilers that are designed to be "field-erected" at the
customer's facility. The high-quality boilers manufactured by Cleaver-Brooks
generally have a useful life of 20 years or more, depending upon use and
maintenance.
FIRETUBE BOILERS. Firetube boilers heat water or produce steam by directing
hot gas from the combustion process through tubes which are submerged in a
chamber of water inside the boiler. Heat is transferred from the hot gas in the
tube through the tube walls to the water.
Cleaver-Brooks offers the industry's broadest line of firetube boilers,
which are generally used in low- and high-pressure industrial applications, and
to produce heat and hot water for large commercial and institutional buildings.
Cleaver-Brooks firetube boilers range in capacity from 15 to 800 BHP. Although
each Cleaver-Brooks firetube boiler is manufactured to specific customer
requirements, each is based on relatively standardized pressure vessel sizes and
other basic components. The prices of Cleaver-Brooks firetube boilers range from
approximately $25,000 to $150,000. Firetube boilers represented approximately
$68 million, or 44%, of Cleaver-Brooks' net sales for the twelve months ended
December 31, 1997.
Cleaver-Brooks firetube boilers are highly regarded for their quality,
efficiency, safety, design simplicity, and ease of operation and maintenance, as
well as their long product life and low emission levels. High efficiency is
often the primary criterion in selecting a boiler as annual fuel costs can
greatly exceed a boiler's purchase price. Because a $50,000 boiler system could
consume over $150,000 per year in fuel, a slight increase in boiler efficiency
can translate into substantial annual savings. Cleaver-Brooks boilers are
designed to operate efficiently to reduce customers' fuel costs. They include
what Aqua-Chem believes to be the world's highest efficiency "four-pass" design
and maintain high gas velocity which provides maximum heat transfer. They also
utilize a single tube sheet design that maintains consistent temperatures for
maximum operating life. Aqua-Chem believes that these factors provide it with a
competitive advantage in the firetube boiler market.
WATERTUBE BOILERS. Watertube boilers produce hot water or steam by
directing water through tubes installed in a chamber filled with hot gas from
the combustion process. This fundamental difference between the firetube and
watertube process allows watertube boilers to be designed with greater capacity
and makes watertube boilers more suitable for certain large, multi-step
industrial applications than firetube boilers. Cleaver-Brooks produces watertube
boilers in a range of models and capacities. Like its firetube boilers,
Cleaver-Brooks watertube boilers are manufactured for maximum efficiency and
ease of maintenance and are purchased by both industrial and commercial
end-users.
Cleaver-Brooks commercial watertube boilers range in capacity from 15 to
250 BHP, which is comparable to its smaller capacity firetube boilers, and
include flexible watertube boilers designed to simplify installation,
maintenance and tube replacement. The division's flexible watertube boilers
minimize potential thermalshock damage due to temperature fluctuation, an
especially important consideration with hot water applications.
Cleaver-Brooks manufactures industrial watertube boilers of only the "D"
design (so named because the watertubes inside the boiler are shaped in the
configuration of the letter "D"), which is preferred by manufacturers for most
industrial applications. Cleaver-Brooks industrial watertube boilers range in
capacity from 40,000 to 140,000 PPH (the approximate equivalent of 1,400 to
4,000 BHP).
Cleaver-Brooks watertube boilers range in price from approximately $25,000
to $500,000. Watertube boilers represented approximately $25 million (16%) of
the division's net sales for the twelve months ended December 31, 1997.
BURNERS. Cleaver-Brooks is a leading supplier of highly-engineered, single
and multi-fuel engineered burners. These burners are installed as original
equipment on certain Cleaver-Brooks product lines, as a retrofit
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<PAGE> 58
to existing boilers where an upgraded or new burner is required, or, under the
Industrial Combustion brand name, on new boilers manufactured by competitors.
Cleaver-Brooks manufactures a broad range of burners that give customers the
flexibility to burn most liquid and gaseous fuels in use today. The Industrial
Combustion product line has an exceptionally strong market position
(approximately 90%) for heavy oil burners and is increasing its share of the gas
burner market. It was instrumental in originating the conversion burner business
and pioneered air atomizing and fuel metering technologies for using heavy fuel
oil.
BOILER ROOM ACCESSORIES. Cleaver-Brooks also offers a wide range of boiler
room accessories, most of which are used to ensure that corrosive gases and
impurities found in water do not seriously affect boiler performance. This
equipment includes deaerators, water softeners, boiler feed water systems and
chemical feed systems. Other boiler room accessories regulate the flow of water
to and from the boiler.
AFTERMARKET PARTS. Taking advantage of its industry-leading installed base
of approximately 80,000 boilers, Cleaver-Brooks offers over 15,000 aftermarket
parts for its own and other manufacturers' boilers through its computerized
immediate access system. The immediate access system electronically links
Cleaver-Brooks' sales representatives and provides information regarding parts
availability, price lists and lead time. Cleaver-Brooks' sales representatives
and distributors stock Cleaver-Brooks parts inventory on a worldwide basis.
Aftermarket parts, which generally carry higher gross margins than new boilers,
represented approximately $31 million (20%) of Cleaver-Brooks' net sales for the
twelve months ended December 31, 1997. As part of several strategic initiatives,
management is emphasizing further penetration of the aftermarket parts business
through additional training and support of its extensive sales representative
network.
Aftermarket products sold by Cleaver-Brooks include a wide range of
combustion and emission controls that generally enhance boiler performance or
safety, including low nitrous oxide ("NO(X)") emissions packages, conversion or
replacement burners, boiler control management systems, high turndown burners,
oxygen trim systems, and flame safeguard controls. For example, Cleaver-Brooks'
industry-leading low NO(X) emissions packages are guaranteed to as low as 20
parts per million ("ppm") of NO(X) levels and are extremely effective at
maintaining system efficiency levels. The majority of these parts are offered as
options to a boiler package.
Although boilers generally have a useful life of up to 20 years, certain
boiler parts are subject to wear and require periodic replacement. These parts
consist primarily of combustion-oriented components such as burners,
burner-safety components, and emissions controls, but also include certain
water-bearing components. The need for aftermarket parts is a function of the
level of use to which a boiler is subjected. Boilers that "cycle" (turn on and
off) more frequently tend to wear more quickly. In addition, oil-burning
components tend to wear more quickly than natural gas-burning components.
Water-bearing components of a boiler can wear more quickly if the end-user does
not properly treat the water used in the boiler to reduce corrosive gases and
impurities that accumulate in untreated water.
Commercial boiler wear can also be affected by cold weather, when a boiler
is more likely to cycle more frequently. Many Cleaver-Brooks boilers are
equipped with multi-fuel options and can readily be switched by the end-user
from one fuel to the other. In many locations, boilers are required by law to
switch from burning natural gas to oil during extended periods of cold weather,
when demand for natural gas for residential and commercial forced-air heating is
high and available gas pressure is reduced. Industrial applications can also
involve high-cycle use, causing boilers to wear more quickly. Inadequate
maintenance practices can also affect boiler wear.
In addition, the demand for aftermarket parts generally increases during
periods of economic difficulty when many businesses elect to defer the purchase
of new boilers in favor of repairing or retrofitting existing boilers. Aqua-Chem
believes that this phenomenon partially offsets the reduced demand for new
boilers during such periods.
COMMITMENT TO QUALITY
Cleaver-Brooks has received numerous industry and quality awards, including
the State of Wisconsin's 1995 Governor's New Product Award. Several of the
division's products have been recognized by the
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<PAGE> 59
Wisconsin Society of Professional Engineers and the Model CB-LE was among a
select group of winners in a statewide competition which singled out new product
innovations in large, medium and small business segments. Additionally, with the
introduction of its low nitrous oxide (NO(X)) emissions product in 1995,
Aqua-Chem was the first boiler manufacturer cited by the California Clean Air
Board and South Coast Air Quality Management District for meeting California's
stringent emissions standards, as well as by the New York Bureau of Air
Research.
SALES, MARKETING AND CUSTOMERS
Cleaver-Brooks maintains strong relationships with its worldwide network of
sales and service representatives, which management believes to be the most
extensive global distribution network for commercial and industrial boilers.
Cleaver-Brooks sells boilers through 50 domestic sales representatives located
throughout North America and 43 international sales representatives located in
Eastern Europe, Asia, Australia, Central and South America, and the Middle East.
These sales representatives have sold Cleaver-Brooks products for an average of
more than 25 years, and do not sell products that compete directly with
Cleaver-Brooks. No sales representative accounted for more than approximately 5%
of Cleaver-Brooks' net sales in the twelve months ended December 31, 1997.
Cleaver-Brooks' sales representatives primarily offer on-demand service and
parts support to consulting engineers, contractors and end-users, as well as
offering multi-year service contracts for boiler parts and accessories.
Additionally, as is customary in the industry, sales representatives provide
on-site start-up assistance and personnel training by factory-qualified
specialists and preventive maintenance programs as part of the range of services
available to keep boiler and pretreatment equipment operating at peak
performance.
Cleaver-Brooks sells boilers to a diverse customer base in a broad range of
industries, with no significant customer concentration. Although Cleaver-Brooks'
customers vary from year to year, management believes that a substantial portion
of annual net sales are generally to repeat customers. Recent customers include
Ford, Cargill, Coca-Cola, Weyerhaeuser, Anheuser-Busch, Baxter Healthcare,
Ralston-Purina, Hewlett-Packard, Georgia Pacific, Chrysler-Jeep, Wrigley,
Sheraton, IBM, and NASA.
RAW MATERIALS AND SUPPLIERS
Cleaver-Brooks' primary raw materials include steel plate and coil steel.
The division also purchases finished components for its products, such as
burners, tubes, controls, insulation, refractory materials, valves, gauges and
pumps. Cleaver-Brooks maintains one-year supply agreements with its steel
suppliers. These arrangements generally specify volume and price, but are
cancelable at any time by either party. For raw materials not covered by supply
agreements, Cleaver-Brooks generally chooses a particular supplier based on
market conditions, availability and pricing. Cleaver-Brooks works closely with
its major suppliers and is not dependent on any single supplier for any of its
raw material or component needs. Cleaver-Brooks is currently implementing new
purchasing procedures to reduce material costs, including consolidation of its
suppliers.
MANUFACTURING
Cleaver-Brooks operates through five manufacturing facilities located in
Stratford, Ontario, Canada; Thomasville, Georgia; Monroe, Wisconsin; Mexico
City, Mexico and Greenville, Mississippi (however, the Company plans to close
its Greenville facility and transfer production to certain other facilities).
Additionally, Cleaver-Brooks conducts applied engineering and product
development activities at a Milwaukee, Wisconsin location, which is shared with
Water Technologies. See "-- Properties and Employees."
The Company has intensified its efforts to develop world-class
manufacturing facilities. Beginning in 1995, Aqua-Chem closed its Lebanon,
Pennsylvania facility, and consolidated its large firetube boiler production in
its Thomasville facility, and its smaller firetube boiler production in its
Stratford facility. These consolidations reduced labor and overhead costs by up
to one-third and took advantage of certain economies of scale in each facility.
In addition, the Company has been engaged in a program to improve its
manufacturing processes by adopting cellular manufacturing techniques,
just-in-time inventory controls and demand flow processing. These initiatives
have minimized scrap, identified manufacturing inefficiencies, significantly
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reduced manufacturing cycle times and have already improved manufacturing
efficiency and inventory management at the Thomasville facility. Aqua-Chem
expects to implement similar cost reduction initiatives and manufacturing
improvements at its other facilities. Aqua-Chem has also established an internal
manufacturing council to address ongoing process improvements, share best
practices and instill a broad base of manufacturing expertise throughout the
organization.
NATIONAL DYNAMICS DIVISION
The Company's National Dynamics Division ("National Dynamics") consists of
the former operations of NDC which were acquired by Aqua-Chem on June 23, 1998.
All references to historical data of NDC, and the term "NDC," refer to the
National Dynamics Division's operations under the ownership of NDC.
PRODUCTS
National Dynamics primarily designs and manufactures industrial watertube
boilers, waste heat recovery systems, and related accessories, as well as a
variety of standard and customized fabricated steel components, such as ductwork
and stacks, which are insourced for use in National Dynamics' products and
produced on a contract basis for other waste heat recovery systems
manufacturers. For the year ended October 31, 1997, NDC's net sales of
industrial watertube boilers and waste heat recovery systems, including related
accessories and components, represented approximately 90% of NDC's net sales.
INDUSTRIAL WATERTUBE BOILERS. National Dynamics produces shop-assembled
industrial watertube boilers, components and other boiler accessories under the
Nebraska Boiler brand-name, chiefly for industrial and institutional
applications. The Nebraska Boiler product line consists primarily of industrial
watertube boilers with larger capacities than those manufactured by
Cleaver-Brooks. Although National Dynamics manufactures industrial watertube
boilers with capacities as low as 7,000 PPH, its primary focus is on large
industrial watertube boilers that range in capacity from 100,000 to 250,000 PPH.
In contrast, Cleaver-Brooks focuses on commercial and industrial watertube
boilers with capacities under 100,000 PPH. The Nebraska Boiler product line also
includes industrial watertube boilers that are capable of producing steam at
much higher temperatures and pressures than those manufactured by
Cleaver-Brooks. NDC manufactured approximately 80 to 90 industrial watertube
boilers per year, which typically ranged in price from approximately $150,000 to
$1 million each.
National Dynamics' primary unit is the "D" design watertube boiler, which
accounted for approximately 72% of NDC's boiler sales in fiscal 1997. Nebraska
Boiler industrial watertube boilers generally utilize the "membrane" tube
design, in contrast to Cleaver-Brooks boilers, which utilize the "tangent" tube
design, each of which is preferred by certain end users for various reasons.
National Dynamics is also one of the few boiler manufacturers that produces "O"
and "A" design boilers in addition to the "D" design. Although the "D" design is
preferred for most industrial applications, the symmetrically designed "O" and
"A" boilers are more readily transportable and better suited for certain uses.
"O" design boilers in particular are compact, fully assembled, easily
transported by truck, and for these reasons are considered ideal for use as
"rental" boilers (boilers installed temporarily to provide supplemental, backup
or replacement service). "A" design boilers typically are designed to have
greater capacity than the "O" or "D" designs and can be designed to burn a
variety of alternative fuels (such as coal, wood and saw dust). "O" and "A"
design boilers accounted for approximately 8% and 20%, respectively, of NDC's
boiler sales in fiscal 1997.
National Dynamics also manufactures industrial watertube boiler components
and accessories, such as ducts, stacks, superheaters (an integral unit in the
boiler that heats the steam produced by the boiler to temperatures in excess of
750 degreesF for particular industrial applications) and economizers (an
integral or add-on unit that captures the heated air and flue gases vented from
the boiler's combustion chamber and uses them to preheat water entering the
boiler to conserve energy).
WASTE HEAT RECOVERY SYSTEMS. National Dynamics designs and produces a
variety of packaged, modular and field-erected waste heat recovery systems under
the Energy Recovery International or "ERI" brand-name. The general principle
behind these systems is that the waste heat generated by a turbine or industrial
process
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can be recaptured and directed into a pressure vessel (resembling a burnerless
boiler) to generate hot water or steam, which can in turn be used to drive a
turbine to generate electricity (a process referred to as "co-generation") or
for other industrial applications. Co-generated electric power may be used
internally; however, if it is generated at levels in excess of internal need,
which is often the case, the excess electricity is generally sold to the local
power company, which has been made possible through the deregulation of the
domestic electrical power industry over the last few years. For certain
applications, waste heat recovery systems can also be designed to operate with a
supplemental heat source, such as a duct burner, that raises the temperature and
pressure to levels comparable with conventional boilers.
NDC's sales of ERI products grew rapidly in the last few years and the
Company expects that such growth will continue due to increased demand for
energy efficient and environmentally conscious power projects, as well as
increased deregulation. Waste heat recovery systems are increasingly popular
because they provide an alternative source of power at significantly reduced
fuel cost.
National Dynamics offers complete system design and service, based on the
customer's specific needs and requirements. In particular, waste heat recovery
systems are generally custom-designed for integration with the individual
customer's facility and equipment at the time of construction. NDC manufactured
approximately 15 to 20 waste heat recovery systems per year.
SALES, MARKETING AND CUSTOMERS
National Dynamics markets its products primarily on the basis of quality,
dependability and custom engineering, which is complemented by the longstanding
working relationships NDC developed with customers and premier engineering
firms. National Dynamics products are marketed worldwide through its 46 sales
representatives and distributors, most of whom sell both Nebraska Boiler and ERI
products. No sales representative accounted for more than approximately 11% of
NDC's net sales for the year ended October 31, 1997. For the year ended October
31, 1996, one customer, Thai Petrochemical, accounted for more than 10% of NDC's
net sales.
National Dynamics sells its products to a diverse customer base in a broad
range of industries, with no significant customer concentration. Recent NDC
customers included Anheuser-Busch, Warner-Lambert, Bristol-Myers, General
Motors, Westinghouse, and Cargill, as well as engineering firms such as
Fluor-Daniels, Bechtel, Black & Veach, and Day and Zimmerman.
RAW MATERIALS AND SUPPLIERS
National Dynamics' primary raw material is steel, and it also purchases
finished components for its products, such as burners, tubes, controls,
insulation, refractory materials, valves, gauges and pumps. National Dynamics is
not dependent on any single supplier for any of its raw material or component
needs.
MANUFACTURING
National Dynamics operates three manufacturing facilities, two of which are
located in Lincoln, Nebraska and one of which is located in Gonzales, Texas. See
"-- Properties and Employees."
WATER TECHNOLOGIES DIVISION
With over 50 years of experience, Water Technologies is a world leader in
the design and production of water purification and treatment products, systems,
aftermarket parts and service for selected commercial, government, military and
industrial applications. Water Technologies, which markets and sells its
products under the Aqua-Chem brand name, has two product categories: (i)
Freshwater and Military Products, which consist of products with relatively
standard components and configurations that are generally sold to customers in
the military, bottled water and pharmaceutical markets; and (ii) Seawater and
Process Systems, which consist primarily of large, highly engineered projects
and products that generally are sold to customers in markets for seawater
desalination and industrial evaporation processes. Water Technologies accounted
for
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approximately 19% ($36.3 million) of Aqua-Chem's net sales for the twelve months
ended December 31, 1997.
PRODUCTS AND SERVICES
Water Technologies manufactures products that utilize evaporation and
filtration technologies to create purified water for use in a variety of
applications. Water Technologies' primary products are thermal distillation
units, which convert seawater or contaminated fresh water into clean water for
drinking and manufacturing processes by passing feedwater over a heated surface
to create steam that is then condensed as distillate. Water Technologies also
offers reverse osmosis units, which pressurize contaminated fresh or salt water
to force it through a semipermeable membrane to produce drinking water.
FRESHWATER AND MILITARY PRODUCTS. Freshwater and Military Products are
primarily pre-engineered water purification and treatment products and systems
for the bottled water and pharmaceutical industries and for the military. Water
Technologies also provides services and replacement parts for its Freshwater and
Military Products. Most Freshwater and Military Products are various types of
thermal distillation units, including an all-electric thermal distillation unit
that is installed on all U.S. Navy Trident submarines. Aqua-Chem believes that
every U.S. aircraft carrier and nuclear submarine utilizes Water Technologies
products to purify water for use by onboard personnel. Water Technologies also
manufactures a reverse osmosis unit marketed under the "ROWPU" (Reverse Osmosis
Water Purification Unit) name that is sold primarily to the U.S. military.
Freshwater and Military Products also include heat exchangers, which are used by
food, chemical and other industries to cool liquids. For example, the U.S. Navy
uses Water Technologies' heat exchangers for seawater cooling of nuclear reactor
waste water and feedwater preheating in steam propulsion plants of nuclear
aircraft carriers. Freshwater and Military water purification units and heat
exchangers generally sell for between $100,000 and $500,000.
Although individual units may be adapted to meet unique customer
specifications, Water Technologies manufactures all Freshwater and Military
Products to basic design parameters at its Knoxville, Tennessee facility.
Freshwater and Military Products are shipped from the Knoxville facility to the
customer as fully-manufactured systems that require a minimum number of piping
and electrical connections for installation. Once installed, the unit is ready
for operation.
SEAWATER AND PROCESS SYSTEMS. Seawater and Process Systems are highly
engineered systems for land-based and offshore desalination and manufacturing
process plants. Water Technologies utilizes a number of thermal distillation
technologies to meet the specific needs of its Seawater and Process Systems
customers. Water Technologies offers both single effect systems, which are
low-cost and simple to operate, and multi-effect systems, which conserve energy
by linking two, three or more evaporators in series and, as a result, are more
popular for industrial applications. For example, Water Technologies has
installed a 10 million gallon per day seawater desalination system which
produces the entire fresh water supply for the Caribbean island of Aruba.
Seawater and Process Systems include thermal distillation units used by the pulp
and paper industry to concentrate heavy scaling sulfite pulping liquors. Water
Technologies also offers reverse osmosis units for industrial applications.
Many Seawater and Process Systems component parts are fabricated, assembled
and hydro-tested at the Knoxville facility prior to shipment to the customer's
job site, where they are assembled into a field erected plant. Seawater and
Process Systems are highly project oriented, may take from 10 to 14 months to
complete, and are contracted on a fixed-price basis, typically ranging between
$1 million and $10 million in installed value.
SALES, MARKETING AND CUSTOMERS
Water Technologies utilizes a network of over 40 representatives,
distributors and licensees worldwide to sell and market its Freshwater and
Military Products. Sales representatives are compensated on a commission-only
basis, while distributors typically make a profit margin on the purchase and
resale of Water Technologies parts. Due to the unique engineering considerations
and the magnitude of the projects, most Seawater and Process Systems are sold by
Water Technologies directly to end-users.
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For the twelve months ended December 31, 1997, Water Technologies had
approximately 325 customers worldwide, with no one customer representing more
than 10% of its gross sales. Water Technologies' leading customers generally
vary from year to year, due in part to the project-oriented nature of many of
its Seawater and Process Systems. Recent customers include Arvind Mills, the
Aruba Water and Energy Authority, and Newport News Shipbuilding. International
customers represented approximately 50% of Water Technologies' sales over the
last three years, with revenues generated from over 35 countries. Payment terms
on international sales are typically denominated in U.S. dollars and satisfied
via letters of credit.
Typically, over half of Water Technologies' annual revenue is based upon
fixed-priced, long-term contracts. Generally, the term of the contract for
Freshwater and Military Products extends from the order date through shipment,
which usually ranges from 4 to 12 months. A start-up or test period may follow
shipment and last for 1 to 3 months. Customers are generally billed at the time
of shipment. Contract terms for Seawater and Process Systems may vary between 10
and 14 months. Seawater and Process Systems are contracted on a fixed-priced
basis, and customers are billed for work performed according to a pre-arranged
schedule detailed in the sales contract.
PRODUCT SERVICE AND SUPPORT
Water Technologies supports its products with a staff of engineers and
service specialists who provide parts, service, technical training, service
publications, overhaul and repair for customers around the world. For instance,
Water Technologies provides qualified technical training anywhere in the world
through a team of training specialists who work closely with customers to
develop productive and dependable operators for all equipment.
When service is needed, Water Technologies dispatches a qualified service
representative who assesses the customer's system and its repair requirements.
To meet customer needs quickly, Water Technologies distributors maintain
authorized parts and service centers across the continental United States, as
well as service centers in Alaska, Canada, South America, Northern Europe,
Southeast Asia, the Middle East and India.
RAW MATERIALS AND SUPPLIERS
Water Technologies utilizes a wide variety of raw materials in the
construction of its products, including copper-nickel, alloys, stainless steel,
electrical control systems and a number of plastic and metal component parts.
Water Technologies maintains relationships with a select group of suppliers to
leverage its purchasing power and may enter into purchasing agreements to ensure
a reliable source of materials. Water Technologies has never experienced a
significant shortage of raw materials.
MANUFACTURING
Water Technologies' primary production facility is located in Knoxville,
Tennessee. The Knoxville plant, an ISO 9001 certified facility, provides
fabrication, machining, welding and assembly work for the production of both
Freshwater and Military Products and the component parts of Seawater and Process
Systems. Units are tested at the Knoxville plant prior to shipment to the
customer's site for installation. The division is currently implementing
cellular manufacturing techniques, just-in-time inventory controls and
demand-flow processing to improve manufacturing efficiency and reduce production
costs.
The Seawater and Process Systems business also utilizes subcontract
manufacturers in connection with international contracts when Aqua-Chem believes
that it provides a competitive advantage. To implement this international
subcontracting strategy, Water Technologies employs pre-qualified subcontractors
and project managers who are responsible for ensuring that quality, schedule and
other specifications of its Seawater and Process Systems contracts are met.
These project managers are supported by engineers who specialize in the
erection, commissioning, performance testing and overall service and
troubleshooting of the systems.
Water Technologies shares an applied engineering and product development
facility with Cleaver-Brooks for evaluating the practical application of
evaporator technology on a broad range of processing needs. This
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capability is an important part of Water Technologies' operations, enabling it
to test the performance and cost effectiveness of the systems it offers.
PROPERTIES AND EMPLOYEES
The following table sets forth certain information regarding the Company's
properties and employees as of June 30, 1998:
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE NUMBER OF
SQUARE EMPLOYEES AT
FACILITY LOCATION USAGE FOOTAGE OWNERSHIP FACILITY
- ------------------------------- --------------------------------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Milwaukee, Wisconsin........... Aqua-Chem, Inc. 81,000 Leased (a) 229
Corporate Headquarters
Milwaukee, Wisconsin........... Cleaver-Brooks and Water 27,000 Owned 9
Technologies
Product Development and Design
Greenville, Mississippi........ Cleaver-Brooks 88,000 Leased (b) 149(b)
Manufacturing (Commercial and
Industrial Watertube Boilers)
Stratford, Ontario, Canada..... Cleaver-Brooks of Canada, Ltd. 74,000 Owned 103(c)
Manufacturing (Firetube and
Commercial Watertube Boilers)
Mexico City, Mexico............ Cleaver-Brooks de Mexico 40,000 Owned 93(c)
Manufacturing (Miscellaneous
Parts and Components)
Thomasville, Georgia........... Cleaver-Brooks 185,000 Owned 253
Manufacturing (Firetube Boilers)
Knoxville, Tennessee........... Water Technologies 162,000 Owned 152
Manufacturing
Monroe, Wisconsin.............. Cleaver-Brooks 81,000 Owned 100(c)
Manufacturing (Burners and
Combustion and Emissions
Controls)
Lincoln, Nebraska.............. National Dynamics 150,000 Owned 218(c)
Manufacturing (Industrial
Watertube Boilers, Waste Heat
Recovery Systems)
Lincoln, Nebraska.............. National Dynamics 50,000 Owned 51
Manufacturing (Fabricated Steel
Components)
Gonzales, Texas................ National Dynamics 75,000 Owned 98
Manufacturing (Industrial
Watertube Boilers, Waste Heat
Recovery Systems and Fabricated
Steel Products)
Elk Grove Village, Illinois.... CB-Kramer Sales & Service, Inc. 46,000 Leased (d) 30
Sales, Service, Warehouse
Lebanon, Pennsylvania.......... (e) 164,000 Owned (e) --(e)
-----
Total: 1,445
</TABLE>
- ------------------
(a) The Company was formerly a limited partner in a partnership that owned this
facility. In July 1998 the partnership sold this facility to a third party
and the partnership was liquidated. The Company occupies the facility under
a lease which expires in June 2006.
(b) The Company plans to close the Greenville facility and transfer all
production currently located there to other Company facilities. The process
of transferring production is expected to be completed, and the
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Greenville facility closed within approximately one year. The Company has
entered into an agreement with the union representing production workers at the
Greenville facility regarding the transfer of production and closure of that
facility. The Company occupies this facility under a year to year lease
which automatically renews until 2061 unless terminated by either party
upon six months' notice.
(c) As of June 30, 1998, approximately 30% of the Company's employees were
represented by various unions. The Company's agreements with its unions
expire on January 1, 1999 in Mexico City, Mexico; on June 5, 2000 in
Stratford, Ontario; on January 19, 2001 in Monroe, Wisconsin and on November
1, 1999 in Lincoln, Nebraska. The Company has not experienced any strikes or
work stoppages in the past five years, except that in 1994, the employees
represented by the International Boilermakers Union at NDC's main
manufacturing facility in Lincoln went on strike for approximately six weeks
in connection with a dispute over employee contributions for health
benefits. See "Risk Factors -- Labor Relations."
(d) The Company occupies this facility under a lease which expires in November
1999.
(e) The Company's Lebanon, Pennsylvania facility, a 164,000 square foot
manufacturing plant, is currently partially leased to third parties and is
held for sale.
ENVIRONMENTAL AND RELATED MATTERS
The Company is subject to a variety of foreign, federal, state and local
laws and regulations relating to the use, storage, handling, generation,
transportation, treatment, emission, discharge, disposal and remediation of, and
exposure to, hazardous and non-hazardous substances, materials, and wastes
("Environmental Laws"). The Company is also subject to laws and regulations
governing employee health and safety.
Under certain Environmental Laws, the Company could be held strictly,
jointly and severally liable for the investigation and remediation of hazardous
substances, materials or wastes at currently or formerly owned or operated
properties, or at third-party waste disposal sites. In addition, the Company
could be held responsible for third-party property or personal injury claims
relating to such contamination or for other violations of Environmental Laws.
The Company has, in some cases, agreed to indemnify the owners of properties
formerly owned by the Company for liabilities under Environmental Laws with
respect to such properties and could be held liable for environmental conditions
which arose while these properties were owned by the Company regardless of such
indemnification. The Company has discovered environmental conditions at a number
of on-site locations that may require additional action, investigation and/or
remediation for which the Company, alone or with others, is or may be
responsible. The Company also has been identified as a responsible party at one
off-site disposal location. Although the Company does not believe that the
aggregate future costs associated with these matters will have a material
adverse effect on its business, results of operations or financial condition,
the amount of such costs in any one year could be substantial.
Certain Environmental Laws impose stringent permitting, operating,
reporting, and other compliance obligations on the Company's operations,
particularly with respect to air and wastewater emissions and to hazardous
substance management and disposal. Failure to comply with such Environmental
Laws could result in substantial fines or penalties, costly corrective action
requirements or operational changes, stringent monitoring or reporting
requirements, and, in certain instances, cessation of operations. The Company is
presently evaluating and addressing various environmental conditions at certain
of its facilities, including the potential that air permits will be required at
certain of its facilities. Although the Company believes that there are no
instances of non-compliance with Environmental Laws that would require it to
incur material costs, there can be no assurance that additional environmental
issues will not arise, either with respect to the Company's existing or formerly
owned facilities, which could have a material adverse effect on the Company's
business, results of operations, or financial condition.
LEGAL PROCEEDINGS
The Company has been named as one of a number of defendants in
approximately 5,900 lawsuits (of which approximately 3,600 are still pending)
alleging personal injury arising from exposure to asbestos-containing materials
allegedly contained in certain boilers manufactured by the Company or its
subsidiaries in the past. The Company believes that substantially all of these
lawsuits are without merit and has not admitted
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liability or been found liable for the plaintiff's injuries in any of these
cases. The Company has disposed of the vast majority of the closed cases without
payment, and is vigorously defending the open cases, although many may not be
resolved for several years. The Company believes that it has adequate insurance
coverage from a number of different insurance carriers for any potential
liability it may face as a result of such claims, although it has agreed to bear
a portion of the defense costs and indemnity payments with regard to a number of
these suits. The Company has established a reserve on its balance sheet to cover
any such exposure and believes this reserve to be adequate. It is the view of
management that the final resolution of said claims and other similar claims
which are likely to arise in the future will not individually or in the
aggregate have a material effect on the Company's financial position or results
of operations, although no assurance to that effect can be given. See "Risk
Factors -- Product Liability Litigation."
The Company is involved in various other litigation matters arising in the
normal course of business. It is the view of management that the Company's
recovery or liability, if any, under pending litigation is not expected to have
a material effect on the Company's financial position or results of operations,
although no assurance to that effect can be given.
PATENTS, TRADEMARKS AND COPYRIGHTS
The Company has a number of United States and foreign patents, patent
applications, patent licensing agreements, trademarks, trademark applications
and copyrights. The Company does not consider its business to be materially
dependent upon any patent, patent application, patent license agreement,
trademark, trademark application or copyright.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF AQUA-CHEM
The following table sets forth certain information concerning the directors
and executive officers of the Company. Each director is elected for a one year
term or until such person's successor is duly elected and qualified. The
Company's by-laws provide for six directors; the Board is currently comprised of
five directors and there is one vacancy on the Board to be designated by
Management (as defined).
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- --------------------------------------------------------
<S> <C> <C>
Jeffrey A. Miller.................... 48 President, Chief Executive Officer and Director
(Chairman of the Board)
J. Scott Barton...................... 49 Vice President, Chief Financial Officer
James A. Feddersen................... 54 Secretary
James H. Fordyce..................... 39 Director
James W. Hook........................ 61 Director
Daniel J. Johnson.................... 48 President-Water Technologies Division
William P. Killian................... 62 Director
Rand E. McNally...................... 46 Executive Vice President and General Manager-
Cleaver-Brooks Division
Charles J. Norris.................... 51 Vice President, Chief Information Officer
Michael R. Stone..................... 35 Director
Ronald G. Thimm...................... 42 Treasurer
</TABLE>
Jeffrey A. Miller has served as President and Chief Executive Officer of
the Company since July 1996 and assumed the role of Chairman of the Board in
August, 1997. Prior to such time, Mr. Miller had undertaken permanent and
interim Chief Executive Officer and Chief Operating Officer assignments for
various major industrial companies, including serving as interim President and
Chief Operating Officer of Donnelly Corporation (an automotive supplier) from
October, 1995 to May, 1996, and Group Vice President of the Automotive Products
Group of Aeroquip Corporation (an automotive supplier) from August, 1992 to
June, 1993. Mr. Miller also spent 19 years in numerous managerial and executive
positions within various business groups of The General Electric Company,
including transportation systems (locomotives, transit cars, transit equipment),
major appliances, mining, oil well drilling, industrial electronics, industrial
controls, factory automation and automotive.
J. Scott Barton has served as Vice President and Chief Financial Officer of
the Company since 1994. Mr. Barton served as Vice President and Controller of
the Company from 1992 to 1994, Corporate Controller of the Company from 1982 to
1992, and Controller of Water Technologies from 1980 to 1982.
James A. Feddersen has served as Secretary of the Company since 1990. Mr.
Feddersen is a shareholder of the law firm of Whyte Hirschboeck Dudek S.C.,
which he joined in 1973. See "Certain Relationships and Related Transactions"
and "Legal Matters."
James H. Fordyce has served as a Director of the Company since August,
1997. Mr. Fordyce is a general partner of J. H. Whitney & Co., a private equity
and mezzanine capital investment firm, which he joined in 1996. Mr. Fordyce
serves on the board of directors of several private companies. Mr. Fordyce was
Senior Vice President of Heller Financial, Inc., a commercial finance firm, from
1988 to 1996.
James W. Hook has served as a Director of the Company since January, 1998.
Mr. Hook has been a professor at the Robert J. McCormick School of Engineering
at Northwestern University since 1992. Mr. Hook served as consultant to
MascoTech, Inc. from 1992 to 1996.
Daniel J. Johnson has served as the President of Water Technologies since
September 1997. Prior to joining the Company, Mr. Johnson served as Vice
President and General Manager of MagneTek Corporation -- Power Electronics and
Drives Division from 1995 to 1997, as MagneTek's Division Vice President --
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Operations from 1994 to 1995, and as Vice president of MagneTek's Engineered
Systems Business Unit from 1991 to 1994. MagneTek Corporation designs,
manufactures and markets variable speed drive automation products and systems.
William P. Killian has served as a Director of the Company since 1993. Mr.
Killian has served as Vice President -- Corporate Development and Strategy at
Johnson Controls, Inc., a global manufacturer of automotive systems and
controls, since 1987. Mr. Killian is also a director of Gehl Company and Q.E.P.
Company, Inc.
Rand E. McNally has served as the Company's Executive Vice President and
General Manager-Cleaver-Brooks Division since November, 1994, and served as
Cleaver-Brooks' Senior Vice President from March, 1990 to November, 1994.
Charles J. Norris has served as Vice President and Chief Information
Officer of the Company since 1996. Prior to joining the Company, Mr. Norris
spent 16 years at Norris Systems Group, Inc., a business systems consulting
company founded and owned by Mr. Norris.
Michael R. Stone has served as a Director of the Company since August,
1997. Mr. Stone is a general partner of J. H. Whitney & Co., a private equity
and mezzanine capital investment firm, which he joined in 1989. Mr. Stone is an
alternate director of Steel Dynamics, Inc., and serves on the board of directors
of several private companies.
Ronald G. Thimm has served as Treasurer of the Company since 1990, and
prior to that as Assistant Treasurer since 1981.
DIRECTOR COMPENSATION
Directors of the Company, other than Messrs. Hook and Killian, receive no
compensation for their services as directors. The Company has entered into
written agreements with Messrs. Hook and Killian with regard to compensation for
their services as directors.
In accordance with the agreement entered into between the Company and Mr.
Killian on December 17, 1997, effective August 1, 1997, for so long as Mr.
Killian remains a director of the Company, the Company will pay him $2,500 on
the first day of February, April, July and November each year, regardless of the
number of meetings held or attended. In addition, the Company agreed to grant
Mr. Killian an option to purchase 600 shares of Common Stock of the Company at a
price of $3.75 per share on August 1 of each year, for so long as Mr. Killian
remains a director. Each option granted to Mr. Killian under this agreement
vests and becomes fully exercisable on July 31 of the year subsequent to the
date of grant and, if not previously exercised, expires and terminates on August
1, 2007; provided, however, that in the event of a Stock Sale, Reorganization or
Termination, as those terms are defined in the December 17, 1997 agreement, the
option may expire and terminate prior to such date.
In accordance with the agreement entered into between the Company and Mr.
Hook on February 19, 1998, effective January 23, 1998, the Company paid Mr. Hook
a one-time fee of $20,000 upon his acceptance of such agreement and, for so long
as Mr. Hook remains a director of the Company, the Company will pay him $2,500
on the first day of February, April, July and November each year, regardless of
the number of meetings held or attended. In addition, the Company granted Mr.
Hook an option to purchase 1,125 shares of Common Stock of the Company at a
price of $3.75 per share, which vest and become fully exercisable at the rate of
225 shares per year commencing on December 31, 1998 through and including
December 31, 2002, and which, if not previously exercised, expires and
terminates on February 11, 2008; provided, however, that in the event of a Stock
Sale, Reorganization or Termination, as those terms are defined in the February
19, 1998 agreement, the option may expire and terminate prior to such date.
The options granted to Messrs. Killian and Hook pursuant to their
compensation agreements with the Company are non-statutory options that are not
part of Aqua-Chem's employee Stock Option Plan and are non-transferable, except
through inheritance. The stock acquired by Messrs. Killian or Hook pursuant to
such options is subject to certain put-call provisions in the event of death or
disability and to a right of first refusal of the Company in the event of any
sale, transfer or other disposition of such stock.
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<PAGE> 69
EXECUTIVE COMPENSATION
The following table sets forth the cash and other compensation paid by the
Company in the fiscal years ended December 31, 1995 and 1996 and in the twelve
months ended December 31, 1997, to the Company's Chief Executive Officer and to
each of the Company's four other most highly compensated executive officers
(collectively, including the Chief Executive Officer, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(A)
----------------------------------------------------
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(B) COMPENSATION(C)
- ---------------------------------------------- ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
Jeffrey A. Miller............................. 1997(d)(e) $182,736 $304,712 $ 292
Chairman of the Board, Chief 1996(e) -- -- --
Executive Officer, President 1995(e) -- -- --
J. Scott Barton............................... 1997(d) $148,086 $ 82,571 $96,420
Vice President, Chief 1996 124,578 45,351 14,187
Financial Officer 1995 118,574 -- 15,181
Rand E. McNally............................... 1997(d) $182,226 $ 79,528 $99,350
Executive Vice President, 1996 145,018 61,285 11,588
General Manager-Cleaver-Brooks 1995 145,018 12,689 11,647
Charles J. Norris............................. 1997(d) $101,478 $ 34,804 $31,534
Vice President, Chief 1996 84,320 27,123 3,942
Information Officer 1995 80,262 2,019 3,779
Ronald G. Thimm............................... 1997(d) $ 89,606 $ 30,977 $ 7,883
Treasurer 1996 86,310 27,123 6,541
1995 82,805 -- 7,400
</TABLE>
- ------------------------------------
(a) Certain personal benefits provided by the Company to the Named Executive
Officers are not included in the table as permitted by regulations of the
Commission because the aggregate amount of such personal benefits for each
Named Executive Officer in each year reflected in the table did not exceed
the lesser of $50,000 or 10% of the sum of such officer's salary and bonus
in such year.
(b) Bonuses are reported for the year or period in which earned, although the
bonuses were paid after the end of the year or period shown.
(c) "All Other Compensation" includes the following:
<TABLE>
<CAPTION>
BARTON MCNALLY NORRIS THIMM
------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Company match under Aqua-Chem's
401(k) savings plan.......................... 1997 $ 4,750 $ 4,750 $ -- $2,870
1996 4,069 4,750 -- 2,589
1995 4,046 4,620 -- 2,920
Life insurance premium payments(i)............. 1997 $10,270 $ 700 $ 390 $ 344
1996 5,135 838 488 500
1995 5,135 1,027 568 586
Company Retirement Plan contribution........... 1997 $ 6,400 $ 6,400 $ 6,144 $4,669
1996 4,983 6,000 3,454 3,452
1995 6,000 6,000 3,211 3,894
"Change In Control" bonus(ii).................. 1997 $75,000 $87,500 $25,000 $ --
</TABLE>
----------------------------------------
(i) The premiums paid for Mr. Barton's policy in calendar 1997 were for two
years of coverage.
(ii) See "Employment Agreements," below.
(d) Represents aggregate compensation for the twelve months ended December 31,
1997 (combining the seven-month fiscal year ended July 31, 1997 and the five
months ended December 31, 1997).
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(e) Mr. Miller became President and Chief Executive Officer pursuant to an
Interim Management Agreement (the "Management Agreement"), dated July 8,
1996, as amended, between the Company and J. Miller Management, Inc.
("JMM"). Amounts paid by the Company under the Management Agreement were
paid to JMM and Mr. Miller was separately compensated by JMM. Mr. Miller
served as President and Chief Executive Officer pursuant to the Management
Agreement until July 31, 1997, when he became employed by the Company. See
"Certain Relationships and Related Transactions."
EMPLOYMENT AGREEMENTS
The Company has employment agreements with all of the Named Executive
Officers except Mr. Thimm. These agreements govern the compensation, benefits
and treatment upon termination under various circumstances, including voluntary
termination by either party or termination by reason of retirement, death or
disability.
Compensation under these employment agreements includes a base salary plus
a bonus calculated under the Company's management incentive program as a
percentage of the executive's base salary. Each Named Executive Officer is
entitled to participate in all employee benefit plans made available to the
Company's senior executive officers, including, without limitation, medical,
disability, life insurance, retirement and management incentive plans. The
employment agreements for the Named Executive Officers provide for additional
benefits, such as club membership, vacation, use of a Company car and
supplemental life insurance. The employment agreements of Messrs. Barton,
McNally and Norris provide for a bonus calculated as a percentage of base salary
(50% in the case of Mr. Norris and 100% in the case of Messrs. Barton and
McNally) in the event of a Change In Control, as that term is defined in the
respective employment agreements. In connection with the Management Buy-Out, in
July 1997 Messrs. Barton, McNally and Norris were awarded bonuses of $150,000,
$175,000, and $50,000, respectively, pursuant to such Change In Control
provisions. One-half of the amount of each Named Executive Officer's Change In
Control bonus was paid in August 1997 and is reflected in the Summary
Compensation Table under "All Other Compensation." Payment of the remaining
one-half was contingent upon continued employment with Aqua-Chem for a period of
six months following the Change In Control, was paid to the Named Executive
Officers on February 1, 1998. The February 1998 payment is not reflected in the
Summary Compensation Table.
Each employment agreement continues indefinitely until terminated as
provided in the agreement, except for Mr. Miller's employment agreement which is
for a six year term expiring on July 31, 2003, unless terminated prior to the
end of such term as provided in the agreement. Each employment agreement may be
terminated by either the Company or the executive at any time by giving notice
as required under the agreement; provided, however, that under certain
conditions the executive may be entitled to certain severance benefits as
described in that executive's individual agreement. Each agreement also imposes
certain confidentiality obligations on the executive and places restrictions on
the executive's involvement in activities that may compete with the Company and
on engaging fellow employees both during employment and following termination.
Violation of such provisions, or other termination for cause, as defined in the
agreements, may result in forfeiture of severance and other benefits that may
otherwise accrue.
RETIREMENT AND SAVINGS PROGRAMS
The Company maintains a defined contribution retirement plan which includes
a 401(k) savings plan. Substantially all employees who are not members of
collective bargaining groups are eligible to participate. The Company's
retirement contribution equals 4% of eligible compensation while 401(k)
contributions equal 50% of employee contributions to a maximum Company
contribution of 3% of eligible compensation. Under provisions of the 401(k)
savings plan, employees may voluntarily contribute a maximum of 17% of eligible
compensation.
In connection with the Acquisition, the Company assumed the sponsorship of
the National Dynamics Corporation 401(k) Plan and the National Dynamics
Corporation Union Pension Plan that were previously maintained by NDC, for the
benefit of employees of the Company's National Dynamics Division.
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<PAGE> 71
The Company also maintains employee incentive plans covering substantially
all employees who are not members of collective bargaining groups. The Company's
contribution to these plans is based upon defined levels of profitability.
The Company maintains unfunded health care plans covering certain eligible
retirees and employees. The estimated costs of postretirement benefits,
principally health care, are accrued over the period the benefits are earned.
The Company's policy is to fund postretirement benefits as incurred.
MANAGEMENT INCENTIVE PLANS
On November 15, 1996, the Company adopted the Aqua-Chem, Inc. Management
Incentive Plan (the "Management Incentive Plan") and the Aqua-Chem, Inc.
Executive Management Incentive Plan (the "Executive Management Incentive Plan").
The Management Incentive Plan was implemented to provide an incentive to
motivate and reward key management eligible employees for achievement of
short-term results. The incentive payment to participants is calculated through
a formula that utilizes Return On Net Assets, or RONA (subject to adjustment in
the event of certain extraordinary charges, such as acquisitions, divestitures
and/or major new strategic initiatives) as the critical financial performance
measure. Participation is limited to selected senior level employees from each
of the business units and at the corporate level. An Administrative Committee is
responsible for administration of the Management Incentive Plan (including
selection of participants, setting individual incentive opportunity ranging from
10% to 100% of the participant's annual salary, setting financial targets, and
evaluation of performance), subject to the review and final approval of the
Compensation Committee of the Board.
The purpose of the Executive Management Incentive Plan, which was
terminated on December 31, 1997, was to focus the senior management team on
implementing and achieving long-term strategic business plans and financial
performance goals to enhance shareholder value. The incentive payment to
participants was calculated each year through a formula based on three-year
Return On Equity, or ROE, goals. Participation was limited to senior level
executives and officers and who had typically been with the Company for at least
one full three-year period.
STOCK OPTION PLAN
In connection with the Management Buy-Out, the Company adopted the
Aqua-Chem, Inc. 1997 Stock Option Plan (as amended and restated, the "Stock
Option Plan"), which provides for the grant to key employees, from time to time
of non-statutory stock options to purchase up to an aggregate of 61,919 shares
of Common Stock of Aqua-Chem at exercise prices to be determined in accordance
with the provisions of the Stock Option Plan. The Stock Option Plan provides
that between 10% and 20% of the aggregate number of shares of Common Stock
underlying each series of options shall vest each year on the anniversary of the
date of the grant, provided that in the prior fiscal year (i) the option holder
completed at least twelve consecutive Months of Service (as defined in the Stock
Option Plan), and (ii) the Company attained 80% to 100% of a specified target of
EBITDA (as defined therein) ($18.3 million in the current year, subject to
adjustment in the event of certain extraordinary activities, such as the
Acquisition (the "EBITDA Goal")). In the event that an installment does not vest
on an anniversary date because the EBITDA Goal is not met, such installment
shall vest on the next succeeding anniversary date as to which (i) the option
holder has completed at least twelve consecutive Months of Service, and (ii) the
Company met the EBITDA Goal by a cumulative amount greater than or equal to the
prior cumulative EBITDA shortfalls. Notwithstanding the foregoing, options
granted under the Stock Option Plan shall vest automatically on the seventh
anniversary of the date of the grant regardless of performance criteria. As of
the date of this Prospectus, no options had been granted under the Stock Option
Plan.
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<PAGE> 72
PHANTOM STOCK PLAN
On January 23, 1998, the Board approved the Aqua-Chem, Inc. 1998 Phantom
Stock Plan (the "Phantom Stock Plan"), effective April 1, 1998, as a replacement
for the Executive Management Incentive Plan, which was terminated as of December
31, 1997.
The objective of the Phantom Stock Plan is to provide certain senior level
executives and officers with the opportunity to share in future increases in the
value of the Company's Common Stock. The Board (or a committee appointed by the
Board) selects participants and determines the number of shares of phantom stock
to be awarded to each participant. Participants who remain employed by the
Company as of the scheduled payment dates (with certain exceptions) become
entitled to receive the value of their phantom stock awards for that year if a
specified percentage of the EBITDA goal (as specified in the Phantom Stock Plan)
is attained (90% in the current year, subject to decrease in future years). The
value of a participant's phantom stock is determined by multiplying the number
of shares of phantom stock initially awarded to the participant that year by the
value of a share of Common Stock determined in accordance with a formula set
forth the Phantom Stock Plan which is based a multiple of Actual EBITDA with
certain balance sheet adjustments. Two-thirds of the value of a participant's
phantom stock award is scheduled to be paid in the June following the end of the
period to which the award relates, with the remaining third to be paid in the
June of the subsequent year. Regardless of the foregoing, in the event that the
amount that would have been paid out at the end of the 1998 or 1999 calendar
years under the Executive Management Incentive Plan is greater than the amount
payable under the Phantom Stock Plan as of June immediately following the end of
the twelve-month period to which the award relates (i.e. two-thirds of the total
value of the award), then the participant shall be entitled to the amount that
would have been payable under the Executive Management Incentive Plan. On April
1, 1998, the following awards were made to Named Executive Officers under the
Phantom Stock Plan, portions of which mature in 1999, 2000 and 2001: Mr. Barton
received 2,518 shares; Mr. McNally received 3,264 shares; Mr. Norris received
1,479 shares; and Mr. Thimm received 1,506 shares.
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<PAGE> 73
CAPITAL STOCK AND PRINCIPAL STOCKHOLDERS
CAPITAL STRUCTURE
The Company has a single class of common stock and three classes of
preferred stock (denominated Series A, Series B, and Series C). As of June 30,
1998, the Company had 2,006,260 shares of authorized capital stock, itemized by
class and series as follows:
(i) 2,000,000 shares of Common Stock, par value $.01 per share
("Common"), of which 1,000,000 shares are issued and outstanding;
(ii) 6,260 shares of Preferred Stock, par value $.01 per share, divided
into the following series:
(a) 130 shares of Series A Cumulative Preferred Stock, par value $.01
per share ("Series A Preferred"), of which 52 shares are issued
and outstanding.
(b) 130 shares of Series B Cumulative Preferred Stock, par value $.01
per share ("Series B Preferred"), of which 130 shares are issued
and outstanding.
(c) 6,000 shares of Series C Cumulative Preferred Stock, par value
$.01 per share ("Series C Preferred"), of which 2,755 shares
are issued and outstanding.
(iii) The Company has issued a warrant (the "Warrant") to purchase up to
176,471 shares of Common at a price of one cent ($0.01) per share.
The Warrant is exercisable at any time by the holder thereof on or
prior to July 31, 2007.
Series A Preferred. The Company formerly had 130 shares of Series A
Preferred outstanding, and used approximately $3.1 million of the proceeds of
the Private Offering to redeem 78 of such shares (see "The Exchange Offer -- Use
of Proceeds"). The remaining 52 shares of Series A Preferred will remain
outstanding subject to redemption as follows: one-half (26) of such shares will
be redeemed (at a redemption price of $1 million plus accrued dividends, if any)
on August 1, 2000 and the remainder will be redeemed (at a redemption price of
$1 million plus accrued dividends, if any) on August 1, 2001. Under the
Company's Certificate of Incorporation (the "Certificate"), holders of the
outstanding nonvoting Series A Preferred are entitled to receive cumulative cash
dividends of $577 per share per quarter beginning August 1, 1998. Holders of
Series A Preferred have the right to require the Company to redeem Series A
Preferred at an aggregate redemption price of $2 million plus accrued dividends
(i) simultaneous with the occurrence of an "overall ownership shift," "employee
ownership shift," or "asset shift" (each as defined in the Certificate); or (ii)
within the 120-day period following an initial public offering of the Company's
equity securities. The Company may call the outstanding shares at any time at
the redemption price of $38,462 per share plus accrued dividends.
Series B Preferred. Holders of the nonvoting Series B Preferred are
entitled to receive cumulative cash dividends of approximately $1,538 per share
per year beginning August 1, 1997 payable at redemption. The redemption price of
Series B Preferred shall be the "Normal Redemption Price," which is generally
based upon Water Technologies' cumulative earnings before taxes for the period
1997 through 2001. The redemption price is modified in the event that prior to
December 31, 2001, either (i) Water Technologies is sold to an unrelated third
party; (ii) there occurs an initial public offering of the Company's equity
securities; or (iii) there occurs an "overall ownership shift," "employee
ownership shift" or "asset shift" (each as defined in the Certificate). The
maximum redemption price, under any circumstance, is $57,692 per share. Holders
of Series B Preferred generally have the right to require the Company to redeem
the Series B Preferred at the applicable redemption price plus accrued dividends
(i) simultaneous with the occurrence of an "overall ownership shift" (as defined
by the Certificate); (ii) within the 120-day period following an initial public
offering of the Company's equity securities; (iii) within the 120-day period
following a refinancing and retirement of the Existing Subordinated Debt; or
(iv) on July 31, 2004. Under certain circumstances the redemption of the Series
B Preferred could result in an event of default under the Indenture. See
"Description of the Notes -- Certain Covenants -- Limitation on Restricted
Payments." The holders of the Series B
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Preferred elected not to require that the Series B Preferred be redeemed in
connection with the Private Offering.
Series C Preferred. Holders of Series C Preferred are entitled to receive
quarterly dividends at the rate of 10.17% per year on the original issue price
per share ($964) beginning on August 1, 1997. Holders of Series C Preferred
generally shall have the right to require the Company to redeem all or any part
of Series C Preferred at a price equal to $1,000 per share, plus accrued
dividends (i) upon an "overall ownership shift," "employee ownership shift," or
"asset shift" (each as defined by the Certificate); (ii) within the 120-day
period following an initial public offering of the Company's equity securities;
or (iii) on July 31, 2005. Any time after July 31, 2004, the Company may call
the outstanding shares at the redemption price of $1,000 per share plus accrued
dividends, provided that the Series A Preferred and Series B Preferred have each
been redeemed. Each share of Series C Preferred has one vote per share,
equivalent to the voting rights of one share of Common.
PRINCIPAL STOCKHOLDERS
Series A and Series B Preferred. The Company's Series A Preferred and
Series B Preferred are owned as follows:
<TABLE>
<CAPTION>
SERIES A PREFERRED SERIES B PREFERRED
----------------------- -----------------------
NUMBER PERCENT NUMBER PERCENT
OF SHARES OF CLASS OF SHARES OF CLASS
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Lyonnaise American Holding, Inc.(b).................. 41.6 80.0% 104 80.0%
Gestra Corporation, N.V.(c).......................... 10.4 20.0% 26 20.0%
</TABLE>
- ------------------------------------
(a) See "-- Capital Structure -- Series A Preferred" above.
(b) c/o Patrick Babin, Northumbrian Water Group, 24. St James's Square, SW1 Y6HZ
London, England.
(c) c/o Miraj Uddin, Rezayat Trading Co. Ltd., P.O. Box 106, Safat, Kuwait
13002.
Common and Series C Preferred. The following table sets forth the
beneficial ownership as of June 30, 1998 of the outstanding Common and Series C
Preferred by (i) each person who is known to the Company to be the beneficial
owner of five percent or more of the outstanding classes shown; (ii) each
director; (iii) each of the Named Executive Officers; and (iv) all directors and
executive officers of the Company as a group.
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<PAGE> 75
All (100%) of the outstanding shares of Common and Series C Preferred are
held by Rush Creek LLC ("Rush Creek"). Pursuant to the Operating Agreement of
Rush Creek, shares of Common and Series C Preferred (and, in the case of the
Whitney Subordinated Debt Fund, L.P., the Warrant) are allocated to each
member's account as set forth in the table below.
<TABLE>
<CAPTION>
SERIES C
COMMON STOCK PREFERRED STOCK TOTAL VOTING POWER
----------------------- ----------------------- -------------------
NUMBER OF NUMBER OF
SHARES PERCENT SHARES PERCENT NUMBER PERCENT
BENEFICIALLY OF BENEFICIALLY OF OF OF
OWNED(A) CLASS(B) OWNED(A) CLASS(B) VOTES(C) VOTES(B)
------------ -------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Whitney Equity Partners, L.P.(d)...... 510,000 51.0% 1,743 63.3% 511,743 51.0%
Whitney Subordinated Debt Fund
L.P.(e)............................. 176,471 15.0 -- -- -- --
Jeffrey A. Miller (f), (g)............ 343,002 34.3 709 25.7 343,711 34.3
James H. Fordyce(f)................... -- -- -- -- -- --
James W. Hook......................... -- -- -- -- -- --
William Killian(h).................... 8,166 * 17 * 8,183 *
Michael R. Stone(f)................... -- -- -- -- -- --
Rand E. McNally(i).................... 57,200 5.7 118 4.3 57,318 5.7
J. Scott Barton(j).................... 49,000 4.9 101 3.7 49,101 4.9
Charles Norris(k)..................... 16,300 1.6 34 1.2 16,334 1.6
Ronald G. Thimm....................... -- -- -- -- -- --
All directors and executive officers
as a group (consisting of 11
persons)............................ 481,834 48.2 996 36.1 482,830 48.2
</TABLE>
- ------------------------------------
(a) "Beneficial ownership" is defined under regulations of the Commission as the
power directly or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise to vote (or direct the voting of)
or dispose of (or direct the disposition of) stock, including stock of which
an individual has the right to acquire beneficial ownership (as defined)
within 60 days. In the above table, beneficial ownership reflects the number
of shares of Common or Series C Preferred allocated to the Rush Creek
capital account of the entity and individual members shown. Fractional
shares are not shown in the table, rather, the numbers of shares are rounded
to the nearest whole share.
(b) Asterisk (*) denotes less than 1%.
(c) Voting power is combined because each share of Common and each share of
Series C Preferred has one (1) vote per share.
(d) 177 Broad Street, Stamford, Connecticut 06901. Whitney Equity Partners, L.P.
("WEP") has 510,000 shares of Common and 1,743 shares of Series C Preferred
allocated to its Rush Creek capital account. WEP is a manager of Rush Creek
(see Note (f)).
(e) 177 Broad Street, Stamford, Connecticut 06901. The Whitney Subordinated Debt
Fund, L.P., a fund managed by J. H. Whitney & Co. ("WSDF") has the Warrant
(see "-- Capital Structure") allocated to its Rush Creek capital account.
WSDF is a manager of Rush Creek (see Note (f)). The percentage shown in the
table assumes the Warrant is exercised in full. If the Warrant were
exercised in full, the voting power (with respect to allocated shares of
Series C Preferred and Common) of all other entities,
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<PAGE> 76
individuals, and the group listed in the above table would be diluted, with
the resulting voting percentages as follows:
<TABLE>
<CAPTION>
RESULTING
VOTING POWER
ASSUMING
BENEFICIAL OWNER EXERCISE OF WARRANT
---------------- -------------------
<S> <C>
WEP......................................................... 43.4%
WSDF........................................................ 15.0
Jeffrey A. Miller (see Note (g), below...................... 29.1
Rand E. McNally (see Note (i), below)....................... 4.9
J. Scott Barton (see Note (j), below)....................... 4.2
Charles Norris (see Note (k), below)........................ 1.4
All directors and executive officers as a group (consisting
of 11 persons)............................................ 40.9
</TABLE>
(f) There are six managers of Rush Creek: WEP, WSDF, and Messrs. Miller,
Fordyce, Stone and Barton. As managers of Rush Creek, these entities and
individuals may be deemed to share voting and dispositive power with respect
to all (100%, or 1,000,000 shares) of Common and all (100%, or 2,755 shares)
Series C Preferred held by Rush Creek. Each such individual or entity
disclaims beneficial ownership with respect to all 1,000,000 shares of
Common and all 2,755 shares of Series C Preferred other than those shares
set forth opposite their respective names in the above table; in addition,
Messrs. Miller and Barton further disclaim beneficial ownership with respect
to certain of the shares set forth opposite their respective names in the
above table. See Notes (g) and (j), below.
(g) 325,002 of these shares are beneficially owned by two entities controlled by
Mr. Miller. The Jeffrey A. Miller Family LLC ("Miller LLC") is a limited
liability company of which Jeffery A. Miller is the manager and sole voting
member. The Miller LLC is a member of Rush Creek and has 130,001 shares of
Common and 269 shares of Class C Preferred allocated to its Rush Creek
capital account. The Jeffrey A. Miller Trust u/a/d/ May 10, 1997 ("Miller
Trust") is a revocable trust of which Jeffery A. Miller (the president and
chief executive officer of the Company) is the grantor, beneficiary, and
trustee. The Miller Trust is a member of Rush Creek and has 195,001 shares
of Common and 403 shares of Series C Preferred allocated to its Rush Creek
capital account. Mr. Miller is a manager of Rush Creek (see Note (f)). In
addition, Mr. Miller is required under the Stockholders' and Members'
Agreement among the stockholders of the Company and the Members of Rush
Creek (see "Voting Agreements," below) to purchase 18,000 shares of Common
and 37 shares of Series C Preferred which were owned by Mr. Bruce Dickson,
the Company's former Vice President of Human Resources, who passed away in
April, 1998. Although Mr. Miller has not yet completed the purchase of such
shares, they are included in the above totals for Mr. Miller.
(h) Mr. Killian is a member of Rush Creek and has 8,166 shares of Common and 17
shares of Series C Preferred allocated to his Rush Creek capital account.
(i) These shares are beneficially owned by two entities controlled by Mr.
McNally. The Rand Eugene McNally Family LLC ("McNally LLC") is a limited
liability company of which Mr. McNally is the manager and sole voting
member. The McNally LLC is a member of Rush Creek and has 17,160 shares of
Common and 35 shares of Series C Preferred allocated to its Rush Creek
capital account. The Rand E. McNally Trust u/a/d/ November 4, 1997 ("McNally
Trust") is a revocable trust of which Mr. McNally is the grantor,
beneficiary, and trustee. The McNally Trust is a member of Rush Creek and
has 40,040 shares of Common and 83 shares of Series C Preferred allocated to
its Rush Creek capital account.
(j) These shares are beneficially owned by an entity controlled by Mr. Barton,
the J. Scott Barton Trust u/a/d December 22, 1997 ("Barton Trust"), a
revocable trust of which Mr. Barton is the grantor, beneficiary, and
trustee. The Barton Trust is a member of Rush Creek and has 49,000 shares of
Common and 101 shares of Series C Preferred allocated to its Rush Creek
capital account.
(k) These shares are beneficially owned by two entities controlled by Mr.
Norris. The Charles J. Norris Family LLC ("Norris LLC") is a limited
liability company of which Mr. Norris is the manager and sole
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<PAGE> 77
voting member. The Norris LLC is a member of Rush Creek and has 3,260 Shares
of Common and 7 shares of Series C Preferred allocated to its Rush Creek
capital account. The Charles Norris Trust u/a/d/ November 21, 1997 ("Norris
Trust") is a revocable trust of which Mr. Norris is the grantor,
beneficiary, and trustee. The Norris Trust is a member of Rush Creek and has
13,040 shares of Common and 27 shares of Series C Preferred allocated to its
Rush Creek capital account.
VOTING AGREEMENT
Pursuant to a Stockholders' and Members' Agreement among the stockholders
of the Company and the Members of Rush Creek, the parties thereto have agreed to
vote to elect a six-member board of directors consisting of (i) two directors
designated by J. H. Whitney & Co. (or WEP and WSDF) (currently, Messrs. Fordyce
and Stone); (ii) two directors designated by certain senior executive officers
of the Company ("Management") (currently, Mr. Miller; the one vacancy on the
Board being a director to be designated by Management); and (iii) two
independent directors who are agreeable to each of J. H. Whitney & Co. and
Management (currently, Messrs. Hook and Killian). The Stockholders' and Members'
Agreement further provides that, in the event of a material breach of certain
documents entered into by the parties in connection with the Management Buy-Out
("Transaction Documents"), the parties agree to increase the number of directors
to nine and to elect three additional directors designated by J. H. Whitney &
Co. (or WEP and WSDF). Each Member of Rush Creek has one vote per Membership
Unit. However, pursuant to the Rush Creek Operating Agreement, the Membership
Units of Rush Creek are designated as either "Institutional Investor Membership
Units" (which includes the Membership Units held by WEP and WDSF) or "Management
Membership Units" (which includes the Membership Units held by the Miller LLC,
the Miller Trust, the McNally LLC, the McNally Trust, the Barton Trust, the
Norris LLC, and the Norris Trust). The election of the Managers of Rush Creek is
subject to a provision of the Operating Agreement which requires that two
managers shall be elected by a majority of the Institutional Investor Membership
Units and two managers shall be elected by a majority of the Management
Membership Units. The Operating Agreement further provides that, in the event of
a material breach of a Transaction Document, one additional manager shall be
designated by a majority of the Institutional Investor Membership Units.
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<PAGE> 78
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AGREEMENT
The Company entered into an Interim Management Agreement ("Management
Agreement") with J. Miller Management, Inc. ("JMM") dated July 8, 1996, pursuant
to which the Company engaged JMM to provide the services of Mr. Miller as the
Company's President and Chief Executive Officer. Mr. Miller is the President and
co-owner of JMM. The Management Agreement provided that Mr. Miller would serve
as Interim Chief Executive Officer, provide management services and expertise to
the Company, and manage the operations of the Company, commencing on July 8,
1996. The Management Agreement was terminable at will by either party; however,
if the Company were to have terminated the Management Agreement without cause it
would have been liable for all compensation due thereunder. If the Company were
to have terminated the Management Agreement with cause (including Mr. Miller's
failure to obtain government security clearance) it would have been liable only
for accrued obligations through the date of termination.
Pursuant to the Management Agreement, the Company agreed to pay JMM $10,000
per week, plus the cost of living accommodations for Mr. Miller in the Milwaukee
area. The Company also agreed to reimburse JMM for out-of-pocket expenses
incurred by JMM on behalf of the Company under the Management Agreement,
including the cost of a company car and weekly travel to and from Mr. Miller's
home in Michigan.
The Management Agreement was amended on January 12, 1997 to extend its term
through December 31, 1997 and to provide for the payment to JMM of incentive
compensation for 1997 in accordance with the Company's Management Incentive
Plan. See "Management -- Management Incentive Plans." Under the Management
Agreement, the amount of incentive compensation that JMM would be paid was based
on base incentive compensation of $356,000 multiplied by a percentage based on a
sliding scale of from 50% to 150% tied to the Company's EBIT (as defined
therein) for the twelve months ended December 31, 1997. If 1997 EBIT were less
than $6.7 million, no incentive compensation would be due under the Management
Agreement; if 1997 EBIT were equal to or greater than $6.7 million but less than
$11.0 million, the base incentive compensation would have been multiplied by
50%; if 1997 EBIT were equal to or greater than $11.0 million but less than
$14.0 million, the base incentive compensation would have been multiplied by
100%; if 1997 EBIT were equal to or greater than $14.0 million but less than
$17.0 million, the base incentive compensation would have been multiplied by
125%; and if 1997 EBIT were equal to or greater than $17.0 million, the base
incentive compensation would have been multiplied by 150%.
The Management Agreement, as amended, also provided for additional
compensation in the event of a completed sale of the Company by December 31,
1998, based on a formula which provided for a Sale Bonus of $356,000 (the "Sale
Bonus") payable if the "net consideration" (as defined in the Management
Agreement) received for the Company was less than $40 million and a percentage
of the excess over $40 million ("Excess Consideration"). The percentage was 1%
of the first $5 million of Excess Consideration, 2% of the second $5 million of
Excess Consideration, 3% of the third $5 million of Excess Consideration, 4% of
the fourth $5 million of Excess Consideration, and 5% of any additional Excess
Consideration (that is, the amount by which the net consideration exceeded $60
million). The Sale Bonus became payable as a result of the Management Buy-Out.
The Management Agreement was terminated on July 31, 1997 when Mr. Miller
became employed by, and entered into an employment agreement with, the Company
(see "Management -- Employment Agreements"). The total cost to the Company for
Mr. Miller's services under the Management Agreement for 1997 was approximately
$1,514,000, including incentive compensation of approximately $267,000 and a
Sale Bonus of $861,000. The total cost to the Company for Mr. Miller's services
under the Management Agreement for 1996 was approximately $286,000.
OTHER
Three of the directors of the Company (Messrs. Fordyce, Miller and Stone)
are managers of Rush Creek, which holds 100% of the Common and Series A
Preferred Stock of the Company. Two of the directors of the Company (Messrs.
Fordyce and Stone) are general partners of J. H. Whitney & Co., which manages
Whitney Equity Partners, L.P., a principal owner of Rush Creek. See "Capital
Stock and Principal
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<PAGE> 79
Stockholders -- Principal Stockholders." The Company has agreed to pay J. H.
Whitney & Co. a "monitoring fee" of $50,000 annually on the first business day
of each year commencing in 1998, and an annual "recognition fee" of $25,000,
also commencing in 1998. The recognition fee is accrued and will become payable
upon the occurrence of an "Organic Transaction" (as defined in the Company
Certificate of Incorporation to include a sale of substantially all the assets
of the Company or a merger of the Company or other similar transaction) or an
initial public offering of the Company's securities.
James A. Feddersen, Secretary of Aqua-Chem, is a shareholder in the law
firm of Whyte Hirschboeck Dudek S.C., which performs legal services for
Aqua-Chem. Through Rush Creek, Mr. Feddersen owns approximately 8,166 shares, or
approximately 0.8% of the outstanding Common Stock and approximately 17 shares,
or approximately 0.6% of the outstanding Series C Preferred Stock. See "Capital
Stock and Principal Stockholders -- Common and Series C Preferred" and "Legal
Matters."
The Company has, pursuant to its Certificate of Incorporation and Bylaws,
established a policy indemnifying officers and directors, to the fullest extent
allowed by the Delaware General Corporation Law, for liabilities and expenses
arising out of their actions in their capacities as officers and directors. This
provision does not exclude indemnification for liability on the part of officers
and directors under the Securities Act arising out of material
misrepresentations or omissions contained in a registration statement filed
under the Securities Act. However, insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers, and
controlling persons pursuant to the foregoing provisions, the Company have been
informed that, in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
72
<PAGE> 80
THE ACQUISITION
THE PURCHASE AGREEMENT
On May 28, 1998, Aqua-Chem entered into a definitive agreement (the "Asset
Purchase Agreement") with National Dynamics Corporation ("NDC"), a Nebraska
corporation, and three of NDC's individual shareholders who collectively held
83.3% of the issued and outstanding shares of NDC (the "Shareholders"), to
acquire substantially all of the assets of NDC for a purchase price of $47.0
million plus the assumption of certain liabilities. Pursuant to the Asset
Purchase Agreement, the purchase price is subject to certain post-closing
adjustments based upon a closing balance sheet and NDC's physical inventory as
of the closing date, to be prepared not later than August 22, 1998.
The Asset Purchase Agreement provided for the assumption of certain of
NDC's liabilities by Aqua-Chem, including without limitation, contractual
obligations to furnish goods and services or to pay for goods and services that
were acquired; provided, however, that Aqua-Chem did not assume any liabilities
for personal or property damage related to Products Sold (as defined therein).
The Asset Purchase Agreement included customary representations and warranties
by Aqua-Chem, NDC and the Shareholders regarding business and legal issues and
customary indemnification provisions. In the Asset Purchase Agreement, NDC and
the Shareholders covenanted not to compete with Aqua-Chem, as described therein,
for a period of 48 months following the closing date and not to disclose
Confidential Information (as defined therein) except as provided therein.
FINANCING
Aqua-Chem used a portion of the proceeds of the Private Offering to finance
the Acquisition, which was closed on June 23, 1998, concurrently with the
Private Offering. See "The Exchange Offer -- Use of Proceeds." Since the
Acquisition, the former business of NDC has been operated as the National
Dynamics Division of the Company. There can be no assurance that the expected
benefits of the Acquisition will be realized. See "Risk Factors -- Realization
of the Benefits of the Acquisition."
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<PAGE> 81
DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW CREDIT FACILITY
In connection with the Private Offering, the Company amended and restated
its existing revolving credit facility (as amended and restated, the "New Credit
Facility"). Borrowings under the New Credit Facility bear interest at variable
rates and permit borrowings and letters of credit totaling $45.0 million.
The obligations of the Company under the New Credit Facility are guaranteed
by all existing and future domestic subsidiaries and by Rush Creek, and
borrowings under the New Credit Facility are secured by substantially all of the
assets of the Company, other than assets (including real property) of foreign
subsidiaries. Pricing on the New Credit Facility is, at the option of the
Company, (i) a base rate equal to the higher of Comerica's prime rate or the
Federal funds rate plus 1.00%, or (ii) a Eurodollar-based rate plus an
applicable margin ranging from 1.00% to 1.75% dependent on the ratio of total
debt to EBITDA. Letters of credit are priced at 1.00% to 1.75% dependent on the
ratio of total debt to EBITDA plus a facing fee. The Company also pays a
revolving credit facility fee of 0.25% to 0.50% dependent on the ratio of total
debt to EBITDA.
The New Credit Facility contains certain restrictive covenants that impose
limitations upon, among other things, the ability of the Company and the
guarantors (other than Rush Creek) to incur liens; merge, consolidate or dispose
of assets; make loans and investments; incur indebtedness; engage in certain
transactions with affiliates; incur contingent obligations; enter into joint
ventures; enter into lease agreements; pay dividends and make other
distributions; change its business; and make capital expenditures.
The New Credit Facility also contains covenants requiring the Company (a)
to maintain certain financial ratios as follows: (i) a fixed charge coverage
ratio; and (ii) a funded debt to EBITDA ratio; and (b) to maintain a minimum
base tangible net worth.
All extensions of credit under the New Credit Facility are subject to
customary documentation and on the continued accuracy of all representations and
warranties as well as the absence of any Default or Event of Default (as defined
in the New Credit Facility).
The New Credit Facility may be refinanced (as defined in the Indenture)
from time to time in accordance with the limits of the Indenture. See
"Description of the Notes -- Certain Covenants -- Limitation on Indebtedness"
and "-- Certain Definitions."
FOREIGN CREDIT FACILITIES
Cleaver-Brooks of Canada, LTD has in place a Cdn$0.5 million revolving
credit facility established with a Canadian bank for convenience purposes and
for funding its working capital and other financing needs. This facility is
unsecured and payable on demand, and as of June 30, 1998, had no outstanding
balance.
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<PAGE> 82
DESCRIPTION OF THE NOTES
GENERAL
The Existing Notes were, and the Exchange Notes are to be, issued under an
Indenture, dated as of June 23, 1998 (the "Indenture"), between the Company and
United States Trust Company of New York, as Trustee (the "Trustee").
The following is a summary of certain provisions of the Indenture and the
Notes, a copy of which Indenture and the form of Notes is available upon request
to the Company at the address set forth under "Available Information." The
following summary of certain provisions of the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Indenture, including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of 1939,
as amended. For purposes of this summary, the term "Company" refers only to
Aqua-Chem, Inc. and not to any of its subsidiaries.
The Existing Notes were, and the Exchange Notes will be, issued only in
fully registered form, without coupons, in denominations of $1,000 and any
integral multiple of $1,000. 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.
TERMS OF THE NOTES
The Existing Notes were, and the Exchange Notes will be, unsecured senior
subordinated obligations of the Company, initially in an aggregate principal
amount of $125.0 million aggregate principal amount, and will mature on July 1,
2008. The Notes bear interest at 11.25% per annum from June 23, 1998, or from
the most recent date to which interest has been paid or provided for, payable
semiannually to Holders of record at the close of business on the December 15 or
June 15 immediately preceding the interest payment date on January 1 and July 1
of each year, commencing January 1, 1999. 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 on the Existing Notes is, and the Exchange Notes will be,
computed on the basis of a 360-day year of twelve 30-day months.
The interest rate on the Notes is subject to increase in certain
circumstances if the Company does not file a registration statement relating to
the Exchange Offer or if the registration statement is not declared effective on
a timely basis or if certain other conditions are not satisfied, all as further
described under "The Exchange Offer -- Registration Agreement."
Subject to the covenants described below under "-- Certain Covenants" and
applicable law, the Company may issue additional Notes under the Indenture in an
unlimited aggregate principal amount. The Notes offered hereby and any
additional Notes subsequently issued would be treated as a single class for all
purposes under the Indenture.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Company prior to July 1, 2003. Thereafter, the
Notes will be redeemable, at the Company's option, in whole or in part, at any
time or from time to time, upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each Holder's registered address, at the
following redemption prices (expressed in percentages of principal amount), plus
accrued interest to the redemption date (subject to the right of Holders
75
<PAGE> 83
of record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on
July 1 of the years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
------ ----------------
<S> <C>
2003........................................................ 105.625%
2004........................................................ 104.219
2005........................................................ 102.813
2006........................................................ 101.406
2007 and thereafter......................................... 100.000
</TABLE>
In addition, at any time and from time to time prior to July 1, 2001, the
Company may redeem in the aggregate up to 20% of the original principal amount
of the Notes with the proceeds of one or more Public Equity Offerings following
which there is a Public Market, at a redemption price (expressed as a percentage
of principal amount) of 111.25% 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); provided, however,
that at least $100.0 million aggregate principal amount of the Notes remains
outstanding after each such redemption.
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 indebtedness evidenced by the Notes is a senior subordinated, unsecured
obligation of the Company. The payment of the principal of, premium (if any) and
interest on the Notes is subordinate in right of payment, as set forth in the
Indenture, to the prior payment in full of all Senior Indebtedness, whether
outstanding on the Issue Date or thereafter incurred, including the Company's
obligations under the Credit Agreement.
As of June 30, 1998 the Company had no Senior Indebtedness outstanding.
Although the Indenture contains limitations on the amount of additional
Indebtedness that the Company may incur, under certain circumstances the amount
of such Indebtedness could be substantial and, in any case, such Indebtedness
may be Senior Indebtedness. See "-- Certain Covenants -- Limitation on
Indebtedness."
A portion of the operations of the Company are conducted through its
subsidiaries. Claims of creditors of such subsidiaries, including trade
creditors, secured creditors and creditors holding indebtedness and guarantees
issued by such subsidiaries, and claims of preferred stockholders (if any) of
such subsidiaries generally will have priority with respect to the assets and
earnings of such subsidiaries over the claims of creditors of the Company,
including holders of the Notes, even though such obligations will not constitute
Senior Indebtedness. The Notes, therefore, will be effectively subordinated to
creditors (including trade creditors) and preferred stockholders (if any) of
subsidiaries of the Company. At June 30, 1998, the total liabilities of the
Company's subsidiaries were approximately $3.2 million, including trade
payables. Although the Indenture limits the incurrence of Indebtedness and
preferred stock of certain of the Company's subsidiaries, such limitation is
subject to a number of significant qualifications. Moreover, the Indenture does
not impose any limitation on the incurrence by such subsidiaries of liabilities
that are not considered Indebtedness under the Indenture. See "-- Certain
Covenants -- Limitation on Indebtedness."
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not Incur, directly or indirectly, any Indebtedness that is subordinate or
junior in ranking in right of payment to its Senior Indebtedness unless such
Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in
right
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<PAGE> 84
of payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not
deemed to be subordinated or junior to Secured Indebtedness merely because it is
unsecured.
The Company may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not repurchase, redeem or otherwise retire any Notes
(collectively, "pay the Notes") if (i) any Designated Senior Indebtedness is not
paid when due or (ii) any other default on Designated Senior Indebtedness occurs
and the maturity of such Designated Senior Indebtedness is accelerated in
accordance with its terms unless, in either case, the default has been cured or
waived and any such acceleration has been rescinded or such Designated Senior
Indebtedness has been paid in full. However, the Company may pay the Notes
without regard to the foregoing if the Company and the Trustee receive written
notice approving such payment from the Representative of the Designated Senior
Indebtedness with respect to which either of the events set forth in clause (i)
or (ii) of the immediately preceding sentence has occurred and is continuing.
During the continuance of any default (other than a default described in clause
(i) or (ii) of the second preceding sentence) with respect to any Designated
Senior Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Company may not pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions described in the first sentence of this
paragraph), unless the holders of such Designated Senior Indebtedness or the
Representative of such holders have accelerated the maturity of such Designated
Senior Indebtedness, the Company may resume payments on the Notes after the end
of such Payment Blockage Period. The Notes shall not be subject to more than one
Payment Blockage Period in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, the holders of Senior Indebtedness will
be entitled to receive payment in full of such Senior Indebtedness before the
Noteholders are entitled to receive any payment, and until the Senior
Indebtedness is paid in full, any payment or distribution to which Noteholders
would be entitled but for the subordination provisions of the Indenture will be
made to holders of such Senior Indebtedness as their interests may appear. If a
distribution is made to Noteholders that, due to the subordination provisions,
should not have been made to them, such Noteholders are required to hold it in
trust for the holders of Senior Indebtedness and pay it over to them as their
interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of Designated Senior
Indebtedness or the Representative of such holders of the acceleration.
By reason of the subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and creditors of
the Company who are not holders of Senior Indebtedness may recover less,
ratably, than holders of Senior Indebtedness and may recover more, ratably, than
the Noteholders.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in trust
by the Trustee for the payment of principal of and interest on the Notes
pursuant to the provisions described under "-- Defeasance."
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BOOK-ENTRY, DELIVERY AND FORM
The Existing Notes were, and the Exchange Notes will be, issued in the form
of a Global Note. The Global Note is deposited with, or on behalf of, the
Depositary and registered in the name of the Depositary or its nominee. Except
as set forth below, the Global Note may be transferred, in whole and not in
part, only to the Depositary or another nominee of the Depositary. Investors may
hold their beneficial interests in the Global Note directly through the
Depositary if they have an account with the Depositary or indirectly through
organizations which have accounts with the Depositary.
Upon the transfer of a Note in definitive form, such Note will, unless the
Global Note has previously been exchanged for Notes in definitive form, be
exchanged for an interest in the Global Note representing the principal amount
of Notes being transferred.
The Depositary has advised the Company as follows: The Depositary 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
Depositary was created to hold securities of institutions that have accounts
with the Depositary ("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
Depositary'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 Depositary'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.
Upon the issuance of the Global Note, the Depositary will credit, on its
book-entry registration and transfer system, the principal amount of the Notes
represented by such Global Note to the accounts of participants. The accounts to
be credited shall be designated by the Initial Purchasers of such Notes.
Ownership of beneficial interests in the Global Note will be limited to
participants or persons that may hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer of
those ownership interests will be effected only through, records maintained by
the Depositary (with respect to participants' interest) and such participants
(with respect to the owners of beneficial interests in the Global Note 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 Note.
So long as the Depositary, or its nominee, is the registered holder and
owner of the Global Note, the Depositary 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 Note will not be entitled to have the Notes
represented by the Global Note 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 Note. The Company understands that under existing industry practice, in
the event an owner of a beneficial interest in the Global Note desires to take
any action that the Depositary, as the holder of the Global Note, is entitled to
take, the Depositary 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
Note registered in the name of and held by the Depositary or its nominee will be
made to the Depositary or its nominee, as the case may be, as the registered
owner and holder of the Global Note.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal of or interest on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the
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Depositary or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in the Global Note 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
Note 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 Depositary and its participants or the relationship
between such participants and the owners of beneficial interests in the Global
Note owning through such participants.
Unless and until it is exchanged in whole or in part for certificated Notes
in definitive form, the Global Note may not be transferred except as a whole by
the Depositary to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary.
Although the Depositary has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depositary, 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
Depositary 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 Note 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 Depositary notifies the Company
that it is unwilling or unable to continue as Depositary for the Global Note or
if at any time the Depositary ceases to be a clearing agency registered under
the Exchange Act and a successor Depositary 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 Note 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 Depositary shall
direct. Subject to the foregoing, the Global Note is not exchangeable, except
for a Global Note of the same aggregate denomination to be registered in the
name of the Depositary or its nominee. In addition, such certificates will bear
the legend referred to under "Transfer Restrictions" (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 requires that payments in respect of Notes (including
principal, premium and interest) be made by wire transfer of immediately
available funds to the accounts specified by the holders thereof or, if no such
account is specified, by mailing a check to each such holder's registered
address.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that the Company
repurchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date):
(i) prior to the first public offering of common stock of the Company,
the Permitted Holders cease to be the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a
majority in the aggregate of the total voting power of the Voting Stock of
the Company, whether as a result of issuance of securities of the Company,
any merger, consolidation, liquidation or dissolution of the Company, any
direct or indirect transfer of securities or otherwise (for purposes of
this clause (i) and clause (ii) below, the Permitted Holders shall be
deemed to beneficially own any Voting Stock of any Person (the "specified
entity") held by any other Person (the "parent entity") so long as the
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Permitted Holders beneficially own (as so defined), directly or indirectly,
in the aggregate a majority of the voting power of the Voting Stock of the
parent entity);
(ii) following the first public offering of common stock of the
Company, any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes
the beneficial owner (as defined in clause (i) above, except that for
purposes of this clause (ii) such person shall be deemed to have
"beneficial ownership" of all shares that any such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 40% of the total
voting power of the Voting Stock of the Company; provided, however, that
the Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company than such other person and
do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors (for
the purposes of this clause (ii), such other person shall be deemed to
beneficially own any Voting Stock of a specified entity held by a parent
entity, if such other person is the beneficial owner (as defined in this
clause (ii)), directly or indirectly, of more than 40% of the voting power
of the Voting Stock of such parent entity and the Permitted Holders
beneficially own (as defined in clause (i) above), directly or indirectly,
in the aggregate a lesser percentage of the voting power of the Voting
Stock of such parent entity and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the board of directors of such parent entity);
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors of the Company then still in office
who were either directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any reason
to constitute a majority of the Board of Directors then in office;
(iv) the adoption of a plan relating to the liquidation or dissolution
of the Company; or
(v) the merger or consolidation of the Company with or into another
Person or the merger of another Person with or into the Company, or the
sale of all or substantially all the assets of the Company to another
Person (other than a Person that is controlled by the Permitted Holders),
and, in the case of any such merger or consolidation, the securities of the
Company that are outstanding immediately prior to such transaction and
which represent 100% of the aggregate voting power of the Voting Stock of
the Company are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving corporation that represent immediately after such transaction, at
least a majority of the aggregate voting power of the Voting Stock of the
surviving corporation.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee (the "Change of Control Offer")
stating: (1) that a Change of Control has occurred and that such Holder has the
right to require the Company to purchase such Holder's Notes at a purchase price
in cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of holders of
record on the relevant record date to receive interest on the relevant interest
payment date); (2) the circumstances and relevant facts regarding such Change of
Control (including information with respect to pro forma historical income, cash
flow and capitalization after giving effect to such Change of Control); (3) the
repurchase date (which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (4) the instructions determined by the
Company, consistent with the covenant described hereunder, that a Holder must
follow in order to have its Notes purchased.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
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The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this covenant
described hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings. Restrictions on the
ability of the Company to incur additional Indebtedness are contained in the
covenant described under "-- Certain Covenants -- Limitation on Indebtedness".
Such restrictions can only be waived with the consent of the holders of a
majority in principal amount of the Notes then outstanding. Except for the
limitations contained in such covenants, however, the Indenture will not contain
any covenants or provisions that may afford holders of the Notes protection in
the event of a highly leveraged transaction.
The Credit Agreement will prohibit the Company from purchasing any Notes
and will also provide that the occurrence of certain change of control events
with respect to the Company would constitute a default thereunder. In the event
a Change of Control occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. In such
case, the Company's failure to purchase tendered Notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
the Credit Agreement. In such circumstances, the subordination provisions in the
Indenture would likely restrict payment to the Holders of Notes.
Future indebtedness of the Company may contain prohibitions on the
occurrence of certain events that would constitute a Change of Control or
require such indebtedness to be repurchased upon a Change of Control. Moreover,
the exercise by the holders of their right to require the Company to repurchase
the Notes could cause a default under such indebtedness, even if the Change of
Control itself does not, due to the financial effect of such repurchase on the
Company. Finally, the Company's ability to pay cash to the holders of Notes
following the occurrence of a Change of Control may be limited by the Company's
then existing financial resources. There can be no assurance that sufficient
funds will be available when necessary to make any required repurchases. The
provisions under the Indenture relative to the Company's obligation to make an
offer to repurchase the Notes as a result of a Change of Control may be waived
or modified with the written consent of the holders of a majority in principal
amount of the Notes.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. (a) The Company shall not, and shall not permit
any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness;
provided, however, that the Company may Incur Indebtedness if, on the date of
such Incurrence and after giving effect thereto, the Consolidated Coverage Ratio
exceeds 2.00 to 1 if such Indebtedness is Incurred prior to January 1, 2000,
2.25 to 1 if such Indebtedness is Incurred on or after January 1, 2000 and prior
to July 1, 2001 or 2.50 to 1 if such Indebtedness is incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred pursuant to the Credit Agreement; provided,
however, that, after giving effect to any such Incurrence, the aggregate
principal amount of such Indebtedness then outstanding does
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not exceed the greater of (i) $45.0 million less the sum of all principal
payments with respect to such Indebtedness pursuant to paragraph (a)(ii)(A)
of the covenant described under "-- Limitation on Sales of Assets and
Subsidiary Stock" and (ii) the sum of (x) 50% of the book value of the
inventory of the Company and its Restricted Subsidiaries (other than any
Foreign Subsidiary that has Indebtedness then outstanding Incurred pursuant
to clause (3) below) and (y) 85% of the book value of the accounts
receivable of the Company and its Restricted Subsidiaries (other than any
Foreign Subsidiary that has Indebtedness then outstanding Incurred pursuant
to clause (3) below);
(2) Indebtedness owed to and held by the Company or a Wholly Owned
Subsidiary; provided, however, that (i) any subsequent issuance or transfer
of any Capital Stock which results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such
Indebtedness (other than to the Company or a Wholly Owned Subsidiary) shall
be deemed, in each case, to constitute the Incurrence of such Indebtedness
by the obligor thereon and (ii) if the Company is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all obligations with respect to the Notes;
(3) Indebtedness of Foreign Subsidiaries in an aggregate principal
amount that, when taken together with the principal amount of all other
Indebtedness Incurred pursuant to this clause (3) (and any Indebtedness
Incurred by Foreign Subsidiaries prior to the Issue Date solely to finance
its working capital) and then outstanding does not exceed the sum of (i)
60% of the book value of the inventory of Foreign Subsidiaries that have
Indebtedness Incurred pursuant to this clause (3) then outstanding and (ii)
85% of the book value of the accounts receivable of Foreign Subsidiaries
that have Indebtedness Incurred pursuant to this clause (3) then
outstanding;
(4) the Notes and the Exchange Notes;
(5) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), (3) or (4) of this covenant);
(6) Indebtedness of a Subsidiary Incurred and outstanding on or prior
to the date on which such Subsidiary was acquired by the Company (other
than Indebtedness Incurred in connection with, or to provide all or any
portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary or was acquired by the Company); provided,
however, that on the date of such acquisition and after giving effect
thereto, the Company would have been able to Incur at least $1.00 of
additional Indebtedness pursuant to clause (a);
(7) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (4), (5) or (6) or this
clause (7); provided, however, that to the extent such Refinancing
Indebtedness directly or indirectly Refinances Indebtedness of a Subsidiary
Incurred pursuant to clause (6), such Refinancing Indebtedness shall be
Incurred only by such Subsidiary;
(8) Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by the Company
pursuant to the Indenture;
(9) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or a Subsidiary,
other than guarantees of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; provided, however, that the maximum assumable
liability in respect of all such Indebtedness shall at no time exceed the
gross proceeds actually received by the Company and its Restricted
Subsidiaries in connection with such disposition;
(10) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within two business days of incurrence;
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(11) Incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or any such Restricted Subsidiaries in an aggregate
principal amount not to exceed the greater of (a) $20 million or (b) 5% of
the Consolidated Net Worth of the Company at any one time outstanding;
(12) Indebtedness of the Company consisting of Guarantees of
Indebtedness of a Foreign Subsidiary Incurred pursuant to clause (3) above;
(13) Indebtedness in respect of performance bonds and surety or appeal
bonds entered into by the Company and its Restricted Subsidiaries in the
ordinary course of their business and letters of credit entered into in the
ordinary course of business by the Company and its Restricted Subsidiaries
to secure such performance bonds or surety or appeal bonds 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 30th Business Day
following payment on such letter of credit; and
(14) Indebtedness in an aggregate principal amount which, together
with all other Indebtedness of the Company outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (1) through (13)
above or paragraph (a)) does not exceed $10 million.
(c) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to the foregoing paragraph (b) if the proceeds thereof are
used, directly or indirectly, to Refinance any Subordinated Obligations unless
such Indebtedness shall be subordinated to the Notes to at least the same extent
as such Subordinated Obligations.
(d) For purposes of determining compliance with the foregoing covenant,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described above.
(e) Notwithstanding paragraphs (a) and (b) above, the Company shall not
Incur (i) any Indebtedness if such Indebtedness is subordinate or junior in
ranking in any respect to any Senior Indebtedness, unless such Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness or (ii) any Secured Indebtedness
that is not Senior Indebtedness unless contemporaneously therewith effective
provision is made to secure the Notes equally and ratably with such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any Restricted Subsidiary, directly or indirectly, to make a Restricted
Payment if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); (2) the Company is not able to Incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under
"-- Limitation on Indebtedness;" or (3) the aggregate amount of such Restricted
Payment and all other Restricted Payments since the Issue Date would exceed the
sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal quarter
immediately following the fiscal quarter during which the Notes are
originally issued to the end of the most recent fiscal quarter ending at
least 45 days prior to the date of such Restricted Payment (or, in case
such Consolidated Net Income shall be a deficit, minus 100% of such
deficit);
(B) the aggregate Net Cash Proceeds received by the Company from the
issuance or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company and other than an issuance or sale to an employee
stock ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees);
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(C) the amount by which Indebtedness of the Company is reduced on the
Company's balance sheet upon the conversion or exchange (other than by a
Subsidiary of the Company) subsequent to the Issue Date of any Indebtedness
of the Company convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of any cash, or the
fair value of any other property, distributed by the Company upon such
conversion or exchange); and
(D) an amount equal to the sum of (i) the net reduction in Investments
in Unrestricted Subsidiaries resulting from dividends, repayments of loans
or advances or other transfers of assets, in each case to the Company or
any Restricted Subsidiary from Unrestricted Subsidiaries, and (ii) the
portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of an Unrestricted Subsidiary at
the time such Unrestricted Subsidiary is designated a Restricted
Subsidiary; provided, however,that the foregoing sum shall not exceed, in
the case of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any Restricted Payments made out of the proceeds of the
substantially concurrent sale of, or made by exchange for, Capital Stock
of the Company (other than Disqualified Stock and other than Capital
Stock issued or sold to a Subsidiary of the Company or an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees); provided, however,
that (A) such Restricted Payment shall be excluded in the calculation of
the amount of Restricted Payments and (B) the Net Cash Proceeds from
such sale shall be excluded from the calculation of amounts under clause
(3)(B) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent
sale of, Indebtedness of the Company which is permitted to be Incurred
pursuant to the covenant described under "-- Limitation on
Indebtedness;" provided, however, that such purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value
shall be excluded in the calculation of the amount of Restricted
Payments;
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this covenant; provided, however, that at the time of payment of
such dividend, no other Default shall have occurred and be continuing
(or result therefrom); provided further, however, that such dividend
shall be included in the calculation of the amount of Restricted
Payments;
(iv) the repurchase or other acquisition of shares of, or options
to purchase shares of, common stock of the Company or any of its
Subsidiaries from employees, former employees, directors or former
directors of the Company or any of its Subsidiaries (or permitted
transferees of such employees, former employees, directors or former
directors), pursuant to the terms of the agreements (including
employment agreements) or plans (or amendments thereto) approved by the
Board of Directors under which such individuals purchase or sell or are
granted the option to purchase or sell, shares of such common stock;
provided, however, that the aggregate amount of such repurchases and
other acquisitions shall not exceed $1 million in any calendar year;
provided further, however, that such repurchases and other acquisitions
shall be excluded in the calculation of the amount of Restricted
Payments;
(v) the repurchase of shares of Series A Preferred Stock (and the
payment of accrued dividends thereon); provided, however, that any such
repurchase shall be excluded in the calculation of the amount of
Restricted Payments; or
(vi) the repurchase of shares of Series B Preferred Stock (and the
payment of accumulated dividends thereon) if on the date of any such
repurchase and after giving effect thereto, the Consolidated Coverage
Ratio exceeds 2.00 to 1; provided, however, that any such repurchase
shall be included in the calculation of the amount of Restricted
Payments.
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Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted Subsidiary to, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (a)
pay dividends or make any other distributions on its Capital Stock to the
Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company,
(b) make any loans or advances to the Company or (c) transfer any of its
property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
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
related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company) and outstanding on
such date;
(iii) any encumbrance or restriction pursuant to an agreement
evidencing Indebtedness Incurred without violation of the Indenture or
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this covenant or this clause (iii) or
contained in any amendment to an agreement referred to in clause (i) or
(ii) of this covenant or this clause (iii); provided, however, that the
encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such agreement, refinancing agreement or amendment are no
less favorable to the Noteholders than encumbrances and restrictions with
respect to such Restricted Subsidiary contained in such predecessor
agreements;
(iv) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the
extent such provisions restrict the transfer of the lease or the property
leased thereunder;
(v) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements or mortgages; and
(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
consummate any Asset Disposition unless (i) the Company or such Restricted
Subsidiary receives consideration at the time of such Asset Disposition at least
equal to the fair market value (including as to the value of all non-cash
consideration), as determined in good faith by the Board of Directors, of the
shares and assets subject to such Asset Disposition and at least 75% of the
consideration thereof received by the Company or such Restricted Subsidiary is
in the form of cash or cash equivalents and (ii) an amount equal to 100% of the
Net Available Cash from such Asset Disposition is applied by the Company (or
such Restricted Subsidiary, as the case may be) (A) first, to the extent the
Company elects (or is required by the terms of any Indebtedness), to prepay,
repay, redeem or purchase Senior Indebtedness or Indebtedness (other than any
Disqualified Stock) of a Wholly Owned Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) within one year
from the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (B) second, to the extent of the balance of such Net Available
Cash after application in accordance with clause (A), to the extent the Company
elects, to acquire Additional Assets within one year from the later of the date
of such Asset Disposition or the receipt of such Net Available Cash; (C) third,
to the extent of the balance of such Net Available Cash after application in
accordance with clauses (A) and (B), to make an offer to the holders of the
Notes (and to holders of other Senior Subordinated Indebtedness designated by
the Company) to purchase Notes (and such other Senior Subordinated Indebtedness)
pursuant to and subject to the conditions
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contained in the Indenture; and (D) fourth, to the extent of the balance of such
Net Available Cash after application in accordance with clauses (A), (B) and (C)
to (x) the acquisition by the Company or any Wholly Owned Subsidiary of
Additional Assets or (y) the prepayment, repayment or purchase of Indebtedness
(other than any Disqualified Stock) of the Company (other than Indebtedness owed
to an Affiliate of the Company) or Indebtedness of any Subsidiary (other than
Indebtedness owed to the Company or an Affiliate of the Company), in each case
within one year from the later of the receipt of such Net Available Cash and the
date the offer described in clause (b) below is consummated; provided,
however,that in connection with any prepayment, repayment or purchase of
Indebtedness pursuant to clause (A), (C) or (D) above, the Company or such
Restricted Subsidiary shall permanently retire such Indebtedness and shall cause
the related loan commitment (if any) to be permanently reduced in an amount
equal to the principal amount so prepaid, repaid or purchased. Notwithstanding
the foregoing provisions of this paragraph, the Company and the Restricted
Subsidiaries shall not be required to apply any Net Available Cash in accordance
with this paragraph except to the extent that the aggregate Net Available Cash
from all Asset Dispositions which are not applied in accordance with this
paragraph exceeds $5 million. Pending application of Net Available Cash pursuant
to this covenant, such Net Available Cash shall be invested in Permitted
Investments.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: (x) the assumption of Indebtedness of the Company or any
Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition and (y) securities received by the Company or any Restricted
Subsidiary from the transferee that are promptly converted by the Company or
such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of the
Notes (and other Senior Subordinated Indebtedness) pursuant to clause (a)(ii)(C)
above, the Company will be required to purchase Notes tendered pursuant to an
offer by the Company for the Notes (and other Senior Subordinated Indebtedness)
at a purchase price of 100% of their principal amount (without premium) plus
accrued but unpaid interest (or, in respect of such other Senior Subordinated
Indebtedness, such lesser price, if any, as may be provided for by the terms of
such Senior Subordinated Indebtedness) in accordance with the procedures
(including prorating in the event of oversubscription) set forth in the
Indenture. If the aggregate purchase price of Notes (and any other Senior
Subordinated Indebtedness) tendered pursuant to such offer is less than the Net
Available Cash allotted to the purchase thereof, the Company will be required to
apply the remaining Net Available Cash in accordance with clause (a)(ii)(D)
above. The Company shall not be required to make such an offer to purchase Notes
(and other Senior Subordinated Indebtedness) pursuant to this covenant if the
Net Available Cash available therefor is less than $5 million (which lesser
amount shall be carried forward for purposes of determining whether such an
offer is required with respect to the Net Available Cash from any subsequent
Asset Disposition).
(c) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue thereof.
Limitation on Affiliate Transactions. (a) The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any property,
employee compensation arrangements or the rendering of any service) with any
Affiliate of the Company (an "Affiliate Transaction") unless the terms thereof
(1) are no less favorable to the Company or such Restricted Subsidiary than
those that could be obtained at the time of such transaction in arm's-length
dealings with a Person who is not such an Affiliate, (2) if such Affiliate
Transaction involves an amount in excess of $2 million, (i) are set forth in
writing and (ii) have been approved by a majority of the members of the Board of
Directors having no personal stake in such Affiliate Transaction and (3) if such
Affiliate Transaction involves an amount in excess of $10 million, have been
determined by a nationally recognized investment banking firm to be fair, from a
financial standpoint, to the Company and its Restricted Subsidiaries.
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(b) The provisions of the foregoing paragraph (a) shall not prohibit
(i) any Restricted Payment permitted to be paid pursuant to the covenant
described under "-- Limitation on Restricted Payments," (ii) any issuance of
securities, or other payments, awards or grants in cash, securities or otherwise
pursuant to, or the funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors, (iii) the grant of stock
options or similar rights to employees and directors of the Company pursuant to
plans approved by the Board of Directors, (iv) loans or advances to employees in
the ordinary course of business in accordance with the past practices of the
Company or its Restricted Subsidiaries, but in any event not to exceed $1
million in the aggregate outstanding at any one time, (v) the payment of
reasonable fees to directors of the Company and its Restricted Subsidiaries who
are not employees of the Company or its Restricted Subsidiaries, (vi) any
Affiliate Transaction between the Company and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries, (vii) the payment by the Company (A) of
customary annual management fees and related expenses to WEP and (B) of fees
paid to WEP, J. H. Whitney & Co., or an affiliate of J. H. Whitney & Co.
pursuant to any financing, underwriting or placement agreement, or in respect of
other investment banking activities, in each case as determined by the Board of
Directors in good faith and (viii) the issuance or sale of any Capital Stock
(other than Disqualified Stock) of the Company.
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Company shall not sell or otherwise dispose of any Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
of its Capital Stock except (i) to the Company or a Wholly Owned Subsidiary,
(ii) if, immediately after giving effect to such issuance, sale or other
disposition, neither the Company nor any of its Subsidiaries owns any Capital
Stock of such Restricted Subsidiary or (iii) if, immediately after giving effect
to such issuance, sale or other disposition, such Restricted Subsidiary would no
longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect thereto would have been permitted to be made under
the covenant described under "-- Limitation on Restricted Payments" if made on
the date of such issuance, sale or other disposition.
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all its assets to, any Person, unless: (i)
the resulting, surviving or transferee Person (the "Successor Company") shall be
a Person organized and existing under the laws of the United States of America,
any State thereof or the District of Columbia and the Successor Company (if not
the Company) shall expressly assume, by an indenture supplemental thereto,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
the obligations of the Company under the Notes and the Indenture; (ii)
immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary as a result of such transaction as having been Incurred by such
Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction, the Successor Company would be able to Incur an
additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant
described under "-- Limitation on Indebtedness;" (iv) the Company shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture and (v) the Company shall have
delivered to the Trustee an Opinion of Counsel to the effect that the Holders
will not recognize income, gain or loss for Federal income tax purposes as a
result of such transaction 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 transaction had not occurred.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Notes.
SEC Reports. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the SEC and provide the Trustee and Noteholders 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,
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such information, documents and other reports to be so filed and provided at the
times specified for the filing of such information, documents and reports under
such Sections.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
(iii) the failure by the Company to comply with its obligations under "--
Certain Covenants -- Merger and Consolidation" above, (iv) the failure by the
Company to comply for 30 days after notice with any of its obligations in the
covenants described above under "Change of Control" (other than a failure to
purchase Notes) or under "-- Certain Covenants" under "-- Limitation on
Indebtedness," "-- Limitation on Restricted Payments," "-- Limitation on
Restrictions on Distributions from Restricted Subsidiaries" or "-- Limitation on
Sales of Assets and Subsidiary Stock" (other than a failure to purchase Notes),
"-- Limitation on Affiliate Transactions," "-- Limitation on the Sale or
Issuance of Capital Stock of Restricted Subsidiaries" or "-- SEC Reports," (v)
the failure by the Company to comply for 60 days after notice with its other
agreements contained in the Indenture, (vi) Indebtedness of the Company or any
Significant Subsidiary is not paid within any applicable grace period after
final maturity or is accelerated by the holders thereof because of a default and
the total amount of such Indebtedness unpaid or accelerated exceeds $7.5 million
(the "cross acceleration provision"), (vii) certain events of bankruptcy,
insolvency or reorganization of the Company or a Significant Subsidiary (the
"bankruptcy provisions") or (viii) any judgment or decree for the payment of
money in excess of $7.5 million is entered against the Company or a Significant
Subsidiary, remains outstanding for a period of 60 days following such judgment
and is not discharged, waived or stayed within 10 days after notice (the
"judgment default provision"). However, a default under clauses (iv), (v) and
(viii) will not constitute an Event of Default until the Trustee or the holders
of 25% in principal amount of the outstanding Notes notify the Company of the
default and the Company does not cure such default within the time specified
after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes may declare the
principal of and accrued but unpaid interest on all the Notes to be due and
payable. Upon such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Notes will ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holders of the Notes. Under certain
circumstances, the holders of a majority in principal amount of the outstanding
Notes may rescind any such acceleration with respect to the Notes and its
consequences. Subject to the provisions of the Indenture relating to the duties
of the Trustee, in case an Event of Default occurs and is continuing, the
Trustee will be under no obligation to exercise any of the rights or powers
under the Indenture at the request or direction of any of the holders of the
Notes unless such holders have offered to the Trustee reasonable indemnity or
security against any loss, liability or expense. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no holder
of a Note may pursue any remedy with respect to the Indenture or the Notes
unless (i) such holder has previously given the Trustee notice that an Event of
Default is continuing, (ii) holders of at least 25% in principal amount of the
outstanding Notes have requested the Trustee to pursue the remedy, (iii) such
holders have offered the Trustee reasonable security or indemnity against any
loss, liability or expense, (iv) the Trustee has not complied with such request
within 60 days after the receipt thereof and the offer of security or indemnity
and (v) the holders of a majority in principal amount of the outstanding Notes
have not given the Trustee a direction inconsistent with such request within
such 60-day period. Subject to certain restrictions, the holders of a majority
in principal amount of the outstanding Notes are given the right to 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. The
Trustee, however, may refuse to follow any direction that conflicts with law or
the Indenture or that the Trustee determines is unduly prejudicial to the rights
of any other holder of a Note or that would involve the Trustee in personal
liability.
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The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Notes notice
of the Default within 90 days after it occurs. Except in the case of a Default
in the payment of principal of or interest on any Note, the Trustee may withhold
notice if and so long as a committee of its trust officers determines that
withholding notice is not opposed to the interest of the holders of the Notes.
In addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
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, (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," (v) make any Note payable 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
provisions which require each holder's consent or in the waiver provisions or
(viii) make any change to the subordination provisions of the Indenture that
would adversely affect the Noteholders.
Without the consent of any holder of the Notes, the Company and 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 SEC in connection with the qualification
of the Indenture under the Trust Indenture Act. However, no amendment may be
made to the subordination provisions of the Indenture that adversely affect the
rights of any holders of Senior Indebtedness then outstanding unless the holders
of such Senior Indebtedness (or their representative) consent to such change.
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.
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
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obligations under "Change of Control" and under the covenants described under
"-- Certain Covenants" (other than the covenant described under "-- Merger and
Consolidation"), the operation of the cross acceleration provision, the
bankruptcy provisions with respect to Significant Subsidiaries and the judgment
default provision described under "-- Defaults" above and the limitations
contained in clauses (iii) and (iv) 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), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "-- Defaults" above or because of the
failure of the Company to comply with clause (iii) or (iv) 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
United States Trust Company of New York is the Trustee under the Indenture
and has been appointed by the Company as Registrar and Paying Agent with regard
to the Notes.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; provided, however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue or resign.
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.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or another Restricted Subsidiary or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; provided, however,
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that any such Restricted Subsidiary described in clauses (ii) or (iii) above is
primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person; provided, however, that the owners of the
Series A Preferred Stock and Series B Preferred Stock on the Issue Date and
their respective Affiliates shall not be considered Affiliates of the Company or
any Restricted Subsidiary solely by virtue of such ownership. For the purposes
of this definition, "control" when used with respect to any Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing. For purposes of the provisions described under "--
Certain Covenants -- Limitation on Restricted Payments," "-- Certain Covenants
- -- Limitation on Affiliate Transactions" and "-- Certain Covenants -- Limitation
on Sales of Assets and Subsidiary Stock" only, "Affiliate" shall also mean any
beneficial owner of Capital Stock representing 5% or more of the total voting
power of the Voting Stock (on a fully diluted basis) of the Company or of rights
or warrants to purchase such Capital Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other disposition
(or series of related sales, leases, transfers 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 (i) any shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary), (ii) all or substantially all the assets of any division
or line of business of the Company or any Restricted Subsidiary or (iii) 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 (i), (ii) and (iii) above, (w) a disposition by a Restricted
Subsidiary to the Company or by the Company or a Restricted Subsidiary to a
Wholly Owned Subsidiary, (x) for purposes of the covenant described under "--
Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition that constitutes a Restricted Payment permitted by the covenant
described under "-- Certain Covenants -- Limitation on Restricted Payments," (y)
a disposition of obsolete or worn out equipment or equipment that is no longer
useful in the conduct of the business of the Company and its Restricted
Subsidiaries and that is disposed of, in each case, in the ordinary course of
business and (z) disposition of assets with a fair market value of less than
$500,000).
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, 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/Leaseback Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of numbers of years from the date of determination to the dates
of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means all Indebtedness outstanding under the Credit
Agreement.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness 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
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due under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty.
"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 into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (1) if the Company or any Restricted
Subsidiary has Incurred any Indebtedness since the beginning of such period that
remains outstanding or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period (provided that if
such Indebtedness is Incurred under a revolving credit facility (or similar
arrangement or under any predecessor revolving credit or similar arrangement)
only that portion of such Indebtedness that constitutes the one year projected
average balance of such Indebtedness (as determined in good faith by senior
management of the Company and assuming a constant level of sales) shall be
deemed outstanding for purposes of this calculation) and the discharge of any
other Indebtedness repaid, repurchased, defeased or otherwise discharged with
the proceeds of such new Indebtedness as if such discharge had occurred on the
first day of such period, (2) if the Company or any Restricted Subsidiary has
repaid, repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any Indebtedness is to be repaid, repurchased,
defeased or otherwise discharged (in each case other than Indebtedness Incurred
under any revolving credit facility unless such Indebtedness has been
permanently repaid and has not been replaced) on the date of the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and
Consolidated Interest Expense for such period shall be calculated on a pro forma
basis as if such discharge had occurred on the first day of such period and as
if the Company or such Restricted Subsidiary has not earned the interest income
actually earned during such period in respect of cash or Temporary Cash
Investments used to repay, repurchase, defease or otherwise discharge such
Indebtedness, (3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative),
directly attributable thereto for 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 Indebtedness 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 Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to the
extent the Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale), (4) 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 assets, including any
acquisition of assets occurring in connection with a transaction requiring 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 Indebtedness) as if such Investment or acquisition
occurred on the first day of such period and (5) 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 Disposition, any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(3) or (4) 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
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such Asset Disposition, Investment or acquisition occurred on the first day of
such period. For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations shall
be determined in good faith, without duplication, by a responsible financial or
accounting Officer of the Company. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest of such Indebtedness
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 Indebtedness 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, without duplication, (i)
interest expense attributable to capital leases and the interest expense
attributable to leases constituting part of a Sale/Leaseback Transaction, (ii)
amortization of debt discount and debt issuance cost, (iii) capitalized
interest, (iv) non-cash interest expenses, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Hedging Obligations (including
amortization of fees), (vii) Preferred Stock dividends in respect of all
Preferred Stock held by Persons other than the Company or a Wholly Owned
Subsidiary, (viii) interest incurred in connection with Investments in
discontinued operations, (ix) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by (or secured by the
assets of) the Company or any Restricted Subsidiary and (x) 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 Indebtedness Incurred
by such plan or trust.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in the calculation of such Consolidated Net Income:
(i) any net income of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that (A) subject to the
exclusion contained in clause (iv) 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 actually
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 paid to a Restricted Subsidiary,
to the limitations contained in clause (iii) below) and (B) the Company's
equity in a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income;
(ii) any net income (or loss) of any Person acquired by the Company or
a Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(iii) any net income 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 by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject
to the exclusion contained in clause (iv) 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
that could have been 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 paid to another Restricted Subsidiary, to the limitation
contained in this clause) and (B) 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;
(iv) any gain or loss realized upon the sale or other disposition of
any assets of the Company, its consolidated Subsidiaries or any other
Person (including pursuant to any sale-and-leaseback arrangement) which is
not sold or otherwise disposed of in the ordinary course of business and
any gain or loss realized upon the sale or other disposition of any Capital
Stock of any Person;
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(v) extraordinary gains or losses;
(vi) the cumulative effect of a change in accounting principles; and
(vii) any restructuring charges related to the closing of the
Company's Greenville, Mississippi manufacturing facility.
Notwithstanding the foregoing, for the purposes of the covenant described under
"Certain Covenants-Limitation on Restricted Payments" only, there shall be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of the Company plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Credit Agreement" means (i) the Second Amended and Restated Credit
Agreement dated as of June 23, 1998, between the Company, the lenders party
thereto in their capacities as lenders thereunder and Comerica Bank, as agent,
together with all exhibits, schedules and appendices thereto, as the same may be
amended, supplemented or otherwise modified from time to time and (ii) any
renewal, extension, refunding, restructuring, replacement or refinancing thereof
(whether under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders).
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement designed to protect
such Person against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof are committed to lend up to,
at least $25 million and is specifically designated by the Company in the
instrument evidencing or governing such Senior Indebtedness as "Designated
Senior Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or
(iii) is redeemable or must be purchased, upon the occurrence of certain events
or otherwise, by such Person at the option of the holder thereof, in whole or in
part, in each case on or prior to the first anniversary of the Stated Maturity
of the Notes; provided, however, that any Capital Stock that would not
constitute Disqualified Stock but for provisions thereof giving holders thereof
the right to require such Person to purchase or redeem such Capital Stock upon
the occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not constitute
Disqualified Stock if (x) the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the terms applicable to the Notes and described under "--
Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock" and "--
Certain Covenants -- Change of Control" and (y) any such requirement only
becomes operative after compliance with such terms applicable to the Notes,
including the purchase of any Notes tendered pursuant thereto.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all
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income tax expense of the Company and its consolidated Restricted Subsidiaries,
(b) depreciation expense of the Company and its consolidated Restricted
Subsidiaries, (c) amortization expense of the Company and its consolidated
Restricted Subsidiaries (excluding amortization expense attributable to a
prepaid cash item that was paid in a prior period) and (d) all other non-cash
charges of the Company and its consolidated Restricted Subsidiaries (excluding
any such non-cash charge to the extent that it represents an accrual of or
reserve for cash expenditures in any future period), in each case for such
period. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization and non-cash charges
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, as amended.
"Foreign Subsidiary" means a Restricted Subsidiary that is incorporated in
a jurisdiction other than the United States or a State thereof or the District
of Columbia and with respect to which more than 80% of any of its sales,
earnings or assets (determined on a consolidated basis in accordance with GAAP)
are located in, generated from or derived from operations located in territories
outside of the United States of America and jurisdictions outside the United
States of America.
"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 SEC 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 SEC.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such 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 (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such 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 Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall be deemed the Incurrence
of Indebtedness.
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"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal in respect of (A) indebtedness of such Person for
money borrowed and (B) indebtedness evidenced by notes, debentures, bonds
or other similar instruments for the payment of which such Person is
responsible or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and payable;
(ii) all Capital Lease Obligations of such Person and all Attributable
Debt in respect of Sale/Leaseback Transactions entered into by such Person;
(iii) 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);
(iv) 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 clauses (i)
through (iii) 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
30th Business Day following payment on the letter of credit);
(v) 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, the liquidation preference
with respect to, any Preferred Stock (but excluding, in each case, any
accrued dividends);
(vi) all obligations of the type referred to in clauses (i) through
(v) 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;
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any Lien on any property or asset 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 assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.
The amount of Indebtedness 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.
"Interest Rate Agreement" means in respect of a Person any interest rate
swap agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect such Person against fluctuations in interest
rates.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and the
covenant described under "-- Certain Covenants -- Limitation on Restricted
Payments," (i) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary equal to an amount (if positive) equal to (x) the Company's
"Investment" in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net
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assets of such Subsidiary at the time of such redesignation; and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to such properties or assets or received in any other
noncash form), in each case net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all Federal,
state, provincial, foreign and local taxes required to be accrued as a liability
under GAAP, as a consequence of such Asset Disposition, (ii) all payments made
on any Indebtedness which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law, be repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments required to be made to minority interest
holders in Restricted Subsidiaries as a result of such Asset Disposition and
(iv) the deduction of appropriate amounts provided by the seller as a reserve,
in accordance with GAAP, against any liabilities associated with the property or
other assets disposed in such Asset Disposition and retained by the Company or
any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means 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 Holders" means (i) J. H. Whitney & Co. and any Person who on the
Issue Date is an Affiliate of J. H. Whitney & Co. and (ii) any Person who, on
the Issue Date, is a member of the senior management and a beneficial
shareholder of the Company.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) the Company, a Restricted Subsidiary or a Person that will,
upon the making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary;
(vii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (viii) Permitted Joint Ventures not
in excess of $7.5 million at any time outstanding; and (ix) any Person to the
extent such Investment represents the non-cash portion of the consideration
received for an Asset Disposition as permitted pursuant to the covenant
described under "-- Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock."
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"Permitted Joint Ventures" means joint ventures conducting a Related
Business primarily outside of the United States.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, 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 a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Public Market" means any time after (x) a Public Equity Offering has been
consummated and (y) at least 15% of the total issued and outstanding common
stock of the Company has been distributed by means of an effective registration
statement under the Securities Act or sales pursuant to Rule 144 under the
Securities Act.
"Refinance" means, in respect of any Indebtedness, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided further,
however, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of
the Company or a Restricted Subsidiary that Refinances Indebtedness of an
Unrestricted Subsidiary.
"Related Business" means any business related, ancillary or complementary
to the businesses of the Company and the Restricted Subsidiaries on the Issue
Date.
"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness of the Company.
"Restricted Payment" with respect to any Person means (i) the declaration
or payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company held by any Person
or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital Stock of the
Company that is not Disqualified Stock),
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(iii) the purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations purchased
in anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of acquisition)
or (iv) the making of any Investment in any Person (other than a Permitted
Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Indebtedness" means (i) Indebtedness of the Company, whether
outstanding on the Issue Date or thereafter Incurred, and (ii) accrued and
unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company to the
extent post-filing interest is allowed in such proceeding) in respect of (A)
Indebtedness of the Company for money borrowed and (B) Indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
the Company is responsible or liable (in the case of each of (A) and (B),
whether outstanding on the Issue Date or thereafter Incurred) unless, in the
case of any particular Indebtedness, the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are subordinate in right of payment to the Notes; provided, however,
that Senior Indebtedness shall not include (1) any obligation of the Company to
any Subsidiary, (2) any liability for Federal, state, local or other taxes owed
or owing by the Company, (3) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities), (4) any Indebtedness of the
Company (and any accrued and unpaid interest in respect thereof) which is
subordinate or junior in any respect to any other Indebtedness or other
obligation of the Company or (5) that portion of any Indebtedness which at the
time of Incurrence is Incurred in violation of the Indenture.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness.
"Series A Preferred Stock" means the Series A Cumulative Preferred Stock,
par value $.01 per share, of the Company.
"Series B Preferred Stock" means the Series B Cumulative Preferred Stock,
par value $.01 per share, of the Company.
"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 SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the final payment of principal of
such security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness 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" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including
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partnership interests) 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 (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one or
more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following:
(i) any investment in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the United
States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws
of the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50,000,000
(or the foreign currency equivalent thereof) and has outstanding debt which
is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule
436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor,
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
(iv) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard & Poor's Ratings
Group, and
(v) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A"
by Standard & Poor's Ratings Group or "A" by Moody's Investors Service,
Inc.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns
any Capital Stock or Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under the covenant described under "-- Certain Covenants -- Limitation on
Restricted Payments." The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided, however, that immediately
after giving effect to such designation (x) the Company could Incur $1.00 of
additional Indebtedness under paragraph (a) of the covenant described under "--
Certain Covenants -- Limitation on Indebtedness" and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
resolution of the Board of Directors giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"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.
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"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"WEP" means Whitney Equity Partners, L.P. and its successors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares and similar ownership
required or made necessary to conduct business by the laws or regulations of the
jurisdiction under which it is incorporated) is owned by the Company or one or
more Wholly Owned Subsidiaries.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Following is a general discussion of the principal United States federal
income tax consequences of the purchase, ownership and disposition of the Notes
to initial holders thereof. Except as provided below under "Foreign Holders,"
this discussion is limited to investors that are United States Holders (that is,
a holder that is, for United States federal income tax purposes, (i) a citizen
or resident of the United States; (ii) a corporation or other entity taxable as
a corporation created or organized in or under the laws of the United States or
any political subdivision thereof; (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source; or
(iv) a trust if (X) a U.S. court is able to exercise primary supervision over
the administration of the trust, and (Y) one or more U.S. persons have the
authority to control all substantial decisions of the trust.
This discussion is based on currently existing provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing and proposed U.S.
Treasury regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect or proposed on the date hereof and all
of which are subject to change, possibly with retroactive effect, or different
interpretations. This discussion does not address the tax consequences to
subsequent purchasers of Notes, and is limited to investors who hold the Notes
as capital assets as defined in section 1221 of the Code. Moreover, the
discussion is for general information only, and does not address all of the tax
consequences that may be relevant to particular investors in light of their
personal circumstances, or to certain types of investors (such as certain
financial institutions, insurance companies, tax exempt entities, dealers in
securities or foreign currencies or persons who hold the Notes as a position in
a straddle or as part of a "conversion transaction" or who have hedged the
interest rate on the Notes).
UNITED STATES HOLDERS
Interest on the Notes
In general, interest paid or payable on a Note will be taxable to a United
States Holder as ordinary interest income at the time it is received or accrued,
in accordance with such holder's method of accounting for federal income tax
purposes.
Disposition of the Notes
Upon the sale, exchange, redemption, retirement at maturity or other
disposition of a Note, a United States Holder will generally recognize taxable
gain or loss equal to the difference between the sum of the cash plus the fair
market value of all other property received on such disposition and such
holder's adjusted tax basis in the Note (except to the extent such cash or
property is attributable to accrued interest, which will be taxable as ordinary
income).
Gain or loss recognized on the disposition of a Note generally will be
capital gain or loss and will be long-term capital gain or loss if the Notes
were held for more than one year at the time of disposition. In the case of
individuals, capital gain will be subject to a maximum rate of (i) 20% if, at
the time of such disposition, the United States Holder's holding period for the
Note is more than 18 months, and (ii) 28% if, at the time of such disposition,
the United States Holder's holding period for the Notes is 18 months or less but
more than one year.
Exchange Offer and Registration
The exchange of an Existing Note for an Exchange Note pursuant to the
Exchange Offer should not constitute a taxable exchange for United States
federal income tax purposes. As a result, holders who exchange Existing Notes
for Exchange Notes pursuant to the Exchange Offer will not recognize any taxable
gain or loss for United States federal income tax purposes at the time of the
exchange and any such holder should have the same adjusted tax basis and holding
period in the Exchange Notes as it had in the Existing Notes immediately before
the exchange.
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Upon failure to comply with certain of its obligations under the
Registration Agreement, the Company would be required to pay additional interest
on the Existing Notes. Although the matter is not free from doubt, if additional
interest becomes payable on the Existing Notes, such additional interest should
be treated in the same manner as stated interest on the Existing Notes. It is
also possible, however, that if additional interest becomes payable on the
Existing Notes, all or a portion of any interest or additional interest earned
on the Existing Note may constitute original issue discount for Unites States
federal income tax purposes and, to that extent, a holder would be required to
report such original issue discount over the remaining term of the Notes on a
constant yield basis. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE TAX
CONSIDERATIONS RELATING TO THE PAYMENT OF ADDITIONAL INTEREST.
FOREIGN HOLDERS
For purposes of this discussion, a Foreign Holder means any holder of a
Note that is not a United States Holder. Subject to the discussion of backup
withholding below, a Foreign Holder generally will not be subject to United
States federal income or withholding tax on payments of interest on a Note,
provided that (i) the holder is not (A) a direct or indirect owner of 10 percent
or more of the total voting power of all voting stock of the Company or (B) a
controlled foreign corporation related to the Company through stock ownership
(actually or constructively), (ii) such interest payments are not effectively
connected with the conduct by the Foreign Holder of a trade or business within
the United States and (iii) the Company or its paying agent receives certain
information from the holder (or a financial institution that holds the Notes in
the ordinary course of its trade or business) certifying that such holder is a
Foreign Holder. See " -- Information Reporting and Backup Withholding" for
recent changes to the requirements described in (iii) above. Subject to the
discussion of backup withholding below, a Foreign Holder generally will not be
subject to United States federal income or withholding tax on gains from the
sale or other disposition of a Note, provided that (i) such gains are not
effectively connected with the conduct by the Foreign Holder of a trade or
business within the United States and (ii) such Foreign Holder is not an
individual who (A) is present in the United States for 183 days or more in the
taxable year of disposition and (B) meets certain other requirements.
INFORMATION REPORTING AND BACKUP WITHHOLDING
On October 6, 1997, the Treasury Department issued final regulations
relating to withholding, information reporting and backup withholding that unify
current certification procedures and forms and clarify reliance standards (the
"Final Regulations"). The Final Regulations generally will be effective with
respect to payments made after December 31, 1999. Except as provided below, this
section describes rules applicable to payments made on or before December 31,
1999.
A holder of a Note may be subject to backup withholding at a rate of 31%
with respect to interest paid on the Note and proceeds from the sale, exchange,
redemption or retirement of the Note, unless such holder (a) is a corporation or
comes within with certain other exempt categories and, when required,
demonstrates that fact or (b) provides a correct taxpayer identification number
(social security number or employer identification number), certifies as to its
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. Certain penalties may be imposed
by the Internal Revenue Service on a holder that is required to supply
information but does not do so in the proper manner.
A Foreign Holder generally will be exempt from backup withholding and
information reporting requirements, but may be required to comply with
certification and identification procedures in order to obtain an exemption from
backup withholding and information reporting.
Any amount withheld under the backup withholding rules from a payment to a
holder is allowable as a credit against such holder's United States federal
income tax (which might entitle such holder to a refund), provided that such
holder furnishes the required information to the Internal Revenue Service.
The Final Regulations impose certain certification and documentation
requirements on Foreign Holders claiming an exemption from withholding,
information reporting and backup withholding on interest paid on the Notes and
proceeds of a sale of the Notes. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS AS
TO THE EFFECT, IF ANY, OF THE FINAL REGULATIONS ON THEIR PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES.
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The exchange of an Existing Note for an Exchange Note should not constitute
a taxable exchange of the Existing Note if the interest rate on the Exchange
Note is equal to the interest rate on the Existing Note. Although there is no
definitive guidance on the issue, even if the interest rate on the Exchange Note
is not equal to the interest rate on the Existing Note because Additional
Interest is payable on the Existing Note but not on the Exchange Note, the
exchange should not constitute a taxable exchange of the Existing Note.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF THE NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL ESTATE OR GIFT TAX LAWS
OR ANY STATE, LOCAL OR FOREIGN TAX LAWS, ANY CHANGES IN APPLICABLE TAX LAWS AND
ANY PENDING OR PROPOSED LEGISLATION OR REGULATIONS. IN ADDITION, INDIVIDUAL
NOTEHOLDERS WHO ARE NOT CITIZENS OF THE UNITED STATES SHOULD CONSULT THEIR TAX
ADVISORS AS TO WHETHER THEY WILL OR WILL NOT BE DEEMED TO BE "RESIDENTS" OF THE
UNITED STATES FOR PURPOSES OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986,
AS AMENDED.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer in exchange for Existing Notes must acknowledge
and agree 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 Existing Notes where such Existing Notes
were acquired as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 180 days after 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 Notes may be required to deliver a prospectus.
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 broker-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 person that participates in the
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 and agreeing that it will deliver and
by delivering this Prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days 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 other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
By acceptance of this Exchange Offer, each broker-dealer agrees that, upon
receipt of notice from the Company of the happening of any event which makes any
statement in the Prospectus untrue in any material respect or which requires the
making of any changes in the Prospectus in order to make the statements therein
not misleading, such broker-dealer will suspend use of the Prospectus until (i)
the Company has amended or supplemented the Prospectus to correct such
misstatement or omission and (ii) either the Company has
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furnished copies of the amended or supplemented Prospectus to such broker-dealer
or, if the Company has not otherwise agreed to furnish such copies and declines
to do so after such broker-dealer so requests, such broker-dealer has obtained a
copy of such amended or supplemented Prospectus as filed with the Commission.
The Company has agreed to deliver such notice and such amended or supplemented
Prospectus promptly to any Participating Broker-Dealer that has so notified the
Company.
Pursuant to the Registration Agreement, the Company and the Guarantors have
jointly and severally agreed to indemnify the Initial Purchasers against certain
liabilities, including certain liabilities incurred in connection with the
offering of the Existing Notes, and contribute to payments the Initial
Purchasers may be required to make in respect thereof.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance and sale
of the Exchange Notes offered hereby will be passed upon for the Company by
Whyte Hirschboeck Dudek S.C., Milwaukee, Wisconsin, of which James A. Feddersen,
Secretary of the Company, is a shareholder (see "Management" and "Certain
Relationships and Related Transactions").
INDEPENDENT AUDITORS
The consolidated financial statements of Aqua-Chem, Inc. for the periods
from January 1, 1997 to July 31, 1997, and August 1, 1997 to December 31, 1997,
included in this Prospectus, have been audited by Arthur Andersen LLP,
Milwaukee, Wisconsin, independent public accountants, as stated in their report
appearing herein.
The consolidated financial statements of Aqua-Chem, Inc. for the period
from January 1, 1995 to December 31, 1996, included in this Prospectus, have
been audited by KPMG Peat Marwick LLP, independent certified public accountants,
Milwaukee, Wisconsin, as stated in their report appearing herein.
Arthur Andersen LLP has served as the Company's independent auditors since
January 23, 1998, when the Company dismissed KPMG Peat Marwick LLP as its
independent auditors. KPMG Peat Marwick LLP's reports on the Company's financial
statements for the years ended December 31, 1995 and 1996 contained no adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles. The Board approved the
decision to change the Company's independent auditors upon the recommendation of
the audit committee. During the Company's fiscal years ended December 31, 1995
and 1996 and through January 23, 1998, there were no disagreements with KPMG
Peat Marwick LLP on any matters of accounting principles or practices, financial
statement disclosures or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of KPMG Peat Marwick LLP, would have caused
that firm to make reference to the subject matter of the disagreement in
connection with its report on the financial statements for such years. During
the Company's two most recent fiscal years and through June 30, 1998, there have
been no reportable events.
The financial statements of National Dynamics Corporation for the period
from November 1, 1995 to October 31, 1997, included in this Prospectus, have
been audited by KPMG Peat Marwick LLP, independent certified public accountants,
Omaha, Nebraska, as stated in their report appearing herein.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act for the registration of the Exchange Notes offered
hereby. This Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
and certain information contained in the Registration Statement has been
omitted, as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the Exchange Notes offered
hereby, reference is made to the Registration Statement, including the exhibits
and financial statements, notes and schedules thereto filed as a part thereof or
incorporated by reference therein. This
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Prospectus contains summaries of material terms and provisions of certain
documents, including the Registration Agreement and the Indenture. With respect
to each such document filed with the Commission as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved. The Registration Statement and the exhibits
and schedules thereto may be inspected without charge and copied at prescribed
rates at the Public Reference Section maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, the Commission's regional
offices located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Northwestern Atrium Center, 500 West Madison Street (Suite 1400),
Chicago, Illinois 60661-2511. The Commission maintains a Web Site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of such
site is http://www.sec.gov.
The principal executive offices of the Company are located at 7800 North
113th Street, P.O. Box 421, Milwaukee, Wisconsin, 53201, and the telephone
number is (414) 359-0600.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents or reports filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the securities offered hereby shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated herein by reference shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is 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 and superseded, to constitute a part of
this Prospectus.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO EXCHANGE, OR A SOLICITATION OF
AN OFFER TO EXCHANGE, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO EXCHANGE OR A SOLICITATION OF AN OFFER TO EXCHANGE SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
The Indenture provides that the Company shall file with the Trustee and
provide holders of Notes, within 15 days after it files them with the
Commission, copies of its annual reports and the information, documents and
other reports that they are required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. To the extent permitted by the Exchange
Act, the Company shall continue to file with the Commission and provide the
Trustee and holders with the annual reports and the information, documents and
other reports that are specified in Sections 13 and 15(d) of the Exchange Act.
In the event that the Company is not permitted to file such reports, documents
and information with the Commission or the Company has subsidiaries that
individually or in the aggregate would be deemed to be "substantial
subsidiaries" (as defined in Rule 1-02 of Regulation S-X, as in effect on June
23, 1998), the Company will provide substantially similar information with
respect to itself and its subsidiaries to the Trustee, holders and prospective
holders (upon written request) as if the Company were subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act. The Company shall also
comply with the other provisions of Trust Indenture Act Section 314(a).
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INDEX TO FINANCIAL STATEMENTS
AQUA-CHEM, INC. AND SUBSIDIARIES AUDITED AND UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
The following audited and unaudited consolidated financial statements of
Aqua-Chem, Inc. and Subsidiaries are presented herein on the pages indicated
below:
<TABLE>
<S> <C>
AUDITED FINANCIAL STATEMENTS
Report of Independent Public Accountants.................... F-2
Independent Auditors' Report................................ F-3
Consolidated Balance Sheets as of December 31, 1997 and
1996...................................................... F-4
Consolidated Statements of Operations for the period August
1, 1997 to December 31, 1997, the period January 1 to July
31, 1997, and the years ended December 31, 1996 and
1995...................................................... F-5
Consolidated Statements of Stockholders' Equity for the
period August 1, 1997 to December 31, 1997, the period
January 1 to July 31, 1997, and the years ended December
31, 1996 and 1995......................................... F-6
Consolidated Statements of Cash Flows for the period August
1, 1997 to December 31, 1997, the period January 1 to July
31, 1997, and the years ended December 31, 1996 and
1995...................................................... F-7
Notes to Consolidated Financial Statements.................. F-8
UNAUDITED FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets as of June 30, 1998
and 1997.................................................. F-25
Consolidated Condensed Statements of Operations for the six
months ended June 30, 1998 and 1997....................... F-26
Consolidated Condensed Statements of Cash Flows for the six
months ended June 30, 1998 and 1997....................... F-27
Notes to Consolidated Condensed Financial Statements........ F-28
Schedule II -- Valuation and Qualifying Accounts............ F-30
Computation of Ratio of Earnings to Fixed Charges........... F-31
</TABLE>
NATIONAL DYNAMICS CORPORATION AUDITED AND UNAUDITED FINANCIAL STATEMENTS
The following audited and unaudited financial statements of National
Dynamics Corporation are presented herein on the pages indicated below:
<TABLE>
<S> <C>
AUDITED FINANCIAL STATEMENTS
Independent Auditors' Report................................ F-32
Balance Sheets as of October 31, 1997 and 1996.............. F-33
Statements of Earnings and Retained Earnings for the years
ended October 31, 1997, 1996 and 1995..................... F-34
Statements of Cash Flows for the years ended October 31,
1997, 1996 and 1995....................................... F-35
Notes to Financial Statements............................... F-36
UNAUDITED FINANCIAL STATEMENTS
Condensed Balance Sheets as of March 31, 1998 and 1997...... F-41
Condensed Statements of Earnings for the five months ended
March 31, 1998 and 1997................................... F-42
Condensed Statements of Cash Flows for the five months ended
March 31, 1998 and 1997................................... F-43
Note to Condensed Financial Statements (Unaudited).......... F-44
</TABLE>
F-1
<PAGE> 115
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of Aqua-Chem, Inc.:
We have audited the accompanying balance sheet of Aqua-Chem, Inc. and
subsidiaries as of December 31, 1997 and the related statements of operations,
stockholders' equity and cash flows for the period from August 1, 1997 to
December 31, 1997 and the period from January 1, 1997 to July 31, 1997. These
financial statements and the supplemental schedule referred to below are the
responsibility of Aqua-Chem'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 financial position of Aqua-Chem, Inc. and
subsidiaries as of December 31, 1997, and the results of their operations and
their cash flows for the period August 1, 1997 to December 31, 1997 and the
period from January 1, 1997 to July 31, 1997, in conformity with generally
accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The supplemental schedule, Schedule II --
Valuation and Qualifying Accounts, is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not a required part of the
basic financial statements. The supplemental schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 4, 1998 (except with respect to
the matters discussed in Notes 16 and
18, as to which the date is May 28,
1998).
F-2
<PAGE> 116
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Aqua-Chem, Inc.:
We have audited the accompanying consolidated balance sheet of Aqua-Chem, Inc.
and subsidiaries (80% owned subsidiary of Lyonnaise American Holding, Inc.) as
of December 31, 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the two-year
period ended December 31, 1996, as listed in the accompanying index to financial
statements. In connection with our audits of the consolidated financial
statements, we also have audited the financial statement schedule, Schedule II
- -- Valuation and Qualifying Accounts, for each of the years in the two-year
period ended December 31, 1996, as listed in the accompanying index to financial
statements. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aqua-Chem, Inc. and
subsidiaries as of December 31, 1996, and the results of their operations and
their cash flows for each of the years in the two-year period ended December 31,
1996, in conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein for each of
the years in the two-year period ended December 31, 1996.
KPMG Peat Marwick LLP
Milwaukee, Wisconsin
January 24, 1997
F-3
<PAGE> 117
AQUA-CHEM, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
BASIS OF BASIS OF
ACCOUNTING ACCOUNTING
---------------- ----------------
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
- ------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 11,936 $ 8,627
Accounts receivable, less allowances of $638 and $659 at
December 31, 1997 and 1996 33,332 33,646
Revenues in excess of billings 5,068 5,283
Inventories 20,814 21,652
Deferred income taxes 4,237 4,884
Prepaid expenses and other current assets 1,093 2,180
-------- --------
Total current assets 76,480 76,272
Property, plant and equipment - net 31,555 21,866
Intangible assets, less accumulated amortization of $273 and
$236 at December 31, 1997 and 1996 10,174 647
Deferred income taxes 2,086 --
Other assets 4,366 2,215
-------- --------
TOTAL ASSETS $124,661 $101,000
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------
Current liabilities:
Current maturities on long-term debt $ 1,055 $ 440
Accounts payable
Trade 10,685 9,647
Other 5,324 6,393
Billings in excess of revenues 5,654 1,780
Compensation and profit sharing 5,318 4,169
Accrued litigation settlements 3,200 --
Accrued expenses 17,624 14,922
-------- --------
Total current liabilities 48,860 37,351
Long-term debt 58,636 19,688
Deferred income taxes -- 1,130
Other long-term liabilities 5,573 2,282
-------- --------
64,209 23,100
Minority interest 589 589
Preferred stock with mandatory redemption provisions 7,365 --
Stockholders' equity:
Common stock, $.01 par value. Authorized 2,000,000
shares; issued and outstanding 1,000,000 shares at
December 31, 1997 10 --
Common stock, $1.00 par value. Authorized 5,000 shares;
issued and outstanding 1,300 shares at December 31,
1996 -- 1
Additional paid-in capital 90 36,924
Retained earnings 3,049 4,445
Warrants 433 --
Cumulative translation adjustment 56 (1,410)
-------- --------
Total stockholders' equity 3,638 39,960
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $124,661 $101,000
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-4
<PAGE> 118
AQUA-CHEM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
POST-
ACQUISITION
BASIS OF
ACCOUNTING PRE-ACQUISITION BASIS OF ACCOUNTING
------------ -----------------------------------------
AUGUST 1 TO YEARS ENDED DECEMBER 31,
DECEMBER 31, JANUARY 1 TO -------------------------
1997 JULY 31, 1997 1996 1995
------------ ------------- ---- ----
<S> <C> <C> <C> <C>
Net sales $91,541 $99,618 $199,552 $183,368
Cost of goods sold 66,333 73,656 153,446 148,650
------- ------- -------- --------
Gross margin 25,208 25,962 46,106 34,718
Costs and expenses:
Selling, general and administrative 17,136 22,258 34,446 37,772
Restructuring charges -- -- 5,038 4,593
------- ------- -------- --------
17,136 22,258 39,484 42,365
Operating income (loss) 8,072 3,704 6,622 (7,647)
Other income (expense):
Interest income 202 450 464 358
Interest expense (2,559) (753) (1,448) (1,663)
Other, net 57 (955) (806) 2,635
------- ------- -------- --------
(2,300) (1,258) (1,790) 1,330
Income (loss) before income taxes and minority
interest 5,772 2,446 4,832 (6,317)
Income tax expense 2,289 421 507 189
Minority interest in earnings (loss) of
consolidated subsidiary 174 171 231 (52)
------- ------- -------- --------
Net income (loss) $ 3,309 $ 1,854 $ 4,094 $ (6,454)
======= ======= ======== ========
Preferred stock dividends 260 -- -- --
Net income (loss) applicable to common $ 3,049 $ 1,854 $ 4,094 $ (6,454)
======= ======= ======== ========
PER SHARE DATA:
Basic net income per share of common stock $ 3.05 N.A. N.A. N.A.
=======
Diluted net income per share of common stock $ 2.59 N.A. N.A. N.A.
=======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-5
<PAGE> 119
AQUA-CHEM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE
------------------- PAID-IN TRANSLATION RETAINED
SHARES AMOUNT CAPITAL WARRANTS ADJUSTMENT EARNINGS TOTAL
--------- ------ ---------- -------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-acquisition basis of
accounting
Balance at December 31, 1994 1,300 $ 1 $ 36,924 $ -- $(1,476) $ 6,805 $42,254
Net loss -- -- -- -- -- (6,454) (6,454)
Cumulative translation
adjustment -- -- -- -- 836 -- 836
--------- --- -------- ---- ------- ------- -------
Balance at December 31, 1995 1,300 1 36,924 -- (640) 351 36,636
Net income -- -- -- -- -- 4,094 4,094
Cumulative translation
adjustment -- -- -- -- (770) -- (770)
--------- --- -------- ---- ------- ------- -------
Balance at December 31, 1996 1,300 1 36,924 -- (1,410) 4,445 39,960
Net income -- -- -- -- -- 1,854 1,854
Cumulative translation
adjustment -- -- -- -- (404) -- (404)
--------- --- -------- ---- ------- ------- -------
Balance at July 31, 1997 1,300 $ 1 $ 36,924 $ -- $(1,814) $ 6,299 $41,410
========= === ======== ==== ======= ======= =======
Post-acquisition basis of
accounting
Balance at July 31, 1997 1,300 1 36,924 -- (1,814) 6,299 41,410
Cancellation of former equity
and elimination of retained
earnings and cumulative
translation adjustment (1,300) (1) (36,924) -- 1,814 (6,299) (41,410)
Issuance of new common stock 1,000,000 10 90 -- -- -- 100
Issuance of warrants -- -- -- 433 -- -- 433
Preferred stock dividends
accrued -- -- -- -- -- (260) (260)
Net income -- -- -- -- -- 3,309 3,309
Foreign currency translation
adjustment -- -- -- -- 56 -- 56
--------- --- -------- ---- ------- ------- -------
Balance at December 31, 1997 1,000,000 $10 $ 90 $433 $ 56 $ 3,049 $ 3,638
========= === ======== ==== ======= ======= =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-6
<PAGE> 120
AQUA-CHEM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
POST-
ACQUISITION
BASIS OF
ACCOUNTING PRE-ACQUISITION BASIS OF ACCOUNTING
------------ -----------------------------------
YEARS ENDED
AUGUST 1 TO JANUARY 1 TO DECEMBER 31,
DECEMBER 31, JULY 31, -------------------
1997 1997 1996 1995
------------ ------------- -------- --------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,309 $ 1,854 $ 4,094 $(6,454)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,284 1,690 2,984 3,153
Deferred tax (benefit) expense (1,784) -- -- 234
Minority interest in earnings (loss) of consolidated
subsidiary 174 171 231 (52)
Increase (decrease) in cash due to changes in:
Accounts receivable (4,852) 5,166 54 4,437
Revenues in excess of billings 3,096 (2,881) (273) (1,113)
Inventories 3,473 (1,948) 8,463 (1,976)
Prepaid expenses and other current assets (332) (623) (57) 737
Accounts payable -- trade (931) 1,969 212 1,954
Accounts payable -- other 674 (1,743) (3,415) 3,183
Billings in excess of revenues 1,624 2,250 (4,489) 3,784
Accrued expenses and other current liabilities 3,800 (999) 880 (6,165)
Other, net (224) (49) (632) (3,273)
-------- ------- ------- -------
Total adjustments 6,002 3,003 3,958 4,903
-------- ------- ------- -------
Net cash provided by (used in) operating activities 9,311 4,857 8,052 (1,551)
Cash flows from investing activities:
Management Buy-Out of Aqua-Chem, Inc. (52,102) -- -- --
Proceeds from sales of property, plant and equipment and
other assets 2,000 73 203 3,639
Additions to property, plant and equipment (1,197) (2,195) (2,789) (4,867)
Additions to intangibles (50) (270) -- --
Proceeds from notes receivable 650 1,511 1,561 289
-------- ------- ------- -------
Net cash used in investing activities (50,699) (881) (1,025) (939)
Cash flows from financing activities:
Proceeds from debt 65,573 118 2,232 538
Principal payments on debt (26,016) (112) (740) --
Issuance of common stock 100 -- -- --
Issuance of warrants 433 -- -- --
Issuance of preferred stock 2,655 -- -- --
Deferred financing costs (2,030) -- -- --
-------- ------- ------- -------
Net cash provided by financing activities 40,715 6 1,492 538
Net increase (decrease) in cash and cash equivalents (673) 3,982 8,519 (1,952)
Cash and cash equivalents at beginning of period 12,609 8,627 108 2,060
-------- ------- ------- -------
Cash and cash equivalents at end of period $ 11,936 $12,609 $ 8,627 $ 108
======== ======= ======= =======
Cash paid (received) during the period for:
Interest $ 2,513 $ 658 $ 1,521 $ 1,601
======== ======= ======= =======
Taxes $ 1,214 $ 11 $ (123) $(1,404)
======== ======= ======= =======
Details of Management Buy-Out
Fair value of assets acquired $116,058
Goodwill 9,689
Liabilities assumed (69,196)
Issuance of Series A Cumulative Preferred Stock (4,449)
--------
Cash paid for assets $ 52,102
========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-7
<PAGE> 121
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
NOTE 1: MANAGEMENT BUY-OUT
On July 31, 1997, Aqua-Chem, Inc. ("OLDCO") entered into a definitive
merger agreement with A-C Acquisition Corp. ("A-C Acquisition"), a 100% owned
subsidiary of Rush Creek LLC ("Rush Creek"). Rush Creek is a Limited Liability
Company owned by certain management of OLDCO and Whitney Equity Partners L.P.
Also on July 31, 1997, A-C Acquisition Corp. acquired the assets of OLDCO (the
"Management Buy-Out") for $125,747, which includes $69,196 of liabilities
assumed and $5,000 of Series A Cumulative Preferred Stock issued to the sellers.
The amount paid or assumed does not include contingent consideration to be paid
to the sellers based on cumulative earnings of certain operations of OLDCO
subsequent to the Management Buy-Out. Maximum additional consideration is $7,500
and will be settled as part of the Series B Cumulative Preferred Stock as
discussed in Note 11.
Concurrently with the Management Buy-Out, A-C Acquisition amended its
certificate of incorporation to change its name to Aqua-Chem, Inc., (hereinafter
referred to as Aqua-Chem). The Management Buy-Out was accounted for by Aqua-Chem
using the purchase method of accounting. The total purchase cost was allocated
first to the identified tangible and intangible assets and liabilities of OLDCO
based upon their respective fair values, with the remainder of $9,689 being
allocated to goodwill, which will be amortized on a straight-line basis over 40
years. The financial statements reflect the preliminary estimates of allocating
purchase price and may be revised at a later date. Other than to reflect the
impact of the contingent consideration noted above, Aqua-Chem would not expect
the finalization of the purchase price allocation to be materially different
from preliminary estimates. The following information presents pro forma
condensed consolidated statements of operations assuming OLDCO had been acquired
by Aqua-Chem as of January 1, 1996. Such information includes adjustments to
reflect additional interest expense and depreciation expense, amortization of
goodwill and other intangibles and a reduction of other expenses due to
Management Buy-Out-related compensation payments being made by OLDCO.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Net sales $191,159 $199,552
Net income (loss) applicable to common shares 2,980 (1,371)
Earnings (loss) per common share (basic) 2.98 N.A.
Earnings (loss) per common share (diluted) 2.53 N.A.
</TABLE>
The above pro forma financial information is not necessarily indicative of
either the results of operations that would have occurred had the Management
Buy-Out been effective at the beginning of the periods presented or of future
operations of Aqua-Chem.
Prior to the Management Buy-Out, OLDCO was an 80% owned subsidiary of
Lyonnaise American Holding, Inc.
NOTE 2: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
(a) Nature of Business
Aqua-Chem primarily operates in two industry segments, (1) packaged
firetube and commercial and industrial watertube boilers ("Cleaver-Brooks") and
(2) water purification and desalination systems ("Water Technologies").
Aqua-Chem markets its products through a network of sales representatives,
distributors and an international direct sales force while maintaining
manufacturing facilities in the United States, Canada and Mexico.
F-8
<PAGE> 122
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
(b) Basis of Presentation
The consolidated financial statements for the period from January 1, 1997
to July 31, 1997 and for each of the years in the two-year period ended December
31, 1996, were prepared using OLDCO's historical basis of accounting (the
"pre-acquisition basis of accounting"). The consolidated financial statements
for the period from August 1, 1997 to December 31, 1997 were prepared under a
new basis of accounting that reflects the fair values of assets acquired and
liabilities assumed, the related financing costs and all debt incurred in
connection with the acquisition of OLDCO by Aqua-Chem (the "post-acquisition
basis of accounting"). Accordingly, the accompanying financial statements are
not comparable in all material respects since those financial statements report
financial position, results of operations, and cash flows of two separate
entities.
(c) Consolidation Policy and Use of Estimates
The consolidated financial statements include the accounts of Aqua-Chem and
all of its majority-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and the
disclosure of commitments and contingent liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(d) Inventories
Inventories are stated at cost determined on the first-in, first-out (FIFO)
basis. The resulting inventory values are not in excess of market. Inventory
cost includes material, labor, burden, and engineering.
Inventories consist of the following:
<TABLE>
<CAPTION>
POST- PRE-
ACQUISITION ACQUISITION
BASIS OF BASIS OF
ACCOUNTING ACCOUNTING
------------ ------------
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Raw materials and work-in-process $16,963 $17,834
Finished goods 3,851 3,818
------- -------
Total Inventories $20,814 $21,652
======= =======
</TABLE>
(e) Property, Plant and Equipment
Prior to August 1, 1997, property, plant and equipment was carried at cost,
less allowances for depreciation and adjustments to net realizable value, and
included expenditures which substantially increased the existing useful lives of
plant and equipment. Depreciation of plant and equipment was provided over the
estimated useful lives of the respective assets using accelerated methods for
both financial statement and income tax purposes.
Effective with the Management Buy-Out, property, plant, and equipment was
adjusted to estimated fair values and is being depreciated on a straight-line
basis. Useful lives are 20 years for buildings and building improvements, 3 to
15 years for machinery and equipment, and 3 to 10 years for furniture and
fixtures. Leasehold improvements are depreciated over the term of the related
lease. Depreciation expense totaled $984, $1,622, $2,865, and $2,966 for the
period August 1 to December 31, 1997, the period January 1 to July 31, 1997, and
the years ended December 31, 1996 and 1995, respectively.
F-9
<PAGE> 123
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
(f) Goodwill and Intangible Assets
Goodwill is being amortized on a straight-line basis over 40 years. At
December 31, 1997, goodwill totaled $9,467, net of accumulated amortization of
$222. Amortization expense totaled $222 for the period August 1 to December 31,
1997.
Prior to August 1, 1997, intangible assets, principally licenses and
technology, were carried at cost, less allowances for amortization. Amortization
of intangible assets was provided on the straight-line basis over the estimated
useful lives of the respective asset.
Effective with the Management Buy-Out, intangible assets were adjusted to
estimated fair values and are being amortized on a straight-line basis over
estimated useful lives ranging from 5 to 17 years. At December 31, 1997 and
1996, intangibles totaled $707 and $647, respectively, net of accumulated
amortization of $51 and $236, respectively. Amortization expense totaled $51,
$68, $119, and $187 for the period August 1 to December 31, 1997, the period
January 1 to July 31, 1997, and the years ended December 31, 1996 and 1995,
respectively.
(g) Income Taxes
Aqua-Chem accounts for income taxes under Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes". Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. In assessing the
realizability of deferred tax assets, Aqua-Chem considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the years in which those temporary
differences become deductible. Aqua-Chem considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and tax planning
strategies in making this assessment.
Prior to the Management Buy-Out, Aqua-Chem filed a consolidated United
States corporate income tax return with Lyonnaise American Holding, Inc.
(Parent). The tax liability was calculated consistent with the provisions of the
1984 tax allocation agreement with the Parent which provided for the allocation
of income tax expense (benefit) based principally on a consolidated return
basis.
(h) Revenue Recognition
Aqua-Chem recognizes revenue utilizing the completed contract method of
accounting, except for large, long-term contracts, for which the percentage of
completion method of revenue recognition is used. The completed contract method
is generally used for contracts which take less than one year to complete.
Revenue is recognized upon shipment of the finished product to the customer.
Under the percentage of completion method, earned revenue is based on the
percentage that incurred costs to date bear to estimates of total costs. The
cumulative impact of revisions in total cost estimates during the progress of
work is reflected in the year in which these changes become known. Earned
revenue reflects the original contract price adjusted for agreed upon change
order revenue, if any. Losses expected to be incurred on jobs in process, after
consideration of estimated recoveries on change orders, are charged to
operations as soon as such losses are known. Progress billings in accounts
receivable are currently due. Estimated revenues in excess of progress billings
and billings in excess of estimated revenues are disclosed in Note 5.
Aqua-Chem has numerous contracts that are in various stages of completion.
Such contracts require estimates to determine the appropriate cost and revenue
recognition. Aqua-Chem has a substantial history of
F-10
<PAGE> 124
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
making reasonably dependable estimates of the extent of progress towards
completion, contract revenues and contract costs. However, current estimates may
be revised as additional information becomes available.
(i) Retainages
Retainages are unpaid amounts due in accordance with the specific terms of
boiler contracts. Certain contracts provide for a percentage of the total
billing price to be retained by the customer until final acceptance of the
product. The amount of retainages included in Aqua-Chem's accounts receivable
balance was $1,485 and $1,034 at December 31, 1997 and 1996, respectively.
(j) Foreign Currency Translation
Substantially all assets and liabilities of foreign subsidiaries are
translated at the exchange rate prevailing at the balance sheet date and
substantially all income and expense accounts are translated at the average
exchange rate in effect during the year. Translation adjustments are accumulated
as a component of stockholders' equity or directly to the consolidated
statements of operations for those countries whose currency has been classified
as highly inflationary. Foreign exchange transaction gains(losses) were not
material for all periods presented in the consolidated statements of operations.
(k) Commissions Payable
Aqua-Chem's domestic and international sales representatives sell products
on a commission basis. The related commissions payable were $2,580 and $3,297 at
December 31, 1997 and 1996, respectively, and are included in accounts payable
- -- other.
(l) Start-Up Accrual
Included in the sales price of Aqua-Chem's products is an estimated future
cost to prepare the product for use. These future costs, referred to as start-up
costs, are accrued by Aqua-Chem at the time of sale. When the customer is ready
for start-up, the service is requested through the sales representative who
performs the necessary work to prepare the product for use. The sales
representative then bills Aqua-Chem for the cost of the work performed. At
December 31, 1997 and 1996, Aqua-Chem had accrued $3,751 and $3,583,
respectively, for future start-up costs, which are included in accrued expenses.
(m) Warranty Costs
Aqua-Chem accrues estimated warranty costs at the time of the sale.
Reserves for warranty costs were $3,646 and $4,257 at December 31, 1997 and
1996, respectively, and are included in accrued expenses.
(n) Research and Development
Research and development costs are expensed as incurred and are included in
selling, general, and administrative expenses. Research and development expense
totaled $872, $1,305, $2,244, and $1,992, for the period August 1 to December
31, 1997, the period January 1 to July 31, 1997, and the years ended December
31, 1996 and 1995, respectively.
(o) Advertising
Advertising costs are expensed as incurred and are included in selling,
general and administrative expenses. Advertising expense totaled $392, $625,
$856, and $1,538 for period August 1 to December 31, 1997, the period January 1
to July 31, 1997, and each of the years ended December 31, 1996 and 1995,
respectively.
(p) Cash Equivalents
For purposes of the consolidated statements of cash flows, Aqua-Chem
considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
F-11
<PAGE> 125
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
(q) Impairment of Long-lived Assets.
Effective January 1, 1996, Aqua-Chem adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles held and used by a company be reviewed for possible impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. SFAS No. 121 also requires that long-lived
assets and certain identifiable intangibles be reported at the lower of carrying
amount or fair value less costs to sell. Aqua-Chem evaluates its long-lived
assets when changes in circumstances may indicate that the carrying amount of an
asset may not be recoverable. Adoption of this standard did not have a material
impact on Aqua-Chem's financial position or results of operations.
(r) Fair Value of Financial Instruments
The carrying amounts of financial instruments approximate fair value due to
the short maturity of these instruments unless otherwise stated. The carrying
amounts of the long-term debt and short-term borrowings approximate fair value
because their stated interest rates approximate current rates for similar
instruments with similar maturities as of December 31, 1997 and 1996.
(s) Reclassifications
Certain 1996 and 1995 amounts as originally reported have been reclassified
to conform with the 1997 presentation.
NOTE 3: RESTRUCTURING CHARGES
During 1994, Aqua-Chem adopted a restructuring plan ("1994 Plan") to reduce
its manufacturing costs and excess capacity within Cleaver-Brooks resulting in
charges of $4,593 and $9,011 in 1995 and 1994, respectively. The 1994 Plan
resulted in the elimination of 180 positions and the closure of the Lebanon
facility in June of 1995. A summary of restructuring activity for the 1994 Plan
is as follows:
<TABLE>
<CAPTION>
1995 ACTIVITY 1996 ACTIVITY
------------------------------------------------------------------- ---------------------------
BALANCE AT BALANCE AT BALANCE AT
DECEMBER 31, CHANGE IN ADDITIONAL DECEMBER 31, DECEMBER 31,
1994 ESTIMATE CHARGES EXPENDITURES 1995 EXPENDITURES 1996
------------ --------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Employee termination
benefits $4,736 $(891) $ 606 $(3,686) $ 765 $(231) $ 534
Costs related to
closing/selling the
facility 1,381 -- 1,565 (2,220) 726 (256) 470
Other restructuring
costs 251 891 2,422 (3,564) -- -- --
------ ----- ------ ------- ------ ----- ------
Total restructuring
reserve $6,368 $ -- $4,593 $(9,470) $1,491 $(487) $1,004
====== ===== ====== ======= ====== ===== ======
<CAPTION>
1997 ACTIVITY
-------------------------------------
BALANCE AT
CHANGE IN JULY 31,
ESTIMATE EXPENDITURES 1997
--------- ------------ ----------
<S> <C> <C> <C>
Employee termination
benefits $119 -- $ 653
Costs related to
closing/selling the
facility -- (97) 373
Other restructuring
costs -- -- --
---- ---- ------
Total restructuring
reserve $119 $(97) $1,026
==== ==== ======
</TABLE>
F-12
<PAGE> 126
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
During 1996, Aqua-Chem adopted a separate restructuring plan ("1996 Plan")
focused on improving overall performance and profitability. The 1996 Plan
included an early retirement program for 47 salaried individuals and certain
organizational changes within its operating units. As a result, restructuring
charges of $5,038 were incurred in 1996. A summary of restructuring activity for
the 1996 Plan is as follows:
<TABLE>
<CAPTION>
1996 ACTIVITY 1997 ACTIVITY
------------------------------------- ----------------------------
BALANCE AT
INITIAL DECEMBER 31, BALANCE AT
CHARGES EXPENDITURES 1996 EXPENDITURES JULY 31, 1997
------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Employee termination benefits $3,045 $(1,915) $1,130 $(588) $542
Professional services 1,993 (1,993) -- -- --
------ ------- ------ ----- ----
Total restructuring reserve $5,038 $(3,908) $1,130 $(588) $542
====== ======= ====== ===== ====
</TABLE>
The balances in the reserves for the 1994 and 1996 Plans are included in
accrued expenses at December 31, 1996.
As a result of the Management Buy-Out, liabilities were established for the
balance in the reserves for the 1994 and 1996 Plans which are included in
accrued expenses at December 31, 1997.
NOTE 4: DIVESTITURES
During 1995, Aqua-Chem sold a product line and several sales territories
and recognized gains totaling $2,240. These gains, which included the disposal
of $572 of intangible assets, are included in other income in the consolidated
statements of operations. Notes receivable related to these sales were $325 and
$2,573 as of December 31, 1997 and 1996, respectively. Of these notes, $156 and
$1,309 are current and are included in prepaid expenses and other current assets
at December 31, 1997 and 1996, respectively.
NOTE 5: CONTRACTS IN PROGRESS
Components of contracts in progress, the majority of which are accounted
for under the percentage of completion method of revenue recognition, are as
follows:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
BASIS OF BASIS OF
ACCOUNTING ACCOUNTING
---------------- ---------------
DECEMBER 31, DECEMBER 31,
1997 1996
---------------- ---------------
<S> <C> <C>
Revenues in Excess of Billings
Costs and estimated earnings $76,996 $65,396
Billings 71,928 60,113
------- -------
$ 5,068 $ 5,283
======= =======
Billings in Excess of Revenues
Billings $29,139 $33,478
Costs and estimated earnings 23,485 31,698
------- -------
$ 5,654 $ 1,780
======= =======
</TABLE>
All receivables on contracts in progress are considered to be collectible
within twelve months. At December 31, 1997 and 1996, Aqua-Chem has accrued
estimated cumulative losses on contracts of $0 and $7,900, respectively, which
are primarily included within billings in excess of revenues and as a write-down
to inventory.
F-13
<PAGE> 127
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
NOTE 6: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
BASIS OF BASIS OF
ACCOUNTING ACCOUNTING
---------------- ---------------
DECEMBER 31, DECEMBER 31,
1997 1996
---------------- ---------------
<S> <C> <C>
Land and land improvements $ 1,872 $ 1,643
Buildings and building improvements 9,715 14,090
Leasehold improvements 1,120 170
Machinery and equipment 15,700 29,263
Furniture and fixtures 4,058 7,159
------- -------
32,465 52,325
Less accumulated depreciation (910) (30,459)
------- -------
$31,555 $21,866
======= =======
</TABLE>
NOTE 7: LEASES
Aqua-Chem leases its corporate offices under a fifteen year operating lease
with two five-year renewal options. This building is owned by a partnership in
which Aqua-Chem has a limited interest.
The future minimum payments under noncancellable operating leases with
initial or remaining terms in excess of one year are as follows:
<TABLE>
<S> <C>
1998 $1,468
1999 1,382
2000 1,026
2001 961
2002 839
Thereafter 2,095
------
Total minimum rental commitments $7,771
======
</TABLE>
Total rent expense for all operating leases was $632 and $891 for the
period from August 1, 1997 to December 31, 1997, and for the period from January
1, 1997 to July 31, 1997, respectively. Total rent expense for all operating
leases for the years ended December 31, 1996 and 1995 was $1,292 and $1,421,
respectively.
NOTE 8: SHORT TERM BORROWINGS
In 1996 and 1995, and in the period January 1 through July 31, 1997,
Aqua-Chem had an unsecured revolving credit agreement for up to $15,000 which
was terminated in conjunction with the Management Buy-Out. No amounts were
outstanding under this revolving credit agreement at December 31, 1996. Interest
under this revolving credit agreement was based on the prime rate, LIBOR or an
adjusted certificate of deposit rate plus a defined interest premium factor.
Aqua-Chem also had available in 1996 and 1995, and in the period January 1
through July 31, 1997 an additional unsecured bank line of credit of $6,500. No
amounts were outstanding under this line of credit at December 31, 1996. This
agreement also was terminated in conjunction with the Management Buy-Out.
F-14
<PAGE> 128
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
NOTE 9: LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
BASIS OF BASIS OF
ACCOUNTING ACCOUNTING
---------------- ---------------
DECEMBER 31, DECEMBER 31,
1997 1996
---------------- ---------------
<S> <C> <C>
Secured term loan $39,000 --
Unsecured term loan -- $16,000
Revolving Credit Agreement -- --
Subordinated debt 21,000 --
Less: Unamortized portion of original issue
discount (427) --
Industrial revenue bonds -- 4,128
Note payable 118 --
------- -------
Total long-term debt 59,691 20,128
Less: Current maturities (1,055) (440)
------- -------
Long-term debt $58,636 $19,688
======= =======
</TABLE>
As part of the Management Buy-Out, Aqua-Chem entered into a revolving
credit agreement and a $40,000 secured term loan. The secured term loan is
payable in quarterly principal installments commencing on October 1, 1998,
through June 30, 2003. The term loan bears interest at the eurocurrency rate
(6.425% at December 31, 1997) plus 1.825%, payable in quarterly installments,
commencing on October 1, 1997. Mandatory prepayments are required if Aqua-Chem
has excess cash flow from operations or receives cash from certain asset
dispositions, as defined by the agreement. The term loan is secured by the
assets of Aqua-Chem. At December 31, 1997, $39,000 was outstanding under the
term loan. Among other restrictions, the credit agreements contain covenants
relating to financial ratios and other limitations, as defined by the agreement.
As of December 31, 1997, Aqua-Chem was in compliance with these covenants.
The revolving credit agreement allows maximum advances of $20,000, subject
to certain restrictions, to be made in the form of revolving credit notes. These
notes bear interest at a rate of either eurocurrency plus a factor as defined in
the agreement, prime plus a factor as defined in the agreement or the lender's
going rate. The revolving credit agreement will terminate on July 31, 2002. As
of December 31, 1997, there were no borrowings outstanding under the revolving
credit agreement.
Concurrent with the Management Buy-Out, Aqua-Chem issued seven year,
unsecured, subordinated notes payable bearing interest at 10.5%, payable
quarterly. A principal payment of $21,000 is due July 30, 2004, or upon the
consummation of an initial public offering or a change in ownership control.
Certain covenant requirements include the limitation of senior indebtedness as
defined in the note. As of December 31, 1997, Aqua-Chem was in compliance with
the covenant requirements.
The unsecured term loan, which bore interest at 6.25% at December 31, 1996,
was repaid in a single payment of $16,000 as part of the Management Buy-Out.
The industrial revenue bonds (IRBs), which bore interest at 5.31% at
December 31, 1996, were issued on October 18, 1995 in the amount of $3,000 and
on September 21, 1995 in the amount of $1,900, for expansions and improvements
at Aqua-Chem's Thomasville, GA and Monroe, WI manufacturing facilities,
respectively. The IRBs required combined annual principal payments of $440. The
IRBs were fully collateralized by certain buildings and equipment. As of the
Management Buy-Out date, the outstanding balances were fully escrowed and
subsequently paid on September 4, 1997.
F-15
<PAGE> 129
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
A summary of the minimum annual principal repayments of long-term debt at
December 31, 1997, is as follows:
<TABLE>
<S> <C>
1998 $ 1,055
1999 4,781
2000 7,282
2001 8,500
2002 10,250
Thereafter 27,823
-------
$59,691
=======
</TABLE>
NOTE 10: INCOME TAXES
The sources of income (loss) before income taxes and minority interest were
as follows:
<TABLE>
<CAPTION>
POST-
ACQUISITION
BASIS OF PRE-ACQUISITION BASIS OF ACCOUNTING
ACCOUNTING ------------------------------------
------------ YEARS ENDED DECEMBER
AUGUST 1 TO 31,
DECEMBER 31, JANUARY 1 TO --------------------
1997 JULY 31, 1997 1996 1995
------------ ------------- ------ -------
<S> <C> <C> <C> <C>
U.S. sources $5,058 $1,661 $3,535 $(6,417)
Foreign sources 714 785 1,297 100
------ ------ ------ -------
Income (loss) before income taxes and minority
interest $5,772 $2,446 $4,832 $(6,317)
====== ====== ====== =======
</TABLE>
The provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
POST-
ACQUISITION
BASIS OF PRE-ACQUISITION BASIS OF ACCOUNTING
ACCOUNTING -----------------------------------
------------ YEARS ENDED
AUGUST 1 TO DECEMBER 31,
DECEMBER 31, JANUARY 1 TO ------------------
1997 JULY 31, 1997 1996 1995
------------ -------------- ----- ------
<S> <C> <C> <C> <C>
Current:
United States $ 3,258 -- $109 $(234)
Foreign 215 $271 310 142
State 600 150 88 47
------- ---- ---- -----
Total current 4,073 421 507 (45)
------- ---- ---- -----
Deferred:
United States (1,507) -- -- 234
Foreign -- -- -- --
State (277) -- -- --
------- ---- ---- -----
Total deferred (1,784) -- -- 234
------- ---- ---- -----
Total income tax provision $ 2,289 $421 $507 $ 189
======= ==== ==== =====
</TABLE>
F-16
<PAGE> 130
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
Total income tax expense differs from amounts expected by applying the
Federal statutory income tax rate to income (loss) before income taxes and
minority interest, as set forth in the following table.
<TABLE>
<CAPTION>
POST-ACQUISITION
BASIS OF ACCOUNTING PRE-ACQUISITION BASIS OF ACCOUNTING
--------------------- ---------------------------------------------------------------
YEARS ENDED DECEMBER 31,
AUGUST 1 TO JANUARY 1 TO -----------------------------------------
DECEMBER 31, 1997 JULY 31, 1997 1996 1995
--------------------- ------------------- ------------------- -------------------
TAX TAX TAX TAX
EXPENSE EXPENSE EXPENSE EXPENSE
(BENEFIT) PERCENT (BENEFIT) PERCENT (BENEFIT) PERCENT (BENEFIT) PERCENT
--------- -------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tax expense (benefit) at
Federal statutory rate $1,962 34.0% $ 832 34.0% $ 1,643 34.0% $(2,148) (34.0)%
Alternative minimum tax -- -- -- -- 96 2.0 -- --
Impact of foreign subsidiary
income and tax rates (27) (0.5) 4 0.2 (131) (2.7) 109 1.7
Change in estimate of prior
year taxes -- -- -- -- -- -- (279) (4.4)
Change in valuation allowance -- -- (604) (24.7) (1,196) (24.7) 2,323 36.8
State income taxes, net of
Federal income tax benefit 215 3.7 150 6.1 88 1.8 47 0.7
Management Buy-Out goodwill
amortization 78 1.4 -- -- -- -- -- --
Other items 61 1.1 39 1.6 7 0.1 137 2.2
------ ---- ----- ----- ------- ----- ------- -----
Total income tax expense $2,289 39.7% $ 421 17.2% $ 507 10.5% $ 189 3.0%
====== ==== ===== ===== ======= ===== ======= =====
</TABLE>
F-17
<PAGE> 131
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
BASIS OF ACCOUNTING BASIS OF ACCOUNTING
------------------- -------------------
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax assets
Inventory $ 289 $ 526
Employee benefits 3,029 1,291
Litigation settlements 1,558 --
Start-up and warranty expenses 743 1,526
Restructuring charges 481 633
Net operating loss carryforward -- 3,023
Other 970 435
------ -------
Total deferred tax assets 7,070 7,434
Less -- valuation allowance -- (1,224)
------ -------
Total deferred tax assets 7,070 6,210
Deferred tax liabilities
Contract related transactions (112) (500)
Property, plant and equipment (494) (1,875)
Other (141) (81)
------ -------
Total deferred tax liabilities (747) (2,456)
------ -------
Net deferred tax asset $6,323 $ 3,754
====== =======
</TABLE>
The classification of the net deferred tax asset is as follows:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
BASIS OF ACCOUNTING BASIS OF ACCOUNTING
-------------------- --------------------
DECEMBER 31, DECEMBER 31,
1997 1996
-------------------- --------------------
<S> <C> <C>
Current deferred tax asset $4,237 $ 4,884
Long-term deferred tax asset 2,086 --
Long-term deferred tax liability -- (1,130)
------ -------
Net deferred tax asset $6,323 $ 3,754
====== =======
</TABLE>
During 1995, Aqua-Chem incurred a tax net operating loss. Due to a January
1996 modification to the existing tax allocation agreement between Aqua-Chem and
the Parent, a carryback of the loss would not have resulted in a refund of cash
to Aqua-Chem. Accordingly, Aqua-Chem elected to carry the tax loss forward and a
valuation allowance was established.
During the period January 1, 1997 through July 31, 1997 and the year ended
December 31, 1996, Aqua-Chem had sufficient income to realize the value of a
portion of the net operating loss. Accordingly, the valuation reserve was
reduced in both periods by the amount of the benefit realized.
F-18
<PAGE> 132
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
NOTE 11: STOCKHOLDERS' EQUITY AND PREFERRED STOCK WITH MANDATORY REDEMPTION
PROVISIONS
As of December 31, 1997, Aqua-Chem has 2,006,260 shares of authorized
capital stock, itemized by class and series as follows:
(i) 2,000,000 shares of Common Stock, par value $.01 per share, with
1,000,000 shares issued and outstanding;
(ii) 6,260 shares of Preferred Stock, par value $.01 per share, divided
into the following series:
(a) 130 shares of Series A Cumulative Preferred Stock, par value $0.01
per share, with 130 shares issued and outstanding.
(b) 130 shares of Series B Cumulative Preferred Stock, par value $0.01
per share, with 130 shares issued and outstanding.
(c) 6,000 shares of Series C Cumulative Preferred Stock, par value $.01
per share, with 2,755 shares issued and outstanding.
Holders of the nonvoting Series A Cumulative Preferred Stock ("Preferred
A") are entitled to receive cumulative cash dividends of $2,307.70 per share per
year beginning August 1, 1997 payable at redemption. Holders of Preferred A
generally have the right to require Aqua-Chem to redeem the Preferred A at the
$5,000 Redemption Price plus accrued dividends (i) simultaneous with the
occurrence of an "overall ownership shift," "employee ownership shift" or "asset
shift" (each as defined by Aqua-Chem's Certificate of Incorporation); (ii)
within the 120 day period following an initial public offering of Aqua-Chem's
equity securities; (iii) within the 120 day period following a refinancing and
retirement of the subordinated notes payable (see Note 9); or (iv) July 31,
2004. Aqua-Chem may call the outstanding shares at any time at the redemption
price of $5,000 plus accrued dividends. As the Preferred A carries a below
market dividend rate of 6%, Aqua-Chem recorded the Preferred A at a discount.
Aqua-Chem is accreting the discount over the term of the Preferred A with the
accretion charged to retained earnings. The carrying value, including accretion
and dividends, of the Preferred A at December 31, 1997 is $4,594.
Holders of the nonvoting Series B Cumulative Preferred Stock ("Preferred
B") are entitled to receive cumulative cash dividends of $1,538.47 per share per
year beginning August 1, 1997 payable at redemption. The redemption price of the
Preferred B shall be the "Normal Redemption Price," which shall generally be
based upon Aqua-Chem's Water Technologies division's cumulative earnings before
income taxes ("EBIT") for the period 1997 through 2001. The redemption price is
modified in the event that prior to December 31, 2001, either (i) the business
of Aqua-Chem's Water Technologies division is sold to an unrelated third party;
or (ii) there occurs an "overall ownership shift," "employee ownership shift" or
"asset shift" (each as defined by Aqua-Chem's Certificate of Incorporation). The
maximum redemption price, under any circumstance, shall be $7,500. The Holders
of Preferred B generally shall have the right to require Aqua-Chem to redeem the
Preferred B at the applicable Redemption Price plus accrued dividends (i)
simultaneous with the occurrence of an "overall ownership shift" (as defined by
Aqua-Chem's Certificate of Incorporation); (ii) within the 120 day period
following an initial public offering of Aqua-Chem's equity securities; (iii)
within the 120 day period following a refinancing and retirement of the
subordinated notes payable (see Note 9); or (iv) July 31, 2004. The carrying
value of the Preferred B is zero at December 31, 1997, as the redemption value
is contingent upon future events.
Holders of Series C Cumulative Preferred Stock ("Preferred C") are entitled
to receive quarterly cash dividends payable at redemption at the rate of 10.17%
per year on the original issue price per share ($964) beginning on August 1,
1997. The holders of the Preferred C generally shall have the right to require
Aqua-Chem to redeem all or any part of the Preferred C at a price equal to
$1,000 per share, plus accrued dividends upon (i) an "overall ownership shift,"
"employee ownership shift," or "asset shift" (each as defined
F-19
<PAGE> 133
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
by Aqua-Chem's Certificate of Incorporation); (ii) within the 120-day period
following an initial public offering; or (iii) July 31, 2005. Any time after
July 31, 2004, Aqua-Chem may call the outstanding shares at the redemption price
of $1,000 per share plus accrued dividends. Holders of the Preferred C are
entitled to voting rights equivalent to the rights of one share of common stock.
As the redemption price of $1,000 per share exceeds the original issue price of
$964, Aqua-Chem recorded the Preferred C at a discount. Similar to the Preferred
A, Aqua-Chem is accreting the discount over the term of the Preferred C with the
accretion charged to retained earnings. The carrying value, including dividends,
of the Preferred C at December 31, 1997 is $2,771.
NOTE 12: STOCK OPTIONS
In connection with the Management Buy-Out, Aqua-Chem adopted the Aqua-Chem,
Inc. 1997 Stock Option Plan (the "Plan"), which provides for the granting to key
employees, directors, and other individuals of options to purchase an aggregate
of 61,919 shares of Aqua-Chem common stock at a purchase price not less than the
greater of (i) $3.75, or (ii) fair market value as determined by the Plan.
Options vest primarily based upon Aqua-Chem achieving certain operating results
or within 7 years from the date of grant. As of December 31, 1997, there were no
options granted or outstanding under the Plan.
Under a separate agreement from the Plan, the option to purchase 600 shares
of common stock was granted to a director of Aqua-Chem. These options, which
vest one year after the effective date of the grant, allow the holder to
purchase common stock of Aqua-Chem at $3.75 per share, which does not differ
significantly from fair market value. As of December 31, 1997, no options were
exercised.
NOTE 13: COMMON STOCK PURCHASE WARRANTS
The holders of the subordinated notes payable (see Note 9) also received
warrants, whereby they can acquire, at any time through July 31, 2007, in total,
176,471 shares of Aqua-Chem's common stock. The exercise price issuable upon
exercise of the warrants is $.01 per share of stock, with adjustments made to
prevent dilution in the event of any changes in capitalization of Aqua-Chem.
After July 31, 2002, there are put and call features that may require
Aqua-Chem to purchase all or any part of warrants or the common stock obtained
by the exercise of such warrants at a price determined in the agreement. During
the period August 1, 1997 to December 31, 1997, no warrants were exercised.
The warrants were recorded as an increase to stockholders' equity at their
approximate fair value at the date of issuance.
NOTE 14: EMPLOYEE BENEFIT PLANS
(a) Pension Plans
Aqua-Chem is required to make payments to certain pension and employee
benefit funds, some of which are not controlled or administered by Aqua-Chem and
certain foreign subsidiary maintained government-mandated pension plans. Pension
expense of these plans for the period August 1 to December 31, 1997 and the
period January 1 to July 31, 1997, and for the years ended December 31, 1996 and
1995 was $189, $140, $266 and $233, respectively.
(b) Retirement and Savings Plans
Aqua-Chem maintains a defined contribution retirement plan which includes a
401(k) savings plan. Substantially all employees who are not members of
collective bargaining groups are eligible to participate. Aqua-Chem's retirement
contribution equals 4% of eligible compensation while 401(k) contributions equal
50% of employee contributions to a maximum Aqua-Chem contribution of 3%. Under
provisions of the
F-20
<PAGE> 134
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
401(k) savings plan, employees may voluntarily contribute a maximum of 13% of
eligible compensation. From the period August 1, 1997 to December 31, 1997, and
the period January 1, 1997 to July 31, 1997, Aqua-Chem contributed $675 and
$910, respectively, to this plan. Aqua-Chem contributed $1,462 and $1,534 for
each of the years ended December 31, 1996 and 1995, respectively.
(c) Postretirement Health Care Plans
Aqua-Chem maintains unfunded health care plans covering certain eligible
retirees and employees. The estimated costs of postretirement benefits,
principally health care, are accrued over the period the benefits are earned.
Aqua-Chem's policy is to fund postretirement benefits as incurred.
The net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
POST-
ACQUISITION
BASIS OF PRE-ACQUISITION BASIS OF ACCOUNTING
ACCOUNTING -----------------------------------
------------ YEARS ENDED
AUGUST 1 TO DECEMBER 31,
DECEMBER 31, JANUARY 1 TO ------------------
1997 JULY 31, 1997 1996 1995
------------ ------------- ---- ----
<S> <C> <C> <C> <C>
Service cost benefits attributed to service during
the year $ 6 $ 9 $ 24 $ 19
Interest cost on accumulated postretirement
benefit obligation 139 203 500 520
Amortization of transition obligation -- 248 426 426
Amortization of unrecognized gain -- (140) (75) (123)
---- ---- ---- -----
Net periodic postretirement benefit cost $145 $320 $875 $ 842
==== ==== ==== =====
</TABLE>
As a result of the plans being unfunded, the liability of the plans was as
follows:
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
BASIS OF ACCOUNTING BASIS OF ACCOUNTING
-------------------- -------------------
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $4,261 $ 4,359
Fully eligible active plan participants 106 99
Other active plan participants 340 302
Unrecognized transition obligation -- (6,695)
Unrecognized net gain (loss) (49) 4,217
------ -------
Accumulated postretirement benefit obligation
included in other long-term liabilities $4,658 $ 2,282
====== =======
</TABLE>
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% for December 31, 1997 and 1996. The
average inflation rates of medical costs over the life of the benefits were
assumed to be 9% in 1998, decreasing 1% per year to 5.5% in 2002 and thereafter.
An increase of 1% in the assumed medical costs trend rates would result in an
increase in the accumulated postretirement benefit obligation of $282 at
December 31, 1997 and an increase in 1997 net periodic postretirement benefit
cost of $9 and $12 for the period August 1 to December 31, 1997 and the period
January 1 to July 31, 1997, respectively.
F-21
<PAGE> 135
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
As a result of the 1996 restructuring plan and the related early retirement
program, Aqua-Chem incurred a curtailment charge of $387, which is included in
the restructuring charges in the year ended December 31, 1996 consolidated
statement of operations.
NOTE 15: SEGMENT INFORMATION
Industry Segments
<TABLE>
<CAPTION>
POST-
ACQUISITION
BASIS OF
ACCOUNTING PRE-ACQUISITION BASIS OF ACCOUNTING
------------ -------------------------------------------
AUGUST 1 TO YEARS ENDED DECEMBER 31,
DECEMBER 31, JANUARY 1 TO ------------------------
SEGMENT 1997 JULY 31, 1997 1996 1995
- -------------------------------------------- ------------ ------------- --------- ---------
<S> <C> <C> <C> <C>
Net sales:
Cleaver-Brooks $ 73,974 $ 80,868 $155,527 $144,711
Water Technologies 17,567 18,750 44,025 38,657
-------- -------- -------- --------
Total $ 91,541 $ 99,618 $199,552 $183,368
======== ======== ======== ========
Operating income (loss):
Cleaver-Brooks $ 7,588 $ 4,086 $ 8,146 $ (3,988)
Water Technologies 1,428 28 750 (2,656)
All others (944) (410) (2,274) (1,003)
-------- -------- -------- --------
Total $ 8,072 $ 3,704 $ 6,622 $ (7,647)
======== ======== ======== ========
Identifiable assets:
Cleaver-Brooks $ 33,707 $ 48,976 $ 65,577 $ 65,247
Water Technologies 13,077 22,734 20,708 19,283
All others 77,877 32,429 14,715 16,851
-------- -------- -------- --------
Total $124,661 $104,139 $101,000 $101,381
======== ======== ======== ========
Capital expenditures:
Cleaver-Brooks $ 337 $ 567 $ 2,339 $ 4,575
Water Technologies 188 1,240 265 187
All others 672 388 185 105
-------- -------- -------- --------
Total $ 1,197 $ 2,195 $ 2,789 $ 4,867
======== ======== ======== ========
Depreciation:
Cleaver-Brooks $ 686 $ 1,160 $ 2,083 $ 2,097
Water Technologies 198 285 462 495
All others 100 177 320 374
-------- -------- -------- --------
Total $ 984 $ 1,622 $ 2,865 $ 2,966
======== ======== ======== ========
</TABLE>
Aqua-Chem does not have any customers who represent 10% of consolidated
sales.
Geographic Segments
Aqua-Chem operates primarily in the United States, with manufacturing
facilities also located in Canada and Mexico. Canadian and Mexican operations
individually represent less than 10% of Aqua-Chem's consolidated net sales and
total assets.
F-22
<PAGE> 136
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
Aqua-Chem's export sales, defined as sales of existing divisions' products
made in the U.S. and sold by Aqua-Chem to foreign customers (excluding Canada
and Mexico) were approximately 19% of net sales for the period August 1, 1997
through December 31, 1997 and 22% for the period January 1, 1997 through July
31, 1997. Aqua-Chem's export sales for the years ended December 31, 1996 and
1995 were approximately 24% of net sales. Aqua-Chem's export sales are included
in the respective segments' sales presented above.
NOTE 16: COMMITMENTS AND CONTINGENCIES
Aqua-Chem and its subsidiaries are involved in legal proceedings, claims
and litigation arising in the ordinary course of business. These claims arise
from a variety of factors, including suits alleging personal injury related to
the use and exposure to certain of Aqua-Chem's products (see the "Risk
Factors -- Product Liability Litigation" and "Business of Aqua-Chem -- Legal
Proceedings" sections of this Offering Circular for further information). The
Company has successfully resolved most closed claims and cases without payment
and is vigorously defending open claims, and believes that it has strong
defenses to all claims brought to date. Although Aqua-Chem believes the costs
and liabilities associated with these matters will not have a material adverse
effect on their results of operations or financial condition, there can be no
assurances to this effect.
In the ordinary course of business, Aqua-Chem is contingently liable for
performance under letters of credit totaling approximately $3,900 at December
31, 1997 and 1996, respectively. Additionally, at December 31, 1996, Aqua-Chem
had letters of credit outstanding of $5,000 which collateralized the IRB's.
Management does not expect any material losses to result from these off-balance
sheet instruments, and, therefore, is of the opinion that the fair value of
these instruments is zero.
NOTE 17: EARNINGS PER SHARE
In 1997, Aqua-Chem adopted SFAS No. 128, "Earnings per Share" for all
periods presented. The new standard simplified the computation of earnings per
share (EPS) and provides improved comparability with international standards.
SFAS No. 128 replaces primary EPS with "Basic" EPS, which excludes dilution and
is computed by dividing net earnings or (loss) by the weighted-average number of
common shares outstanding for the period. "Diluted" EPS is computed similarly to
primary EPS by reflecting the potential dilution that occurs if securities or
other contracts to issue common stock were exercised or converted to common
stock or resulted in the issuance of common stock that then shared in the
earnings. The following reconciles the numerators and denominators of the basic
and diluted earnings per share computations.
<TABLE>
<CAPTION>
POST-ACQUISITION
BASIS OF
ACCOUNTING
----------------
AUGUST 1 TO
DECEMBER 31,
1997
----------------
<S> <C>
Basic Earnings Per Share:
Net Income $ 3,309
Less: Preferred Stock Dividends 260
---------
Net Income $ 3,049
=========
Weighted Average Number of Shares 1,000,000
=========
Basic Earnings Per Share $ 3.05
=========
</TABLE>
F-23
<PAGE> 137
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
POST-ACQUISITION
BASIS OF
ACCOUNTING
----------------
AUGUST 1 TO
DECEMBER 31,
1997
----------------
<S> <C>
Diluted Earnings Per Share:
Net Income applicable to common $ 3,049
=========
Weighted Average Number of Shares-Basic 1,000,000
Effect of Dilutive Securities:
Warrants 176,471
---------
Weighted Average Number of Shares-Diluted 1,176,471
=========
Diluted Earnings Per Share $ 2.59
=========
</TABLE>
NOTE 18: SUBSEQUENT EVENTS
Subsequent to December 31, 1997, Aqua-Chem entered into two separate
product performance settlements relating to products sold in 1993. Aqua-Chem
paid $2,150 subsequent to year end and agreed to pay an additional $1,050 in
1998 and $900 in 1999. These amounts have been recorded at December 31, 1997 as
accrued litigation settlements for amounts paid or payable in 1998 and within
other long-term liabilities for amounts due in 1999.
On May 28, 1998, Aqua-Chem entered into a definitive agreement to purchase
substantially all of the assets of National Dynamics Corporation ("NDC"),
located principally in Nebraska, for approximately $47,000 in cash plus the
assumption of certain liabilities. The transaction is subject to the completion
of due diligence.
Aqua-Chem has reached a tentative decision to close its Greenville,
Mississippi facility and has taken steps to initiate discussions concerning this
decision with the Union representing its production workers. Under the proposed
plan, work currently performed at the Greenville facility will be transferred to
other Aqua-Chem facilities and/or outsourced. Aqua-Chem estimates that closing
the Greenville facility will cost approximately $5,500, to be expended in 1998
and 1999.
F-24
<PAGE> 138
AQUA-CHEM, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,300 $ 11,936
Accounts receivable, less allowances of $1,331 at June 30,
1998
and $638 at December 31, 1997 36,590 33,332
Revenues in excess of billings 2,834 5,068
Inventories 33,443 20,814
Deferred income taxes 3,903 4,237
Prepaid expenses and other current assets 3,263 1,093
-------- --------
Total current assets 89,333 76,480
Property, plant and equipment -- net 38,439 31,555
Intangible assets, less accumulated amortization of $444 at
June 30, 1998 and $273 at December 31, 1997 38,792 10,174
Deferred income taxes 1,640 2,086
Other assets 7,530 4,366
-------- --------
TOTAL ASSETS $175,734 $124,661
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities on long-term debt $ -- $ 1,055
Accounts payable
Trade 9,057 10,685
Other 4,839 5,324
Billings in excess of revenues 4,671 5,654
Compensation and profit sharing 2,998 5,318
Accrued litigation settlements 1,575 3,200
Accrued expenses 19,359 17,624
-------- --------
Total current liabilities 42,499 48,860
Long-term debt 125,000 58,636
Other long-term liabilities 4,642 5,573
-------- --------
Total other liabilities 129,642 64,209
Minority interest 500 589
Preferred stock with mandatory redemption provisions 4,704 7,365
Stockholders' equity:
Common stock, $.01 par value. Authorized 2,000,000 shares;
issued and outstanding 1,000,000 shares at June 30,
1998 and December 31, 1997 10 10
Additional paid-in capital 90 90
Retained earnings (2,151) 3,049
Warrants 468 433
Cumulative translation adjustment (28) 56
-------- --------
Total stockholders' equity (deficit) (1,611) 3,638
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $175,734 $124,661
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-25
<PAGE> 139
AQUA-CHEM, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS; EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
BASIS OF ACCOUNTING BASIS OF ACCOUNTING
------------------- -------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
<S> <C> <C>
Net sales $76,222 $83,211
Cost of goods sold 55,930 62,087
------- -------
Gross margin 20,292 21,124
Costs and expenses:
Selling, general and administrative 17,446 18,069
Restructuring charges 4,720 --
------- -------
Operating income (loss) (1,874) 3,055
Other income (expense):
Interest income 209 390
Interest expense (3,004) (597)
Other, net 26 22
------- -------
(2,769) (185)
------- -------
Income (loss) before income taxes, minority interest and
extraordinary item (4,643) 2,870
Income tax expense (benefit) (1,448) 494
Minority interest in earnings of consolidated subsidiary 136 136
------- -------
Net income (loss) before extraordinary item (3,331) 2,240
Extraordinary item, net of tax benefit of $840 1,260 --
------- -------
Net income (loss) $(4,591) $ 2,240
Preferred stock dividends (310) --
------- -------
Net income (loss) applicable to common $(4,901) $ 2,240
======= =======
Other comprehensive income (loss), net of tax
Cumulative translation adjustment (84) (209)
------- -------
Other comprehensive (loss) (84) (209)
------- -------
Comprehensive income (loss) $(4,675) $ 2,031
------- -------
PER SHARE DATA:
Basic net (loss) per share of common stock $ (4.90) N.A.
Diluted net (loss) per share of common stock (4.90) N.A.
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-26
<PAGE> 140
AQUA-CHEM, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
BASIS OF ACCOUNTING BASIS OF ACCOUNTING
------------------- -------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (4,591) $ 2,240
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,902 1,723
Deferred tax expense 1,007 --
Minority interest in earnings of consolidated
subsidiary 136 136
Extraordinary item, net of tax benefit 1,260 --
Restructuring charges 4,720 --
Increase (decrease) in cash due to changes in:
Accounts receivable 7,199 6,286
Revenues in excess of billings 2,234 (2,102)
Inventories (4,094) (247)
Prepaid expenses and other current assets 139 (27)
Accounts payable -- trade (4,151) (3,302)
Accounts payable -- other (1,086) (877)
Billings in excess of revenues (3,507) 780
Accrued expenses and other current liabilities (10,523) (3,052)
Other, net (987) 208
-------- -------
Total adjustments (5,751) (474)
-------- -------
Net cash provided by (used in) operating activities (10,342) 1,766
Cash flows from investing activities:
Purchase of National Dynamics Corporation (47,900) --
Proceeds from sales of property, plant and equipment and
other assets 11 38
Additions to property, plant and equipment (1,023) (1,097)
Additions to intangibles -- (269)
Proceeds from notes receivable -- 1,363
-------- -------
Net cash provided by (used in) investing activities (48,912) 35
Cash flows from financing activities:
Issuance of Notes 125,000 --
Proceeds from revolving credit agreement 3,000 --
Issuance of notes payable -- 118
Principal payments on debt (63,063) (49)
Redemption of preferred stock (3,269) --
Deferred financing costs (5,050)
-------- -------
Net cash provided by (used in) financing activities 56,618 69
-------- -------
Net (decrease) increase in cash and cash equivalents (2,636) 1,870
Cash and cash equivalents at beginning of period 11,936 8,627
-------- -------
Cash and cash equivalents at end of period $ 9,300 $10,497
======== =======
Cash paid during the period for:
Interest $ 2,909 $ 595
Taxes $ 2,033 $ 11
Details of Acquisition of NDC:
Fair value of assets acquired $ 29,174
Goodwill 28,807
Liabilities assumed (10,081)
--------
Cash paid for assets $ 47,900
========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-27
<PAGE> 141
AQUA-CHEM, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) In the opinion of Management, the accompanying unaudited financial
statements of Aqua-Chem, Inc. contain all adjustments which are of a normal
recurring nature necessary to present fairly the financial position as of
June 30, 1998, and the results of operations and cash flows for the periods
indicated. Interim financial results are not necessarily indicative of
operating results for an entire year.
(2) Certain notes and other information have been condensed or omitted from
these interim consolidated condensed financial statements. Therefore, these
statements should be read in conjunction with the Aqua-Chem, Inc.
Consolidated Financial Statements as of December 31, 1997 and 1996.
(3) On July 31, 1997, Aqua-Chem, Inc. ("OLDCO") entered into a definitive
merger agreement with A-C Acquisition Corp. ("A-C Acquisition"), a 100%
owned subsidiary of Rush Creek LLC ("Rush Creek"). Rush Creek is a Limited
Liability Company owned by certain management of OLDCO and Whitney Equity
Partners L.P. Also on July 31, 1997, A-C Acquisition acquired the assets of
OLDCO (the "Management Buy-Out") for $125,747, which includes $69,196 of
liabilities assumed and $5,000 of Series A Cumulative Preferred Stock
issued to the sellers. The amount paid does not include contingent
consideration to be paid to the sellers based on cumulative earnings of
certain operations of Aqua-Chem subsequent to the Management Buy-Out. The
Management Buy-Out was accounted for by Aqua-Chem using the purchase method
of accounting.
(4) The consolidated condensed financial statements for the six months ended
June 30, 1997 were prepared using OLDCO's historical basis of accounting
(the "pre-acquisition basis of accounting"). The consolidated condensed
financial statements for the six months ended June 30, 1998 were prepared
under a new basis of accounting that reflects the fair values of assets
acquired and liabilities assumed, the related financing costs and all debt
incurred in connection with the Management Buy-Out (the "post-acquisition
basis of accounting"). Accordingly, the accompanying financial statements
are not comparable in all material respects since those financial
statements report financial position, results of operations, and cash flows
of two separate entities.
(5) Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
<S> <C> <C>
Raw materials and work-in-process $25,744 $16,963
Finished goods 7,699 3,851
------- -------
Total inventories $33,443 $20,814
======= =======
</TABLE>
(6) On June 23, 1998 Aqua-Chem issued $125,000 in unsecured senior subordinated
notes. The notes carry an interest rate of 11 1/4% and are due July 1,
2008. Interest is payable semi-annually beginning January 1, 1999. Proceeds
from the notes were used to repay Aqua-Chem's existing debt, to redeem
$3,269 of Aqua-Chem's Series A Preferred Stock, to acquire substantially
all of the assets of National Dynamics Corporation ("NDC") (see note (9)),
to pay the accrued interest and dividends, fees and expenses associated
with the foregoing, and for general corporate purposes.
In conjunction with the issuance of the notes and the acquisition of NDC,
Aqua-Chem entered into a revised $45,000 secured revolving credit facility.
Borrowings under this facility are made in the form of revolving credit
notes. These notes bear interest at a rate of either eurocurrency plus a
factor as defined in the agreement, prime, or federal funds rate plus 100
basis points. The revolving credit agreement will terminate June 23, 2003.
The facility is secured by substantially all of the assets of the Company.
At June 30, 1998 there were no borrowings outstanding. Among other
restrictions, the credit agreement contains covenants relating to financial
ratios and other limitations, as defined by the agreement. As of June 30,
1998, the Company was in compliance with these covenants.
(7) On June 25, 1998 the Board of Directors approved a plan of closure for the
Greenville, Mississippi facility and the agreement reached with the Union
representing the facility's production workers. As a result, the Company
recorded a restructuring charge of $4,720 to operations in the six months
ended June 30, 1998. Work currently performed at the facility will be
transferred to other Company facilities and/or outsourced. The plan will
result in the elimination of 149 positions and closure of the facility
within approximately one year. The provision includes $3,021 to write down
the value of certain fixed assets and inventory, $1,460 of employee
termination benefits and $239 of other costs.
F-28
<PAGE> 142
(8) On June 23, 1998, Aqua-Chem acquired substantially all the assets of
National Dynamics Corporation for $57,981, which includes $10,081 of
liabilities assumed. The acquisition was accounted for using the purchase
method of accounting. The total purchase cost was allocated first to
identified tangible and intangible assets and liabilities based upon their
respective fair values, with the remainder of $28,807 being allocated to
goodwill, which will be amortized on a straight-line basis over 40 years.
The financial statements reflect the preliminary estimates of allocating
purchase price and may be revised at a later date. The Company does not
expect the final purchase price allocation to be materially different from
preliminary estimates.
(9) The following information presents pro forma condensed consolidated
statements of operations assuming OLDCO and National Dynamics Corporation
had been acquired by Aqua-Chem as of January 1, 1997. Such information
includes adjustments to reflect additional interest expense and
depreciation expense, amortization of goodwill and other intangibles, a
reduction of other expenses to Management Buy-Out-related payments being
made by OLDCO and the net elimination of employment costs of the former
owners of National Dynamics Corporation.
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
<S> <C> <C>
Net sales $98,495 $112,833
Net loss applicable to common shares (4,971) (49)
Loss per common share (basic) $ (4.97) $ (0.05)
</TABLE>
(10) Effective January 1, 1998, Aqua-Chem adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No.
130"). This statement establishes standards for reporting and display of
comprehensive income and its components. Components of comprehensive income
are net income and all other non-owner changes in equity. SFAS No. 130
requires that an enterprise classify items of other comprehensive income by
their nature in a financial statement for the period in which they are
recognized. Aqua-Chem has chosen to disclose comprehensive income in the
Consolidated Statements of Operations. Prior years have been restated to
conform to the SFAS No. 130 requirements.
Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" was issued by The
American Institute of Certified Public Accountants in March of 1998 and is
effective for fiscal years beginning after December 15, 1998. Aqua-Chem's
accounting for costs of computer software developed or obtained for
internal use is consistent with the guidelines established in the SOP and,
as a result, Aqua-Chem does not anticipate that the adoption of this
statement will have a material impact on Aqua-Chem's financial position or
results of operations.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities. The statement establishes accounting
and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as an asset or liability measured at its fair
value. Statement 133 is effective for fiscal years beginning after June 15,
1999. The Company has not determined the timing of or method of adoption,
but does not anticipate that the adoption of this standard will have a
material impact on its financial statements.
(11) In connection with the Management Buy-Out, Aqua-Chem adopted the Aqua-Chem
1997 Stock Option Plan (the "Plan"), which provides for the granting to key
employees, directors, and other individuals of options to purchase an
aggregate of 61,919 shares of Aqua-Chem common stock at a purchase price
not less than the greater of (i) $3.75, or (ii) fair market value as
determined by the Plan. Options vest primarily based upon Aqua-Chem
achieving certain operating results or within 7 years from the date of
grant. As of June 30, 1998, there were no options granted or outstanding
under the Plan.
Under separate agreements from the Plan, the option to purchase 1,725
shares of common stock have been granted to two directors of Aqua-Chem.
Under the terms of the agreements, the option to purchase 600 shares vests
one year from the effective date of the grant, with the remaining 1,125
options vesting at a rate of 225 per year commencing on December 31, 1998
and continuing through December 31, 2002. These options allow the holder to
purchase common stock of Aqua-Chem at $3.75 per share, which does not
differ significantly from fair market value. As of June 30, 1998, no
options were exercised.
F-29
<PAGE> 143
AQUA-CHEM, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
------------------
BALANCE CHARGED CHARGED
AT TO COSTS TO BALANCE
BEGINNING AND OTHER AT END
OF PERIOD EXPENSES ACCOUNT DEDUCTIONS OF PERIOD
--------- -------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts receivable:
January 1 to June 30, 1998..................... $638 $125 $750(a) $182 $1,331
==== ==== ==== ==== ======
August 1 to December 31, 1997.................. $684 $ 28 $ -- $ 74 $ 638
==== ==== ==== ==== ======
January 1 to July 31, 1997..................... $659 $136 $ -- $111 $ 684
==== ==== ==== ==== ======
Year ended December 31, 1996................... $596 $205 $ -- $142 $ 659
==== ==== ==== ==== ======
Year ended December 31, 1995................... $746 $ 97 $ -- $247 $ 596
==== ==== ==== ==== ======
</TABLE>
- ------------------------------------
(a) Reflects the balance acquired as a result of the acquisition of National
Dynamics Corporation.
F-32
<PAGE> 144
AQUA-CHEM, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
POST-ACQUISITION PRE-ACQUISITION
BASIS OF ACCOUNTING BASIS OF ACCOUNTING
--------------------------------- -------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
JANUARY 1 TO AUGUST 1 TO JANUARY 1 TO JANUARY 1 TO -----------------------------------
JUNE 30, 1998 DECEMBER 31, 1997 JULY 31, 1997 JUNE 30, 1997 1996 1995 1994 1993
------------- ----------------- ------------- ------------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)........ $(4,591) $3,309 $1,854 $2,240 $4,094 $(6,454) $(4,678) $2,752
Add:
Interest............... 2,837 2,414 753 597 1,448 1,663 1,200 1,075
Amortization of
capitalized debt
expense.............. 167 145 -- -- -- -- -- --
Income tax expense
(benefit)............ (1,448) 2,289 421 494 507 189 (2,806) 2,191
Extraordinary item (net
of tax).............. 1,260 -- -- -- -- -- -- --
------- ------ ------ ------ ------ ------- ------- ------
Earnings (loss)
as defined.... $(1,775) $8,157 $3,028 $3,331 $6,049 $(4,602) $(6,284) $6,018
======= ====== ====== ====== ====== ======= ======= ======
Interest................. 2,837 2,414 753 597 1,448 1,663 1,200 1,075
Amortization of
capitalized debt
expense................ 167 145 -- -- -- -- -- --
------- ------ ------ ------ ------ ------- ------- ------
Fixed charges as
defined....... $ 3,004 $2,559 $ 753 $ 597 $1,448 $ 1,663 $ 1,200 $1,075
Ratio of earnings to
fixed charges.......... --(a) 3.2x 4.0x 5.6x 4.2x --(b) --(c) 5.6x
======= ====== ====== ====== ====== ======= ======= ======
</TABLE>
- ---------------
(a) Earnings were inadequate to cover fixed charges by $4,779 for the six months
ended June 30, 1998.
(b) Earnings were inadequate to cover fixed charges by $6,265 for the year ended
December 31, 1995.
(c) Earnings were inadequate to cover fixed charges by $7,484 for the year ended
December 31, 1994.
F-33
<PAGE> 145
INDEPENDENT AUDITORS' REPORT
The Board of Directors
National Dynamics Corporation:
We have audited the accompanying balance sheets of National Dynamics
Corporation as of October 31, 1997 and 1996 and the related statements of
earnings and retained earnings and cash flows for each of the years in the
three-year period ended October 31, 1997. 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 financial position of National Dynamics
Corporation as of October 31, 1997 and 1996 and the results of its operations
and its cash flows for each of the years in the three-year period ended October
31, 1997, in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Omaha, Nebraska
December 23, 1997
F-34
<PAGE> 146
NATIONAL DYNAMICS CORPORATION
BALANCE SHEETS
OCTOBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
ASSETS
- ------------------------------------------------------------
Current assets:
Cash $ 66,883 222,415
Trade accounts receivable (including retainage of
$1,822,957 and $1,003,154 in 1997 and 1996,
respectively, net of allowance for doubtful accounts of
$750,000 and $1,534,000 in 1997 and 1996, respectively) 13,398,380 11,279,456
Inventories 2,589,595 1,807,447
Costs in excess of billings on uncompleted contracts 2,711,606 2,661,098
Prepaid expenses 134,807 181,937
----------- ----------
Total current assets 18,901,271 16,152,353
----------- ----------
Property, plant and equipment, at cost 11,251,137 9,835,805
Less accumulated depreciation 4,871,991 4,377,549
----------- ----------
Net property, plant and equipment 6,379,146 5,458,256
----------- ----------
Other assets 710,920 533,505
----------- ----------
$25,991,337 22,144,114
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------
Current liabilities:
Note payable to bank $ 1,422,000 1,472,000
Accounts payable 4,247,628 4,017,391
Accrued expenses 3,545,127 3,744,727
Billings in excess of cost on uncompleted contracts 1,471,422 1,393,237
Stockholders' dividends payable 500,000 500,000
----------- ----------
Total current liabilities 11,186,177 11,127,355
Deferred compensation 140,000 130,000
----------- ----------
Total liabilities 11,326,177 11,257,355
----------- ----------
Stockholders' equity:
Common stock of $1 par value per share.
Authorized 20,000 shares; issued and outstanding 8,000
shares 8,000 8,000
Additional paid-in capital 81,186 81,186
Retained earnings 14,575,974 10,797,573
----------- ----------
Total stockholders' equity 14,665,160 10,886,759
----------- ----------
Commitments and contingencies
$25,991,337 22,144,114
=========== ==========
</TABLE>
See accompanying notes to financial statements.
F-35
<PAGE> 147
NATIONAL DYNAMICS CORPORATION
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Net sales $59,292,002 54,852,771 49,717,216
Cost of sales 45,861,865 43,460,577 40,915,723
----------- ---------- ----------
Gross profit 13,430,137 11,392,194 8,801,493
Selling, general and administrative expenses 5,814,695 5,515,591 6,600,609
----------- ---------- ----------
Operating income 7,615,442 5,876,603 2,200,884
Other income 298,186 153,884 170,924
Other deductions, including interest expense of
$182,770, $42,765 and $135,442 in 1997, 1996 and 1995,
respectively (185,227) (133,494) (254,029)
----------- ---------- ----------
Net earnings 7,728,401 5,896,993 2,117,779
Retained earnings at beginning of year 10,797,573 8,245,741 8,020,962
Dividends declared ($493.75, $418.15 and $236.63 per
share in 1997, 1996 and 1995, respectively) (3,950,000) (3,345,161) (1,893,000)
----------- ---------- ----------
Retained earnings at end of year $14,575,974 10,797,573 8,245,741
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-36
<PAGE> 148
NATIONAL DYNAMICS CORPORATION
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 7,728,401 5,896,993 2,117,779
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 496,938 462,719 449,909
Loss on sale and disposal of assets 843 2,581 --
Change in assets and liabilities:
Accounts receivable (2,118,924) 1,005,589 (4,077,443)
Inventories (782,148) (210,511) (146,864)
Costs in excess of billings on uncompleted
contracts (50,508) (37,063) 127,112
Prepaid expenses 47,130 (84,946) (31,297)
Other assets (177,415) (8,341) (117,749)
Accounts payable 230,237 (125,914) 1,209,740
Accrued expenses (199,600) (1,011,590) 1,371,415
Billings in excess of costs on uncompleted
contracts 78,185 (472,180) (858,567)
Deferred compensation 10,000 10,000 10,000
----------- ----------- -----------
Net cash provided by operating activities 5,263,139 5,427,337 54,035
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures (1,419,271) (570,767) (1,758,158)
Proceeds from sale of property, plant and equipment 600 -- --
Net payments on note receivable -- -- 582,611
----------- ----------- -----------
Net cash used by investing activities (1,418,671) (570,767) (1,175,547)
----------- ----------- -----------
Cash flows from financing activities:
Dividends paid (3,950,000) (2,845,161) (1,893,000)
Net (payments) advances on note payable to bank (50,000) (662,000) 2,028,000
Proceeds on issuance of long-term debt -- 200,000 1,300,000
Principal payments on long-term debt -- (1,432,136) (351,500)
----------- ----------- -----------
Net cash provided by (used in) financing activities (4,000,000) (4,739,297) 1,083,500
----------- ----------- -----------
Net increase (decrease) in cash (155,532) 117,273 (38,012)
Cash at beginning of year 222,415 105,142 143,154
----------- ----------- -----------
Cash at end of year $ 66,883 222,415 105,142
=========== =========== ===========
Supplemental cash flow information:
Cash paid for interest $ 7,129 102,881 210,562
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-37
<PAGE> 149
NATIONAL DYNAMICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997, 1996 AND 1995
(1) ORGANIZATION
National Dynamics Corporation (the Company) has the following operating
divisions: Lincoln Manufacturing Company (LMC), Nebraska Boiler Company
(Boiler), Energy Recovery International (ERI) and Gonzales Manufacturing Company
(GMC).
Boiler, the largest of the operating divisions, contracts to manufacture,
markets and sells large industrial-use boilers. The boilers are used for
purposes of heat and energy generation in large buildings and at construction
sites. ERI's operations consist of the manufacture and installation of systems
used to operate the boilers at the most efficient rate. LMC is involved in the
manufacture of roadside structure equipment and specialty products. GMC's
operations consist mainly of steel fabrication work for use in the manufacture
of boilers. All significant transactions between divisions have been eliminated
in the financial statements.
The Company's customers are located in the United States and foreign
countries. Sales to foreign customers are transacted in US dollars. Foreign
customers represent 6.8%, 16.2% and 3.5% of net sales for 1997, 1996 and 1995,
respectively. Foreign sales in 1996 included a $6,500,000 sale to a customer in
Thailand.
The Company is an S Corporation and, as such, the income tax liabilities of
an S Corporation are the responsibility of the shareholders, therefore, no
provisions for federal and state income tax expense at the corporate level is
necessary.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories, primarily raw materials, are stated as cost under the last-in,
first-out (LIFO) method, which is less than net realizable value.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
Property, plant and equipment is carried at cost less accumulated
depreciation. Expenditures for maintenance, repairs and renewals of relatively
minor items are generally charged to expense as incurred. Major renewals and
improvements are capitalized. Depreciation is computed on the straight-line
method over the following estimated useful lives:
<TABLE>
<S> <C>
Land improvements........................................... 10 years
Buildings................................................... 40 years
Cranes and building improvements............................ 10 - 40 years
Machinery and equipment..................................... 5 - 10 years
Transportation equipment.................................... 5 years
</TABLE>
Upon retirement or other disposition of property, plant and equipment, the
cost and related accumulated depreciation are removed from the accounts and the
resulting gain or loss is reflected in income for the period.
REVENUE RECOGNITION
Revenue is recognized on boiler sales utilizing the completed contract
method of accounting. Revenue is recognized in accordance with contract terms,
when title passes, either at shipment or when the equipment is ready for
shipment, but held at customer's request. In such instances, revenues are
recognized when the customer accepts the related billing and contracts for
storage and all risks of ownership pass to customer. Related costs incurred to
date are relieved from inventories and charged to cost of sales at the time
revenue is recognized. Shipping, inspection and other costs required to install
the boilers are provided for in the appropriate accounts at the time revenues
are recognized. Any losses on contracts are recognized in the period in which
they become estimable and accruable. This method is used because the typical
contract is completed in three months or less and financial position and results
of operations do not vary significantly from those which would result from use
of the percentage of completion method.
For nonboiler, noncontract sales, revenues and cost of sales are recognized
at the time of shipment.
F-36
<PAGE> 150
NATIONAL DYNAMICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
WARRANTY
The Company offers its customers a limited warranty for approximately
eighteen months after installation of the boilers or other manufactured items.
The estimated costs of warranty are accrued and expensed at the time revenue is
recognized. Expense for the years ended October 31, 1997, 1996 and 1995 was
$300,000, $198,000 and $407,000, respectively.
ADVERTISING AND RESEARCH AND DEVELOPMENT
All advertising and promotion as well as research and development costs are
expensed as incurred and are not material to the Company's operations.
OTHER ASSETS
Other assets are primarily comprised of cash surrender value of life
insurance policies and tax deposits required of S Corporations.
LONG-LIVED ASSETS
Long-lived to be held and used are reviewed for impairment whenever events
or change in circumstance dictate that the related carrying amount may not be
recoverable. Recoverability of assets to be held and used is measured by
comparison of the carrying amount of an asset to future cash flows expected to
be generated by the asset. There have been no write-downs for impairment in the
financial statements.
SELF-INSURANCE
The Company is self-insured for payment of health claims for its employees.
The Company has established a voluntary benefit trust account (VEBA) and funds
the VEBA from time to time, as necessary, from operations. The Company has
stop-loss insurance coverage for individual claims in excess of $50,000 per
person.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(3) INVENTORIES
Shown below is selected financial information reported under the LIFO
method of inventory valuation for the Company. These amounts are compared to
results had the FIFO method, which approximates replacement cost, been used for
all divisions.
<TABLE>
<CAPTION>
1997 1996 1995
------------------------- ------------------------- -------------------------
AS REPORTED IF REPORTED AS REPORTED IF REPORTED AS REPORTED IF REPORTED
UNDER LIFO UNDER FIFO UNDER LIFO UNDER FIFO UNDER LIFO UNDER FIFO
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Inventories, including costs
incurred on uncompleted
contracts................... $ 6,539,065 $ 7,088,195 $ 5,471,695 $ 5,991,505 $ 5,234,632 $ 5,776,433
Cost of sales................. $45,861,865 $45,782,545 $43,460,577 $43,482,568 $40,915,723 $40,856,236
Net earnings.................. $ 7,728,401 $ 7,807,721 $ 5,896,993 $ 5,875,002 $ 2,117,779 $ 2,177,266
</TABLE>
F-37
<PAGE> 151
NATIONAL DYNAMICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(4) COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Costs incurred on uncompleted contracts..................... $3,949,470 $3,664,248
Billings on uncompleted contracts........................... 2,709,286 2,396,387
---------- ----------
$1,240,184 $1,267,861
========== ==========
</TABLE>
Included in the accompanying balance sheets under the following captions:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Costs in excess of billings on uncompleted contracts........ $2,711,606 $2,661,098
Billings in excess of costs on uncompleted contracts........ 1,471,422 1,393,237
---------- ----------
$1,240,184 $1,267,861
========== ==========
</TABLE>
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at October 31, 1997 and 1996, at cost, are
shown below:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Land................................................. $ 306,211 $ 306,211
Land improvements.................................... 398,012 327,781
Building............................................. 5,316,118 4,387,037
Cranes and building fixtures......................... 1,194,695 1,136,888
Machinery and equipment.............................. 3,694,322 3,380,120
Transportation equipment............................. 341,779 297,768
----------- ----------
$11,251,137 $9,835,805
=========== ==========
</TABLE>
(6) NOTE PAYABLE TO BANK
The Company has a revolving loan agreement with a bank with a $6,000,000
maximum credit line available which expires April 1, 1999. The note accrues
interest at the rate of one percentage point under the prime rate (7.5% at
October 31, 1997). There was $1,422,000 and $1,472,000 outstanding under this
agreement at October 31, 1997 and 1996, respectively.
Substantially all assets are pledged as collateral on the revolving loan
agreement. The revolving loan agreement contains certain limitations on
additional borrowing and fixed asset additions, as well as minimum net worth,
working capital, current ratio, cash flow and debt to tangible net worth levels.
The Company was in compliance with all the loan covenants at October 31, 1997
and 1996.
(7) BENEFIT PLANS
The Company has a defined benefit pension plan covering substantially all
union employees. The benefits are based on years of service and the employee's
compensation during the last five years of employment. The Company's funding
policy is to contribute annually the maximum amount that can be deducted for
federal income tax purposes. Contributions are intended to provide not only for
benefits attributed to service to date, but also for those expected to be earned
in the future.
Net pension cost for 1997, 1996 and 1995 included the following components:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Service cost-benefits earned during the
period........................................ $ 67,762 72,786 127,406
Interest cost on projected benefit obligation... 60,266 56,709 73,870
Actual return on plan assets.................... (70,143) (30,046) (97,392)
Net amortization and deferral................... 11,856 (19,181) 9,016
-------- ------- -------
Net periodic pension cost....................... $ 69,741 80,268 112,900
======== ======= =======
</TABLE>
F-38
<PAGE> 152
NATIONAL DYNAMICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The funded status of the pension plan as of August 1, 1997, 1996 and 1995,
the most recent actuarial valuation dates, is shown below:
<TABLE>
<CAPTION>
1997 1996 1995
----------- -------- ----------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested -- current employees............................ $ 716,313 510,090 820,983
Nonvested.............................................. 18,355 3,932 94,590
----------- -------- ----------
Accumulated benefit obligation................. 734,668 514,022 915,573
----------- -------- ----------
Projected benefit obligation for service rendered to
date................................................... $(1,266,479) (841,301) (1,502,344)
Fair market value of plan assets......................... 875,521 681,002 1,100,627
----------- -------- ----------
Projected benefit obligation in excess of plan assets.... (390,958) (160,299) (401,717)
Unrecognized net gain (loss) from past experience
different from that assumed and effects of changes in
assumptions............................................ 143,303 (146,829) 16,763
Prior service costs...................................... 99,675 105,344 156,192
Unrecognized net asset at August 1, 1997, 1996 and 1995
being recognized ratably over approximately 13 years... (33,509) (38,049) (41,086)
----------- -------- ----------
Accrued pension cost included in accrued expenses........ $ (181,489) (239,833) (269,848)
----------- -------- ----------
</TABLE>
The assumptions used as of August 1, 1997, 1996 and 1995 in determining the
funded status information and pension expense were:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate.......................................... 6.50% 7.25 6.50
Expected long-term inflation rate...................... 4.86 4.86 4.00
Expected long-term rate of return on assets............ 7.50 7.50 7.50
</TABLE>
Effective January 1, 1996, the Company adopted the National Dynamics
Corporation 401(k) Plan (the Plan). This qualified Plan is a defined
contribution plan covering all nonunion employees of the Company who have one
year of service and have attained the age of twenty-one. Participants may
contribute up to 15% of their pay in pretax dollars. Participants' contributions
are 100% vested at all times. The Company made a matching contribution of 50% of
each participant's contributions, up to 5% of pay for 1997 and 1996. This
discretionary matching contribution by the Company may vary from year to year.
Additional amounts may be contributed at the option of the Company's Board of
Directors. Vesting in Company contributions is 100% after five years in the
Plan. Plan expenses were $112,727 and $102,709 for the years ended October 31,
1997 and 1996, respectively.
(8) ACCRUED EXPENSES
Accrued expenses at October 31, 1997 and 1996 are shown below:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Accrued wages and bonuses and commissions.............. $ 938,989 1,217,315
Accrued compensated absences........................... 360,000 241,000
Accrued warranty and costs to install.................. 1,735,728 1,810,793
Accrued pension benefits............................... 181,489 239,833
Other.................................................. 328,921 235,786
---------- ---------
$3,545,127 3,744,727
========== =========
</TABLE>
(9) DEFERRED COMPENSATION
The Company has entered into nonqualified deferred compensation agreements
with four key employees. Each employee, upon meeting certain requirements, would
receive annual payments ranging from $10,000 to $30,000 for ten years subsequent
to retirement.
Benefits will be funded with life insurance contracts purchased by the
Company. The cost of these benefits is being charged to expense and accrued
using a present value method over the expected term of employment. Expense for
the years ended 1997, 1996 and 1995 was $10,000 annually.
F-39
<PAGE> 153
NATIONAL DYNAMICS CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, trade accounts receivable, note payable to bank, accounts payable and
accrued expenses -- The carrying amount approximates the fair market value due
to the short maturity, less than one year, of these instruments.
(11) LETTERS OF CREDIT
The Company is a party to six letters of credit totaling $3,651,549 at
October 31, 1997. These letters of credit are issued on behalf of the Company by
banks for certain customers as the beneficiaries. The letters of credit are for
specific jobs that are in process and expire on various dates through February
11, 1999. Management does not expect any material losses to result from these
off-balance sheet instruments because performance is not expected to be
required.
(12) LITIGATION
In the normal course of business, the Company is involved in various claims
and suits, the majority of which are covered by insurance. Management does not
believe any of these claims or suits will result in settlements which would
materially affect the financial statements of the Company.
During 1997, a dissident minority shareholder filed suit seeking a variety
of actions. Subsequent to year-end, a conditional settlement was reached with no
cost other than insignificant legal fees to the Company.
(13) LEASE
The Company leases a vehicle under a noncancelable operating lease that
expires in August 1998. The monthly lease expense is $1,330 and the future
minimum lease payments as of October 31, 1997 are $13,300.
F-40
<PAGE> 154
NATIONAL DYNAMICS CORPORATION
CONDENSED BALANCE SHEETS
MARCH 31, 1998 AND OCTOBER 31, 1997
<TABLE>
<CAPTION>
MARCH 31, OCTOBER 31,
1998 1997
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents of $3,292,000 and $-0- in 1998
and 1997, respectively $ 3,544,149 66,883
Trade accounts receivable (including retainage of
$1,270,445 and $1,822,957 in 1998 and 1997,
respectively, net of allowance for doubtful accounts of
$750,000 in 1998 and 1997) 11,837,261 13,398,380
Inventories 1,552,911 2,589,595
Costs in excess of billings on uncompleted contracts -- 2,711,606
Prepaid expenses -- 134,807
----------- ----------
Total current assets 16,934,321 18,901,271
----------- ----------
Property, plant and equipment, at cost 11,473,539 11,251,137
Less accumulated depreciation 5,071,615 4,871,991
----------- ----------
Net property, plant and equipment 6,401,924 6,379,146
----------- ----------
Other assets 739,565 710,920
----------- ----------
$24,075,810 25,991,337
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank $ -- 1,422,000
Accounts payable 3,348,533 4,247,628
Accrued expenses 3,040,248 3,545,127
Billings in excess of cost on uncompleted contracts 625,169 1,471,422
Stockholders' dividends payable -- 500,000
----------- ----------
Total current liabilities 7,013,950 11,186,177
Deferred compensation 144,200 140,000
----------- ----------
Total liabilities 7,158,150 11,326,177
----------- ----------
Stockholders' equity:
Common stock of $1 par value per share. Authorized 20,000
shares; issued and outstanding 8,000 shares 8,000 8,000
Additional paid-in capital 81,186 81,186
Retained earnings 16,828,474 14,575,974
----------- ----------
Total stockholders' equity 16,917,660 14,665,160
----------- ----------
Commitments and contingencies
$24,075,810 25,991,337
=========== ==========
</TABLE>
See accompanying note to financial statements.
F-41
<PAGE> 155
NATIONAL DYNAMICS CORPORATION
CONDENSED STATEMENTS OF EARNINGS
FIVE-MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net sales $25,561,029 21,722,260
Cost of sales 19,972,678 17,150,280
----------- ----------
Gross profit 5,588,351 4,571,980
Selling, general and administrative expenses 2,471,501 1,887,790
----------- ----------
Operating income 3,116,850 2,684,190
Other income 397,661 312,024
Other deductions, including interest expense of $60,772 and
$75,933 in 1998 and 1997, respectively (62,011) (76,214)
----------- ----------
Net earnings $ 3,452,500 2,920,000
=========== ==========
</TABLE>
See accompanying note to financial statements.
F-42
<PAGE> 156
NATIONAL DYNAMICS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
FIVE-MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash Flows from operating activities:
Net earnings $ 3,452,500 2,920,000
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation 199,625 192,999
Change in assets and liabilities:
Accounts receivable 1,561,119 (2,994,452)
Inventories 1,036,684 730,968
Costs in excess of billings on uncompleted contracts 2,711,606 2,661,098
Prepaid expenses 134,807 (168,897)
Other assets (28,645) (26,175)
Accounts payable (899,095) (444,702)
Accrued expenses (504,879) (834,268)
Billings in excess of costs on uncompleted contracts (846,253) 1,118,364
Deferred compensation 4,200 4,200
----------- ----------
Net cash provided by operating activities 6,821,669 3,159,135
----------- ----------
Cash flows from investing activities:
Capital expenditures (222,403) (262,493)
----------- ----------
Cash flows from financing activities:
Dividends paid (1,700,000) (1,100,000)
Net payments on note payable to bank (1,422,000) (1,472,000)
----------- ----------
Net cash used in financing activities (3,122,000) (2,572,000)
----------- ----------
Net increase in cash and cash equivalents 3,477,266 324,642
Cash and cash equivalents at beginning of year 66,883 222,415
----------- ----------
Cash and cash equivalents at end of year $ 3,544,149 547,057
=========== ==========
Supplemental cash flow information:
Cash paid for interest $ 60,772 75,993
=========== ==========
</TABLE>
See accompanying note to financial statements.
F-43
<PAGE> 157
NATIONAL DYNAMICS CORPORATION
NOTE TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1998
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of National
Dynamics Corporation (the Company), include all adjustments necessary for a fair
statement of earnings for each period shown, in the opinion of management. All
such adjustments made are of a normal recurring nature. The balance sheet at
October 31, 1997 is derived from the audited balance sheet as of that date.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. Management believes that the disclosures made
are adequate and that the information is fairly presented; costs and billings on
uncompleted contracts are presented net in the interim financial statement. The
results for the interim periods are not necessarily indicative of the results
for the full year. These financial statements should be read in conjunction with
the audited financial statements and notes thereto for the years ended October
31, 1997, 1996 and 1995.
F-44
<PAGE> 158
------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY INITIAL PURCHASER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE SUCH DATE. UNTIL , 19 ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, 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.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Summary.............................. 1
Risk Factors......................... 15
The Exchange Offer................... 22
Capitalization....................... 32
Unaudited Pro Forma Financial Data... 33
Selected Financial Data of
Aqua-Chem.......................... 39
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of Aqua-Chem......... 41
Selected Financial Data of NDC....... 46
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of NDC............... 47
Business of the Company.............. 49
Management........................... 60
Capital Stock and Principal
Stockholders....................... 66
Certain Relationships and Related
Transactions....................... 71
The Acquisition...................... 73
Description of Certain
Indebtedness....................... 74
Description of the Notes............. 75
Certain United States Federal Income
Tax Considerations................. 102
Plan of Distribution................. 104
Legal Matters........................ 105
Independent Auditors................. 105
Available Information................ 105
Incorporation of Certain Documents by
Reference.......................... 106
Index to Financial Statements........ F-1
</TABLE>
------------------------------------------------------
------------------------------------------------------
[AQUA-CHEM LOGO]
$125,000,000
11 1/4% Senior
Subordinated Notes
Due 2008
PROSPECTUS
------------------------------------------------------
<PAGE> 159
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, as amended,
provides in regards to indemnification of directors and officers as follows:
145. Indemnification of Officers, Directors, Employees
and Agents; Insurance.
(a) A corporation shall have power to indemnify any person 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 (other than an action
by or in the right of the corporation) by reason of the fact that the
person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection
with such action, suit or proceeding if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
(b) A corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the
fact that the person is or was
<PAGE> 160
a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by the person in connection with the
defense or settlement of such action or suit if the person acted in
good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
(c) To the extent that a present or former director or
officer of a corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in subsections
(a) and (b)of this section, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the present or former director, officer, employee or
agent is proper in the circumstances because the person has met the
applicable standard of conduct set forth in subsections (a) and (b) of
this section. Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination,
(1) by a majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such
directors, even though less than a quorum, or (3) if there are no such
directors, or if such directors so direct, by independent legal counsel
in a written opinion, or (4) by the stockholders.
<PAGE> 161
(e) Expenses (including attorneys' fees) incurred by an officer
or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that
such person is not entitled to be indemnified by the corporation as
authorized in this section. Such expenses (including attorneys' fees)
incurred by former directors or officers or other employees and agents
may be so paid upon such terms and conditions, if any, as the
corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other subsections of this section shall not
be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as
to action in another capacity while holding such office.
(g) A corporation shall have 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 as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to
indemnity him against such liability under this section.
(h) For purposes of this Section, references to "the
corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint
<PAGE> 162
venture, trust or other enterprise, shall stand in the same position
under the provisions of this section with respect to the resulting or
surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving 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 an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner
such person reasonably believed to be in the interest 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" as referred to in this section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise
provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such a
person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise. The Court of Chancery may summarily determine a
corporation's obligation to advance expenses (including attorneys
fees).
<PAGE> 163
Section 102(b)(7) of the Delaware General Corporation Law, as
amended, provides in regard to the limitation of liability of directors
and officers as follows --
(b) In addition to the matters required to be set forth in the
certificate of incorporation by subsection (a) of this section, the
certificate of incorporation may also contain any or all of the
following matters:
* * * *
(7) A provision eliminating or limiting the personal liability
of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director: (i)
for any breach of the director's duty of loyalty to the corporation or
its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii)
under Section 174 of this title; or (iv) for any transaction from which
the director derived an improper personal benefit. No such provision
shall eliminate or limit the liability of a director for any act or
omission occurring prior to the date when such provision becomes
effective. All references to this paragraph to a director shall also be
deemed to refer (x) to a member of the governing body of a corporation
which is not authorized to issue capital stock, and (y) to such other
person or persons, if any, who, pursuant to a provision of the
certificate of incorporation in accordance with ss.141(a) of this
title, exercise or perform any of the powers or duties otherwise
conferred or imposed upon the board of directors by this title.
Article 7 of the Registrant's Certificate of Incorporation, as amended,
provides in regard to the limitation of liability of directors and officers as
follows:
No director shall be liable to the Company or any of its
stockholders for monetary damages for breach of fiduciary duty as a
director, except with respect to (1) a breach of director's duty of
loyalty to the Company or its stockholders, (2) acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of the law, (3) liability under Section 174 of the Delaware
General Corporation Law or (4) a transaction from which the director
derived an improper personal benefit, it being the intention of the
foregoing provision to eliminate the
<PAGE> 164
liability of the Company's directors to the Company or its stockholders
to the fullest extent permitted by Section 102(b)(7) of the Delaware
General Corporation Law, as amended from time to time. The Company
shall indemnify to the fullest extent permitted by Sections 102(b)(7)
and 145 of the Delaware General Corporation Law, as amended from time
to time, each person that such Sections grant the Company the power to
indemnify.
Article 8 of Registrant's By-Laws provide, in summary, that the
corporation will indemnify present or former directors, officers employees or
agents (including those acting at the request of the Corporation in such role
for another entity) against amounts owed in connection with any proceeding
regarding action taken while serving in such role. The indemnification is to the
fullest extent as permitted by applicable law. With regard to directors and
officers, repeal or modification of that section of the by-laws or other
applicable laws will not change the obligations of the corporation in effect at
the time of the act giving rise to the proceeding. The right to indemnification
is not exclusive of any other rights to which the parties may be entitled. The
Corporation shall also have the power to purchase and maintain insurance on
behalf of any such person, without regard to whether the Corporation has the
power to indemnify that person under the by-laws or applicable law.
The Registrant has entered into an Indemnification Agreement with
Jeffrey A. Miller, the Registrant's Chairman, President and Chief Executive
Officer, pursuant to which the Registrant has agreed to indemnify Mr. Miller
against Expenses (as defined therein) and Liability (as defined therein)
arising out of his employment by or position as a director of the Registrant.
Mr. Miller's rights to indemnification under the Indemnification Agreement are
generally consistent with, and are specifically defined to include, the fullest
extent of the rights under the Delaware General Corporation Law, and the
Registrant's Certificate of Incorporation and Bylaws set forth as described
above.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The Exhibit Index attached hereto following the Signature Pages is
incorporated herein by reference.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) 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 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 the initial bona fide offering
thereof.
(2) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and persons
controlling the Registrant pursuant to the foregoing
<PAGE> 165
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 Securities 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 person controlling the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or 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 Securities
Act and will be governed by the final adjudication of such issue.
(3) To respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Item 4, 10(b), 11 or 13 of Form S-4,
within one business day of receipt of such request, and to send the incorporated
documents by first-class mail or equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date responding to the request.
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement when it became
effective.
<PAGE> 166
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Aqua- Chem,
Inc. has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Milwaukee,
State of Wisconsin, on this 5th day of August, 1998.
By: /s/ Jeffrey A. Miller
------------------------------------
Name: Jeffrey A. Miller
Title: Chairman of the Board, President and
Chief Executive Officer
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.
- ---------------------------- --------------------------- --------------
Signature Title Date
Principal Executive Officer:
/s/ Jeffrey A. Miller
- ------------------------------- President and Chief August 4, 1998
Jeffrey A. Miller Executive Officer
Principal Financial and Accounting Officer:
/s/ J. Scott Barton
- ------------------------------- Vice President, Chief August 4, 1998
J. Scott Barton Financial Officer
Board of Directors:
/s/ Jeffrey A. Miller
- ------------------------------- Director (Chairman of August 4, 1998
Jeffrey A. Miller the Board)
Director
- --------------------------
James H. Fordyce
<PAGE> 167
- -------------------------- -------------------------------- ------------------
Signature Title Date
/s/ James W. Hook
- -------------------------
James W. Hook Director August 3, 1998
/s/ William P. Killian
- ------------------------- Director August 4, 1998
William P. Killian
/s/ Michael R. Stone
- ------------------------- Director August 4, 1998
Michael R. Stone
<PAGE> 168
EXHIBIT INDEX
TO REGISTRATION STATEMENT ON FORM S-4
OF
AQUA-CHEM, INC.
- --------------------------------------------------------------------------------
EXHIBIT DESCRIPTION FILED
Number HEREWITH
2.1 Asset Purchase Agreement dated May X
28, 1998 among Aqua-Chem, Inc.,
National Dynamics Corporation, and
certain shareholders of National
Dynamics Corporation
2.2 Agreement and Plan of Reorganization (1)
dated July 31, 1997 among Lyonnaise
American Holding, Inc., Gestra
Corporation N.V., Rush Creek LLC,
Aqua-Chem, Inc., A-C Acquisition
Corp. and Jeffrey A. Miller
2.3 Amendment dated June 22, 1998 to Agreement (1)
and Plan of Reorganization among
Lyonnaise American Holding, Inc.,
Gestra Corporation N.V., Rush Creek
LLC, Aqua-Chem, Inc., A-C
Acquisition Corp. and Jeffrey A.
Miller
3.1 Aqua-Chem, Inc. Certificate of X
Incorporation (incorporating amendments)
3.2 Aqua-Chem, Inc. Bylaws X
4.1 Indenture of Trust dated June 23, X
1998 between Aqua-Chem, Inc. and
United States Trust Company of New
York, as Trustee
4.2 Form of Aqua-Chem, Inc. 11-1/4% X(2)
Senior Subordinated Note Due 2008,
to be issued in the Exchange Offer
subject to this Registration
Statement
4.3 Form of Aqua-Chem, Inc. 11-1/4% X(3)
Senior Subordinated Note Due 2008
issued on June 23, 1998
----------------
(1) To be filed by amendment.
(2) Included as Exhibit A to the Indenture of
Trust included as Exhibit 4.1 to this
Registration Statement.
(3) Included as Exhibit 1 to the Rule 144A/
Regulation S Appendix to the Indenture
of Trust included as Exhibit 4.1 to this
Registration Statement.
<PAGE> 169
- --------------------------------------------------------------------------------
EXHIBIT DESCRIPTION FILED
NUMBER HEREWITH
4.4 Common Stock Purchase Warrant dated July 31, 1997 X
5.1 Opinion as to legality of securities (1)
to be issued in the Exchange Offer
subject to this Registration
Statement
9.1 Stockholders' and Members' Agreement X
dated July 31, 1997 among the
Stockholders of Aqua-Chem, Inc. and
the Members of Rush Creek, LLC.
10.1 Credit Agreement dated June 23, 1998 X
among Aqua-Chem, Inc. and Comerica
Bank
10.2 Registration Rights Agreement dated X
June 18, 1998 among Aqua-Chem,
Inc., Credit Suisse First Boston
Corporation, and Bear, Stearns &
Co. Inc.
10.3 Employment Agreement dated July 31, X
1997 between Aqua-Chem, Inc. and
Jeffrey A. Miller, as amended
10.4 Employment Agreement dated February X
5, 1997 between Aqua-Chem, Inc.
and Rand E. McNally, as amended
10.5 Employment Agreement dated January X
20, 1997 between Aqua-Chem, Inc.
and J. Scott Barton, as amended
10.6 Employment Agreement dated January 7, 1997 X
between Aqua-Chem, Inc. and
Charles J. Norris, as amended
10.7 Employment Agreement dated September 1, 1997 X
between Aqua-Chem, Inc. and
Daniel L. Johnson, as amended
------------------
(1) To be filed by amendment.
<PAGE> 170
- --------------------------------------------------------------------------------
EXHIBIT DESCRIPTION FILED
NUMBER HEREWITH
10.8 Interim Management Agreement dated July 8, X
1996 between Aqua-Chem, Inc.
J. Miller Management, Inc. and Jeffery A.
Miller
10.9 Aqua-Chem, Inc. 1997 Stock Option X
Plan Amended and Restated
10.10 Aqua-Chem, Inc. Management Incentive (1)
Plan approved November 15, 1996
10.11 Aqua-Chem, Inc. Executive Management X
Incentive Plan approved November
15, 1996
10.12 Aqua-Chem, Inc. 1998 Phantom Stock Plan X
10.13 Amendment to Interim Management Agreement (1)
between Aqua-Chem, Inc., J. Miller Management,
Inc. and Jeffrey A. Miller
10.14 Aqua-Chem, Inc. 11 1/4% Senior Subordinated X
Notes Due 2008, Purchase Agreement dated
June 18, 1998
10.15 Consulting Agreement with Verlyn Westra dated X
June 19, 1998
10.16 Consulting Agreement with Roger Swanson dated X
June 19, 1998
10.17 Amended and Restated Securities Purchase X
Agreement dated December 5, 1997 by and among
Rush Creek, LLC, A-C Acquisition Corp., CB-Kramer
Sales and Service, Inc., Whitney Subordinated Debt
Fund, LP, and Whitney Equity Partners, LP
10.18 First Amendment and Consent Agreement dated June X
23, 1998, by and among Rush Creek, LLC,
A-C Acquisition Corp., CB-Kramer Sales and
Service, Inc., Whitney Subordinated Debt Fund, LP,
and Whitney Equity Partners, LP
10.19 Letter Agreement with William P. Killian X
dated December 17, 1997
10.20 Letter Agreement with James W. Hook dated X
February 11, 1998
- ------------------
(1) To be filed by amendment.
<PAGE> 171
- --------------------------------------------------------------------------------
EXHIBIT DESCRIPTION FILED
NUMBER HEREWITH
12.1 Statements Regarding Computation of Ratios X(4)
16.1 Letter regarding change in Certifying Accountant (1)
21.1 Subsidiaries of the Registrant X
23.1 Consent of Arthur Andersen LLP X
23.2 Consent of KPMG Peat Marwick, LLP, Milwaukee, X
Wisconsin
23.3 Consent of KPMG Peat Marwick, LLP, Omaha, X
Nebraska
23.4 Consent of Whyte Hirschboeck Dudek S.C. X
24.1 Powers of Attorney of Directors and Officers of X
Aqua-Chem, Inc.
25.1 Statement of Eligibility of United States Trust X
Company of New York as Trustee under the Indenture
on Form T-1 under the Trust Indenture Act of 1939,
as amended
27.1 Financial Data Schedule (12 months ended 12/31/95) X
27.2 Financial Data Schedule (12 months ended 12/31/96) X
27.3 Financial Data Schedule (7 months ended 7/31/97) X
27.4 Financial Data Schedule (5 months ended 12/31/97) X
27.5 Financial Data Schedule (6 months ended 6/30/98) X
99.1 Letter of Transmittal (1)
- -------------------------
(1) To be filed by amendment.
(4) Included in the Prospectus which forms a part of this
Registration Statement immediately following the consolidated
condensed financial statements of Aqua-Chem, Inc.
<PAGE> 172
- --------------------------------------------------------------------------------
EXHIBIT DESCRIPTION FILED
NUMBER HEREWITH
99.2 Instructions to Holders of Aqua-Chem, Inc. (1)
11-1/4% Senior Subordinated Notes Due 2008
99.3 Notice of Guaranteed Delivery (1)
- ----------------------------------
(1) To be filed by amendment.
<PAGE> 1
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
AQUA-CHEM, INC.,
NATIONAL DYNAMICS CORPORATION
AND
THE SHAREHOLDERS OF
NATIONAL DYNAMICS CORPORATION
MAY 28, 1998
-------------------------------------------------------------------
EXHIBITS TO ASSET PURCHASE AGREEMENT BY AND AMONG AQUA-CHEM, INC., NATIONAL
DYNAMICS CORPORATION AND THE SHAREHOLDERS OF NATIONAL DYNAMICS CORPORATION
DATED MAY 28, 1998
--------------------------------------------------
SCHEDULES TO ASSET PURCHASE AGREEMENT BY AND AMONG AQUA-CHEM, INC. ("BUYER")
AND NATIONAL DYNAMICS CORPORATION ("SELLER"), DANIEL T. SCULLY, ROGER L. SWANSON
AND VERLYN L. WESTRA (THE "SHAREHOLDERS") DATED MAY 28, 1998
-------------------------------------------------------------------
<PAGE> 2
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
AQUA-CHEM, INC.,
NATIONAL DYNAMICS CORPORATION
AND
THE SHAREHOLDERS OF
NATIONAL DYNAMICS CORPORATION
MAY 28, 1998
<PAGE> 3
EXHIBIT 2.1
TABLE OF CONTENTS
Tab No.
1. Asset Purchase Agreement By and Among Aqua-Chem, Inc., National
Dynamics Corporation And The Shareholders of National Dynamics
Corporation Dated May 28, 1998
*Letter dated May 28, 1998 to Roger L. Swanson from J. Scott
Barton at Aqua-Chem, Inc.*
2. Exhibits to Asset Purchase Agreement By and Among Aqua-Chem, Inc.,
National Dynamics Corporation And The Shareholders of National
Dynamics Corporation Dated May 28, 1998
Exhibit A: Assumed Liabilities
Exhibit B: Liability
Exhibit C: Excluded Assets in Addition to
Those Identified as "Excluded
Assets" in Section 1 of the Asset
Purchase Agreement
Exhibit D: Purchase Price Escrow Agreement
Exhibit E: Warranty and Start Up Escrow
Agreement
Exhibit F: Closing Balance Sheet Example
Exhibit G: Assignments, Bills of Sale and Deeds
Exhibit H: Assumption Agreement
Exhibit I: Allocation of Purchase Price
Exhibit J: Financial Statements
Exhibit K: Schedule of Title Insurance Amounts
Exhibit L: Opinion of Seller's Legal Counsel
Exhibit M: Roger L. Swanson Consulting
Agreement
Exhibit N: Verlyn L. Westra Consulting
Agreement
Exhibit O: Opinion of Buyer's Legal Counsel
-i-
<PAGE> 4
EXHIBIT 2.1
TABLE OF CONTENTS
(Continued)
3. Schedules to Asset Purchase Agreement By And Among Aqua-Chem,
Inc., ("Buyer") And National Dynamics Corporation ("Seller"),
David T. Scully, Roger L. Swanson And Verlyn L. Westra (The
"Shareholders")
Schedule 1 Acquired Assets
Schedule 3(a) Organization of the Seller
Schedule 3(b) Authorization of Transaction
Schedule 3(c) Noncontravention
Schedule 3(d) Brokers' Fees
Schedule 3(e) Title to Assets
Schedule 3(f) Subsidiaries
Schedule 3(g) Financial Statements
Schedule 3(h) Events Subsequent to Most Recent
Fiscal Year End
Schedule 3(i) Undisclosed Liabilities
Schedule 3(j) Legal Compliance
Schedule 3(k) Real Property
Schedule 3(l) Intellectual Property
Schedule 3(m) Tangible Assets
Schedule 3(n) Inventory
Schedule 3(o) Contracts
Schedule 3(p) Notes and Accounts Receivable
Schedule 3(q) Accounts and Powers of Attorney
Schedule 3(r) Insurance
Schedule 3(s) Litigation
Schedule 3(t) Employees
Schedule 3(u) Employee Benefits
-ii-
<PAGE> 5
EXHIBIT 2.1
TABLE OF CONTENTS
(Continued)
Schedule 3(v) Guaranties
Schedule 3(w) Environment, Health and Safety
Schedule 3(x) Taxes
Schedule 3(y) Product Warranty
Schedule 3(z) Shareholder Authorization
Schedule 3(aa) Noncontravention
Schedule 3(ab) Seller shares
Schedule 3(ac) Certain Business Relationships with
the Seller
Schedule 3(ad) Disclosure
Schedule 5.2(f) Confidentiality Agreement
-iii-
<PAGE> 6
EXHIBIT 2.1
TABLE OF CONTENTS
1. Definitions............................................................ -1-
2. Basic Transaction...................................................... -6-
(a) Purchase and Sale of Assets....................................... -6-
(b) Assumption of Liabilities......................................... -6-
(c) Purchase Price.................................................... -6-
(d) The Closing....................................................... -8-
(e) Deliveries at the Closing......................................... -8-
(f) Allocation........................................................ -8-
3. Representations and Warranties of the Shareholders..................... -8-
(a) Organization of the Seller........................................ -9-
(b) Authorization of Transaction...................................... -9-
(c) Noncontravention.................................................. -9-
(d) Brokers' Fees..................................................... -9-
(e) Title to Assets................................................... -9-
(f) Subsidiaries...................................................... -10-
(g) Financial Statements.............................................. -10-
(h) Events Subsequent to Most Recent Fiscal Year End.................. -10-
(i) Undisclosed Liabilities........................................... -12-
(j) Legal Compliance.................................................. -12-
(k) Real Property..................................................... -12-
(l) Intellectual property............................................. -13-
(m) Tangible Assets........................................... -15-
(n) Inventory......................................................... -16-
(o) Contracts......................................................... -16-
(p) Notes and Accounts Receivable..................................... -17-
(q) Accounts, Letters of Credit, Bonds and Powers of Attorney......... -17-
(r) Insurance......................................................... -17-
(s) Litigation........................................................ -17-
(t) Employees......................................................... -18-
(u) Employee Benefits................................................. -18-
(v) Guaranties........................................................ -20-
(w) Environment, Health and Safety............................ -20-
(x) Taxes............................................................. -20-
(y) Product Warranty............................................. -20-
(z) Shareholder Authorization......................................... -20-
(aa) Noncontravention............................................. -21-
(ab) Seller Shares............................................. -21-
(ac) Certain Business Relationships With the Seller............ -21-
(ad) Disclosure................................................ -21-
(ae) Disclaimer of Other Representations and Warranties........ -21-
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<PAGE> 7
EXHIBIT 2.1
4. Representations and Warranties of the Buyer............................ -21-
(a) Organization of the Buyer......................................... -22-
(b) Authorization of Transaction...................................... -22-
(c) Noncontravention.................................................. -22-
(d) Brokers' Fees..................................................... -22-
(e) Disclosure........................................................ -22-
(f) Disclaimer of Other Representations and Warranties................ -22-
5.1 Pre-Closing Covenants.................................................. -23-
(a) General........................................................... -23-
(b) Financing......................................................... -23-
(c) Notices and Consents.............................................. -23-
(d) Operation of Business Section..................................... -23-
(e) Preservation of Business Section.................................. -23-
(f) Full Access Section............................................... -24-
(g) Exclusivity....................................................... -24-
(h) Title Insurance................................................... -24-
(i) Surveys........................................................... -24-
(j) Effect of Disclosure.............................................. -25-
5.2 Other Covenants....................................................... -26-
(a) General........................................................... -26-
(b) Litigation Support................................................ -26-
(c) Seller and Shareholder Confidentiality............................ -26-
(d) Covenant Not to Compete........................................... -27-
(e) Non Assignable Contracts.......................................... -27-
(f) Buyer Confidentiality............................................. -28-
(g) Warranty, Make Good and Start Up Liability and Work............... -28-
(i) Liability for Warranty, Make-Good and Startup............. -28-
(ii) Performance of Warranty, Make-Good and Startup Work...... -28-
(iii) Payment for Warranty Work, Make-Good Work and Startup
Performed for Seller by Buyer..................................... -29-
(iv) Warranty, Startup, Accounts and Notes Receivable Escrow
Account .......................................................... -29-
(h) Accounts and Notes Receivable..................................... -30-
(i) Product Liability................................................. -31-
(j) Surety Bonds and Letters of Credit................................ -31-
(k) Certain Employment Related Matters............................... -31-
(l) Certain Environmental Matters..................................... -33-
(m) Tax Returns and Employee Benefit Plan Returns and Reports. -33-
6. Conditions to Obligation to Close...................................... -34-
(a) Conditions to Obligation of the Buyer............................. -34-
(b) Conditions to Obligation of the Seller............................ -35-
7. Termination............................................................ -36-
(a) Mutual Consent.................................................... -36-
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<PAGE> 8
EXHIBIT 2.1
(b) Passage of Time................................................... -36-
(c) Non-Satisfaction of Section6(a) Conditions........................ -36-
(d) Non-Satisfaction of Section6(b) Conditions........................ -36-
(e) Failure to Obtain Financing...................................... -36-
(f) Matters Disclosed in Updates to Disclosure Schedule............... -36-
(g) Title Insurance and Survey........................................ -37-
(h) Further Due Diligence............................................. -37-
8. Remedies.............................................................. -37-
(a) Survival of Representations and Warranties........................ -37-
(b) Indemnification Provisions for Benefit of the Buyer............... -37-
(c) Indemnification Provisions for Benefit of the Seller and the
Shareholders...........................................................
-38-
(d) Limitations....................................................... -39-
(e) Indemnification Procedures........................................ -40-
(f) Recoupment........................................................ -41-
(g) Payment........................................................... -41-
(h) General........................................................... -42-
9. Miscellaneous.......................................................... -43-
(a) Bulk Transfer Laws................................................ -43-
(b) Press Releases and Public Announcements........................... -43-
(c) No Third Party Beneficiaries...................................... -43-
(d) Entire Agreement.................................................. -43-
(e) Succession and Assignment......................................... -43-
(f) Counterparts...................................................... -43-
(g) Headings.......................................................... -43-
(h) Notices........................................................... -43-
(i) Governing Law..................................................... -44-
(j) Amendments and Waivers............................................ -44-
(k) Severability...................................................... -45-
(l) Expenses.......................................................... -45-
(m) Incorporation of Exhibits and Schedules................... -45-
(n) Construction...................................................... -45-
(o) Submission to Jurisdiction........................................ -45-
(p) Specific Performance.............................................. -45-
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<PAGE> 9
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
AGREEMENT made and entered into as of May ____,1998, by and among
AQUA-CHEM, INC., a Delaware corporation (the "Buyer"), NATIONAL DYNAMICS
CORPORATION, a Nebraska corporation (the "Seller") and DANIEL T. SCULLY, ROGER
L. SWANSON, and VERLYN L. WESTRA, the holders of eighty-three and 25/100 percent
(83.25%) of the issued and outstanding shares of the Seller (the
"Shareholders"). The Buyer, the Seller and the Shareholders are referred to
collectively herein as the "Parties."
WITNESSETH:
WHEREAS, the Buyer desires to purchase and acquire the Seller's assets
and business as a going concern and assume certain liabilities of Seller on the
terms and conditions hereinafter set forth and
WHEREAS, the Seller and the Shareholders desire that the Seller sell
its assets and business as a going concern to the Buyer on the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Acquired Assets" means all right, title, and interest in and to all of
the assets of the Seller as of the Closing Date as hereinafter defined,
including, without limitation, all of its (a) real property, leaseholds and
subleaseholds therein, improvements, fixtures, and fittings thereon, and
easements, rights-of-way, and other appurtenants thereto (such as appurtenant
rights in and to public streets), (b) tangible personal property (such as
machinery, equipment, inventories of raw materials and supplies, manufactured
and purchased parts, goods in process and finished goods, furniture,
automobiles, trucks, tractors, trailers, tools, jigs, and dies), (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto, and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions, (d) leases, subleases, and rights
thereunder, (e) those agreements, contracts, indentures, mortgages, instruments,
Security Interests, guaranties, other similar arrangements, and rights
thereunder as listed in Section 1 of the Disclosure Schedule (as hereinafter
defined), (f) accounts, notes, and other receivables, (g) claims, deposits,
prepayments, refunds, causes of action, choses in action, rights of recovery,
rights of set off, and rights of recoupment, excluding any of the foregoing
items which relate to Taxes paid by Seller, Excluded Assets and/or obligations
or liabilities of Seller which are not Assumed Liabilities, (h) franchises,
approvals, permits, licenses, orders, registrations, certificates, variances,
and similar rights obtained from governments and governmental agencies, (i)
books, records, ledgers, files, documents, correspondence, lists, plats,
architectural plans, drawings, and specifications, creative
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<PAGE> 10
EXHIBIT 2.1
materials, advertising and promotional materials, studies, reports, and
other printed or written materials, and (j) Cash; provided, however, that the
Acquired Assets shall not include the "Excluded Assets" (as hereinafter
defined).
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Applicable Rate" means the corporate base rate of interest announced
from time to time in the Midwest Edition of the Wall Street Journal or any
successor publication.
"Assumed Liabilities" means, as of the Closing Date, (a) all
Liabilities of the Seller to the extent of the dollar amount reflected on the
Closing Balance Sheet (as hereinafter defined) and taken into account in the
calculation of the Closing Net Asset Value (as hereinafter defined), (b) all
obligations of the Seller under the agreements, contracts, leases, licenses, and
other arrangements referred to in the definition of Acquired Assets either (i)
to furnish goods, services, and other non-Cash benefits to another party after
the Closing or (ii) to pay for goods, services, and other non-Cash benefits that
another party will furnish to it after the Closing, and (c) those other
Liabilities and obligations of the Seller set forth in Exhibit A attached
hereto, provided, however, that the Assumed Liabilities shall not include (i)
any Liability of the Seller for Taxes, except to the extent of the dollar amount
of those Taxes reflected on the Closing Balance Sheet which relate to tax
returns the Buyer is required to file pursuant to Section 5.2(m) of this
Agreement, (ii) any Liability of the Seller for the unpaid Taxes of any Person,
as a transferee or successor, by contract, or otherwise, (iii) any obligation of
the Seller to indemnify any Person (including any of the Shareholders) by reason
of the fact that such Person was a director, officer, employee, or agent of the
Seller or was serving at the request of any such entity as a partner, trustee,
director, officer, employee, or agent of another entity (whether such
indemnification is for judgments, damages, penalties, fines, costs, amounts paid
in settlement, losses, expenses, or otherwise and whether such indemnification
is pursuant to any statute, charter document, bylaw, agreement, or otherwise),
(iv) any Liability or obligation of the Seller under this Agreement; (v) any
Liabilities or obligations directly or indirectly relating to or arising in
connection with the EGT Projects (as hereinafter defined), (vi) any Liabilities
or obligations (including, without limitation liabilities for personal injury
and property damage) directly or indirectly relating to or arising in connection
with Products Sold (as hereinafter defined) on or before the Closing Date (as
hereinafter defined), except for the obligation of Buyer to perform product
warranty, make-good and startup work for the Seller as hereinafter specifically
set forth in Section 5.2(g) of this Agreement, or any Liability listed on
Exhibit B attached hereto and/or (vii) any Liabilities under the Seller's VEBA.
"Buyer" has the meaning set forth in the preface above.
"Cash" means cash excluding marketable securities and short term
investments
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<PAGE> 11
EXHIBIT 2.1
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Balance Sheet" has the meaning set forth in Section 2(c)(2)
below.
"Closing Date" has the meaning set forth in Section 2(d) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the
businesses and affairs of the Buyer and/or the Seller that is not already
available to the public.
"Disclosure Schedule" has the meaning set forth in Section 3 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health and Safety Requirements" means all applicable
federal, state, local, administrative and foreign statutes, rules, regulations,
and ordinances concerning public health and safety, worker health and safety,
and pollution or protection of the environment, including without limitation,
all those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
industrial, chemical, toxic or hazardous materials, substances or wastes (as
such terms are defined under any applicable federal, state, local or foreign
statute, rule, regulation or ordinance), as such requirements are enacted and in
effect on or prior to the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means the following assets owned by the Seller: (i)
life insurance policies (including any cash surrender values) on the lives of
Daniel T. Scully, Roger L. Swanson and Verlyn L. Westra; (ii) product liability
insurance policies; (iii) art work and bronzes, which have previously been
removed from the Seller's Premises; (iv) accounts receivable (all of which have
previously been written off) or liabilities relating to the European Gas
Turbines on projects identified as Browning Ferris Gas Services, Inc. ("BFGSI")
Pine Bend, MN Project, BFGSI Arbor Hills, MI Project, Anheuser Busch Newark
Brewery Project and Princeton University Project as more fully described in the
Disclosure Schedule (collectively the "EGT Projects"); (v) any and all other
insurance policies other than the policies of life insurance on the lives of
David N. Bouquet, Gary D. Johnson, Lawrence H. Miller and Harry W. Kumpula (the
"Executives") which serve as the funding vehicle for the
-3-
<PAGE> 12
EXHIBIT 2.1
Seller's deferred compensation obligations to the Executives (the "Deferred
Compensation Obligations"); (vi) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the Seller
as a corporation, or any of the rights of the Seller under this Agreement; (vii)
marketable securities, short-term investments and/or tax deposits; (viii) those
prepaid expenses and other items specifically listed in Exhibit C attached
hereto and (ix) any assets related to the Seller's VEBA.
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statement" has the meaning set forth in Section 3(g) below.
"GAAP" means generally accepted accounting principles as in effect in
the United States as of the date of this Agreement.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
bills of material, customer and supplier lists, customer job files, pricing and
cost information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium).
"Knowledge" means that which is actually known or, after reasonable
investigation, should have been known by the Shareholders.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
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<PAGE> 13
EXHIBIT 2.1
"Most Recent Fiscal Month End" has the meaning set forth in Section
3(g) below.
"Most Recent Fiscal Year End" has the meaning set forth in Section
3(g) below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Real Estate Encumberances" means those defects,
encroachments, easements, covenants and other restrictions set forth in the
title commitments or the surveys referenced in Section 3(k) of the Disclosure
Schedule and approved by the Buyer in accordance with Section 3(k) of the
Disclosure Schedule.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Products Sold" means those products which under GAAP, applied on a
basis consistent with prior years, the Seller is permitted or required to
regard, under the completed contract method of accounting, as having been sold
on or before the Closing Date and with respect to which Seller has, accordingly,
been required or permitted to recognize profit or loss Section
"Prohibited Transaction" has the meaning set forth in ERISA Section
406 and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2(c) below.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, adverse claim, deed of trust or other security interest, other than (a)
mechanic's, materialmen's, and similar liens arising in connection with the
Assumed Liabilities, (b) liens for Taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business which arise in
connection with an Assumed Liability and were not incurred in connection with
the borrowing of money.
-5-
<PAGE> 14
EXHIBIT 2.1
other liens arising in the Ordinary Course of Business which arise in connection
with an Assumed Liability and were no incurred in connection with the borrowing
of money.
"Subsidiary" means any partnership, corporation, limited liability
company, business trust, or any other entity with respect to which Seller has an
equity interest or has the power to vote or direct the voting of equity
securities.
"Survey" has the meaning set forth in Section 5.1(i) below.
"Seller" has the meaning set forth in the preface above.
"Shareholder" shall have the meaning set forth in the preface above.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller, and
the Seller agrees to sell, transfer, convey, and deliver to the Buyer, all of
the Acquired Assets at the Closing for the consideration specified below in this
Section 2.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer covenants and agrees at the Closing to
assume and become solely responsible for all of the Assumed Liabilities. From
and after Closing, the Buyer shall pay and perform all amounts and obligations
arising out of or in connection with the Assumed Liabilities promptly as the
same become due and shall not suffer or permit the same to become delinquent or
in default. The Buyer will not assume or have any responsibility, however, with
respect to any obligation or Liability of the Seller not specifically included
within the definition of Assumed Liabilities.
(c) Purchase Price.
(1) The Purchase Price, subject to adjustment as set forth below, shall
be Forty-Seven Million Dollars ($47,000,000), Thirty Eight Million
Dollars ($38,000,000) of which shall be paid to the Seller by wire
transfer of immediately available funds on the Closing Date, Five
Million Dollars ($5,000,000) of which shall be deposited by wire
transfer of immediately available
<PAGE> 15
EXHIBIT 2.1
funds in an escrow account (the "Purchase Price Escrow Account") with
Bank One Trust Company, N.A.(the "Escrow Agent") to be held in
accordance with a Purchase Price Escrow Agreement substantially in the
form of Exhibit D and disbursed as set forth in Section 2(c)(3) and
Section 2(e) below and Four Million Dollars ($4,000,000) of which shall
be deposited by wire transfer of immediately available funds in an
escrow account (the "Warranty, Startup, Accounts and Notes Receivable
Escrow Account") with the Escrow Agent to be held in accordance with a
Warranty and Startup Escrow Agreement substantially in the form of
Exhibit E and disbursed as set forth in Section 5.2(g) and
Section 5.2(h) below. The Buyer and the Seller shall each pay one-half
of the fees and expenses of the Escrow Agent.
(2) A physical inventory shall be jointly conducted by the Seller and
the Buyer as of the close of business on the Closing Date subject to
the provisions of Section 2(c)(4) below. As promptly as possible, but
not later than 60 days after the Closing, the Buyer shall prepare and
deliver to the Seller an audited balance sheet certified by Arthur
Andersen (the "Closing Balance Sheet"), dated as of the Closing Date,
prepared from the Company's books and records in accordance with the
accounting conventions set forth in Section 2(c)(4) below and a
calculation of the Closing Net Asset Value (as hereinafter defined).
The Parties hereby acknowledge and agree that the Closing Net Asset
Value shall be calculated in the manner and utilizing the methodology
set forth on Exhibit F attached hereto. In the event the Seller
disagrees with any items set forth on the Closing Balance Sheet or the
calculation of the Closing Net Asset Value, the Seller shall by
written notice to the Buyer within 30 days of receipt of the Closing
Balance Sheet specify the disputed items and the basis for
disagreement (the "Seller's Notice") and the Buyer and the Seller
shall thereafter attempt to resolve any such differences. The Buyer
shall permit the Seller and its representatives to observe the
processes used and to review any work papers prepared by Arthur
Andersen in connection with the audit of the Closing Balance Sheet.
Buyer shall pay all of the fees of Arthur Andersen in connection
herewith. In the event that all disputed items have not been resolved
by the Seller and the Buyer within 30 days after the Buyer's receipt
of the Seller's Notice, upon the written request of either the Seller
or the Buyer, any unresolved disputed items shall be submitted to the
independent accounting firm of Coopers & Lybrand (the "Accountants"),
whose decision, which shall be made within thirty (30) days after
submission of the disputed items, shall be final and binding upon the
Buyer, the Seller and the Shareholders. The Buyer and the Seller shall
cooperate with the Accountants and make available to the Accountants
all work papers, records and other information as may be requested. If
Seller's Notice is given, the Buyer and the Seller shall each pay
one-half (1/2) of the reasonable fees and expenses of the Accountants
and shall execute such agreements as the Accountants may reasonably
request in connection with such services.
(3) In the event that (i) the book value of the Acquired Assets (net of
depreciation and amortization) as set forth on the Closing Balance
Sheet, minus (ii) the sum of (A) the "Agreed Upon Reserve" (as
hereinafter defined), plus (B) the book value of the Assumed
Liabilities as set forth on the Closing Balance Sheet (the "Closing Net
Asset Value"), is less than $17,125,160, the Purchase Price shall be
reduced by the amount of such deficiency. The Purchase Price, as
reduced by any adjustment required under the preceding sentence, or the
original Purchase Price of Forty Seven Million Dollars ($47,000,000),
if no adjustment is
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<PAGE> 16
EXHIBIT 2.1
required under the preceding sentence, is hereinafter referred to as
the "Final Purchase Price". If the Final Purchase Price is more than
Forty Two Million Dollars ($42,000,000), the Escrow Agent will pay the
Seller by wire transfer of immediately available funds an amount equal
to (a) the Final Purchase Price, minus (b) Forty Two Million Dollars
($42,000,000) and return the balance, if any, of the original principal
amount of the Purchase Price Escrow Account to the Buyer. If the Final
Purchase Price is less than Forty Two Million Dollars ($42,000,000),
(a) the Escrow Agent will return all funds in the Purchase Price Escrow
Account to the Buyer and (b) the Seller will pay the Buyer by wire
transfer of immediately available funds an amount equal to (a) Forty
Two Million Dollars ($42,000,000), minus (b) the Final Purchase Price.
Any earnings on the Purchase Price Escrow Account shall be distributed
to the Seller and/or the Buyer on a basis proportionate with the
distribution of the principal distributions to the Seller and/or the
Buyer from the Escrow Account.
(4) Each accounting term used herein shall have the meaning that is
applied thereto in accordance with GAAP and each account included in
the Closing Balance Sheet shall be calculated in accordance with GAAP
and shall be consistent with the books and records of the Company;
provided, that all known arithmetic errors shall be taken into account
in the calculation of each account set forth above, regardless of their
materiality and with respect to the calculation of the levels of the
accounts set forth above and, provided further, that in determining the
Closing Net Asset Value there shall be no reserves for: vacation pay,
product warranty, make good and start-up liability and work, excess,
obsolete, damaged or defective inventory, product liability, bad debts,
the Seller's VEBA, or any unfunded liabilities associated with either
the Defined Benefit Plan (except for the Agreed Upon Reserve) or the
Deferred Compensation Obligations. As used in this Agreement, the term
"Agreed Upon Reserve" shall mean an amount equal to (i) the sum of (A)
the reserve for the Defined Benefit Plan (as hereinafter defined) as
set forth in Most Recent Fiscal Year End Financial Statements, plus (B)
the addition thereto for current service costs for the period from
November 1, 1997 through the Closing Date, minus (ii) contributions
made by the Seller on or after November 1, 1997 to the Defined Benefit
Plan.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Whyte Hirschboeck
Dudek SC, 2100 Bank One Plaza, Milwaukee, WI 53202, commencing at 10:00 a.m.
local time on such date as the Buyer and the Seller may agree upon, but not
later than the fifth business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself), (the "Closing Date").
However, in no event shall Closing occur later than July 18, 1998.
(e) Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 6(a) below; (ii) the Buyer will deliver to the Seller
the various certificates, instruments, and documents referred to in
Section 6(b) below; (iii) the Seller will execute, acknowledge, and deliver to
the Buyer (A) assignments, bills of sale, deeds in the forms attached hereto as
Exhibits G1, G2 and G3 and (B) such other instruments of sale, transfer,
conveyance, and assignment (including motor vehicle and Intellectual Property
transfer documents)
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<PAGE> 17
EXHIBIT 2.1
as the Buyer and its counsel reasonably may request; (iv) the Buyer will
execute and deliver to the Seller (A) an assumption agreement in the form
attached hereto as Exhibit H and (B) such other instruments of assumption as
the Seller and its counsel reasonably may request; (v) the Seller, the
Shareholders, the Buyer and the Escrow Agent will execute and deliver the
Purchase Price Escrow Agreement in the form of Exhibit B and the Warranty and
Startup Escrow Agreement in the form of Exhibit C; (vi) the Buyer will
deliver to the Seller and the Escrow Agent an aggregate amount of Forty-Seven
Million Dollars ($47,000,000) as provided in Section 2(c) above; (vii) the
Buyer and Roger L. Swanson will execute the Swanson Consulting Agreement (as
hereinafter defined); the Buyer and Verlyn L. Westra will execute the Westra
Consulting Agreement (as hereinafter defined)
(f) Allocation. The Parties agree to allocate the Purchase Price (and
all other capitalizable costs) among the Acquired Assets in accordance with the
allocation attached hereto as Exhibit I, and to use such allocation for all tax
reporting purposes connected herewith.
3. Representations and Warranties of the Shareholders. The Seller and
the Shareholders jointly and severally represent and warrant to the Buyer that,
notwithstanding any investigation by the Buyer, the statements contained in this
Section 3 are true, correct and complete as of the date of this Agreement and
will be true, correct and complete as of the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3), except as set forth in the disclosure schedule
accompanying this Agreement (the "Disclosure Schedule"). The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 3. Any matter reasonably
disclosed in one section of the Disclosure Schedule shall be deemed to be
disclosed for purposes of other sections of the Disclosure Schedule without the
necessity of specific cross reference. The Seller or any Shareholder may
periodically update the Disclosure Schedule as necessary between the date
hereof and the Closing Date by delivery of a copy of such update to Buyer as
provided in Section 9(h). Matters reasonably disclosed in the Disclosure
Schedule or in such updates shall constitute express exceptions to and
limitations of the representations and warranties of the Seller and the
Shareholders as hereinafter set forth.
(a) Organization of the Seller. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Nebraska.
(b) Authorization of Transaction. The Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors of the Seller and the
Shareholders have duly authorized the execution, delivery, and performance of
this Agreement by the Seller. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its terms and
conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above),
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Seller is subject or any
provision of the articles of incorporation or bylaws of the Seller
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EXHIBIT 2.1
or (ii) except for any required third party consents or approvals, conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which the Seller is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets). The Seller does
not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement (including the assignments and assumptions referred to in Section 2
above) other than as required pursuant to the Hart-Scott-Rodino Act, and such
authorizations, consents or approvals as may be required to assign the
agreements, contracts, leases, instruments and other arrangements included in
the Acquired Assets to Buyer as contemplated herein.
(d) Brokers' Fees. The Seller has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated, except to extent accrued on the Closing Balance Sheet.
(e) Title to Assets. Subject to the exceptions set forth in
Section 3(k)(i)(A), Section 5.1(h) and Section 5.1(i) relating to real
property, the Seller has, or will at Closing have, good and marketable title
to, or a valid leasehold interest in, the Acquired Assets free and clear of all
Security Interests, except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Most Recent Balance Sheet.
(f) Subsidiaries. The Seller has no Subsidiaries and has had no
Subsidiaries for the prior eight years.
(g) Financial Statements. Attached hereto as Exhibit J are the
following financial statements (collectively the "Financial Statements"): (i)
audited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended October 31, 1995,
1996, and 1997 (the "Most Recent Fiscal Year End") for the Seller; and (ii)
unaudited balance sheets and statements of income, changes in stockholders'
equity, and cash flow (the "Most Recent Financial Statements") as of and for the
five (5) months ended March 31, 1998 (the "Most Recent Fiscal Month End") for
the Seller. The Financial Statements (including the Notes thereto) have been
prepared in accordance with GAAP applied on a basis consistent with Seller's
prior year end audited Financial Statements, and present fairly the financial
condition of the Seller as of such dates and the results of operations of the
Seller for such periods; provided, however, that the Most Recent Financial
Statements are subject to normal year-end adjustments (which will not be
material individually or in the aggregate) and lack footnotes and other
presentation items.
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any occurrence, event, incident,
action, failure to act, or transaction outside the ordinary course of business
involving the Seller which would have a material adverse effect on the business
or financial results of Seller or a material adverse effect on the Acquired
Assets. Without limiting the generality of the foregoing, since that date:
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EXHIBIT 2.1
(i) the Seller has not sold, leased, transferred, or assigned any
of the Acquired Assets, other than for a fair consideration in the
Ordinary Course of Business;
(ii) the Seller has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
and licenses) either involving more than $10,000 or outside the
Ordinary Course of Business;
(iii) no party (including the Seller) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) to which
the Seller is a party or by which it is bound;
(iv) the Seller has not had imposed any Security Interest upon any
of the Acquired Assets;
(v) the Seller has not made any capital expenditure (or series of
related capital expenditures) either involving more than $10,000 or
outside the Ordinary Course of Business;
(vi) the Seller has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans, and acquisitions)
outside the Ordinary Course of Business;
(vii) the Seller has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation;
(viii) the Seller has not delayed and/or postponed the payment of
accounts payable or other Liabilities outside the Ordinary Course of
Business;
(ix) the Seller has not canceled, compromised, waived, or released
any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business;
(x) the Seller has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) the Seller has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in
cash or in kind) which will result in the Closing Net Asset Value being
less than $15,031,850, or redeemed, purchased, or otherwise acquired
any of its capital stock;
(xii) the Seller has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to the
Acquired Assets;
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EXHIBIT 2.1
(xiii) the Seller has not made any loan to, or entered into any
other transaction with, any of its directors, officers, employees or
any other Person outside the Ordinary Course of Business;
(xiv) the Seller has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
(xv) the Seller has not granted any increase in the base
compensation of any of its directors, officers, and/or employees;
(xvi) the Seller has not adopted, amended, modified or terminated
any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors,
officers, and/or employees (or taken any such action with respect to
any other Employee Benefit Plan);
(xvii) the Seller has not made any other change in employment
terms for any of its directors, officers, and/or employees;
(xviii) the Seller has not made or pledged to make any charitable
or other capital contribution;
(xix) except for market or economic conditions which are matters
of general knowledge in the industry, there has not been any other
occurrence, event, incident, action, failure to act, or transaction
outside the Ordinary Course of Business involving the Seller which
would have a material adverse effect on the business or financial
results of Seller or a material adverse effect on the Acquired Assets;
and
(xx) the Seller has not committed to any of the foregoing.
(i) Undisclosed Liabilities. The Seller has no Liabilities (and there
are no pending or threatened actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, or demands against Seller which
could reasonably be expected to give rise to any Liability), except for (i)
Liabilities to the extent reflected in the Most Recent Balance Sheet; (ii)
Liabilities which have arisen after the date of the Most Recent Fiscal Month End
Balance Sheet in the Ordinary Course of Business (none of which results from,
arises out of, relates to, or was caused by any material breach of contract,
breach of warranty, tort, infringement, or violation of law); and (iii)
Liabilities arising under this Agreement or in connection with agreements,
contracts, leases, licenses and other arrangements which are included in the
Assumed Liabilities as to which Seller is not in default.
(j) Legal Compliance. Each of the Seller and its predecessors have
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure so to comply.
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EXHIBIT 2.1
(k) Real Property.
(i) Section 3(k)(i) of the Disclosure Schedule contains the legal
description of all real property that the Seller owns. With respect to
each such parcel of owned real property:
(A) the Seller has good and marketable title to the parcel
of real property, free and clear of any Security Interest,
easement, covenant, or other restriction, except for Permitted
Real Estate Encumberances, real estate taxes and installments of
special assessments not yet delinquent and applicable zoning laws
and building restrictions
(B) To the Knowledge of the Seller, there are no pending
or threatened condemnation proceedings, lawsuits, or
administrative actions relating to the property or other matters
having an adverse effect on its current use, or Seller's occupancy
thereof;
(C) Seller has received all approvals of governmental
authorities (including licenses and permits) required in
connection with the ownership or operation of the real property as
currently used by Seller, and has operated and maintained the same
in accordance with applicable laws, rules, and regulations;
(D) there are no leases, subleases, licenses, concessions,
or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of the real
property;
(E) there are no outstanding options or rights of first
refusal to purchase the real property, or any portion thereof or
interest therein; and
(F) there are no parties (other than the Seller) in
possession of the real property, other than tenants under any
leases disclosed in the Disclosure Schedule who are in possession
of space to which they are entitled.
(ii) Section 3(k)(ii) of the Disclosure Schedule sets forth the
legal description of all real property leased or subleased to the
Seller, and contains a true and correct copy of each lease and
sublease of real property to the Seller. With respect to each lease
and sublease listed in Section 3(k)(ii) of the Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect, except that such
enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium (whether general or specific) or other
similar laws now or hereafter in effect relating to creditors'
rights generally and to general principles of equity;
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<PAGE> 22
EXHIBIT 2.1
(B) except for any required third party consents or
approvals, the lease or sublease will continue to be legal, valid,
binding, enforceable in accordance with its terms, and in full
force and effect on identical terms following the consummation of
the transactions contemplated hereby (including the assignments
and assumptions referred to in Section 2 above), except that such
enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium (whether general or specific) or other
similar laws now or hereafter in effect relating to creditors'
rights generally and to general principles of equity;
(C) no party to the lease or sublease is in breach
or default, and no event has occurred which, with notice or lapse
of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) no party to the lease or sublease has repudiated
any provision thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(F) with respect to each sublease, the
representations and warranties set forth in subsections (A)
through (E) above are true and correct with respect to the
underlying lease;
(G) the Seller has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest
in the leasehold or subleasehold; and
(H) all facilities leased or subleased thereunder
have received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation
thereof as currently used by Seller, and have been operated and
maintained in accordance with applicable laws, rules, and
regulations.
(l) Intellectual property.
(i) The Seller owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property
necessary for the operation of the businesses of the Seller as
presently conducted. Each item of Intellectual Property owned or used
by the Seller immediately prior to the Closing hereunder, except for
required third party approvals or consents, will be owned or available
for use by the Buyer on identical terms and conditions immediately
subsequent to the Closing hereunder. The Seller has taken all necessary
action to maintain and protect each item of Intellectual Property that
it owns or uses, including, without limitation, maintaining all
engineering drawings, bills of material and other documentation
necessary to manufacture the products of the Seller's business.
(ii) The Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and the Seller has never
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EXHIBIT 2.1
received any charge, complaint, claim, demand, or notice alleging any
such interference, infringement, misappropriation, or violation
(including any claim that the Seller must license or refrain from
using any Intellectual Property rights of any third party). To the
Knowledge of the Seller, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Seller.
(iii) Section 3(l)(iii) of the Disclosure Schedule identifies
each patent or registration which has been issued to the Seller with
respect to any of its Intellectual Property, identifies each pending
patent application or application for registration which the Seller
has made with respect to any of its Intellectual Property, and
identifies each license, agreement, or other permission which the
Seller has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). Except for the
terms of licenses or restrictions which are set forth in the body of
pre-packaged or off-the-shelf software, the Seller has delivered to
the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as
amended to date) and has made available to the Buyer correct and
complete copies of all other written documentation evidencing
ownership and prosecution (if applicable) of each such item.
Section 3(l)(iii) of the Disclosure Schedule also identifies each trade
name or unregistered trademark used by the Seller in connection with
any of its businesses. With respect to each item of Intellectual
Property required to be identified in Section 3(l)(iii) of the
Disclosure Schedule:
(A) the Seller possesses all right, title, and
interest in and to the item, free and clear of any Security
Interest, license, or other restriction;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or,
to the Knowledge of the Seller, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the item;
and
(D) the Seller has not ever agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
(iv) Section 3(l)(iv) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that the
Seller uses pursuant to license, sublicense, agreement, or permission,
except any pre-packaged or off-the-shelf software. Except for licenses
or restrictions contained in the body of pre-packaged or off-the-shelf
software, the Seller has delivered to the Buyer correct and complete
copies of all such licenses, sublicenses, agreements, and permissions
(as amended to date). With respect to each item of Intellectual
Property required to be identified in Section 3(l)(iv) of the
Disclosure Schedule;
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<PAGE> 24
EXHIBIT 2.1
(A) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding,
enforceable, and in full force and effect, except that such
enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium (whether general or specific) or the
similar laws now or hereafter in effect relating to creditors'
rights generally and to general principles of equity;
(B) except for any required third party consents or
approvals, the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable in accordance
with their terms, and in full force and effect on identical terms
following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in
Section 2 above), except that such enforceability may be subject
to bankruptcy, insolvency, reorganization, moratorium (whether
general or specific) or the similar laws now or hereafter in
effect relating to creditors' rights generally and to general
principles of equity;
(C) no party to the license, sublicense,
agreement, or permission is in breach or default, and no event
has occurred which with notice or lapse of time would constitute
a breach or default or permit termination, modification, or
acceleration thereunder;
(D) no party to the license, sublicense, agreement,
or permission has repudiated any provision thereof;
(E) with respect to each sublicense, the
representations and warranties set forth in subsections (A)
through (D) above are true and correct with respect to the
underlying license;
(F) the underlying item of Intellectual Property is
not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or,
to the Knowledge of the Seller, is threatened which challenges the
legality, validity, or enforceability of the underlying item of
Intellectual Property; and
(H) the Seller has not granted any sublicense or
similar right with respect to the license, sublicense, agreement,
or permission.
(M) Tangible Assets. The Seller owns or leases all
buildings, machinery, equipment, and other tangible assets used in the conduct
of its businesses as presently conducted. Each such tangible asset has been
maintained in accordance with normal industry practice, is in good operating
condition (subject to normal wear and tear), and as currently used by Seller is
suitable for the purposes for which it is presently used and is free from known
defects,
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<PAGE> 25
EXHIBIT 2.1
(n) Inventory. The inventory of the Seller consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is free from damage or defects and merchantable and fit for
the purpose for which it was procured or manufactured.
(o) Contracts. To the extent the same are included in the Assumed
Liabilities, Section 3(o) of the Disclosure Schedule lists the following
contracts and other agreements to which the Seller is a party:
(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $10,000 per annum;
(ii) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year or
involves consideration in excess of $10,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, or under which it has
imposed a Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(vii) any collective bargaining agreement;
(viii) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis or providing severance
benefits;
(ix) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, and employees; or
(x) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement (as amended to date) listed in Section 3(o) of the Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect, except that such
enforceability may be subject to bankruptcy, insolvency, reorganization,
moratorium (whether general or specific) or other similar laws now or hereafter
in effect relating to creditors' rights generally and
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<PAGE> 26
EXHIBIT 2.1
to general principles of equity; (B) except for third party consents or
approvals, the agreement will continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the consummation of
the transactions contemplated hereby (including the assignments and assumptions
referred to in Section 2 above), except that such enforceability may be
subject to bankruptcy, insolvency, reorganization, moratorium (whether general
or specific) or other similar laws now or hereafter in effect relating to
creditors' rights generally and to general principles of equity; (C) no party
is in breach or default, and no event has occurred which with notice or lapse
of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
(p) Notes and Accounts Receivable. All notes and accounts receivable of
the Seller are reflected properly on its books and records, are valid
receivables, properly aged and the result of bona fide sales.
(q) Accounts, Letters of Credit, Bonds and Powers of Attorney. The Seller
has no outstanding powers of attorney, bank accounts, brokerage or similar
accounts or letters of credit or bonds.
(r) Insurance. With respect to each insurance policy included in the
Acquired Assets, Section 3(r) of the Disclosure Schedule sets forth the
following information:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured; and
(iii) the policy number and the period of coverage.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect, except that such
enforceability may be subject to bankruptcy, insolvency, reorganization,
moratorium (whether general or specific) or other similar laws now or hereafter
in effect relating to creditors' rights generally or to general principles of
equity; (B) subject to necessary consents and approvals, each policy, if any, to
be included among the Acquired Assets will continue, subject to Buyer's
compliance with all terms of the policy, to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby (including the assignments
and assumptions referred to in Section 2 above) except that such
enforceability may be subject to bankruptcy, insolvency, reorganization,
moratorium (whether general or specific) or other similar laws now or hereafter
in effect relating to creditors' rights generally or to general principles of
equity; (C) neither the Seller nor any other party to the policy is in breach
or default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (D) no party to the policy has
repudiated any provision thereof.
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<PAGE> 27
EXHIBIT 2.1
(s) Litigation. Section 3(s) of the Disclosure Schedule sets forth each
instance in which the Seller (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. The Seller has no Knowledge that any such
action, suit, proceeding, hearing, or investigation may be brought or threatened
against the Seller. Section 3(s) of the Disclosure Schedule also lists and
describes all litigation the Seller has been involved in or, to the Seller's
Knowledge, threatened with during the preceding five years in which the
plaintiff sought either equitable relief or the recovery of more than $25,000.
(t) Employees. To the actual knowledge of the Shareholders (without any
investigation), except for Roger L. Swanson and Verlyn L. Westra, no executive,
key employee, or group of employees has any plans to terminate employment with
the Seller. The Seller is not party to or bound by any collective bargaining
agreement, nor since November 1, 1994, has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. Since November 1, 1994, the Seller has not committed any unfair labor
practice. The Seller does not have any Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of the Seller.
(u) Employee Benefits.
(i) Section 3(u) of the Disclosure Schedule lists each Employee
Benefit Plan that the Seller maintains or to which the Seller contributes.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in
all respects with the applicable requirements of ERISA, the Code,
and other applicable laws.
(B) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The requirements of Part
6 of Subtitle B of Title I of ERISA and of Code Section 4980B have
been met with respect to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan.
(C) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been
paid to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and all contributions for any period ending on or
before the Closing Date which are not yet due have been paid to each
such Employee Pension Benefit Plan or accrued in accordance with the
past custom and practice of the Seller . All premiums or other
payments for all periods ending on or before the Closing Date have
been paid with respect to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan.
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EXHIBIT 2.1
(D) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan"
under Code Section 401(a) and a favorable determination letter
regarding the Defined Benefit Plan was received from the Internal
Revenue Service in January of 1996.
(E) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan (other than
any Multiemployer Plan) equals or exceeds the present value of all
vested and nonvested Liabilities thereunder determined in accordance
with PBGC methods, factors, and assumptions applicable to an
Employee Pension Benefit Plan as provided in the report of the
Principal Financial Group prepared as of November 1, 1997, a copy of
which is included in Section 3(u) of the Disclosure Schedule.
(F) The Seller has delivered to the Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, and all related
trust agreements, insurance contracts, and other funding agreements
which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that the Seller ever
has maintained or to which it contributes, ever has contributed, or ever
has been required to contribute:
(A) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been completely
or partially terminated or been the subject of a Reportable Event as
to which notices would be required to be filed with the PBGC. No
proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been instituted
or, to the Knowledge of any of the Shareholders, threatened.
(B) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of
any such Employee Benefit Plan. No action, suit, proceeding,
hearing, or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other
than routine claims for benefits) is pending or, to the Knowledge
any of the Shareholders, threatened. None of the Shareholders has
any Knowledge of any Basis for any such action, suit, proceeding,
hearing, or investigation.
(C) The Seller has not incurred, and none of the Shareholders
has any reason to expect that the Seller will incur; any Liability
to the PBGC (other than PBGC premium payments) or otherwise under
Title IV of ERISA (including any withdrawal Liability) or under the
Code with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
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EXHIBIT 2.1
(iii) The Seller has never contributed to, or ever has been required
to contribute to any Multiemployer Plan or has any Liability (including
withdrawal Liability) under any Multiemployer Plan.
(iv) The Seller does not maintain and never has maintained or
contributed, or ever has been required to contribute to any Employee
Welfare Benefit Plan providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance
with Code Section 4980B).
(v) Guaranties. The Seller is not a guarantor or otherwise liable for any
Liability or obligation (including indebtedness) of any other Person.
(w) Environment, Health and Safety.
(i) The Seller and its predecessors have complied with all
Environmental, Health, and Safety Laws, and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against any of them alleging any failure so to
comply or asserting that the Seller or its predecessors have any Liability
under any Environmental, Health, and Safety Laws nor do any of the
Shareholders have any Knowledge of any basis for any of the foregoing.
Without limiting the generality of the preceding sentence, each of the
Seller and its predecessors has obtained and been in compliance with all
of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are contained
in, all Environmental, Health, and Safety Laws.
(ii) The Seller has no Liability (and the Seller and its
predecessors have not handled or disposed of any substance, arranged for
the disposal of any substance, exposed any employee or other individual to
any substance or condition, or owned or operated any property or facility
in any manner that could form the Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against the Seller giving rise to any Liability) for damage to any
site, location, or body of water (surface or subsurface), for any illness
of or personal injury to any employee or other individual, or for any
reason under any Environmental, Health, and Safety Law.
(iii) All properties and equipment used in the business of the
Seller and its predecessors have been free of asbestos, PCB's, methylene
chloride, trichloroethylene, 1,2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(x) Taxes. The Seller has timely filed all Tax returns required to be
filed by it and timely paid all Taxes owed by it. To the extent the same are
related to Taxes which are included in the Assumed Liabilities, the reserve for
Taxes set forth on the Closing Balance Sheet is adequate to cover all Taxes
which may be assessed in the future relating to periods ending on or before the
Closing Date including, without limitation, prorated real estate and personal
property taxes.
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EXHIBIT 2.1
(y) Product Warranty. To the Knowledge of the Shareholders, no product
manufactured, sold, leased, or delivered by the Seller or any predecessor is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease. Section 3(y) of the Disclosure
Schedule includes copies of the standard terms and conditions of sale or lease
for the Seller (containing all applicable guaranty, warranty, and indemnity
provisions).
(z) Shareholder Authorization. Each Shareholder has full power and
authority to execute and deliver this Agreement and to perform his obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of each Shareholder, enforceable in accordance with its terms and conditions.
(aa) Noncontravention. Neither the execution and the delivery of this
Agreement by any Shareholder, nor the performance by any Shareholder of his
obligations hereunder, will (i) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, stipulation, ruling, or other
restriction of any government, governmental agency, or court to which the
Shareholder is subject or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Shareholder is a party or by which he is bound or to which any of his assets
is subject.
(ab) Seller Shares. The names of each of the stockholders of the Seller
and the number of shares of stock of the Seller owned by each stockholder are as
set forth in Section 3(ab) of the Disclosure Schedule
(ac) Certain Business Relationships With the Seller. None of the
Shareholders and/or their families has been involved in any business arrangement
or relationship with the Seller within the past 12 months, and none of the
Shareholders and/or their families owns any asset, tangible or intangible, which
is used in the business of the Seller.
(ad) Disclosure. The representations and warranties contained in this
Section 3, as modified by the Disclosure Schedule and any updates thereto, do
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this Section 3 not misleading.
(ae) Disclaimer of Other Representations and Warranties. EXCEPT AS
EXPRESSLY SET FORTH IN THIS SECTION 3, THE SELLER AND THE SHAREHOLDERS MAKE NO
REPRESENTATION OR WARRANTY, EXPRESS OF IMPLIED, AT LAW OR IN EQUITY, IN RESPECT
OF ANY OF THE SELLER'S ASSETS (INCLUDING, WITHOUT LIMITATION, THE ACQUIRED
ASSETS), LIABILITIES (INCLUDING, WITHOUT LIMITATION THE ASSUMED LIABILITIES) OR
OPERATIONS AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY
DISCLAIMED. BUYER HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THE EXTENT
SPECIFICALLY SET
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EXHIBIT 2.1
FORTH IN THIS SECTION 3, THE BUYER IS PURCHASING THE ACQUIRED ASSETS
ON AN "AS-IS" "WHERE-IS" BASIS.
4. Representations and Warranties of the Buyer. The Buyer represents,
warrants and covenant to and with the Seller that, notwithstanding any
investigation by the Seller, the statements contained in this Section 4 are
true, correct and complete as of the date of this Agreement and will be true,
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout
this Section 4), except as set forth in the Disclosure Schedule. The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 4. Any matter fairly disclosed
in one section of the Disclosure Schedule shall be deemed to be disclosed for
purposes of other sections of the Disclosure Schedule without the necessity of
specific cross reference. The Buyer shall periodically update the Disclosure
Schedule as necessary between the date hereof and the Closing Date. If any
matters disclosed in such updates by the Buyer are not acceptable to the
Seller, the Seller shall, notwithstanding anything to the contrary in this
Agreement, have the right to unilaterally terminate this Agreement without
liability to the Buyer. If the matters disclosed in such updates by the Buyer
are acceptable to the Seller, such updates shall be initialed by the Buyer and
the Seller and the same shall constitute exceptions to the representations and
warranties hereinafter set forth.
(a) Organization of the Buyer. The Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
(b) Authorization of Transaction. The Buyer, subject to the fulfilment of
the Buyer's financing contingency, has full power and authority (including full
corporate power and authority) to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Buyer, enforceable in accordance with its
terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above),
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer is subject or any
provision of the articles of incorporation or bylaws of the Buyer or (ii)
subject to the fulfillment of the Buyer's financing contingency, conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Buyer is a party or by which it
is bound or to which any of its assets is subject (or result in the imposition
of any Security Interest upon any of its assets). The Buyer does not need to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the Parties
to consummate the transactions contemplated by this Agreement (including the
assignments and assumptions referred to in Section 2 above) other than as
required pursuant to the Hart-Scott-Rodino Act, and such authorizations,
consents or approvals as may be required in connection with the Buyer's
financing and to assign the
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EXHIBIT 2.1
contracts, leases and agreements included in the Acquired Assets to Buyer as
contemplated herein all of which shall unless waived by the Buyer be obtained
by the Seller prior to Closing.
(d) Brokers' Fees. The Buyer has no Liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller or the
Shareholders could become liable or obligated.
(e) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
(f) Disclaimer of Other Representations and Warranties. EXCEPT AS
EXPRESSLY SET FORTH IN THIS SECTION 4, THE BUYER MAKES NO REPRESENTATION OR
WARRANTY, EXPRESS OF IMPLIED, AT LAW OR IN EQUITY, AND ANY SUCH OTHER
REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.
5.1 Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will, commencing as of the date of this
Agreement and continuing until the close of business on July 18,1998, use its
best efforts consistent with commercial reasonableness to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, performing all acts required by this Agreement to be performed by
such Party at or before Closing and all acts necessary to make such Party's
representations and warranties true and correct at and as of the Closing Date.
However, nothing herein shall be deemed or construed to require either party to
extend the Closing Date beyond July 18, 1998, or agree to pay any cost or
expense referred to in Section 5.1(c) in excess of $25,000.
(b) Financing. The Buyer shall use its best efforts to obtain, on a
commercially reasonable basis, the financing it needs in order to refinance its
existing debt, consummate the transactions contemplated hereby and meet its
future capital requirements. In the event that the Buyer becomes aware of any
material adverse development that is reasonably likely to jeopardize its ability
to obtain such financing, Buyer shall promptly provide written notice to Seller
describing in detail such material adverse development.
(c) Notices and Consents. The Seller will give any notices to third
parties, and the Seller will use its best efforts consistent with a standard of
commercial reasonableness to obtain any third party approvals or consents that
may be necessary to transfer any agreement, contract, lease, license, instrument
or other arrangement included in the Acquired Assets to Buyer at Closing. Each
of the Parties will give any notices to, make any filings with, and use its
best efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the matters referred
to in Section 3(c) and Section 4(c) above. Without limiting the generality of
the foregoing, each of the Parties will file any Notification and Report Forms
and related material that it may be required to file with the Federal Trade
Commission and the Antitrust Division of the United States Department
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EXHIBIT 2.1
of Justice under the Hart-Scott-Rodino Act, and will make any further filings
pursuant thereto that may be necessary, proper, or advisable in connection
therewith, provided that any extension of the applicable waiting period shall be
approved in writing by Seller unless such extension would cause the closing to
be delayed beyond July 18, 1998.. The Buyer agrees to pay any filing fees
required in connection with such filings under the Hart-Scott-Rodino Act. The
Parties have retained the services of Collier, Shannon, Rill & Scott, PLLC to
act as their legal counsel in connection with such filings, and have agreed to
divide the legal fees and expenses of such firm in connection with such filings
on a 50-50 basis up to total legal fees of $50,000.00, after which amount the
fee and expense division shall be subject to re-negotiation by the Parties.
(d) Operation of Business. The Seller will operate its business in the
Ordinary Course of Business consistent with prior custom and practice. Without
limiting the generality of the foregoing, the Seller will not (i) declare, set
aside, or pay any dividend or make any distribution with respect to its capital
stock to the extent the same could reasonably be expected to reduce the Closing
Net Asset Value below $15,031,850 or (ii) redeem, purchase, or otherwise acquire
any of its capital stock
(e) Preservation of Business. The Seller will use its best efforts
consistent with commercially reasonable practice to keep its business and
properties substantially intact, including its present operations, physical
facilities, and relationships with lessors, licensors, suppliers, customers, and
employees.
(f) Full Access. The Seller will permit representatives of the Buyer to
have full access at all reasonable times, and in a manner so as not to interfere
with the normal business operations of the Seller , to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents of
or pertaining to the Seller.
(g) Exclusivity. Neither the Seller nor any of the Shareholders will (i)
solicit, initiate, or encourage the submission of any proposal or offer from any
Person relating to the acquisition of any capital stock or other voting
securities, or any substantial portion of the assets of the Seller (including
any acquisition structured as a merger, consolidation, or share exchange) or
(ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. The Seller will notify the Buyer immediately if any Person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.
(h) Title Insurance. The Seller will use its best efforts consistent with
a standard of commercial reasonableness to obtain the following title insurance
commitments, policies, and riders at standard rates in preparation for the
Closing. With respect to each parcel of real estate that the Seller owns, an
ALTA Owner's Policy of Title Insurance Form B-1987 (or equivalent policy
reasonably acceptable to the Buyer if the real property is located in a state in
which an ALTA Owner's Policy of Title Insurance Form B-1987 is not available)
from Chicago Title Company issued through Nebraska Title Co. (with respect to
real estate located in Nebraska) and from Stewart Title Guarantee Company issued
through Burchard Abstract Corporation (with respect to real estate located in
Texas) as the land title insurance agencies, in the amounts shown in Exhibit K
hereto, in each instance insuring title to
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EXHIBIT 2.1
such real property in the Buyer as of the Closing (subject only to the title
exceptions described above in Section 3(k)(i)(A) of this Agreement. Each title
insurance policy delivered under Section 5(h) above shall (A) insure title to
the real property and all recorded easements benefitting such real property,
(B) contain GAP and "extended coverage" endorsements insuring over the general
exceptions contained customarily in such policies, (C) contain an ALTA Zoning
Endorsement 3.1 (or equivalent), (D) contain an endorsement insuring that the
real property described in the title insurance policy is the same real estate
as shown on the Survey delivered with respect to such property, (E) contain an
endorsement insuring that each street adjacent to the real property is a public
street and that there is direct and unencumbered pedestrian and vehicular
access to such street from the real property, (F) if the real property consists
of more than one record parcel, contain a "contiguity" endorsement insuring
that all of the record parcels are contiguous to one another, (G) contain a
"non-imputation" endorsement to the effect that title defects known to the
officers, directors, and stockholders of the owner prior to the Closing shall
not be deemed "facts known to the insured" for purposes of the policy and (H)
contain a "Comprehensive" endorsement for improved land. The cost of such
policy or policies and the endorsements shall be divided equally between Buyer
and Seller. In the event Seller is unable to obtain such title insurance or any
one or more of the foregoing endorsements at standard rates, Buyer's sole
remedy with respect to such failure shall be to terminate this Agreement,
unless Seller elects to share equally with Buyer the increased costs thereof.
(i) Surveys. With respect to each parcel of real property as to which a
title insurance policy is to be procured pursuant to Section 5(h) above, the
Seller will procure in preparation for the Closing a current survey of the
real property certified to the Buyer, prepared by a licensed surveyor and (A)
with respect to real estate located in Nebraska, conforming to current ALTA
Minimum Standard Detail Requirements for Land Title Surveys and the Accuracy
Standards of an Urban Survey, and (B) with respect to real estate located in
Texas, conforming to boundary survey requirements customarily imposed for the
preparation of commercial surveys in Texas for commercial real estate
transactions, with all of the foregoing surveys disclosing the location of all
improvements, easements, party walls, sidewalks, roadways, utility lines, water
courses, drains and sewers, applicable set back lines, and other matters shown
customarily on such surveys, and showing access affirmatively to public streets
and roads (the "Survey").The cost of such Surveys shall be divided equally
between Buyer and Seller. In the event that the Survey discloses any defect or
encroachment from, onto or otherwise affecting the real property, then unless
the same is waived by Buyer, the Seller shall have the option, but not the
obligation, to correct such defect to Buyer's reasonable satisfaction. In the
event such defect is not cured, Buyer's sole remedy with respect to such defect
shall be to terminate this Agreement.
(j) Effect of Disclosure
(i) To the extent that any state of fact, item or information
reasonably disclosed in the Disclosure Schedule as of the date of this
Agreement is contrary to any representation or warranty of the Seller
and/or the Shareholders herein or in any certificate or document furnished
by the Seller and/or one or more of the Shareholders to Buyer hereunder,
Buyer's execution of this Agreement shall constitute an acceptance of such
state of fact, item or information as an express exception to and
limitation of such representation or warranty and shall be conclusively
deemed to constitute an irrevocable agreement by Buyer to waive and
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EXHIBIT 2.1
forego the right to seek indemnification pursuant to Section
8(b)(i)(A) of this Agreement from either the Seller or any one or more of
the Shareholders with respect to any Adverse Consequence which any Buyer
Indemnified Party (as hereinafter defined) may suffer in connection
therewith.The provisions of this subparagraph (i) shall not apply to any
Liability of the Seller which is not an Assumed Liability and the
disclosure of a Liability of the Seller, which does not otherwise
constitute an Assumed Liability, in the Disclosure Schedule shall not
cause such Liability of the Seller to become an Assumed Liability.
(ii) To the extent any updates to the Disclosure Schedule are made
by the Seller and/or any one or more of the Shareholders and reasonably
disclose any state of fact, item or information which is/are contrary to
any representation or warranty of the Seller and/or the Shareholders
herein or in any certificate or document furnished by the Seller or any
one or more of the Shareholders to Buyer hereunder or in the event such
update reasonably discloses that the Seller cannot, after the exertion of
commercially reasonable efforts, obtain any approval, consent or
authorization required hereunder then, in such event, the Buyer's sole and
exclusive remedy with respect to the information set forth in such update
shall be to (A) waive such item, information, state of facts or such
authorization, consent or approval and proceed to Closing, in which event
Buyer shall be conclusively deemed to have agreed to irrevocably waive and
forego its right to seek indemnification from either the Seller or any one
or more of the Shareholders with respect to any Adverse Consequences which
Buyer may suffer in connection therewith; or (B) terminate this Agreement
prior to Closing in accordance with Section 7 hereof.The provisions of
this subparagraph (ii) shall not apply to any Liability of the Seller
which is not an Assumed Liability and the disclosure of a Liability of
the Seller, which does not otherwise constitute an Assumed Liability, in
any update ot the Disclosure Schedule shall not cause such Liability of
the Seller to become an Assumed Liability.
5.2 Other Covenants. In addition to the covenants and agreements set forth
elsewhere in this Agreement, the Parties agree as follows:
(a) General. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Asset Purchase
Agreement, each of the Parties will use commercially reasonable efforts to take
such further action (including the execution and delivery of such further
instruments and documents) as any other Party reasonably may request.
(b) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Asset Purchase Agreement specifically
including, but not limited to the collection of any account receivable or note
Seller or Shareholders repurchase pursuant to Section 5.2(h) hereof, or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Seller, each of the other Parties will
cooperate with the contesting or defending Party and his or its counsel in the
contest or defense, make available his or its personnel, and provide such
testimony and access to his or its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or
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EXHIBIT 2.1
defending Party (unless the contesting or defending Party is
entitled to indemnification as hereinafter provided).
(c) Seller and Shareholder Confidentiality. Following the Closing, the
Seller and each of the Shareholders will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to the Buyer or
destroy, at the request and option of the Buyer, all tangible embodiments (and
all copies) of the Confidential Information which are in his or its possession.
In the event that the Seller or any of the Shareholders is requested or required
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, the Seller or that
Shareholder will notify the Buyer promptly of the request or requirement so that
the Buyer may seek an appropriate protective order or waive compliance with the
provisions of this section. If, in the absence of a protective order or the
receipt of a waiver hereunder, the Seller or any of the Shareholders is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, the Seller or that Shareholder may
disclose the Confidential Information to the tribunal; provided, however, that
the disclosing Party shall use his or its reasonable best efforts to obtain, at
the reasonable request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate. Any costs or
expenses incurred by Seller or the Shareholders in connection with the foregoing
shall be paid by Buyer. Until Closing or in the event the transactions
contemplated by this Agreement do not close on or before July 18, 1998, or such
later date as may be agreed to by the Parties, thereafter, the Confidentiality
and Non-Disclosure Agreement between Buyer and Seller dated March 26, 1998 (the
"Confidentiality Agreement") shall continue in full force and effect.
(d) Covenant Not to Compete. For a period of four years from and after the
Closing Date, neither the Seller nor any of the Shareholders will in any
capacity whatsoever engage directly or indirectly in:
(i) the design, manufacture, sale or repair of industrial watertube
boilers, ducts, stacks, and/or waste heat boilers which compete with those
sold, offered for sale or under design by the Seller during the one year
period preceding the Closing Date and which are destined for use in the
United States or any foreign country within which the Seller sold or
offered to sell the same during the one year period preceding the Closing
Date;
(ii) the design, manufacture, sale or repair of fabricated metal products
which are of a type similar to those fabricated metal products designed,
manufactured, sold or repaired by the Seller during the one year period
preceding the Closing Date (specifically including, but not limited to,
guard rails, motorcycle jacks, tire repair equipment and/or ovens) and
which are destined for use in the United States or any foreign country
within which the Seller sold or offered to sell the same during the one
period preceding the Closing Date;
(iii) the solicitation or attempted solicitation of business (of the type
engaged in by the Seller during the one year period preceding the Closing
Date) from any Person who was a customer
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EXHIBIT 2.1
of the Seller (or from whom the Seller solicited business) during the one
year period preceding the Closing Date;
(iv) any action that is intended or designed to have the effect of
discouraging any Person who was an employee, agent, lessor, licensor,
customer, supplier, or other business associate of the Seller during the
twelve month period preceding the Closing Date from maintaining the same
business relationships with the Buyer as were maintained with the Seller;
and/or
(v) any effort to attempt to hire or otherwise obtain the services of any
person who was employed by the Seller during the one year period preceding
the Closing Date.
The ownership of less than 5% of the outstanding stock of any publicly traded
corporation shall not be deemed to violate the foregoing provisions. The Parties
hereby acknowledge and agree that (a) the Seller's business is international in
scope, (b) the Seller's most significant asset is its goodwill, as is evidenced
by the allocation of the Purchase Price as set forth in Exhibit I attached
hereto, (c) the foregoing restrictions are reasonable and necessary to protect
such goodwill, (d) without such restrictions the Seller and the Shareholders
would by virtue of their prior experience and contacts be in a position to
unfairly compete with the Buyer and destroy the value of the goodwill which the
Buyer is purchasing, (e) the Buyer would suffer irreparable harm in the event of
a breach of the foregoing restrictions and, accordingly (f) the Buyer, in
addition to any other remedies available to it, shall be entitled to injunctive
relief without the posting of a bond or other collateral. The Parties also agree
that the term of the foregoing restrictions shall without further action by the
Parties be automatically extended by any period the Seller and/or any of the
Shareholders are determined to have been in violation of any such restrictions.
(e) Non Assignable Contracts In the event that the Seller is unable to
obtain any required third party consents to the assignment of any contract and
the Buyer waives the condition to its obligation to close in connection
therewith and proceeds with the Closing, the Seller and the Buyer agree to
cooperate with each other and take any and all commercially reasonable actions
necessary or desirable, including without limitation sucontracting where
appropriate, to accomplish the intended economic result that would have been
obtained from the assignment of such contract.
(f) Buyer Confidentiality. Prior to the Closing, except as may be
otherwise required by law or the final non-appealable order of a court of
competent jurisdiction, the Buyer shall continue to be bound by the
Confidentiality Agreement (a copy of which is included in the Disclosure
Schedule); provided, however, that (i) the Buyer may incorporate information
concerning the Seller in preliminary drafts of offering documents being prepared
by the Buyer and its underwriters in connection with the Buyer's high yield
offering if all Persons provided such preliminary drafts acknowledge and agree
to maintain the confidentiality of all such information, and (ii) upon the
expiration of the HSR waiting period , the Buyer may make such disclosures to
any Persons as are necessary or desirable in connection with the Buyer's high
yield offering. Except with respect to the foregoing, the Confidentiality
Agreement shall continue in effect (i) in the event that Closing does not occur,
and (ii) with regard to matters relating to the Shareholders.
(g),Warranty, Make Good and Start Up Liability and Work
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EXHIBIT 2.1
(i) Liability for Warranty, Make-Good and Startup . The Seller and the
Shareholders shall jointly and severally be responsible for all express
and/or implied warranty, make good and/or startup (which shall include all
work necessary to complete a contract in accordance with it s express
terms) obligations relating to Products Sold. The Buyer shall be
responsible for all other express and/or implied warranty, make good and/
or startup obligations relating to products sold after the Closing Date.
(ii) Performance of Warranty, Make-Good and Startup Work. With respect to
Products Sold, the Buyer shall perform for the Seller product warranty,
make good and startup work to the extent the (A) startup work is required
by the contract with the customer, (B) warranty work is required as the
result of a defect or failure that first occurs within the express
warranty period as set forth in the sales contract with the customer, (C)
make-good work which is approved in advance by the Seller (which approval
will not unreasonably be withheld in light of the Seller's past practices)
and arises in connection with product sales which are part of a turn key
project and arises from a defect or failure that first occurs after the
expiration of the express warranty period as set forth in the contract
with the customer but prior to 18 months after startup, unless the Seller
has contracted for an extended express warranty period and/or (D)
make-good work which is approved in advance by the Seller (in its sole
discretion) and arises in connection with product sales which are not part
of a turn key project and arises from a defect or failure that first
occurs after the expiration of the express warranty period as set forth in
the contract with the customer but prior to 18 months after startup,
unless the Seller has contracted for an extended express warranty period.
Buyer shall use commercially reasonable efforts to promptly and thoroughly
investigate all startup, warranty and make-good claims relating to
Products Sold. To the extent such startup or warranty work is determined,
in the Buyer's reasonable discretion, to be required by the terms of this
paragraph (g)(ii) or to the extent that the Seller approves such make good
work, Buyer shall use commercially reasonable efforts to promptly
undertake and diligently pursue to completion the performance of such
startup, warranty or make-good work on behalf of the Seller. In its
performance of such startup, warranty work or make-good work, the Buyer
shall use its best efforts, consistent with a standard of commercial
reasonableness and the prior customs and practices of the Seller, to
perform such work as efficiently and in as economic a manner as is
reasonably possible under the circumstances then existing.
(iii) Payment for Warranty Work, Make-Good Work and Startup Performed for
Seller by Buyer. The Seller and the Shareholders jointly and severally
agree to pay and reimburse Buyer for the costs actually incurred by Buyer
in connection with performing the startup, warranty and make-good work
(provided that, with respect to make good work the required approval of
the Seller under paragraph (g)(ii) above is obtained) which Buyer performs
on behalf of the Seller pursuant to paragraph (g)(ii) above. For purposes
of this Agreement, Buyer's costs shall mean only those costs which are
reasonably and necessarily incurred by Buyer in the performance of such
work as provided in paragraph (g)(ii) above and shall include only Buyer's
cost for labor (including the burden associated with the Service
Department but excluding any other charges for sales, general or
administration expenses), Buyer's costs (labor, material and burden) for
parts and materials, and Buyer's other out-of-pocket expenses. Buyer shall
bill Seller and the Shareholders, for the cost of warranty work, make-good
work and/or startup which Buyer performs on behalf of Seller as provided
in paragraph (g)(ii) above,
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EXHIBIT 2.1
and Seller and the Shareholders jointly and severally agree to pay or
cause such invoices to be paid to Buyer on a net basis within thirty (30)
days of receipt.
(iv) Warranty, Startup, Accounts and Notes Receivable Escrow Account. To
the extent that adequate funds are available in the Warranty, Startup,
Accounts and Notes Receivable Escrow Account, the obligation of the Seller
and the Shareholders to pay and reimburse the Buyer as set forth in
paragraph (g)(iii) above and Section 5.2(h) below shall be satisfied by
payment from the Warranty and Startup Escrow Account. In the event the
balance in the Warranty, Startup, Accounts and Notes Receivable Escrow
Account should at any time or times fall below $250,000, the Seller and
the Shareholders jointly and severally agree within five (5) days of
written notice thereof to wire transfer sufficient funds to restore the
balance of the Warranty, Startup, Accounts and Notes Receivable Escrow
Account to $500,000. At such time as all warranty periods (pursuant to the
terms of the Seller's express warranty provisions) for all Products Sold
have expired and all amounts due to the Buyer at such date pursuant to
paragraph (g)(ii) above have been paid, the Buyer and the Seller shall (A)
if there are as of such date no pending claims for work within the scope
of paragraph (g)(ii) above and no accounts or notes receivable which are
included among the Acquired Assets which have not been paid in full,
notify the Escrow Agent that the Warranty, Startup, Accounts and Notes
Receivable Escrow is to be terminated and all funds distributed to the
Seller, or (B) if there are as of such date pending claims for work within
the scope of paragraph (g)(ii) above and/or uncollected accounts or notes
receivable which are within the scope of Section 5.2(h), attempt in good
faith to estimate the amount reasonably likely to be become due the Buyer
under paragraph (g)(iii) for completing such work and/or Section 5.2(h)
with respect the uncollected accounts and/or notes receivable and notify
the Escrow Agent and instruct it to distribute to the Seller all funds in
the Warranty, Startup, Accounts and Notes Receivable Escrow Account that
are in excess thereof. At such time as all warranty periods (pursuant to
the terms of the Seller's express warranty provisions) for all Products
Sold have expired, all amounts due to the Buyer at such date pursuant to
paragraph (g)(ii) above have been paid, there remain no pending claims for
work within the scope of paragraph (g)(ii) above, and all accounts and
notes receivable which are within the scope of Section 5.2(h) have been
collected in full or repurchased by the Seller, the Buyer and the Seller
shall notify the Escrow Agent and instruct it that the Warranty, Startup,
Accounts and Notes Receivable Escrow is to be terminated and all funds
therein distributed to the Seller. The fact that there are insufficient
funds in the Warranty , Startup, Accounts and Notes Receivable Escrow
Account or that such account has been terminated shall not alter or
diminish the obligations of the Seller and the Shareholders to make any
payments otherwise due to the Buyer pursuant to paragraph (g)(iii) above
and/or Section 5.2(h) or the obligation of the Buyer to perform warranty,
startup or make good work on behalf of the Seller or the Shareholders
pursuant to paragraph (g)(ii) above.
(h) Accounts and Notes Receivable. Following Closing, Buyer shall use
reasonable efforts to collect all accounts receivable or notes which are
included in the Acquired Assets. To the extent any accounts receivable or note
included in the Acquired Assets remains uncollected as of the twelve (12) month
anniversary of the Closing Date, then, unless the reason for nonpayment is on
account of a bona fide claim by the customer that startup, warranty and or make
good work which is within the scope of work the Buyer is required to perform
pursuant to Section 5.2(g)(ii) above has not been performed, the Seller and
Shareholders jointly and severally agree to repurchase such account
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EXHIBIT 2.1
receivable or note from Buyer at a price equal to the remaining unpaid face
amount of such account receivable or note. If any accounts receivable or notes
included in the Acquired Assets which remain uncollectible on the twelve (12)
month anniversary of the Closing have not been collected at that time due to a
bona fide claim by the customer that startup, warranty and or make good work
which is within the scope of work the Buyer is required to perform pursuant to
Section 5.2(g)(ii) above has not been performed, then the Seller and the
Shareholders, jointly and severally agree to repurchase such account receivable
or note from the Buyer at a price equal to unpaid face amount of such account
receivable or note at the earlier of (A) 30 days after the time at which all
such work required under Section 5.2(g)(ii) has been performed, or (B) eighteen
(18) months after startup. Notwithstanding anything to the contrary in this
Agreement, in the event the Seller refuses to approve product make-good work
pursuant to Section 5.1(g)(ii) above (with respect to which there is an unpaid
account receivable or note which has not been paid due to a bona fide claim by
the customer that it is entitled to have such work performed), the Seller and
Shareholders jointly and severally agree to repurchase such account receivable
or note from Buyer within 30 days after the date on which the Buyer requested
such approval at a price equal to the remaining unpaid face amount of such
account receivable or note. The fact that an account or note receivable has been
repurchased pursuant to this Section 5.2(h) shall not alter or diminish any
obligation of the Buyer to perform startup, warranty and/or make good work
required pursuant to Section 5.2(g)(ii) hereof. As used in this Section 5.2(h),
reasonable business efforts shall include but not be limited to, the following
actions to be taken by Buyer in connection with the collection of accounts
receivable or notes:
(i) Buyer shall issue statements with respect to the accounts receivable
and notes on a monthly basis, and pursue such other collection efforts,
including personal contact by phone or in person with the debtor, as may
be consistent with Buyer's normal and customary business practice, but
excluding the commencement of litigation; provided, however, that if the
Seller notifies the Buyer that the Seller, due to the expiration of the
statute of limitations or any tolling agreement entered into in connection
therewith, desires that litigation be commenced, the Buyer shall either
itself commence such litigation or assign such account receivable or note
back to the Seller so as to enable the Seller to commence such litigation,
in either of which events the Seller and the Shareholders shall jointly
and severally indemnify the Buyer from all Liabilities, costs and
expenses, including reasonable attorneys' fees, in connection with such
litigation
(ii) Buyer shall take commercially reasonable efforts, consistent with the
Seller's prior normal and customary business practices, to (A) perfect
and/or preserve any and all material claims, rights or causes of action
against the debtor or any third party and (B) avoid having the same lapse,
expire or otherwise become unenforceable because of lack of notice,
passage of time or otherwise
(iii) Buyer shall promptly undertake and diligently pursue to completion
all warranty work or make good work required to be performed by the Buyer
pursuant to Section 5(g)(ii) to the extent that such work may be necessary
or appropriate to address and resolve any defect or failure in any
Products Sold to the account or note debtor which constitutes the basis in
whole or in part for nonpayment of any such account receivable or note.
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EXHIBIT 2.1
(i) Product Liability. Seller shall retain all Liabilities and
obligations with respect to Products Sold, including, without limitation,
Liability for personal injury or property damage occurring at any time caused by
Products Sold. Seller shall purchase and cause to remain in force for a period
of at least (10) ten years product liability insurance providing coverage of at
least $10,000,000 (subject to standard exceptions and limitations) for personal
injury and property damage occurring at any time caused by Products Sold on or
prior to the Closing Date. To the extent the same is available, the Seller shall
cause the Buyer to be named as an additional insured on such policy; provided
that if such endorsement involves an additional cost, the Buyer, if it desires
to be added as an additional insured, shall pay the cost of such endorsement.
Buyer shall be solely responsible for all other Liabilities and obligations with
respect to products other than Products Sold, including, without limitation,
Liability for personal injury or property damage caused by products other than
Products Sold.
(j) Surety Bonds and Letters of Credit. From and after the Closing Date,
the Buyer shall either assume all surety bonds and letters of credit which are
listed in Section (3)(q) of the Disclosure Schedule or shall provide substitute
surety bonds and letters of credit, acceptable to the beneficiaries thereof, in
order that Seller's surety bonds and letters of credit are released and any
liabilities thereunder are extinguished. The foregoing requirement, or any
action in fulfilment thereof, shall not, however, convert any underlying
obligation of the Seller to the beneficiary of such surety bond or letter of
credit, which is not expressly assumed by the Buyer pursuant to the other terms
of this Agreement, to become an Assumed Liability.
(k) Certain Employment Related Matters
(i) The Seller shall use reasonable efforts to obtain a one year
extension (upon terms which are satisfactory to the Buyer) to the
existing Labor Agreement between Nebraska Boiler Company and the
International Brotherhood of Boilermakers, Iron Ship Builders,
Blacksmiths, Forgers and Helpers, Lodge No. 83 ( the "Union" and the
"CBA"). If the CBA is so extended, the Buyer will assume the CBA as of
the Closing Date and the Seller will obtain the Union's written consent
and approval to such assumption. If the CBA is not so extended, the
Buyer, at its option, may elect to assume the CBA as of the Closing Date
and the Seller will obtain the Union's written consent and approval to
such assumption. In either of such events, except for the Unfunded
Liability (as hereinafter defined), the Buyer will only be responsible
for the liabilities and responsibilities of the Seller under the CBA
which accrue and are based upon acts or occurrences which take place
after the Closing Date and the same shall constitute Assumed Liabilities.
Except as hereinafter specifically provided to the contrary with respect
to the Unfunded Liability, the Buyer shall have no responsibility for any
liabilities or responsibilities under the CBA which accrued or are based
upon acts or occurrences which took place on or prior to the Closing
Date. The written consent and agreement of the Union shall incorporate
the foregoing division of responsibility between the Buyer and the Seller
and acknowledge that the assumption of the CBA by the Buyer is contingent
upon the consummation of the transactions contemplated by this Agreement.
The Buyer acknowledges that the Seller has not given any WARN Act notice
to its employees and the Buyer shall be solely responsible for any and
all obligations and liabilities as a result thereof and the same shall
constitute Assumed Liabilities.
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EXHIBIT 2.1
(ii) The Buyer, provided that it assumes the CBA as set forth above and
the Seller obtains the Union's consent and approval in connection with the
Buyer's assumption of the CBA, shall also assume (A) those obligations of
the Seller, which accrue or are based upon acts or occurrences which take
place after the Closing Date, as sponsor of the National Dynamics
Corporation Pension Plan, a/k/a Nebraska Boiler Company, Inc. Defined
Benefit Plan, for the benefit of the employees covered by the CBA, which
has been in effect since November 1, 1981 and which is currently
administered under a prototype plan document of Principal Financial Group
(the "Defined Benefit Plan") and (B) all of he Seller's unfunded
liabilities under the Defined Benefit Plan (the "Unfunded Liability") and
the same shall constitute Assumed Liabilities. Except for the Unfunded
Liability, the Buyer shall have no responsibility for any liabilities or
responsibilities under the Defined Benefit Plan which accrued or are based
upon acts or occurrences which took place on or prior to the Closing Date
except for the processing and coordinating the payment by The Principal
Group of benefit claims which have not been completed as of the Closing
Date.
(iii) The Buyer shall not assume any of the Seller's obligations under the
Seller's existing VEBA but will provide health insurance coverage and
other benefits similar in all material respects to those provided under
the VEBA; provided, however, that the preceding commitment shall not
prevent the Buyer from making such future changes as it deems appropriate
and which are in all material respects similar to fringe benefit programs
at one or more of Buyer's other locations
(iv) Until such time as Daniel T. Scully, Roger L. Swanson and Verlyn L.
Westra, respectively, reach age 65, the Buyer shall, at its sole cost and
expense, cause health insurance to be provided to Daniel T. Scully, Roger
L. Swanson and Verlyn L. Westra and their spouses under the Buyer's group
health insurance programs with coverage and at levels which the Buyer
provides or otherwise makes available to the executives of the Buyer who
are employed at or who have primary responsibility for the Buyer's
Lincoln, Nebraska facility. At such time as Daniel T. Scully, Roger L.
Swanson and Verlyn L. Westra attain age 65, the Buyer shall permit each
such individual's spouse to make a COBRA election and continue coverage
for 18 months thereafter provided that such spouse reimburses the Buyer
for the cost of such insurance.
(l) Certain Environmental Matters. The Buyer shall initially pay all costs
associated with any work recommended in the draft Clayton Environmental Report,
a copy of which has been furnished to the Seller ( "Recommended Environmental
Work"). The Buyer, the Seller and the Shareholders hereby agree that the further
testing recommended in the aforementioned draft Clayton Environmental Report
shall not constitute Required Environmental Work (as hereinafter defined). The
Seller and the Shareholders jointly and severally agree to promptly reimburse
the Buyer for one-half of the cost of Recommended Environmental Work that is
required to comply with Environmental, Health and Safety Requirements ("Required
Environmental Work"). The The Seller and the Shareholders shall not be required
to reimburse the Buyer for any Recommended Environmental Work that is not
Required Environmental Work and the maximum amount that the Sellers and the
Shareholders shall be required to reimburse the Buyer for Required Environmental
Work under the preceding sentence shall be $100,000. Notwithstanding anything to
the contrary in this Agreement, in the event that all of the costs initially
paid (and not taking into account any reimbursement from the
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EXHIBIT 2.1
Seller and the Shareholders) by the Buyer for Required Environmental Work exceed
$200,000, then an amount equal to such excess shall be deemed to be Adverse
Consequences for which the Buyer is entitled to indemnification pursuant to
Section 8(b)(i)(A). For purposes of the limitations of Section 8(d) in
connection with determining whether the $500,000 limitation has been exceeded,
only one $10,000 limitation shall be applied to all costs incurred by the Buyer
in performing Required Environmental Work. Prior to the Closing, the Seller, at
its expense, shall cause all drums and barrels located on any property owned or
occupied by the Seller to be properly disposed of in accordance with all
applicable Environmental, Health and Safety Requirements and the disposal cost
incurred by the Seller in connection therewith shall reduce on a dollar for
dollar basis the $100,000 maximum reimbursement requirement as set forth above,
(m) Tax Returns and Employee Benefit Plan Returns and Reports. The Buyer
shall prepare and file or cause to be filed at its expense on or prior to the
due date thereof (including extensions) all Tax returns and reports and all
other returns and reports relating to the Defined Benefit Plan which the Buyer
is required by law to file and which are due after the Closing Date and shall
include therein, as appropriate to the particular form or report, the results of
the Seller's operations on or before the Closing Date, to the extent such
reflection of the Seller's operations on or before the Closing Date is required
or permitted under applicable reporting laws, rules and/or regulations. The
Seller shall prepare and file or cause to be filed at its expense on or prior to
the due date thereof (including extensions) all other Tax returns and reports
relating to the Seller's operations on or before the Closing Date and all other
returns and reports relating to the Seller's Employee Benefit Plans (other than
the Defined Benefit Plan) which the Seller is required by law to file. The
preceding allocation of responsibility for the filing of Tax returns and reports
and other returns and reports relating to Employee Benefit Plans shall not alter
the definition of Acquired Assets, Excluded Assets or Assumed Liabilities and
any Party receiving a Tax refund check shall promptly deliver the same to the
Party entitled to the same pursuant to such definitions and the responsibility
for any Taxes determined to be due at any time shall be determined pursuant to
such definitions. The Buyer will provide the Seller and its representatives,
upon reasonable notice and during normal working hours, access to records,
information and personnel at no expense to the Seller as necessary to permit the
Seller to prepare the returns and reports it is required to prepare and file.
The Buyer will retain and maintain such records and information for the periods
of statutes of limitation applicable to the state and federal income tax returns
of the Seller and the Shareholders.
6. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
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EXHIBIT 2.1
(iii) the Seller shall have procured all of the third party consents
specified in Section 5.1(c) above, all of the title insurance
commitments, policies, riders and surveys specified in Section 5.1(i)
and (j) above;
(iv) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement, (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, (C)
materially affect adversely the right of the Buyer to own the Acquired
Assets, to operate the former businesses of the Seller, (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(v) the Seller shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in Section
6(a)(i)-(iv) is satisfied in all respects;
(vi) all applicable waiting periods (and any extensions thereof,
provided that Seller has consented in writing to any such extensions)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the Seller and the Buyer shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3(c) and Section 4(c) above;
(vii) the Buyer shall have received from counsel to the Seller an
opinion substantially in the form of Exhibit L attached hereto, addressed
to the Buyer, and dated as of the Closing Date;
(viii) the Buyer shall have obtained on terms and conditions
reasonably satisfactory to it all of the financing it needs in order to
refinance its existing debt, consummate the transactions contemplated
hereby and fund its future capital requirements;
(ix) the Buyer shall have entered into consulting arrangements with
Roger L. Swanson and Verlyn L. Westra in the form of Exhibits M (the
"Swanson Consulting Agreement) and N (the "Westra Consulting Agreement")
attached hereto, the Seller shall have made reasonable efforts to assist
the Buyer to obtain satisfactory employment arrangements with certain of
the Seller's other management employees and the Buyer shall have arrived
at satisfactory arrangements with the Seller's employees who are covered
by the Seller's existing collective bargaining agreement; and
(x) all actions to be taken by the Seller in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form
and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6(a) if it
executes a writing so stating at or prior to the Closing; provided, however,
that if the Seller is unable to obtain the Union's consent to either a one year
extension of the CBA (upon terms which are reasonably satisfactory to the
Buyer) or the
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EXHIBIT 2.1
Buyer's assumption of the existing CBA as set forth in Section 5.2(k)(i) and the
Buyer waives such condition to closing and consummates the transactions
contemplated by this Agreement, then in such event and notwithstanding anything
to the contrary in this Agreement, the Buyer shall assume the Seller's
obligations under the Defined Benefit Plan as described in Section 5.2(k)(ii)
and the same shall constitute an Assumed Liability.
(b) Conditions to Obligation of the Seller. The obligation of the Seller
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree, ruling, or
charge would (A) prevent consummation of any of the transactions
contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation (and
no such injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(iv) the Buyer shall have delivered to the Seller a certificate to
the effect that each of the conditions specified above in Section 6(b)
(i)-(iii) is satisfied in all respects;
(v) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the Seller and the Buyer shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3(c) and Section 4(c) above;
(vi) the Seller shall have received from counsel to the Buyer an
opinion substantially in the form of Exhibit O attached hereto, addressed
to the Seller, and dated as of the Closing Date; and
(vii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby specifically
including, but not limited to, the payment of the Purchase Price as
provided in Section 2 shall have been taken and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Seller.
The Seller may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing.
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EXHIBIT 2.1
7. Termination. This Agreement may be terminated and the sale and purchase
of the Acquired Assets may be abandoned at any time prior to Closing as follows:
(a) Mutual Consent. By mutual consent of the Seller, the Shareholders
and Buyer;
(b) Passage of Time. By either the Seller and the Shareholders on the one
hand or the Buyer on the other hand (the "Terminating Party"), if the Closing
has not occurred on or before July 18, 1998 (the "Termination Date") other than
as the result of a material breach of any covenant or agreement contained in
this Agreement by the Terminating Party;
(c) Non-Satisfaction of Section 6(a) Conditions. By the Buyer, in the
event that the conditions to its obligations set forth in Section 6(a) hereof
have not been satisfied or waived at or prior to the Termination Date, unless
the Buyer is then in material breach of any covenant contained in this
Agreement
(d) Non-Satisfaction of Section 6(b) Conditions. By the Seller, in the
event that the conditions to its obligations set forth in Section 6(b) hereof
have not been satisfied or waived at or prior to the Termination Date unless
the Seller or the Shareholders are then in material breach of any covenant
contained in this Agreement;
(e) Failure to Obtain Financing By the Seller or the Shareholders, in
the event that Buyer provides Seller any notice as required pursuant to
Section 5.1(b) above.
(f) Matters Disclosed in Updates to Disclosure Schedule. By the Buyer,
upon 5 days prior written notice to Seller and the Shareholders following the
Buyer's receipt of any update to the Disclosure Schedule, or within such shorter
period as may be reasonable if the update is received by Buyer less than 5 days
prior to Closing, in the event Buyer is not willing to accept the state of
fact(s), item(s) or information set forth in such update as an express exception
to and limitation of the representations and warranties of Seller and the
Shareholders hereunder or under any certificate or document furnished to Buyer
by the Seller or any Shareholders hereunder or waive any authorization, consent
or approval identified therein as not having been obtained, whichever may be
appropriate under the circumstances, and in the further event that the Buyer is
not willing to waive and agree to forego its right to indemnification in respect
thereto as contemplated by Section 5.1(j) hereof.
(g) Title Insurance and Survey. By Buyer in the event Seller does not
obtain title insurance which is required by Section 5.1(h) or in the event the
survey required by Section 5.1(i) shall disclose defects or encroachments
which are not cured by Seller prior to Closing and which Buyer is not willing
to waive.
(h) Further Due Diligence. By the Buyer within ten days after the date of
the signing of this Agreement by all of the Parties, if the results of the
further due diligence to be conducted by the Buyer after such signing of this
Agreement (which shall be limited to reviewing and analyzing (i) the Seller's
order backlog, (ii) the Seller's outstanding proposals to customers and (iii)
the warranty and Liability exposure relating to products manufactured by the
Seller) are not, in the sole discretion of the Buyer, satisfactory to the Buyer.
If this Agreement is terminated pursuant to this Section 7 all rights,
obligations and liabilities of the Parties hereunder shall terminate and be of
no further force or effect whatsoever except for (i) the
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EXHIBIT 2.1
respective right and obligation of the Parties set forth in Section 5.2(f),
9(b) and 9(l), which shall survive termination of this Agreement and shall
continue to be enforceable in accordance with their terms, and (ii) the
liability of any party which is in material breach of any covenant or agreement
of this Agreement prior to the effective date of such termination, which shall
also survive termination of this Agreement.
8. Remedies.
(a) Survival of Representations and Warranties. The respective
representations and warranties of the Seller, the Shareholders and the Buyer as
contained herein or in any certificates or other documents delivered at the
Closing shall survive the Closing for a period of twenty four months, except
that the representations and warranties set forth in Section 3(a), (b), (d),
(e), (z) and (ab) and Section 4(a), (b), (c) and (d) shall survive for the
period of the applicable statute of limitations. The provisions of this
Section 8(a) shall not otherwise limit any covenant or agreement of the Parties
hereto which, by its terms, contemplates performance after the Closing Date.
(b) Indemnification Provisions for Benefit of the Buyer.
(i) the Seller and the Shareholders jointly and severally agree to
defend. indemnify and hold the Buyer and its officers, directors,
employees, shareholders, subsidiaries, successors and assigns (the "Buyer
Indemnified Parties") harmless from and against any Adverse Consequences
the Buyer Indemnified Parties may incur as a result of, without
duplication:
(A) subject to the limitations set forth in Section 8(d)
and (h) hereof, the breach of any representation or warranty given
to Buyer by the Seller or the Shareholders pursuant to this
Agreement or any certificate or other document furnished to Buyer
by the Seller or any one or more of the Shareholders hereunder
(provided that the Seller and the Shareholders are given written
notice of such breach during the survival period specified in
Section 8(a) above);
(B) subject to the limitations in Section 8(h), the breach
of any covenant or agreement of the Seller or any Shareholder as
set forth in this Agreement; and
(C) subject to the limitations in Section 8(h), any
Liability of the Seller other than the Assumed Liabilities.
For purposes of this Section 8(b) any claim for indemnification made
after the Closing Date by a Buyer Indemnified Party on the basis that the
Seller and/or the Shareholders violated the provisions of Section 5.1(a)
by failing to perform all acts necessary to make their representations
and warranties true and correct at and as of the Closing Date shall be
recoverable only under and subject to the limitations of Section
8(b)(i)(A) above and no amount shall be recoverable under Section
8(b)(i)(B) above. Notwithstanding anything to the contrary in this
Agreement, the right of any Buyer Indemnified Party to be indemnified for
any Liability of the Seller which is not an Assumed Liability shall be
governed solely by subparagraph (C) above and shall not be subject to any
of the limitations of Section 8(d) of this Agreement.
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<PAGE> 48
EXHIBIT 2.1
(c) Indemnification Provisions for Benefit of the Seller and the
Shareholders.
(i) the Buyer agrees to defend. indemnify and hold the Seller and
its officers, directors, employees, shareholders, successors and assigns
(the "Seller Indemnified Parties") harmless from and against any Adverse
Consequences the Seller Indemnified Parties may suffer as a result of,
without duplication,
(A) subject to the limitations in Section 8(d) and (h), the
breach of any representation or warranty given to Seller or any
Shareholder by the Buyer pursuant to this Agreement or any
certificate or other document furnished to Seller or any
Shareholder by the Buyer (provided that the Buyer is given written
notice of such breach during the survival period specified in
Section 8(a) above);
(B) subject to the limitations in Section 8(h), the breach
of any covenant or agreement of the Buyer as set forth in this
Agreement;
(C) subject to the limitations in Section 8(h), the failure
of the Buyer to timely pay, perform and discharge any of the
Assumed Liabilities, including its obligations under Section
5.2(g)(ii) hereof, or any Liabilities arising from the Buyer's
operation of the Seller's business after the Closing Date, and
(D) subject to the limitations in Section 8(h), the Buyer's
financing as contemplated pursuant to Section 5.1(b) hereof to the
extent that the same is not the result of or attributable to the
breach of a representation or warranty set forth in Section 3
hereof.
For purposes of this Section 8(c) any claim for indemnification made
after the Closing Date by a Seller Indemnified Party on the basis that
the Buyer violated the provisions of Section 5.1(a) by failing to
perform all acts necessary to make its representations and warranties
true and correct at and as of the Closing Date shall be recoverable only
under and subject to the limitations of Section 8(c)(i)(A) above and no
amount shall be recoverable under Section 8(c)(i)(B) above.
Notwithstanding anything to the contrary in this Agreement, the right of
any Seller Indemnified Party to be indemnified for any Liability which is
an Assumed Liability, including the Buyer's obligations under Section
5.2(g)(ii) hereof, or any Liabilities arising from the Buyer's operation
of the Seller's business after the Closing Date shall be governed solely
by subparagraph (C) above and shall not be subject to any of the
limitations of Section 8(d) of this Agreement
(d) Limitations.
(i) Neither the Seller nor any Shareholder shall be required to
indemnify any Buyer Indemnified Party for any Adverse Consequence which
any Buyer Indemnified Party may incur as a result of any occurrence
referred to in and governed by Section 8(b)(i)(A) above (other than
Adverse Consequences arising out of any breach under Sections 3(a), (b),
(d), (e), (z) and (ab), which shall be subject to no limitations
whatsoever), unless (i) the Buyer Indemnified Party seeking
indemnification delivers written notice of the claim for breach of
representation or
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<PAGE> 49
EXHIBIT 2.1
warranty to the Seller and the Shareholders prior to the expiration of the
survival period for such representation and warranty as set forth in
Section 8(a) above and (ii) the aggregate of all Adverse Consequences
incurred by all Buyer Indemnified Parties with respect to all occurrences
referred to in Section 8(b)(i)(A) above exceed $500,000, in which event
the Buyer Indemnified Parties shall be entitled to indemnification for
all Adverse Consequences (i.e., back to the first dollar). For purposes
of determining whether the preceding $500,000 threshold has been exceeded
the Adverse Consequences arising from any single breach of a
representation or warranty shall not be included unless the total Adverse
Consequences arising from such single breach of representation or
warranty exceed $10,000.00. However, in the event that the Adverse
Consequences arising from such breach exceed $10,000, then all Adverse
Consequences (i.e., back to the first dollar) arising from such breach
shall be included in such determination. For purposes of determining
whether the preceding $10,000 and $500,000 thresholds have been exceeded,
Adverse Consequences shall not be reduced by the amount of any Insurance
Benefit (as hereinafter defined) derived from an insurance policy owned
by any Buyer Indemnified Party or Tax Benefit (as hereinafter defined).
Further, (except for Adverse Consequences arising out of any breach under
Sections 3(a), (b), (d) , (e), (z) and (ab) which shall be subject to no
limitations whatsoever) the obligation of the Seller and the Shareholders
to indemnify any Buyer Indemnified Party for all occurrences referred to
in and governed Section 8(b)(i)(A) above shall in total be subject to a
maximum aggregate cap of $14,665,160.
(ii) The Buyer shall not be required to indemnify any Seller
Indemnified Party for any Adverse Consequence which any Seller Indemnified
Party may incur as a result of any occurrence referred to in and governed
by Section 8(c)(i)(A) above (other than Adverse Consequences arising out
of any breach under Sections 4(a), (b) or (d), which shall be subject to
no limitations whatsoever), unless (i) the Seller Indemnified Party
seeking indemnification delivers written notice of the claim for breach
of representation or warranty to the Buyer prior to the expiration of the
survival period for such representation and warranty as set forth in
Section 8(a) above and (ii) the aggregate of all Adverse Consequences
incurred by all Seller Indemnified Parties with respect to all
occurrences referred to in and governed by Section 8(c)(i)(A) above
exceed $500,000, in which event the Seller Indemnified Parties shall be
entitled to indemnification for all Adverse Consequences (i.e., back to
the first dollar). For purposes of determining whether the preceding
$500,000 threshold has been exceeded, the Adverse Consequences arising
from a single breach of a representation or warranty shall not be
included unless the total Adverse Consequences arising from such breach
of representation or warranty exceed $10,000.00. However, in the event
that the Adverse Consequences arising from such breach exceed $10,000,
then all Adverse Consequences arising from such breach shall be included
in such determination (i.e., back to the first dollar). For purposes of
determining whether the preceding $10,000 and $500,000 thresholds have
been exceeded, Adverse Consequences shall not be reduced by the amount of
any Insurance Benefit (as hereinafter defined) derived from any insurance
policy owned by any Seller Indemnified Party or Tax Benefit (as
hereinafter defined). Further, (except for Adverse Consequences arising
out of any breach under Sections 4(a), (b) or (d), which shall be subject
to no limitations whatsoever) the obligation of the Buyer to indemnify
any Seller Indemnified Party for all occurrences referred to in and
governed by Section 8(c)(i)(A) above shall in total be subject to a
maximum aggregate cap of $14,665,160.
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<PAGE> 50
EXHIBIT 2.1
(e) Indemnification Procedures.
(i) Any person making a claim for indemnification pursuant to
Section 8(b) or 8(c) above (each, an "Indemnified Party") must give the
party from whom indemnification is sought (an "Indemnifying Party")
written notice of such claim promptly after the Indemnified Party
receives any written notice of any action, lawsuit, proceeding,
investigation or other claim (a "Proceeding") against or involving the
Indemnified Party by any person or otherwise discovers the liability,
obligation or facts giving rise to such claim for indemnification;
provided, that the failure to notify or delay in notifying an
Indemnifying Party will not relieve the Indemnifying Party of its or
their obligations pursuant to Section 8(b) or 8(c) above, as applicable,
except to the extent that such failure actually and materially harms the
Indemnifying Party.
(ii) With respect to the defense of any Proceeding brought by any
Person who is not a party to this Agreement against or involving an
Indemnified Party in which any Person in question seeks only the recovery
of a sum of money (and not for injunctive or equitable relief) for which
indemnification is provided in Section 8(b) or 8(c) above, at its option
an Indemnifying Party may appoint as lead counsel of such defense any
legal counsel selected by the Indemnifying Party and reasonably
acceptable to the Indemnified Party; provided, that before the
Indemnifying Party assumes control of such defense it must first:
(A) enter into an agreement with the Indemnified Party (in form and
substance satisfactory to the Indemnified Party) pursuant to which
the Indemnifying Party agrees to be fully responsible (with no
reservation of any rights other than the right to be subrogated to
the rights of the Indemnified Party) for all Adverse Consequences
relating to such Proceeding and unconditionally guarantees the
payment and performance of any liability or obligation which may
arise with respect to such Proceeding or the facts giving rise to
such claim for indemnification; and
(B) furnish the Indemnified Party with evidence that the
Indemnifying Party, in the Indemnified Party's sole judgment, is and
will be able to satisfy any such liability.
(iii) Notwithstanding Section 8(e)(ii) above: (A) the Indemnified
Party will be entitled to participate in the defense of such claim and to
employ counsel of its choice for such purpose at its own expense
(provided that the Indemnifying Party will bear the reasonable fees and
expenses of such separate counsel incurred prior to the date upon which
the Indemnifying Party effectively assumes control of such defense), and
(B) the Indemnifying Party will not be entitled to assume control of the
defense of such claim, and will pay the reasonable fees and expenses of
legal counsel retained by the Indemnified Party if:
(A) the Indemnified Party reasonably believes that an adverse
determination of such Proceeding could be detrimental to or injure
the Indemnified Party's reputation or future business prospects;
(B) the Indemnified Party reasonably believes that there exists or
could arise a conflict of interest which, under applicable
principles of legal ethics, could prohibit a single legal
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<PAGE> 51
EXHIBIT 2.1
counsel from representing both the Indemnified Party and the
Indemnifying Party in such Proceeding; or
(C) a court of competent jurisdiction rules that the Indemnifying
Party has failed or is failing to prosecute or defend vigorously
such claim.
(iv) the Indemnifying Party shall not enter into any settlement of
such claim or Proceeding or cease to defend such claim or Proceeding,
without first obtaining the prior written consent of the Indemnified Party
(which the Indemnified Party will not unreasonably withhold) provided that
any such settlement shall provide for the full release of all claims
against each Indemnified Party.
(f) Recoupment. Each of the Parties acknowledges that the agreement
contained in this Section 8 is an integral part of the transactions
contemplated by this Agreement and that, without such agreement, they would not
have entered into this Agreement. Accordingly, if any Indemnifying Parties fail
to pay promptly the amounts due pursuant to either Section 8(b) or 8(c) such
Indemnifying Parties shall also be jointly and severally obligated to pay
interest at the Applicable Rate from the original due date of the payment to
the actual date of payment. In addition, if in order to obtain such amounts,
the Indemnified Party commences a suit to collect the amounts provided for
herein, the Indemnifying Parties shall also be jointly and severally liable to
pay to Indemnified Party its costs and expenses (including attorneys' fees)
reasonably incurred in connection with such.
(g) Payment. Upon the determination of the liability under Section 8, or
otherwise between the parties, by judicial proceeding from which no appeal is
possible or taken, the appropriate party shall pay to the other, as the case may
be, within ten (10) days after such determination, the amount of any claim for
indemnification made hereunder. In the event that the Indemnified Party is not
paid in full for any such claim pursuant to the foregoing provisions promptly
after the other party's obligation to indemnify has been determined in
accordance herewith, it shall have the right, notwithstanding any other rights
that it may have against any other Person, to set off the unpaid amount of any
such claim against any amounts owed by it under any instrument or agreement
entered into pursuant to this Agreement or otherwise, including the Purchase
Price Escrow Account. Upon the payment in full of any claim, either by set off
or otherwise, the entity making payment shall be subrogated to the rights of the
Indemnified Party against any Person with respect to the subject matter of such
claim. Any indemnification payment made hereunder shall be deemed to be an
adjustment to the Purchase Price.
(h) General.
(i) Except to the extent the same would result in an increase of
insurance premiums on a prospective basis or a retroactive premium
adjustment or result in the inability to obtain future insurance coverage,
the dollar amount of indemnification due any party shall be reduced to the
extent that such claim has been reimbursed by the Indemnified Party's
actual receipt of insurance proceeds net of any Taxes payable on account
of the receipt of such proceeds ("Insurance Benefit") unless any of the
Indemnifying Parties have insurance coverage, in which event such coverage
shall be primary and the coverage of the Indemnified Party shall be
secondary. Notwithstanding anything to the contrary herein, neither the
Seller nor the
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<PAGE> 52
EXHIBIT 2.1
Shareholders shall be entitled to the benefit of this subparagraph (i) if
the provisions of Section 5.2(i) of this Agreement have been violated.
(ii) The amounts for which an Indemnifying Party shall be liable to
an Indemnified Party hereunder with respect to breach of representation or
warranty shall be net of any Tax deduction, credit, refund or other
benefit realized during the then current tax year by the Indemnified Party
or the discounted present value (computed at the Indemnified Party's
interest rate on long term debt then outstanding or, if none is
outstanding, at the then current Applicable Rate) to be realized by the
Indemnified party in a future tax year as a result of the facts and
circumstances giving rise to the claim for indemnification.("Tax
Benefit"). The foregoing shall not apply to any Adverse Consequences
arising from the breach by any Party of its obligations under Section
2(c), 5.1(h) or (i), 5.2(g)(iii) or (iv), 5.2(h), (k)(iv) or (l). For
purposes of computing the Tax Benefit that the Buyer may derive from any
Liability other than an Assumed Liability, the Parties hereby acknowledge
and agree that such Liability will for Tax purposes be deemed to increase
the Buyer's tax basis in the Acquired Assets and be allocated to goodwill
and amortized over a 15 year period on a straight line basis.
(iii) The indemnification provisions contained in this Section 8
shall be the exclusive remedy any party hereto may have for monetary
damages for any breach of any representations or warranties under this
Agreement, provided, however, that the foregoing limitation shall not in
any way derogate any party's remedies for fraud under common law or
federal securities laws; and provided, further, that nothing contained
herein shall limit the rights of any party hereto to seek or obtain any
non-monetary relief to which it may be entitled at law or in equity. The
covenants and agreements in this Section 8 shall survive until such time
as any claim for indemnification is fully settled in accordance with the
terms thereof.
(v) Notwithstanding anything in the contrary in this Agreement,
neither the Seller nor any Shareholder shall be required to indemnify any
Buyer Indemnified Party in respect to: (i) any Adverse Consequences
arising from the alleged breach of any representation or warranty set
forth in Section 3 of this Agreement which the Buyer Indemnified Party
may incur as a result of any state of fact, item or information
reasonably disclosed in the Disclosure Schedule or in any update thereto;
(ii) any Adverse Consequence which results from Seller's inability to
obtain any consent, approval or permission to the extent the same is
communicated to Buyer prior to Closing; (iii) any Liability which is
included in the Assumed Liabilities; (iv) any accounts or notes
receivable which have been repurchased in accordance with the provisions
of Section 5.2(h) hereof and/or (v) any product warranty, make good or
start up costs incurred by the Buyer for which it has been reimbursed
pursuant to the provisions of Section 5.2(g)(iii) hereof. The provisions
of this subparagraph (v) shall not apply to any Liability of the Seller
which is not an Assumed Liability and the disclosure of a Liability of
the Seller, which does not otherwise constitute an Assumed Liability, in
the Disclosure Schedule shall not cause such Liability of the Seller to
become an Assumed Liability.
9. Miscellaneous.
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<PAGE> 53
EXHIBIT 2.1
(a) Bulk Transfer Laws. The Buyer acknowledges that the Seller will not
comply with the provisions of any bulk transfer laws of any jurisdiction that
may be applicable in connection with the transactions contemplated by this
Agreement.
(b) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to making the
disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective, personal
representatives, executors, heirs, legatees, successors and permitted assigns.
No Party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other Party;
provided, however, that the Buyer may (i) assign any or all of its rights and
interests hereunder to one or more of its Affiliates and/or to a subsequent
purchaser of the Business being acquired and (ii) designate one or more of its
Affiliates to perform its obligations hereunder (in any or all of which cases
the Buyer nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Buyer: Aqua-Chem, Inc. Copy to: James A. Feddersen, Esq.
7800 N. 113th St. Suite 2100,
P. O. Box 421 111 E. Wisconsin Ave.
Milwaukee, WI 53224 Milwaukee, WI 53202
Fax (414)577-3157 Fax (414)223-5000
If to the Seller: National Dynamics Corp. Copy to: Paul M. Schudel, Esq.
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<PAGE> 54
EXHIBIT 2.1
P. O. Box 80404 Suite 1500, 206 S. 13th St.
Lincoln, NE 685801 Lincoln, NE 68508
Fax (402)434-2064 Fax (402)474-5777
If to Shareholders: Roger L. Swanson Copy to: John S. Zeilinger, Esq.
2485 Woodscrest 1500 Woodmen Tower
Lincoln, NE 68502 Omaha, NE 68102-2069
Fax (402)344-0588
Verlyn L. Westra John S. Zeilinger, Esq.
7530 N. Hampton Rd. 1500 Woodmen Tower
Lincoln, NE 68506 Omaha, NE 68102-2069
Daniel T. Scully L. Bruce Wright, Esq.
9601 Firethorn Ln. 1900 US Bank Bldg.
Lincoln, NE 68520 Lincoln, NE 68508
Fax (402)474-5393
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Wisconsin without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Wisconsin or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Wisconsin.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. The Seller may consent to any such amendment at any time
prior to the Closing with the prior authorization of its board of directors. No
waiver by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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<PAGE> 55
EXHIBIT 2.1
(l) Expenses. Except as otherwise provided herein, each of the Buyer, the
Seller and the Shareholders will bear his or its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
(m) Incorporation of Exhibits and Schedules. The Exhibits and Schedules,
including the Disclosure Schedule, identified in this Agreement are incorporated
herein by reference and made a part hereof.
(n) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
Nothing in the Disclosure Schedule shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless the Disclosure
Schedule identifies the exception with reasonable particularity and describes
the relevant facts in reasonable detail. Subject to the exclusive remedy
provisions set forth in Section 8(h)(iii): (A) the Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance and (B) if any Party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the Party has not
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
(o) Submission to Jurisdiction. Each of the Parties hereby submits to the
jurisdiction of and agrees that suit will only be brought in the state or
federal court sitting in Milwaukee, Wisconsin (the "Wisconsin Court") in any
action or proceeding arising out of or relating to this Agreement and/or the
transactions contemplated hereby. Each party also agrees not to bring any action
or proceeding arising out of or relating to this Agreement in any other court
except as may be necessary to enforce any judgment or order of the Wisconsin
Court. Each of the Parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety,
or other security that might be required of any other Party with respect
thereto.
(p) Specific Performance. Each of the Parties acknowledges and agrees that
the other Party would be damaged irreparably in the event any of the provisions
of this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties agrees that the other
Party shall be entitled, without the posting of a bond or other collateral, to
an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in the Wisconsin Court, in addition
to any other remedy to which it may be entitled, at law or in equity.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
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<PAGE> 56
EXHIBIT 2.1
AQUA-CHEM, INC.
By: /s/ J. A. Miller
----------------------------------------
Jeffrey A. Miller, President
NATIONAL DYNAMICS CORPORATION
By: /s/ Roger L. Swanson, President
----------------------------------------
Roger L. Swanson, President
/s/ Daniel T. Scully
- --------------------------------------------
Daniel T. Scully, Individually
/s/ Roger L. Swanson
- --------------------------------------------
Roger L. Swanson, Individually
/s/ Verlyn L. Westra
- --------------------------------------------
Verlyn L. Westra, Individually
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
AQUA-CHEM, INC.
(incorporating amendments effected
by Certificate of Merger filed
August 1, 1997, and Certificate of
Amendment filed June 23, 1998)
ARTICLE ONE. The name of the corporation is Aqua-Chem, Inc.
ARTICLE TWO. The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE THREE. The purpose of the corporation (the "Company") is to
engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law.
ARTICLE FOUR. The total number of shares of stock which the Company
shall have authority to issue is Two Million Six Thousand Two Hundred Sixty
(2,006,260), divided into classes as follows:
a. Two Million (2,000,000) shares of Common Stock,
having a par value of $.01 per share.
Each share of Common Stock shall be entitled to one vote on
any matter submitted to a vote of the shareholders of the
Company.
b. Six Thousand Two Hundred Sixty (6,260) shares of Preferred
Stock, having a par value of $.01 per share. The Preferred
Stock shall be further divided into series, with such
designations, powers, preferences and rights and subject to
the qualifications, limitations and restrictions as set forth
below.
PREFERRED STOCK
STATEMENT OF RIGHTS AND PREFERENCES
I. SERIES A PREFERRED STOCK
There shall be One Hundred Thirty (130) shares of Series A Preferred
Stock authorized. The terms of the Series A Preferred Stock shall be as follows:
A. Dividends.
1. Normal Dividends. Simultaneous with consummation of the
refinancing and retirement (the "1998 Refinancing
Transaction") of the WSDF Note (the " WSDF Note") as defined
in the Amended and Restated Securities Purchase Agreement
(the "Securities Purchase Agreement") dated as of December 5,
<PAGE> 2
EXHIBIT 3.1
1997, by and among Rush Creek LLC, the Company, CB-Kramer
Sales and Service, Inc. Whitney Equity Partners, L.P. and
Whitney Subordinated Debt Fund L.P. and thereafter on the
first day of each August, November, February and May, the
holders of the 130 shares of Series A Preferred Stock shall
be entitled to receive out of funds of the Company at the
time legally available for such purpose dividends at the rate
of $2,307.70 per share per year, and no more, payable in cash
and without interest. Dividends on all such issued and
outstanding preferred shares shall accrue on a daily basis
(initially from the date of issuance to the date of payment
of the first dividend and, thereafter, from dividend payment
date to dividend payment date) whether or not earned or
declared and shall be computed on the basis of a 360-day year
consisting of twelve 30-day months. Such dividends shall be
paid before any dividends shall be declared or paid upon or
set apart for the common shares or any other class or series
of the Company's capital stock and shall be cumulative, so
that if in any year or years dividends upon such outstanding
preferred shares shall not have been paid (at the rate set
forth above), the amount of the deficiency shall be paid, but
without interest, before any distribution, whether by way of
dividend or otherwise, shall be declared or paid upon, or set
apart for, the common shares or any other class or series of
the Company's capital stock.
Unless all cumulative dividends on the Series A Preferred
Stock (including default dividends as described in Section
I.A.2. below) have been or contemporaneously are declared by
the Company's Board of Directors and paid or declared and a
sum sufficient for the payment thereof set apart by the
Company to the date of any event described in Section I.G.
below, the Company shall not redeem, purchase, retire or
otherwise acquire for any consideration, or make any payment
on account of a sinking fund or other similar fund for the
redemption, purchase, retirement or acquisition of any other
capital stock of the Company (other than the Series B
Preferred Stock), or any warrant, right or option to purchase
any thereof, or make any distribution in respect thereof,
directly or indirectly, whether in cash, obligations or
securities of the Company or other property. Notwithstanding
the foregoing, the Company shall be entitled to redeem in
whole or in part warrants issued pursuant to the Aqua-Chem,
Inc. Common Stock Purchase Warrant dated as of July 30, 1997
in favor of Rush Creek LLC, a Wisconsin limited liability
company ("Warrants"), or the shares of the Company's common
stock issued pursuant to such Warrants ("Warrant Shares") in
each case in accordance with the terms set forth in the
Warrants. The Company shall also be entitled to redeem shares
of the Company's common stock issued to employees or
consultants of the Company ("Plan Shares") pursuant to the
terms of the Aqua-Chem, Inc. 1997 Stock Option Plan or any
successor plan adopted by the Company or any agreement (each
a "Plan") other than plan shares held by Jeffrey A. Miller
("Miller"), J. Scott Barton ("Barton"),
2
<PAGE> 3
EXHIBIT 3.1
Rand E. McNally ("McNally"), Bruce Dickson ("Dickson"), and
Charles Norris ("Norris") (Miller, Barton, McNally, Dickson,
Norris, and their permitted transferees are collectively
referred to herein as the "Management Group") to the extent
such redemptions do not, in the aggregate, exceed 61,919
shares of common stock as adjusted for stock splits and
combinations of stock.
2. Dividends Upon Default. In the event of a default by the
Company after exercise of the Put Option or Call Option (both
as hereinafter defined) in the payment of the redemption
price or accrued dividends as required by Section I.G.1. of
this Statement of Rights and Preferences (the "Statement"),
the rate of dividends on the Series A Preferred Stock from
the date of default to the date on which such default is
cured shall prospectively increase to $3,461.55 per share per
year (a 50% increase) from the date of default to the date on
which such default is cured.
B. Liquidation and Rank. In the event of a liquidation,
dissolution, or winding up of the Company (whether voluntary or
involuntary), the holders of the Series A Preferred Stock
shall be entitled to receive out of the assets of the Company,
whether such assets are capital or surplus of any nature, an
amount equal to $38,461.54 per share and, in addition to such
amount, a further amount equal to the dividends unpaid and
accumulated thereon, as provided in Section I.A. hereof, to the
date of such distribution, whether earned or declared or not, and
no more, before any payment shall be made or any assets
distributed to the holders of common shares or any other class or
series of the Company's capital stock (other than the Series B
Preferred Stock).
If upon such liquidation, dissolution, or winding up, whether
voluntary or involuntary, the assets thus distributed among the
holders of all classes or series of the Company's Series A
Preferred Stock and Series B Preferred Stock shall be insufficient
to permit the payment to such shareholders of the full
preferential amounts, then the entire assets of the Company to be
distributed shall be distributed ratably among the holders of all
of the Series A Preferred Stock and Series B Preferred Stock.
In the event of any such liquidation, dissolution, or winding up
of the Company, whether voluntary or involuntary, subject to all
of the preferential rights of the holders of the Series A
Preferred Stock and all other classes or series of preferred stock
on distribution or otherwise, the holders of common shares shall
be entitled to receive, ratably, all of the remaining assets of
the Company.
A consolidation or merger of the Company with or into any other
corporation or corporations or any other event specified in
Section I.G.1. shall not be deemed to be a liquidation,
dissolution, or winding up, within the meaning of this clause.
3
<PAGE> 4
EXHIBIT 3.1
The Series A Preferred Stock shall rank prior to any other class
or series of the Company's capital stock (other than the Series B
Preferred Stock) and in no event shall the Company redeem,
purchase, retire or otherwise acquire for any consideration, or
make any payment on account of a sinking fund or other similar
fund for the redemption, purchase, retirement or acquisition of,
any other capital stock of the Company (other than the Series B
Preferred Stock), or any warrant, right or option to purchase any
thereof, or make any distribution in respect thereof, directly or
indirectly, whether in cash, obligations or securities of the
Company or other property prior to the redemption of all of the
shares of Series A Preferred stock as provided herein.
Notwithstanding the foregoing, the Company shall be entitled to
redeem Warrants or Warrant Shares in each case in accordance with
the terms set forth in the Warrants. The Company shall also be
entitled to redeem Plan Shares pursuant to the terms of the Plan
other than Plan Shares held by the Management Group provided such
redemptions do not, in the aggregate, exceed 61,919 shares as
adjusted for stock splits and combinations of stock.
C. Voting. The holders of the Series A Preferred Stock shall have
no voting rights except to the extent that such voting rights
may not be denied under the Delaware General Corporation Law.
D. Transfer Restrictions. Except as hereinafter provided, no holder
of the Series A Preferred Stock may transfer such shares. A holder
of shares of Series A Preferred Stock may, upon furnishing the
Company with (i) information sufficient for the Company to
determine in its reasonable judgment that the proposed transfer is
exempt from registration under the Securities Act of 1933, or (ii)
an opinion letter from the holder's legal counsel reasonably
satisfactory in form and substance to the Company as to the
proposed transfer's compliance with state and federal securities
laws, transfer all, but not less than all, of the shares of Series
A Preferred Stock owned by such holder to any corporation
controlled by, controlling, or under common control with, the
initial holder of such shares, provided that such transferee is
not engaged in any business which is in competition with any
business engaged in by the Company.
E. Waiver of Preemptive Rights. Notwithstanding any provision of
this Certificate of Incorporation, no holder of the Series A
Preferred Stock shall be entitled as such as a matter of right to
subscribe for or purchase any part of any new or additional issue
of stock of any class whatsoever, or of securities convertible
into stock of any class whatsoever, whether now or hereafter
authorized, or whether issued for property or services or by way
of dividend or for cash, and all such rights are waived by each
holder of Series A Preferred Stock.
F. Right to Receive Financial Information; Non-Disclosure. The
Company shall, on or before August 31 of each year, furnish the
holders of the Series A Preferred Stock with its internally
prepared unaudited income statement and balance sheet as at and
4
<PAGE> 5
EXHIBIT 3.1
for the six months ended June 30 and, on or before March 31 of
each year, its annual audited year end income statement and
balance sheet. Access to such financial statements shall be
strictly limited by the holders of the Series A Preferred Stock to
those persons employed by such shareholders and their affiliates
who have responsibility for monitoring the investment in the
Company and, under no circumstances, shall such financial
statements or the information contained therein be made available
or disclosed to any other persons or used for any other purposes.
G. Redemption.
1. Put Option. Each holder of shares of the Series A
Preferred Stock shall have the right, upon written notice to
the Company, to require the Company to redeem all but not
less than all of the shares of Series A Preferred Stock owned
by such holder at the date of redemption (the "Put Option")
at a price equal to $38,461.54 per share, plus accrued
dividends (whether or not earned or declared) (as described
in Section I-A above) to and including the date fixed for
redemption as follows: (a) at such time as cumulatively more
than two thirds (2/3) of the outstanding equity interests in
the Company (which for purposes of this entire Section I.G.1.
shall be deemed to include any successor thereto or any
holding company whose principal asset consists of its
investment in the Company or such successor) are in one or
more transactions sold to an "Unrelated Third Party", which
shall mean one or more parties not directly or indirectly
controlled by, controlling, or under common control with the
Company (an "Overall Ownership Shift" which, by way of
clarification, shall not include a distribution of the
outstanding equity interests of the Company owned by Rush
Creek LLC to its members); (b) at such time as the Management
Group and other then current management employees of the
Company or their family members or trusts, limited liability
companies or partnerships for their benefit (together, the
"Employee Ownership Group") collectively cease to retain a
beneficial ownership interest of at least fifty percent (50%)
of the percentage equity interest in the Company initially
issued to the Employee Ownership Group (excluding any amounts
reserved for the Employee Ownership Group which are
contingent upon the future performance of the Company) unless
such cessation is the result of (i) the issuance of
additional equity interest by the Company to persons other
than the Employee Ownership Group, or (ii) a sale of equity
interests in the Company by the Employee Ownership Group due
to the Company's being in substantial distress as, for
example, evidenced by the declaration of a default by the
holders of the Company's debt instruments (an "Employee
Ownership Shift"); (c) upon the transfer of substantially all
of the assets of the Company to an Unrelated Third Party,
whether by sale, merger, consolidation or otherwise (an
"Asset Shift"); (d) at such time as the Company may specify
within the 120-day period following either a refinancing and
retirement (a "New Refinancing Transaction") of the
5
<PAGE> 6
EXHIBIT 3.1
$125,000,000 senior notes being issued in connection with the
1998 Refinancing Transaction or an IPO (as hereinafter
defined); or (e) seven years after issuance of the Series A
Preferred Stock. In the event that the Put Option would
become exercisable by reason of an Overall Ownership Shift or
an Employee Ownership Shift under circumstances other than a
sale of all of the stock of the Company (other than the
Series A and Series B Preferred Stock), and the exercise of
the Put Option under such other circumstances would cause the
Company to be in default of covenants with its lenders, the
exercise of the Put Option shall be deferred until such time
as its exercise would not cause a default (but not later than
seven (7) years after issuance). During any such deferral
period, the Company shall use its best efforts with its
lenders to obtain an amendment or waiver to permit such
exercise and shall not permit any increase to occur in the
compensation payable to any member of the Management Group or
repurchase any of its other outstanding stock.
Notwithstanding the foregoing, the Company shall be entitled
to redeem Warrants or Warrant Shares in each case in
accordance with the terms set forth in the Warrants. The
Company shall also be entitled to redeem Plan Shares pursuant
to the terms of the Plan other than Plan Shares held by the
Management Group provided such redemptions do not, in the
aggregate, exceed 61,919 shares as adjusted for stock splits
and combinations of stock. No such deferral or delay in the
exercise of the Put Option shall prevent the termination of
the indemnity obligations of the initial holders of the
Series A Preferred Stock in accordance with the terms of the
Agreement and Plan of Reorganization among the Company and
certain other parties dated as of July 30, 1997 (the
"Reorganization Agreement").
In the event the Company shall propose to take any action of
the type described in this Section I.G.1. (or upon the
occurrence of any event described in this Section I.G.1., if
not within the Company's control), the Company shall give
written notice at least 15 days prior to the taking of the
proposed action (or within 5 days of any action not in the
Company's control) to each stockholder at the post office
address as shown on the Company's records which notice shall
specify the approximate date on which such action shall take
place.
Upon the delivery of written notice to the Company of any
stockholder's election to redeem all of the Series A
Preferred Stock held by such stockholder pursuant to this
Section I.G.1., the Company shall, as promptly as practicable
after the date of surrender of the redeemed certificates, pay
all redemption amounts due to such stockholder.
"IPO" shall mean the initial public offering by the Company
of its equity securities pursuant a registration statement on
Form S-1 or otherwise under the Securities Act of 1933 as
amended.
6
<PAGE> 7
EXHIBIT 3.1
2. Call Option. The Company, at the option of the Board of
Directors, may at any time redeem all or any part of the
Series A Preferred Stock by paying in cash therefor an amount
equal to $38,461.54 per share, and, in addition to such
amount, an amount in cash equal to all dividends on such
preferred shares unpaid and accumulated as provided in
Section I-A of this Statement, whether or not earned or
declared, to and including the date fixed for redemption. In
case of the redemption of only a part of such outstanding
preferred shares, the Company shall effect such redemption
pro rata. At least thirty (30) days' previous notice by mail,
postage prepaid, shall be given to the holders of record of
the Series A Preferred Stock to be redeemed, such notice to
be addressed to each such stockholder at his, her, or its
post office address as shown by the records of the Company.
On or after the date fixed for redemption and stated in such
notice, each holder of such Series A Preferred Stock called
for redemption shall surrender his, her, or its certificate
evidencing such shares to the Company at the place designated
in such notice and shall thereupon be entitled to receive and
shall receive on such date payment of the redemption price.
In case less than all of the shares represented by any such
surrendered certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares. If such notice
of redemption shall have been duly given, and if on the date
fixed for redemption funds necessary for the redemption shall
be available therefor, then, notwithstanding that the
certificates evidencing any Series A Preferred Stock so
called for redemption shall not have been surrendered, the
dividends with respect to the shares so called for redemption
shall cease to accrue after the date fixed for redemption and
all rights with respect to the shares so called for
redemption shall forthwith after such date cease, except only
the right of the holders to receive the redemption price
thereof without interest upon surrender of their certificates
therefor.
3. Mandatory Redemption. Simultaneous with the consummation of
the 1998 Refinancing Transaction, the holders of the Series A
Preferred Stock shall sell and the Company shall purchase and
redeem on a pro-rata basis from each of the holders thereof
an aggregate of seventy eight (78) shares of the Series A
Preferred Stock at a price equal to $38,461.54 per share,
plus accrued dividends. On August 1, 2000, the holders of the
Series A Preferred Stock shall sell and the Company shall
purchase and redeem on a pro-rata basis from each of the
holders thereof an aggregate of twenty six (26) shares of the
Series A Preferred Stock at a price equal to $38,461.54 per
share, plus accrued dividends. On August 1, 2001, the holders
of the Series A Preferred Stock shall sell and the Company
shall purchase and redeem twenty six on a pro-rata basis from
each of the holders thereof an aggregate of (26) shares of
the Series A Preferred Stock at a price equal to $38,461.54
per share, plus accrued dividends. Each holder of such Series
A Preferred Stock being redeemed shall surrender his, her, or
its certificate evidencing such shares to
7
<PAGE> 8
EXHIBIT 3.1
the Company at its principal office and shall thereupon be
entitled to receive and shall receive on such date payment of
the redemption price by wire transfer of immediately
available funds to such account as the holder shall direct in
writing. In case less than all of the shares represented by
any such surrendered certificate are redeemed, a new
certificate shall be issued representing the unredeemed
shares. If on the date fixed for redemption funds necessary
for the redemption shall be available therefor, then,
notwithstanding that the certificates evidencing any Series A
Preferred Stock scheduled for redemption shall not have been
surrendered, the dividends with respect to such shares shall
cease to accrue after the date fixed for redemption and all
rights with respect to such shares shall forthwith after such
date cease, except only the right of the holders to receive
the redemption price thereof.
H. Offset. Notwithstanding any provision herein to the contrary,
the actual redemption price paid hereunder for the Series A
Preferred Stock shall be the redemption price calculated as
provided hereunder minus the amount of any claims owing under
Sections 6, 7 and 8 of the Reorganization Agreement.
I. Amendment. Notwithstanding any other paragraph or provision
hereof, neither the Company nor any of its subsidiaries may amend,
restate or modify the Certificate of Incorporation, Bylaws or
other governance documents in a manner which could adversely
affect the rights of the holders of the Series A Preferred Stock
without the approval, by vote or written consent, of the holders
of all of the issued and outstanding Series A Preferred Stock.
II. SERIES B PREFERRED STOCK.
There shall be One Hundred Thirty (130) shares of Series B
Preferred Stock authorized. The terms of the Series B Preferred Stock shall be
as follows:
A. Dividends.
1. Normal Dividends. The holders of the 130 shares of Series B
Preferred Stock shall be entitled to receive dividends at the
rate of $1,538.47 per share per year, and no more, payable in
cash, without interest and only upon redemption, out of any
funds of the Company at the time legally available for the
declaration of dividends, when and as declared by the Board
of Directors. Dividends on all such issued and outstanding
preferred shares shall accrue from day to day from the date
of issuance of such shares to the date set forth in Section B
or G hereunder, as the case may be, whether or not earned or
declared and shall be computed on the basis of a 360-day year
consisting of twelve 30-day months. Such dividends shall be
payable before any dividends shall be declared or paid upon
or set apart for the common shares or any other
8
<PAGE> 9
EXHIBIT 3.1
class or series of the Company's capital stock (other than
the Series A Preferred Stock), and shall be cumulative, so
that if in any year or years dividends upon such outstanding
preferred shares shall not have been declared (at the rate
described above) and set apart therefor, the amount of the
deficiency shall be fully declared and set apart for payment,
but without interest, before any distribution, whether by way
of dividend or otherwise, shall be declared or paid upon, or
set apart for, the common shares or any other class or series
of the Company's capital stock (other than the Series A
Preferred Stock).
Unless all cumulative dividends on the Series B Preferred
Stock (including default dividends as described in Section
II.A.2. below) have been or contemporaneously are declared by
the Company's Board of Directors and paid or declared and a
sum sufficient for the payment thereof set apart by the
Company to the date of any event described in Section II.G.
below, the Company shall not redeem, purchase, retire or
otherwise acquire for any consideration, or make any payment
on account of a sinking fund or other similar fund for the
redemption, purchase, retirement or acquisition of any other
capital stock of the Company (other than the Series A
Preferred Stock), or any warrant, right or option to purchase
any thereof, or make any distribution in respect thereof,
directly or indirectly, whether in cash, obligations or
securities of the Company or other property. Notwithstanding
the foregoing, the Company shall be entitled to redeem
Warrants or Warrant Shares in each case in accordance with
the terms set forth in the Warrants. The Company shall also
be entitled to redeem Plan Shares pursuant to the terms of
any Plan other than Plan Shares held by the Management Group
provided such redemptions do not, in the aggregate, exceed
61,919 shares as adjusted for stock splits and combinations.
2. Dividends Upon Default. In the event of a default by the
Company after exercise of the Put Option or Call Option (both
as hereinafter defined) in the payment of the redemption
price or accrued dividends as required by Section II.G.1. of
this Statement, the rate of dividends on the Series B
Preferred Stock from the date of default to the date on which
such default is cured shall prospectively increase to
$2,307.69 per share per year (a 50% increase) from the date
of default to the date on which such default is cured.
B. Liquidation and Rank. In the event of a liquidation, dissolution,
or winding up of the Company (whether voluntary or involuntary),
the holders of the Series B Preferred Stock shall be entitled to
receive out of the assets of the Company, whether such assets are
capital or surplus of any nature, an amount per share equal to
1/130th of the Redemption Price (as hereinafter defined) and, in
addition to such amount, a further amount equal to the dividends
unpaid and accumulated thereon, as provided
9
<PAGE> 10
EXHIBIT 3.1
in Section II.A hereof, to the date of such distribution, whether
earned or declared or not, and no more, before any payment shall
be made or any assets distributed to the holders of common shares
or any other class or series of the Company's capital stock (other
than the Series A Preferred Stock).
If upon such liquidation, dissolution, or winding up, whether
voluntary or involuntary, the assets thus distributed among the
holders of all classes or series of the Company's Series A
Preferred Stock and Series B Preferred Stock shall be insufficient
to permit the payment to such shareholders of the full
preferential amounts, then the entire assets of the Company to be
distributed shall be distributed ratably among the holders of the
Series A Preferred Stock and Series B Preferred Stock.
In the event of any such liquidation, dissolution, or winding up
of the Company, whether voluntary or involuntary, subject to all
of the preferential rights of the holders of the Series B
Preferred Stock and all other classes or series of preferred stock
on distribution or otherwise, the holders of common shares shall
be entitled to receive ratably all of the remaining assets of the
Company.
A consolidation or merger of the Company with or into any other
corporation or corporations or any other event specified in
II.G.1. shall not be deemed to be a liquidation, dissolution, or
winding up, within the meaning of this clause.
The Series B Preferred Stock shall rank prior to any other class
or series of the Company's capital stock (other than the Series A
Preferred Stock) and in no event shall the Company redeem,
purchase, retire or otherwise acquire for any consideration, or
make any payment on account of a sinking fund or other similar
fund for the redemption, purchase, retirement or acquisition of
any other capital stock of the Company (other than the Series A
Preferred Stock), or any warrant, right or option to purchase any
thereof, or make any distribution in respect thereof, directly or
indirectly, whether in cash, obligations or securities of the
Company or other property prior to the redemption of all of the
shares of Series A Preferred Stock and Series B Preferred Stock as
provided herein. Notwithstanding the foregoing, the Company shall
be entitled to redeem Warrants or Warrant Shares in each case in
accordance with the terms set forth in the Warrants. The Company
shall also be entitled to redeem Plan Shares pursuant to the terms
of any Plan, other than shares held by the Management Group
provided such redemptions do not, in the aggregate, exceed 61,919
shares as adjusted for stock splits and combinations of stock.
C. Voting. The holders of the Series B Preferred Stock shall have
no voting rights except such voting rights as may not be denied
under the Delaware General Corporation Law.
10
<PAGE> 11
EXHIBIT 3.1
D. Transfer Restrictions. Except as hereinafter provided, no holder
of the Series B Preferred Stock may transfer such shares. A holder
of shares of Series B Preferred Stock may, upon furnishing the
Company with (i) information sufficient for the Company to
determine in its reasonable judgment that the proposed transfer is
exempt from registration under the Securities Act of 1933, or (ii)
an opinion letter from the holder's legal counsel reasonably
satisfactory in form and substance to the Company as to the
proposed transfer's compliance with state and federal securities
laws, transfer all, but not less than all, of the shares of Series
B Preferred Stock owned by such holder to any corporation
controlled by, controlling, or under common control with, the
initial holder of such shares, provided that such transferee is
not engaged in any business which is in competition with any
business engaged in by the Company.
E. Waiver of Preemptive Rights. Notwithstanding any provision of
this Certificate of Incorporation, no holder of the Series B
Preferred Stock shall be entitled as such as a matter of right to
subscribe for or purchase any part of any new or additional issue
of stock of any class whatsoever, or of securities convertible
into stock of any class whatsoever, whether now or hereafter
authorized, or whether issued for property or services or by way
of dividend or for cash, and all such rights are waived by each
holder of Series B Preferred Stock.
F. Right to Receive Financial Information; Non-Disclosure. The
Company shall, on or before August 31 of each year, furnish the
holders of the Series B Preferred Stock with its internally
prepared unaudited income statement and balance sheet as at and
for the six months ended June 30 and, on or before March 31 of
each year, its annual audited year end income statement and
balance sheet. Access to such financial statements shall be
strictly limited by the holders of the Series B Preferred Stock to
those persons employed by such shareholders and their affiliates
who have responsibility for monitoring the investment in the
Company and, under no circumstances, shall such financial
statements or the information contained therein be made available
or disclosed to any other persons or used for any other purposes.
G. Redemption.
1. Put Option. Each holder of shares of the Series B Preferred
Stock shall have the right, upon written notice to the
Company, to require the Company to redeem all but not less
than all of the shares of Series B Preferred Stock owned by
such holder at the date of redemption (the "Put Option") at a
per share price equal to 1/130th of the "Redemption Price"
(as defined in Section II.H. below), plus accrued dividends
(whether or not earned or declared) (as described in Section
II.A. above) to and including, the date fixed for redemption
as follows: (a) upon the occurrence of an Overall Ownership
Shift, Employee Ownership Shift or Asset Shift; (b) at such
time as the Company may specify within the 120-day period
following either a New
11
<PAGE> 12
EXHIBIT 3.1
Refinancing Transaction or an IPO (as hereinafter defined);
or (c) seven years after issuance of the Series B Preferred
Stock. In the event that the Put Option would become
exercisable by reason of an Overall Ownership Shift or an
Employee Ownership Shift under circumstances other than a
sale of all of the stock of the Company (other than the
Series A and Series B Preferred Stock), and the exercise of
the Put Option under such other circumstances would cause the
Company to be in default of covenants with its lenders, the
exercise of the Put Option shall be deferred until such time
as its exercise would not cause a default (but not later than
seven (7) years after issuance). During any such deferral
period, the Company shall use its best efforts with its
lenders to obtain an amendment or waiver to permit such
exercise and shall not permit any increase to occur in the
compensation payable to any member of the Management Group or
repurchase any of its other outstanding stock.
Notwithstanding the foregoing, the Company shall be entitled
to redeem Warrants or Warrant Shares in each case in
accordance with the terms set forth in the Warrants. The
Company shall also be entitled to redeem Plan Shares pursuant
to the terms of any Plan other than Plan Shares held by the
Management Group provided such redemptions do not, in the
aggregate, exceed 61,919 shares as adjusted for stock splits
and combinations of stock. No such deferral or delay in the
exercise of the Put Option shall prevent the termination of
the indemnity obligations of the initial holders of the
Series B Preferred Stock in accordance with the terms of the
Reorganization Agreement.
In the event the Company shall propose to take any action of
the type described in this Section II.G.1. (or upon the
occurrence of any event described in this Section II.G.1., if
not within the Company's control), the Company shall give
written notice at least 15 days prior to the taking of the
proposed action (or within 5 days of any action not in the
Company's control) to each stockholder at the post office
address as shown on the Company's records which notice shall
specify the approximate date on which such action shall take
place.
Upon the delivery of written notice to the Company of any
stockholder's election to redeem all of the Series B
Preferred Stock held by such stockholder pursuant to this
Section II.G.1., the Company shall, as promptly as
practicable after the date of surrender of the redeemed
certificates, pay all redemption amounts due to such
stockholder.
2. Call Option. The Company, at the option of the Board of
Directors, may at any time after December 31, 2001 redeem all
or any part of the Series B Preferred Stock by paying in cash
therefor an amount equal to 1/130th of the Redemption Price
per share and, in addition to such amount, an amount in cash
equal to all dividends on such preferred shares unpaid and
accumulated
12
<PAGE> 13
EXHIBIT 3.1
as provided in this Section II.A, whether or not earned or
declared, to and including the date fixed for redemption. In
case of the redemption of only a part of such outstanding
preferred shares, the Company shall effect such redemption
pro rata. At least thirty (30) days' previous notice by mail,
postage prepaid, shall be given to the holders of record of
the Series B Preferred Stock to be redeemed, such notice to
be addressed to each such stockholder at his post office
address as shown by the records of the Company. On or after
the date fixed for redemption and stated in such notice, each
holder of such Series B Preferred Stock called for redemption
shall surrender his certificate evidencing such shares to the
Company at the place designated in such notice and shall
thereupon be entitled to receive and shall receive on such
date payment of the redemption price. In case less than all
of the shares represented by any such surrendered certificate
are redeemed, a new certificate shall be issued representing
the unredeemed shares. If such notice of redemption shall
have been duly given, and if on the date fixed for redemption
funds necessary for the redemption shall be available
therefor, then, notwithstanding that the certificates
evidencing any Series B Preferred Stock so called for
redemption shall not have been surrendered, the dividends
with respect to the shares so called for redemption shall
cease to accrue after the date fixed for redemption and all
rights with respect to the shares so called for redemption
shall forthwith after such date cease, except only the right
of the holders to receive the redemption price thereof
without interest upon surrender of their certificates
therefor.
H. Redemption Price.
1. Normal Redemption Price. Except as hereinafter specifically
set forth to the contrary Certificate of Incorporation, the
redemption price of the Series B Preferred Stock (the
"Redemption Price") shall be the "Normal Redemption Price"
which shall be based upon the Company's Water Tech Division's
cumulative earnings before income taxes ("EBIT"), for the
period 1997 through 2001 as set forth below (except as set
forth in II.H.1.(f).).
(a) If actual cumulative EBIT is less than 80% of the
cumulative EBIT shown on Schedule A, attached hereto,
the Normal Redemption Price shall be zero.
(b) If actual cumulative EBIT is 80% of the cumulative EBIT
shown on Schedule A, the Normal Redemption Price shall
be $2,500,000.
(c) If actual cumulative EBIT is more than 80%, but less
than 120%, of the cumulative EBIT shown on Schedule A,
the Normal Redemption Price shall be $2,500,000 plus
$125,000 for each percentage point by which the actual
cumulative EBIT exceeds 80% of the cumulative
13
<PAGE> 14
EXHIBIT 3.1
EBIT shown on Schedule A (prorated for each portion of a
percentage point).
(d) If actual cumulative EBIT is 120% or more of the
cumulative EBIT shown on Schedule A, the Normal
Redemption Price shall be $7,500,000.
(e) The cumulative EBIT thresholds shown on Schedule A
shall not be adjusted in the event of an acquisition.
(f) If, prior to December 31, 2001, either (a) the business
of the Company's Water Tech Division (the "Water Tech
Business") is sold to an Unrelated Third Party or (b)
there occurs an IPO, an Overall Ownership Shift, an
Asset Shift or an Employee Ownership Shift, then in any
of such events, the Normal Redemption Price shall be
computed as of the end of the month preceding the date
of any such event.
2. Redemption Price if Water Tech Business Sold. If the Water
Tech Business is sold to an Unrelated Third Party prior to
redemption of the Series B Preferred Stock, the Redemption
Price shall be the greater of (i) the Normal Redemption Price
or (ii) the "Alternative Redemption Price", as hereinafter
defined.
3. Redemption Price if IPO Occurs. If, prior to the first to
occur of (i) December 31, 2001 or (ii) a sale of the Water
Tech Business to an Unrelated Third Party, there occurs an
IPO, then, in such event, but only in such event, the
Redemption Price shall be the greatest of (a) $5,000,000, (b)
the Normal Redemption Price, or (c) the Alternative
Redemption Price. In determining the Alternative Redemption
Price in the event of an IPO, the Alternative Redemption
Price provisions applicable upon a sale of the Water Tech
Business shall be applied, with the Water Tech Business being
deemed to have been sold at a selling price representing the
same multiple of Water Tech EBIT for the most recently
completed fiscal year as the multiple of Company-wide EBIT
for such fiscal year that the offering price in the IPO
represents. If the IPO occurs after December 31, 2001, but
before a sale of the Water Tech business, the Redemption
Price for the Series B Preferred Stock shall be the Normal
Redemption Price, unless the Normal Redemption Price is zero,
in which event the Redemption Price shall be the Alternative
Redemption Price.
4. Redemption Price if Sale of Company Occurs. If, prior to the
first to occur of (i) December 31, 2001 or (ii) a sale of the
Water Tech Business to an Unrelated Third Party, there occurs
either (a) an Overall Ownership Shift, (b)
14
<PAGE> 15
EXHIBIT 3.1
an Employee Ownership Shift or (c) an Asset Shift and, in the
further event that, at the time of the closing of a
transaction described in clause (a), (b) or (c) above, the
actual cumulative Company-wide EBIT for the cumulative period
beginning January 1, 1997 and ending on such closing date is
at least 80% of the projected cumulative Company-wide EBIT
for such cumulative period as set forth in Schedule A, then,
in the event that all of the preceding conditions precedent
have been met, the Redemption Price for the Series B
Preferred Stock shall be the greatest of (x) $5,000,000, (y)
the Normal Redemption Price, or (z) the Alternative
Redemption Price. In determining the Alternative Redemption
Price in the event of a sale transaction described in this
paragraph, the Water Tech Business shall be deemed to have
been sold at a selling price representing the same multiple
of Water Tech EBIT for the most recently completed fiscal
year as (i) in the event of an Overall Ownership Shift or an
Employee Ownership Shift, the multiple of per share
Company-wide EBIT for such fiscal year that the actual per
share selling price of a share of the Company's common stock
represents or (ii) in the event of an Asset Shift, the
multiple of Company-wide EBIT for such year that the selling
price (adjusted for any retained assets or liabilities)
represents. If (a), (b) or (c) above occur after December 31,
2001, but before a sale of the Water Tech Business, or if
they occur and the Company-wide EBIT test above has not been
met, the Redemption Price shall be the Alternative Redemption
Price and the Water Tech business shall be deemed to have
been sold at a selling price representing the same multiple
of Water Tech EBIT for the most recently completed fiscal
year as the multiple of per share Company-wide EBIT for such
fiscal year that the actual selling price of the Company's
common stock represents.
For purposes of this Section II.H., the selling price shall
include all consideration paid for the business sold,
including, but without limitation, all cash, securities,
property and other assets received by the seller. All
consideration to be received by seller which is contingent on
the occurrence of future events shall be valued on the
selling date in a manner mutually agreeable to the Company
and the Series B Preferred stockholders.
5. Alternative Redemption Price. The Alternative Redemption
Price shall be determined as set forth below:
(a) If the sale of the Water Tech Business occurs prior to
July 30, 2002, the Alternative Redemption Price shall be
an amount equal to the sum of (1) $10,000 multiplied by
each percentage point of the net book value of the
assets of the Water Tech Division ("NBV") that the
actual selling price represents, up to and including
200% of NBV, plus (2) $15,000 multiplied by each
percentage point of NBV above
15
<PAGE> 16
EXHIBIT 3.1
200% that the actual selling price represents (and in
each case prorated for each portion of a percentage
point).
(b) If the sale of the Water Tech Business occurs on or
after July 30, 2002, the Alternative Redemption Price
shall be one-half of the amount determined under the
immediately preceding formula in Section II.H.5(a)
above.
(c) If the actual selling price of the Water Tech Business
represents less than 50% of NBV, the Alternative
Redemption Price shall be zero.
(d) In determining the selling price for purposes of the
preceding calculations, an appropriate dollar-for-dollar
adjustment shall be made to reflect any Water Tech
assets or liabilities retained by the Company.
6. Maximum Redemption Price. Notwithstanding anything to the
contrary herein, the maximum Redemption Price under any
circumstances or alternatives shall not exceed $7,500,000.
I. Auditors; Dispute Resolution. The Company shall retain a Big Six
accounting firm to audit its annual financial statements and may
switch to a non-Big Six accounting firm only with the prior
written consent of the holders of the Series B Preferred Stock,
which consent shall not unreasonably be withheld. In connection
with any redemption of the Series B Preferred Stock, such
shareholders or their representatives (upon execution of a
confidentiality agreement) shall have the right to review the
Company's determination of the Redemption Price and its auditors'
work papers. Any disputes regarding the determination of the
Redemption Price shall be resolved by binding arbitration in
Chicago, Illinois in accordance with the rules of the American
Arbitration Association by a panel of three arbitrators. Any award
so obtained may be enforced in any Wisconsin state court or the
Federal Court of the United States sitting in Milwaukee, Wisconsin
and a judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law.
J. No Reorganization. Until the Company has redeemed all of the
shares of Series B Preferred Stock, the Company shall not, without
the prior written consent of all of the Series B Preferred
shareholders thereof, reorganize, restructure or otherwise
transfer any of the assets of its Water Tech Business or do any
other action that would have the effect of altering the
calculation of the Redemption Price hereunder.
K. Offset. Notwithstanding any provision herein to the contrary,
the actual redemption price paid hereunder for the Series B
Preferred Stock shall be the redemption price
16
<PAGE> 17
EXHIBIT 3.1
calculated as provided in Section H hereunder minus the amount of
any claims owing under Sections 6, 7 and 8 of the Reorganization
Agreement.
L. Amendment. Notwithstanding any other paragraph or provision
hereof, neither the Company nor any of its subsidiaries may amend,
restate or modify the Certificate of Incorporation, Bylaws or
other governance documents which could adversely affect the rights
of the holders of the Series B Preferred Stock without the
approval, by vote or written consent, of the holders of all of the
issued and outstanding Series B Preferred Stock.
III. SERIES C PREFERRED STOCK
There shall be Six Thousand (6,000) shares of Series C Preferred Stock
authorized. The terms of the Series C Preferred Stock shall be as follows:
A. Dividends. The holders of Series C Preferred Stock shall be
entitled to receive quarterly dividends at the rate of ten and
17/100 percent (10.17%) per annum on the Original Issue Price (as
hereinafter defined), and no more, payable in cash only upon
redemption thereof, upon the liquidation, dissolution or winding
up of the Company or upon the occurrence of an Overall Ownership
Shift, an Employee Ownership Shift, an Asset Shift or an IPO, out
of any funds of the Company at the time legally available for the
declaration of dividends, when and as declared by the Board of
Directors. Dividends on all such issued and outstanding shares of
Series C Preferred Stock shall accrue from day to day from the
date of issuance of such shares to the date set forth in Section B
or C hereunder, as the case may be, whether or not earned or
declared and shall be computed o the basis of a 360 day year
consisting of twelve 30-day months. Such dividends shall be
payable before any dividends shall be declared or paid upon or set
apart for the common shares or any other class or series of the
Company's capital stock (other than the Series A and Series B
Preferred Stock), and shall be cumulative, so that if in any year
or years dividends upon such outstanding shares of Series C
Preferred Stock shall not have been declared (at the rate
described above) and set apart therefor, the amount of the
deficiency shall be fully declared and set apart for payment, but
without interest, before any distribution, whether by way of
dividends or otherwise, shall be declared or paid upon, or set
apart for, the common shares or any other class or series of the
Company's capital stock (other than the Series A and Series B
Preferred Stock).
B. Liquidation. In the event of a liquidation, dissolution, or
winding up of the Company (whether voluntary or involuntary), the
holders of the Series C Preferred Stock shall be entitled to
receive out of the assets of the Company, whether such assets are
capital or surplus of any nature, subject to the preferential
rights of the Series A and Series B Preferred Stock, an amount
equal to one hundred percent (100%) of the Original Issue Price,
and, in addition to such amount, a further amount equal to the
17
<PAGE> 18
EXHIBIT 3.1
dividends unpaid and accumulated thereon, as provided in Section
III-A of this Statement, to the date of such distribution, whether
earned or declared or not, and no more, before any payment shall
be made or any assets distributed to the holders of common shares
or any other class or series of the Company's capital Stock (other
than the Series A and Series B Preferred Stock).
If upon such liquidation, dissolution, or winding up, whether
voluntary or involuntary, the assets thus distributed among the
holders of the Series C Preferred Stock shall be insufficient to
permit the payment to such holders of the Series C Preferred Stock
of the full preferential amounts, then such assets to be
distributed shall be distributed ratably among the holders of the
Series C Preferred Stock.
In the event of any such liquidation, dissolution, or winding up
of the Company, whether voluntary or involuntary, subject to all
of the preferential rights of the holders of the Series A, Series
B and Series C Preferred Stock on distribution or otherwise, the
holders of common shares shall be entitled to receive ratably all
of the remaining assets of the Company.
A consolidation or merger of the Company with or into any other
corporation or corporations or other events specified in Section
I.G.1. shall not be deemed to be a liquidation, dissolution, or
winding up, within the meaning of this clause.
Original Issue Price shall mean one thousand dollars ($1,000) per
share for each of the then outstanding series of Series C
Preferred Stock, as may be adjusted for subdivisions or
combinations of the Series C Preferred Stock.
C. Redemption.
1. Put Option. Notwithstanding any provision in this
Certificate of Incorporation, including without limitation
any provision of Section I or Section II, the holders of the
Series C Preferred Stock shall have the right, if the holders
of a majority of the issued and outstanding shares of Series
C Preferred Stock so elect, and after providing written
notice to the Company, to require the Company to redeem all
or any part of the Series C Preferred Stock (the "Put
Option") at a price equal to one thousand dollars ($1,000)
per share (the "Series C Redemption Price"), plus accrued
dividends (as described in Section III-A above) as follows:
(i) upon the occurrence of an Overall Ownership Shift, an
Employee Ownership Shift or an Asset Shift; (ii) within the
120-day period following an IPO; or (iii) eight (8) years
after issuance.
2. Call Option. Notwithstanding any provision in this
Certificate of Incorporation, including without limitation
any provision of Section I or Section II, the Company, at the
option of the Board of Directors, may,
18
<PAGE> 19
EXHIBIT 3.1
provided the Series A and Series B Preferred Stock have been
previously redeemed, at any time after seven years redeem all
or any part of the Series C Preferred Stock by paying in cash
therefor an amount equal to the pro-rata portion of the
Series C Redemption Price per share, and, in addition to such
amount, an amount in cash equal to all dividends on such
shares of Series C Preferred Stock unpaid and accumulated as
provided in Section III-A of this Statement, whether or not
earned or declared, to and including the date fixed for
redemption. In case of the redemption of only a part of such
outstanding Series C Preferred Stock, the Company shall
effect such redemption pro rata. At least thirty (30) days'
previous notice by mail, postage prepaid, shall be given to
the holders of record of the Series C Preferred Stock to be
redeemed, such notice to be addressed to each such
stockholder at his post office address as shown by the
records of the Company. On or after the date fixed for
redemption and stated in such notice, each holder of such
Series C Preferred Stock called for redemption shall
surrender his certificate evidencing such shares to the
Company at the place designated in such notice and shall
thereupon be entitled to receive and shall receive on such
date payment of the redemption price. In case less than all
of the shares represented by any such surrendered certificate
are redeemed, a new certificate shall be issued representing
the unredeemed shares. If such notice of redemption shall
have been duly given, and if on the date fixed for redemption
funds necessary for the redemption shall be available
therefor, then, notwithstanding that the certificates
evidencing any Series C Preferred Stock so called for
redemption shall not have been surrendered, the dividends
with respect to the shares so called for redemption shall
cease to accrue after the date fixed for redemption and all
rights with respect to the shares so called for redemption
shall forthwith after such date cease, except only the right
of the holders to receive the redemption price thereof
without interest upon surrender of their certificates
therefor.
D. Voting. Each share of Series C Preferred Stock shall have the
voting rights equivalent to the rights of one share of common
stock.
E. Restrictions on Corporate Actions. Notwithstanding any other
paragraph or provision hereof, none of the following actions may
be taken by the Company or any of its Subsidiaries without the
approval by vote or written consent of the holders of a majority
of all issued and outstanding shares of Series C Preferred Stock:
1. During the period beginning July 30, 1997 and ending on
July 29, 2005, the consummation of an Organic Transaction (as
defined below).
2. Any amendment, restatement or modification of the Certificate
of Incorporation, By-laws (the "BY-LAWS") or other governance
documents
19
<PAGE> 20
EXHIBIT 3.1
which could adversely affect the rights of the holders of
the Series C Preferred Stock;
3. Declaration or payment of any dividend or making of any
distribution on or with respect to the Common Stock or any
other capital stock (other than the Series A, Series B, and
Series C Preferred Stock);
4. Except as permitted herein with respect to the Series A,
Series B and Series C Preferred Stock, purchase, redeem or
retire, directly or indirectly, of any shares of capital
stock or other equity securities of the Company (or any
securities convertible or exchangeable into such securities);
5. Authorization, creation or issuance of any shares of capital
stock or other securities other than shares of Series A
Preferred Stock and Series B Preferred Stock issued in
accordance with the Agreement and Plan of Reorganization by
and among Rush Creek LLC, Aqua-Chem, Inc., A-C Acquisition
Corp., Miller, Lyonnaise American Holding, Inc., and Gestra
Corporation, N.V.
6. Incurrence of Indebtness (as defined in the Securities
Purchase Agreement) other than as described in paragraphs (a)
through (l) of Section 9.4 of the Securities Purchase
Agreement. References herein to any defined terms or
provisions of the Securities Purchase Agreement is to such
terms and provisions as in effect as of the date of the
Securities Purchase Agreement, without regard to any
subsequent, termination, amendment or other modification to
such terms or provisions.
7. Any amendment, restatement or modification of the terms of,
or documentation relating to Indebtedness of the Company
other than as permitted in the Securities Purchase Agreement.
References herein to any defined terms or provisions of the
Securities Purchase Agreement is to such terms and provisions
as in effect as of the date of the Securities Purchase
Agreement, without regard to any subsequent, termination,
amendment or other modification to such terms or provisions.
8. Engaging in any business other than the business in which
the Company or its Subsidiaries are currently engaged;
9. A voluntary dissolution, liquidation or winding up;
10. Enter into any transaction or agreement with, or make any
payment to, any Affiliate, officer or director of the
Company, amend or terminate any existing agreement with any
Affiliate, officer or director of the Company, purchase from
or provide to any Affiliate, officer or director of the
Company any
20
<PAGE> 21
EXHIBIT 3.1
selling, general management or administrative services,
directly or indirectly make any sales to or purchases from
any Affiliate, officer or director of the Company; or
11. The sale of any assets of business of the company or any of
its Subsidiaries or the acquisition of assets that would be
prohibited by the Securities Purchase Agreement, as in effect
as of the date hereof, without regard to any subsequent,
termination, amendment or other modification of the Securites
Purchase Agreement.
For the purposes hereof the term (1) "ORGANIC TRANSACTION" means (x) the sale,
lease, exchange, transfer or other disposition of all or substantially all of
the Company's assets to a person or group of persons (y) any merger,
consolidation, refinancing or recapitalization that results in the holders of
the issued and outstanding voting securities of the Company immediately prior to
such transaction owning or controlling less than a majority of the voting
securities of the continuing or surviving entity immediately following such
transaction and/or (z) any person or persons acting together or which would
constitute a "group" for the purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), together or with any
Affiliates thereof, other than the holders of the Common Stock or their
permitted transferees as of July 30, 1997, and the holders of the Series C
Preferred Stock as of July 30, 1997, and their respective Affiliates,
beneficially owning (as defined in Rule 13d-3 of the Exchange Act) or
controlling, directly or indirectly, at least 50% of the total voting power of
all classes of capital stock entitled to vote generally in the election of
Directors of the Company; and (2) "AFFILIATE" shall have the meaning assigned to
that term in Regulation 12b-2 promulgated under the Securities Exchange Act of
1934, as amended.
ARTICLE FIVE. A majority vote of the shareholders entitled to vote on a
matter shall be required for action on that matter.
ARTICLE SIX. The board of directors is authorized to make, alter or
repeal the by-laws of the Company.
ARTICLE SEVEN. No director shall be liable to the Company or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
Company or its stockholders, (2) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (3) liability
under Section 174 of the Delaware General Corporation Law or (4) a transaction
from which the director derived an improper personal benefit, it being the
intention of the foregoing provision to eliminate the liability of the Company's
directors to the Company or its stockholders to the fullest extent permitted by
Section 102(b)(7) of the Delaware General Corporation Law, as amended from time
to time. The Company shall indemnify to the fullest extent permitted by Sections
102(b)(7) and 145 of the Delaware General Corporation Law, as amended from time
to time, each person that such Sections grant the Company the power to
indemnify.
21
<PAGE> 22
EXHIBIT 3.1
ARTICLE EIGHT. The name and mailing address of the sole incorporator
is:
James A. Feddersen
Whyte Hirschboeck Dudek S.C.
111 E. Wisconsin Avenue
Suite 2100
Milwaukee, WI 53202
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 31st day of July, 1997.
/S/ James A. Feddersen
-----------------------------------------
James A. Feddersen, Sole Incorporator
22
<PAGE> 23
EXHIBIT 3.1
SCHEDULE A
WATER TECH
PROJECTED EARNINGS BEFORE INCOME AND TAXES
1997 - 2001
EBIT
1997 $2,474,000
1998 $3,156,000
1999 $4,720,000
2000 $6,890,000
2001 $8,979,000
AQUA-CHEM, INC.
PROJECTED EARNINGS BEFORE INCOME AND TAXES
1997-2001
EBIT
1997 $13,065,000
1998 $15,108,000
1999 $19,684,000
2000 $25,454,000
2001 $32,713,000
23
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
Aqua-Chem, Inc.
(A Delaware Corporation)
------------------------
ARTICLE I
DEFINITIONS
As used in these By-laws, unless the context otherwise requires, the
term:
1.1 "Assistant Secretary" means an Assistant Secretary of the
Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the
Corporation.
1.3 "Board" means the Board of the Corporation.
1.4 "By-laws" means the initial by-laws of the Corporation, as amended
from time to time.
1.5 "Certificate of Incorporation" means the initial certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.
1.6 "Corporation" means Aqua-Chem, Inc.
1.7 "Directors" means directors of the Corporation.
<PAGE> 2
EXHIBIT 3.2
1.8 "General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended from time to time.
1.9 "Office of the Corporation" means executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.10 "President" means the President of the Corporation.
1.11 "Secretary" means the Secretary of the Corporation.
1.12 "Stockholders" means stockholders of the Corporation.
1.13 "Treasurer" means the Treasurer of the Corporation.
ARTICLE 2
STOCKHOLDERS
2.1 Place of Meetings. Every meeting of the stockholders shall be held
at the office of the Corporation or at such other place within or without the
State of Delaware as shall be specified or fixed in the notice of such meeting
or in the waiver of notice thereof.
2.2 Annual Meeting. A meeting of stockholders shall be held annually
for the election of directors or the transaction of other business at such hour
and on such business day in December or January as may be determined by the
Board and designated in the notice of meeting.
2.3 Deferred Meeting for Election of Directors, Etc. If the annual
meeting of stockholders for the election of directors and the transaction of
other business is not held on the date fixed in Section 2.2, the Board shall
call a meeting of stockholders for the election of directors and the transaction
of other business as soon thereafter as convenient.
2
<PAGE> 3
EXHIBIT 3.2
2.4 Other Special Meetings. A special meeting of stockholders (other
than a special meeting for the election of directors), unless otherwise
prescribed by statute, may be called at any time by the Board or by the
President or by the Secretary. At any special meeting of stockholders only such
business may be transacted which is related to the purpose or purposes of such
meeting set forth in the notice thereof given pursuant to Section 2.6 of the
By-laws or in any waiver of notice thereof given pursuant to Section 2.7 of the
By-laws.
2.5 Fixing Record Date. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend of the allotment of any rights or entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board may fix, in advance, a
date as the record date for any such determination of stockholders. Such date
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. If no such record
date is fixed:
2.5.1 The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held;
2.5.2 The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the Board is necessary, shall be the day on which the first written
consent is expressed;
3
<PAGE> 4
EXHIBIT 3.2
2.5.3 The record date for determining stockholders for any purpose
other than that specified in Sections 2.5.1 and 2.5.2 shall be at the close of
business on the day on which the Board adopts the resolution relating thereto.
When a determination of stockholders entitled to notice of or to vote at any
meeting of stockholders has been made as provided in this Section 2.5, such
determination shall apply to any adjournment thereof unless the Board fixes a
new record date for the adjourned meeting.
2.6 Notice of Meetings of Stockholders. Except as otherwise provided in
Sections 2.5 and 2.7 of the By-laws, whenever under the General Corporation Law
or the Certificate of Incorporation or the By-laws, stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. A copy of the notice of
any meeting shall be given, personally or by mail, not less than ten nor more
than sixty days before the date of the meeting, to each stockholder entitled to
notice of or to vote at such meeting. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, with postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation. An affidavit of the Secretary or an Assistant Secretary or of the
transfer agent of the Corporation that the notice required by this section has
been given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted at the
meeting as originally called. If, however, the adjournment is for more than
thirty days, or if after
4
<PAGE> 5
EXHIBIT 3.2
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
2.7 Waivers of Notice. Whenever notice is required to be given to any
stockholder under any provision of the General Corporation Law or of the
Certificate of Incorporation or the By-laws, a written waiver thereof, signed by
the stockholder entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a stockholder at a
meeting shall constitute a waiver of notice of such meeting, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice.
2.8 List of Stockholders. The Secretary shall prepare and
make, or cause to be prepared and made, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
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EXHIBIT 3.2
2.9 Quorum of Stockholders; Adjournment. The holders of one-third of
the shares of stock entitled to vote at any meeting of stockholders, present in
person or represented by proxy, shall constitute a quorum for the transaction of
any business at such meeting. When a quorum is once present to organize a
meeting of stockholders, it is not broken by the subsequent withdrawal of any
stockholders. The holders of a majority of the shares of stock present in person
or represented by proxy at any meeting of stockholders, including an adjourned
meeting, whether or not a quorum is present, may adjourn such meeting to another
time and place.
2.10 Voting; Proxies. Unless otherwise provided in the Certificate of
Incorporation every stockholder of record shall be entitled at every meeting of
stockholders to one vote for each share of capital stock standing in his or her
name on the record of stockholders determined in accordance with Section 2.5 of
the By-laws. If the Certificate of Incorporation provides for more or less than
one vote for any share on any matter, every reference in the By-laws or the
General Corporation Law to a majority or other proportion of stock shall refer
to such majority or other proportion of the votes of such stock. The provisions
of Sections 212 and 217 of the General Corporation Law shall apply in
determining whether any shares of capital stock may be voted and the persons, if
any, entitled to vote such shares; but the Corporation shall be protected in
treating the persons in whose names shares of capital stock stand on the record
of stockholders as owners thereof for all purposes. At any meeting of
stockholders (at which a quorum was present to organize the meeting), all
matters, except as otherwise provided by law or by the Certificate of
Incorporation or by the By-laws, shall be decided by a majority of the votes
cast at such meeting by the holders of shares present in person or represented
by proxy and entitled to vote thereon, whether or not a quorum is present when
the vote is taken. All elections
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EXHIBIT 3.2
of directors shall be written ballot unless otherwise provided in the
Certificate of Incorporation. In voting on any other question on which a vote by
ballot is required by law or is demanded by any stockholder entitled to vote,
the voting shall be by ballot. Each ballot shall be signed by the stockholder
voting or by his proxy, and shall state the number of shares voted. On all other
questions, the voting may be viva voce. Every stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent without a meeting may
authorize another person or persons to act for him by proxy. The validity and
enforceability of any proxy shall be determined in accordance with Section 212
of the General Corporation Law.
2.11 Selection and Duties of the Inspectors at Meetings of
Stockholders. The Board, in advance of any meeting of stockholders, may appoint
one or more inspectors to act at the meeting or any adjournment thereof. If
inspectors are not so appointed, the person presiding at such meeting may, and
on the request of any stockholder entitled to vote thereat shall, appoint one or
more inspectors. In case any person appointed fails to appear or act, the
vacancy may be filled by appointment made by the Board in advance of the meeting
or at the meeting by the person presiding thereat. Each inspector, before
entering upon the discharge of his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of such inspector's ability. The
inspector or inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all
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EXHIBIT 3.2
stockholders. On request of the person presiding at the meeting or any
stockholder entitled to vote thereat, the inspector or inspectors shall make a
report in writing of any challenge, question or matter determined by such
inspector(s) and execute a certificate of any fact found by such inspector(s).
Any report or certificate made by the inspector(s) shall be prima facie evidence
of the facts stated and of the vote as certified by such inspector(s).
2.12 Organization. At every meeting of stockholders, the President, or
in the absence of the President a Vice President, and in case more than one Vice
President shall be present, that Vice President designated by the Board (or in
the absence of any such designation, the most senior Vice President, based on
age, present) shall act as chairperson of the meeting. The Secretary, or in his
or her absence one of the Assistant Secretaries, shall act as secretary of the
meeting. In case none of the officers above designated to act as chairperson or
secretary of the meeting, respectively, shall be present, a chairperson or
secretary of the meeting, as the case may be, shall be chosen by a majority of
the votes cast at such meeting by the holders of shares of capital stock present
in person or represented by proxy and entitled to vote at the meeting.
2.13 Order of Business. The order of business at all meetings of
stockholders shall be determined by the chairperson of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a majority of the votes cast at such meeting by the holders of
shares of capital stock present in person or represented by proxy and entitled
to vote at the meeting.
2.14 Written Consent of Stockholders Without a Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required by
the General Corporation Law to be taken at any annual or special meeting of
stockholders of the Corporation, or any action
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EXHIBIT 3.2
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE 3
DIRECTORS
3.1 General Powers. Except as otherwise provided in the Certificate of
Incorporation, the business and affairs of the Corporation shall be managed by
or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or the
By-laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to the powers
expressly conferred by the By-laws, the Board may exercise all powers and
perform all acts which are not required, by the By-laws or the Certificate of
Incorporation or by law, to be exercised and performed by the stockholders.
3.2 Number; Qualification; Term of Office. The Board shall initially
consist of six (6) members. The number of directors may hereafter be changed
from time to time by a amendment pursuant to Section 13 of the By-laws.
Directors need not be stockholders. Each
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EXHIBIT 3.2
director shall hold office until his or her successor is elected and qualified
or until his or her earlier death, resignation or removal.
3.3 Election. Directors shall, except as otherwise required by law or
by the Certificate of Incorporation, be elected by a plurality of the votes cast
at a meeting of stockholders by the holders of shares entitled to vote in the
election.
3.4 Newly Created Directorships and Vacancies. Unless otherwise
provided in the Certificate of Incorporation, newly created directorships
resulting from an increase in the number of directors and vacancies occurring in
the Board for any reason, including the removal of directors without cause, may
be filled by vote of a majority of the directors then in office, although less
than a quorum, or by a sole remaining director, any meeting of the Board or may
be elected by a plurality of the votes cast by the holders of shares of capital
stock entitled to vote in the election at a special meeting of stockholders
called for that purpose. A director elected to fill a vacancy shall be elected
to hold office until his or her successor is elected and qualified, or until his
or her earlier death, resignation or removal.
3.5 Resignations. Any director may resign at any time by written notice
to the Corporation. Such resignation shall take effect at the time therein
specified, and, unless otherwise specified, the acceptance of such resignation
shall not be necessary to make it effective.
3.6 Removal of Directors. Except as otherwise provided by law, any or
all of the directors may be removed with or without cause, by vote of the
holders of a majority of the shares then entitled to vote at an election of
directors.
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EXHIBIT 3.2
3.7 Compensation. Each director, in consideration of his or her service
as such, shall be entitled to receive from the Corporation such amount per annum
or such fees for attendance at directors' meetings, or both, as the Board may
from time to time determine, together with reimbursement for the reasonable
expenses incurred by him or her in connection with the performance of such
director's duties. Each director who shall serve as a member of any committee of
directors in consideration of his or her serving as such shall be entitled to
such additional amount per annum or such fees for attendance at committee
meetings, or both, as the Board may from time to time determine, together with
reimbursement for the reasonable expenses incurred by him or her in the
performance of such director's duties. Nothing in this section contained shall
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving proper compensation therefor.
3.8 Place and Time of Meetings of the Board. Meetings of the Board,
regular or special, may be held at any place within or without the State of
Delaware. The times and places for holding meetings of the Board may be fixed
from time to time by resolution of the Board or (unless contrary to resolution
of the Board) in the notice of the meeting.
3.9 Annual Meetings. On the day when and at the place where the annual
meeting of stockholders for the election of directors is held, and as soon as
practicable thereafter, the Board may hold its annual meeting, without notice of
such meeting, for the purpose of organization, the election of officers and the
transaction of other business. The annual meeting of the Board may be held at
any other time and place specified in a notice given as provided in Section 3.11
of the By-laws for special meetings of the Board or in a waiver of notice
thereof.
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EXHIBIT 3.2
3.10 Regular Meetings. Regular meetings of the Board may be held at
such times and places as may be fixed from time to time by the Board. Unless
otherwise required by the Board, regular meetings of the Board may be held
without notice. If any day fixed for a regular meeting of the Board be a
Saturday or Sunday or a legal holiday at the place where such meeting is to be
held, then such meeting shall be held at the same hour at the same place on the
first business day thereafter which is not a Saturday, Sunday or legal holiday.
3.11 Special Meetings. Special meetings of the Board shall be held
whenever called by the President or the Secretary or by any two or more
directors. Notice of each special meeting of the Board shall, if mailed, be
addressed to each director at the address designated by him or her for that
purpose or, if none is designated, at such director's last known address at
least two days before the date on which the meeting is to be held; or such
notice shall be sent to each director at such address by telegraph, cable or
wireless, or be delivered to him or her personally, not later than the day
before the date on which such meeting is to be held. Every such notice shall
state the time and place of the meeting but need not state the purposes of the
meeting, except to the extent required by law. If mailed, each notice shall be
deemed given when deposited, with postage thereon prepaid, in a post office or
official depository under the exclusive care and custody of the United States
Postal Service. Such mailing shall be by first class mail.
3.12 Adjourned Meetings. A majority of the directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. Notice of any
adjourned meeting of the Board need not be given to any director whether or not
present at the time of the adjournment. Any business
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EXHIBIT 3.2
may be transacted at any adjourned meeting that might have been transacted at
the meeting as originally called.
3.13 Waiver of Notice. Whenever notice is required to be given to any
director or member of a committee of directors under any provision of the
General Corporation Law or the Certificate of Incorporation or By-laws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
directors, or members of a committee of directors, need be specified in any
written waiver of notice.
3.14 Organization. At each meeting of the Board, the President of the
Corporation, or in the absence of the President, a chairperson chosen by the
majority of the directors present, shall preside. The Secretary shall act as
secretary at each meeting of the Board. In case the Secretary shall be absent
from any meeting of the Board, an Assistant Secretary shall perform the duties
of secretary at such meeting; and in the absence from any such meeting of the
Secretary and Assistant Secretaries, the person presiding at the meeting may
appoint any person to act as secretary of the meeting.
3.15 Quorum of Directors. A majority of the directors then in office
shall constitute a quorum for the transaction of business or of any specified
item of business at any meeting of the Board.
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EXHIBIT 3.2
3.16 Action by the Board. All corporate action taken by the Board or
any committee thereof shall be taken at a meeting of the Board, or of such
committee, as the case may be, except that any action required or permitted to
be taken at any meeting of the Board, or of any committee thereof, may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee. Members of the Board, or any
committee designated by the Board, may participate in a meeting of the Board, or
of such committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
Section 3.16 shall constitute presence in person at such meeting. Except as
otherwise provided by the Certificate of Incorporation or by law, the vote of a
majority of the directors present (including those who participate by means of
conference telephone or similar communications equipment) at the time of the
vote, if a quorum is present at such time, shall be the act of the Board.
ARTICLE 4
COMMITTEES OF THE BOARD
The Board may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of one or more of
the directors of the corporation. The Board may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
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EXHIBIT 3.2
present at any meeting and not disqualified from voting, whether or not such
member(s) constitute a quorum, may unanimously appoint another member of the
Board to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board, shall have and may exercise all the powers and authority of the Board in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to amending
the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or revocation of a
dissolution, or amending the By-laws of the Corporation; and unless the
resolution designating it expressly so provides, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
ARTICLE 5
OFFICERS
5.1 Officers. The Board shall elect a President, a Secretary
and a Treasurer, and may elect or appoint one or more Vice Presidents and such
other officers as it may determine. The Board may designate one or more Vice
Presidents as Executive Vice Presidents, and may use descriptive words or
phrases to designate the standing, seniority or area of special competence of
the Vice Presidents elected by appointed by it. Each officer shall hold his
office until his or her successor is elected and qualified or until such
officer's earlier death, resignation
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EXHIBIT 3.2
or removal in the manner provided in Section 5.2 of the By-laws. Any two or more
offices may be held in the same person. The Board may require any officer to
give a bond or other security for the faithful performance of his duties, in
such amount and with such sureties as the Board may determine. All officers, as
between themselves and the Corporation, shall have such authority and perform
such duties in the management of the Corporation as may be provided in the
By-laws or as the Board may from time to time determine.
5.2 Removal of Officers. Any officers elected or appointed by Board may
be removed by the Board with or without cause. The removal of an officer without
cause shall be without prejudice to such officer's contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights.
5.3 Resignations. Any officer may resign at any time in writing by
notifying the Board or the President or the Secretary. Such resignation shall
take effect at the date of receipt of such notice or at such later time as is
therein specified, and, unless otherwise specified, the acceptance of such
resignation shall not be necessary to make it effective. The resignation of an
officer shall be without prejudice to the contract rights of the Corporation, if
any.
5.4 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled for the unexpired
portion of the term in the manner prescribed in the By-laws for the regular
election or appointment to such office.
5.5 Compensation. Salaries or other compensation of the officers may be
fixed from time to time by the Board. No officer shall be prevented from
receiving a salary or other compensation by reason of the fact that such officer
is also a director.
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EXHIBIT 3.2
5.6 President. The President shall be the chief executive officer of
the Corporation and shall have general supervision over the business of the
Corporation, subject, however, to the control of the Board and of any duly
authorized committee of directors. The President shall, if present, preside at
all meetings of the stockholders and at all meetings of the Board. The President
may, with the Secretary or the Treasurer or an Assistant Secretary or an
Assistant Treasurer, sign certificates for shares of capital stock of the
Corporation. The President may sign and execute in the name of the Corporation
deeds, mortgages, bonds, contracts and other instruments, except in cases where
the signing and execution thereof shall be expressly delegated by the Board or
by the By-laws to some other officer or agent of the Corporation, or shall be
required by law otherwise to be signed or executed; and, in general the
President shall perform all duties incident to the office of President and such
other duties as from time to time may be assigned to the President by the Board.
5.7 Vice Presidents. At the request of the President, or in
the President's absence, at the request of the Board, the Vice Presidents shall
(in such order as may be designated by the Board or in the absence of any such
designation in order of seniority based on age) perform all of the duties of the
President and so acting shall have all the powers of and be subject to all
restrictions upon the President. Any Vice President may also, with the Secretary
or Treasurer or an Assistant Secretary or an Assistant Treasurer, sign
certificates for shares of capital stock of the Corporation; may sign and
execute in the name of the Corporation deeds, mortgages, bonds, contracts or
other instruments authorized by the Board, except in cases where the signing and
execution thereof shall be expressly delegated by the Board or by the By-laws to
some other officer or agent of the Corporation, or shall be required by law
otherwise to be signed
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EXHIBIT 3.2
or executed; and shall perform such other duties as from time to time may be
assigned to him or her by the Board or by the President.
5.8 Secretary. The Secretary, if present, shall act as secretary of all
meetings of the stockholders and of the Board, and shall keep the minutes
thereof in the proper book or books to be provided for that purpose; the
Secretary shall see that all notices required to be given by the Corporation are
duly given and served; the Secretary may, with the President or Vice President,
sign certificates for shares of capital stock of the Corporation; the Secretary
shall be custodian of the seal of the Corporation, or facsimile thereof, all
certificates for shares of capital stock of the Corporation and all documents
the execution of which on behalf of the Corporation under its corporate seal is
authorized in accordance with the provisions of the By-laws; the Secretary shall
have charge of the stock ledger and also of the other books, records and papers
of the Corporation relating to its organization and management as a Corporation,
and shall see that the reports, statements and other documents required by law
are properly kept and filed; and shall, in general, perform all the duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to the Secretary by the Board or by the President.
5.9 Treasurer. The Treasurer shall have charge and custody of, and be
responsible for, all funds, securities and notes of the Corporation; receive and
give receipts for moneys due and payable to the Corporation from any sources
whatsoever; deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositaries as shall be selected in accordance
with these By-laws; against proper vouchers, cause such funds to be disbursed by
checks or drafts on the authorized depositaries of the Corporation signed in
such manner as shall be determined in accordance with any provisions of the
By-laws, and be
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EXHIBIT 3.2
responsible for the accuracy of the amounts of all moneys so disbursed;
regularly enter or cause to be entered in books to be kept by the Treasurer or
under the Treasurer's direction full and adequate account of all moneys received
or paid by the Treasurer for the account of the Corporation; have the right to
require, from time to time, reports or statements giving such information as the
Treasurer may desire with respect to any and all financial transactions of the
Corporation from the officers or agents transacting the same; render to the
President or the Board, whenever the President or the Board, respectively, shall
require the Treasurer so to do, an account of the financial condition of the
Corporation and of all his or her transactions as Treasurer; exhibit at all
reasonable times his or her books of account and other records to any of the
directors upon application at the office of the Corporation where such books and
records are kept; and in general, perform all the duties incident to the office
or Treasurer and such other duties as from time to time may be assigned to the
Treasurer by the Board or by the President; and the Treasurer may sign, with the
President, or a Vice President certificates for shares of capital stock of the
Corporation.
5.10 Assistant Secretaries and Assistant Treasurers. Assistant
Secretaries and Assistant Treasurers shall perform such duties as shall be
assigned to them by the Secretary or by the Treasurer, respectively, or by the
Board or by the President. Assistant Secretaries and Assistant Treasurers may,
with the President or a Vice President, sign certificates for shares of capital
stock of the Corporation.
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EXHIBIT 3.2
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 Execution of Contracts. The Board may authorize any officer,
employee or agent, in the name and on behalf of the Corporation, to enter into
any contract or execute and satisfy any instruments, and any such authority may
be general or confined to specific instances, or otherwise limited.
6.2 Loans. The President or any other officer, employee or agent
authorized by the By-laws or by the Board may effect loans and advances at any
time for the Corporation from any bank, trust company or other institution or
from any firm, corporation or individual and for such loans and advances may
make, execute and deliver promissory notes, bonds or other certificates or
evidences of indebtedness of the Corporation, and when authorized so to do may
pledge and hypothecate or transfer any securities or other property of the
Corporation as security for any such loans or advances. Such authority conferred
by the Board may be general or confined to specific instances or otherwise
limited.
6.3 Checks, Drafts, Etc. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all notes or other
evidences of indebtedness of the Corporation shall be signed on behalf of the
Corporation in such manner as shall from time to time be determined by
resolution of the Board.
6.4 Deposits. The funds of the Corporation not otherwise employed shall
be deposited from time to time to the order of the Corporation in such banks,
trust companies or other depositaries as the Board may select or as may be
selected by an officer, employee or agent of the Corporation to whom such power
may from time to time be delegated by the Board.
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EXHIBIT 3.2
ARTICLE 7
STOCK AND DIVIDENDS
7.1 Certificates Representing Shares. The shares of capital stock of
the Corporation shall be represented by certificates in such form (consistent
with the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the President or a
Vice President and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer, and may be sealed with the seal of the Corporation or
a facsimile thereof. The signatures of the officers upon a certificate may be
facsimiles, if the certificate is countersigned by a transfer agent or registrar
or other than the Corporation itself or its employee. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon any certificate shall have ceased to be such offices, transfer agent
or registrar before such certificate is issued, such certificate may, unless
otherwise ordered by the Board, be issued by the Corporation with the same
effect as if such person were such officer, transfer agent or registrar at the
date of issue.
7.2 Transfer of Shares. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by such holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates representing
such shares of capital stock properly endorsed for transfer and upon payment of
all necessary transfer taxes. Every certificate exchanged, returned or
surrendered to the Corporation shall be marked "Canceled," with the date of
cancellation, by the Secretary or an Assistant Secretary or the transfer agent
of the Corporation. A person in whose name shares of capital stock shall stand
on the books of the Corporation shall be deemed the owner thereof to receive
dividends, to vote as such owner and for all other purposes as respects the
Corporation. No transfer of shares of capital
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EXHIBIT 3.2
stock shall be valid as against the Corporation, its stockholders and creditors
for any purpose, except to render the transferee liable for the debts of the
Corporation to the extent provided by law, until such transfer shall have been
entered on the books of the Corporation by an entry showing from and to whom
transferred.
7.3 Transfer and Registry Agents. The Corporation may from time to time
maintain one or more transfer offices or agent and registry offices or agents at
such place or places as may be determined from time to time by the Board.
7.4 Lost, Destroyed, Stolen and Mutilated Certificates. The
holder of any shares of capital stock of the Corporation shall immediately
notify the Corporation of any loss, destruction, theft or mutilation of the
certificate representing such shares, and the Corporation may issue a new
certificate to replace the certificate alleged to have been lost, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of any
such new certificate require the owner of the lost, stolen or mutilated
certificate, or such owner's legal representatives, to make proof satisfactory
to the Board of such loss, destruction, theft or mutilation and to advertise
such fact in such manner as the Board may require, and to give the Corporation
and its transfer agents and registrars, or such of them as the Board may
require, a bond in such form, in such sum and with such surety or sureties as
the Board may direct, to indemnify the Corporation and its transfer agents and
registrars against any claims that may be made against any of them on account of
the continued existence of any such certificate so alleged
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EXHIBIT 3.2
to have been lost, destroyed, stolen or mutilated and against any expense in
connection with such claim.
7.5 Regulations. The Board may make such rules and regulations as it
may deem expedient, not inconsistent with the By-laws or with the Certificate of
Incorporation, concerning the issue, transfer and registration of certificates
representing shares of its capital stock.
7.6 Restriction on Transfer of Stock. A written restriction on the
transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be enforced against the
holder of the restricted capital stock or any successor or transferee of the
holder including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person or estate of the
holder. Unless noted conspicuously on the certificate representing such capital
stock, a restriction, even though permitted by Section 202 of the General
Corporation Law, shall be ineffective except against a person with actual
knowledge of the restriction. A restriction on the transfer or registration of
transfer of capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number of stockholders
or among such stockholders and the Corporation. No restriction so imposed shall
be binding with respect to capital stock issued prior to the adoption of the
restriction unless the holders of such capital stock are parties to an agreement
or voted in favor of the restriction.
7.7 Dividends, Surplus, Etc. Subject to the provisions of the
Certificate of Incorporation and of law, the Board:
23
<PAGE> 24
EXHIBIT 3.2
7.7.1 May declare and pay dividends or make other distributions on
the outstanding shares of capital stock in such amounts and at such time or
times as, in its discretion, the condition of the affairs of the Corporation
shall render advisable;
7.7.2 May use and apply, in its discretion, any of the surplus of
the Corporation in purchasing or acquiring any shares of capital stock of the
Corporation, or purchase warrants therefor, in accordance with law, or any of
its bonds, debentures, notes, scrip or other securities or evidences of
indebtedness;
7.7.3 May set aside from time to time out of such surplus or net
profits such sum or sums as, in its discretion, it may think proper, as a
reserve fund to meet contingencies, or for equalizing dividends or for the
purpose of maintaining or increasing the property or business of the
Corporation, or for any purpose it may think conducive to the best interests of
the Corporation.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification of Officers and Directors. The Corporation
shall indemnify any person 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, by reason of the fact
that such person is or was a director or an officer of the Corporation, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding to the fullest extent and in the manner set forth in
and permitted by the General
24
<PAGE> 25
EXHIBIT 3.2
Corporation Law, and any other applicable law, as from time to time in effect.
Such right of indemnification shall not be deemed exclusive of any other rights
to which such director or officer may be entitled apart from the foregoing
provisions. The foregoing provisions of this Section 8.1 shall be deemed to be a
contract between the Corporation and each director and officer who serves in
such capacity at any time while this Article 8 and the relevant provisions of
the General Corporation Law and other applicable law, if any, are in effect and
any repeal or modification thereof shall not affect any rights or obligations
then existing with respect to any state of facts then or theretofore existing or
any action, suit or proceeding theretofore or thereafter brought or threatened
based in whole or in part upon any such state of facts.
8.2 Indemnification of Other Persons. The Corporation may indemnify any
person 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 by reason of the fact that he is or
was an employee or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of another
Corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding to the extent and in the manner set forth in and
permitted by the General Corporation Law, and any other applicable law, as from
time to time in effect. Such right of indemnification shall not be deemed
exclusive of any other rights to which such person may be entitled apart from
the foregoing provisions.
8.3 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the
25
<PAGE> 26
EXHIBIT 3.2
Corporation, or is or was serving at the request of the Corporation or a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise 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 power to indemnify him against such
liability under the provisions of Section 8.1 and 8.2 of the By-laws or under
Section 145 of the General Corporation Law or any other provision of Law.
ARTICLE 9
BOOKS AND RECORDS
9.1 Books and Records. The Corporation shall keep correct and complete
books and records of account and shall keep minutes of the proceedings of the
stockholders, the Board and any committee of the Board. The Corporation shall
keep at the office designated in the Certificate of Incorporation or at the
office of the transfer agent or registrar of the Corporation in Delaware, a
record containing the names and addresses of all stockholders, the number and
class of shares held by each and the dates when they respectively became the
owners of record thereof.
9.2 Form of Records. Any records maintained by the Corporation in the
regular course of its business including its stock ledger, books of account, and
minute books, may be kept on, or be in the form of, diskettes, magnetic tape,
photographs, microphotographs, or any other information storage device, provided
that the records so kept can be converted into clearly legible written form
within a reasonable time. The Corporation shall so convert any records so kept
upon the request of any person entitled to inspect the same.
26
<PAGE> 27
EXHIBIT 3.2
9.3 Inspection of Books and Records. Except as otherwise provided by
law, the Board shall determine from time to time whether, and, if allowed, when
and under what conditions and regulations the accounts, books, minutes and other
records of the Corporation shall be open to the inspection of any stockholder or
director.
ARTICLE 10
SEAL
The Board may adopt a corporate seal which shall be in the form of a
circle and shall bear the full name of the Corporation, the year of its
incorporation and the word "Delaware."
ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall be determined, and may be
changed, by resolution of the Board.
ARTICLE 12
VOTING OF SHARES HELD
Unless otherwise provided by resolution of the Board, the President
may, from time to time, appoint one or more attorneys or agents of the
Corporation, in the name and on behalf of the Corporation, to cast the votes
which the Corporation may be entitled to cast as a stockholder or otherwise in
any other corporation, any of whose shares or securities may be held
27
<PAGE> 28
EXHIBIT 3.2
by the Corporation, at meetings of the holders of stock or other securities of
such other corporation, or to consent in writing to any action by any such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such votes or giving such consent, and may execute or cause to
be executed on behalf of the Corporation and under its corporate seal, or
otherwise, such written proxies, consents, waivers or other instruments as the
President may deem necessary or proper in the premises; or the President may
attend in person any meeting of the holders of the stock or other securities of
any such other corporation and thereat vote or exercise any or all other powers
of the Corporation as the holder of such stock or other securities of such other
corporation.
ARTICLE 13
AMENDMENTS
The By-laws may be altered, amended, supplemented or repealed, or new
By-laws may be adopted, by vote of the holders of the shares entitled to vote in
the election of directors. The By-laws may be altered, amended, supplemented,
repealed, or new By-laws may be adopted, by the Board, provided that the vote of
a majority of the entire Board shall be required to change the number of
authorized directors. Any By-laws adopted, altered, amended or supplemented by
the Board may be altered, amended or supplemented or repealed by the
stockholders entitled to vote thereon.
28
<PAGE> 1
EXHIBIT 4.1
===============================================================================
AQUA-CHEM, INC.
Issuer
11 1/4% Senior Subordinated Notes Due 2008
--------------------
INDENTURE
Dated as of June 23, 1998
---------------------
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
===============================================================================
<PAGE> 2
EXHIBIT 4.1
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) ..............................11.03
(c) ..............................11.03
313(a) ..............................7.06
(b)(1) ..............................N.A.
(b)(2) ..............................7.06
(c) ..............................11.02
(d) ..............................7.06
314(a) ..............................4.02;
4.10; 11.02
(b) ..............................N.A.
(c)(1) ..............................11.04
(c)(2) ..............................11.04
(c)(3) ..............................N.A.
(d) ..............................N.A.
(e) ..............................11.05
(f) ..............................4.10
315(a) ..............................7.01
(b) ..............................7.05; 11.02
(c) ..............................7.01
(d) ..............................7.01
(e) ..............................6.11
316(a)(last sentence) ..............................11.06
(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) ..............................11.01
N.A. means Not Applicable.
__________________________
Note: This Cross-Reference Table shall not, for any
purpose, be deemed to be part of the Indenture.
i
<PAGE> 3
EXHIBIT 4.1
TABLE OF CONTENTS
ARTICLE 1 Page
Definitions and Incorporation by Reference
SECTION 1.01. Definitions ............................ 1
SECTION 1.02. Other Definitions ...................... 23
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act ........................ 23
SECTION 1.04. Rules of Construction .................. 24
ARTICLE 2
The Securities
SECTION 2.01. Form and Dating ........................ 25
SECTION 2.02. Execution and Authentication ........... 25
SECTION 2.03. Registrar and Paying Agent ............. 26
SECTION 2.04. Paying Agent To Hold Money in Trust..... 27
SECTION 2.05. Securityholder Lists ................... 27
SECTION 2.06. Transfer and Exchange .................. 27
SECTION 2.07. Replacement Securities ................. 28
SECTION 2.08. Outstanding Securities ................. 29
SECTION 2.09. Temporary Securities ................... 29
SECTION 2.10. Cancellation ........................... 29
SECTION 2.11. Defaulted Interest ..................... 30
SECTION 2.12. CUSIP Numbers .......................... 30
SECTION 2.13. Issuance of Additional Securities....... 30
ARTICLE 3
Redemption
SECTION 3.01. Notices to Trustee ..................... 30
SECTION 3.02. Selection of Securities To Be
Redeemed ............................. 31
SECTION 3.03. Notice of Redemption ................... 31
SECTION 3.04. Effect of Notice of Redemption ......... 32
SECTION 3.05. Deposit of Redemption Price ............ 32
SECTION 3.06. Securities Redeemed in Part ............ 33
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<PAGE> 4
EXHIBIT 4.1
ARTICLE 4
Covenants
SECTION 4.01. Payment of Securities ........................... 33
SECTION 4.02. SEC Reports ..................................... 33
SECTION 4.03. Limitation on Indebtedness ...................... 33
SECTION 4.04. Limitation on Restricted Payments ............... 37
SECTION 4.05. Limitation on Restrictions on
Distributions from Subsidiaries ............... 40
SECTION 4.06. Limitation on Sales of Assets and
Subsidiary Stock .............................. 41
SECTION 4.07. Limitation on Affiliate Transactions ............ 45
SECTION 4.08. Limitation on the Sale or Issuance of
Capital Stock of Restricted
Subsidiaries .................................. 46
SECTION 4.09. Change of Control ............................... 46
SECTION 4.10. Compliance Certificates ......................... 49
SECTION 4.11. Further Instruments and Acts .................... 49
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer
Assets ........................................ 49
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default ............................... 50
SECTION 6.02. Acceleration .................................... 53
SECTION 6.03. Other Remedies .................................. 53
SECTION 6.04. Waiver of Past Defaults ......................... 53
SECTION 6.05. Control by Majority ............................. 54
SECTION 6.06. Limitation on Suits ............................. 54
SECTION 6.07. Rights of Holders To Receive Payment ............ 55
SECTION 6.08. Collection Suit by Trustee ...................... 55
SECTION 6.09. Trustee May File Proofs of Claim ................ 55
SECTION 6.10. Priorities ...................................... 55
SECTION 6.11. Undertaking for Costs ........................... 56
SECTION 6.12. Waiver of Stay or Extension Laws ................ 56
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<PAGE> 5
EXHIBIT 4.1
ARTICLE 7
Trustee
SECTION 7.01. Duties of Trustee .............................. 56
SECTION 7.02. Rights of Trustee .............................. 58
SECTION 7.03. Individual Rights of Trustee ................... 58
SECTION 7.04. Trustee's Disclaimer ........................... 59
SECTION 7.05. Notice of Defaults ............................. 59
SECTION 7.06. Reports by Trustee to Holders .................. 59
SECTION 7.07. Compensation and Indemnity ..................... 59
SECTION 7.08. Replacement of Trustee ......................... 60
SECTION 7.09. Successor Trustee by Merger .................... 61
SECTION 7.10. Eligibility; Disqualification .................. 62
SECTION 7.11. Preferential Collection of Claims
Against Company ............................. 62
ARTICLE 8
Discharge of Indenture; Defeasance
SECTION 8.01. Discharge of Liability on Securities;
Defeasance ................................... 62
SECTION 8.02. Conditions to Defeasance ........................ 63
SECTION 8.03. Application of Trust Money ...................... 65
SECTION 8.04. Repayment to Company ............................ 65
SECTION 8.05. Indemnity for Government
Obligations .................................. 66
SECTION 8.06. Reinstatement ................................... 66
ARTICLE 9
Amendments, Supplements and Waivers
SECTION 9.01. Without Consent of Holders ..................... 66
SECTION 9.02. With Consent of Holders ........................ 67
SECTION 9.03. Compliance with Trust Indenture Act ............ 68
SECTION 9.04. Revocation and Effect of Consents
and Waivers ................................. 68
SECTION 9.05. Notation on or Exchange of
Securities .................................. 69
SECTION 9.06. Trustee To Sign Amendments ..................... 69
SECTION 9.07. Payment for Consent ............................ 69
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<PAGE> 6
EXHIBIT 4.1
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate ......................... 70
SECTION 10.02. Liquidation, Dissolution,
Bankruptcy .................................... 70
SECTION 10.03. Default on Senior Indebtedness ................... 70
SECTION 10.04. Acceleration of Payment of
Securities .................................... 72
SECTION 10.05. When Distribution Must Be Paid
Over ........................................... 72
SECTION 10.06. Subrogation ....................................... 72
SECTION 10.07. Relative Rights ................................... 72
SECTION 10.08. Subordination May Not Be Impaired
by Company ..................................... 72
SECTION 10.09. Rights of Trustee and Paying
Agent .......................................... 72
SECTION 10.10. Distribution or Notice to
Representative ................................. 73
SECTION 10.11. Article 10 Not To Prevent Events of
Default or Limit Right To
Accelerate ..................................... 73
SECTION 10.12. Trust Moneys Not Subordinated ..................... 73
SECTION 10.13. Trustee Entitled To Rely .......................... 74
SECTION 10.14. Trustee To Effectuate
Subordination .................................. 74
SECTION 10.15. Trustee Not Fiduciary for Holders
of Senior Indebtedness ......................... 74
SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions ..................................... 75
ARTICLE 11
Miscellaneous
SECTION 11.01. Trust Indenture Act Controls ..................... 75
SECTION 11.02. Notices .......................................... 75
SECTION 11.03. Communication by Holders with Other
Holders ........................................ 76
SECTION 11.04. Certificate and Opinion as to
Conditions Precedent ........................... 76
SECTION 11.05. Statements Required in Certificate
or Opinion ..................................... 77
SECTION 11.06. When Securities Disregarded ....................... 77
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<PAGE> 7
EXHIBIT 4.1
SECTION 11.07. Rules by Trustee, Paying Agent and
Registrar .......................... 77
SECTION 11.08. Legal Holidays ................................... 77
SECTION 11.09. Governing Law .................................... 78
SECTION 11.10. No Recourse Against Others ....................... 78
SECTION 11.11. Successors ....................................... 78
SECTION 11.12. Multiple Originals ............................... 78
SECTION 11.13. Table of Contents; Headings ...................... 78
Rule 144A/Regulation S Appendix
v
<PAGE> 8
EXHIBIT 4.1
INDENTURE dated as of June 23, 1998, between
AQUA-CHEM, INC., a Delaware corporation (the
"Company"), and UNITED STATES TRUST COMPANY OF NEW
YORK, a New York banking corporation (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 11
1/4% Senior Subordinated Notes Due 2008 (the "Initial Securities") and, if and
when issued pursuant to a registered exchange for Initial Securities, the
Company's 11 1/4% Senior Subordinated Notes Due 2008 (the "Exchange Securities")
and if and when issued pursuant to a private exchange for Initial Securities,
the Company's 11 1/4% Senior Subordinated Notes Due 2008 (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.
"Additional Assets" means (i) any property or assets (other
than Indebtedness and Capital Stock) in a Related Business; (ii) the Capital
Stock of a Person that becomes a Restricted Subsidiary as a result of the
acquisition of such Capital Stock by the Company or another Restricted
Subsidiary or (iii) Capital Stock constituting a minority interest in any Person
that at such time is a Restricted Subsidiary; provided, however, that any such
Restricted Subsidiary described in clauses (ii) or (iii) above is primarily
engaged in a Related Business.
"Affiliate" of any specified Person means any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person; provided, however, that the owners of
the Series A Preferred Stock and Series B Preferred Stock on the Issue Date and
their respective Affiliates shall not be considered Affiliates of the Company or
any Restricted Subsidiary solely by virtue of such ownership. For the purposes
of this definition, "control" when used with respect to any Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to
<PAGE> 9
2
EXHIBIT 4.1
the foregoing. For purposes of Sections 4.04, 4.06 and 4.07 only, "Affiliate"
shall also mean any beneficial owner of Capital Stock representing 5% or more of
the total voting power of the Voting Stock (on a fully diluted basis) of the
Company or of rights or warrants to purchase such Capital Stock (whether or not
currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers 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 (i) any shares of Capital
Stock of a Restricted Subsidiary (other than directors' qualifying shares or
shares required by applicable law to be held by a Person other than the Company
or a Restricted Subsidiary), (ii) all or substantially all the assets of any
division or line of business of the Company or any Restricted Subsidiary or
(iii) 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 (i), (ii) and (iii) above, (w) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary, (x) for purposes of Section 4.06 only,
a disposition that constitutes a Restricted Payment permitted under Section
4.04, (y) a disposition of obsolete or worn out equipment or equipment that is
no longer useful in the conduct of the business of the Company and its
Restricted Subsidiaries and that is disposed of, in each case, in the ordinary
course of business and (z) disposition of assets with a fair market value of
less than $500,000).
"Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, 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/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of numbers of years from the date of
determination to the dates of each successive scheduled principal payment
<PAGE> 10
3
EXHIBIT 4.1
of such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (ii) the sum of all
such payments.
"Bank Indebtedness" means all Indebtedness
outstanding under the Credit Agreement.
"Board of Directors" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day which is not a Legal
Holiday.
"Capital Lease Obligations" means an obligation that is
required to be classified and accounted for as a capital lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
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.
"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
into such equity.
"Change of Control" means the occurrence of any of
the following events:
(i) prior to the first public offering of common stock of the
Company, the Permitted Holders cease to be the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a
majority in the aggregate of the total voting power of the Voting Stock of the
Company, whether as a result of issuance of securities of the Company, any
merger, consolidation, liquidation or dissolution of the Company, any direct or
indirect transfer of securities or otherwise (for purposes of this clause (i)
and clause (ii) below, the Permitted Holders shall be deemed to beneficially own
any Voting Stock of any Person (the "specified entity") held by any other Person
(the "parent entity") so long as the Permitted Holders beneficially own (as so
defined), directly or
<PAGE> 11
4
EXHIBIT 4.1
indirectly, in the aggregate a majority of the voting power of the Voting Stock
of the parent entity);
(ii) following the first public offering of common stock of
the Company, any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in clause (i) above, except that for
purposes of this clause (ii) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly of more than 40% of the total voting power of the Voting
Stock of the Company; provided, however, that the Permitted Holders beneficially
own (as defined in clause (i) above), directly or indirectly, in the aggregate a
lesser percentage of the total voting power of the Voting Stock of the Company
than such other person and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the Board
of Directors (for the purposes of this clause (ii), such other person shall be
deemed to beneficially own any Voting Stock of a specified entity held by a
parent entity, if such other person is the beneficial owner (as defined in this
clause (ii)), directly or indirectly, of more than 40% of the voting power of
the Voting Stock of such parent entity and the Permitted Holders beneficially
own (as defined in clause (i) above), directly or indirectly, in the aggregate a
lesser percentage of the voting power of the Voting Stock of such parent entity
and do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the board of directors of such
parent entity);
(iii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders of the Company was approved by a
vote of a majority of the directors of the Company then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office;
(iv) the adoption of a plan relating to the liquidation or
dissolution of the Company; or
<PAGE> 12
5
EXHIBIT 4.1
(v) the merger or consolidation of the Company with or into
another Person or the merger of another Person with or into the Company, or the
sale of all or substantially all the assets of the Company to another Person
(other than a Person that is controlled by the Permitted Holders), and, in the
case of any such merger or consolidation, the securities of the Company that are
outstanding immediately prior to such transaction and which represent 100% of
the aggregate voting power of the Voting Stock of the Company are changed into
or exchanged for cash, securities or property, unless pursuant to such
transaction such securities are changed into or exchanged for, in addition to
any other consideration, securities of the surviving corporation that represent
immediately after such transaction, at least a majority of the aggregate voting
power of the Voting Stock of the surviving corporation.
"Code" means the Internal Revenue Code of 1986, as
amended.
"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.
"Consolidated Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that (1) if the Company or any Restricted
Subsidiary has Incurred any Indebtedness since the beginning of such period that
remains outstanding or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period (provided that if
such Indebtedness is Incurred under a revolving credit facility (or similar
arrangement or under any predecessor revolving credit or similar arrangement)
only that portion of such Indebtedness that constitutes the one year projected
average balance of such Indebtedness (as determined in good faith by senior
management of the Company and assuming a constant level of sales) shall be
deemed outstanding for purposes of this calculation) and the discharge of any
other Indebtedness repaid, repurchased, defeased or otherwise discharged with
the proceeds of such
<PAGE> 13
6
EXHIBIT 4.1
new Indebtedness as if such discharge had occurred on the first day of such
period, (2) if the Company or any Restricted Subsidiary has repaid, repurchased,
defeased or otherwise discharged any Indebtedness since the beginning of such
period or if any Indebtedness is to be repaid, repurchased, defeased or
otherwise discharged (in each case other than Indebtedness Incurred
under any revolving credit facility unless such Indebtedness has been
permanently repaid and has not been replaced) on the date of the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and
Consolidated Interest Expense for such period shall be calculated on a pro forma
basis as if such discharge had occurred on the first day of such period and as
if the Company or such Restricted Subsidiary has not earned the interest income
actually earned during such period in respect of cash or Temporary Cash
Investments used to repay, repurchase, defease or otherwise discharge such
Indebtedness, (3) if since the beginning of such period the Company or any
Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such
period shall be reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative),
directly attributable thereto for 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 Indebtedness 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 Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Indebtedness of such Restricted Subsidiary to the
extent the Company and its continuing Restricted Subsidiaries are no longer
liable for such Indebtedness after such sale), (4) 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 assets, including any
acquisition of assets occurring in connection with a transaction requiring 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 Indebtedness) as if such Investment or acquisition
occurred on the first day of such period and (5) if since
<PAGE> 14
7
EXHIBIT 4.1
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 Disposition, any
Investment or acquisition of assets that would have required an adjustment
pursuant to clause (3) or (4) 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 Disposition, Investment or acquisition occurred on the first day of such
period. For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations shall
be determined in good faith, without duplication, by a responsible financial or
accounting Officer of the Company. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest of such Indebtedness
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 Indebtedness 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,
without duplication, (i) interest expense attributable to capital leases and the
interest expense attributable to leases constituting part of a Sale/Leaseback
Transaction, (ii) amortization of debt discount and debt issuance cost, (iii)
capitalized interest, (iv) non-cash interest expenses, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs associated with Hedging
Obligations (including amortization of fees), (vii) Preferred Stock dividends in
respect of all Preferred Stock held by Persons other than the Company or a
Wholly Owned Subsidiary, (viii) interest incurred in connection with Investments
in discontinued operations, (ix) interest accruing on any Indebtedness of any
other Person to the extent such Indebtedness is Guaranteed by (or secured by the
assets of) the Company or any Restricted Subsidiary and (x) 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
<PAGE> 15
8
EXHIBIT 4.1
Person (other than the Company) in connection with Indebtedness Incurred
by such plan or trust.
"Consolidated Net Income" means, for any period, the net
income of the Company and its consolidated Subsidiaries; provided, however, that
there shall not be included in the calculation of such Consolidated Net Income:
(i) any net income of any Person (other than the Company) if
such Person is not a Restricted Subsidiary, except that (A) subject to the
exclusion contained in clause (iv) 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 actually 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
paid to a Restricted Subsidiary, to the limitations contained in clause (iii)
below) and (B) the Company's equity in a net loss of any such Person for such
period shall be included in determining such Consolidated Net Income;
(ii) any net income (or loss) of any Person acquired by the
Company or a Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition;
(iii) any net income 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 by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject to
the exclusion contained in clause (iv) 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 that could have
been 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 paid to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) 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;
(iv) any gain or loss realized upon the sale or other
disposition of any assets of the Company, its consolidated Subsidiaries or any
other Person (including
<PAGE> 16
9
EXHIBIT 4.1
pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise
disposed of in the ordinary course of business and any gain or loss realized
upon the sale or other disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses;
(vi) the cumulative effect of a change in accounting
principles; and
(vii) any restructuring charges related to the closing of the
Company's Greenville, Mississippi manufacturing facility.
Notwithstanding the foregoing, for the purposes of Section 4.04 only, there
shall be excluded from Consolidated Net Income any dividends, repayments of
loans or advances or other transfers of assets from Unrestricted Subsidiaries to
the Company or a Restricted Subsidiary to the extent such dividends, repayments
or transfers increase the amount of Restricted Payments permitted under such
Section pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown
on the balance sheet of the Company and its consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company ending at least 45 days prior to the
taking of any action for the purpose of which the determination is being made,
as (i) the par or stated value of all outstanding Capital Stock of the Company
plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated deficit
and (B) any amounts attributable to Disqualified Stock.
"Credit Agreement" means (i) the Second Amended and Restated
Credit Agreement dated as of June 23, 1998, between the Company, the lenders
party thereto in their capacities as lenders thereunder and Comerica Bank, as
agent, together with all exhibits, schedules and appendices thereto, as the same
may be amended, supplemented or otherwise modified from time to time and (ii)
any renewal, extension, refunding, restructuring, replacement or refinancing
thereof (whether under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders).
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or
<PAGE> 17
10
EXHIBIT 4.1
other similar agreement designed to protect such Person against fluctuations in
currency values.
"Default" means any event which is, or after notice or passage
of time or both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank
Indebtedness and (ii) any other Senior Indebtedness of the Company which, at the
date of determination, has an aggregate principal amount outstanding of, or
under which, at the date of determination, the holders thereof are committed to
lend up to, at least $25 million and is specifically designated by the Company
in the instrument evidencing or governing such Senior Indebtedness as
"Designated Senior Indebtedness" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable or must be purchased, upon the
occurrence of certain events or otherwise, by such Person at the option of the
holder thereof, in whole or in part, in each case on or prior to the first
anniversary of the Stated Maturity of the Securities; provided, however, that
any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
purchase or redeem such Capital Stock upon the occurrence of an "asset sale" or
"change of control" occurring prior to the first anniversary of the Stated
Maturity of the Securities shall not constitute Disqualified Stock if (x) the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are not more favorable to the holders of such Capital Stock than the provisions
of Sections 4.06 and 4.09 and (y) any such requirement only becomes operative
after compliance with such terms applicable to the Securities, including the
purchase of any Securities tendered pursuant thereto.
"EBITDA" for any period means the sum of Consolidated Net
Income, plus Consolidated Interest Expense plus the following to the extent
deducted in calculating such Consolidated Net Income: (a) all income tax expense
of the Company and its consolidated Restricted Subsidiaries, (b) depreciation
expense of the Company and its consolidated
<PAGE> 18
11
EXHIBIT 4.1
Restricted Subsidiaries, (c) amortization expense of the Company and its
consolidated Restricted Subsidiaries (excluding amortization expense
attributable to a prepaid cash item that was paid in a prior period) and (d) all
other non-cash charges of the Company and its consolidated Restricted
Subsidiaries (excluding any such non-cash charge to the extent that it
represents an accrual of or reserve for cash expenditures in any future period),
in each case for such period. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and non-cash charges 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, as amended.
"Foreign Subsidiary" means a Restricted Subsidiary that is
incorporated in a jurisdiction other than the United States or a State thereof
or the District of Columbia and
with respect to which more than 80% of any of its sales, earnings or assets
(determined on a consolidated basis in accordance with GAAP) are located in,
generated from or derived from operations located in territories outside of the
United States of America and jurisdictions outside the United States of America.
"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 SEC 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
<PAGE> 19
12
EXHIBIT 4.1
in staff accounting bulletins and similar written statements from the accounting
staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any Person and
any obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness or other obligation of such 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 (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such 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 Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall be deemed the Incurrence
of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal in respect of (A) indebtedness of such Person
for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or
other similar instruments for the payment of which such Person is responsible or
liable, including, in each case, any premium
<PAGE> 20
13
EXHIBIT 4.1
on such indebtedness to the extent such premium has become due and payable;
(ii) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions entered into by such
Person;
(iii) 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);
(iv) 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 clauses (i) through (iii)
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 30th Business Day following
payment on the letter of credit);
(v) 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, the liquidation preference with
respect to, any Preferred Stock (but excluding, in each case, any accrued
dividends);
(vi) all obligations of the type referred to in clauses (i)
through (v) 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;
(vii) all obligations of the type referred to in clauses (i)
through (vi) of other Persons secured by any Lien on any property or asset 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 assets or the amount of the obligation so secured; and
(viii) to the extent not otherwise included in this definition,
Hedging Obligations of such Person.
<PAGE> 21
14
EXHIBIT 4.1
The amount of Indebtedness 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.
"Indenture" means this Indenture as amended or supplemented from
time to time.
"Interest Rate Agreement" means in respect of a Person any
interest rate swap agreement, interest rate cap agreement or other financial
agreement or arrangement designed to protect such Person against fluctuations in
interest rates.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary," the definition of "Restricted Payment" and Section
4.04 (i) "Investment" shall include the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of any Subsidiary of the Company at the time that such Subsidiary is designated
an Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary
at the time of such redesignation less (y) the portion (proportionate to the
Company's equity interest in such Subsidiary) of the fair market value of the
net assets of such Subsidiary at the time of such redesignation; and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"Issue Date" means the date on which the Securities are
originally issued.
<PAGE> 22
15
EXHIBIT 4.1
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash
payments received therefrom (including any cash payments received by way of
deferred payment of principal pursuant to a note or installment receivable or
otherwise and proceeds from the sale or other disposition of any securities
received as consideration, but only as and when received, but excluding any
other consideration received in the form of assumption by the acquiring Person
of Indebtedness or other obligations relating to such properties or assets or
received in any other noncash form), in each case net of (i) all legal, title
and recording tax expenses, commissions and other fees and expenses incurred,
and all Federal, state, provincial, foreign and local taxes required to be
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien upon
or other security agreement of any kind with respect to such assets, or which
must by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments required to be made to
minority interest holders in Restricted Subsidiaries as a result of such Asset
Disposition and (iv) the deduction of appropriate amounts provided by the seller
as a reserve, in accordance with GAAP, against any liabilities associated with
the property or other assets disposed in such Asset Disposition and retained by
the Company or any Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of
Capital Stock, means 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 or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two
Officers.
<PAGE> 23
16
EXHIBIT 4.1
"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 Holders" means (i) J. H. Whitney & Co. and any Person
who on the Issue Date is an Affiliate of J. H. Whitney & Co. and (ii) any Person
who, on the Issue Date, is a member of the senior management and a beneficial
shareholder of the Company.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) the Company, a Restricted Subsidiary or a Person
that will, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary is a
Related Business; (ii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted Subsidiary;
(vii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (viii) Permitted Joint Ventures not
in excess of $7.5 million at any time outstanding; and (ix) any Person to the
extent such Investment represents the non-cash portion of the consideration
received for an Asset Disposition as permitted pursuant to Section 4.06.
"Permitted Joint Ventures" means joint ventures conducting a
Related Business primarily outside of the United States.
<PAGE> 24
17
EXHIBIT 4.1
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, 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 a Security means the principal of the Security
plus the premium, if any, payable on the Security which is due or overdue or is
to become due at the relevant time.
"Public Equity Offering" means an underwritten primary public
offering of common stock of the Company pursuant to an effective registration
statement under the Securities Act of 1933.
"Public Market" means any time after (x) a Public Equity Offering
has been consummated and (y) at least 15% of the total issued and outstanding
common stock of the Company has been distributed by means of an effective
registration statement under the Securities Act or sales pursuant to Rule 144
under the Securities Act.
"Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount
<PAGE> 25
18
EXHIBIT 4.1
(or if Incurred with original issue discount, an aggregate issue price) that is
equal to or less than the aggregate principal amount (or if Incurred with
original issue discount, the aggregate accreted value) then outstanding or
committed (plus fees and expenses, including any premium and defeasance costs)
under the Indebtedness being Refinanced; provided further, however, that
Refinancing Indebtedness shall not include (x) Indebtedness of a Subsidiary that
Refinances Indebtedness of the Company or (y) Indebtedness of the Company or a
Restricted Subsidiary that Refinances Indebtedness of an Unrestricted
Subsidiary.
"Related Business" means any business related, ancillary or
complementary to the businesses of the Company and the Restricted Subsidiaries
on the Issue Date.
"Representative" means any trustee, agent or representative
(if any) for an issue of Senior Indebtedness of the Company.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation)), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company held by any Person
or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital Stock of the
Company that is not Disqualified Stock), (iii) the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
a sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of
<PAGE> 26
19
EXHIBIT 4.1
acquisition) or (iv) the making of any Investment in any Person (other than a
Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of
the Company that is not an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired whereby the Company or a Restricted
Subsidiary transfers such property to a Person and the Company or a Restricted
Subsidiary leases it from such Person.
"SEC" means the Securities and Exchange
Commission.
"Secured Indebtedness" means any Indebtedness of
the Company secured by a Lien.
"Senior Indebtedness" means (i) Indebtedness of the Company,
whether outstanding on the Issue Date or thereafter Incurred, and (ii) accrued
and unpaid interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company to the
extent post-filing interest is allowed in such proceeding) in respect of (A)
Indebtedness of the Company for money borrowed and (B) Indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
the Company is responsible or liable (in the case of each of (A) and (B),
whether outstanding on the Issue Date or thereafter Incurred) unless, in the
case of any particular Indebtedness, the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided that such
obligations are subordinate in right of payment to the Securities; provided,
however, that Senior Indebtedness shall not include (1) any obligation of the
Company to any Subsidiary, (2) any liability for Federal, state, local or other
taxes owed or owing by the Company, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
guarantees thereof or instruments evidencing such liabilities), (4) any
Indebtedness of the Company (and any accrued and unpaid interest in respect
thereof) which is subordinate or junior in any respect to any other Indebtedness
or other obligation of the Company or (5) that portion of any Indebtedness which
at the time of Incurrence is Incurred in violation of this Indenture.
"Senior Subordinated Indebtedness" means the Securities and
any other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari
<PAGE> 27
20
EXHIBIT 4.1
passu with the Securities in right of payment and is not subordinated by its
terms in right of payment to any Indebtedness or other obligation of the Company
which is not Senior Indebtedness.
"Series A Preferred Stock" means the Series A Cumulative
Preferred Stock, par value $.01 per share, of the Company.
"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 SEC.
"Stated Maturity" means, with respect to any security, the
date specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness 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" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) 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 (i) such Person,
(ii) such Person and one or more Subsidiaries of such Person or (iii) one or
more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the
following:
(i) any investment in direct obligations of the United States
of America or any agency thereof or obligations guaranteed by the United States
of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of
deposit and money market deposits maturing
<PAGE> 28
21
EXHIBIT 4.1
within 180 days of the date of acquisition thereof issued by a bank or trust
company which is organized under the laws of the United States of America, any
state thereof or any foreign country recognized by the United States, and which
bank or trust company has capital, surplus and undivided profits aggregating in
excess of $50,000,000 (or the foreign currency equivalent thereof) and has
outstanding debt which is rated "A" (or such similar equivalent rating) or
higher by at least one nationally recognized statistical rating organization (as
defined in Rule 436 under the Securities Act) or any money-market fund sponsored
by a registered broker dealer or mutual fund distributor,
(iii) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (i) above
entered into with a bank meeting the qualifications described in clause (ii)
above,
(iv) investments in commercial paper, maturing not more than
90 days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Group, and
(v) investments in securities with maturities of six months or
less from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard &
Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of this Indenture, except as
provided in Section 9.03.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture 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.
<PAGE> 29
22
EXHIBIT 4.1
"Uniform Commercial Code" means the New York Uniform
Commercial Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of
its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on
any property of, the Company or any other Subsidiary of the Company that is not
a Subsidiary of the Subsidiary to be so designated; provided, however, that
either (A) the Subsidiary to be so designated has total assets of $1,000 or less
or (B) if such Subsidiary has assets greater than $1,000, such designation would
be permitted under Section 4.04. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (x) the Company could Incur
$1.00 of additional Indebtedness under Section 4.03(a) and (y) no Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the resolution of the Board of Directors giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"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 Person means all classes of Capital Stock
or other interests (including partnership interests) of such Person then
outstanding and normally entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof.
"WEP" means Whitney Equity Partners, L.P. and its
successors.
<PAGE> 30
23
"Wholly Owned Subsidiary" means a Restricted Subsidiary all
the Capital Stock of which (other than directors' qualifying shares and similar
ownership required or made necessary to conduct business by the laws or
regulations of the jurisdiction under which it is incorporated) is owned by the
Company or one or more Wholly Owned Subsidiaries.
SECTION 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction" ................ 4.07
"Bankruptcy Law" ....................... 6.01
"Blockage Notice" ...................... 10.03
"covenant defeasance option" ........... 8.01(b)
"Custodian" ............................ 6.01
"Event of Default" ..................... 6.01
"legal defeasance option" .............. 8.01(b)
"Legal Holiday" ........................ 11.08
"Offer" ................................ 4.06(b)
"Offer Amount" ......................... 4.06(c)(2)
"Offer Period" ......................... 4.06(c)(2)
"pay the Securities" ................... 10.03
"Paying Agent" ......................... 2.03
"Payment Blockage Period" .............. 10.03
"Purchase Date" ........................ 4.06(c)(1)
"Registrar"............................. 2.03
"Successor Company" .................... 5.01
</TABLE>
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:
"Commission" means the SEC;
"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
<PAGE> 31
24
EXHIBIT 4.1
"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 SEC 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;
(8) 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; and
(9) all references to the date the Securities were originally
issued shall refer to the date the Initial Securities were originally
issued.
<PAGE> 32
25
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 the Rule 144A/Regulation S Appendix attached hereto (the
"Appendix") 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 the Appendix
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 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 the Appendix 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 Secu-
rities 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 signatory 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.
At any time and from time to time after the execution of
this Indenture, the Trustee or an authenticating agent shall upon
receipt of 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 authenticate and deliver Securities for original
<PAGE> 33
26
EXHIBIT 4.1
issue in the aggregate principal amount specified in such order, provided that
the Trustee shall be entitled to receive an Officer's Certificate and an Opinion
of Counsel of the Company that it may reasonably request in connection with
such authentication and delivery of Securities. 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 in the case of an issuance of
Securities pursuant to Section 2.13 after the date of execution of this
Indenture, shall certify that such issuance is in compliance with Section 4.03.
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 "Registrar" includes any co-registrar and 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 and any change in the
address of such agent. If the Company fails to appoint and 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.
<PAGE> 34
27
EXHIBIT 4.1
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 Subsidiary acts as Paying Agent, it shall segregate
the money held by it as Paying Agent and hold it as a separate trust fund for
the benefit of the Securityholders. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying Agent for
the Securities. 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
and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. Transfer and Exchange. The Securities shall be
issued in registered form and shall be transferable only upon the surrender of a
Security for registration of transfer. When a Security is presented to the
Registrar or a co-registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if the requirements of Section
8-401(a)(1) of the Uniform Commercial Code are met. When Securities are
presented to the Registrar or a co-registrar with a request to exchange them for
an equal principal amount of Securities of other denominations, the Registrar
shall make the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Company
<PAGE> 35
28
EXHIBIT 4.1
shall execute and the Trustee shall authenticate Securities at the Registrar's
or co-registrar's request. The Company may require payment of a sum sufficient
to pay all taxes, assessments or other governmental charges in connection with
any transfer or exchange pursuant to this Section. The Company shall not be
required to make and the Registrar need not register transfers or exchanges of
Securities selected for redemption (except, in the case of Securities to be
redeemed in part, the portion thereof not to be redeemed) or any Securities for
a period of 15 days before a selection of Securities to be redeemed or 15 days
before an interest payment date.
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.
All Securities issued upon any transfer or exchange pursuant to the
terms of this Indenture will evidence the same debt and will be entitled to the
same benefits under this Indenture as the Securities surrendered upon such
transfer or exchange.
SECTION 2.07. Replacement Securities. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
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.
<PAGE> 36
29
EXHIBIT 4.1
SECTION 2.08. 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 cancellation and those described in this
Section as not outstanding. Except as set forth in Section 11.06, 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 2.07, 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 2.09. 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 and as shall be reasonably acceptable to
the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Securities and deliver them in exchange
for temporary Securities. Holders of temporary Securities shall be entitled to
all of the benefits of this Indenture.
SECTION 2.10 Cancellation. The Company at any time may deliver
Securities to the Trustee for cancellation. 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 record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancellation 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
<PAGE> 37
30
EXHIBIT 4.1
it has redeemed, paid or delivered to the Trustee for cancellation.
SECTION 2.11. 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, in each case at the rate provided in the Securities. The Company may pay
the defaulted interest to the persons who are Securityholders on a subsequent
special record date which date shall be at least five Business Days prior to the
payment 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. At least 15
days before the special record date, the Company (or, upon the written request
of the Company, the Trustee, in the name of and at the expense of the Company)
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 2.12. 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.
The Company shall promptly notify the Trustee of any change in the "CUSIP"
numbers.
SECTION 2.13. Issuance of Additional Securities. The Company may,
subject to Section 4.03, issue additional Securities under this Indenture which
will have identifical terms as the Securities issued on the Issue Date other
than with respect to the Issue Date, issue price and first payment of interest.
The Securities issued on the Issue Date and any additional Securities
subsequently issued shall be treated as a single class for all purposes under
this Indenture.
<PAGE> 38
31
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 the paragraph of the Securities pursuant to which the redemption
will occur.
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, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee in its
sole discretion shall deem to be fair and appropriate and in accordance with
methods generally used at the time of selection by fiduciaries in similar
circumstances. 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 at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
<PAGE> 39
32
EXHIBIT 4.1
(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;
(7) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed; and
(8) 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 signed by an Officer of the Company, 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.
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 related interest payment date). 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
Subsidiary is the
<PAGE> 40
33
EXHIBIT 4.1
Paying Agent, shall segregate and hold in trust) money sufficient to pay the
redemption price of and accrued interest 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 cancellation.
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.
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 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. SEC Reports. Notwithstanding that the Company may not
be subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the SEC 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 Section 314(a).
<PAGE> 41
34
EXHIBIT 4.1
SECTION 4.03. Limitation on Indebtedness. (a) The Company shall not,
and shall not permit any Restricted Subsidiary to, Incur, directly or
indirectly, any Indebtedness; provided, however, that the Company may Incur
Indebtedness if, on the date of such Incurrence and after giving effect thereto,
the Consolidated Coverage Ratio exceeds 2.00 to 1.
(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred pursuant to the Credit Agreement;
provided, however, that, after giving effect to any such Incurrence, the
aggregate principal amount of such Indebtedness then outstanding does not
exceed the greater of (i) $45.0 million less the sum of all principal
payments with respect to such Indebtedness pursuant to Section
4.06(a)(ii)(A) and (ii) the sum of (x) 60% of the book value of the
inventory of the Company and its Restricted Subsidiaries (other than any
Foreign Subsidiary that has Indebtedness then outstanding Incurred
pursuant to clause (3) below) and (y) 85% of the book value of the
accounts receivable of the Company and its Restricted Subsidiaries (other
than any Foreign Subsidiary that has Indebtedness then outstanding
Incurred pursuant to clause (3) below);
(2) Indebtedness owed to and held by the Company or a Wholly Owned
Subsidiary; provided, however, that (i) any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent
transfer of such Indebtedness (other than to the Company or a Wholly Owned
Subsidiary) shall be deemed, in each case, to constitute the Incurrence of
such Indebtedness by the obligor thereon and (ii) if the Company is the
obligor on such Indebtedness, such Indebtedness is expressly subordinated
to the prior payment in full in cash of all obligations with respect to
the Securities;
(3) Indebtedness of Foreign Subsidiaries in an aggregate principal
amount that, when taken together with the principal amount of all other
Indebtedness Incurred pursuant to this clause (3) (and any Indebtedness
Incurred by Foreign Subsidiaries prior to the Issue Date solely to finance
its working capital) and then outstanding does not exceed the sum of (i)
60% of the book value of the inventory of Foreign
<PAGE> 42
35
EXHIBIT 4.1
Subsidiaries that have Indebtedness Incurred pursuant to this clause (3)
then outstanding and (ii) 85% of the book value of the accounts receivable
of Foreign Subsidiaries that have Indebtedness Incurred pursuant to this
clause (3) then outstanding;
(4) the Securities and the Exchange Securities;
(5) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), (3) or (4) of this Section
4.03(b));
(6) Indebtedness of a Subsidiary Incurred and outstanding on or
prior to the date on which such Subsidiary was acquired by the Company
(other than Indebtedness Incurred in connection with, or to provide all or
any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such
Subsidiary became a Subsidiary or was acquired by the Company); provided,
however, that on the date of such acquisition and after giving effect
thereto, the Company would have been able to Incur at least $1.00 of
additional Indebtedness pursuant to Section 4.03(a);
(7) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to Section 4.03(a) or pursuant to clause (4), (5), or (6) of this
Section 4.03(b) or this clause 7; provided, however, that to the extent
such Refinancing Indebtedness directly or indirectly Refinances
Indebtedness of a Subsidiary Incurred pursuant to Section 4.03(b)(6), such
Refinancing Indebtedness shall be Incurred only by such Subsidiary;
(8) Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by the Company
pursuant to this Indenture;
(9) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or assumed
in connection with the disposition of any business, assets or a
Subsidiary, other than guarantees of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or a Subsidiary for
the purpose of financing such acquisition;
<PAGE> 43
36
EXHIBIT 4.1
provided, however, that the maximum assumable liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds actually
received by the Company and its Restricted Subsidiaries in connection with
such disposition;
(10) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts) drawn against
insufficient funds in the ordinary course of business; provided, however,
that such Indebtedness is extinguished within two Business Days of
incurrence;
(11) Incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or any such Restricted Subsidiaries in an
aggregate principal amount not to exceed the greater of (a) $20 million or
(b) 5% of the Consolidated Net Worth of the Company at any one time
outstanding;
(12) Indebtedness of the Company consisting of Guarantees of
Indebtedness of a Foreign Subsidiary Incurred pursuant to Section
4.03(b)(3);
(13) Indebtedness in respect of performance bonds and surety or
appeal bonds entered into by the Company and its Restricted Subsidiaries
in the ordinary course of their business and letters of credit entered
into in the ordinary course of business by the Company and its Restricted
Subsidiaries to secure such performance bonds or surety or appeal bonds 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 30th
Business Day following payment on such letter of credit; and
(14) Indebtedness in an aggregate principal amount which, together
with all other Indebtedness of the Company outstanding on the date of such
Incurrence (other than Indebtedness permitted by clauses (1) through (13)
of this Section 4.03(b) or Section 4.03(a)) does not exceed $10 million.
<PAGE> 44
37
EXHIBIT 4.1
(c) Notwithstanding the foregoing, the Company shall not Incur any
Indebtedness pursuant to Section 4.03(b) if the proceeds thereof are used,
directly or indirectly, to Refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Securities to at least the same extent
as such Subordinated Obligations.
(d) For purposes of determining compliance with this Section 4.03,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described herein, the Company, in its sole
discretion, will classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of the above clauses and
(ii) an item of Indebtedness may be divided and classified in more than one of
the types of Indebtedness described herein.
(e) Notwithstanding Section 4.03(a) or 4.03(b), the Company shall
not Incur (i) any Indebtedness if such Indebtedness is subordinate or junior in
ranking in any respect to any Senior Indebtedness, unless such Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness or (ii) any Secured Indebtedness
that is not Senior Indebtedness unless contemporaneously therewith effective
provision is made to secure the Securities equally and ratably with such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
SECTION 4.04. Limitation on Restricted Payments. (a) The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to make a Restricted Payment if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Company is not able to Incur an additional $1.00 of
Indebtedness under Section 4.03; or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter immediately following the fiscal quarter during which the
Securities are originally
<PAGE> 45
38
EXHIBIT 4.1
issued to the end of the most recent fiscal quarter ending at least 45
days prior to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from the
issuance or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company and other than an issuance or sale to an
employee stock ownership plan or to a trust established by the Company or
any of its Subsidiaries for the benefit of their employees);
(C) the amount by which Indebtedness of the Company is reduced on
the Company's balance sheet upon the conversion or exchange (other than by
a Subsidiary of the Company) subsequent to the Issue Date of any
Indebtedness of the Company convertible or exchangeable for Capital Stock
(other than Disqualified Stock) of the Company (less the amount of any
cash, or the fair value of any other property, distributed by the Company
upon such conversion or exchange); and
(D) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries resulting from dividends,
repayments of loans or advances or other transfers of assets, in each case
to the Company or any Restricted Subsidiary from Unrestricted
Subsidiaries, and (ii) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of
an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary;
provided, however, that the foregoing sum shall not exceed, in the
case of any Unrestricted Subsidiary, the amount of Investments
previously made (and treated as a Restricted Payment) by the Company
or any Restricted Subsidiary in such Unrestricted Subsidiary.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any Restricted Payments made out of the proceeds of the
substantially concurrent sale of, or
<PAGE> 46
39
EXHIBIT 4.1
made by exchange for, Capital Stock of the Company (other than Disqualified
Stock and other than Capital Stock issued or sold to a Subsidiary of the Company
or an employee stock ownership plan or to a trust established by the Company or
any of its Subsidiaries for the benefit of their employees); provided, however,
that (A) such Restricted Payment shall be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from such sale shall
be excluded from the calculation of amounts under clause (3)(B) of Section
4.04(a);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company which is permitted to be Incurred pursuant to
Section 4.03; provided, however, that such purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value shall be excluded in the
calculation of the amount of Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied with
Section 4.04(a); provided, however, that at the time of payment of such
dividend, no other Default shall have occurred and be continuing (or result
therefrom); provided further, however, that such dividend shall be included in
the calculation of the amount of Restricted Payments;
(iv) the repurchase or other acquisition of shares of, or options to
purchase shares of, common stock of the Company or any of its Subsidiaries from
employees, former employees, directors or former directors of the Company or any
of its Subsidiaries (or permitted transferees of such employees, former
employees, directors or former directors), pursuant to the terms of the
agreements (including employment agreements) or plans (or amendments thereto)
approved by the Board of Directors under which such individuals purchase or sell
or are granted the option to purchase or sell, shares of such common stock;
provided, however, that the aggregate amount of such repurchases and other
acquisitions shall not exceed $1 million in any calendar year; provided further,
however, that such repurchases and other acquisitions shall be excluded in the
calculation of the amount of Restricted Payments;
<PAGE> 47
40
EXHIBIT 4.1
(v) the repurchase of shares of Series A Preferred Stock (and the
repayment of accumulated dividends thereon) on the Issue Date in an aggregate
amount of up to $3.5 million; provided, however, that such repurchase shall be
excluded in the calculation of the amount of Restricted Payments; or
(vi) Restricted Payments in an aggregate amount not to exceed $7.5
million; provided, however, that such Restricted Payments shall be excluded in
the calculation of the amount of Restricted Payments.
SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on
its Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) make any loans or advances to the Company
or (c) transfer any of its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date;
(ii) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by
such Restricted Subsidiary on or prior to the date on which such Restricted
Subsidiary was acquired by the Company (other than Indebtedness 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 related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
evidencing Indebtedness Incurred without violation of this Indenture or
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this covenant or this clause (iii) or
contained in any amendment to an agreement referred to in clause (i) or (ii) of
this covenant or this clause (iii); provided, however, that the encumbrances and
restrictions with respect to such Restricted Subsidiary contained in any such
agreement, refinancing agreement or amendment are no less favorable to the
Securityholders than encumbrances and
<PAGE> 48
41
EXHIBIT 4.1
restrictions with respect to such Restricted Subsidiary contained in such
predecessor agreements;
(iv) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the extent
such provisions restrict the transfer of the lease or the property leased
thereunder;
(v) in the case of clause (c) above, restrictions contained in
security agreements or mortgages securing Indebtedness of a Restricted
Subsidiary to the extent such restrictions restrict the transfer of the property
subject to such security agreements or mortgages; and
(vi) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition.
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless (i) the Company
or such Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value (including as to the value
of all non-cash consideration), as determined in good faith by the Board of
Directors, of the shares and assets subject to such Asset Disposition and at
least 75% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash or cash equivalents and (ii) an
amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by the Company (or such Restricted Subsidiary, as the case may be) (A)
first, to the extent the Company elects (or is required by the terms of any
Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness or
Indebtedness (other than any Disqualified Stock) of a Wholly Owned Subsidiary
(in each case other than Indebtedness owed to the Company or an Affiliate of the
Company) within one year from the later of the date of such Asset Disposition or
the receipt of such Net Available Cash; (B) second, to the extent of the balance
of such Net Available Cash after application in accordance with clause (A), to
the extent the Company elects, to acquire Additional Assets within one year from
the later of the date of such Asset Disposition or the receipt of such Net
Available Cash; (C) third, to the extent of the balance of such Net Available
Cash after application in accordance with clauses
<PAGE> 49
42
EXHIBIT 4.1
(A) and (B), to make an Offer (as defined in Section 4.06 (b)) to
the holders of the Securities (and to holders of other Senior Subordinated
Indebtedness designated by the Company) to purchase Securities (and such other
Senior Subordinated Indebtedness) pursuant to and subject to the conditions
Section 4.06(b); and (D) fourth, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A), (B) and (C), to
(x) the acquisition by the Company or any Wholly Owned Subsidiary of Additional
Assets or (y) the prepayment, repayment or purchase of Indebtedness (other than
any Disqualified Stock) of the Company (other than Indebtedness owed to an
Affiliate of the Company) or Indebtedness of any Subsidiary (other than
Indebtedness owed to the Company or an Affiliate of the Company), in each case
within one year from the later of the receipt of such Net Available Cash and the
date the offer described in Section 4.06(b) is consummated; provided, however,
that in connection with any prepayment, repayment or purchase of Indebtedness
pursuant to clause (A), (C) or (D) above, the Company or such Restricted
Subsidiary shall permanently retire such Indebtedness and shall cause the
related loan commitment (if any) to be permanently reduced in an amount equal to
the principal amount so prepaid, repaid or purchased. Notwithstanding the
foregoing provisions of this Section 4.06(a), the Company and the Restricted
Subsidiaries shall not be required to apply any Net Available Cash in accordance
with this Section 4.06(a) except to the extent that the aggregate Net Available
Cash from all Asset Dispositions which are not applied in accordance with this
Section 4.06(a) exceeds $5 million. Pending application of Net Available Cash
pursuant to this Section 4.06(a), such Net Available Cash shall be invested in
Permitted Investments.
For the purposes of this Section 4.06(a), the following are
deemed to be cash or cash equivalents: (x) the assumption of Indebtedness of the
Company or any Restricted Subsidiary and the release of the Company or such
Restricted Subsidiary from all liability on such Indebtedness in connection with
such Asset Disposition and (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the
purchase of Securities (and other Senior Subordinated Indebtedness) pursuant to
Section 4.06 (a)(ii)(C), the Company shall be required to purchase Securities
tendered pursuant to an offer by the Company for the Securities (and other
Senior Subordinated Indebtedness)
<PAGE> 50
43
EXHIBIT 4.1
(the "Offer") at a purchase price of 100% of their principal amount (without
premium) plus accrued but unpaid interest (or, in respect of such other Senior
Subordinated Indebtedness, such lesser price, if any, as may be provided for by
the terms of such Senior Subordinated Indebtedness) in accordance with the
procedures (including prorating in the event of oversubscription) set forth in
Section 4.06(c). If the aggregate purchase price of Securities (and any other
Senior Subordinated Indebtedness) tendered pursuant to the Offer is less than
the Net Available Cash allotted to the purchase thereof, the Company shall be
required to apply the remaining Net Available Cash in accordance with Section
4.06(a)(ii)(D) above. The Company shall not be required to make an Offer to
purchase Securities (and other Senior Subordinated Indebtedness) pursuant to
this Section 4.06 if the Net Available Cash available therefor is less than $5
million (which lesser amount shall be carried forward for purposes of
determining whether such an Offer is required with respect to the Net Available
Cash from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 10 days after the
Company becomes obligated to make an Offer, the Company shall be obligated to
deliver to the Trustee and send, by first-class mail to each Holder, a written
notice stating that the Holder may elect to have his Securities purchased by the
Company either in whole or in part (subject to prorating as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The notice shall
specify a purchase date not less than 30 days nor more than 60 days after the
date of such notice (the "Purchase Date") and shall contain such information
concerning the business of the Company which the Company in good faith believes
will enable such Holders to make an informed decision (which at a minimum will
include (i) the most recently filed Annual Report on Form 10-K (including
audited consolidated financial statements) of the Company, the most recent
subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form
8-K of the Company filed subsequent to such Quarterly Report, other than Current
Reports describing Asset Dispositions otherwise described in the offering
materials (or corresponding successor reports), (ii) a description of material
developments in the Company's business subsequent to the date of the latest of
such Reports, and (iii) if material, appropriate pro forma financial
information) and all instructions and materials necessary to tender Securities
pursuant to the Offer, together with the information contained in clause (3).
<PAGE> 51
44
EXHIBIT 4.1
(2) Not later than the date upon which written notice of an
Offer is delivered to the Trustee as provided below, the Company shall deliver
to the Trustee an Officers' Certificate as to (i) the amount of the Offer (the
"Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the provisions of Section 4.06(a). On such date, the
Company shall also irrevocably deposit with the Trustee or with a paying agent
(or, if the Company is acting as its own paying agent, segregate and hold in
trust) in Temporary Cash Investments, maturing on the last day prior to the
Purchase Date or on the Purchase Date if funds are immediately available by open
of business, an amount equal to the Offer Amount to be held for payment in
accordance with the provisions of this Section. Upon the expiration of the
period for which the Offer remains open (the "Offer Period"), the Company shall
deliver to the Trustee for cancellation the Securities or portions thereof which
have been properly tendered to and are to be accepted by the Company. The
Trustee shall, on the Purchase Date, mail or deliver, or cause to be delivered,
payment to each tendering Holder in the amount of the purchase price. In the
event that the aggregate purchase price of the Securities delivered, or caused
to be delivered, by the Company to the Trustee is less than the Offer Amount
applicable to the Securities, the Trustee shall deliver the excess to the
Company immediately after the expiration of the Offer Period for application in
accordance with this Section.
(3) Holders electing to have a Security purchased shall be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders shall be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the Purchase Date, a telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Security which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased. If at the expiration of the Offer
Period the aggregate principal amount of Securities (and any other Senior
Subordinated Indebtedness included in the Offer) surrendered by holders thereof
exceeds the Offer Amount, the Company shall select the Securities and the other
Senior Subordinated Indebtedness to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only Securities
and the other Senior Subordinated Indebtedness in denominations of
<PAGE> 52
45
EXHIBIT 4.1
$1,000, or integral multiples thereof, shall be purchased). Holders whose
Securities are purchased only in part shall be issued new Securities equal in
principal amount to the unpurchased portion of the Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee
which are to be accepted for purchase, the Company shall also deliver an
Officers' Certificate stating that such Securities are to be accepted by the
Company pursuant to and in accordance with the terms of this Section. A
Security shall be deemed to have been accepted for purchase at the time the
Trustee, directly or through an agent, mails or delivers payment therefor to the
surrendering Holder.
(d) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.07. Limitation on Affiliate Transactions. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, enter into
or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property, employee compensation arrangements or the rendering of
any service) with any Affiliate of the Company (an "Affiliate Transaction")
unless the terms thereof (1) are no less favorable to the Company or such
Restricted Subsidiary than those that could be obtained at the time of such
transaction in arm's-length dealings with a Person who is not such an Affiliate,
(2) if such Affiliate Transaction involves an amount in excess of $2 million,
(i) are set forth in writing and (ii) have been approved by a majority of the
members of the Board of Directors having no personal stake in such Affiliate
Transaction and (3) if such Affiliate Transaction involves an amount in excess
of $10 million, have been determined by nationally recognized investment banking
firm to be fair, from a financial standpoint, to the Company and its Restricted
Subsidiaries.
(b) The provisions of Section 4.07(a) shall not prohibit (i)
any Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any
issuance of securities,
<PAGE> 53
46
EXHIBIT 4.1
or other payments, awards or grants in cash, securities or otherwise pursuant
to, or the funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors, (iii) the grant of stock
options or similar rights to employees and directors of the Company pursuant to
plans approved by the Board of Directors, (iv) loans or advances to employees in
the ordinary course of business in accordance with the past practices of the
Company or its Restricted Subsidiaries, but in any event not to exceed $1
million in the aggregate outstanding at any one time, (v) the payment of
reasonable fees to directors of the Company and its Restricted Subsidiaries who
are not employees of the Company or its Restricted Subsidiaries, (vi) any
Affiliate Transaction between the Company and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries, (vii) the payment by the Company (A) of
customary annual management fees and related expenses to WEP and (B) of fees
paid to WEP, J. H. Whitney & Co., or an affiliate of J. H. Whitney & Co.
pursuant to any financing, underwriting or placement agreement, or in respect of
other investment banking activities, in each case as determined by the Board of
Directors in good faith and (viii) the issuance or sale of any Capital Stock
(other than Disqualified Stock) of the Company.
SECTION 4.08. Limitation on the Sale or Issuance of Capital
Stock of Restricted Subsidiaries. The Company shall not sell or otherwise
dispose of any Capital Stock of a Restricted Subsidiary, and shall not permit
any Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise
dispose of any of its Capital Stock except (i) to the Company or a Wholly Owned
Subsidiary, (ii) if, immediately after giving effect to such issuance, sale or
other disposition, neither the Company nor any of its Subsidiaries own any
Capital Stock of such Restricted Subsidiary or (iii) if, immediately after
giving effect to such issuance, sale or other disposition, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect thereto would have been permitted
to be made under the covenant described Section 4.04 if made on the date of such
issuance, sale or other disposition.
SECTION 4.09. Change of Control. (a) Upon the occurrence of a
Change of Control, each Holder shall have the right to require that the Company
repurchase such Holder's Securities at a purchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (the "Change of Control Payment") (subject to the right of
holders of record
<PAGE> 54
47
EXHIBIT 4.1
on the relevant record date to receive interest on the relevant interest payment
date), in accordance with the terms contemplated in Section 4.09(b). In the
event that at the time of such Change of Control the terms of the Credit
Agreement restrict or prohibit the repurchase of Securities pursuant to this
Section, then prior to the mailing of the notice to Holders provided for in
Section 4.09(b) below but in any event within 30 days following any Change of
Control, the Company may, at its option, seek to obtain the requisite consent
under the Credit Agreement to permit the repurchase of the Securities as
provided for in Section 4.09(b).
(b) Within 30 days following any Change of Control, the
Company shall mail a notice to each Holder with a copy to the Trustee (the
"Change of Control Offer") stating:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Company to purchase such Holder's
Securities at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of Holders of record on the relevant
record date to receive interest on the relevant interest payment date);
(2) the circumstances and relevant facts regarding such Change
of Control (including information with respect to pro forma historical
income, cash flow and capitalization, each after giving effect to such
Change of Control);
(3) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent
with this Section, that a Holder must follow in order to have its
Securities purchased.
(c) Holders electing to have a Security purchased will be
required to surrender the Security, with an appropriate form duly completed, to
the Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders will be entitled to withdraw their election
if the Trustee or the Company receives not later than one Business Day prior to
the purchase date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Security which was
delivered for purchase by the Holder and
<PAGE> 55
48
EXHIBIT 4.1
a statement that such Holder is withdrawing his election to have such Security
purchased.
(d) On a date that is at least 30 but no more than 60 days
from the date on which the Company mails notice of the Change of Control (the
"Change of Control Payment Date"), the Company will, to the extent lawful, (1)
accept for payment all Securities or portions thereof properly tendered pursuant
to the Change of Control Offer, (2) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all Securities or portions
thereof so tendered and (3) deliver or cause to be delivered to the Trustee the
Securities so accepted together with an Officers' Certificate stating the
aggregate principal amount of Securities or portions thereof being purchased by
the Company. The Paying Agent will promptly mail to each Holder of Securities so
tendered the Change of Control Payment for such Securities, and the Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Security equal in principal amount to any unpurchased portion
of the Securities surrendered, if any; provided that each such new Security will
be in a principal amount of $1,000 or an integral multiple thereof. Prior to
complying with the provisions of this Section 4.14, but in any event within 90
days following a Change of Control, the Company will either repay all
outstanding Senior Indebtedness or obtain the requisite consents, if any, under
all agreements governing outstanding Senior Indebtedness to permit the
repurchase of Securities required by this covenant. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
(e) Notwithstanding the foregoing provisions of this Section,
the Company will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in Section
applicable to a Change of Control Offer made by the Company and purchases all
Securities validly tendered and not withdrawn under such Change of Control
Offer.
(f) The Company shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Securities pursuant to
this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of
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EXHIBIT 4.1
this Section, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section by virtue thereof.
SECTION 4.10. 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
Subsection 314(a)(4).
SECTION 4.11. Further Instruments and Acts. Upon request of
the Trustee, the Company will 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.
ARTICLE 5
Successor Company
SECTION 5.01. When Company May Merge or Transfer Assets. (a)
The Company shall not consolidate with or merge with or into, or convey,
transfer or lease, in one transaction or a series of transactions, all or
substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the
laws of the United States of America, any State thereof or the District
of Columbia and the Successor Company (if not the Company) shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Subsidiary as a result of such transaction as having
been Incurred by the Successor Company or such
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EXHIBIT 4.1
Subsidiary at the time of such transaction), no Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
(iv) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with this Indenture; and
(v) the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that the Holders will not recognize income,
gain or loss for Federal income tax purposes as a result of such
transaction 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 transaction had not occurred.
The Successor Company shall be the successor to the Company
and shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture, but the predecessor Company in the
case of a conveyance, transfer or lease shall not be released from the
obligation to pay the principal of and interest on the Securities.
ARTICLE 6
Defaults and Remedies
SECTION 6.01. Events of Default. An "Event of
Default" occurs if:
(1) the Company defaults in any payment of interest on any
Security when the same becomes due and payable, whether or not such
payment shall be prohibited by Article 10, and such default continues
for a period of 30 days;
(2) the Company (i) defaults in the payment of the principal
of any Security when the same becomes due and payable at its Stated
Maturity, upon redemption, upon declaration or otherwise, whether or
not such payment
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EXHIBIT 4.1
shall be prohibited by Article 10 or (ii) fails to redeem or purchase
Securities when required pursuant to this Indenture or the Securities,
whether or not such redemption or purchase shall be prohibited by Article
10;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05,
4.06, 4.07, 4.08, 4.09, 4.10 or 4.11 (other than a failure to purchase
Securities when required under Section 4.06 or 4.09) and such failure
continues for 30 days after the notice specified below;
(5) the Company fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in clause (1),
(2), (3) or (4) above) and such failure continues for 60 days after the
notice specified below;
(6) Indebtedness of the Company or any Significant Subsidiary is not
paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $7.5 million, or
its foreign currency equivalent at the time;
(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;
(8) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
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EXHIBIT 4.1
(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; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days; or
(9) any judgment or decree for the payment of money in excess of
$7.5 million or its foreign currency equivalent at the time is entered
against the Company or any Significant Subsidiary, remains outstanding for
a period of 60 days following the entry of such judgment or decree and is
not discharged, waived or the execution thereof stayed within 10 days
after the notice specified below.
The foregoing will constitute Events of Default 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.
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.
A Default under clauses (4), (5), or (9) is not an Event of Default
until the Trustee or the holders of at least 25% in principal amount of the
outstanding Securities notify the Company of the Default and the Company does
not cure such Default within the time specified after receipt of such notice.
Such notice must specify the Default, demand that it be remedied and state that
such notice is a "Notice of Default."
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) and any event which with the giving of
notice or the lapse of time would become an Event of Default
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EXHIBIT 4.1
under clause (4), (5) or (9), its status and what action the Company is taking
or proposes to take with respect thereto.
The Trustee shall not be charged with knowledge of any Event of
Default unless written notice thereof shall have been given to the Trustee by
the Company, the Paying Agent or any Securityholder.
SECTION 6.02. Acceleration. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (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 principal amount of the outstanding Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
but unpaid interest on all the Securities to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default specified in Section 6.01(7) or (8) with respect to the
Company occurs, the principal of and interest on all the Securities shall ipso
facto become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any Securityholders. The Holders of a majority
in principal amount of the Securities by notice to the Trustee may rescind an
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 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
principal amount of the Securities then outstanding by notice to the Trustee may
waive an
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EXHIBIT 4.1
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security (ii) a Default arising from the failure
to redeem or purchase any Security when required pursuant to this Indenture or
(iii) 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
principal amount of the 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. 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 indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.06. Limitation on Suits. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no
Securityholder may pursue any remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities
do not give the Trustee a direction
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EXHIBIT 4.1
inconsistent with the request during such 60-day period.
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 the 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;
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EXHIBIT 4.1
SECOND: to holders of Senior Indebtedness of the Company to the
extent required by Article 10;
THIRD: 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
FOURTH: 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 principal amount of the Securities.
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.
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EXHIBIT 4.1
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.
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EXHIBIT 4.1
(e) The Trustee, in its capacity as Trustee, Registrar or Paying
Agent, 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.
(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 and/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 here-
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EXHIBIT 4.1
under 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, co-registrar
or co-paying agent 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
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), 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 January 1 beginning with the January 1 following the date
of this Indenture, and in any event prior to March 31 in each year, the Trustee
shall mail to each Securityholder a brief report dated as of January 1 that
complies with TIA Section 313(a). The Trustee also shall comply with TIA Section
313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC, each stock exchange (if any) on which the
Securities are listed and delivered to the Company. 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 rea-
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EXHIBIT 4.1
sonable 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 and advances 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 in any capacity in which it is acting hereunder against any and all
loss, liability or expense (including attorneys' fees) incurred by it in
connection with the 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) with respect to
the Company, 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 principal amount
of the 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;
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EXHIBIT 4.1
(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, is removed by the Company or by the Holders
of a majority in principal amount of the 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 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 principal amount of the 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 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
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EXHIBIT 4.1
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 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 Section 310(a)(1), (2) and (3). The
Trustee shall have a combined capital and surplus of at least $50 million as set
forth in its most recent published annual report of condition. The Trustee
shall comply with TIA Section 310(b); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or indentures
under which other securities or certificates of interest or participation in
other securities of the Company are out standing if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met. Nothing herein shall be
deemed to prevent the Trustee from filing with the SEC the application referred
to in the penultimate paragraph of TIA Section 310(b).
SECTION 7.11. Preferential Collection of Claims Against Company. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 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 cancellation 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 hereof,
and the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all outstanding Securities, including interest
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EXHIBIT 4.1
thereon to maturity or such redemption date (other than Securities replaced
pursuant to Section 2.07), together with irrevocable instructions from the
Company directing the Trustee to apply such funds to the payment thereof at
maturity or redemption, as the case may be, and if in either case 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, 4.03,
4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10 and 4.11 and the operation of Sections
6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections
6.01(7) and (8), with respect only to Significant Subsidiaries) and the
limitations contained in Sections 5.01(a)(iii) and (iv) ("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 with respect
thereto. 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(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of
Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) or
because of the failure of the Company to comply with Section 5.01(a)(iii) or
(iv).
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 clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07 and 7.08 and in
this Article 8 shall survive until the Securities have been paid in full.
Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall
survive.
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EXHIBIT 4.1
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,
and irrevocably instructs the Trustee to apply such money or the proceeds
of such U.S. Government Obligations to the payment of such principal and
interest;
(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 Sections 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 and is not prohibited by Article 10;
(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;
(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
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EXHIBIT 4.1
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. The Trustee shall be
under no obligation to invest such money or U.S. Government Obligations except
as it may agree in writing with the Company. Money and securities so held in
trust are not subject to Article 10.
SECTION 8.04. Repayment to Company. Subject to Sections 7.07, 8.01
and 8.02, 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
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EXHIBIT 4.1
Trustee in any capacity in which it is acting hereunder 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.
ARTICLE 9
Amendments, Supplements and Waivers
SECTION 9.01. Without Consent of Holders. The Company and the
Trustee may amend or supplement 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 make any change in Article 10 that would limit or terminate
the benefits available to any holder
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EXHIBIT 4.1
of Senior Indebtedness (or Representatives therefor) under Article 10;
(5) to add guarantees with respect to the Securities, or to secure
the Securities;
(6) 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;
(7) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA; or
(8) to make any change that does not adversely affect the rights of
any Securityholder;
provided, however, that the Company has delivered to the Trustee an
Opinion of Counsel stating that such amendment or supplement complies with
the provisions of this Section 9.01.
An amendment or supplement under this Section may not make any
change that adversely affects the rights under Article 10 of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
After an amendment or supplement under this Section becomes
effective, the Company shall mail to Securityholders a notice briefly describing
such amendment or supplement. 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 principal
amount of the Securities then outstanding (including consents obtained in
connection with a tender offer or exchange for the Securities). However, without
the consent of each Securityholder affected thereby, an amendment, supplement or
waiver may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
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EXHIBIT 4.1
(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 premium 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 money other than that stated in the
Security;
(6) make any change in Article 10 that adversely affects the rights
of any Securityholder under Article 10; or
(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.
An amendment under this Section may not make any change that
adversely affects the rights under Article 10 of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any group or representative thereof authorized to give a consent) consent to
such change.
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 subse-
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EXHIBIT 4.1
quent 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, supplement or waiver 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, supplement or waiver authorized pursuant to this Article 9 if the
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, supplement or waiver 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,
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EXHIBIT 4.1
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.
ARTICLE 10
Subordination
SECTION 10.01. Agreement To Subordinate. The Company agrees, and
each Securityholder by accepting a Security agrees, that the Indebtedness
evidenced by the Securities is subordinated in right of payment, to the extent
and in the manner provided in this Article 10, to the prior payment of all
Senior Indebtedness and that the subordination is for the benefit of and
enforceable by the holders of such Senior Indebtedness. The Securities shall in
all respects rank pari passu with all other Senior Subordinated Indebtedness of
the Company and only Indebtedness of the Company which is Senior Indebtedness
shall rank senior to the Securities in accordance with the provisions set forth
herein. All provisions of this Article 10 shall be subject to Section 10.12.
SECTION 10.02. Liquidation, Dissolution, Bank- ruptcy. Upon any
payment or distribution of the assets of the Company to creditors upon a total
or partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Indebtedness shall be entitled to receive
payment in full of such Senior Indebtedness before Securityholders shall
be entitled to receive any payment of principal of or interest on the
Securities; and
(2) until such Senior Indebtedness is paid in full, any payment or
distribution to which Securityholders would be entitled but for this
Article 10 shall be made to holders of such Senior Indebtedness as their
interests may appear.
SECTION 10.03. Default on Senior Indebtedness. The Company may not
pay the principal of or interest on the
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EXHIBIT 4.1
Securities or make any deposit pursuant to Section 8.01 and may not repurchase,
redeem or otherwise retire any Securities (collectively, "pay the Securities")
if (i) any Designated Senior Indebtedness is not paid when due or (ii) any other
default on Designated Senior Indebtedness occurs and the maturity of such
Designated Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, (x) the default has been cured or waived and any such
acceleration has been rescinded or (y) such Designated Senior Indebtedness has
been paid in full; provided, however, that the Company may pay the Securities
without regard to the foregoing if the Company and the Trustee receive written
notice approving such payment from the Representative of such Designated Senior
Indebtedness. During the continuance of any default (other than a default
described in clause (i) or (ii) of the preceding sentence) with respect to any
Designated Senior Indebtedness pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods, the Company may not pay the Securities for a period (a "Payment
Blockage Period") commencing upon the receipt by the Company and the Trustee of
written notice (a "Blockage Notice") of such default from the Representative of
such Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (i) by written notice to the Trustee and the
Company from the Person or Persons who gave such Blockage Notice, (ii) because
the default giving rise to such Blockage Notice is no longer continuing or (iii)
because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions contained in the first sentence of this Section),
unless the holders of such Designated Senior Indebtedness or the Representative
of such holders shall have accelerated the maturity of such Designated Senior
Indebtedness, the Company may resume payments on the Securities after
termination of such Payment Blockage Period. Not more than one Blockage Notice
may be given in any consecutive 360-day period, irrespective of the number of
defaults with respect to Designated Senior Indebtedness during such period. For
purposes of this Section, no default or event of default which existed or was
continuing on the date of the commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period shall be, or be made, the basis of the commencement of a subsequent
Payment Blockage Period by the Representative of such Designated Senior
Indebtedness,
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EXHIBIT 4.1
whether or not within a period of 360 consecutive days, unless such default or
event of default shall have been cured or waived for a period of not less than
90 consecutive days.
SECTION 10.04. Acceleration of Payment of Securities. If payment of
the Securities is accelerated because of an Event of Default, the Company or the
Trustee at the direction and expense of the Company shall promptly notify the
holders of the Designated Senior Indebtedness (or their Representatives) of the
acceleration.
SECTION 10.05. When Distribution Must Be Paid Over. If a
distribution is made to Securityholders that because of this Article 10 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness and pay it over to
them as their interests may appear.
SECTION 10.06. Subrogation. After all Senior Indebtedness is paid in
full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of such Senior Indebtedness to receive
distributions applicable to such Senior Indebtedness. A distribution made under
this Article 10 to holders of such Senior Indebtedness which otherwise would
have been made to Securityholders is not, as between the Company and
Securityholders, a payment by the Company on such Senior Indebtedness.
SECTION 10.07. Relative Rights. This Article 10 defines the
relative rights of Securityholders and holders of Senior Indebtedness. Nothing
in this Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their
terms; or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness to receive distributions otherwise payable to
Securityholders.
SECTION 10.08. Subordination May Not Be Impaired by Company. No
right of any holder of Senior Indebtedness to enforce the subordination of the
Indebtedness evidenced by the Securities shall be impaired by any act or failure
to
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EXHIBIT 4.1
act by the Company or by its failure to comply with this Indenture.
SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding
Section 10.03, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, the Trustee receives at its
Corporate Trust Office notice satisfactory to it that payments may not be made
under this Article 10. The Company, the Registrar or co-registrar, the Paying
Agent, a Representative or a holder of Senior Indebtedness may give the notice;
provided, however, that, if an issue of Senior Indebtedness has a
Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 10 with respect to any Senior Indebtedness which may at any time be held
by it, to the same extent as any other holder of such Senior Indebtedness; and
nothing in Article 7 shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article 10 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.07.
SECTION 10.10. Distribution or Notice to Representative. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative (if
any).
SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit
Right To Accelerate. The failure to make a payment pursuant to the Securities by
reason of any provision in this Article 10 shall not be construed as preventing
the occurrence of a Default. Nothing in this Article 10 shall have any effect on
the right of the Securityholders or the Trustee to accelerate the maturity of
the Securities.
SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 8 by the Trustee for
the payment of principal of and interest on the Securities
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EXHIBIT 4.1
shall not be subordinated to the prior payment of any Senior Indebtedness or
subject to the restrictions set forth in this Article 10, and none of the
Securityholders shall be obligated to pay over any such amount to the Company or
any holder of Senior Indebtedness or any other creditor of the Company.
SECTION 10.13. Trustee Entitled To Rely. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section
10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent
or other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of such Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10. In the event that the Trustee determines, in good
faith, that evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 10, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and other facts
pertinent to the rights of such Person under this Article 10, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all
actions or omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. Trustee To Effectuate Subordination. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness as provided in this Article 10 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 10.15. Trustee Not Fiduciary for Holders of Senior
Indebtedness. With respect to the holders of the
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EXHIBIT 4.1
Senior Indebtedness, the Trustee undertakes to perform only such obligations on
the part of the Trustee as are specifically set forth in this Article 10, and no
implied covenants or obligations with respect to holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall
not be liable to any such holders if it shall mistakenly pay over or distribute
to Securityholders or the Company or any other Person, money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
10 or otherwise.
SECTION 10.16. Reliance by Holders of Senior Indebtedness on
Subordination Provisions. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of such Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
ARTICLE 11
Miscellaneous
SECTION 11.01. 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 11.02. Notices. Any notice or communication shall
be in writing and delivered in person, or mailed by first-class mail addressed
as follows:
if to the Company:
7800 North 113th Street
P.O. Box 421
Milwaukee, Wisconsin 53201
Attention of: Chief Financial Officer
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EXHIBIT 4.1
if to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036-1532
Attention: Corporate Trust Division
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Notices and communications to the Trustee shall not be deemed
to have been given until actually received by the Trustee at its address as
provided herein. 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 11.03. Communication by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 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 Section 312(c).
SECTION 11.04. 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
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EXHIBIT 4.1
(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.
SECTION 11.05. 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 11.06. 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 11.07. Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
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EXHIBIT 4.1
SECTION 11.08. 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 11.09. 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 11.10. 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 11.11. 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 11.12. 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.
SECTION 11.13. 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.
<PAGE> 86
EXHIBIT 4.1
IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed as of the date first written above.
AQUA-CHEM, INC.,
by /s/ JA Miller
---------------------------
Name: Jeffrey A. Miller
Title: Chairman of the
Board, President
and Chief Executive
Officer
UNITED STATES TRUST COMPANY OF
NEW YORK,
by /s/ John Guiliano
---------------------------
Name: JOHN GUILIANO
Title: VICE PRESIDENT
<PAGE> 87
EXHIBIT 4.1
RULE 144A/REGULATION S APPENDIX
PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES
AND EXCHANGE SECURITIES
1. Definitions
1.1 Definitions
For the purposes of this Appendix the following terms shall have the
meanings indicated below:
"Additional Series" means the 11 1/4% Senior Subordinated
Notes Due 2008 issued under this Indenture pursuant to Secton 2.13.
"Depository" means The Depository Trust Company, its nominees
and their respective successors.
"Exchange Securities" means the 11 1/4% Senior Subordinated
Notes Due 2008 to be issued pursuant to this Indenture in connection with a
Registered Exchange Offer pursuant to the Registration Rights Agreement.
"Initial Purchasers" means (i) with respect to the Initial
Series, Credit Suisse First Boston Corporation and Bear, Stearns & Co. Inc. and
(ii) with respect to each Additional Series, the Persons purchasing such
Additional Series under the related Purchase Agreement.
"Initial Securities" means (i) the Initial Series and (ii)
each Additional Series.
"Initial Series" means the 11 1/4% Senior Subordinated Notes
Due 2008 issued under this Indenture on or about the date hereof.
"Private Exchange" means the offer by the Company, pursuant to
the Registration Rights 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 Securities.
"Purchase Agreement" means (i) with respect to the Initial
Series, the Purchase Agreement dated June 18, 1998, between the Company and the
Initial Purchasers and (ii) with respect to each Additional Series, the
Purchase Agreement
<PAGE> 88
2
EXHIBIT 4.1
between the Company and the Persons purchasing such Additional Series.
"QIB" means a "qualified institutional buyer" as
defined in Rule 144A.
"Registered Exchange Offer" means the offer by the Company,
pursuant to the Registration Rights 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 Rights Agreement" means (i) with respect to the
Initial Series, the Registration Rights Agreement dated June 18, 1998, among
the Company and the Initial Purchasers and (ii) with respect to each Additional
Series, the registration rights agreement among the Company and the Persons
purchasing such Additional Series under the related Purchase Agreement.
"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 and 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
Rights Agreement.
"Transfer Restricted Securities" means 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)
<PAGE> 89
3
EXHIBIT 4.1
"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.
(a) Global Securities. Initial Securities offered and sold to
a QIB in reliance on Rule 144A under the Securities Act ("Rule 144A") or in
reliance on Regulation S under the Securities Act ("Regulation S"), in each case
as provided in the Purchase Agreement, 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 Trustee, at its New York office, as custodian for
the Depository (or with such other custodian as the Depository may direct), 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 hereinafter
provided. 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), 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 custodian for the
Depository.
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
<PAGE> 90
4
EXHIBIT 4.1
the Depository or by the Trustee as the custodian of the Depository 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) Certificated Securities. Except as provided in this
Section 2.1 or Section 2.3, 2.4 or 2.5, 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 specified
in the written order of the Company issued pursuant to Section 2.02 in this
Indenture 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 Rights Agreement, for a like principal amount of
Initial Securities, in each case, upon 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 $125,000,000 except
as provided in Section 2.07 and Section 2.13 in this Indenture.
2.3 Transfer and Exchange. (a) 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 to the Registrar a
written order given in accordance with the Depositary's procedures containing
information regarding the
<PAGE> 91
5
EXHIBIT 4.1
participant account of the Depositary to credited with a beneficial interest in
the Global Security. The Registrar shall, in accordance with such instructions
instruct the Depositary to credit to the account of the Person specified in such
instructions a beneficial interest in the Global Security and to debit the
account of the Person making the transfer the beneficial interest in the Global
Security being transferred.
(ii) Notwithstanding any other provisions of this Appendix
(other than the provisions set forth in Section 2.4), a Global Security
may not be transferred as a whole except 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.
(iii) In the event that a Global Security is exchanged for
Securities in definitive registered form pursuant to Section 2.4 or
Section 2.09 of this Indenture, 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
or Regulation S, as the case may be) and such other procedures as may
from time to time be adopted by the Company.
(b) Legend.
(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Security certificate evidencing the Global
Securities (and all Securities issued in exchange therefor or in
substitution thereof) shall bear a legend in substantially the
following form:
"THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER
OF THIS SECURITY
<PAGE> 92
6
EXHIBIT 4.1
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION
5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY (I) INSIDE THE U.S. TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (II) OUTSIDE THE U.S. IN A TRANSACTION IN
ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III)
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE),
(IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, OR (V) TO THE COMPANY, IN EACH OF CASES (I)
THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE."
(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, 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 certificated Security
that does not bear the legend set forth above and rescind any
restriction on the transfer of such Transfer Restricted Security, 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 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 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 Initial Security or Private Exchange
<PAGE> 93
7
EXHIBIT 4.1
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 or directions to transfer such Holder's
interest in the Global Security, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Securities pursuant to which 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 issued to certain Holders 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.
(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 still apply, and Private Exchange Securities in
global form with the Restricted Securities Legend set forth in Exhibit
1 hereto will be available to Holders that exchange such Initial
Securities in such Private Exchange.
(c) Cancellation or Adjustment of Global Security. At such
time as all beneficial interests in a Global Security have either been exchanged
for certificated Securities, redeemed, repurchased or canceled, such Global
Security shall be returned to the Depository for cancellation or retained and
canceled by the Trustee. At any time prior to such cancellation, if any
beneficial interest in a Global Security is exchanged for certificated
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
<PAGE> 94
8
EXHIBIT 4.1
to such Global Security, by the Trustee or the Securities Custodian, to reflect
such reduction.
(d) 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 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, 4.09 and 9.05 of
the Indenture).
(iii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) any certificated Security
selected for redemption in whole or in part pursuant to Article 3 of
this Indenture, except the unredeemed portion of any certificated
Security being redeemed in part, or (b) any Security for a period
beginning 15 Business Days before the mailing of a notice of an offer
to repurchase or redeem Securities or 15 Business 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.
<PAGE> 95
9
EXHIBIT 4.1
(e) 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 other Person with respect to the
accuracy of the records of the Depository or its nominee or of any
participant or member 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 or upon
the order of 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 custodian for the Depository 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
<PAGE> 96
10
EXHIBIT 4.1
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 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
Initial 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.
(d) In the event of the occurrence of either of the events
specified in Section 2.4(a), the Company will promptly make available to the
Trustee a reasonable supply of certificated Securities in definitive, fully
registered form without interest coupons.
2.5 Additional Series and Registered Offer.
(a) If any Additional Series is issued pursuant to a registration
statement under the Securities Act, the Initial Securities relating to such
Additional Series shall, at the option of the Company, be issued initially in
(i) the form of one or more global Securities in definitive, fully registered
form without interest coupons or (ii) certificated form. All requirements
pertaining to legends on
<PAGE> 97
11
EXHIBIT 4.1
such Initial Security shall not apply and the requirements requiring any such
Initial Security issued to certain Holders be issued and held in global form
shall not apply.
<PAGE> 98
EXHIBIT 4.1
EXHIBIT 1
to
RULE 144A/REGULATION S APPENDIX
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY 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 (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF
THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(I) INSIDE THE U.S. TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT), (II) OUTSIDE THE U.S. IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (IV) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (V) TO THE
COMPANY, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED
<PAGE> 99
2
EXHIBIT 4.1
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE.
<PAGE> 100
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EXHIBIT 4.1
No. CUSIP No.
$-
11 1/4% Senior Subordinated Note Due 2008
Aqua-Chem, Inc., a Delaware corporation, promises to pay to
, or registered assigns, the principal sum of Dollars on
July 1, 2008.
Interest Payment Dates: January 1 and July 1.
Record Dates: December 15 and June 15.
Additional provisions of this Security are set forth on the
other side of this Security.
Dated:
AQUA-CHEM, INC.,
by
-----------------------
Name:
Title:
-----------------------
Name:
Title:
[Seal]
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee, certifies
that this is one of the
Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
<PAGE> 101
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EXHIBIT 4.1
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
11 1/4% Senior Subordinated Note Due 2008
1. Interest
Aqua-Chem, Inc., a Delaware 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 Rights Agreement) occurs,
additional interest will accrue on this Security at a rate of 0.50% 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 January 1 and July 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 .
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.
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 December 15 or June 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
<PAGE> 102
5
EXHIBIT 4.1
address of each Holder thereof; provided, however, that payments on a
certificated Security will be made 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, United States Trust Company of New York, a New York
banking corporation ("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 or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as
of June 23, 1998 ("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.
Sections 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. The Company may, subject to Section 4.03 of the Indenture, issue
additional Securities under the Indenture. The Indenture contains certain
covenants which, among other things, will limit (i) the incurrence of
additional indebtedness by the Company and certain of its subsidiaries, (ii)
the payment of dividends and other restricted payments by the Company and
certain of its subsidiaries, (iii) the creation of restrictions on distributions
from certain subsidiaries of the Company, (iv) asset sales, (v) transactions
with affiliates, sales and issuances of capital stock of certain subsidiaries
of the Company and (vi) certain consolidations and mergers. All of these
limitations and prohibitions, however, are subject to a number of important
qualifications.
<PAGE> 103
6
EXHIBIT 4.1
5. Optional Redemption
Except as set forth in the next paragraph, the Securities may not be
redeemed prior to July 1, 2003. On and after that date, the Company may redeem
the Securities, in whole or in part, at any time or from time to time, at the
following redemption prices (expressed in percentages of principal amount), 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 related
interest payment date):
if redeemed during the 12-month period beginning
July 1,
<TABLE>
<CAPTION>
Period Percentage
<S> <C>
2003......................................................... 105.625%
2004......................................................... 104.219
2005......................................................... 102.813
2006......................................................... 101.406
2007 and thereafter.......................................... 100.000%
</TABLE>
In addition, at any time and from time to time prior to July 1, 2001,
the Company may redeem in the aggregate up to 20% of the aggregate principal
amount of all Securities issued for cash under the Indenture (including any
additional Securities issued after the Issue Date pursuant to Section 2.13 of
the Indenture) with the proceeds of one or more Public Equity Offerings
following which there is a Public Market, at a redemption price (expressed as a
percentage of principal amount) of 111.25% 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 related interest payment date);
provided, however, that at least $100.0 million aggregate principal amount of
the Securities remains outstanding after each such redemption.
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Securities to be
redeemed at his 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
<PAGE> 104
7
EXHIBIT 4.1
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.
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions, to cause the Company to repurchase all or
any part of the Securities of such Holder at a repurchase price equal to 101% of
the principal amount of the Securities to be repurchased plus accrued interest
to the date of repurchase (subject to the right of holders of record on the
relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness, as defined
in the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give it effect and
appoints the Trustee as attorney-in-fact for such purpose.
9. 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. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees 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 any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the owner
of it for all purposes.
<PAGE> 105
8
EXHIBIT 4.1
11. 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.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company irrevocably 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.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the 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 to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
or to add guarantees with respect to the Securities or to secure the Securities,
or to add additional covenants or surrender rights and powers conferred on the
Company, or to comply with any request of the SEC in connection with qualifying
the Indenture under the Act, or to make certain changes in the subordination
provisions, or to make any change that does not adversely affect the rights of
any Securityholder.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30
days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
or 6 of the Securities, upon acceleration or otherwise, or failure by the
Company to redeem or purchase
<PAGE> 106
9
EXHIBIT 4.1
Securities when required; (iii) failure by the Company to comply with other
agreements in the Indenture or the Securities, in certain cases subject to
notice and lapse of time; (iv) certain accelerations (including failure to pay
within any grace period after final maturity) of other Indebtedness of the
Company if the amount accelerated (or so unpaid) exceeds $7.5 million, or its
foreign currency equivalent at the time; (v) certain events of bankruptcy or
insolvency with respect to the Company and the Significant Subsidiaries; and
(vi) certain judgments or decrees for the payment of money in excess of $7.5
million, or its foreign currency equivalent at the time. If an Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities to be due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities being due and payable immediately
upon the occurrence of such Events of Default.
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 principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, 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.
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee 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
<PAGE> 107
10
EXHIBIT 4.1
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
17. 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.
18. 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).
19. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Security, by acceptance hereof, acknowledges and
agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
20. 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.
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 in larger type. Requests may be made to:
Aqua-Chem, Inc.
7800 North 113th Street
P.O. Box 421
Milwaukee, Wisconsin 53201
Attention of: Chief Financial Officer
<PAGE> 108
EXHIBIT 4.1 11
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 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 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:
CHECK ONE BOX BELOW
(1) [] to the Company; or
(2) [] pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) [] 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
<PAGE> 109
EXHIBIT 4.1 12
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) [] 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
(5) [] 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)
or (5) 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, such
as the exemption provided by Rule 144 under such Act.
--------------------------
Signature
Signature Guarantee:
- --------------------- --------------------------
Signature must be guaranteed Signature
<PAGE> 110
EXHIBIT 4.1 13
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
<PAGE> 111
EXHIBIT 4.1 14
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global Security have been
made:
<TABLE>
<S> <C> <C> <C> <C>
Date of Amount of decrease Amount of increase Principal amount of Signature of
Exchange in Principal in Principal this Global authorized officer
Amount of this Amount of this Security following of Trustee or
Global Security Global Security such decrease or Securities
increase Custodian
</TABLE>
<PAGE> 112
EXHIBIT 4.1 15
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 or 4.09 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security purchased by the
Company pursuant to Section 4.06 or 4.09 of the Indenture, state the amount in
principal amount: $
Date:_____________________________ Your Signature:____________________________
(Sign exactly as your name
appears on the other side of
this Security.)
Signature Guarantee: _____________________________________________________
(Signature must be guaranteed)
<PAGE> 113
EXHIBIT 4.1
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE
SECURITY]
[*/]
[**/]
No. Cusip No. -
$ -
11 1/4% Senior Subordinated Note Due 2008
Aqua-Chem, Inc., a Delaware corporation, promises to pay
to , or registered assigns, the principal sum of
Dollars on July 1, 2008.
Interest Payment Dates: January 1 and July 1.
Record Dates: December 15 and June 15.
Additional provisions of this Security are set forth on the
other side of this Security.
Dated:
- ---------------
*/ [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".]
**/ [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
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.]
<PAGE> 114
EXHIBIT 4.1 2
AQUA-CHEM, INC.,
by
-----------------------
President
-----------------------
Secretary
[Seal]
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee, certifies
that this is one of the
Securities referred
to in the Indenture.
by
-----------------------------
Authorized Signatory
<PAGE> 115
EXHIBIT 4.1 3
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY
OR PRIVATE EXCHANGE SECURITY]
11 1/4% Senior Subordinated Note Due 2008
1. Interest
Aqua-Chem, Inc., a Delaware 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 Rights Agreement) occurs,
interest will accrue on this Security at a rate of 0.50% 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 January 1 and July 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 . 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.
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 December 15 or June 15 next preceding the interest
payment date even if Securities are canceled after the record date and on or
before the interest payment date.
- ---------------
***/ 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 Rights Agreement. Holders must surrender
Securities to a Paying
<PAGE> 116
EXHIBIT 4.1 4
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 Securities
(including principal, premium and interest) will be made by wire transfer of
immediately available funds to the accounts specified by the holders thereof or,
if no U.S. dollar account maintained by the payee with a bank in the United
States is designated by any holder to the Trustee or the Paying Agent at least
30 days prior to the relevant due date for payment (or such other date as the
Trustee may accept in its discretion), by mailing a check to the registered
address of such holder.
3. Paying Agent and Registrar
Initially, United States Trust Company of New York, a New York
banking corporation ("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 or co-registrar.
4. Indenture
The Company issued the Securities under an Indenture dated as
of June 23, 1998 ("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.
Sections 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. The Company may, subject to Section 4.03 of the Indenture, issue
additional Securities under the Indenture. The Indenture contains certain
covenants which, among other things, will limit (i) the incurrence of additional
indebtedness by the Company and certain of its subsidiaries, (ii) the payment
of dividends and other restricted payments by the Company and certain of its
subsidiaries, (iii) the creation of restrictions on distributions from certain
subsidiaries of the Company, (iv) asset sales, (v) transactions with
affiliates, sales and issuances of capital stock of certain subsidiaries of the
<PAGE> 117
EXHIBIT 4.1 5
Company and (vi) certain consolidations and mergers. All of these limitations
and prohibitions, however, are subject to a number of important qualifications.
5. Optional Redemption
Except as set forth in the next paragraph, the Securities may
not be redeemed prior to July 1, 2003. On and after that date, the Company may
redeem the Securities, in whole or in part, at any time or from time to time at
the following redemption prices (expressed in percentages of principal amount),
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 related
interest payment date):
if redeemed during the 12-month period beginning
July 1,
Period Percentage
2003........................................................ 105.625%
2004........................................................ 104.219
2005........................................................ 102.813
2006........................................................ 101.406
2007 and thereafter......................................... 100.000%
In addition, at any time and from time to time prior to
July 1, 2001, the Company may redeem in the aggregate up to 20% of the
aggregate principal amount of all Securities issued for cash under the Indenture
(including any additional Securities issued after the Issue Date pursuant to
Section 2.13 of the Indenture) with the proceeds of one or more Public Equity
Offerings following which there is a Public Market, at a redemption price
(expressed as a percentage of principal amount) of 111.25% 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 related interest payment date);
provided, however, that at least $100.0 million aggregate principal amount of
the Securities remains outstanding after each such redemption.
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder of Securities to be
redeemed at his registered
<PAGE> 118
EXHIBIT 4.1 6
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.
7. Put Provisions
Upon a Change of Control, any Holder of Securities will have
the right, subject to certain conditions, to cause the Company to repurchase all
or any part of the Securities of such Holder at a repurchase price equal to 101%
of the principal amount of the Securities to be repurchased plus accrued
interest to the date of repurchase (subject to the right of holders of record on
the relevant record date to receive interest due on the related interest payment
date) as provided in, and subject to the terms of, the Indenture.
8. Subordination
The Securities are subordinated to Senior Indebtedness, as
defined in the Indenture. To the extent provided in the Indenture, Senior
Indebtedness must be paid before the Securities may be paid. The Company agrees,
and each Securityholder by accepting a Security agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give it
effect and appoints the Trustee as attorney-in-fact for such purpose.
9. 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. The Registrar may require
a Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees 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 any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
<PAGE> 119
EXHIBIT 4.1 7
10. Persons Deemed Owners
The registered Holder of this Security may be treated as the
owner of it for all purposes.
11. 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.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may
terminate some or all of its obligations under the Securities and the Indenture
if the Company irrevocably 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.
13. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i)
the Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the 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 to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
or to add guarantees with respect to the Securities or to secure the Securities,
or to add additional covenants or surrender rights and powers conferred on the
Company, or to comply with any request of the SEC in connection with qualifying
the Indenture under the Act, or to make certain changes in the subordination
provisions, or to make any change that does not adversely affect the rights of
any Securityholder.
<PAGE> 120
EXHIBIT 4.1 8
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for
30 days in payment of interest on the Securities; (ii) default in payment of
principal on the Securities at maturity, upon redemption pursuant to paragraph 5
or 6 of the Securities, upon acceleration or otherwise, or failure by the
Company to redeem or purchase Securities when required; (iii) failure by the
Company to comply with other agreements in the Indenture or the Securities, in
certain cases subject to notice and lapse of time; (iv) certain accelerations
(including failure to pay within any grace period after final maturity) of other
Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds
$7.5 million, or its foreign currency equivalent at the time; (v) certain events
of bankruptcy or insolvency with respect to the Company and the Significant
Subsidiaries; and (vi) certain judgments or decrees for the payment of money in
excess of $7.5 million, or its foreign currency equivalent at the time. If an
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the Securities may declare all the Securities
to be due and payable immediately. Certain events of bankruptcy or insolvency
are Events of Default which will result in the Securities being due and payable
immediately upon the occurrence of such Events of Default.
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 principal
amount of the Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Securityholders notice of any continuing
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the Act, 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.
<PAGE> 121
EXHIBIT 4.1 9
16. No Recourse Against Others
A director, officer, employee or stockholder, as such, of the
Company or the Trustee 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.
17. 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.
18. 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).
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.
20. Holders' Compliance with Registration Rights Agreement.
Each Holder of a Security, by acceptance hereof, acknowledges
and agrees to the provisions of the Registration Rights Agreement, including,
without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.
<PAGE> 122
EXHIBIT 4.1 10
21. 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.
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 in larger type. Requests may be made to:
Aqua-Chem, Inc.
7800 North 113th Street
P.O. Box 421
Milwaukee, Wisconsin 53201
Attention of: Chief Financial Officer
<PAGE> 123
11
EXHIBIT 4.1
________________________________________________________________________________
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 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.
<PAGE> 124
12
EXHIBIT 4.1
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.06 or 4.09 of the Indenture, check the box:
[ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.06 or 4.09 of the Indenture,
state the amount: $
Date:____________________________ Your Signature: _____________________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:___________________________________________________________
(Signature must be guaranteed by a member
firm of the New York Stock Exchange or a
commercial bank or trust company)
<PAGE> 1
EXHIBIT 4.4
July 31, 1997
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT AND SUCH LAWS.
THE SALE, TRANSFER OR ENCUMBRANCE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF AN OPERATING AGREEMENT,
DATED AS OF JULY 31, 1997, AMONG ALL OF THE MEMBERS. COPIES OF SUCH AGREEMENT
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF AQUA-CHEM, INC.
AQUA-CHEM, INC.
COMMON STOCK PURCHASE WARRANT
Void after July 31, 2007
Aqua-Chem, Inc. (the "Company"), a Delaware corporation (formerly known
as A-C Acquisition Corp.), hereby certifies that for value received, Rush Creek
LLC, a Wisconsin limited liability company, or its successors or assigns (the
"Holder"), is entitled to purchase, subject to the terms and conditions
hereinafter set forth, an aggregate of 176,471 fully paid and (subject to
applicable law) nonassessable shares of Common Stock (as hereinafter defined) of
the Company, at an exercise price of $.01 per share (the "Purchase Price"),
subject to adjustment as provided herein, at any time or from time to time
beginning on the date hereof and prior to 5:00 P.M., New York City time, on July
31, 2007 (the "Expiration Date").
This Warrant is issued pursuant to the Securities Purchase Agreement
(the "Purchase Agreement"), dated as of the date hereof, among Rush Creek, LLC,
the Company, CB-Kramer Sales and Service, Inc., Whitney Subordinated Debt Fund,
L.P., a Delaware limited partnership, and Whitney Equity Partners, L.P. ("WEP"),
and is subject to the terms thereof. Capitalized terms used herein and not
otherwise defined shall have the meanings assigned such terms in the Purchase
Agreement. The Holder is entitled to the rights and subject to the obligations
contained in the
1
<PAGE> 2
EXHIBIT 4.4
Purchase Agreement and the Stockholders' and Members' Agreement relating to this
Warrant and the shares of Common Stock issuable upon exercise of this Warrant.
1. Definitions. For the purposes of this Warrant, the following
terms shall have the meanings indicated:
"Applicable Price" shall mean the higher of (a) the Current
Market Price per share of Common Stock on the applicable record or other
relevant date and (b) the Dilution Price.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"Closing Price" shall mean, with respect to each share of
Common Stock for any day, (a) the last reported sale price regular way or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices regular way, in either case as reported on the principal national
securities exchange on which the Common Stock is listed or admitted for trading
or (b) if the Common Stock is not listed or admitted for trading on any
national securities exchange, the last reported sale price or, in case no such
sale takes place as of such day the Current Market Price shall be the fair
market value of each such share of Common Stock on such date as determined in
good faith by the Board of Directors of the Company, provided that the Holder
may, at its sole cost and expense, engage an independent investment banking
firm of nationally recognized stature to make such determination, which
determination shall be controlling, unless the Company, at its sole cost and
expense, engages a similar investment banking firm for such purpose, in which
event such two investment banking firms shall jointly make such determination.
"Common Stock" means the common stock, par value $.01 per
share, of the Company, and any class of stock resulting from successive changes
or reclassification of such Common Stock.
"Company" has the meaning ascribed to such term in the first
paragraph of this Warrant.
"Current Market Price" shall be determined in accordance with
Subsection 3(e).
"Dilution Price" shall mean, with respect to each share of
Common Stock, $3.75, subject to appropriate adjustment for events described in
Subsection 3(a).
"Exercise Date" has the meaning ascribed to such term in
Subsection 2(d).
"Expiration Date" has the meaning ascribed to such term in
the first paragraph of this Warrant.
2
<PAGE> 3
EXHIBIT 4.4
"Holder" has the meaning ascribed to such term in the first
paragraph and Section 9 of this Warrant.
"Initial Public Offering" shall mean the sale by either the
Company or any of its Subsidiaries of its capital stock pursuant to a
registration statement on Form S-1 or otherwise under the Securities Act.
"NASDAQ" shall mean the Automatic Quotation System of the
National Association of Securities Dealers, Inc.
"Person" shall mean any individual, firm, corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or an agency or political subdivision thereof)
or other entity of any kind, and shall include any successor (by merger or
otherwise) of such entity.
"Purchase Agreement" has the meaning ascribed to such term in
the second paragraph of this Warrant.
"Purchase Price" has the meaning ascribed to such term in the
first paragraph of this Warrant.
"Repurchase Period" shall mean the period commencing on the
earliest of (a) the fifth anniversary of the Closing Date, (b) a Change of
Control or (c) the filing of a registration statement under the Securities Act
(or other commencement of an Initial Public Offering) and terminating on the
earlier of the consummation of an Initial Public Offering or the Expiration
Date.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations
thereunder, all as the same shall be in effect at the time.
"Stockholders' and Members' Agreement" means the Stockholders'
and Members' Agreement substantially in the form attached to the Purchase
Agreement as Exhibit F.
"Subsidiary" shall mean, with respect to any Person, a
corporation or other entity of which 50% or more of the voting power of the
voting equity securities or equity interests is owned, directly or indirectly,
by such Person.
"Warrant" shall mean this Warrant and any subsequent Warrant
issued pursuant to Subsection 2(c).
"Warrant Register" has the meaning ascribed to such term in
Subsection 9(c).
"Warrant Shares" shall mean the shares of Common Stock
issuable upon exercise of the Warrant.
3
<PAGE> 4
EXHIBIT 4.4
2. Exercise of Warrant.
(a) Exercise. This Warrant may be exercised, in whole or in
part, at any time or from time to time during the period beginning on the date
hereof and ending on the Expiration Date, by surrendering to the Company at its
principal office this Warrant, with the form of Election to Purchase Shares (the
"Election to Purchase Shares") attached hereto as Exhibit A duly executed by the
Holder and accompanied by payment of the Purchase Price for the number of shares
of Common Stock specified in such form.
(b) Delivery of Shares; Payment of Purchase Price. As soon as
practicable after surrender of this Warrant and receipt of payment, the Company
shall promptly issue and deliver to the Holder a certificate or certificates for
the number of shares of Common Stock set forth in the Election to Purchase
Shares, in such name or names as may be designated by such Holder, along with a
check for the amount of cash to be paid in lieu of issuance of fractional
shares, if any. Payment of the Purchase Price may be made as follows (or by any
combination of the following): (i) in United States currency by cash or delivery
of a certified check, bank draft or postal or express money order payable to the
order of the Company, (ii) by assigning to the Company all or any part of the
unpaid principal amount of the WSDF Note held by the Holder in a principal
amount equal to the Purchase Price, (iii) by surrender of a number of shares of
Common Stock held by the Holder equal to the quotient obtained by dividing (A)
the Purchase Price payable with respect to the portion of this Warrant then
being exercised by (B) the Current Market Price per share of Common Stock on the
Exercise Date, or (iv) by cancellation of any portion of this Warrant with
respect to the number of shares of Common Stock equal to the quotient obtained
by dividing (A) the aggregate Purchase Price payable with respect to the portion
of this Warrant then being exercised by (B) the difference between (1) Current
Market Price per share of Common Stock on the Exercise Date, and (2) the
Purchase Price per share of Common Stock.
(c) Partial Exercise. If this Warrant is exercised for less
than all of the shares of Common Stock purchasable under this Warrant, the
Company shall cancel this Warrant upon surrender hereof and shall execute and
deliver to the Holder a new Warrant of like tenor for the balance of the shares
of Common Stock purchasable hereunder.
(d) When Exercise Effective. The exercise of this Warrant
shall be deemed to have been effective immediately prior to the close of
business on the Business Day on which this Warrant is surrendered to and the
Purchase Price is received by the Company as provided in this Section 2 (the
"Exercise Date") and the Person in whose name any certificate for shares of
Common Stock shall be issuable upon such exercise, as provided in Subsection
2(b), shall be deemed to be the record holder of such shares of Common Stock for
all purposes on the Exercise Date.
(e) Continued Validity. A Holder of shares of Common Stock
issued upon the exercise of this Warrant, in whole or in part, shall continue to
be entitled to all of the rights and subject to all of the obligations set forth
in Section 10.
4
<PAGE> 5
EXHIBIT 4.4
3. Adjustment of Purchase Price and Number of Shares. The
Purchase Price and the number of shares of Common Stock issuable upon exercise
of this Warrant shall be adjusted from time to time upon the occurrence of the
following events:
(a) Dividend, Subdivision, Combination or Reclassification of
Common Stock. If the Company shall, at any time or from time to time, (i)
declare a dividend on the Common Stock payable in shares of its capital stock
(including Common Stock), (ii) subdivide the outstanding Common Stock into a
larger number of shares of Common Stock, (iii) combine the outstanding Common
Stock into a smaller number of shares of its Common Stock, or (iv) issue any
shares of its capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then in each such
case, the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of capital stock issuable
on such date shall be proportionately adjusted so that the Holder of any
Warrant exercised after such date shall be entitled to receive, upon payment of
the same aggregate amount as would have been payable before such date, the
aggregate number and kind of shares of capital stock which, if such Warrant had
been exercised immediately prior to such date, such Holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. Any such adjustment shall become
effective immediately after the record date of such dividend or the effective
date of such subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall occur. If a
dividend is declared and such dividend is not paid, the Purchase Price shall
again be adjusted to be the Purchase Price in effect immediately prior to such
record date.
(b) Issuance of Rights to Purchase Common Stock Below Current
Market Price or Dilution Price. If the Company shall, at any time or from time
to time, fix a record date for the issuance of rights, options or warrants to
all holders of Common Stock (except for employees receiving options under bona
fide employee benefit plans coming within the scope of paragraph (d)(iv) below)
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Common Stock, or securities convertible into
Common Stock at a price per share of Common Stock or having a conversion price
per share of Common Stock if a security is convertible into Common Stock
(determined in either such case by dividing (x) the total consideration payable
to the Company upon exercise, conversion or exchange of such rights, options,
warrants or other securities convertible into Common Stock by (y) the total
number of shares of Common Stock covered by such rights, options, warrants or
other securities convertible into Common Stock) which is lower than either the
Current Market Price per share of Common Stock on such record date (or, if an
ex-dividend date has been established for such record date, on the day next
preceding such ex-dividend date) or the Dilution Price, then the Purchase Price
shall be reduced to the price determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the sum of the number of shares of Common Stock outstanding on
such record date plus the number of additional shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock so to be
offered (or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at
5
<PAGE> 6
EXHIBIT 4.4
the Applicable Price and the denominator of which shall be the number of shares
of Common Stock outstanding on such record date plus the number of additional
shares of Common Stock to be offered for subscription or purchase (or into which
the convertible securities so to be offered are initially convertible). In case
such price for subscription or purchase may be paid in a consideration part or
all of which shall be in a form other than cash, the value of such consideration
shall be determined in good faith by the Board of Directors of the Company. Any
such adjustment shall become effective immediately after the record date for
such rights or warrants. Such adjustment shall be made successively whenever
such a record date is fixed. If such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to the Purchase Price in effect
immediately prior to such record date.
(c) Certain Distributions. If the Company shall, at any time
or from time to time, fix a record date for the distribution to all holders of
Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation) of
evidences of indebtedness, assets or other property (other than regularly
scheduled cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in capital stock for which
adjustment is made under Subsection 3(a)) or subscription rights, options or
warrants (excluding those referred to in Subsection 3(b)), then the Purchase
Price shall be reduced to the price determined by multiplying the Purchase Price
in effect immediately prior to such record date by a fraction (which shall in no
event be less than zero), the numerator of which shall be the Current Market
Price per share of Common Stock on such record date (or, if an ex-dividend date
has been established for such record date, on the next day preceding such
ex-dividend date), less the fair market value (as determined in good faith by
the Board of Directors of the Company) of the portion of the assets, evidences
of indebtedness, other property, subscription rights or warrants so to be
distributed applicable to one share of Common Stock and the denominator of which
shall be such Current Market Price per share of Common Stock. Any such
adjustment shall become effective immediately after the record date for such
distribution. Such adjustments shall be made successively whenever such a record
date is fixed. In the event that such distribution is not so made, the Purchase
Price shall be adjusted to the Purchase Price in effect immediately prior to
such record date.
(d) Issuance of Common Stock Below Current Market Price or Dilution
Price. If the Company shall, at any time and from time to time, after the date
hereof directly or indirectly, sell or issue shares of Common Stock (regardless
of whether originally issued or from the Company's treasury), or rights,
options, warrants or convertible or exchangeable securities containing the right
to subscribe for or purchase shares of Common Stock (excluding shares issued:
(i) in any of the transactions described in Subsections 3(a), (b) and (c)
hereof; (ii) upon exercise of this Warrant; (iii) upon the exercise or
conversion of options, warrants or any other securities convertible into or
exchangeable for shares of Common Stock outstanding as of the date hereof; (iv)
to the Company's or its Subsidiaries' employees under bona fide employee benefit
plans approved or adopted by the Company's Board of Directors which, in the
aggregate, shall not be convertible or exercisable into more than ten percent
(10%) of the fully diluted capital stock of the Company (and provided that the
same shall be exercisable at the then Current Market Price); and (v) in any
arm's length institutional
6
<PAGE> 7
EXHIBIT 4.4
financing of debt and equity in which shares of Common Stock or rights,
options, warrants or convertible or exchangeable securities containing the
right to subscribe for or purchase shares of Common Stock are issued as part of
a unit, if such shares would otherwise be included in this Section 3(d)) at a
price per share of Common Stock (determined, in the case of rights, options,
warrants or convertible or exchangeable securities, by dividing (x) the total
consideration received or receivable by the Company in consideration of the
sale or issuance of such rights, options, warrants or convertible or
exchangeable securities, plus the total consideration payable to the Company
upon exercise or conversion or exchange thereof, by (y) the total number of
shares of Common Stock covered by such rights, options, warrants or
convertible or exchangeable securities) which is lower than either the Current
Market Price per share of Common Stock or the Dilution Price immediately prior
to such sale or issuance, then the Purchase Price shall be reduced to a price
determined by multiplying the Purchase Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such sale or issuance
plus the number of shares of Common Stock which the aggregate consideration
received (determined as provided below) for such sale or issuance would
purchase at the Applicable Price and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately after such sale
or issuance. Such adjustment shall be made successively whenever such sale or
issuance is made. For the purposes of such adjustments, the shares of Common
Stock which the holder of any such rights, options, warrants, or convertible or
exchangeable securities shall be entitled to subscribe for or purchase shall be
deemed to be issued and outstanding as of the date of such sale or issuance and
the consideration "received" by the Company therefor shall be deemed to be the
consideration actually received or receivable by the Company (plus any
underwriting discounts or commissions in connection therewith) for such rights,
options, warrants or convertible or exchangeable securities, plus the
consideration stated in such rights, options, warrants or convertible or
exchangeable securities to be payable to the Company for the shares of Common
Stock covered thereby. If the Company shall sell or issue shares of Common
Stock for a consideration consisting, in whole or in part, of property other
than cash or its equivalent, then in determining the "price per share of Common
Stock" and the "consideration" received or receivable by or payable to the
Company for purposes of the first sentence and the immediately preceding
sentence of this Subsection 3(d), the fair value of such property shall be
determined in good faith by the Board of Directors of the Company. The
determination of whether any adjustment is required under this Subsection 3(d)
by reason of the sale and issuance of rights, options, warrants or convertible
or exchangeable securities and the amount of such adjustment, if any, shall be
made only at the time of such issuance or sale and not at the subsequent time
of issuance of shares of Common Stock upon the exercise of such rights to
subscribe or purchase.
(e) Determination of Current Market Price. For the purpose of
any computation under Subsections (b), (c) or (d) of this Section 3 or any other
provision of this Warrant, the Current Market Price per share of Common Stock on
any date shall be deemed to be the average of the daily Closing Prices per share
of Common Stock for the 10 consecutive trading days commencing 15 trading days
before such date. If on any such date the shares of Common Stock are not listed
or admitted for trading on any national securities exchange or quoted by NASDAQ
or a similar service, then the Company, on the one hand, and WSDF on the
other hand, shall each promptly appoint as an
7
<PAGE> 8
EXHIBIT 4.4
appraiser an individual who shall be a member of a nationally recognized
investment banking firm. Each appraiser shall be instructed to, within 30 days
of appointment, determine the Current Market Price per share of Common Stock
which shall be deemed to be equal to the fair market value per share of Common
Stock as of such date. If the two appraisers are unable to agree on the Current
Market Price per share of Common Stock within such 30 day period, then the two
appraisers, within 10 days after the end of such 30 day period shall jointly
select a third appraiser. The third appraiser shall, within 30 days of its
appointment, determine, in good faith, the Current Market Price per share of
Common Stock and such determination shall be controlling. If any party fails to
appoint an appraiser or if one of the two initial appraisers fails after
appointment to submit its appraisal within the required period, the appraisal
submitted by the remaining appraiser shall be controlling. The cost of the
foregoing appraisals shall be shared one-half by the Company and one-half by
WSDF, provided, however, in the event a third appraiser is utilized and one of
the two initial appraisals (but not the other initial appraisal) is greater than
or less than the appraisal by such third appraiser by 10% or more, then the cost
of all of the foregoing appraisals shall be borne by the party who appointed the
appraiser who made such initial appraisal.
(f) DeMinimis Adjustments. No adjustment in the Purchase Price
shall be made if the amount of such adjustment would result in a change in the
Purchase Price per share of less than $0.10, but in such case any adjustment
that would otherwise be required to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment, which
together with any adjustment so carried forward, would result in a change in the
Purchase Price of $0.10 per share or more. If the Company shall, at any time or
from time to time, issue Common Stock by way of dividends on any stock of the
Company or subdivide or combine the outstanding shares of the Common Stock, such
amount of $0.10 (as theretofore increased or decreased, if such amounts shall
have been adjusted in accordance with the provisions of this clause) shall
forthwith be proportionately increased in the case of a combination or decreased
in the case of a subdivision or stock dividend so as appropriately to reflect
the same. Notwithstanding the provisions of the first sentence of this
Subsection 3(f), any adjustment postponed pursuant to this Subsection 3(f) shall
be made no later than the earlier of (i) three years from the date of the
transaction that would, but for the provisions of the first sentence of this
Section 3(f), have required such adjustment, (ii) an Exercise Date or (iii) the
Expiration Date.
(g) Adjustments to Other Shares. In the event that at any
time, as a result of an adjustment made pursuant to Subsection 3(a), the Holder
shall become entitled to receive, upon exercise of this Warrant, any shares of
capital stock of the Company other than shares of Common Stock, the number of
such other shares so receivable upon exercise of this Warrant shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares of Common Stock
contained in Subsections 3(a), (b), (c) and (d), inclusive, and the provisions
of Sections 2, 5, 6 and 7 with respect to the shares of Common Stock shall apply
on like terms to any such other shares.
(h) Adjustment of Number of Shares Issuable Upon Exercise.
Upon each adjustment of the Purchase Price as a result of the calculations made
in Subsections 3(a), (b), (c) or
8
<PAGE> 9
EXHIBIT 4.4
(d), this Warrant shall thereafter evidence the right to receive, at the
adjusted Purchase Price, that number of shares of Common Stock (calculated to
the nearest one-hundredth) obtained by dividing (x) the product of the aggregate
number of shares of Common Stock covered by this Warrant immediately prior to
such adjustment and the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price by (y) the Purchase Price in effect immediately
after such adjustment of the Purchase Price.
(i) Reorganization, Reclassification, Merger and Sale of
Assets. If there occurs any capital reorganization or any reclassification of
the Common Stock of the Company, the consolidation or merger of the Company with
or into another Person (other than a merger or consolidation of the Company in
which the Company is the continuing corporation and which does not result in any
reclassification or change of outstanding shares of its Common Stock) or the
sale or conveyance of all or substantially all of the assets of the Company to
another Person, then the Holder will thereafter be entitled to receive, upon the
exercise of this Warrant in accordance with the terms hereof the same kind and
amounts of securities (including shares of stock) or other assets, or both,
which were issuable or distributable to the holders of outstanding Common Stock
of the Company upon such reorganization, reclassification, consolidation,
merger, sale or conveyance, in respect of that number of shares of Common Stock
then deliverable upon the exercise of this Warrant if this Warrant had been
exercised immediately prior to such reorganization, reclassification,
consolidation, merger, sale or conveyance; and, in any such case, appropriate
adjustments (as determined in good faith by the Board of Directors of the
Company) shall be made to assure that the provisions hereof (including
provisions with respect to changes in, and other adjustments of, the Purchase
Price) shall thereafter be applicable, as nearly as reasonably may be
practicable, in relation to any securities or other assets thereafter
deliverable upon exercise of this Warrant.
4. Certificate as to Adjustments. Whenever the Purchase Price
and the number of shares of Common Stock issuable, or the securities or other
property deliverable, upon the exercise of this Warrant shall be adjusted
pursuant to the provisions hereof, the Company shall promptly give written
notice thereof to the Holder, in accordance with Section 13, in the form of a
certificate signed by the Chairman of the Board, President or one of the Vice
Presidents of the Company, and by the Chief Financial Officer, Treasurer or one
of the Assistant Treasurers of the Company, stating the adjusted Purchase Price,
the number of shares of Common Stock issuable, or the securities or other
property deliverable, upon exercise of the Warrant calculated to the nearest
cent or the nearest one-hundredth of a share and setting forth in reasonable
detail the method of calculation and the facts requiring such adjustment and
upon which such calculation is based. Each adjustment shall remain in effect
until a subsequent adjustment is required.
5. Fractional Shares. Notwithstanding an adjustment pursuant
to Section 3(h) in the number of shares of Common Stock covered by this Warrant
or any other provision of this Warrant, the Company shall not be required to
issue fractions of shares upon exercise of this Warrant or to distribute
certificates which evidence fractional shares. In lieu of fractional shares, the
Company may make payment to the Holder, at the time of exercise of this Warrant
as herein
9
<PAGE> 10
EXHIBIT 4.4
provided, of an amount in cash equal to such fraction multiplied by the greater
of the Current Market Price of a share of Common Stock on the Exercise Date and
the Dilution Price.
6. Notice of Proposed Actions. In case the Company shall
propose at any time or from time to time (a) to declare or pay any dividend
payable in stock of any class to the holders of Common Stock or to make any
other distribution to the holders of Common Stock (other than a regularly
scheduled cash dividend), (b) to offer to the holders of Common Stock rights or
warrants to subscribe for or to purchase any additional shares of Common Stock
or shares of stock of any class or any other securities, rights or options, (c)
to effect any reclassification of its Common Stock, (d) to effect any
consolidation, merger or sale, transfer or other disposition of all or
substantially all of the property, assets or business of the Company which
would, if consummated, adjust the Purchase Price or the securities issuable upon
exercise of the Warrants, (e) to effect the liquidation, dissolution or winding
up of the Company, or (f) to take any other action that would require a vote of
the Company's stockholders, then, in each such case, the Company shall give to
the Holder, in accordance with Section 13, a written notice of such proposed
action, which shall specify (i) the record date for the purposes of such stock
dividend, distribution of rights or warrants or vote of the stockholders of the
Company, or if a record is not to be taken, the date as of which the holders of
shares of Common Stock of record to be entitled to such dividend, distribution
of rights or warrants, or vote is to be determined, or (ii) the date on which
such reclassification, consolidation, merger, sale, transfer, disposition,
liquidation, dissolution or winding up is expected to become effective, and such
notice shall be so given as promptly as possible but in any event at least ten
(10) Business Days prior to the applicable record, determination or effective
date specified in such notice.
7. No Dilution or Impairment. The Company will not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the Holder of this Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any shares of stock receivable on the exercise of
this Warrant above the amount payable therefor on such exercise, (b) will at
all times reserve and keep available the maximum number of its authorized
shares of Common Stock, free from all preemptive rights therein, which will be
sufficient to permit the full exercise of this Warrant, and (c) will take all
such action as may be necessary or appropriate in order that all shares of
Common Stock as may be issued pursuant to the exercise of this Warrant will,
upon issuance, be duly and validly issued, fully paid and (subject to
applicable law) nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof.
8. Replacement of Warrants. On receipt by the Company of an
affidavit of an authorized representative of the Holder stating the
circumstances of the loss, theft, destruction or mutilation of this Warrant
(and in the case of any such mutilation, on surrender and cancellation of such
Warrant), the Company at its expense will promptly execute and deliver, in lieu
thereof, a new Warrant of like tenor which shall be exercisable for a like
number of shares of Common Stock. If
10
<PAGE> 11
EXHIBIT 4.4
required by the Company, such Holder must provide an indemnity bond or other
indemnity sufficient in the judgment of the Company to protect the Company from
any loss which it may suffer if a lost, stolen or destroyed Warrant is replaced.
9. Restrictions on Transfer.
(a) The term "Holder" as used herein shall also include any
transferee of this Warrant whose name has been recorded by the Company in the
Warrant Register (as hereinafter defined). Each transferee of this Warrant or
the Common Stock issuable upon the exercise thereof acknowledges that this
Warrant or the Common Stock issuable upon the exercise thereof has not been
registered under the Securities Act and may be transferred only pursuant to an
effective registration under the Securities Act or pursuant to an applicable
exemption from the registration requirements of the Securities Act.
(b) With respect to a transfer that should occur prior to the
time that the Warrant or the Common Stock issuable upon the exercise thereof is
registered under the Securities Act, such Holder shall request an opinion of
counsel (which shall be rendered by counsel reasonably acceptable to the
Company) that the proposed transfer may be effected without registration or
qualification under any Federal or state securities or blue sky law. Counsel
shall, as promptly as practicable, notify the Company and the Holder of such
opinion and of the terms and conditions, if any, to be observed in such
transfer, whereupon the Holder shall be entitled to transfer this Warrant or
such shares of Common Stock (or portion thereof), subject to any other
provisions and limitations of this Warrant. In the event this Warrant shall be
exercised as an incident to such transfer, such exercise shall relate back and
for all purposes of this Warrant be deemed to have occurred as of the date of
such notice regardless of delays incurred by reason of the provisions of this
Section 9 which may result in the actual exercise on any later date.
(c) The Company shall maintain a register (the "Warrant
Register") in its principal office for the purpose of registering the Warrant
and any transfer thereof, which register shall reflect and identify, at all
times, the ownership of any interest in the Warrant. Upon the issuance of this
Warrant the Company shall record the name of the initial purchaser of this
Warrant in the Warrant Register as the first Holder. Upon surrender for
registration of transfer or exchange of this Warrant together with a properly
executed Form of Assignment attached hereto as Exhibit B at the principal office
of the Company, the Company shall, at its expense, execute and deliver one or
more new Warrants of like tenor which shall be exercisable for a like aggregate
number of shares of Common Stock, registered in the name of the Holder or a
transferee or transferees.
This Warrant may be transferred or assigned by the Holder at
any time to a transferee or transferees which shall be a Person(s) other than an
entity(s) that conducts business in the same industry and in direct competition
with the Company.
10. No Rights or Liability as a Stockholder. This Warrant does not
entitle the Holder hereof to any voting rights or other rights as a stockholder
of the Company. No provisions hereof,
11
<PAGE> 12
EXHIBIT 4.4
in the absence of affirmative action by the Holder hereof to purchase Common
Stock, and no enumeration herein of the rights or privileges of the Holder shall
rgive rise to any liability of such Holder as a stockholder of the Company.
11. Charges, Taxes and Expenses. Issuance of certificates for
shares of Common Stock upon the exercise of this Warrant shall be made
without charge to the Holder hereof for any issue or transfer tax, or other
incidental expense, in respect of the issuance or delivery of such certificates
or the securities represented thereby, all of which taxes and expenses shall be
paid by the Company.
12. Amendment or Waiver. This Warrant and any term hereof may be
amended, waived, discharged or terminated only by and with the written consent
of the Company and the Holder.
13. Notices. Any notice or other communication (or delivery)
required or permitted hereunder shall be made in writing and shall be
by registered mail, return receipt requested, telecopier, courier service or
personal delivery to the Company at its principal office as specified in
Section 11.2 of the Purchase Agreement and to the Holder at its address as it
appears in the Warrant Register. All such notices and communications (and
deliveries) shall be deemed to have been duly given: when delivered by hand, if
personally delivered; when delivered by courier, if delivered by commercial
overnight courier service; five Business Days after being deposited in the
mail, postage prepaid, if mailed; and when receipt is acknowledged, if
telecopied.
14. Company's Obligation to Repurchase the Warrant. The Holder shall
have the right exercisable at any time, and from time to time, during the
Repurchase Period, to cause the Company to purchase from the Holder all or any
portion of this Warrant at the Warrant Repurchase Price, as determined below.
Such right shall be exercisable by the Holder by delivery of written notice (the
"Warrant Repurchase Notice") to the Company, specifying the portion of this
Warrant that shall be repurchased and the date on which such repurchase shall
occur, which date shall not be less than forty-five (45) days nor more than
seventy (70) days after the date of the Warrant Repurchase Notice (the "Warrant
Repurchase Closing Date"). On the Warrant Repurchase Closing Date, the Holder
shall surrender this Warrant to the Company, against (i) payment of the Warrant
Repurchase Price by wire transfer to an account designated by the Holder, and,
(ii) if the Holder has elected to have only a portion of the Warrant
repurchased, delivery of a new warrant duly executed by the Company, on the same
terms and conditions as this Warrant, except that such warrant shall be
exercisable for the remaining number of the Warrant Shares. For purposes of this
Warrant, the term "Warrant Repurchase Price" shall mean the price equal to the
amount obtained by multiplying the (i) difference obtained by subtracting the
Purchase Price from the Applicable Price on the date of the Warrant Repurchase
Notice by (ii) the number of Warrant Shares subject to the portion of the
Warrant that is being repurchased pursuant to this Section 14 or Section 16, as
the case may be.
15. Company's Obligation to Repurchase Issued Warrant Shares. The
Holder shall have the right exercisable at any time, and from time to time,
during the Repurchase Period, to cause the Company to purchase from the Holder
all or any portion of the Warrant Shares that have been issued upon the exercise
of this Warrant (the "Issued Warrant Shares") at the Warrant Share Repurchase
12
<PAGE> 13
EXHIBIT 4.4
Price, as determined below. Such right shall be exercisable by the Holder by
delivery of written notice (the "Warrant Share Repurchase Notice") to the
Company, specifying the number of Issued Warrant Shares that shall be
repurchased and the date on which such repurchase shall occur, which date shall
not be less than forty-five (45) days nor more than seventy (70) days after the
date of such the Warrant Share Repurchase Notice (the "Warrant Share Repurchase
Closing Date"). On the Warrant Share Repurchase Closing Date, the Holder shall
surrender the Issued Warrant Shares to be repurchased, against payment of the
Warrant Share Repurchase Price by wire transfer to an account designated by the
Holder. For purposes of this Agreement, the term "Warrant Share Repurchase
Price" shall be equal to the Applicable Price on the date of the Warrant Share
Repurchase Notice multiplied by the number of Issued Warrant Shares being
repurchased pursuant to this Section 15 or Section 17, as the case may be.
16. Holder's Obligation to Sell the Warrant. The Company shall
have the right exercisable at any time, and from time to time, during the
Repurchase Period, to cause the Holder to sell to the Company all or any
portion of this Warrant at the Warrant Repurchase Price. Such right shall be
exercisable by the Company by delivery of written notice (the "Warrant Sale
Notice") to the Holder, specifying the portion of this Warrant that shall be
repurchased and the date on which such sale shall occur, which date shall not
be less than forty-five (45) days nor more than seventy (70) days after the
date of the Warrant Sale Notice (the "Warrant Sale Closing Date"). On the
Warrant Sale Closing Date, the Holder shall surrender this Warrant to the
Company, against (i) payment of the Warrant Repurchase Price by wire transfer
to an account designated by the Holder, and, (ii) if the Company has elected to
have only a portion of the Warrant sold, delivery of a new warrant duly
executed by the Company, on the same terms and conditions as this Warrant,
except that such warrant shall be exercisable for the remaining number of the
Warrant Units.
17. Holder's Obligation to Sell Issued Warrant Shares. The Company
shall have the right exercisable at any time, and from time to time, during the
Repurchase Period, to cause the Holder to sell to the Company all or any portion
of the Issued Warrant Shares at the Warrant Repurchase Price. Such right shall
be exercisable by the Company by delivery of written notice (the "Warrant Share
Sale Notice") to the Holder, specifying the number of Issued Warrant Shares that
shall be sold to the Company and the date on which such sale shall occur, which
date shall not be less than forty five (45) days nor more than seventy (70) days
after the date of such the Warrant Share Sale Notice (the "Warrant Share Sale
Closing Date"). On the Warrant Share Sale Closing Date, the Holder shall
surrender the Issued Warrant Shares to be sold, against payment of the Warrant
Repurchase Price.
18. Certain Remedies. The Holder shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this Warrant
and to enforce specifically the terms and provisions of this Warrant in any
court of the United States or any state thereof having jurisdiction, this being
in addition to any other remedy to which such Holder may be entitled at law or
in equity.
19. Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the principles of conflicts of law of such State.
13
<PAGE> 14
EXHIBIT 4.4
20. Headings. The headings in this Warrant are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
21. Survival. The provisions of Sections 14, 15, 16 and 17 hereof,
inclusive, shall survive the complete exercise of this Warrant and the issuance
of all Issued Warrant Shares. For purposes of Sections 14, 15, 16 and 17,
"Holder" shall include any Person owning any of the Issued Warrant Shares.
AQUA-CHEM, INC.
By: /s/ JA Miller
---------------------------------
Name: Jeffrey A. Miller
Title: President
14
<PAGE> 15
EXHIBIT 4.4
Exhibit A to Common
Stock Purchase Warrant
[FORM OF]
ELECTION TO PURCHASE SHARES
The undersigned hereby irrevocably elects to exercise the Warrant to
purchase _____ shares of Common Stock, par value $.01 per share ("Common
Stock"), of Aqua-Chem, Inc. (the "Company") and hereby [makes payment of
$__________ therefor] [or] [makes payment therefor by assignment to the Company
pursuant to Section 2(b)(ii) of the Warrant of $_____________ aggregate
principal amount of WSDF Note (as defined in the Warrant)] [or] [makes payment
therefore by surrendering pursuant to Section 2(b)(iii) _______ shares of
Common Stock of the Company] [or] [makes payment therefor by cancellation
pursuant to Section 2(b)(iv) of a portion of the Warrant with respect to ____
shares of Common Stock]. The undersigned hereby requests that certificates for
such shares be issued and delivered as follows:
ISSUE TO:______________________________________________________________
(NAME)
________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
_________________________________________________________________________
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO: __________________________________________________________
(NAME)
_________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock purchased hereby is less than
the number of shares of Common Stock covered by the Warrant, the undersigned
requests that a new Warrant representing the number of shares of Common Stock
not purchased be issued and delivered as follows:
ISSUE TO: _______________________________________________________________
(NAME OF HOLDER)
_________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
DELIVER TO: ______________________________________________________________
(NAME OF HOLDER)
__________________________________________________________________________
(ADDRESS, INCLUDING ZIP CODE)
Dated:________________________ [NAME OF HOLDER]
By:__________________
Name:
Title:
_______________________
(1) Name of Holder must conform in all respects to name of Holder as specified
on the face of the Warrant.
<PAGE> 16
EXHIBIT 4.4
Exhibit B to Common
Stock Purchase Warrant
[FORM OF] ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned to
purchase Common Stock, par value $0.01 per share ("Common Stock"), of Aqua-Chem,
Inc. (the "Company") represented by the Warrant, with respect to the number of
shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
and does hereby irrevocably constitute and appoint ____________________ Attorney
to make such transfer on the books of the Company maintained for that purpose,
with full power of substitution in the premises.
Dated:_______________________ [NAME OF HOLDER]
By: ____________________________
Name:
Title:
___________________
1 Name of Holder must conform in all respects to name of Holder as specified on
the face of the Warrant.
16
<PAGE> 1
EXHIBIT 9.1
STOCKHOLDERS' AND MEMBERS' AGREEMENT
AGREEMENT (this "AGREEMENT"), dated as of July 31, 1997, by and among
Aqua-Chem, Inc. ("AQUA-CHEM or the "COMPANY"), a Delaware corporation (formerly
known as A-C Acquisition Corp.), Rush Creek LLC (the "HOLDING COMPANY"), Whitney
Equity Partners, L.P. ("WEP"), a Delaware limited partnership, Whitney
Subordinated Debt Fund, L.P. ("WSDF" and together with WEP, the "WHITNEY
FUNDS"),a Delaware limited partnership, the Miller Family LLC ("MILLER LLC"),
a Michigan limited liability company, Jeffrey A. Miller, Trustee of the Jeffrey
A. Miller Trust u/a/d May 10, 1997 (the "MILLER TRUST") J. Scott Barton
("BARTON"), Rand E. McNally ("MCNALLY"), Bruce Dickson ("DICKSON") and Charles
Norris ("NORRIS" and together with the Miller LLC, the Miller Trust, Barton,
McNally and Dickson,the "MANAGEMENT STOCKHOLDERS"). WEP, WSDF and the
Management Stockholders are sometimes hereinafter collectively referred to as
the "Stockholders" and each individually as a "STOCKHOLDER."
WHEREAS, pursuant to the terms of the Operating Agreement (the
"OPERATING AGREEMENT"), dated as of the date hereof, by and among the
Institutional Investors and the Management Stockholders, the equity securities
of Aqua-Chem, including, without limitation, the shares of common stock,
par-value $.0l per share, of Aqua-Chem (the "COMMON STOCK"), and the Series C
Redeemable Preferred Stock, par-value $.0l per share, of Aqua-Chem (the "SERIES
C PREFERRED STOCK") set forth opposite each of the names of the Stockholders
have been allocated to their respective Capital Accounts.
WHEREAS, the Stockholders believe that it is in the best interest of
the Company and the Stockholders that provision be made for the continuity and
stability of the business and policies of the Company, and, accordingly, desire
to make certain arrangements among themselves with respect to the election of
directors of the Company and with respect to certain other matters.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenant and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms shall have
the following respective meanings, and all capitalized terms used herein which
are not otherwise defined shall have the meaning assigned thereto in the
Securities Purchase Agreement, dated as of the date hereof, by and among the
Holding Company, the Company, CB-Kramer Sales and Service, Inc, a Delaware
corporation, and the Institutional Investors.
(a) "AFFILIATE" shall mean (i) in the case of an entity, any Person
who or which, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, any specified
Person or (ii) in the case of an individual, such individual's spouse, children,
grandchildren or parents or a trust primarily for the benefit of any of the
foregoing.
<PAGE> 2
EXHIBIT 9.1
(b) "BONA FIDE PURCHASER" shall mean any Person (other than a
selling Stockholder's Affiliates) who or which has delivered a good faith
written offer to purchase all or any portion of such Stockholder's Shares.
(c) "CAPITAL ACCOUNT" shall have the meaning specified in the
Operating Agreement.
(d) "CERTIFICATE OF INCORPORATION" shall mean the Certificate of
Incorporation of the Company, as amended, as in effect as of the date hereof.
(e) "COMMON STOCK" shall have the meaning assigned to that term in
the first Whereas clause of this Agreement.
(f) "DISPOSE" or "DISPOSITION" (and any derivatives thereof) shall
mean (i) a voluntary or involuntary sale, assignment, mortgage, grant, pledge,
hypothecation, exchange, transfer, conveyance or other disposition of a
Stockholder's Shares, and (ii) any agreement, contract or commitment to do any
of the foregoing.
(g) "ELIGIBLE STOCKHOLDER" shall mean each of WEP, WSDF, and their
respective successors and assigns.
(h) "ENCUMBRANCE" or "ENCUMBER" shall mean or refer to any lien,
claim, charge, pledge, mortgage, encumbrance, security interest, preferential
arrangement, restriction on voting or alienation of any kind, adverse interest,
or the interest of a third party under any conditional sale agreement, capital
lease or other title retention agreement.
(i) "INITIAL PUBLIC OFFERING" shall mean the sale by either the
Company or any of its Subsidiaries of its capital stock pursuant to a
registration statement on Form S-1 or otherwise under the Securities Act.
(j) "INSTITUTIONAL INVESTORS" shall mean (i) WSDF and (ii) WEP and
their respective successors and assigns.
(k) "MANAGERS" shall mean Jeffrey A. Miller ("Miller"), Barton,
McNally, Dickson, Norris and the other members of the management of the Company
who hold Shares and become a party to this Agreement.
(1) "MEMBERSHIP UNITS" shall have the meaning specified in the
Operating Agreement.
(m) "OTHER MANAGERS" shall mean Barton, McNally, Dickson, Norris and
other members of the management of the Company.
(n) "PERMITTED TRANSFEREES" shall mean in the case of (i) WEP, its
successors and assigns, including, without limitation, the Affiliates, partners
and retired partners of WEP or
2
<PAGE> 3
EXHIBIT 9.1
Whitney, the estates and family members of any such partners and retired
partners and of their spouses, and any trusts for the benefit of any of the
foregoing persons, (ii) WSDF, its successors and assigns, including without
limitation, the Affiliates, partners and retired partners of WSDF or Whitney,
the estates and family members of any such partners and retired partners and of
their spouses, and any trusts for the benefit of any of the foregoing persons,
(iii) in the case of Miller, (A) the estate and family members of Miller, any
trusts for the benefit of the foregoing persons, any trust which is revocable by
Miller and of which Miller is the primary beneficiary during Miller's lifetime,
any limited partnership, all of the partners of which are family members of
Miller, and any limited liability company, all of the members of which are
family members of Miller, and (B) the Other Managers, (iv) in the case of any
Stockholder that is not a not trust, the estates and family members of such
Stockholder, any trusts for the benefit of the foregoing persons, any trust
which is revocable by such Stockholder and of which the Stockholder is the
primary beneficiary during the Stockholder's lifetime, any limited partnership,
all of the partners of which are family members of such Stockholder, and any
limited liability company, all of the members of which are family members of
such Stockholder, (v) in the case of any Other Manager, (A) the estate and
family members of such Other Manager, any trusts for the benefit of the
foregoing persons, any trust which is revocable by such Other Manager and of
which such Other Manager is the primary beneficiary during such Other Manager's
lifetime, any limited partnership, all of the partners of which are family
members of such Other Manager, and any limited liability company, all of the
members of which are family members of such Other Manager, and (B) Miller
(provided the Disposition to Miller is effected pursuant to the original terms
(without amendment or modification) of the Rush Creek Management Group Stock
Restriction and Membership Unit and original Purchase Agreement, dated as of the
date hereof, by and among the Holding Company and the Management Stockholders)
and (vi) in the case of the other Stockholders who are trusts, the estates and
family members of such trusts beneficiaries, and any other trusts for the
benefit of such beneficiaries; provided, however, that in each case such person
shall agree in writing with the parties hereto to be bound by and to comply with
all applicable provisions of this Agreement.
(o) "PERSON" shall mean any individual, partnership, corporation,
limited liability company, joint venture, trust, firm, association,
unincorporated organization or other entity.
(p) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(q) "SHARES" shall mean, with respect to any Stockholder, (i) the
Membership Units held at any time by any such Stockholder, (ii) the shares of
Series C Preferred Stock held at any time by any Stockholder (iii) the shares of
Common Stock held at any time by such Stockholder and, if applicable, (ii) the
shares of Common Stock issuable upon the exercise of any option or warrant
(including the WSDF Warrant) or upon conversion of any convertible securities
held at any time by such Stockholder.
3
<PAGE> 4
EXHIBIT 9.1
(r) "STOCKHOLDER" shall mean each person so identified in the
preamble hereto and shall include any other Person who agrees in writing with
the parties hereto to be bound by and to comply with all applicable provisions
of this Agreement and all Permitted Transferees thereof.
(s) "SUBSIDIARIES" shall mean, with respect to any Person, a
corporation or other entity of which 50% or more of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly, by
such Person. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company or to Subsidiaries thereof.
(t) "THRESHOLD AMOUNT" shall mean two (2) of the two (2)
Institutional Investors.
(u) "WHITNEY" shall mean J.H. Whitney & Co.
The parties hereto acknowledge that pursuant to the terms of the
Operating Agreement, the Holding Company is required to exercise the rights
(provided that such Stockholder performs the corresponding obligations) accorded
to the holders of Common Stock and/or Series C Preferred Stock under this
Agreement at the direction of and for the benefit of the Members. In furtherance
of the purposes of the Operating Agreement, the parties hereto acknowledge and
agree that this Agreement shall be performed as if each Member directly owned
the Common Stock and/or Series C Preferred Stock allocated to its Capital
Account (provided that until such time as the Common Stock and/or Series C
Preferred Stock allocated to the Capital Account of a Member is distributed to
such Member, the certificates representing such Common Stock or Series C
Preferred Stock, as the case may be, shall be registered in the name of the
Holding Company). For purposes of this Agreement, each Stockholder shall be
deemed to be the holder of the Common Stock and/or Series C Preferred Stock
allocated to such Stockholder's Capital Account, as well as any such Common
Stock and/or Series C Preferred Stock distributed to such Stockholder pursuant
to the terms of the Operating Agreement. No certificate or other instrument
registered in the name of the Holding Company representing Common Stock or
Series C Preferred Stock allocated to a Member's Capital Account shall represent
any Common Stock or Series C Preferred Stock, as the case may be, allocated to
any other Member's Capital Account.
SECTION 2. PREEMPTIVE RIGHTS. (a) If at any time the Company wishes to
issue any shares of Common Stock or any rights to acquire Common Stock,
including, without limitation, any rights to acquire securities exercisable for,
convertible into or exchangeable for Common Stock (collectively the "EQUITY
EQUIVALENTS") to any Person or Persons, the Company shall promptly deliver a
notice of its intention to sell (the "COMPANY'S NOTICE OF INTENTION TO SELL") to
each Eligible Stockholder and Manager setting forth a description of the Equity
Equivalents to be sold, the proposed purchase price thereof and terms of sale.
Upon receipt of the Company's Notice of Intention to Sell, each Eligible
Stockholder and Manager shall have the right to elect to purchase (or cause the
Holding Company to purchase and to allocate to such Eligible Stockholder's or
Manager's, as the case may be, Capital Account), at the price and on the terms
stated in the Company's Notice
4
<PAGE> 5
EXHIBIT 9.1
of Intention to Sell, a number of the Equity Equivalents equal to such Eligible
Stockholder's or Manager's, as the case may be, aggregate proportionate
ownership of Equity Equivalents (calculated on a fully-diluted basis) held by
all Eligible Stockholders and Managers, multiplied by the number of Equity
Equivalents to be issued. For the purpose of determining the number of Equity
Equivalents that may be purchased by any Eligible Stockholder (or by the Holding
Company for the account of such Eligible Stockholder or Manager, as the case may
be), each Eligible Stockholder and Manager shall be deemed to be the owner of
any Equity Equivalents transferred, prior to the date of such election to
purchase, to any Permitted Transferee. Such election is to be made by the
Eligible Stockholders and Managers by written notice to the Company within 30
days after receipt by the Eligible Stockholders and Managers of the Company's
Notice of Intention to Sell (the "ACCEPTANCE PERIOD FOR EQUITY EQUIVALENTS").
Each Eligible Stockholder and Manager shall also have the option, exercisable by
so specifying in such written notice, to purchase (or cause the Holding Company
to purchase and to allocate to such Eligible Stockholder's or Manager's, as the
case may be, Capital Account) on a pro rata basis similar to that described
above, any remaining Equity Equivalents not purchased by other Eligible
Stockholders or Managers (or by the Holding Company for the account of such
other Eligible Stockholders or Managers, as the case may be,), in which case the
Eligible Stockholders or Managers exercising such further option shall be deemed
to have elected to purchase (or have the Holding Company purchase) such
remaining Equity Equivalents on such pro rata basis, up to the aggregate number
of Equity Equivalents which such Eligible Stockholder shall have specified. The
Company shall promptly notify each electing Eligible Stockholder and Manager in
writing of each notice of election received from other Eligible Stockholders and
Managers pursuant to this paragraph 2 (a).
(b) If effective acceptances shall not be received pursuant to
paragraph 2 (a) above in respect of all the Equity Equivalents, then the Company
may, at its election, during a period of 120 days following the expiration of
the Acceptance Period for Equity Equivalents, sell and issue the remaining
Equity Equivalents to another Person at a price and upon terms not more
favorable to such Person than those stated in the Company's Notice of Intention
to Sell; provided, however, that failure by an Eligible Stockholder or Manager
to exercise his, her or its option to purchase (or cause to be purchased) with
respect to one offering, sale and issuance of Equity Equivalents shall not
affect his, her or its option to purchase (or cause to be purchased) Equity
Equivalents in any subsequent offering, sale and purchase. In the event the
Company has not sold the Equity Equivalents, or entered into an agreement to
sell the Equity Equivalents, within such 120-day period, the Company shall not
thereafter issue or sell any Equity Equivalents without first offering such
securities to each Eligible Stockholder and Manager in the manner provided in
Section 2(a) hereof.
(c) If an Eligible Stockholder or Manager gives the Company notice,
pursuant to the provisions of this Section 2, that such Eligible Stockholder or
Manager desires to purchase (or cause the Holding Company to purchase) any of
the Equity Equivalents, payment therefor shall be made by the Eligible
Stockholder or Manager, as the case may be, by check or wire transfer, against
delivery of the securities at the executive offices of the Company within 15
business days after giving the Company such notice, or, if later, the closing
date for the sale of such Equity Equivalents. In the event that any such
proposed issuance is for a consideration other than cash, such Eligible
5
<PAGE> 6
EXHIBIT 9.1
Stockholder or Manager will be entitled to pay cash for each share or other
unit, in lieu of such other consideration, in the amount determined in good
faith by the Board of Directors of the Company to constitute the fair value of
such consideration other than cash to be paid per share or other unit.
(d) The preemptive rights contained in this Section 2 shall not
apply to (i) Common Stock issued (A) as a stock dividend to holders of Common
Stock, Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock of the Company, or upon any subdivision or combination of shares of Common
Stock, (B) pursuant to an Initial Public Offering, (C) upon the conversion of
any equity security or debt security of the Company issued on or prior to the
date hereof, or (D) the exercise of any option, warrant or other right to
subscribe for, purchase or otherwise acquire either Common Stock or any equity
security or debt security convertible into Common Stock, issued prior to the
date hereof, and (ii) the issuance by the Company of up to 61,919 shares of
Common Stock reserved or to be reserved for issuance upon the exercise of stock
options, granted or to be granted exclusively to employees, officers, directors
or consultants of the Company or its Subsidiaries and/or Affiliates pursuant to
the Company's employee stock option plan(s) now in existence.
SECTION 3. TRANSFER OF SHARES. No Stockholder shall effect a
Disposition of any of such Stockholder's Shares (or cause the Company to effect
a Disposition of any of the Shares allocated to such Stockholder's Capital
Account), except to a Permitted Transferee or as provided in this Agreement. Any
purported Disposition in violation of this Agreement shall be null and void ab
inito, and neither the Company nor the Holding Company shall recognize any such
Disposition or accord to any such purported transferee any rights as a
Stockholder or a Member (as such term is defined in the Operating Agreement).
SECTION 4. RIGHT OF FIRST REFUSAL; RIGHT OF CO-SALE.
(a) If any Stockholder shall desire at any time to effect the
Disposition of any of such Stockholder's Shares (or cause the Holding Company to
effect the Disposition of any Shares allocated to such Stockholder's Capital
Account) (the "OFFERED SHARES") and shall receive a purchase offer therefor or
the terms of a potential purchase offer therefor from a Bona Fide Purchaser
(such offer being hereinafter referred to as a "PURCHASE OFFER") then such
selling Stockholder ("SELLING STOCKHOLDER") shall promptly notify the Company,
the Holding Company and each Eligible Stockholder of the terms and conditions of
such Purchase Offer; provided, however, that this Section 4 shall not apply to
any transfers by (i) a Stockholder (or by the Holding Company) to such
Stockholder's Permitted Transferees, or (ii) any Eligible Stockholder to any
Person.
(b) Upon receipt of such notice of the Purchase Offer, each Eligible
Stockholder shall have the right to elect to purchase (or cause the Holding
Company to purchase and allocate to such Eligible Stockholder's Capital
Account), at the price and on the terms stated in such notice, a number of the
Offered Shares subject to the Purchase Offer equal to the product obtained by
multiplying (i) the aggregate number of Offered Shares covered by the Purchase
Offer by (ii) a fraction the numerator of which is the number of Equity
Equivalents (calculated on a fully-diluted basis) at the
6
<PAGE> 7
EXHIBIT 9.1
time owned by such Eligible Stockholder and the denominator of which is the
aggregate number of the Equity Equivalents (calculated on a fully-diluted basis)
owned by all Eligible Stockholders. Such election is to be made by written
notice ("NOTICE OF ELECTION") to the Selling Stockholder, to each other Eligible
Stockholder and to the Company within 60 days after receipt by such Eligible
Stockholder of the notice of a Purchase Offer (the "ACCEPTANCE PERIOD"). Each
Eligible Stockholder who elects to exercise his, her or its rights under this
Section 4 ("ELECTING STOCKHOLDER") shall also have the option, exercisable by so
specifying in the Notice of Election, to purchase (or to cause to be purchased)
on a pro rata basis similar to that described above any remaining Offered Shares
covered by the Purchase Offer not purchased by the other Eligible Stockholders
(or the Holding Company for the account of such other Eligible Stockholders), in
which case the Eligible Stockholders exercising such further option shall be
deemed to have elected to purchase (or cause the Holding Company to purchase)
such remaining Offered Shares on such pro rata basis, up to the aggregate number
of shares which such Electing Stockholder shall have specified.
(c) If effective acceptances shall not have been received pursuant
to paragraph 4(b) above in respect of all of the Offered Shares subject to the
Purchase Offer, then the Selling Stockholder may, at such Selling Stockholder's
election, either (i) sell (or cause the Holding Company to sell) to the Electing
Stockholders (or the Holding Company for the account of the Electing
Stockholder) pursuant to their elections and sell (or cause the Holding Company
to sell) any remaining Offered Shares subject to the Purchase Offer to the Bona
Fide Purchaser, or (ii) rescind the notice of the Purchase Offer, which
rescission shall be effected by notice in writing delivered to the Holding
Company and each Eligible Stockholder that shall have elected to purchase (or
have the Holding Company purchase) and to the Company within 10 days after
expiration of the Acceptance Period, and keep (or cause the Holding Company to
keep for its account) all, but not less than all, of the Offered Shares subject
to the Purchase Offer. In the event that the Selling Stockholder elects to sell
(or cause the Holding Company to sell) any Offered Shares pursuant to the
Purchase Offer, pursuant to clause (i) of this Section 4(c), the Bona Fide
Purchaser and the Electing Stockholders must purchase such Offered Shares (or in
the case of the Electing Stockholders cause the Company to purchase such Offered
Shares for their respective accounts) no more than 60 days after the end of the
Acceptance Period strictly in accordance with the terms and conditions of the
Purchase Offer; provided, however, that, in the event that the Selling
Stockholder shall so elect to sell (or cause the Holding Company to sell)
Offered Shares to the Bona Fide Purchaser, the prospective Bona Fide Purchaser,
as a condition precedent to the purchase of the Offered Shares, or any part
thereof, shall subscribe to this Agreement and agree to be bound by all of the
terms and conditions hereof. In the event that the Selling Stockholder shall so
elect to sell (or cause the Holding Company to sell) Offered Shares subject to
the Purchase Offer to the Bona Fide Purchaser and Electing Stockholders pursuant
to clause (i) of this Section 4(c), the Selling Stockholder shall so notify in
writing each Eligible Stockholder who is not an Electing Stockholder (the
"OUTSIDE SALE NOTICE") and no such sale shall be made unless and until each such
Eligible Stockholder (collectively, the "ELIGIBLE CO-SALE STOCKHOLDERS") shall
have been afforded the right (the "CO-SALE RIGHT"), exercisable upon written
notice to the Holding Company and the Company within 30 days after receipt of
the Outside Sale Notice, to participate (or cause the Holding Company to
participate) in the sale of Shares at the same time and on the same terms and
conditions under which the Selling Stockholder will sell (or
7
<PAGE> 8
EXHIBIT 9.1
cause the Holding Company to sell) the Selling Stockholder's Offered Shares.
Each such Eligible Co-Sale Stockholder may sell (or cause the Holding Company to
sell) all or any part of that number of Shares held by such Eligible Co-Sale
Stockholder equal to the product obtained by multiplying (i) the aggregate
number of Offered Shares covered by the Purchase Offer by (ii) a fraction the
numerator of which is the number of Equity Equivalents (calculated on a
fully-diluted basis) at the time owned by such Eligible Co-Sale Stockholder and
the denominator of which is the aggregate number of Equity Equivalents
(calculated on a fully-diluted basis) owned by all Eligible Co-Sale Stockholders
exercising their Co-Sale Right plus the number of Equity Equivalents (calculated
on a fully-diluted basis) then owned by the Selling Stockholder.
(d) If the Company so requests, each Eligible Co-Sale Stockholder
receiving an Outside Sale Notice in accordance with Section 4(c) and exercising
his, her or its Co-Sale Right shall deliver to (or cause the Holding Company to
deliver) the Company, as agent for such Eligible Co-Sale Stockholder, for
transfer to the Bona Fide Purchaser (i) a stock certificate or certificates
evidencing such Shares of which such Eligible Co-Sale Stockholder elects to
Dispose pursuant to this Section 4 (other than the Membership Units unless the
Operating Agreement provides that Membership Units shall be represented by
certificates) and (ii) an appropriate assignment separate from any certificate
duly executed in a proper form to effect the Disposition of such Shares to the
Bona Fide Purchaser on the books and records of the Company and/or the Holding
Company, as the case may be. No Disposition of such Shares shall be made on
terms and conditions, including the form of consideration, different from those
contained in the Purchase Offer unless the Selling Stockholder re-offers the
Offered Shares subject to the Purchase Offer to the Stockholders in accordance
with this Section 4.
(e) The Shares delivered by the Eligible Co-Sale Stockholders (or
the Holding Company) to the Company pursuant to Section 4(d) shall be
transferred by the Company to the Bona Fide Purchaser in consummation of the
Disposition of the Shares pursuant to the terms and conditions specified
in Section 4(a), and the Company shall promptly thereafter remit to each
Eligible Co-Sale Stockholder (or the Holding Company) that portion of the
Disposition proceeds to which such Eligible Co-Sale Stockholder is entitled by
reason of such Selling Stockholder's participation in such Disposition.
(f) In the event that a Selling Stockholder shall not have Disposed
of (or caused the Holding Company to have Disposed of) all such Stockholder's
Offered Shares subject to a Purchase Offer within 120 days after the date of
the notice given pursuant to Section 4(a), such Selling Stockholder shall
not thereafter Dispose of any Shares (or cause the Holding Company to dispose
of any Shares allocated to such Selling Stockholder's Capital Account) pursuant
to the Purchase Offer or otherwise without first reoffering such Shares to each
Eligible Stockholder in the manner set forth in Section 4 hereof.
(g) Notwithstanding anything contained in this Section 4 or any
notice given hereunder, the provisions of this Section 4 shall be suspended
immediately upon the occurrence of any event within the scope of Section 5.
8
<PAGE> 9
EXHIBIT 9.1
SECTION 4A. ADDITIONAL RIGHT OF CO-SALE.
(a) In the event that an Eligible Stockholder (the "SELLING ELIGIBLE
STOCKHOLDER") shall elect to sell (or cause the Holding Company to sell) any of
its Shares (the "SELLING ELIGIBLE STOCKHOLDER'S OFFERED SHARES") to any Person
other than such Eligible Stockholder's Permitted Transferees, the Selling
Eligible Stockholder shall so notify in writing (the "SALE NOTICE") each of the
Managers and the other Eligible Stockholder (collectively, the "CO-SALE
STOCKHOLDERS") and no such sale shall be made unless and until each of the
Co-Sale Stockholders shall have been afforded the right (the "STOCKHOLDER
CO-SALE RIGHT"), exercisable upon written notice to the Holding Company and the
Company within 30 days after receipt of the Sale Notice, to participate (or
cause the Holding Company to participate) in the sale of Shares at the same time
and on the same terms and conditions under which the Selling Eligible
Stockholder will sell (or cause the Holding Company to sell) the Selling
Eligible Stockholder's Offered Shares. Each such Co-Sale Stockholder may sell
(or cause the Holding Company to sell) all or any part of that number of Shares
held by such Co-Sale Stockholder equal to the product obtained by multiplying
(i) the aggregate number of Selling Eligible Stockholder's Offered Shares by
(ii) a fraction the numerator of which is the number of Equity Equivalents
(calculated on a fully-diluted basis) at the time owned by such Co-Sale
Stockholder and the denominator of which is the aggregate number of Equity
Equivalents (calculated on a fully-diluted basis) owned by all Co-Sale
Stockholders exercising their Stockholder Co-Sale Right plus the number of
Equity Equivalents (calculated on a fully-diluted basis) then owned by the
Selling Eligible Stockholder.
(b) If the Company so requests, each Co-Sale Stockholder receiving a
Sale Notice in accordance with Section 4A(a) and exercising his, her or its
Stockholder Co-Sale Right shall deliver to (or cause the Holding Company to
deliver) the Company, as agent for such Co-Sale Stockholder, for transfer to the
purchaser (i) a stock certificate or certificates evidencing such Shares of
which such Co-Sale Stockholder elects to Dispose pursuant to this Section 4A
(other than the Membership Units unless the Operating Agreement provides that
Membership Units shall be represented by certificates) and (ii) an appropriate
assignment separate from any certificate duly executed in a proper form to
effect the Disposition of such Shares to the purchaser on the books and records
of the Company and/or the Holding Company, as the case may be.
(c) The Shares delivered by the Eligible Co-Sale Stockholders
(or the Holding Company) to the Company pursuant to Section 4A(b) shall be
transferred by the Company to the purchaser in consummation of the Disposition
of the Shares pursuant to the terms and conditions specified in Section 4A(a),
and the Company shall promptly thereafter remit to each Co-Sale Stockholder (or
the Holding Company) that portion of the Disposition proceeds to which such
Co-Sale Stockholder is entitled by reason of such Selling Stockholder's
participation in such Disposition.
(d) Notwithstanding anything contained in this Section 4A or any
notice given hereunder, the provisions of this Section 4A shall terminate
immediately upon the occurrence of any event within the scope of Section 5.
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<PAGE> 10
EXHIBIT 9.1
SECTION 5. RIGHT OF BRING-ALONG.
(a) If the Threshold Amount of the Institutional Investors (the
"Selling Institutional Investors") propose to Dispose of all (but not less than
all) of the Shares allocated to their respective Capital Accounts and/or all
(but not less than all) of the Membership Units owned by them (the
"INSTITUTIONAL INVESTOR SHARES") to a Bona Fide Purchaser, other than any
transfers by such Institutional Investors (or by the Holding Company) to such
Institutional Investors' respective Permitted Transferees, then, notwithstanding
anything in this Agreement to the contrary, the Selling Institutional Investors
may require the other Stockholders (the "NON-SELLING HOLDERS") to Dispose of all
their Shares allocated to their respective Capital Accounts and/or Membership
Units, as the case may be, (the "MANAGEMENT SHARES") to such Bona Fide Purchaser
on the same terms and conditions (other than with respect to representations and
warranties) upon which the Selling Institutional Investors effect the
Disposition of the Institutional Investor Shares; provided, however, that the
Non-Selling Stockholders must receive in consideration for the Management Shares
an amount determined by an independent, nationally recognized investment bank or
appraisal firm to be fair market value therefor.
(b) In the event that the Selling Institutional Investors desire to
exercise their rights pursuant to Section 5(a)), the Selling Institutional
Investors shall deliver to the Company and the Non-Selling Holders written
notice ("SALE NOTICE") setting forth the consideration per share or per unit to
be paid by such Bona Fide Purchaser and the other terms and conditions of such
Disposition (the Sale Notice shall have attached to it the fairness opinion,
valuation report or similar document from the investment bank or appraisal firm
opining on the fair market value of the Management Shares, as required by
Section 5(a). Within ten (10) days following the date of such notice, each of
the other Stockholders shall deliver (or cause the Holding Company to deliver)
to the Selling Institutional Investors (i) a stock certificate or certificates
evidencing such Management Shares (other than the Membership Units unless the
Operating Agreement provides that Membership Units shall be represented by
certificates), (ii) an appropriate assignment separate from any certificate duly
executed in a proper form to effect the Disposition of the Management Shares
from the Non-Selling Holders to the Bona Fide Purchaser on the books and records
of the Company and/or the Holding Company, as the case may be, and (iii) a
limited power-of-attorney authorizing one of the Selling Institutional Investors
to effect the Disposition of the Management Shares pursuant to the terms of such
Bona Fide Purchaser's offer as such terms may be modified by the Selling
Institutional Investors, provided, that all of the Management Shares are
disposed of for the same consideration per share and otherwise on the same terms
and conditions upon which the Selling Institutional Investors effect the
Disposition of the Institutional Investor Shares. In the event that any
Non-Selling Holder shall fail to deliver such stock certificate(s), assignment
separate from certificate and limited power-of-attorney to the Selling
Institutional Investors, the Company and/or the Holding Company, as the case may
be, shall cause a notation to be made on its books and records to reflect that
the Management Shares of such Non-Selling Holder are bound by the provisions of
this Section 4 and that the Disposition of such Management Shares may be
effected without such Non-Selling Holder's consent or surrender of its
Management Shares.
10
<PAGE> 11
EXHIBIT 9.1
In addition, in the event the Selling Institutional Investors exercise
their rights under Section 5(a), the Non-Selling Holders shall be required to
make to a Bona Fide Purchaser such unqualified representations and warranties
with respect to the Management Shares as are set forth in Section 5(e) hereof
and representations and warranties with respect to all other matters as are
reasonably requested by the Bona Fide Purchaser, provided that the Non-Selling
Holders will only be required to provide representations and warranties on the
same basis and subject to the same qualifications as the Selling Institutional
Investors and will only be required to indemnify the Bona fide Purchaser against
breaches of such representations and warranties up to an aggregate dollar amount
not to exceed their respective consideration received other than with respect to
representations and warranties regarding ownership of stock and authority to
consummate the transaction in question.
(c) Promptly (but in no event later than the day of receipt) after
the consummation of the Disposition of Institutional Investor Shares and the
Management Shares pursuant to this Section 5, the Selling Institutional
Investors shall (i) deliver notice thereof to the Non-Selling Holders, (ii)
remit to the Non-Selling Holders the total sales price of their respective
Management Shares Disposed of pursuant hereto, and (iii) furnish such other
evidence of the completion and time of completion of such Disposition and the
terms thereof as may be reasonably requested in writing by the Non-Selling
Holders.
(d) If, within ninety (90) days after the Selling Institutional
Investors' delivery of the notice required pursuant to Section 5(b), the
Selling Institutional Investors have not completed the Disposition of the
Institutional Investor Shares and the Management Shares in accordance herewith,
the Selling Institutional Investors shall return to the Non-Selling Holders (i)
any stock certificates and assignments with respect to the Non-Selling
Holders' Management Shares which the Non-Selling Holder delivered pursuant to
this Section 5 and (ii) the related limited power-of-attorney. Upon the
Non-Selling Holder's receipt of such materials, all the restrictions on
Disposition contained in this Agreement with respect to the Institutional
Investor Shares and the Management Shares shall again be in effect.
(e) All sales of Institutional Investor Shares and Management
Shares to be made pursuant to this Section 5 shall be subject to the
following terms:
(i) the Disposing Stockholder shall deliver to the Bona
Fide Purchaser the Shares being sold, free and clear of Encumbrances
(ii) the Disposing Stockholders shall deliver certificates
representing the Shares being sold (other than certificates with respect to the
Membership Units unless the Operating Agreement provides that Membership Units
shall be represented by certificates), together with duly executed stock
transfer powers (or, in the case of Membership Units, assignments) in favor of
the Bona Fide Purchaser or its nominees and such other documents, including
evidence of ownership and authority, as the Bona Fide Purchaser may reasonably
request;
11
<PAGE> 12
EXHIBIT 9.1
(ii) except as otherwise specifically set forth herein,
the Disposing Stockholder shall not be required to make any representations or
warranties to any Person in connection with such sale, except as to (A) good
title to the Shares being sold, (B) the absence of Encumbrances with respect to
the Shares being sold, (C) its valid existence and good standing (if
applicable), (D) the authority for, and validity and binding effect of (as
against such Disposing Stockholder), any agreement entered into by such
Disposing Stockholder in connection with such sale, (E) all required material
consents to Disposing Stockholder's sale and material governmental approvals
having been obtained (excluding any securities laws) and (vi) the fact that no
broker's commission is payable by the Disposing Stockholder as a result of
Disposing Stockholder's conduct in connection with the sale; and
(iii) the Disposing Stockholder shall not be required to
provide any indemnities in connection with such sale except for breach of the
representations and warranties specifically required by the terms of this
Agreement.
SECTION 6. ELECTION OF DIRECTORS.
(a) From and after the date hereof, at any annual or special
stockholders' meeting called for such purpose, or by written consent in lieu of
a meeting, the Stockholders agree to vote the Shares owned of record or
beneficially by them to maintain a six-member Board of Directors and to elect
(i) two nominees designated by Whitney (or the Whitney Funds) to the Company's
Board of Directors, (ii) two nominees designated by Management (as defined in
the Purchase Agreement) to the Company's Board of Directors, (iii) two
"independent" nominees who are agreeable to each of Whitney (or the Whitney
Funds) and Management (as defined in the Purchase Agreement) to the Company's
Board of Directors, and (v) two nominees of Whitney (or the Whitney Funds) to
each of the Company's audit committee and compensation committee, in each case,
one of which shall be elected as Chairman of such committee provided, however,
that if there is a material breach of any provision of any Transaction Document,
the Stockholders, at the election of Whitney (or the Whitney Funds) agree to
vote the Shares owned of record or beneficially by them to increase the size of
the Board of Directors of the Company to nine and to elect three additional
nominees designated by Whitney (or the Whitney Funds) to the Board of Directors
of the Company. All such directors shall hold office until their respective
successors shall have been elected and shall have qualified. The Company shall
provide to such directors the same information concerning the Company and its
Subsidiaries, and access thereto, provided to other members of the Company's
Board of Directors. The reasonable travel expenses incurred by any such director
or manager in attending any such meetings shall be reimbursed by the Company to
the extent consistent with the Company's then existing policy of reimbursing
directors generally for such expenses. Within two months following the date
hereof, the Company shall purchase directors' and officers' insurance upon terms
and pricing customary for a company of its size and operating in its industry;
provided, however, the Company shall not be obligated to purchase such insurance
in the event that such terms and pricing are not commercially available.
12
<PAGE> 13
EXHIBIT 9.1
(b) In the event that Whitney (or the Whitney Funds) shall not
have a designee serving on the Board of Directors of the Company for any
reason, the Company shall give Whitney and the Whitney Funds notice of (in the
same manner as notice is given to directors), and permit one Person designated
by Whitney(or the Whitney Funds) to attend as observer, all meetings of the
Company's Board of Directors and all executive and other committee
meetings of the Board of Directors and shall provide to Whitney and the Whitney
Funds the same information concerning the Company, and access thereto, provided
to members of the Company's Board of Directors. The reasonable travel expenses
incurred by any such designee of Whitney (or the Whitney Funds) in attending
any board or committee meetings shall be reimbursed by the Company to the
extent consistent with the Company's then existing policy of reimbursing
directors generally for such expenses.
(c) The parties hereto will cause the Company's Board of Directors
to meet at least once every quarter on as regular a basis as possible, or more
frequently to the extent that the directors designated by Whitney (or the
Whitney Funds), or in the event no such directors are then serving on the Board
of Directors, an observer designated thereby, reasonably wishes the Board of
Directors to meet.
SECTION 7. LEGEND ON STOCK CERTIFICATES. Each certificate of the
signatories hereto representing Shares shall bear the following legend until
such time as the Shares represented thereby are no longer subject to the
provisions hereof:
"THE SALE, TRANSFER OR ENCUMBRANCE OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A STOCKHOLDERS
AGREEMENT, DATED AS OF JULY 31,1997 AMONG AQUA-CHEM, INC. AND CERTAIN HOLDERS OF
ITS OUTSTANDING CAPITAL STOCK. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF AQUA-CHEM, INC."
SECTION 8. DURATION OF AGREEMENT. The rights and obligations of each
Stockholder under this Agreement shall terminate as to such Stockholder upon the
earliest to occur of (i) the transfer of all Shares owned by such Stockholder in
accordance with this Agreement, and (ii) the tenth anniversary of the date
hereof. Upon consummation of an Initial Public Offering, the rights and
obligations of each Stockholder under Sections 2, 3, 4 and 5 of this Agreement
shall terminate.
SECTION 9. REPRESENTATIONS AND WARRANTIES. Each Stockholder
represents and warrants to the other Stockholders as follows:
(a) The execution, delivery and performance of this Agreement by
such Stockholder will not violate any provision of law, any order of any court
or other agency of government, or any provision of any indenture, agreement or
other instrument to which such Stockholder or any of his, her or its properties
or assets is bound, or conflict with, result in a breach of or constitute (with
due notice or lapse of time or both) a default under any such indenture,
agreement or other instrument,
13
<PAGE> 14
EXHIBIT 9.1
or result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the properties or assets of such Stockholder.
(b) This Agreement has been duly executed and delivered by such
Stockholder and constitutes the legal, valid and binding obligation of such
Stockholder, enforceable in accordance with its terms.
(c) The Shares set forth on Exhibit A to the Operating Agreement
listed under the caption "Capital Contribution" opposite each Stockholder's
name constitute all of the securities of the Company owned by such Stockholder
(or allocated to such Stockholder's Capital Account), and, except as set forth
in the Transaction Documents, such Stockholder does not have any right or
obligation to acquire (or cause the Holding Company to acquire) any additional
securities of the Company. The Membership Units set forth on Exhibit A to the
Operating Agreement listed under the caption "Membership Units" opposite each
Stockholder's name constitute all of the equity interest owned by such
Stockholder, and such Stockholder does not have any right or obligation to
acquire any additional equity interest in the Holding Company.
SECTION 10. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF DELAWARE WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF
SUCH STATE.
SECTION 11. JURISDICTION. EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY AGREES THAT THE ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE NOTES, THE SHARES, THE WARRANTS OR ANY
AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE BROUGHT IN THE
COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL
JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY
WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT THE SUCH COURTS ARE AN
INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 13, SUCH SERVICE TO BECOME
EFFECTIVE 10 DAYS AFTER SUCH MAILING.
SECTION 12. BENEFITS OF AGREEMENT. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
assigns, legal representatives and heirs. Any purported issuance of Equity
Equivalents by the Company, or Disposition of the Shares, in violation of the
provisions of this Agreement shall be null and void ab initio.
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EXHIBIT 9.1
SECTION 13. NOTICES. All notices, requests and other communications to
be given or otherwise made to any Stockholder or other party hereto shall be
deemed to be sufficient if contained in a written instrument duly transmitted by
telecopy or telex or duly sent by overnight courier service or first class
registered or certified mail, postage prepaid, addressed to such party at the
address set forth below or at such other address as may hereafter be designated
in writing by the addressee to the addressor listing all parties:
if to the Company: Aqua-Chem, Inc.
7800 North 113th Street
Milwaukee, WI 53201
Telecopier: 414-577-2953
Attention: Mr. Jeffrey A. Miller
with a copy to: Whyte Hirschboeck Dudek S.C.
Suite 2100
111 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Telecopier: 414-273-1439
Attention: James A. Feddersen, Esq.
if to the Holding
Company: Rush Creek LLC
c/o Aqua-Chem, Inc.
7800 North 113th Street
Milwaukee, WI 53201
Telecopier: 414-577-2953
Attention: Mr. Jeffrey A. Miller
with a copy to: Whyte Hirschboeck Dudek S.C.
Suite 2100
111 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Telecopier: 414-273-1439
Attention: James A. Feddersen, Esq.
if to WSDF: Whitney Subordinated Debt Fund, L.P.,
177 Broad Street, 1st Floor
Stamford, CT 06901
Attention: Mr. James H. Fordyce
Mr. Daniel J. O'Brien
15
<PAGE> 16
EXHIBIT 9.1
with a copy to: Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, NY 10022
Telecopier No. (212) 735-8708
Attention: David A. Scherl, Esq.
if to WEP: Whitney Equity Partners, L.P.,
177 Broad Street, 1st Floor
Stamford, CT 06901
Attention: Mr. James H. Fordyce
Mr. Daniel J. O'Brien
with a copy to: Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, NY 10022
Telecopier No. (212) 735-8708
Attention: David A. Scherl, Esq.
if to any Manage-
ment Stockholder: c/o Aqua-Chem, Inc.
7800 North 113th Street
Milwaukee, WI 53201
Telecopier: 414-577-2953
Attention: Mr. Jeffrey A. Miller
with a copy to: Whyte Hirschboeck Dudek S.C.
Suite 2100
111 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Telecopier: 414-273-1439
Attention: James A. Feddersen, Esq.
or to such other address or addresses as shall have been furnished in writing to
the other parties hereto. Each Stockholder agrees, at all times, to provide the
Company with an address for notices hereunder.
All notices hereunder shall be effective on the date of transmission if
transmitted by telex or telecopy, on the first day after delivery to an
overnight national courier service if sent by such service and on the date of
receipt if sent by mail.
16
<PAGE> 17
EXHIBIT 9.1
SECTION 14. MODIFICATION. Except as otherwise provided herein, neither
this Agreement nor any provision hereof shall be modified, changed, discharged
or terminated except by an instrument in writing signed by the party against
whom the enforcement of any modification, change, discharge or termination is
sought or by the agreement of all of the Stockholders, subject to this
Agreement; provided, however, that no modification or amendment shall be
effective to reduce the percentage of the Shares the consent of the holders of
which is required under this Section 14.
SECTION 15. ENTIRE AGREEMENT. This Agreement and the Operating
Agreement constitutes the entire agreement among the undersigned with respect to
matters or understandings involving the ownership, control or disposition of
their Shares and supersedes any and all prior agreements or understandings, oral
or written, among any or all of the undersigned relating to such ownership,
control or disposition.
SECTION 16. SIGNATURES; COUNTERPARTS. Telefacsimile transmissions of
any executed original document and/or retransmission of any executed
telefacsimile transmission shall be deemed to be the same as the delivery of an
executed original. At the request of any party hereto, the other parties hereto
shall confirm telefacsimile transmissions by executing duplicate original
documents and delivering the same to the requesting party or parties. 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.
[Balance of page intentionally left blank]
17
<PAGE> 18
EXHIBIT 9.1
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
AQUA-CHEM, INC.
By: /s/ JA Miller
-----------------------------------------
Name: Jeffrey A. Miller
Title: President
RUSH CREEK LLC
By: /s/ JA Miller
-----------------------------------------
Jeffrey A. Miller, Manager
WHITNEY EQUITY PARTNERS, L.P.
By: J.H. WHITNEY EQUITY PARTNERS, LLC,
Its General Partner
By: /s/ James H. Fordyce
-----------------------------------------
Name: James H. Fordyce
Attorney-in-Fact
WHITNEY SUBORDINATED DEBT FUND, L.P.
By: /s/ James H. Fordyce
-----------------------------------------
Name: James H. Fordyce
A General Partner
/s/ JA Miller
-----------------------------------------
JEFFREY A. MILLER, TRUSTEE OF THE
JEFFREY A. MILLER TRUST U/A/D
MAY 10, 1997
FIRST SIGNATURE PAGE TO THE STOCKHOLDERS' AND MEMBERS' AGREEMENT]
18
<PAGE> 19
EXHIBIT 9.1
/s/ J-Scott Barton
------------------------------------------
J. SCOTT BARTON
/s/ Rand E. McNally
------------------------------------------
RAND E. MCNALLY
/s/ Bruce Dickson
------------------------------------------
BRUCE DICKSON
/s/ Charles Norris
------------------------------------------
CHARLES NORRIS
MILLER FAMILY LLC
By: /s/ JA Miller
---------------------------------------
Jeffrey A. Miller, Manager
19
<PAGE> 1
EXHIBIT 10.1
================================================================================
AQUA-CHEM, INC.
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
DATED AS OF JUNE 23, 1998
COMERICA BANK, AS AGENT
================================================================================
<PAGE> 2
EXHIBIT 10.1
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. DEFINITIONS..............................................................................................1
2. REVOLVING CREDIT........................................................................................23
2.1 Revolving Credit Commitment...........................................................23
2.2 Accrual of Interest and Maturity......................................................24
2.3 Requests for Advances and Requests for Refundings and Conversions of
Revolving Credit Advances............................................................24
2.4 Disbursement of Revolving Credit Advances.............................................26
2.5 Prime-based Advance in Absence of Election or Upon Default............................27
2.6 Revolving Credit Facility Fee.........................................................27
2.7 Reduction of Indebtedness; Revolving Credit Aggregate Commitment......................27
2.8 Optional Reduction or Termination of Revolving Credit Aggregate
Commitment...........................................................................28
2.9 Extension of Revolving Credit Maturity Date...........................................28
3. LETTERS OF CREDIT.......................................................................................29
3.1 Letters of Credit.....................................................................29
3.2 Conditions to Issuance................................................................29
3.3 Notice................................................................................31
3.4 Letter of Credit Fees.................................................................31
3.5 Other Letter of Credit Fees...........................................................32
3.6 Draws and Demands for Payment Under Letters of Credit.................................32
3.7 Obligations Irrevocable...............................................................33
3.8 Risk Under Letters of Credit..........................................................34
3.9 Indemnification.......................................................................35
3.10 Right of Reimbursement................................................................36
3.11 Existing Letters of Credit............................................................36
4. SWING LINE CREDIT.......................................................................................37
4.1 Swing Line Advances...................................................................37
4.2 Accrual of Interest; Margin Adjustments...............................................37
4.3 Requests for Swing Line Advances......................................................37
4.4 Disbursement of Swing Line Advances...................................................39
4.5 Refunding of or Participation Interest in Swing Line Advances.........................39
5. MARGIN ADJUSTMENTS; INTEREST PAYMENTS...................................................................40
5.1 Margin Adjustments....................................................................40
5.2 Prime-based Interest Payments.........................................................41
5.3 Eurocurrency-based Interest Payments..................................................41
5.4 Quoted Rate Advance Interest Payments.................................................42
</TABLE>
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EXHIBIT 10.1
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
5.5 Interest Payments on Conversions......................................................42
5.6 Interest on Default...................................................................42
5.7 Prepayment of Revolving Credit and Swing Line Advances................................42
6. CONDITIONS..............................................................................................43
6.1 Execution of Notes and this Agreement.................................................43
6.2 Corporate Authority...................................................................43
6.3 Reaffirmation of Certain Loan Documents...............................................44
6.4 Real Estate Documentation.............................................................44
6.5 Insurance.............................................................................44
6.6 Compliance with Certain Documents and Agreements......................................44
6.7 Opinion of Counsel....................................................................44
6.8 Company's Certificate.................................................................45
6.9 Payment of Fees.......................................................................45
6.10 Pro Forma Balance Sheet...............................................................45
6.11 Existing Credit Facilities............................................................45
6.13 National Dynamics Acquisition Documents...............................................45
6.14 Subordinated Debt.....................................................................46
6.15 Perfection of Security Interests......................................................46
6.16 Other Documents and Instruments.......................................................46
6.17 Continuing Conditions.................................................................46
7. REPRESENTATIONS AND WARRANTIES..........................................................................47
7.1 Corporate Authority...................................................................47
7.2 Due Authorization - Company...........................................................47
7.3 Due Authorization - Guarantors........................................................47
7.4 Liens.................................................................................47
7.5 Taxes.................................................................................48
7.6 No Defaults...........................................................................48
7.7 Enforceability of Agreement and Loan Documents -- Company.............................48
7.8 Enforceability of Loan Documents -- Guarantors........................................48
7.9 Compliance with Laws..................................................................48
7.10 Non-contravention -- Company..........................................................49
7.11 Non-contravention -- Guarantors.......................................................49
7.12 No Litigation.........................................................................49
7.13 Consents, Approvals and Filings, Etc..................................................49
7.14 Agreements Affecting Financial Condition..............................................50
7.15 No Investment Company or Margin Stock.................................................50
7.16 ERISA.................................................................................50
7.17 Conditions Affecting Business or Properties...........................................50
</TABLE>
- ii -
<PAGE> 4
EXHIBIT 10.1
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
7.18 Environmental and Safety Matters......................................................51
7.19 Subsidiaries..........................................................................51
7.20 Accuracy of Information...............................................................51
7.21 Financial Statements - Company........................................................51
7.22 Solvency..............................................................................52
7.23 Year 2000 Requirement.................................................................52
8. AFFIRMATIVE COVENANTS...................................................................................53
8.1 Financial Statements..................................................................53
8.2 Certificates; Other Information.......................................................54
8.3 Payment of Obligations................................................................54
8.4 Conduct of Business and Maintenance of Existence......................................54
8.5 Maintenance of Property; Insurance....................................................55
8.6 Inspection of Property; Books and Records, Discussions................................55
8.7 Notices...............................................................................55
8.8 Hazardous Material Laws...............................................................56
8.9 Maintain Base Tangible Net Worth......................................................57
8.10 Fixed Charge Coverage Ratio...........................................................57
8.11 Senior Funded Debt to Consolidated EBITDA Ratio.......................................57
8.12 [Reserved]............................................................................57
8.13 [Reserved]............................................................................57
Taxes ...............................................................................................57
8.15 Governmental and Other Approvals......................................................57
8.16 Compliance with ERISA.................................................................57
8.17 ERISA Notices.........................................................................57
8.18 Security..............................................................................58
8.19 Defense of Collateral.................................................................58
8.20 Use of Proceeds.......................................................................58
8.21 Future Subsidiaries. .................................................................58
8.22 Financial Covenant Amendments.........................................................59
8.23 Further Assurances....................................................................59
9. NEGATIVE COVENANTS......................................................................................60
9.1 Limitation on Debt....................................................................60
9.2 Limitation on Liens...................................................................61
9.3 Limitation on Guarantee Obligations...................................................62
9.4 Acquisitions..........................................................................62
9.5 Limitation on Fundamental Changes and Sale of Assets..................................62
9.6 Restricted Payments...................................................................64
9.7 Limitation on Capital Expenditures....................................................64
</TABLE>
- iii -
<PAGE> 5
EXHIBIT 10.1
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
9.8 Limitation on Investments, Loans and Advances.........................................65
9.9 Transactions with Affiliates..........................................................66
9.10 Sale and Leaseback....................................................................66
9.11 Limitation on Negative Pledge Clauses.................................................66
9.12 Prepayment of Debts...................................................................66
9.13 Subordinated Obligations and Subordinated Debt........................................67
9.14 Modification of Certain Agreements....................................................67
10. DEFAULTS................................................................................................67
10.1 Events of Default.....................................................................67
10.2 Exercise of Remedies..................................................................70
10.3 Rights Cumulative.....................................................................70
10.4 Waiver by Company of Certain Laws.....................................................70
10.5 Waiver of Defaults....................................................................70
10.6 Set Off...............................................................................71
11. PAYMENTS, RECOVERIES AND COLLECTIONS....................................................................71
11.1 Payment Procedure.....................................................................71
11.2 Application of Proceeds of Collateral.................................................73
11.3 Pro-rata Recovery.....................................................................73
12. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS........................................................73
12.1 Reimbursement of Prepayment Costs.....................................................73
12.2 Agent's Eurocurrency Lending Office...................................................74
12.3 Circumstances Affecting Eurocurrency-based Rate Availability..........................74
12.4 Laws Affecting Eurocurrency-based Advance Availability................................74
12.5 Increased Cost of Eurocurrency-based Advances.........................................75
12.6 Indemnity.............................................................................76
12.7 Other Increased Costs.................................................................76
12.8 Substitution of Banks.................................................................77
13. AGENT...................................................................................................77
13.1 Appointment of Agent..................................................................77
13.2 Deposit Account with Agent............................................................78
13.3 Scope of Agent's Duties...............................................................78
13.4 Successor Agent.......................................................................79
13.5 Agent in its Individual Capacity......................................................79
13.6 Credit Decisions......................................................................79
13.7 Agent's Fees..........................................................................80
13.8 Authority of Agent to Enforce Notes and This Agreement................................80
</TABLE>
- iv -
<PAGE> 6
EXHIBIT 10.1
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
13.9 Indemnification.......................................................................80
13.10 Knowledge of Default..................................................................80
13.11 Agent's Authorization; Action by Banks................................................81
13.12 Enforcement Actions by the Agent......................................................81
14. MISCELLANEOUS...........................................................................................81
14.1 Accounting Principles.................................................................81
14.2 Consent to Jurisdiction...............................................................81
14.3 Law of Michigan.......................................................................82
14.4 Interest..............................................................................82
14.5 Closing Costs and Other Costs; Indemnification........................................82
14.6 Notices...............................................................................83
14.7 Further Action........................................................................84
14.8 Successors and Assigns; Participations; Assignments...................................84
14.9 Indulgence............................................................................87
14.10 Counterparts..........................................................................87
14.11 Amendment and Waiver..................................................................87
14.12 Confidentiality.......................................................................88
14.13 Withholding Taxes.....................................................................88
14.14 Taxes and Fees........................................................................89
14.15 WAIVER OF JURY TRIAL..................................................................89
14.16 Complete Agreement; Conflicts.........................................................89
14.17 Severability..........................................................................89
14.18 Table of Contents and Headings........................................................89
14.19 Construction of Certain Provisions....................................................90
14.20 Independence of Covenants.............................................................90
14.21 Reliance on and Survival of Various Provisions........................................90
14.22 Complete Agreement; Amendment and Restatement.........................................90
</TABLE>
- v -
<PAGE> 7
EXHIBIT 10.1
TABLE OF CONTENTS
(Continued)
SCHEDULES
Schedule 1.1 Pricing Matrix
Schedule 1.2 Percentages
Schedule 2 Insurance Deposits (Permitted Liens)
Schedule 3.1 Existing Letters of Credit
Schedule 6.2 List of Jurisdictions in which Company and/or Subsidiaries do
business
Schedule 6.3 List of Jurisdictions in which to file financing statements
Schedule 7.9 Compliance with Laws
Schedule 7.12 Litigation
Schedule 7.16 Employee Pension Benefit Plans
Schedule 7.18 Environmental Matters
Schedule 7.19 Subsidiaries
Schedule 7.20 Contingent Obligations
Schedule 8.8 Environmental Actions
Schedule 8.21 Real Estate Documentation
Schedule 9.1 Existing Debt
Schedule 9.2 Permitted Liens
Schedule 14.6 Notices
EXHIBITS
A FORM OF REQUEST FOR REVOLVING CREDIT ADVANCE
B FORM OF REVOLVING CREDIT NOTE
C FORM OF NOTICE OF LETTERS OF CREDIT
D FORM OF REQUEST FOR SWING LINE ADVANCE
E FORM OF SWING LINE NOTE
F FORM OF SWING LINE BANK PARTICIPATION CERTIFICATE
G [Reserved]
H FORM OF COVENANT COMPLIANCE REPORT
I FORM OF ASSIGNMENT AGREEMENT
J FORM OF SUBORDINATION PROVISIONS
K FORMS OF INTERCOMPANY NOTE
L FORM OF REAFFIRMATION OF CERTAIN LOAN DOCUMENTS
- vi -
<PAGE> 8
EXHIBIT 10.1
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
This Second Amended and Restated Revolving Credit Agreement
("Agreement") is made as of the 23rd day of June, 1998, by and among the
financial institutions from time to time signatory hereto (individually a
"Bank," and any and all such financial institutions collectively the "Banks"),
Comerica Bank, as structuring, documentation and administrative agent for the
Banks (in such capacity, "Agent"), and Aqua-Chem, Inc., a Delaware corporation
(the "Company");
A. Company has requested that the Banks amend, renew and/or extend to
it revolving credit and letters of credit as previously extended to Company by
the Banks under that certain Amended and Restated Revolving Credit and Term Loan
Agreement dated as of December 5, 1997, by and among Company, Agent and the
Banks (the "Prior Credit Agreement") on the terms and conditions set forth
herein.
B. The Banks are prepared to extend such credit as aforesaid, by
amendment and renewal (but not in novation) of the Prior Credit Agreement, but
only upon the terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the covenants contained herein,
Company, the Banks and Agent agree as follows:
COMPANY, AGENT AND BANKS AGREE:
1. DEFINITIONS
For the purposes of this Agreement the following terms will have the
following meanings:
"Account Party(ies)" shall mean, with respect to any Letter of Credit,
the account party or parties (which shall be the Company, individually, or a
Domestic Significant Subsidiary which is a Guarantor jointly and severally with
Company) named in an application to the Issuing Bank for the issuance of such
Letter of Credit.
"Account(s)" shall mean any account or account receivable as defined
under the UCC, including without limitation, with respect to any Person, any
right of such Person to payment for goods sold or leased or for services
rendered.
"Account Debtor" shall mean the party who is obligated on or under
any Account.
"Actual Capital Expenditures" shall mean as of any date of
determination, Capital Expenditures minus that portion of such Capital
Expenditures financed under Capitalized Leases or other Debt.
<PAGE> 9
EXHIBIT 10.1
"Adjusted Consolidated Tangible Net Worth" shall mean, as of any date
of determination, Consolidated Tangible Net Worth as of such date plus an
amount equal to the aggregate outstanding principal amount of the Subordinated
Debt as of such date.
"Advance(s)" shall mean, as the context may indicate, a borrowing
requested by Company, and made by the Banks under Section 2.1 hereof or
requested by the Company and made by the Swing Line Bank under Section 4.1
hereof, including without limitation any readvance, refunding or conversion of
such borrowing pursuant to Section 2.3 or 4.5 hereof, any advance in respect of
a Letter of Credit under Section 3.6 hereof (including without limitation the
unreimbursed amount of any draws under any Letters of Credit), and shall
include, as applicable, a Eurocurrency-based Advance, a Prime-based Advance, and
a Quoted Rate Advance.
"Affected Lender" shall have the meaning set forth in Section 12.8.
"Affiliate" shall mean, with respect to any Person, any other Person or
group acting in concert in respect of the first Person that, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with such first Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person or group of Persons, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise. Unless otherwise specified to the contrary herein, or the context
requires otherwise, Affiliate shall refer to the Company's Affiliates.
"Agent" shall mean Comerica Bank, in its capacity as agent for the
Banks hereunder, or any successor agent appointed in accordance with Section
13.4 hereof.
"Agent's Fees" shall mean those agency, and other fees and expenses
required to be paid by Company to Agent under Section 13.7 hereof.
"Alternate Base Rate" shall mean, for any day, an interest rate per
annum equal to the Federal Funds Effective Rate in effect on such day, plus one
percent (1%).
"Applicable Evaluation Date" shall mean the last day of the Company's
most recent fiscal year (i) which ended prior to the applicable date an event or
transaction proposed to be undertaken by the Company is to be tested hereunder
and (ii) for which the Banks have received audited financial statements pursuant
to Section 8.1(a) hereof; provided, however, that until the Company has
delivered the financial statements required under Section 8.1(a) hereof for its
fiscal year ending March 31, 1999, (x) the Applicable Evaluation Date shall be
June 23, 1998 and (y) all such evaluations shall be based on the Closing Pro
Forma Balance Sheet.
"Applicable Facility Fee Percentage" shall mean as of any date of
determination thereof, the applicable percentage used to calculate the Revolving
Credit Facility Fee due and payable
2
<PAGE> 10
EXHIBIT 10.1
hereunder, determined by reference to the appropriate columns in the pricing
matrix attached to this Agreement as Schedule 1.1.
"Applicable Interest Rate" shall mean the Eurocurrency-based Rate, the
Prime-based Rate, or the Quoted Rate, as selected by Company from time to time
subject to the terms and conditions of this Agreement.
"Applicable L/C Fee Percentage" shall mean, as of any date of
determination thereof, the applicable percentage used to calculate the Letter of
Credit Fees due and payable hereunder, determined by reference to the
appropriate columns in the pricing matrix attached to this Agreement as Schedule
1.1.
"Asset Disposition" shall mean the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise of any of the
following: (a) any of the equity interest or stock of the Company or any of its
Subsidiaries or (b) any or all of the assets of the Company or its Subsidiaries
other than sales of Inventory in the ordinary course of business.
"Asset Sale" shall mean the sale, transfer or other disposition by the
Company or any Subsidiary of any asset to any Person, other than sales,
transfers or other dispositions of inventory in the ordinary course of business;
provided, however that Asset Sales shall not include assets damaged, destroyed
or condemned which the Company or such Subsidiary has replaced, or has begun the
process of replacing, within 180 days of such damage, destruction or
condemnation with the proceeds of insurance.
"Banks" shall mean Comerica Bank and the other Banks signatory hereto
and such other financial institutions from time to time parties hereto as
lenders and shall include the Swing Line Bank and any assignee which becomes a
Bank pursuant to Section 14.8 hereof.
"Base Tangible Net Worth" shall mean (i) $70,000,000 plus (ii) (on a
cumulative basis) for each fiscal quarter ending on or after the Effective Date,
the sum of (A) fifty percent (50%) of Consolidated Net Income (if positive),
earned in each fiscal quarter commencing after the Effective Date and (B) one
hundred percent (100%) of the cash proceeds of the issuance of any Equity
Interests of Company (net of reasonable and customary costs and expenses of
issuance) during such fiscal quarter.
"Business Day" shall mean any day on which commercial banks are open
for domestic and international business in Detroit, London and New York.
"CapEx Limit" shall mean for fiscal years ending March 31, 1999 and
March 31, 2000, $8,000,000 and for each fiscal year thereafter, the greater of
$7,000,000 or three percent (3%) of the Company's Consolidated revenues
(determined according to GAAP) for the immediately preceding fiscal year but in
any event not to exceed $10,000,000.00.
3
<PAGE> 11
EXHIBIT 10.1
"Capital Expenditures" shall mean, for any period of determination, the
amount capitalized as capital expenditures for the period in question, under
GAAP, as property, plant, and equipment or similar fixed asset accounts, plus
deposits made during such period in connection with property, plant, and
equipment; less deposits of a prior period included above.
"Capitalized Lease" shall mean, as applied to any Person, any lease of
any property (whether real, personal or mixed) with respect to which the
discounted present value of the rental obligations of such Person as lessee
thereunder, in conformity with GAAP, is required to be capitalized on the
balance sheet of that Person.
"CB-Kramer" shall mean CB-Kramer Sales and Service, Inc., a Delaware
corporation, and the wholly-owned Subsidiary of Company.
"Closing Pro Forma Balance Sheet" is defined in Section 6.10 hereof.
"Collateral" shall mean all property or rights in which a security
interest, mortgage, lien or other encumbrance for the benefit of the Banks is or
has been granted or arises or has arisen, under or in connection with this
Agreement, the other Loan Documents, or otherwise.
"Collateral Documents" shall mean the Pledge Agreement, the Parent
Pledge Agreement, the Security Agreement, the Mortgages, and all of the other
acknowledgments, certificates, stock powers, financing statements, instruments
and other security documents executed by Company or any Domestic Subsidiary in
favor of the Agent for the benefit of the Banks and delivered to the Agent, as
security for the Indebtedness, in connection with this Agreement, the other Loan
Documents, in each case, as such collateral documents may be amended or
otherwise modified from time to time.
"Comerica Bank" shall mean Comerica Bank, a Michigan banking
corporation, its successors or assigns.
"Commonly Controlled Entity" shall mean an entity, whether or not
incorporated, which is under common control with the Company within the meaning
of Section 4001 of ERISA or which is part of a group which includes the Company
and which is treated as a single employer under Section 414 of the Internal
Revenue Code.
"Company" is defined in the Preamble.
"Consolidated" or "Consolidating" shall mean, when used with reference
to any financial term in this Agreement, the aggregate for two or more Persons
of the amounts signified by such term for all such Persons determined on a
consolidated basis in accordance with GAAP. Unless otherwise specified herein,
references to Consolidated financial statements or data of Company includes
consolidation with its Subsidiaries in accordance with GAAP.
4
<PAGE> 12
EXHIBIT 10.1
"Consolidated EBITDA" shall mean net income (or loss) of the Company
and its Subsidiaries, for the period in question, on a Consolidated basis
but excluding: (a) the income (or loss) of any Person (other than
Subsidiaries of the Company) in which the Company or any of its Subsidiaries
has an ownership interest, unless received by the Company or its
Subsidiaries in a cash distribution; and (b) the income (or loss) of any
Person accrued prior to the date it became a Subsidiary of the Company or
is merged into or consolidated with the Company, plus the sum of the
following: (i) any provision for (or less any benefit from) income and
franchise taxes included in the determination of net income; (ii)
Interest Expense net of interest income, deducted in the determination of
net income; (iii) depreciation deducted in the determination of net income;
(iv) amortization deducted in determining net income; (v) losses (or less
gains) from Asset Dispositions or other non-cash items included in the
determination of net income (excluding sales, expenses or losses related
to current assets) and all restructuring charges related to the closing of
the Company's Greenville, Mississippi manufacturing facility (as
permitted hereunder); (vi) extraordinary losses (or less gains), as defined
under GAAP, net of related tax effects included in the determination of net
income; (vii) other expense (as set forth in the Company's financial
statements); (viii) less other income; and (ix) expenses of the transactions
completed pursuant to the Transaction Documents included in the determination
of net income provided that such expenses were included in the Initial Pro
Forma Balance Sheet (as defined in the Prior Credit Agreement) and in the
Closing Pro Forma Balance Sheet, as the case may be, or disclosed in the
notes thereto.
"Consolidated Fixed Charges" shall mean Interest Expense for the
preceding four quarters, plus any provision for (benefit from) income or
franchise taxes included in the determination of net income for such period,
plus scheduled payments of principal with respect to all Debt (including the
principal portion of scheduled payments of Capitalized Lease obligations) of the
Company and its Subsidiaries for the immediately succeeding four quarters, plus
all rental and lease expenses of the Company and its Subsidiaries for the
preceding four quarters; in each case determined (without duplication) on a
Consolidated basis.
"Consolidated Funded Debt" shall mean as of any date of determination,
the sum, without duplication, of (a) all indebtedness of Company and its
Consolidated Subsidiaries for borrowed money (including all Subordinated Debt)
or for the deferred purchase price of property or services as of such date
(other than trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices) or which is evidenced by a note,
bond, debenture or similar instrument, (b) all obligations of Company and its
Consolidated Subsidiaries under Capitalized Leases as of such date, (c) all
obligations of Company and its Consolidated Subsidiaries in respect of letters
of credit, acceptances or similar obligations issued or created for the account
of Company or any of its Consolidated Subsidiaries as of such date, (d) all
liabilities secured by any lien on any property owned by Company or its
Consolidated Subsidiaries as of such date even though Company or such
Subsidiaries, as applicable, have not assumed or otherwise become liable for the
payment thereof, (e) all Guarantee Obligations of Company and its Consolidated
Subsidiaries as of such date, and (f) all other contingent obligations of the
Company and its Consolidated Subsidiaries which should be classified as
liabilities in accordance with GAAP (but excluding pending litigation not yet
reduced to judgment), in each case determined in accordance with GAAP.
5
<PAGE> 13
EXHIBIT 10.1
"Consolidated Net Income" shall mean, for any period of determination,
the net income (but not loss) of Company and its consolidated Subsidiaries for
such period, determined in accordance with GAAP.
"Consolidated Net Worth" shall mean as of any date all amounts that
would be included under stockholders' equity on a Consolidated balance sheet of
Company and its consolidated Subsidiaries determined in accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean, as of any applicable date
of determination, the difference between (i) net book value of all assets of the
Company and its Consolidated Subsidiaries (other than patents, patent rights,
trademarks, trade names, franchises, copyrights, licenses, goodwill and similar
intangible assets), minus (ii) all Debt of Company and its Consolidated
Subsidiaries, in each case as reflected on the balance sheet of the Company's
most recently delivered financial statements.
"Contractual Obligation" shall mean as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Covenant Compliance Report" shall mean the report to be furnished by
Company to the Agent pursuant to Section 8.2(a) hereof, in the form of attached
Exhibit H and certified by a Responsible Officer, in which report Company shall
set forth, among other things, detailed calculations and the resultant ratios or
financial tests with respect to the financial covenants contained in Sections
8.9 through 8.13, and Sections 9.1, 9.5(d) and 9.7(b) of this Agreement and
shall calculate the ratio of Consolidated Funded Debt to Consolidated EBITDA.
"De Minimis Matters" shall mean environmental or other matters, the
existence of which and any liability which may result therefrom, would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the financial condition or businesses of the Company and its
Subsidiaries (taken as a whole) or on the ability of the Company and
Subsidiaries (taken as a whole) to pay their debts, as such debts become due.
"Debt" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP, including without limitation, any items so classified on a
balance sheet and any reimbursement obligations in respect of letters of credit,
obligations in respect of bankers acceptances, provided, however that for
purposes of calculating the aggregate Debt of such Person and its Subsidiaries
(if any), the direct and indirect and absolute and contingent obligations of
such Person (whether direct or contingent) shall be determined without
duplication.
"Default" shall mean any event which with the giving of notice or the
passage of time, or both, would constitute an Event of Default under this
Agreement.
6
<PAGE> 14
EXHIBIT 10.1
"Dollars" and the sign "$" shall mean lawful money of the United States
of America.
"Domestic Significant Subsidiary(ies)" shall mean any Domestic
Subsidiary which is also a Significant Subsidiary.
"Domestic Subsidiary(ies)" shall mean those direct or indirect
Subsidiaries of the Company incorporated under the laws of the United States of
America, or any state thereof.
"Effective Date" shall mean the date on which all the conditions
precedent set forth in Sections 6.1 through 6.16 have been satisfied.
"Environmental Reserve" shall mean an initial amount of $1,000,000, to
be held back from availability to the Company of Advances of the Revolving
Credit, subject to reductions in such holdback in amounts approved from time to
time by the Majority Banks (based on the estimated costs set forth on Schedules
8.8A and 8.8B hereto or such other cost information acceptable to the Majority
Banks), from time to time, upon completion of Environmental Tasks in accordance
with Section 8.8 hereof, such reductions to become effective upon determination
by the Majority Banks that the applicable Environmental Tasks have been
completed in accordance with this Agreement (such determination to be in the
sole discretion of the Majority Banks and promptly confirmed in writing to
Company, if and when such determination has been made).
"Environmental Tasks" shall mean those environmental compliance and
remediation measures set forth (and identified as Environmental Tasks) on
Schedules 8.8A and 8.8B hereto which Company is obligated to conduct and
complete pursuant to Section 8.8 hereof.
"Equity Interests" means, with respect to any Person, any and all
shares, share capital, interests, participations, warrants, options or other
equivalents (however designated) of capital stock of a corporation and any and
all equivalent ownership interests in a Person (other than a corporation).
"Equity Partners" shall mean Whitney Equity Partners, L.P., a Delaware
limited partnership.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor act or code and the regulations in effect from time
to time thereunder.
"Eurocurrency-based Advance" shall mean an Advance which bears interest
at the Eurocurrency-based Rate.
"Eurocurrency-based Rate" shall mean, with respect to any
Eurocurrency-Interest Period, the per annum interest rate which is equal to the
sum of the Margin plus the quotient of:
(A) the per annum interest rate at which deposits in eurodollars
are offered to Agent's Eurocurrency Lending Office by other
prime banks in the eurodollar market in an amount comparable
to the relevant Eurocurrency-based Advance and for a period
7
<PAGE> 15
EXHIBIT 10.1
equal to the relevant Eurocurrency-Interest Period at
approximately 11:00 a.m. Detroit time two (2) Business Days
prior to the first day of such Eurocurrency-Interest Period,
divided by
(B) an amount equal to one minus the stated maximum rate
(expressed as a decimal) of all reserve requirements
(including, without limitation, any marginal, emergency,
supplemental, special or other reserves) that is specified on
the first day of such Eurocurrency-Interest Period by the
Board of Governors of the Federal Reserve System (or any
successor agency thereto) for determining the maximum reserve
requirement with respect to eurodollar funding (currently
referred to as "eurocurrency liabilities" in Regulation D of
such Board) maintained by a member bank of such System, all as
conclusively determined (absent manifest error) by the Agent,
such sum to be rounded upward, if necessary, to the nearest
whole multiple of 1/16th of 1%.
"Eurocurrency-Interest Period" shall mean the Interest Period
applicable to a Eurocurrency-based Advance.
"Eurocurrency Lending Office" shall mean, (a) with respect to the
Agent, Agent's office located at Grand Cayman, British West Indies or such other
branch or branches of Agent, domestic or foreign, as it may hereafter designate
as a Eurocurrency Lending Office by notice to Company and the Banks, and (b) as
to each of the Banks, its office, branch or affiliate located at its address set
forth in Agent's administrative questionnaire completed by such Bank (or
identified thereon as a Eurocurrency Lending Office), or at such other office,
branch or affiliate of such Bank as it may hereafter designate as its
Eurocurrency Lending Office by notice to Company and Agent.
"Event of Default" shall mean each of the Events of Default specified
in Section 10.1 hereof.
"Existing Letters of Credit" means those letters of credit listed on
Schedule 3.1 hereto which were issued by the Agent for the account of the
Account Parties listed on such schedule before the Effective Date, as such
letters of credit may be amended, modified, or supplemented from time to time in
accordance with the terms hereof and thereof.
"Federal Funds Effective Rate" shall mean, for any day, a fluctuating
interest rate per annum equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by Agent from three Federal funds brokers of recognized standing
selected by it, all as conclusively determined by the Agent, such sum to be
rounded upward, if necessary, to the nearest whole multiple of 1/16th of 1%.
"Fees" shall mean the Revolving Credit Facility Fee, the Letter of
Credit Fees, the Agent's Fees, and the other fees and charges payable by Company
to the Banks or Agent hereunder.
8
<PAGE> 16
EXHIBIT 10.1
"Financial Statements" shall mean all those balance sheets, earnings
statements and other financial data (whether of the Company or the Subsidiaries)
which have been furnished to the Agent or the Banks for the purposes of, or in
connection with, this Agreement and the transactions contemplated hereby.
"Fixed Charge Coverage Ratio" shall mean, for any period of
determination, a ratio (A) the numerator of which shall be equal to Consolidated
EBITDA plus all rental and lease expenses of the Company and its Subsidiaries
for such period, and (B) the denominator of which is Consolidated Fixed Charges
for such period.
"Foreign Subsidiary(ies)" shall mean all of the Company's direct or
indirect Subsidiaries other than the Domestic Subsidiaries.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as in effect on the date hereof, consistently applied.
"Governmental Obligations" means noncallable direct general obligations
of the United States of America or obligations the payment of principal of and
interest on which is unconditionally guaranteed by the United States of America.
"Guarantee Obligation" shall mean as to any Person (the "guaranteeing
person") any obligation of the guaranteeing person in respect of any obligation
of another Person (including, without limitation, any bank under any letter of
credit), the creation of which was induced by a reimbursement agreement, counter
indemnity or similar obligation issued by the guaranteeing person, in either
case guaranteeing or in effect guaranteeing any Debt, leases, dividends or other
obligations (the "primary obligations") of any other third Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds (1) for the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Company in good faith.
9
<PAGE> 17
EXHIBIT 10.1
"Guarantor(s)" shall mean the Parent and each Domestic Significant
Subsidiary of the Company and each Person otherwise becoming a Domestic
Significant Subsidiary of the Company subsequent to the date hereof or otherwise
entering into a Guaranty (by joinder agreement or otherwise) from time to time
and shall as of the date of execution of this Agreement consist of the Domestic
Subsidiaries listed on Schedule 7.19 hereto.
"Guaranty" shall mean the Guaranty made by each of the Guarantors in
favor of the Agent for the ratable benefit of the Banks in connection with the
Prior Agreement (or to be made by execution of a Joinder Agreement substantially
in the form of the Joinder Agreement attached as "Exhibit A" to such Guaranty),
as amended or otherwise modified from time to time.
"Hazardous Material" shall mean and include any hazardous, toxic or
dangerous waste, substance or material defined as such in (or for purposes of)
the Hazardous Material Laws.
"Hazardous Material Law(s)" shall mean all laws, codes, ordinances,
rules, regulations, orders, decrees and directives issued by any federal, state,
provincial, local, foreign or other governmental or quasi-governmental authority
or body (or any agency, instrumentality or political subdivision thereof)
pertaining to any hazardous, toxic or dangerous waste, substance or material on
or about any facilities owned, leased or operated by Company or any of its
Subsidiaries, or any portion thereof including, without limitation, those
relating to soil, surface, subsurface ground water conditions and the condition
of the ambient air; and any state and local laws and regulations pertaining to
any hazardous, toxic or dangerous waste, substance or material and/or asbestos;
any so-called "superfund" or "superlien" law; and any other federal, state,
provincial, foreign or local statute, law, ordinance, code, rule, regulation,
order or decree regulating, relating to, or imposing liability or standards of
conduct concerning, any hazardous, toxic or dangerous waste, substance or
material, as now or at any time hereafter in effect.
"Hedging Transaction" means each interest rate swap transaction, basis
swap transaction, forward rate transaction, commodity swap transaction, equity
transaction, equity index transaction, foreign exchange transaction, cap
transaction, floor transaction (including any option with respect to any of
these transactions and any combination of any of the foregoing) entered into by
the Company from time to time pursuant to an Interest Rate Protection Agreement;
provided that such transaction is entered into for risk management purposes and
not for speculative purposes.
"Hereof", "hereto", "hereunder" and similar terms shall refer to this
Agreement and not to any particular paragraph or provision of this Agreement.
"Indebtedness" shall mean all indebtedness and liabilities (including
without limitation interest, fees and other charges) arising under this
Agreement or any of the other Loan Documents, whether direct or indirect,
absolute or contingent, of Company or any Subsidiary to any of the Banks or to
the Agent, in any manner and at any time, whether evidenced by the Notes,
arising under any Guaranty or any of the other Loan Documents, due or hereafter
to become due, now owing or that may hereafter be incurred by Company or any
Subsidiary to, any of the Banks or the Agent, and any judgments that may
hereafter be rendered on such indebtedness or any part thereof, with interest
10
<PAGE> 18
EXHIBIT 10.1
according to the rates and terms specified, or as provided by law, any payment
obligations, if any, under Hedging Transactions evidenced by Interest Rate
Protection Agreements, and any and all consolidations, amendments, renewals,
replacements, substitutions or extensions of any of the foregoing; provided,
however that for purposes of calculating the Indebtedness outstanding under the
Notes or any of the other Loan Documents, the direct and indirect and absolute
and contingent obligations of the Company and the Subsidiaries (whether direct
or contingent) shall be determined without duplication.
"Initial Acquisition" shall mean the acquisition by merger, pursuant to
the terms and conditions of the Agreement and Plan of Reorganization, of the
Company by the Parent.
"Initial Acquisition Documents" shall mean the Agreement and Plan of
Reorganization, the Securities Purchase Agreement, the Warrant, the Registration
Rights Agreement, the Stockholders' and Members' Agreement, the Contribution
Agreement, the Miller Employment Agreement, the Certificate of Designation, the
Certificate of Merger, the Agreement and Plan of Merger (each such term, to the
extent not defined herein, as defined in the Original Credit Agreement), and the
Certificate of Amendment to the Certificate of Incorporation of the Company
dated as of the date hereof ("Restated Articles"), together with all other
documents and instruments executed and delivered in connection with the Initial
Acquisition, each as amended to the date hereof and as the same may be further
amended or otherwise modified from time to time in compliance with the terms of
this Agreement.
"Intercompany Loan" shall mean any loan (or advance in the nature of a
loan) by the Company or any 100% Significant Subsidiary to another 100%
Significant Subsidiary and/or any loan (or advance in the nature of a loan) by
Aqua-Chem International, Inc. to the Company; provided, however that each such
loan or advance is subordinated in right of payment and priority to the
Indebtedness on terms and conditions satisfactory to Agent and the Banks; and
provided further however that, all such loans shall be evidenced by Intercompany
Notes (copies or originals of which shall have been delivered to Agent), which
notes, except for Intercompany Notes issued to a Foreign Subsidiary, shall be
pledged to the Agent for the benefit of the Banks as security for the
Indebtedness hereunder.
"Intercompany Loans, Advances or Investments" shall mean any
Intercompany Loan and any advance or investment by the Company or any 100%
Significant Subsidiary (including without limitation any guaranty of obligations
or indebtedness to third parties) to or in another 100% Significant Subsidiary.
"Intercompany Note" shall mean an Intercompany Note evidencing
Intercompany Loans substantially in the form of Exhibit K-1 or K-2, as
applicable, and otherwise on terms and conditions satisfactory to the Agent and
the Banks.
"Interest Coverage Ratio" shall mean, for any period of determination,
a ratio (A) the numerator of which shall be equal to EBITDA for such period and
(B) the denominator of which shall be Interest Expense for such period less
amortization of capitalized fees and expenses incurred
11
<PAGE> 19
EXHIBIT 10.1
with respect to the Transaction Documents included in the calculation of such
Interest Expense, less interest paid in kind and included in the calculation of
such Interest Expense.
"Interest Expense" shall mean, with respect to the Company and its
Subsidiaries on a consolidated basis for any period, the sum of (a) gross
interest expense of the Company and its Subsidiaries for such period determined
on a Consolidated basis in accordance with GAAP consistently applied, including
(i) the amortization of debt discounts, (ii) the amortization of all fees
payable in connection with the incurrence of Debt to the extent included in
interest expense, (iii) the portion of any payments or accruals with respect to
Capitalized Lease obligations allocable to interest expense and (iv) all
commissions paid to factors during such period, and (b) any other capitalized
interest of the Company and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP.
"Interest Period" shall mean (a) with respect to a Eurocurrency-based
Advance, one (1), two (2), three (3) or six (6) months (or any lesser or greater
number of days agreed to in advance by Company, Agent and the Banks) as selected
by Company pursuant to Section 2.3, provided, however, that any
Eurocurrency-Interest Period which commences on the last Business Day of a
calendar month (or on any day for which there is no numerically corresponding
day in the appropriate subsequent calendar month) shall end on the last Business
Day of the appropriate subsequent calendar month and (b) with respect to a Swing
Line Advance, shall mean a period of one (1) to thirty (30) days agreed to in
advance by Company and the Swing Line Bank as selected by Company pursuant to
Section 4.3. Each Interest Period which would otherwise end on a day which is
not a Business Day shall end on the next succeeding Business Day or, if such
next succeeding Business Day falls in the next succeeding calendar month, on the
next preceding Business Day, and no Interest Period which would end after the
Revolving Credit Maturity Date, shall be permitted with respect to any Advance.
"Interest Rate Protection Agreement" means any interest rate swap, cap,
floor, collar, forward rate agreement, foreign currency agreement or other rate
protection transaction, or any combination of such transaction or agreements or
any option with respect to any such transactions or agreements now existing or
hereafter entered into between Company and any Bank or an Affiliate of a Bank.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time, and the regulations promulgated thereunder.
"Inventory" shall have the meaning assigned to such term in the UCC in
effect on the date of this Agreement.
"Investment" shall mean, when used with respect to any Person, (a) any
loan, investment or advance made by such Person to any other Person (including,
without limitation, any contingent obligation) in respect of any capital stock,
Debt, obligation or liability of such other Person and (b) any other investment
made by such Person (however acquired) in stock or other ownership interests
12
<PAGE> 20
EXHIBIT 10.1
in any other Person, including, without limitation, any investment made in
exchange for the issuance of shares of stock of such Person.
"Issuing Bank" shall mean Comerica Bank in its capacity as issuer of
one or more Letters of Credit hereunder.
"Issuing Office" shall mean Issuing Bank's office located at One
Detroit Center, 500 Woodward Avenue, Detroit, Michigan 48226-3289 or such other
office as Issuing Bank shall designate as its Issuing Office.
"Joinder Agreement (Guaranty)" shall mean a joinder agreement
substantially in the form attached as "Exhibit A" to the form of the Guaranty,
to be executed and delivered by any Person required to be a Guarantor pursuant
to Section 8.21 of this Agreement.
"Joint Venture" shall mean any corporation, partnership, association,
joint stock company, business trust or other combined enterprise, other than a
Consolidated Subsidiary, in which (or to which) the Company or any of its
Subsidiaries has made a loan, investment or advance or has an ownership stake or
interest, whether in the nature of share capital, partnership or equity interest
or otherwise.
"Letter of Credit Agreement" shall mean, in respect of each Letter of
Credit, the application and related documentation satisfactory to the Issuing
Bank of an Account Party or Account Parties requesting Issuing Bank to issue
such Letter of Credit, as amended from time to time.
"Letter of Credit Fees" shall mean the letter of credit fees and the
facing fees payable to Agent for the accounts of the Banks (including the
Issuing Bank) in connection with Letters of Credit pursuant to Section 3.4
hereof.
"Letter of Credit Obligations" shall mean at any date of determination,
the sum of (a) the aggregate undrawn amount of all Letters of Credit then
outstanding, (b) the aggregate face amount of all Letters of Credit requested
but not yet issued as of such date and (c) the aggregate amount of Reimbursement
Obligations which have not been reimbursed by the Company as of such date.
"Letter of Credit Payment" shall mean any amount paid or required to be
paid by the Issuing Bank in its capacity hereunder as issuer of a Letter of
Credit as a result of a draft or other demand for payment under any Letter of
Credit.
"Letter(s) of Credit" shall mean any standby or trade letters of credit
issued by Issuing Bank at the request of or for the account of an Account Party
or Account Parties pursuant to Article 3 hereof and shall include Existing
Letters of Credit.
"Lien" shall mean any pledge, assignment, hypothecation, mortgage,
security interest, deposit arrangement, option, trust receipt, conditional sale
or title retaining contract, sale and leaseback transaction, financing statement
or comparable notice or other filing or recording,
13
<PAGE> 21
EXHIBIT 10.1
Capitalized Lease, subordination or any claim or right, or any other type of
lien, charge, encumbrance, preferential or priority arrangement or other claim
or right, whether based on common law or statute.
"Loan Documents" shall mean, collectively, this Agreement, the Notes,
the Letter of Credit Agreements, the Letters of Credit, the Guaranty(ies), the
Collateral Documents, the Subordination Agreement, the Reaffirmation of Certain
Loan Documents, any Interest Rate Protection Agreement and any other documents,
certificates, instruments or agreements executed pursuant to or in connection
with any such document or this Agreement, as such documents may be amended from
time to time.
"Lyonnaise and Gestra" shall mean Lyonnaise American Holding Company,
Inc. and Gestra Corporation, N.V.
"Majority Banks" shall mean at any time Banks holding 66-2/3% of the
aggregate principal amount of the Indebtedness then outstanding under the Notes
(provided that, for purposes of determining Majority Banks hereunder,
Indebtedness outstanding under the Swing Line Notes shall be allocated among the
Banks based upon their respective Percentages), or, if no Indebtedness is then
outstanding, Banks holding 66-2/3% of the Percentages.
"Margin" shall mean, as of any date of determination thereof, the
applicable interest rate margin determined in accordance with the provisions of
Section 5.1 hereof by reference to the appropriate columns in the pricing matrix
attached to this Agreement as Schedule 1.1.
"Material Adverse Effect" shall mean a material adverse effect on (a)
the business, operations, property, or financial condition of the Company and
its Subsidiaries taken as a whole, (b) the ability of the Company to perform its
obligations under this Agreement, the Notes or any other Loan Document to which
it is a party, or (c) the validity or enforceability of this Agreement, any of
the Notes or any of the other Loan Documents or the rights or remedies of the
Agent or the Banks hereunder or thereunder.
"Mortgages" shall mean the mortgages of real property owned by the
Company in Wisconsin, Tennessee and Georgia delivered in connection with the
Original Credit Agreement, the mortgages of real property acquired pursuant to
the National Dynamics Acquisition and any mortgage of real property owned by the
Company or any Domestic Subsidiary delivered after the Effective Date, in each
case as such mortgages may be amended or otherwise modified from time to time
and "Mortgage" shall mean any of them.
"Multiemployer Plan" shall mean a Pension Plan which is a multiemployer
plan as defined in Section 4001(a)(3) of ERISA.
"National Dynamics" shall mean National Dynamics Corporation, a
Nebraska corporation.
14
<PAGE> 22
EXHIBIT 10.1
"National Dynamics Acquisition" shall mean the acquisition by the
Company of certain assets and the assumption of certain liabilities, pursuant to
the terms and conditions of the National Dynamics Asset Purchase Agreement.
"National Dynamics Acquisition Documents" shall mean the National
Dynamics Asset Purchase Agreement together with all other documents and
instruments executed and delivered in connection with the National Acquisition.
"National Dynamics Asset Purchase Agreement" shall mean that certain
asset purchase agreement dated as of May 28, 1998 by and among the Company,
National Dynamics and certain shareholders of National Dynamics, as such
agreement may be amended (subject to the terms hereof) from time to time.
"Notes" shall mean the Revolving Credit Notes and the Swing Line Note.
"Original Credit Agreement" shall mean that certain Revolving Credit
and Term Loan Agreement dated as of July 31, 1997, by and among Company, Agent
and the financial institutions signatory thereto.
"Parent" shall mean Rush Creek, LLC, a Wisconsin limited liability
company.
"Parent Operating Agreement" shall mean the Rush Creek LLC Operating
Agreement dated as of July 31, 1997, as amended (subject to the terms hereof)
from time to time.
"Parent Pledge Agreement" shall mean the Parent Pledge Agreement
executed and delivered by Parent in favor of the Agent in connection with the
Original Credit Agreement, as amended or otherwise modified from time to time.
"Percentage" shall mean, with respect to any Bank, its percentage
share, as set forth on Schedule 1.2 hereto, of the Revolving Credit Aggregate
Commitment and Letters of Credit, as the context indicates, as such Exhibit may
be revised from time to time by Agent in accordance with provisions of Section
14.8.
"Permitted Acquisition" shall mean any acquisition by the Company or
any Subsidiary of all or substantially all of the assets of another Person, or
of a division or line of business of another Person, or shares of stock or other
ownership interests of another Person which satisfies and/or is conducted in
accordance with the following requirements:
(a) Such acquisition is of a business or Person engaged in a
line of business which is compatible with, or complementary to, the
business of the Company, or is engaged in a business using systems or
techniques not unlike those of the Company or any Subsidiary;
15
<PAGE> 23
EXHIBIT 10.1
(b) The Company shall have delivered to the Agent and the
Banks not less than thirty (30) nor more than ninety (90) days prior to
the date of such acquisition, notice of such acquisition together with
Pro Forma Projected Financial Information;
(c) Both immediately before and after such acquisition no
Default or Event of Default shall have occurred and be continuing;
(d) The board of directors (or other Person(s) exercising
similar functions) of the seller of the assets or issuer of the shares
of stock or other ownership interests being acquired shall not have
disapproved such transaction or recommended that such transaction be
disapproved; and
(e) All governmental, quasi-governmental, agency, regulatory
or similar licenses, authorizations, exemptions, qualifications,
consents and approvals necessary or appropriate under any laws
applicable to Company or any of its Subsidiaries, or the acquisition
target for or in connection with the proposed acquisition and all
necessary or appropriate non-governmental and other third-party
approvals which, in each case, are material to such acquisition shall
have been obtained, and all necessary or appropriate declarations,
registrations or other filings with any court, governmental or
regulatory authority, securities exchange or any other person have been
made, and evidence thereof satisfactory in form and substance to Agent
and the Majority Banks shall have been delivered, or caused to have
been delivered, by Company to Agent;
(f) There are no actions, suits or proceedings pending or, to
the knowledge of Company threatened against or affecting the
acquisition target in any court or before or by any governmental
department, agency or instrumentality, an adverse decision in which
would materially adversely affect the financial condition of the
acquisition target or the ability of the target company to enter into
or perform its obligations in connection with the proposed acquisition,
nor are any actions, suits, or proceedings pending, or to the knowledge
of Company threatened against Company or any of its Subsidiaries which
would materially adversely affect the ability of the Company or any of
its Subsidiaries to enter into or perform their respective obligations
in connection with the proposed acquisition;
(g) The Company shall have delivered or caused to be delivered
to the Agent evidence that the Company will, as of the effective date
of the acquisition (and giving effect thereto), be in compliance with
Section 7.23 hereof (mutatis mutandis);
(h) The Company shall have delivered or caused to be delivered
to the Agent such information as any Bank may reasonably request to
evidence that the Company will, as of the effective date of the
acquisition (and giving effect thereto), be in compliance with Section
7.18 hereof (mutatis mutandis);
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<PAGE> 24
EXHIBIT 10.1
(i) The Company shall have delivered or caused to be delivered
to Agent a list of any new Liens resulting from the acquisition, which
Liens shall be Liens permitted pursuant to Section 9.2 hereof; and
(j) In the event that value of such proposed acquisition,
computed on the basis of total acquisition consideration paid or
incurred, or to be paid or incurred, by the Company or the acquiring
Subsidiary with respect thereto, including all Debt (other than trade
payables and other liabilities which do not constitute Debt for money
borrowed incurred in the ordinary course of business) which is assumed
or to which such assets, businesses or ownership interests or
shares, or any Person so acquired, is subject (but excluding from the
calculation of the value of such acquisition the value of any common
or preferred shares transferred as a part of such acquisition) is
greater than or equal to ten percent (10%) of Adjusted Consolidated
Tangible Net Worth as of the Applicable Evaluation Date, then subject
to the satisfaction by the Company of the Special Conditions.
"Permitted Investments" shall mean with respect to any Person:
(a) Governmental Obligations;
(b) Obligations of a state of the United States, the District
of Columbia or any possession of the United States, or any political
subdivision thereof, which are described in Section 103(a) of the
Internal Revenue Code and are graded in any of the highest three (3)
major grades as determined by at least one Rating Agency; or secured,
as to payments of principal and interest, by a letter of credit
provided by a financial institution or insurance provided by a bond
insurance company which in each case is itself or its debt is rated in
one of the highest three (3) major grades as determined by at least one
Rating Agency;
(c) Banker's acceptances, commercial accounts, demand deposit
accounts, certificates of deposit, or depository receipts issued by or
maintained with any Bank or a bank, trust company, savings and loan
association, savings bank or other financial institution whose deposits
are insured by the Federal Deposit Insurance Corporation and whose
reported capital and surplus equal at least $250,000,000, provided that
such minimum capital and surplus requirement shall not apply to demand
deposit accounts maintained by the Company or any of its Subsidiaries
in the ordinary course of business;
(d) Commercial paper rated at the time of purchase within the
two highest classifications established by not less than two Rating
Agencies, and which matures within 270 days after the date of issue;
(e) Secured repurchase agreements against obligations itemized
in paragraph (a) above, and executed by a bank or trust company or by
members of the association of primary dealers or other recognized
dealers in United States government securities, the market value of
which must be maintained at levels at least equal to the amounts
advanced; and
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<PAGE> 25
EXHIBIT 10.1
(f) Any fund or other pooling arrangement which exclusively
purchases and holds the investments itemized in (a) through (e) above.
"Permitted Liens" shall mean with respect to any Person:
(a) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings, provided that adequate
reserves with respect thereto are maintained on the books of such
Person in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, landlord's liens or other like Liens arising in the
ordinary course of business which are not overdue for a period of more
than 60 days or which are being contested in good faith by
appropriate proceedings;
(c) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation and deposits securing liability to insurance carriers under
insurance or self-insurance arrangements, in an aggregate amount for
all such items not to exceed $4,000,000 at any one time;
(d) deposits to secure (i) the performance of bids, trade
contracts (other than for borrowed money), statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a
like nature at any one time or (ii) the performance of leases permitted
hereunder, in each case given or incurred on terms, in amounts and
otherwise in the ordinary course of business, but in an aggregate
amount at any time outstanding for all such items under clauses (i) and
(ii) of this subparagraph not to exceed seven and one-half percent
(7-1/2%) of Adjusted Consolidated Tangible Net Worth as of the
Applicable Evaluation Date; and
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of such
Person.
"Permitted Subordinated Debt" shall mean (a) the Subordinated Debt and
(b) any other unsecured Debt created, issued or incurred by the Company that (i)
has a stated maturity date extending beyond the Revolving Credit Maturity Date
in effect as of the date such Debt is incurred, (ii) has no amortization (in the
case of public Debt) and (in the case of all other Debt) has an average life to
maturity which exceeds the maturity of the Revolving Credit as then in effect,
(iii) has terms that are no more restrictive than the terms of this Agreement
and (iv) is subordinated in right of payment and priority to the Indebtedness on
terms and conditions satisfactory to the Agent and the Majority Banks; provided
that subordination provisions substantially in the form of those contained in
the Subordinated Debt Documents (but only as to additional public Debt) or in
the form attached hereto as Exhibit J shall be deemed to be satisfactory to
Agent and the Majority Banks hereunder.
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<PAGE> 26
EXHIBIT 10.1
"Person" shall mean a natural person, corporation, limited liability
company, partnership, limited liability partnership, trust, incorporated or
unincorporated organization, joint venture, joint stock company, or a government
or any agency or political subdivision thereof or other entity of any kind.
"Pledge Agreement" shall mean the Pledge Agreement executed and
delivered by the Company and its Domestic Significant Subsidiaries in favor of
the Agent in connection with the Original Credit Agreement or to be executed and
delivered pursuant to Section 8.21 hereof, as amended or otherwise modified from
time to time.
"Prime-based Advance" shall mean an Advance which bears interest at the
Prime-based Rate.
"Prime-based Rate" shall mean, for any day, that rate of interest which
is equal to the sum of the Margin plus the greater of (i) the Prime Rate, and
(ii) the Alternate Base Rate.
"Prime Rate" shall mean the per annum rate of interest announced by the
Agent, at its main office from time to time as its "prime rate" (it being
acknowledged that such announced rate may not necessarily be the lowest rate
charged by the Agent to any of its customers), which Prime Rate shall change
simultaneously with any change in such announced rate.
"Prior Credit Agreement" is defined in Recital A.
"Pro Forma Projected Financial Information" shall mean, as to any
proposed acquisition, a statement executed by a Responsible Officer of the
Company (supported by reasonable detail) setting forth the total consideration
to be paid or incurred in connection with the proposed acquisition and, pro
forma combined projected financial information for the Company and its
consolidated Subsidiaries and the acquisition target (if applicable), consisting
of projected balance sheets as of the proposed effective date of the acquisition
or the closing date and as of the end of at least the next succeeding five (5)
fiscal years of Company following the acquisition and projected statements of
income for each of those years, including sufficient detail to permit
calculation of the amounts and the ratios described in Sections 8.9 through 8.13
hereof, as projected as of the effective date of the acquisition and for those
fiscal years and accompanied by (i) a statement setting forth a calculation of
the ratios and amounts so described, (ii) a statement in reasonable detail
specifying all material assumptions underlying the projections and (iii) such
other information as any Bank shall reasonably request.
"Purchasing Lender" shall have the meaning set forth in Section 12.8.
"Quoted Rate" shall mean the rate of interest per annum offered by the
Swing Line Bank in its sole discretion with respect to a Swing Line Advance.
"Quoted Rate Advance" means any Swing Line Advance which bears interest
at the Quoted Rate.
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<PAGE> 27
EXHIBIT 10.1
"Rating Agency" shall mean Moody's Investor Services, Standard and
Poor's Ratings Group or any other nationally recognized statistical rating
organization which is acceptable to the Agent.
"Reaffirmation of Certain Loan Documents" shall mean the Reaffirmation
of Certain Loan Documents, substantially in the form of Exhibit L, as executed
and delivered by the Company and the Significant Subsidiaries, as amended or
otherwise modified from time to time.
"Reimbursement Obligation(s)" shall mean the obligation of an Account
Party or Account Parties under each Letter of Credit Agreement to reimburse the
Issuing Bank for each payment made by the Issuing Bank under the Letter of
Credit issued pursuant to such Letter of Credit Agreement, together with all
other sums, fees, charges and amounts which may be owing to the Issuing Bank
under such Letter of Credit Agreement.
"Request for Revolving Credit Advance" shall mean a Request for
Revolving Credit Advance issued by Company under Section 2.3 of this Agreement
in the form annexed hereto as Exhibit A, as amended or otherwise modified.
"Request for Swing Line Advance" shall mean a Request for Swing Line
Advance issued by Company under Section 4.3 of this Agreement in the form
attached hereto as Exhibit D, as amended or otherwise modified.
"Requirement of Law" shall mean as to any Person, the certificate of
incorporation and bylaws, the partnership agreement or other organizational or
governing documents of such Person and any law, treaty, rule or regulation or
determination of an arbitration or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Responsible Officer" shall mean the chief executive officer or the
president of the Company, or any other officer having substantially the same
authority and responsibility; or with respect to compliance with financial
covenants, the chief financial officer or the treasurer of the Company, or any
other officer having substantially the same authority and responsibility.
"Restated Articles" is defined in the definition of Initial Transaction
Documents.
"Revolving Credit" shall mean the revolving credit loan to be advanced
to the Company by the Banks pursuant to Article 2 hereof, in an aggregate amount
(subject to the terms hereof), not to exceed, at any one time outstanding, the
Revolving Credit Aggregate Commitment.
"Revolving Credit Advance" shall mean a borrowing requested by Company
and made by the Banks under Section 2.1 of this Agreement, including without
limitation any readvance, refunding or conversion of such borrowing pursuant to
Section 2.3 hereof and any advance in respect of a Letter of Credit under
Section 3.6 hereof, and shall include, as applicable, a Eurocurrency-based
Advance and/or a Prime-based Advance.
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<PAGE> 28
EXHIBIT 10.1
"Revolving Credit Aggregate Commitment" shall mean Forty Five Million
Dollars ($45,000,000), subject to reduction or termination under Section 2.8 or
10.2 hereof, minus the aggregate amount of the Environmental Reserve.
"Revolving Credit Facility Fee" shall mean the fees payable to Agent
for distribution to the Banks pursuant to Section 2.6 hereof.
"Revolving Credit Maturity Date" shall mean the earlier to occur of (i)
July 1, 2003, as such date may be extended from time to time pursuant to Section
2.9 hereof, and (ii) the date on which the Revolving Credit Aggregate Commitment
shall be terminated pursuant to Section 2.8 or Section 10.2 hereof.
"Revolving Credit Notes" shall mean the revolving credit notes
described in Section 2.1 hereof, made by Company to each of the Banks in the
form annexed to this agreement as Exhibit B, as such notes may be amended or
supplemented from time to time, and any other notes issued in substitution,
replacement or renewal thereof from time to time.
"Securities Purchase Agreement" shall mean the Amended and Restated
Securities Purchase Agreement dated as of July 31, 1997 by and among the Parent,
the Company, CB-Kramer, the Whitney Subordinated Debt Fund, L.P. and Equity
Partners, as amended from time to time in accordance with the terms of this
Agreement.
"Security Agreement" shall mean the Security Agreement executed and
delivered by the Company and each Domestic Significant Subsidiary in favor of
the Agent in connection with the Original Credit Agreement, or to be executed
and delivered pursuant to Section 8.21 hereof, as amended or otherwise modified
from time to time.
"Senior Funded Debt" shall mean, as of any date of determination,
Consolidated Funded Debt other than Subordinated Debt.
"Significant Subsidiary(ies)" shall mean, as of any date of
determination, any Subsidiary which has total assets in excess of $50,000 (or,
in the case of a Foreign Significant Subsidiary (the equivalent in any foreign
currency) determined by Agent as of the end of the most recent fiscal quarter of
the Company.
"Special Conditions" shall mean those special terms and conditions
required to be satisfied prior to or concurrently with the consummation of a
Permitted Acquisition, as follows:
(a) the Company shall have delivered or caused to be delivered
to Agent and each of the Banks not less than thirty (30) nor more than
ninety (90) days prior to the date of such acquisition, a draft copy of
the letter of intent and, when available, all other material
acquisition documents (including, as soon as available, a copy of the
purchase agreement) to be executed and delivered pursuant thereto;
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<PAGE> 29
EXHIBIT 10.1
(b) the Company shall have delivered or caused to be delivered
to Agent and each of the Banks not less than thirty (30) nor more than
ninety (90) days prior to the date of such acquisition, detail setting
forth the acquisition price with supporting documentation, the
acquisition target's most recent audited financial statements, and
historical financial information (including income statement, balance
sheet and cash flows) covering at least three complete fiscal years of
the acquisition target prior to the effective date of the acquisition
or the entire credit history of the acquisition target, whichever
period is shorter (provided, however, that, if the financial
information referred to in this subparagraph (e) is not available,
Company shall furnish Agent with financial information otherwise
reasonably satisfactory to the Majority Banks, and provided further
that, to the extent following the delivery of such financial statements
(but prior to such acquisition) there shall have occurred a material
adverse change in the financial condition of the acquisition target (or
in the condition, financial or otherwise, of the business, results or
operations thereof), the Company shall furnish updated financial
information to Agent and the Banks which shall be entitled to reapprove
such acquisition under subparagraph (e) hereof); and
(c) Prior to its consummation, the Majority Banks shall have
approved in writing the proposed acquisition.
"Subordinated Debt" shall mean Debt of the Company and other
obligations under the Subordinated Debt Documents and any other Debt of the
Company which has been subordinated in right of payment and priority to the
Indebtedness, all on terms and conditions satisfactory to the Agent and the
Banks.
"Subordinated Debt Documents" shall mean and include (a) the
Subordinated Notes, and (b) any other documents evidencing Subordinated Debt, in
each case, as the same may be amended, modified or supplemented from time to
time in compliance with the terms of this Agreement.
"Subordinated Notes" shall mean the unsecured eleven and one quarter
percent (11.25%) Senior Subordinated Notes, due 2008, issued by the Company
pursuant to the Indenture (the "Indenture"), to be dated as of June 23, 1998
between the Company and United States Trust Company of New York, as trustee,
as amended (subject to the terms hereof) from time to time.
"Subordination Agreement" shall mean the Subordination Agreement dated
as of July 31, 1997 by the Whitney Subordinated Debt Fund, L.P., the Parent,
Equity Partners, the other Subordinated Creditors (as defined therein), the
Company and CB-Kramer in favor of the Agent, for and on behalf of the Banks, as
the same may be amended or otherwise modified from time to time in compliance
with the terms thereof and of this Agreement.
"Subsidiary(ies)" shall mean any other corporation, association, joint
stock company, business trust, limited liability company or any other business
entity of which more than fifty percent (50%) of the outstanding voting stock,
share capital, membership or other interests, as the case may be, is owned
either directly or indirectly by any Person or one or more of its Subsidiaries,
or the management of which is otherwise controlled, directly, or indirectly
through one or more
22
<PAGE> 30
EXHIBIT 10.1
intermediaries, or both, by any Person and/or its Subsidiaries. Unless otherwise
specified to the contrary herein, Subsidiary(ies) shall refer to the Company's
Subsidiary(ies).
"Super-majority Banks" shall mean at any time Banks holding 75% of the
aggregate principal amount of the Indebtedness then outstanding under the Notes
(provided that, for purposes of determining Super-majority Banks hereunder,
Indebtedness outstanding under the Swing Line Notes shall be allocated among the
Banks based upon their respective Percentages), or, if no Indebtedness is then
outstanding, Banks holding 75% of the Percentages.
"Swing Line Advance" shall mean a borrowing made by Swing Line Bank to
Company pursuant to Section 4.1 hereof.
"Swing Line Bank" shall mean Comerica Bank in its capacity as lender
under Article 4 of this Agreement.
"Swing Line Credit" shall mean the revolving credit loan to be advanced
to the Company by the Swing Line Bank pursuant to Article 4 hereof, in an
aggregate amount (subject to the terms hereof), not to exceed, at any one time
outstanding, the amount set forth in Section 4.1.
"Swing Line Note" shall mean the swing line note described in Section
4.1 hereof, made by Company to Swing Line Bank in the form annexed hereto as
Exhibit E, as such Note may be amended or supplemented from time to time, and
any notes issued in substitution, replacement or renewal thereof from time to
time.
"Transaction Documents" shall mean collectively, this Agreement, the
Notes, the other Loan Documents, the Subordinated Debt Documents, Initial
Acquisition Documents and the National Dynamics Acquisition Documents.
"Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial
Code of any applicable state, and, unless specified otherwise the Uniform
Commercial Code as in effect in the State of Michigan.
"Whitney Subordinated Debt" shall mean the Subordinated Debt as defined
under the Prior Credit Agreement.
2. REVOLVING CREDIT
2.1 Revolving Credit Commitment. Subject to the terms and conditions of
this Agreement (including Section 2.3 hereof), each Bank severally and for
itself alone agrees to make Advances of the Revolving Credit to Company from
time to time on any Business Day during the period from the Effective Date
hereof until (but excluding) the Revolving Credit Maturity Date in an aggregate
amount not to exceed at any one time outstanding each such Bank's Percentage of
the Revolving Credit Aggregate Commitment. All of such Advances hereunder shall
be evidenced by the
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<PAGE> 31
EXHIBIT 10.1
Revolving Credit Notes, under which advances, repayments and readvances may be
made, subject to the terms and conditions of this Agreement.
2.2 Accrual of Interest and Maturity. The Revolving Credit Notes, and
all principal and interest outstanding thereunder, shall mature and become due
and payable in full on the Revolving Credit Maturity Date, and each Advance
evidenced by the Revolving Credit Notes from time to time outstanding hereunder
shall, from and after the date of such Advance, bear interest at its Applicable
Interest Rate. The amount and date of each Revolving Credit Advance, its
Applicable Interest Rate, its Interest Period, and the amount and date of any
repayment shall be noted on Agent's records, which records may be kept
electronically and which will be conclusive evidence thereof, absent manifest
error; provided, however, that any failure by the Agent to record any such
information shall not relieve Company of its obligation to repay the outstanding
principal amount of such Advance, all interest accrued thereon and any amount
payable with respect thereto in accordance with the terms of this Agreement and
the Loan Documents.
2.3 Requests for Advances and Requests for Refundings and Conversions
of Revolving Credit Advances. Company may request a Revolving Credit Advance,
refund any Revolving Credit Advance in the same type of Revolving Credit Advance
or convert any Revolving Credit Advance to any other type of Revolving Credit
Advance only after delivery to Agent of a Request for Revolving Credit Advance
executed by a person authorized by the Company to make such requests on behalf
of Company subject to the following and to the remaining provisions hereof:
(a) each such Request for Revolving Credit Advance shall set
forth the information required on the Request for Revolving Credit
Advance including without limitation:
(i) the proposed date of Revolving Credit
Advance, which must be a Business Day;
(ii) whether the Revolving Credit Advance is a
refunding or conversion of an outstanding
Revolving Credit Advance; and
(iii) whether such Revolving Credit Advance is to
be a Prime-based Advance or a
Eurocurrency-based Advance, and, except in
the case of a Prime-based Advance, the
Interest Period applicable thereto;
(b) each such Request for Revolving Credit Advance shall be
delivered to Agent by 11:00 a.m. (Detroit time) three (3) Business Days
prior to the proposed date of Revolving Credit Advance, except in the
case of a Prime-based Advance, for which the Request for Revolving
Credit Advance must be delivered by 10 a.m. (Detroit time) on such
proposed date;
(c) the principal amount of such requested Revolving Credit
Advance, plus the principal amount of all other Advances then
outstanding hereunder, plus the Letter of Credit
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<PAGE> 32
EXHIBIT 10.1
Obligations, less the principal amount of any outstanding Swing Line
Advance or Revolving Credit Advance to be refunded by the requested
Revolving Credit Advance shall not exceed the then applicable Revolving
Credit Aggregate Commitment;
(d) (x) in the case of a Prime-based Advance, the principal
amount of the initial funding of such Advance, as opposed to any
refunding or conversion thereof, shall be at least One Million Dollars
($1,000,000) and (y) in the case of a Eurocurrency-based Advance, the
principal amount of such Advance, plus the amount of any other
outstanding Indebtedness under this Agreement to be then combined
therewith having the same Interest Period shall be at least Two Million
Dollars ($2,000,000) and at any one time there shall not be in effect
more than four (4) Interest Periods with respect to the Revolving
Credit;
(e) each Request for Revolving Credit Advance shall constitute
and include a certification by the Company as of the date thereof that:
(i) both before and after the Revolving Credit
Advance, the obligations of the Company and
the Guarantors set forth in this Agreement
and the other Loan Documents, as applicable,
are valid, binding and enforceable
obligations of such parties;
(ii) to the best knowledge of Company all
conditions to Advances of the Revolving
Credit have been satisfied;
(iii) there is no Default or Event of Default in
existence, and none will exist upon the
making of the Advance;
(iv) the representations and warranties contained
in this Agreement and the other Loan
Documents (except in the case of refundings
or conversions of outstanding Advances) are
true and correct in all material respects
and shall be true and correct in all
material respects as of and immediately
after the making of the Advance; and
(v) the execution of such Revolving Credit
Advance will not violate the material terms
and conditions of any material contract,
agreement or other borrowing of Company or
any of its Subsidiaries.
Agent, acting on behalf of the Banks, may, at its option, lend under
this Section 2 upon the telephone request of an authorized officer of Company
and, in the event Agent, acting on behalf of the Banks, makes any such Advance
upon a telephone request, the requesting officer shall, if so requested by
Agent, fax to Agent, on the same day as such telephone request, a Request for
Advance. Company hereby authorizes Agent to disburse Advances under this Section
2.3 pursuant to the telephone instructions of any person purporting to be a
person identified by name on a written list of persons authorized by the Company
to make Requests for Advance on behalf of the Company. Notwithstanding the
foregoing, the Company acknowledges that Company shall bear all risk of loss
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<PAGE> 33
EXHIBIT 10.1
resulting from disbursements made upon any telephone request. Each telephone
request for an Advance shall constitute a certification of the matters set forth
in the Request for Advance form as of the date of such requested Advance.
2.4 Disbursement of Revolving Credit Advances.
(a) Upon receiving any Request for a Revolving Credit Advance
from Company under Section 2.3 hereof, Agent shall promptly notify each
Bank by wire, telecopy, telex or by telephone (confirmed by wire,
telecopy or telex) of the amount of such Revolving Credit Advance to be
made and the date such Advance is to be made by said Bank pursuant to
its Percentage of the Revolving Credit Advance. Unless such Bank's
commitment to make Revolving Credit Advances hereunder shall have been
suspended or terminated in accordance with this Agreement, each Bank
shall send the amount of its Percentage of the Advance in same day
funds in Dollars to Agent at the office of Agent located at One Detroit
Center, 500 Woodward Avenue, Detroit, Michigan 48226-3289 not later
than 3:00 p.m. (Detroit time) on the date of such Advance.
(b) Subject to submission of a Request for Revolving Credit
Advance delivered in accordance with Section 2.3 hereof by Company
without exceptions noted in the compliance certification therein and to
the other terms and conditions hereof, Agent shall make available to
Company the aggregate of the amounts so received by it from the Banks
under this Section 2.4, in like funds, not later than 4:00 p.m.
(Detroit time) on the date of such Revolving Credit Advance by credit
to an account of Company maintained with Agent or to such other account
or third party as Company may reasonably direct.
(c) Unless Agent shall have been notified by any Bank prior to
the date of any proposed Revolving Credit Advance that such Bank does
not intend to make available to Agent such Bank's Percentage of the
Revolving Credit Advance, Agent may assume that such Bank has made such
amount available to Agent on such date, as aforesaid and may, in its
sole discretion and without obligation to do so, in reliance upon such
assumption, make available to Company a corresponding amount. If such
amount is not in fact made available to Agent by such Bank in
accordance with Section 2.4(a), as aforesaid, Agent shall be entitled
to recover such amount on demand from such Bank. If such Bank does not
pay such amount forthwith upon Agent's demand therefor, the Agent shall
promptly notify Company, and Company shall pay such amount to Agent.
Agent shall also be entitled to recover from such Bank or from Company,
as the case may be but without duplication, interest on such amount in
respect of each day from the date such amount was made available by
Agent to Company to the date such amount is recovered by Agent, at a
rate per annum equal to:
(i) in the case of such Bank, the Federal Funds Effective
Rate for the first two (2) Business Days such amount
remains unpaid and at the rate of interest applicable
to the Revolving Credit Advances thereafter; or
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<PAGE> 34
EXHIBIT 10.1
(ii) in the case of Company, the rate of interest then
applicable to the Revolving Credit Advance.
The obligation of any Bank to make any Revolving Credit Advance
hereunder shall not be affected by the failure of any other Bank to
make any Revolving Credit Advance hereunder, and no Bank shall have any
liability to the Company, the Agent, any other Bank, or any other party
for another Bank's failure to make any loan or Revolving Credit Advance
hereunder.
2.5 Prime-based Advance in Absence of Election or Upon Default. If, as
to any outstanding Eurocurrency-based Advance, Agent has not received payment on
the last day of the Interest Period applicable thereto, or does not receive a
timely Request for Revolving Credit Advance meeting the requirements of Section
2.3 hereof with respect to the refunding or conversion of such Advance, or,
subject to Section 5.6 hereof, if on such day a Default or Event of Default
shall exist, the principal amount thereof which is not then prepaid shall be
converted automatically to a Prime-based Advance and the Agent shall thereafter
promptly notify Company of said action.
2.6 Revolving Credit Facility Fee. From the Effective Date to the
Revolving Credit Maturity Date, the Company shall pay to the Agent on behalf of
Banks a Revolving Credit Facility Fee quarterly in arrears commencing October 1,
1998 (in respect of the prior fiscal quarter or portion thereof), and on the
first day of each fiscal quarter thereafter. The Revolving Credit Facility Fee
shall be the sum of the Applicable Facility Fee Percentage times the Revolving
Credit Aggregate Commitment (whether used or unused) then in effect without
giving effect to any reductions therein based on the amount of the Environmental
Reserve, computed on a daily basis. The Revolving Credit Facility Fee shall be
computed on the basis of a year of three hundred sixty (360) days and assessed
for the actual number of days elapsed. Whenever any payment of the Revolving
Credit Facility Fee shall be due on a day which is not a Business Day, the date
for payment thereof shall be extended to the next Business Day. Upon receipt of
such payment, Agent shall make prompt payment to each Bank of its share of the
Revolving Credit Facility Fee based upon its respective Percentage. It is
expressly understood that the Revolving Credit Facility Fees described in this
Section are not refundable under any circumstances.
2.7 Reduction of Indebtedness; Revolving Credit Aggregate Commitment.
If at any time and for any reason the aggregate principal amount of Swing Line
Advances and Revolving Credit Advances hereunder to Company, plus the Letter of
Credit Obligations which shall be outstanding at such time, shall exceed the
Revolving Credit Aggregate Commitment then in effect, the Company shall
immediately reduce any pending request for an Advance on such day by the amount
of such excess and, to the extent any excess remains thereafter, immediately
repay an amount of the Indebtedness equal to such excess and, to the extent such
Indebtedness consists of Letter of Credit Obligations, provide cash collateral
on the basis set forth in Section 10.2 hereof. Company acknowledges that, in
connection with any repayment required hereunder, it shall also be responsible
for the reimbursement of any prepayment or other costs required under Section
12.1 hereof; provided, however, that Company shall, in order to reduce any such
prepayment costs and expenses, first prepay such portion of the Indebtedness
then carried as a Prime-based Advance, if any.
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EXHIBIT 10.1
2.8 Optional Reduction or Termination of Revolving Credit Aggregate
Commitment. The Company may, upon at least five (5) Business Days' prior written
notice to Agent, permanently reduce the Revolving Credit Aggregate Commitment in
whole at any time, or in part from time to time, without premium or penalty,
provided that: (i) each partial reduction of the Revolving Credit Aggregate
Commitment shall be in an aggregate amount equal to at least Two Million Dollars
($2,000,000) or a larger integral multiple of One Million Dollars ($1,000,000);
(ii) each reduction shall be accompanied by the payment of the Revolving Credit
Facility Fee, if any, accrued to the date of such reduction; (iii) the Company
shall prepay in accordance with the terms hereof the amount, if any, by which
the sum of the aggregate unpaid principal amount of Swing Line Advances and
Revolving Credit Advances, plus the Letter of Credit Obligations, exceeds the
then applicable Revolving Credit Aggregate Commitment, taking into account the
aforesaid reductions thereof, together with accrued but unpaid interest on the
principal amount of such prepaid Advances to the date of prepayment; (iv) if the
termination or reduction of the Revolving Credit Aggregate Commitment requires
the prepayment of a Eurocurrency-based Advance or Quoted Rate Advance, the
termination or reduction may be made only on the last Business Day of the then
current Interest Period applicable to such Advance; and (v) no reduction shall
reduce the amount of the Revolving Credit Aggregate Commitment to an amount
which is less than the Letter of Credit Obligations at such time. Reductions of
the Revolving Credit Aggregate Commitment and any accompanying prepayments of
the Revolving Credit Notes shall be distributed by Agent to each Bank in
accordance with such Bank's Percentage thereof, and will not be available for
reinstatement by or readvance to the Company and any accompanying prepayments of
the Swing Line Notes shall be distributed by Agent to the Swing Line Bank and
will not be available for reinstatement by or readvance to the Company. Any
reductions of the Revolving Credit Aggregate Commitment hereunder shall reduce
each Bank's portion thereof proportionately (based upon the applicable
Percentages), and shall be permanent and irrevocable. Any payments made pursuant
to this Section shall be applied first to outstanding Prime-based Advances under
the Revolving Credit, next to Swing Line Advances which bear interest at the
Prime-based Rate, next to Quoted Rate Advances and then to Eurocurrency-based
Advances.
2.9 Extension of Revolving Credit Maturity Date. (a) Provided that no
Default or Event of Default has occurred and is continuing, Company may, by
written notice to Agent (with sufficient copies for each Bank) (which notice
shall be irrevocable and which shall not be deemed effective unless actually
received by Agent) prior to August 1, but not before July 1, of each fiscal
year, request that the Banks extend the then applicable Revolving Credit
Maturity Date to a date that is one year later than the Revolving Credit
Maturity Date then in effect (each such request, a "Request"). Each Bank shall,
not later than August 31st of such fiscal year, give written notice to the Agent
stating whether such Bank is willing to extend the Revolving Credit Maturity
Date as requested. If Agent has received the aforesaid written approvals of such
Request from each of the Banks, then, effective upon the date of Agent's receipt
of all such written approvals from the Banks, as aforesaid, the Revolving Credit
Maturity Date shall be so extended for an additional one year period, the term
Revolving Credit Maturity Date shall mean such extended date and Agent shall
promptly notify the Company that such extension has occurred.
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EXHIBIT 10.1
(b) If (i) any Bank gives the Agent written notice that it is
unwilling to extend the Revolving Credit Maturity Date as requested or (ii) any
Bank fails to provide written approval to Agent of such a Request on or before
August 31st of such fiscal year, then (w) the Banks shall be deemed to have
declined to extend the Revolving Credit Maturity Date, (x) the then-current
Revolving Credit Maturity Date shall remain in effect (with no further right on
the part of Company to request extensions thereof under this Section 2.9), and
(y) the commitments of the Banks to make Advances of the Revolving Credit
hereunder shall terminate on the Revolving Credit Maturity Date then in effect,
and Agent shall promptly notify Company thereof.
3. LETTERS OF CREDIT
3.1 Letters of Credit. Subject to the terms and conditions of this
Agreement, Issuing Bank shall through its Issuing Office, at any time and from
time to time from and after the date hereof until thirty (30) days prior to the
Revolving Credit Maturity Date, upon the written request of an Account Party
accompanied by a duly executed Letter of Credit Agreement, and such other
documentation related to the requested Letter of Credit as the Issuing Bank may
reasonably require, issue Letters of Credit for the account of such Account
Party, in an aggregate amount for all Letters of Credit issued hereunder at any
one time outstanding not to exceed an amount equal to the then applicable
Revolving Credit Aggregate Commitment minus the aggregate principal amount of
Revolving Credit Advances plus Swing Line Advances at such time outstanding plus
the aggregate amount of Reimbursement Obligations which have not reimbursed by
the Company as of such date. Each Letter of Credit shall be in a minimum face
amount of Five Thousand Dollars ($5,000) (or such lesser amount as the Issuing
Bank, in its sole discretion, may permit) and shall have an expiration date not
later than the earlier of (i) twenty four months from the date of issuance
thereof, and (ii) ten (10) Business Days prior to the Revolving Credit Maturity
Date. The submission of all applications and the issuance of each Letter of
Credit hereunder shall be subject in all respects to the Uniform Customs and
Practices for Documenting Credits of the International Chamber of Commerce, 1993
Revisions, ICC Publication No. 500. Each Application for Letter of Credit shall
have noted on the first page thereof, or shall be deemed to have noted thereon:
"Note: This application is entered into in accordance with
that certain Aqua-Chem, Inc. Second Amended and Restated Revolving
Credit Agreement dated as of June 23, 1998, as amended or otherwise
modified from time to time (the "Credit Agreement") among the Banks
signatory thereto, Comerica Bank, as Agent for the Banks and Aqua-Chem,
Inc., and in the event of a conflict between this application and the
Credit Agreement, the terms and conditions of the Credit Agreement
shall govern."
3.2 Conditions to Issuance. No Letter of Credit shall be issued at the
request and for the account of any Account Party unless, as of the date of
issuance of such Letter of Credit:
(a) the face amount of the Letter of Credit requested, plus
the Letter of Credit Obligations, does not exceed an amount equal to
(i) the then applicable Revolving Credit
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EXHIBIT 10.1
Aggregate Commitment minus (ii) the aggregate principal amount of
Revolving Credit Advances and Swing Line Advances at such time
outstanding;
(b) the obligations of Company and the Subsidiaries set forth
in this Agreement and the Loan Documents are valid, binding and
enforceable obligations of Company and each of the Subsidiaries and the
valid, binding and enforceable nature of this Agreement and the other
Loan Documents has not been disputed by Company or any of the
Subsidiaries;
(c) both immediately before and immediately after issuance of
the Letter of Credit requested, no Default or Event of Default exists;
(d) the representations and warranties contained in this
Agreement and the other Loan Documents are true in all material
respects as if made on such date;
(e) the execution of the Letter of Credit Agreement with
respect to the Letter of Credit requested will not violate the terms
and conditions of any material contract, agreement or other borrowing
of Company or any Subsidiary;
(f) the Account Party requesting the Letter of Credit shall
have delivered to Issuing Bank at its Issuing Office (with a copy sent
by Account Party to the Agent), not less than three (3) Business Days
prior to the requested date for issuance (or such shorter time as the
Issuing Bank, in its sole discretion, may permit), the Letter of Credit
Agreement related thereto, together with such other documents and
materials as may be required pursuant to the terms thereof, and the
terms of the proposed Letter of Credit shall be satisfactory to Issuing
Bank and its Issuing Office;
(g) no order, judgment or decree of any court, arbitrator or
governmental authority shall purport by its terms to enjoin or restrain
Issuing Bank from issuing the requested Letter of Credit, or any Bank
from taking an assignment of its Percentage thereof pursuant to Section
3.6 hereof, and no law, rule, regulation, request or directive (whether
or not having the force of law) shall prohibit or request that Issuing
Bank refrain from issuing, or any Bank refrain from taking an
assignment of its Percentage of, the Letter of Credit requested or
letters of credit generally;
(h) there shall have been no introduction of or change in the
interpretation of any law or regulation that would make it unlawful or
unduly burdensome for the Issuing Bank to issue or for any Bank to take
an assignment of its Percentage of the requested Letter of Credit, no
declaration of a general banking moratorium by banking authorities in
the United States, Michigan or the respective jurisdictions in which
the Banks, the applicable Account Party and the beneficiary of the
requested Letter of Credit are located (each a "Banking Authority"),
and no establishment of any new material restrictions by any Banking
Authority on transactions involving letters of credit or on banks
materially affecting the issuance of letters of credit by banks; and
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EXHIBIT 10.1
(i) Issuing Bank shall have received the facing fee required
in connection with the issuance of such Letter of Credit pursuant to
Section 3.4(b) hereof.
Each Letter of Credit Agreement submitted to Issuing Bank pursuant hereto shall
constitute the certification by the Company and the Account Party of the matters
set forth in this Section 3.2 (a) through (f). The Issuing Bank shall be
entitled to rely on such certification without any duty of inquiry.
3.3 Notice. The Issuing Bank will deliver to the Agent, concurrently or
promptly following its delivery of any Letter of Credit, a true and complete
copy of each Letter of Credit. Promptly upon its receipt thereof, Agent shall
give notice, substantially in the form attached as Exhibit C, to each Bank of
the issuance of each Letter of Credit, specifying the amount thereof and the
amount of such Bank's Percentage thereof.
3.4 Letter of Credit Fees. Company shall pay to the Agent for
distribution to the Issuing Bank and the Banks in accordance with the
Percentages, Letter of Credit Fees as follows:
(a) A per annum letter of credit fee with respect to the
undrawn amount of each Letter of Credit issued pursuant hereto in the
amount of the Applicable L/C Fee Percentage (determined with reference
to Schedule 1.1 of this Agreement), exclusive of the facing fee to be
paid to Issuing Bank under Section 3.4(b) hereof.
(b) A facing fee of the greater of (i) one eighth percentage
point (1/8%) per annum on the undrawn amount of each Letter of Credit
and (ii) $150.00, to be paid by the Company to the Issuing Bank for its
own account.
(c) If any change in any law or regulation or in the
interpretation thereof by any court or administrative or governmental
authority charged with the administration thereof shall either (i)
impose, modify or cause to be deemed applicable any reserve, special
deposit, limitation or similar requirement against letters of credit
issued by or participated in, or assets held by, or deposits in or for
the account of, Issuing Bank or any Bank or (ii) impose on Issuing Bank
or any of the Banks any other condition regarding this Agreement or the
Letters of Credit, and the result of any event referred to in clause
(i) or (ii) above shall be to increase in an amount deemed material by
Issuing Bank or such Bank the cost or expense to Issuing Bank or the
Banks of issuing or maintaining or participating in any of the Letters
of Credit (which increase in cost or expense shall be determined by the
Issuing Bank's or such Bank's reasonable allocation of the aggregate of
such cost increases and expense resulting from such events), then, upon
demand by the Issuing Bank or such Bank, as the case may be, the
Company shall, within thirty days following demand for payment, pay to
Issuing Bank or such Bank, as the case may be, from time to time as
specified by the Issuing Bank or such Bank, additional amounts which
shall be sufficient to compensate the Issuing Bank or such Bank for
such increased cost and expense, together with interest on each such
amount from thirty days after the date demanded until payment in full
thereof at the Prime-based Rate. A certificate as to such increased
cost or expense incurred by the Issuing Bank
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EXHIBIT 10.1
or such Bank, as the case may be, as a result of any event mentioned in
clause (i) or (ii) above, shall be promptly submitted to the Company
and shall be conclusive evidence, absent manifest error, as to the
amount thereof.
(d) All payments by the Company to the Agent for distribution
to the Issuing Bank or the Banks under this Section 3.4 shall be made
in Dollars and in immediately available funds at the principal office
of the Agent or such other office of the Agent as may be designated
from time to time by written notice to the Company by the Agent. The
fees described in clause (a) above shall be nonrefundable under all
circumstances and shall be payable quarterly in advance (or such lesser
period, if applicable, for Letters of Credit issued with stated
expiration dates of less than one year) upon the issuance of each such
Letter of Credit, and shall be calculated on the basis of a 360 day
year and assessed for the actual number of days from the date of the
issuance thereof to the stated expiration thereof.
3.5 Other Letter of Credit Fees. In connection with the Letters of
Credit, and in addition to the Letter of Credit Fees, the Company and the
applicable Account Party shall pay, for the sole account of the Issuing Bank,
standard documentation, administration, payment and cancellation charges
assessed by Issuing Bank or its Issuing Office, at the times, in the amounts and
on the terms set forth or to be set forth from time to time in the standard fee
schedule of Issuing Office in effect from time to time.
3.6 Draws and Demands for Payment Under Letters of Credit.
(a) The Company and each applicable Account Party agree to pay
to the Agent for the account of the Issuing Bank, on the day on which
the Issuing Bank shall honor a draft or other demand for payment
presented or made under any Letter of Credit, an amount equal to the
amount paid by the Issuing Bank in respect of such draft or other
demand under such Letter of Credit and all reasonable expenses paid or
incurred by the Issuing Bank relative thereto. Unless the Company or
the applicable Account Party shall have made such payment
to the Agent for the account of the Issuing Bank on such day, upon each
such payment by the Issuing Bank, the Agent shall be deemed to have
disbursed to the Company, and the Company shall be deemed to have
elected to substitute for its Reimbursement Obligation, a Prime-based
Advance from the Banks in an amount equal to the amount so paid by the
Issuing Bank in respect of such draft or other demand under such Letter
of Credit. Such Prime-based Advance shall be disbursed notwithstanding
any failure to satisfy any conditions for disbursement of any Advance
set forth in Article 2 hereof and, to the extent of the Prime-based
Advance so disbursed, the Reimbursement Obligation of the Company or
the applicable Account Party to the Agent under this Section 3.6 shall
be deemed satisfied.
(b) If the Issuing Bank shall honor a draft or other demand
for payment presented or made under any Letter of Credit, the Issuing
Bank shall provide notice thereof to the Company and the applicable
Account Party on the date such draft or demand is honored, and to each
Bank on such date unless the Company or applicable Account Party shall
have satisfied its Reimbursement Obligation under Section 3.6(a) by
payment to the Agent on
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EXHIBIT 10.1
such date. The Issuing Bank shall further use reasonable efforts to
provide notice to the Company or applicable Account Party prior to
honoring any such draft or other demand for payment, but such notice,
or the failure to provide such notice, shall not affect the rights or
obligations of the Issuing Bank with respect to any Letter of Credit or
the rights and obligations of the parties hereto, including without
limitation the obligations of the Company or applicable Account Party
under Section 3.6(a) hereof.
(c) Upon issuance by the Issuing Bank of each Letter of Credit
hereunder, each Bank shall automatically acquire a pro rata risk
participation interest in such Letter of Credit and related Letter of
Credit Payment based on its respective Percentage. Each Bank, on the
date a draft or demand under any Letter of Credit is honored, shall
make its Percentage share of the amount paid by the Issuing Bank, and
not reimbursed by the Company or applicable Account Party by payment to
the Agent on such day, available in immediately available funds at the
principal office of the Agent for the account of the Issuing Bank. If
and to the extent such Bank shall not have made such pro rata portion
available to the Agent, such Bank, the Company and the applicable
Account Party severally agree to pay to the Issuing Bank forthwith on
demand such amount together with interest thereon, for each day from
the date such amount was paid by the Issuing Bank until such amount is
so made available to the Agent for the account of the Issuing Bank at a
per annum rate equal to the interest rate applicable during such period
to the related Advance disbursed under Section 3.6(a) in respect of the
Reimbursement Obligation of the Company and the applicable Account
Party. If such Bank shall pay such amount to the Agent for the account
of the Issuing Bank together with such interest, such amount so paid
shall constitute a Prime-based Advance by such Bank disbursed in
respect of the Reimbursement Obligation of the Company or applicable
Account Party under Section 3.6(a) for purposes of this Agreement,
effective as of the date such amount was paid by the Issuing Bank. The
failure of any Bank to make its pro rata portion of any such amount
paid by the Issuing Bank available to the Agent for the account of the
Issuing Bank shall not relieve any other Bank of its obligation to make
available its pro rata portion of such amount, but no Bank shall be
responsible for failure of any other Bank to make such pro rata portion
available to the Agent for the account Issuing Bank.
(d) Nothing in this Agreement shall be construed to require or
authorize any Bank other than the Issuing Bank to issue any Letter of
Credit, it being recognized that the Issuing Bank shall be the sole
issuer of Letters of Credit under this Agreement.
3.7 Obligations Irrevocable. The obligations of Company and any Account
Party to make payments to Agent for the account of the Issuing Bank or of the
Banks with respect to Reimbursement Obligations under Section 3.6 hereof, shall
be unconditional and irrevocable and not subject to any qualification or
exception whatsoever, including, without limitation:
(a) Any lack of validity or enforceability of any Letter of
Credit or any documentation relating to any Letter of Credit or to any
transaction related in any way to such Letter of Credit (the "Letter of
Credit Documents");
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EXHIBIT 10.1
(b) Any amendment, modification, waiver, consent, or any
substitution, exchange or release of or failure to perfect any interest
in collateral or security, with respect to any of the Letter of Credit
Documents;
(c) The existence of any claim, setoff, defense or other right
which the Company or any Account Party may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any persons
or entities for whom any such beneficiary or any such transferee may be
acting), the Agent, the Issuing Bank or any other Bank or any other
person or entity, whether in connection with any of the Letter of
Credit Documents, the transactions contemplated herein or therein or
any unrelated transactions;
(d) Any draft or other statement or document presented under
any Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any
respect;
(e) Absent gross negligence or willful misconduct on the part
of the Issuing Bank or Banks, any failure, omission, delay or lack on
the part of the Agent, the Issuing Bank or any other Bank or any party
to any of the Letter of Credit Documents to enforce, assert or exercise
any right, power or remedy conferred upon the Agent, the Issuing Bank,
any other Bank or any such party under this Agreement, any of the Loan
Documents or any of the Letter of Credit Documents, or any other acts
or omissions on the part of the Agent, the Issuing Bank, any other Bank
or any such party; or
(f) Absent gross negligence or willful misconduct on the part
of the Issuing Bank or Banks, any other event or circumstance that
would, in the absence of this Section 3.7, result in the release or
discharge by operation of law or otherwise of Company or any Account
Party from the performance or observance of any obligation, covenant or
agreement contained in Section 3.6.
No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which Company or any Account Party has or may have
against the beneficiary of any Letter of Credit shall be available hereunder to
Company or any Account Party against the Agent, the Issuing Bank or any other
Bank. Nothing contained in this Section 3.7 shall be deemed to prevent Company
or the Account Parties, after satisfaction in full of the absolute and
unconditional obligations of Company and the Account Parties hereunder, from
asserting in a separate action any claim, defense, set off or other right which
they (or any of them) may have against Agent, the Issuing Bank or any Bank.
3.8 Risk Under Letters of Credit. (a) In the handling of Letters of
Credit and any security therefor, or any documents or instruments given in
connection therewith, and notwithstanding the granting of risk participation
hereunder, the Issuing Bank shall have the sole right to take or refrain from
taking any and all actions under or upon the Letters of Credit.
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EXHIBIT 10.1
(b) Subject to other terms and conditions of this Agreement,
Issuing Bank shall issue the Letters of Credit and shall hold the
documents related thereto in its own name and shall make all
collections thereunder and otherwise administer the Letters of Credit
in accordance with Issuing Bank's regularly established practices and
procedures and, Issuing Bank will have no further obligation with
respect thereto. In the administration of Letters of Credit, Issuing
Bank shall not be liable for any action taken or omitted on the advice
of counsel, accountants, appraisers or other experts selected by
Issuing Bank with due care and Issuing Bank may rely upon any notice,
communication, certificate or other statement from Company, any Account
Party, beneficiaries of Letters of Credit, or any other Person which
Issuing Bank believes to be authentic. Issuing Bank, will, upon
request, furnish the Banks with copies of Letter of Credit Agreements,
Letters of Credit and documents related thereto.
(c) In connection with the issuance and administration of
Letters of Credit and the assignments hereunder, Issuing Bank makes no
representation and shall, subject to Section 3.7 hereof, have no
responsibility with respect to (i) the obligations of Company or any
Account Party or, the validity, sufficiency or enforceability of any
document or instrument given in connection therewith, (ii) the
financial condition of, any representations made by, or any act or
omission of Company, the applicable Account Party or any other Person,
or (iii) any failure or delay in exercising any rights or powers
possessed by Issuing Bank in its capacity as issuer of Letters of
Credit, in the absence of its gross negligence or willful misconduct.
Each of the Banks expressly acknowledge that they have made and will
continue to make their own evaluations of Company's creditworthiness
without reliance on any representation of Issuing Bank or Issuing
Bank's officers, agents and employees.
(d) If at any time Agent or the Issuing Bank shall recover any
part of any unreimbursed amount for any draw or other demand for
payment under a Letter of Credit, or any interest thereon, Agent or the
Issuing Bank, as the case may be, shall receive same for the pro rata
benefit of the Banks in accordance with their respective Percentage
interests therein and shall promptly deliver to each Bank its share
thereof, less such Bank's pro rata share of the costs of such recovery,
including court costs and attorney's fees. If at any time any Bank
shall receive from any source whatsoever any payment on any such
unreimbursed amount or interest thereon in excess of such Bank's
Percentage share of such payment, such Bank will promptly pay over such
excess to Agent, for redistribution in accordance with this Agreement.
3.9 Indemnification. (a) The Company and each Account Party hereby
indemnifies and agrees to hold harmless the Banks, the Issuing Bank and the
Agent, and their respective officers, directors, employees and agents, from and
against any and all claims, damages, losses, liabilities, costs or expenses of
any kind or nature whatsoever which the Banks, the Issuing Bank or the Agent or
any such Person may incur or which may be claimed against any of them by reason
of or in connection with any Letter of Credit, and none of the Issuing Bank, any
Bank or the Agent or any of their respective officers, directors, employees or
agents shall be liable or responsible for: (i) the use which may be made of any
Letter of Credit or for any acts or omissions of any beneficiary in connection
therewith; (ii) the validity, sufficiency or genuineness of documents or of any
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EXHIBIT 10.1
endorsement thereon, even if such documents should in fact prove to be in any or
all respects invalid, insufficient, fraudulent or forged; (iii) payment by the
Issuing Bank to the beneficiary under any Letter of Credit against presentation
of documents which do not strictly comply with the terms of any Letter of Credit
(unless such payment resulted from the gross negligence or willful misconduct of
the Issuing Bank), including failure of any documents to bear any reference or
adequate reference to such Letter of Credit; (iv) any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit; or (v) any
other event or circumstance whatsoever arising in connection with any Letter of
Credit; provided, however, that with respect to subparagraphs (a)(i) through
(a)(v) hereof, Company and Account Parties shall not be required to indemnify
the Issuing Bank, the other Banks and the Agent and such other persons, and the
Issuing Bank shall be liable to the Company and the Account Parties to the
extent, but only to the extent, of any direct, as opposed to consequential or
incidental, damages suffered by Company and the Account Parties which were
caused by the Issuing Bank's gross negligence, willful misconduct or wrongful
dishonor of any Letter of Credit after the presentation to it by the beneficiary
thereunder of a draft or other demand for payment and other documentation
strictly complying with the terms and conditions of such Letter of Credit.
(b) It is understood that in making any payment under a Letter of
Credit the Issuing Bank will rely on documents presented to it under such Letter
of Credit as to any and all matters set forth therein without further
investigation and regardless of any notice or information to the contrary. It is
further acknowledged and agreed that Company or an Account Party may have rights
against the beneficiary or others in connection with any Letter of Credit with
respect to which the Banks are alleged to be liable and it shall be a condition
of the assertion of any liability of the Banks under this Section that Company
or applicable Account Party shall contemporaneously pursue all remedies in
respect of the alleged loss against such beneficiary and any other parties
obligated or liable in connection with such Letter of Credit and any related
transactions.
3.10 Right of Reimbursement. Each Bank agrees to reimburse the Issuing
Bank on demand (by payment to the Agent for the account of the Issuing Bank),
pro rata in accordance with their Percentages, for (i) the reasonable
out-of-pocket costs and expenses of the Issuing Bank to be reimbursed by Company
or any Account Party pursuant to any Letter of Credit Agreement or any Letter of
Credit, to the extent not reimbursed by Company or Account Party and (ii) any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, fees, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against Issuing Bank
(in its capacity as issuer of any Letter of Credit) in any way relating to or
arising out of this Agreement, any Letter of Credit, any documentation or any
transaction relating thereto, or any Letter of Credit Agreement, except to the
extent that such liabilities, losses, costs or expenses were incurred by Issuing
Bank as a result of Issuing Bank's gross negligence or willful misconduct or
wrongful dishonor of any Letter of Credit.
3.11 Existing Letters of Credit. Each Existing Letter of Credit shall
be deemed for all purposes of this Agreement to be a Letter of Credit, and each
application submitted in connection with each Existing Letter of Credit shall be
deemed for all purposes of this Agreement to be a Letter
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EXHIBIT 10.1
of Credit Agreement. On the Effective Date of this Agreement, the Agent shall be
deemed automatically to have sold and transferred, and each other Bank shall be
deemed automatically, irrevocably, and unconditionally to have purchased and
received from the Agent, without recourse or warranty, an undivided interest and
participation (on the terms set forth herein), to the extent of such other
Bank's Percentage, in each Existing Letter of Credit and the applicable
reimbursement obligations with respect thereto and any security therefor or
guaranty pertaining thereto. Notwithstanding the foregoing, Letter of Credit
Fees paid under the Prior Credit Agreement shall not be recalculated,
redistributed or reallocated by Company, Agent or the Banks.
4. SWING LINE CREDIT
4.1 Swing Line Advances. The Swing Line Bank shall, on the terms and
subject to the conditions hereinafter set forth (including Section 4.3), make
one or more advances (each such advance being a "Swing Line Advance") to Company
from time to time on any Business Day during the period from the date hereof to
(but excluding) the Revolving Credit Maturity Date in an aggregate amount not to
exceed Four Million Dollars ($4,000,000) at any time outstanding; provided,
however, that after giving effect to all Swing Line Advances and all Revolving
Credit Advances requested to be made on such date, the sum of the aggregate
principal amount of all outstanding Revolving Credit Advances, Swing Line
Advances and Letter of Credit Obligations shall not exceed the then applicable
Revolving Credit Aggregate Commitment. All Swing Line Advances shall be
evidenced by the Swing Line Note, under which advances, repayments and
readvances may be made, subject to the terms and conditions of this Agreement.
Each Swing Line Advance shall mature and the principal amount thereof shall be
due and payable by Company on the last day of the Interest Period applicable
thereto. In no event whatsoever shall any outstanding Swing Line Advance be
deemed to reduce, modify or affect any Bank's commitment to make Revolving
Credit Advances based upon its Percentage.
4.2 Accrual of Interest; Margin Adjustments. Each Swing Line Advance
shall, from time to time after the date of such Advance, bear interest at its
Applicable Interest Rate. The amount and date of each Swing Line Advance, its
Applicable Interest Rate, its Interest Period, and the amount and date of any
repayment shall be noted on Agent's records, which records will be conclusive
evidence thereof, absent manifest error; provided, however, that any failure by
the Agent to record any such information shall not relieve Company of its
obligation to repay the outstanding principal amount of such Advance, all
interest accrued thereon and any amount payable with respect thereto in
accordance with the terms of this Agreement and the Loan Documents.
4.3 Requests for Swing Line Advances. Company may request a Swing Line
Advance only after delivery to Swing Line Bank of a Request for Swing Line
Advance executed by a person authorized by the Company to make such requests on
behalf of Company, subject to the following and to the remaining provisions
hereof:
(a) each such Request for Swing Line Advance shall set forth
the information required on the Request for Swing Line Advance
including without limitation:
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EXHIBIT 10.1
(i) the proposed date of Swing Line Advance,
which must be a Business Day;
(ii) whether such Swing Line Advance is to be a
Prime-based Advance or Quoted Rate Advance; and
(iii) the duration of the Interest Period
applicable thereto;
(b) each such Request for Swing Line Advance shall be
delivered to Swing Line Bank by 12:00 p.m. (Detroit time) on the
proposed date of the Swing Line Advance;
(c) the principal amount of such requested Swing Line Advance,
plus the principal amount of all other Revolving Credit Advances and
Swing Line Advances then outstanding hereunder, plus the Letter of
Credit Obligations, shall not exceed the then applicable Revolving
Credit Aggregate Commitment;
(d) the principal amount of such Swing Line Advance shall be
at least Two Hundred Fifty Thousand Dollars ($250,000);
(e) each Request for Swing Line Advance, once delivered to
Swing Line Bank, shall not be revocable by Company, and shall
constitute and include a certification by the Company as of the date
thereof that:
(i) both before and after the Swing Line
Advance, the obligations of the Company and the Guarantors set
forth in this Agreement and the Loan Documents, as applicable,
are valid, binding and enforceable obligations of such
parties;
(ii) to the best knowledge of Company all
conditions to Advances have been satisfied;
(iii) there is no Default or Event of Default in
existence, and none shall exist upon the making of the Swing
Line Advance; and
(iv) the representations and warranties
contained in this Agreement and the Loan Documents are true
and correct in all material respects and shall be true and
correct in all material respects as of and immediately after
the making of the Swing Line Advance.
Swing Line Bank shall promptly deliver to Agent by telecopier a copy of any
Request for Swing Line Advance received.
Swing Line Bank, may, at its option, lend under this Section 4.3 upon
the telephone request of an authorized officer of Company and, in the event
Swing Line Bank makes any such Advance
38
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EXHIBIT 10.1
upon a telephone request, the requesting officer shall, if so requested by Swing
Line Bank, fax to Swing Line Bank, on the same day as such telephone request, a
Request for Swing Line Advance. Company hereby authorizes Swing Line Bank to
disburse Advances under this Section 4 pursuant to the telephone instructions of
any person purporting to be a person identified by name on a written list of
persons authorized by the Company to make Requests for Advance on behalf of the
Company. Notwithstanding the foregoing, the Company acknowledges that Company
shall bear all risk of loss resulting from disbursements made upon any telephone
request. Each telephone request for an Advance shall constitute a certification
of the matters set forth in the Request for Swing Line Advance form as of the
date of such requested Advance.
4.4 Disbursement of Swing Line Advances. Subject to submission of an
executed Request for Swing Line Advance by Company without exceptions noted in
the compliance certification therein and to the other terms and conditions
hereof, Swing Line Bank shall make available to Company the amount so requested,
in same day funds, not later than 4:00 p.m. (Detroit time) on the date of such
Swing Line Advance by credit to an account of Company maintained with Swing Line
Bank or to such other account or third party as Company may reasonably direct.
Swing Line Bank shall promptly notify Agent of any Swing Line Advance by
telephone, telex or telecopier.
4.5 Refunding of or Participation Interest in Swing Line Advances.
(a) The Swing Line Bank at any time in its sole and absolute
discretion, may on behalf of the Company (which hereby irrevocably
directs the Swing Line Bank to act on its behalf) request each Bank
(including the Swing Line Bank in its capacity as a Bank) to make a
Prime-based Advance of the Revolving Credit in an amount equal to such
Bank's Percentage of the principal amount of the Swing Line Advances
(the "Refunded Swing Line Advances") outstanding on the date such
notice is given; provided that (i) at any time as there shall be a
Swing Line Advance outstanding for more than thirty days, the Swing
Line Bank shall, on behalf of the Company (which hereby irrevocably
directs the Agent to act on its behalf), promptly request each Bank
(including the Swing Line Bank) to make a Revolving Credit Advance in
an amount equal to such Bank's Percentage of the principal amount of
such outstanding Swing Line Advance, (ii) Swing Line Advances may be
prepaid by the Company in accordance with the provisions of Section 5.7
or Section 12.1 hereof and (iii) Quoted Rate Advances which are
converted to Revolving Credit Advances at the request of the Agent at a
time when no Default or Event of Default has occurred and is continuing
shall not be subject to Section 5.7 and no losses, costs or expenses
may be assessed by the Swing Line Bank against the Company or the other
Banks as a consequence of any such conversion covered by this clause
(iii). Unless any of the events described in Section 10.1(j) shall have
occurred (in which event the procedures of paragraph (b) of this
Section 4.5 shall apply) and regardless of whether the conditions
precedent set forth in this Agreement to the making of a Revolving
Credit Advance are then satisfied, each Bank shall make the proceeds of
its Revolving Credit Advance available to the Agent for the ratable
benefit of the Swing Line Bank at the office of the Agent specified in
Section 2.4(a) prior to 11:00 a.m. Detroit time, in funds immediately
available on the Business Day next succeeding the date such
39
<PAGE> 47
EXHIBIT 10.1
notice is given. The proceeds of such Revolving Credit Advances shall
be immediately applied to repay the Refunded Swing Line Advances.
(b) If, prior to the making of a Revolving Credit Advance
pursuant to paragraph (a) of this Section 4.5, one of the events
described in Section 10.1(j) shall have occurred, each Bank will, on
the date such Revolving Credit Advance was to have been made, purchase
from the Swing Line Bank an undivided participating interest in the
Refunded Swing Line Advance in an amount equal to its Percentage of
such Refunded Swing Line Advance. Each Bank will immediately transfer
to the Agent, in immediately available funds, the amount of its
participation and upon receipt thereof the Agent will deliver to such
Bank a Swing Line Bank Participation Certificate in the form of Exhibit
F dated the date of receipt of such funds and in such amount.
(c) Each Bank's obligation to make Revolving Credit Advances
and to purchase participation interests in accordance with clauses (a)
and (b) above shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any
setoff, counterclaim, recoupment, defense or other right which such
Bank may have against Swing Line Bank, the Company or any other Person
for any reason whatsoever; (ii) the occurrence or continuance of any
Default or Event of Default; (iii) any adverse change in the condition
(financial or otherwise) of the Company or any other Person; (iv) any
breach of this Agreement by the Company or any other Person; (v) any
inability of the Company to satisfy the conditions precedent to
borrowing set forth in this Agreement on the date upon which such
participating interest is to be purchased; or (vi) any other
circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing. If any Bank does not make available to the Agent
the amount required pursuant to clause (a) or (b) above, as the case
may be, the Agent shall be entitled to recover such amount on demand
from such Bank, together with interest thereon for each day from the
date of non-payment until such amount is paid in full at the Federal
Funds Effective Rate for the first two Business Days and at the
Alternate Base Rate thereafter.
5. MARGIN ADJUSTMENTS; INTEREST PAYMENTS
5.1 Margin Adjustments. Adjustments in the Margin, based on the ratio
of Consolidated Funded Debt to Consolidated EBITDA set forth in the pricing
matrix attached to this Agreement as Schedule 1.1, applicable to
Eurocurrency-based Advances, the Applicable Facility Fee Percentage and the
Applicable L/C Fee Percentage, shall be implemented on a quarterly basis as
follows:
(a) Such adjustments shall be given prospective effect only,
effective (i) as to all Prime-based Advances outstanding hereunder, the
Applicable Facility Fee Percentage and the Applicable L/C Fee
Percentage, upon the required date of delivery of the financial
statements under Sections 8.1(a) and 8.1(b) hereunder, in each case
establishing applicability of the appropriate adjustment, and (ii) as
to each Eurocurrency-based Advance outstanding hereunder, effective
upon the expiration of the applicable Interest Period(s), if any, in
effect on the date of the delivery of such financial statements, in
each case with no retroactivity or
40
<PAGE> 48
EXHIBIT 10.1
claw-back. In the event Company fails timely to deliver the financial
statements required under Section 8.1(a) or 8.1(b), then from the date
delivery of such financial statements was required until such financial
statements are delivered, the margins and fee percentages shall be
those set forth under the Level V Column of the pricing matrix attached
to this Agreement as Schedule 1.1.
(b) With respect to Eurocurrency-based Advances outstanding
hereunder, an adjustment hereunder, after becoming effective, shall
remain in effect only through the end of the applicable Interest
Period(s) for such Eurocurrency-based Advances if any; provided,
however, that upon any change in the Margin level then in effect, as
aforesaid, or the occurrence of any other event which under the terms
hereof causes such adjustment no longer to be applicable, then any such
subsequent adjustment or no adjustment, as the case may be, shall be
effective (and said pricing shall thereby be adjusted up or down, as
applicable) with the commencement of each Interest Period following
such change or event, all in accordance with the preceding
subparagraph.
(c) Such Margin adjustments under this Section 5.1 shall be
made irrespective of, and in addition to, any other interest rate
adjustments hereunder.
(d) From the date hereof until the required date of delivery
under Section 8.1(b) of the Company's financial statements for the
fiscal quarter ending June 30, 1998, the margins and fee percentages
shall be those set forth under the Level V column of the pricing matrix
attached to this Agreement as Schedule 1.1.
5.2 Prime-based Interest Payments. Interest on the unpaid balance of
all Prime-based Advances from time to time outstanding shall accrue until paid
at a per annum interest rate equal to the Prime-based Rate, and shall be payable
in immediately available funds quarterly commencing on the first day of the
fiscal quarter next succeeding the fiscal quarter during which the initial
Advance is made and on the first day of each fiscal quarter thereafter. Interest
accruing at the Prime-based Rate shall be computed on the basis of a 360 day
year and assessed for the actual number of days elapsed, and in such computation
effect shall be given to any change in the interest rate resulting from a change
in the Prime-based Rate on the date of such change in the Prime-based Rate.
5.3 Eurocurrency-based Interest Payments. Interest on each
Eurocurrency-based Advance having a related Eurocurrency-Interest Period of 3
months or less shall accrue at its Eurocurrency- based Rate and shall be payable
in immediately available funds on the last day of the Interest Period applicable
thereto. Interest shall be payable in immediately available funds on each
Eurocurrency-based Advance outstanding from time to time having a
Eurocurrency-Interest Period of 6 months or longer, at intervals of 3 months
after the first day of the applicable Interest Period, and shall also be payable
on the last day of the Interest Period applicable thereto. Interest accruing at
the Eurocurrency-based Rate shall be computed on the basis of a 360 day year and
assessed for the actual number of days elapsed from the first day of the
Interest Period applicable thereto to, but not including, the last day thereof.
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<PAGE> 49
EXHIBIT 10.1
5.4 Quoted Rate Advance Interest Payments. Interest on each Quoted Rate
Advance shall accrue at its Quoted Rate and shall be payable in immediately
available funds on the last day of the Interest Period applicable thereto.
Interest accruing at the Quoted Rate shall be computed on the basis of a 360 day
year and assessed for the actual number of days elapsed from the first day of
the Interest Period applicable thereto to, but not including the last day
thereof.
5.5 Interest Payments on Conversions. Notwithstanding anything to the
contrary in Sections 5.2 and 5.3, all accrued and unpaid interest on any Advance
refunded or converted pursuant to Section 2.3 hereof shall be due and payable in
full on the date such Advance is refunded or converted.
5.6 Interest on Default. Notwithstanding anything to the contrary set
forth in Sections 5.2, 5.3 and 5.4, in the event and so long as any Event of
Default shall exist under this Agreement, interest shall be payable daily on the
principal amount of all Advances from time to time outstanding (and, to the
extent delinquent, on all other monetary obligations of Company hereunder and
under the other Loan Documents) at a per annum rate equal to the Applicable
Interest Rate (calculated on the basis of the maximum Margins) in respect of
each such Advance, plus, in the case of Eurocurrency-based Advances and Quoted
Rate Advances, two percent (2%) per annum for the remainder of the then existing
Interest Period, if any, and at all other such times and for all Prime-based
Advances, at a per annum rate equal to the Prime-based Rate, plus two percent
(2%).
5.7 Prepayment of Revolving Credit and Swing Line Advances. Company may
prepay all or part of the outstanding balance of any Prime-based Revolving
Credit Advance(s) at any time, provided that the amount of any partial
prepayment shall be at least Five Hundred Thousand Dollars ($500,000) and the
aggregate balance of Prime-based Revolving Credit Advance(s) remaining
outstanding, if any, shall be at least One Million Dollars ($1,000,000) and the
aggregate amount outstanding under all Swing Line Advances, if any, shall be at
least Two Hundred Fifty Thousand Dollars ($250,000). Company may prepay all or
part of any Eurocurrency-based Revolving Credit Advance (subject to not less
than three (3) Business Days' notice to Agent) only on the last day of the
Interest Period applicable thereto, provided that the amount of any such partial
prepayment shall be at least Five Hundred Thousand Dollars ($500,000), and the
unpaid portion of such Advance which is refunded or converted under Section 2.3
shall be at least Two Million Dollars ($2,000,000). Company may prepay Quoted
Rate Advances only on the last day of the Interest Period applicable thereto.
Any prepayment made in accordance with this Section shall be without premium,
penalty or prejudice to the right to reborrow under the terms of this Agreement.
Any other prepayment of all or any portion of the Revolving Credit, whether by
acceleration, mandatory or required prepayment or otherwise, shall be subject to
Section 12.1 hereof, but otherwise without premium, penalty or prejudice. All
prepayments of Revolving Credit Advances shall be made to the Agent for
distribution ratably to the Banks.
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<PAGE> 50
EXHIBIT 10.1
6. CONDITIONS
The obligations of Banks to make Advances or loans pursuant to this
Agreement and the obligation of the Issuing Bank to issue Letters of Credit are
subject to the following conditions:
6.1 Execution of Notes and this Agreement. Company shall have executed
and delivered to Agent for the account of each Bank, the Revolving Credit Notes,
the Swing Line Note, this Agreement and the other Loan Documents to which it is
a party (including all schedules, exhibits, certificates, opinions, financial
statements and other documents to be delivered pursuant hereto), and such Notes,
and this Agreement and the other Loan Documents shall be in full force and
effect.
6.2 Corporate Authority. Agent shall have received, with a counterpart
thereof for each Bank:
(a) In connection with the Company, a certificate of
Responsible Officer as to:
(i) resolutions of the board of directors of the
Company evidencing approval of the transactions contemplated
by this Agreement and the Notes and authorizing the execution
and delivery thereof and the borrowing of Advances and the
requesting of Letters of Credit hereunder,
(ii) the incumbency and signature of the officers of the
Company executing any Loan Document,
(iii) a certificate of good standing or continued
existence (or the equivalent thereof) from the State of
Delaware, and from every state or other jurisdiction listed on
Schedule 6.2 hereof if issued by such jurisdiction, subject to
the limitations (as to qualification and authorization to do
business) contained in Section 7.1, and
(iv) copies of Company's articles of incorporation and
bylaws or other constitutional documents, as in effect on the
Effective Date;
(b) in connection with each Guarantor, a certificate from an
authorized officer of such Guarantor as to:
(i) resolutions of the board of directors or members or
managers, as the case may be, of each such Guarantor
evidencing approval of the transactions contemplated by the
Loan Documents to which such Guarantor is a party and
authorizing the execution and delivery thereof,
(ii) the incumbency and signature of the officers or
members or managers, as the case may be, of such Guarantor
executing any Loan Document to which such Guarantor is a
party,
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<PAGE> 51
EXHIBIT 10.1
(iii) a certificate of good standing from the state or
other jurisdiction of such Guarantor's incorporation, and from
every state or other jurisdiction in which such Guarantor is
qualified to do business, if issued by such jurisdiction,
subject to the limitations (as to qualification and
authorization to do business) contained in Section 7.1,
hereof, and
(iv) copies of Guarantor's articles of incorporation and
bylaws or other constitutional documents, as in effect on the
Effective Date.
6.3 Reaffirmation of Certain Loan Documents. The Agent shall have
received a Reaffirmation of Certain Loan Documents, including the Pledge
Agreement, the Subsidiary Pledge Agreement, the Parent Pledge Agreement, the
Security Agreement and the Guaranty, in the form of Exhibit L, executed and
delivered by each of the Company, CB-Kramer, Parent, the Domestic Significant
Subsidiaries and the Guarantors.
6.4 Real Estate Documentation. (a) With respect each Mortgage executed
and delivered in connection with the Original Credit Agreement, a Reaffirmation
of Certain Loan Documents, if applicable or an amendment to such Mortgage
reflecting the transactions contemplated by this Agreement; and (b) with respect
to each parcel of real property in Nebraska and Texas acquired pursuant to the
National Dynamics Acquisition, (i) a Mortgage in form and substance satisfactory
to Agent and the Banks, together with the other real estate documentation listed
on Schedule 8.21 hereto, and (ii) written environmental audits or risk
assessments acceptable to Agent and the Banks prepared at Company's expense by
an environmental engineer or auditing firm experienced in such matters and
reasonably acceptable to Agent and the Banks.
6.5 Insurance. The Agent shall have received evidence satisfactory to
it that the Company has obtained the insurance policies required by Section 8.5
hereof and that such insurance policies are in full force and effect.
6.6 Compliance with Certain Documents and Agreements. The Company and
each Guarantor (and any of their respective Subsidiaries or Affiliates) shall
have each performed and complied in all material respects with all agreements
and conditions contained in this Agreement, other Loan Documents, or any
agreement or other document executed thereunder and required to be performed or
complied with by each of them (as of the applicable date) and none of such
parties shall be in material default in the performance or compliance with any
of the terms or provisions hereof or thereof.
6.7 Opinion of Counsel. Company and each Guarantor shall furnish Agent
prior to the initial Advance under this Agreement, and with signed copies for
each Bank, opinions of counsel to the Company and such Guarantor, dated the date
hereof, and covering such matters as reasonably required by and otherwise
reasonably satisfactory in form and substance to the Agent and each of the
Banks.
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<PAGE> 52
EXHIBIT 10.1
6.8 Company's Certificate. The Agent shall have received, prior to the
initial Advance under this Agreement (with a signed counterpart for each Bank),
a certificate of a Responsible Officer of Company dated the date of the making
of Advances hereunder, stating that to the best of his or her knowledge after
due inquiry, (a) the conditions of paragraphs 6.1, 6.3, 6.5, 6.6, 6.11 and 6.13
hereof have been fully satisfied; (b) the representations and warranties made by
Company, each Guarantor or any other party to any of the Loan Documents
(excluding the Agent and Banks) in this Agreement or any of the other Loan
Documents, and the representations and warranties of any of the foregoing which
are contained in any certificate, document or financial or other statement
furnished at any time hereunder or thereunder or in connection herewith or
therewith shall have been true and correct in all material respects when made
and shall be true and correct in all material respects on and as of the
Effective Date; and (c) no Default or Event of Default shall have occurred and
be continuing, and there shall have been no material adverse change in the
financial condition, properties, business, results or operations of the Company
and its Subsidiaries taken as a whole from March 31, 1998 to the date of the
making of the first borrowing hereunder.
6.9 Payment of Fees. Company shall have paid to the Agent all interest,
fees, costs and expenses accrued to the Effective Date for which reimbursement
is then owing under the Prior Credit Agreement, and all fees, costs and expenses
required to be paid to Agent upon execution of this Agreement.
6.10 Pro Forma Balance Sheet. The Company shall have delivered to the
Agent a pro forma consolidated balance sheet of the Company and its Subsidiaries
(the "Closing Pro Forma Balance Sheet"), certified by the chief financial
officer of the Company that it fairly presents the pro forma adjustments
reflecting the consummation of the transactions (including the National Dynamics
Acquisition) contemplated by this Agreement, including all material fees and
expenses in connection therewith, subject to normal year end adjustments.
6.11 Existing Credit Facilities. All existing Debt (including the Term
Loan as that term was defined in the Prior Agreement), other than Debt expressly
permitted hereunder and Loans hereunder to be made or continued on the Effective
Date, together with all interest, all prepayment premiums and other amounts due
and payable with respect thereto, shall have been paid in full and the related
commitments terminated.
6.12 Lessors' Acknowledgments. Agent has received lessors'
acknowledgments, in form and substance acceptable to the Agent and the Banks, in
connection with the property in Illinois and Wisconsin leased by Company.
6.13 National Dynamics Acquisition Documents. The Agent shall have
received executed copies of the National Dynamics Acquisition Documents,
certified by a Responsible Officer of the Company. The National Dynamics
Acquisition Documents shall be in form and substance satisfactory to the Agent
and the Majority Banks and each of the National Dynamics Acquisition Documents
shall have been duly authorized, executed and delivered by each of the parties
thereto and shall be in full force and effect. No material term or provision of
the National Dynamic Acquisition Documents shall have been modified, and no
material condition to consummation of
45
<PAGE> 53
EXHIBIT 10.1
the National Dynamics Acquisition shall have been waived, in either case in a
manner detrimental to the Company, by any of the parties thereto. The Company
shall have in all material respects done and performed such acts and observed
such covenants which it is required to do or perform under the National Dynamics
Acquisition Documents and in order to consummate the National Dynamics
Acquisition on or prior to the Effective Date. The Company shall have delivered,
or caused to be delivered to the Agent, National Dynamics' audited financial
statements as of the end of the most recent fiscal year end.
6.14 Subordinated Debt. On or before the Effective Date, the Agent
shall have received evidence that the Subordinated Notes shall have been issued
in an aggregate amount not less than $125,000,000 and the Whitney Subordinated
Debt (as such term is defined in the Prior Agreement) has been repaid in full.
6.15 Perfection of Security Interests. The Agent shall have received
(i) the results of searches of the Uniform Commercial Code (or equivalent)
filings made with respect to the Company and its Subsidiaries (and National
Dynamics and any of its subsidiaries which shall be transferring assets to
Company (herein, the "National Dynamics Parties") under the National Dynamics
Acquisition Documents) in those jurisdictions in which property to be acquired
pursuant to the National Dynamics Acquisition which will become Collateral is
located and in the jurisdictions in which the Company, any Subsidiary or any of
the National Dynamics Parties maintains its chief executive office (any filings
which shall have been disclosed pursuant to such search shall be either
permitted under Section 9.2 hereof or shall be released) and (ii) any documents
(including, without limitation, financing statements, amendments to financing
statements and assignments of financing statements, and stock powers) required
to be filed in connection with the Security Agreement or the Pledge Agreements
to create, in favor of the Agent (for and on behalf of the Banks), a perfected
security interest in the Collateral thereunder shall have been delivered to the
Agent in a proper form for filing in each office in each jurisdiction listed in
Schedule 6.3 and with the United States Patent and Trademark Office, or other
office, as the case may be.
6.16 Other Documents and Instruments. The Agent shall have received,
with a photocopy for each Bank, such other instruments and documents as each of
the Banks may reasonably request in connection with the making of Advances or
issuance of Letters of Credit hereunder, and all such instruments and documents
shall be satisfactory in form and substance to Agent and each Bank.
6.17 Continuing Conditions. The obligations of the Banks to make
Advances (including the initial Advance) under this Agreement and the obligation
of the Issuing Bank to issue any Letters of Credit shall be subject to the
continuing conditions that:
(a) All conditions of Sections 6.1 through 6.16 shall have been and
remain satisfied as of the date of the Advance or the request for the Letter of
Credit;
(b) No Default or Event of Default shall exist as of the date of the
Advance or the request for the Letter of Credit; and
46
<PAGE> 54
EXHIBIT 10.1
(c) Each of the representations and warranties contained in this
Agreement and in each of the other Loan Documents shall be true and correct in
all material respects as of the date of the Advance or Letter of Credit.
7. REPRESENTATIONS AND WARRANTIES
Company represents and warrants and such representations and warranties
shall be deemed to be continuing representations and warranties until the
Revolving Credit Maturity Date and thereafter until the expiration of all
Letters of Credit and the final payment in full of the Indebtedness and the
performance by Company of all other obligations under this Agreement:
7.1 Corporate Authority. Company is a corporation duly organized and
existing in good standing under the laws of the State of Delaware; each
Subsidiary is a corporation or other business entity duly organized and existing
in good standing under the laws of the jurisdiction of its incorporation; the
Parent is a limited liability company duly organized and existing under the laws
of Wisconsin; and each of the Company, its Subsidiaries and the Parent is duly
qualified and authorized to do business as a foreign corporation in each
jurisdiction where the character of its assets or the nature of its activities
makes such qualification necessary and where failure to be so qualified would
have a material adverse effect on their respective businesses.
7.2 Due Authorization - Company. Execution, delivery and performance of
this Agreement, the Reaffirmation of Certain Loan Documents, the other Loan
Documents and any other documents and instruments required under or in
connection with this Agreement or the other Loan Documents (or to be so executed
and delivered), and the issuance of the Notes by Company are within its
corporate powers, have been duly authorized, are not in contravention of law or
the terms of the Company's organizational documents and, except as have been
previously obtained or as referred to in Section 7.13, below, do not require the
consent or approval, material to the transactions contemplated by this Agreement
and the other Loan Documents, of any governmental body, agency or authority.
7.3 Due Authorization - Guarantors. Execution, delivery and performance
of the Reaffirmation of Certain Loan Documents, any other Loan Documents and all
other documents and instruments required of Guarantors under or in connection
with this Agreement and the other Loan Documents (or to be so executed and
delivered), and to which each Guarantor is a party, are within the corporate
powers or limited liability company of each such Guarantor, have been duly
authorized, are not in contravention of law or the terms of such Guarantor's
organizational documents, and, except as have been previously obtained (or as
referred to in Section 7.13 below), do not require the consent or approval,
material to the transactions contemplated by this Agreement and the other Loan
Documents, of any governmental body, agency or authority not previously
obtained.
7.4 Liens. There are no security interests in, liens, mortgages, or
other encumbrances on and no financing statements on file with respect to any of
the property owned, pledged, mortgaged
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EXHIBIT 10.1
or otherwise encumbered (or to be encumbered) by Company, any of the Guarantors
or any of the Subsidiaries except for Liens permitted pursuant to Section 9.2.
7.5 Taxes. Company, each of the Guarantors, and each of the
Subsidiaries has filed on or before their respective due dates or within the
applicable grace periods, all federal, state and foreign tax returns which are
required to be filed or has obtained extensions for filing such tax returns and
is not delinquent in filing such returns in accordance with such extensions and
has paid all taxes which have become due pursuant to those returns or pursuant
to any assessments received by any such party, as the case may be, to the extent
such taxes have become due, except to the extent such tax payments are being
actively contested in good faith by appropriate proceedings and with respect to
which adequate provision has been made on the books of Company, such Guarantor
or such Subsidiary as may be required by GAAP.
7.6 No Defaults. There exists no material default under the provisions
of any instrument evidencing any indebtedness for borrowed money of the Company,
any Guarantor or any Subsidiary which is permitted hereunder or of any agreement
relating thereto.
7.7 Enforceability of Agreement and Loan Documents -- Company. This
Agreement, each of the other Loan Documents to which Company is a party, and all
other certificates, agreements and documents executed and delivered by Company
under or in connection herewith or therewith have each been duly executed and
delivered by its duly authorized officers and constitute the valid and binding
obligations of Company, enforceable in accordance with their respective terms,
except as enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium or similar laws
affecting the enforcement of creditor's rights, generally and by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in law or equity).
7.8 Enforceability of Loan Documents -- Guarantors. The Loan Documents
to which each of the Guarantors is a party, and all certificates, documents and
agreements executed in connection therewith by the Guarantors have each been
duly executed and delivered by the duly authorized officers or members or
managers, as the case may be, of the Guarantors and constitute the valid and
binding obligations of such Guarantors, enforceable in accordance with their
respective terms, except as enforcement thereof may be limited by applicable
bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or
similar laws affecting the enforcement of creditor's rights, generally and by
general principles of equity (regardless of whether enforcement is considered in
a proceeding in law or equity).
7.9 Compliance with Laws. Except as disclosed on Schedule 7.9, each of
the Company, each of the Guarantors and each of the Subsidiaries has complied
with all applicable federal, state and local laws, ordinances, codes, rules,
regulations and guidelines (including consent decrees and administrative orders)
except to the extent that failure to comply therewith would not materially
interfere with the conduct of the business of Company, each of the Guarantors
and each of the Subsidiaries taken as a whole, or would not have a Material
Adverse Effect; except for such matters as are not likely to have a Material
Adverse Effect, and except as set forth in Schedule 7.9 hereof,
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EXHIBIT 10.1
and without limiting the generality of Section 7.12, there have been no
past, and there is no pending or threatened, litigation, action, proceeding or
controversy affecting the Company, any of the Guarantors or any of the
Subsidiaries, and no pending or threatened complaint, notice or inquiry to the
Company, any of the Guarantors or any of the Subsidiaries, regarding potential
liability of the Company, any of the Guarantors or any of the Subsidiaries, or
any officer, director, agent or employee of the Company, any of the Guarantors
or any of the Subsidiaries; and, to the knowledge of the Company, no facts or
situation exists that could form the basis for any such litigation, action,
proceeding, controversy, complaint, notice or inquiry.
7.10 Non-contravention -- Company. The execution, delivery and
performance of this Agreement and the other Loan Documents and any other
documents and instruments required under or in connection with this Agreement by
Company are not in contravention of the terms of any indenture, agreement or
undertaking to which Company or any of its Subsidiaries is a party or by which
its or their properties are bound or affected where such violation would
reasonably be expected to have a Material Adverse Effect.
7.11 Non-contravention -- Guarantors. The execution, delivery and
performance of those Loan Documents signed by the Guarantors, and any other
documents and instruments required under or in connection with this Agreement or
any other Loan Document by the Guarantors are not in contravention of the terms
of any indenture, agreement or undertaking to which any Guarantor or Company is
a party or by which it or its properties are bound or affected where such
violation would reasonably be expected to have a Material Adverse Effect.
7.12 No Litigation. Except for De Minimis Matters or as set forth on
Schedule 7.12 hereof, there is no suit, action, proceeding, including, without
limitation, any bankruptcy proceeding, or governmental investigation pending
against or to the knowledge of Company, affecting Company, any Guarantor or any
Subsidiary (other than any suit, action or proceeding in which Company, such
Guarantor or such Subsidiary is the plaintiff and in which no counterclaim or
cross-claim against Company, such Guarantor or such Subsidiary has been filed),
nor has Company, any Guarantor or any Subsidiary or any of its or their
officers, members, managers, or directors, as the case may be, been subject to
any suit, action, proceeding or governmental investigation as a result of which
any such officer, member, manager or director is or may be entitled to
indemnification by Company or a Guarantor or a Subsidiary, as applicable, which
suits, if resolved adversely to Company, such Guarantor or such Subsidiary, are
reasonably likely to have a Material Adverse Effect. Except as set forth on
Schedule 7.12, there is not outstanding against Company or any Subsidiary any
judgment, decree, injunction, rule, or order of any court, government,
department, commission, agency, instrumentality or arbitrator nor is Company,
any Guarantor or any Subsidiary in violation of any applicable law, regulation,
ordinance, order, injunction, decree or requirement of any governmental body or
court where such violation would reasonably be expected to have a Material
Adverse Effect.
7.13 Consents, Approvals and Filings, Etc. Except as have been
previously obtained, no authorization, consent, approval, license, qualification
or formal exemption from, nor any filing, declaration or registration with, any
court, governmental agency or regulatory authority or any
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EXHIBIT 10.1
securities exchange or any other person or party (whether or not governmental)
is required in connection with the execution, delivery and performance: (i) by
Company of this Agreement, the Agreement and Plan of Reorganization, any of the
other Loan Documents to which it is a party, or any other documents or
instruments to be executed and or delivered by Company in connection therewith
or herewith; (ii) by any Guarantor, of any of the other Loan Documents to which
such Subsidiary is a party, or (iii) by Company or any of the Guarantors, of the
liens, pledges, mortgages, security interests or other encumbrances granted,
conveyed or otherwise established (or to be granted, conveyed or otherwise
established) by or under this Agreement or the other Loan Documents, except for
such filings to be made concurrently herewith as are required by the Collateral
Documents to perfect liens in favor of the Agent. All such authorizations,
consents, approvals, licenses, qualifications, exemptions, filings, declarations
and registrations which have previously been obtained or made, as the case may
be, are in full force and effect and are not the subject of any attack, or to
the knowledge of Company threatened attack (in any material respect) by appeal
or direct proceeding or otherwise.
7.14 Agreements Affecting Financial Condition. Neither the Company, nor
any Guarantor nor any Subsidiary is party to any agreement or instrument or
subject to any charter or other corporate restriction which has a Material
Adverse Effect.
7.15 No Investment Company or Margin Stock. Neither the Company, nor
any Guarantor nor any Subsidiary is an "investment company" within the meaning
of the Investment Company Act of 1940, as amended. Neither the Company, nor any
Guarantor nor any Subsidiary is engaged principally, or as one of its important
activities, directly or indirectly, in the business of extending credit for the
purpose of purchasing or carrying margin stock. None of the proceeds of any of
the Advances will be used by the Company nor any Subsidiary to purchase or carry
margin stock or will be made available by the Company or any of its Subsidiaries
in any manner to any other Person to enable or assist such Person in purchasing
or carrying margin stock. Terms for which meanings are provided in Regulation U
of the Board of Governors of the Federal Reserve System or any regulations
substituted therefor, as from time to time in effect, are used in this paragraph
with such meanings.
7.16 ERISA. Neither Company, nor any Guarantor nor any Subsidiary
maintains or contributes to any Pension Plan subject to Title IV of ERISA,
except as set forth on Schedule 7.16 hereto; and there is no accumulated funding
deficiency within the meaning of ERISA, or any existing liability with respect
to any of the Pension Plans owed to the Pension Benefit Guaranty Corporation or
any successor thereto, and no "reportable event" or "prohibited transaction", as
defined in ERISA, has occurred with respect to any Pension Plan, and all such
Pension Plans are in material compliance with the requirements of the Internal
Revenue Code and ERISA.
7.17 Conditions Affecting Business or Properties. Neither the
respective businesses nor the properties of Company, nor any Guarantor nor any
Subsidiary is affected by any fire, explosion, accident, strike, lockout or
other dispute, drought, storm, hail, earthquake, embargo, Act of God or other
casualty (whether or not covered by insurance).
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EXHIBIT 10.1
7.18 Environmental and Safety Matters. Except as set forth in Schedules
7.18 and 7.12 and except for such matters as are not likely to have a Material
Adverse Effect:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Company or any of its Subsidiaries,
have been, and continue to be, owned or leased by the Company and the
Subsidiaries in material compliance with all Hazardous Material Laws;
(b) to the best knowledge of the Company, there have been no
past, and there are no pending or threatened
(i) claims, complaints, notices or requests
for information received by the Company or any of its
Subsidiaries with respect to any alleged violation of any
Hazardous Material Law, or
(ii) complaints, notices or inquiries to the
Company or any of its Subsidiaries regarding potential
liability under any Hazardous Material Law; and
(c) no conditions exist at, on or under any property now or
previously owned or leased by the Company or any of its Subsidiaries
which, with the passage of time, or the giving of notice or both, would
give rise to liability under any Hazardous Material Law.
7.19 Subsidiaries. As of the Effective Date, and except as disclosed on
Schedule 7.19 hereto, the Company has no Domestic Subsidiaries, Foreign
Subsidiaries or Significant Subsidiaries.
7.20 Accuracy of Information. (a) Each of the Company's financial
statements previously furnished to Agent and the Banks prior to the date of this
Agreement, has been prepared in accordance with GAAP and is complete and correct
in all material respects and fairly presents (subject to year-end adjustments in
the case of interim statements) the financial condition of Company and the
results of its operations for the periods covered thereby.
(b) Since March 31, 1998 through the Effective Date there has
been no material adverse change in the financial condition of Company or its
Subsidiaries taken as a whole; to the best knowledge of Company, neither Company
nor any of its Subsidiaries has any contingent obligations (including any
liability for taxes) not disclosed by or reserved against in the March 31, 1998
balance sheets, as applicable, except as set forth on Schedule 7.20 hereof, and
at the present time there are no unrealized or anticipated losses from any
present commitment of Company or any of its Subsidiaries which in the aggregate
is likely to have a Material Adverse Effect.
7.21 Financial Statements - Company. The Company has heretofore
delivered to the Banks consolidated financial statements of the Company audited
by KPMG Peat Marwick, including a balance sheet and statements of income, cash
flow and stockholders' equity of the Company and its Subsidiaries, audited by
KPMG Peat Marwick for the fiscal year ending December 31, 1996, audited by
Arthur Anderson LLP for the fiscal year ending December 31, 1997 and on an
unaudited basis
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<PAGE> 59
EXHIBIT 10.1
for its fiscal year ending March 31, 1998. Such financial statements were
prepared in accordance with GAAP consistently applied and fairly present the
financial position and results of operations of the Company and its Subsidiaries
for the periods covered thereby.
7.22 Solvency. As of the Effective Date of the Prior Agreement, after
giving effect to the Acquisition and the other transactions contemplated by the
Prior Agreement, the Company and each of its Subsidiaries was solvent, was able
to pay its indebtedness as it matures and had capital sufficient to carry on its
business and all business in which it was about to engage. After giving effect
to the consummation of the transactions contemplated by this Agreement, the
Company and each of its Subsidiaries will each be solvent, able to pay its
indebtedness as it matures and will have capital sufficient to carry on its
business and all business in which it is about to engage. This Agreement is
being executed and delivered by the Company to Agent and the Banks in good faith
and in exchange for fair, equivalent consideration. Neither of the Company nor
any of its Subsidiaries is insolvent, nor will either the Company or any
Subsidiary be rendered insolvent by its execution and delivery to Agent and the
Banks of this Agreement or by the consummation of the transactions contemplated
by this Agreement, and the capital and monies remaining in the Company and its
Subsidiaries are not now and will not become so unreasonably small as to
preclude the Company or its Subsidiaries from carrying on their businesses.
Neither the Company nor any Subsidiary intends to nor does management of the
Company or any Subsidiary believe it will incur debts beyond its ability to pay
as they mature. Neither the Company nor any Subsidiary contemplates filing a
petition in bankruptcy or for an arrangement or reorganization under the
Bankruptcy Code, nor does the Company or any Subsidiary have any knowledge of
any threatened bankruptcy or insolvency proceedings against Company or any
Subsidiary.
7.23 Year 2000 Requirement. The Company and its Subsidiaries have
reviewed the areas in their business and operations which could be adversely
affected by, and have developed or are developing a program to address on a
timely basis the risk that computer applications used by the Company and its
Subsidiaries may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31, 1999.
Any reprogramming required to permit the proper functioning, in and following
the year 2000, of (i) the Company's and its Subsidiaries' computer systems and
(ii) equipment containing embedded microchips (including systems and equipment
supplied by others or with which the Company's or any Subsidiary's systems
interface) and the testing of all such systems and equipment, as so
reprogrammed, will be completed by July 31, 1999. The cost to the Company and
its Subsidiaries of such reprogramming and testing and of the reasonably
foreseeable consequences of year 2000 to the Company and its Subsidiaries
(including, without limitation, reprogramming errors and the failure of others'
systems or equipment) will not result in a Default or a Material Adverse Effect.
Except for such of the reprogramming referred to in the preceding sentence as
may be necessary, the computer and management information systems of the Company
and its Subsidiaries are and, with ordinary course upgrading and maintenance,
will continue for the term of this Agreement to be, sufficient to permit the
Company and its Subsidiaries to conduct their business without Material Adverse
Effect.
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EXHIBIT 10.1
8. AFFIRMATIVE COVENANTS
Company covenants and agrees that it will, and, as applicable, it will
cause each of its Subsidiaries, until the Revolving Credit Maturity Date and
thereafter until expiration of all Letters of Credit and final payment in full
of the Indebtedness and the performance by the Company of all
other obligations under this Agreement and the other Loan Documents:
8.1 Financial Statements. Furnish to the Agent with sufficient copies
for each Bank:
(a) as soon as available, but in any event within 105 days
after the end of each fiscal year of the Company (i) a copy of the
audited Consolidated financial statements of the Company as at the end
of such year and the related audited statements of income, statement of
stockholders' equity and cash flows for such year setting forth in
comparative form the figures for the previous year, certified as being
fairly stated in all material respects by a nationally recognized
certified public accountant satisfactory to the Agent and the Banks and
(ii) a copy of the Company prepared Consolidating financial statements
of the Company for such year setting forth in comparative form the
figures for the same period for the previous calendar year and
certified by a Responsible Officer as being fairly stated in all
material respects;
(b) as soon as available, but in any event not later than 45
days after the end of each fiscal quarter, including the last fiscal
quarter of the fiscal year, the unaudited Consolidated and
Consolidating financial statements of the Company as at the end of such
fiscal quarter and the related unaudited statements of income,
statement of stockholders' equity and cash flows of the Company for the
portion of the fiscal year through the end of such fiscal quarter,
setting forth in each case in comparative form the figures for the
previous year, and certified by a Responsible Officer as being fairly
stated in all material respects; and
(c) as soon as available, but in any event not later than 30
days after the end of each month, including the last month of the
fiscal year, except the last month of each fiscal quarter (including
the last month of the fiscal year) which shall be delivered not later
than 45 days after the end of each month, the unaudited Consolidated
financial statements of the Company as at the end of such month and the
related unaudited statements of income and cash flows of the Company
for the portion of the fiscal year through the end of such month,
setting forth in each case in comparative form the figures for the
previous year, certified by a Responsible Officer as being fairly
stated in all material respects;
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
throughout the periods reflected therein and with prior periods (except as
approved by such officer and disclosed therein), provided however that the
financial statements delivered pursuant to clauses (b) and (c) hereof will not
be required to include footnotes and will be subject to year-end adjustments, in
accordance with GAAP.
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EXHIBIT 10.1
8.2 Certificates; Other Information. Furnish to the Agent with
sufficient copies for each Bank:
(a) Together with the financial statements required under
Section 8.1(b), a Covenant Compliance Certificate;
(b) Together with the financial statements delivered pursuant
to Section 8.1(a), annual financial projections for the Company in form
reasonably acceptable to the Agent and the Banks;
(c) Within 30 days after and as of the end of each March and
September of each year, a litigation status report in the form
satisfactory to the Agent and the Banks;
(d) On or before the required dates of delivery thereunder,
such other financial statements, projections, reports, supplements,
filings, notices, releases, and other information or materials required
to be delivered by Company to the holders of the Subordinated Debt, as
and to the extent requested in writing from time to time by Agent or
the Majority Banks; and
(e) promptly and in form to be reasonably satisfactory to
Majority Banks, such additional financial and/or other information, or
other reports as any Bank may from time to time reasonably request.
8.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all of its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Company.
8.4 Conduct of Business and Maintenance of Existence.
(a) Continue to engage solely in the business as now conducted
by it or in other lines of business compatible with, or complementary
thereto, and preserve, renew and keep in full force and effect its
existence;
(b) take all reasonable action to maintain all material
rights, privileges and franchises necessary or desirable in the normal
conduct of its business except as otherwise permitted pursuant to
Section 9.4; and
(c) comply with all Contractual Obligations and Requirements
of Law, except to the extent that failure to comply therewith could
not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
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EXHIBIT 10.1
8.5 Maintenance of Property; Insurance. Keep all property useful and
necessary in its business in good working order and maintain insurance coverage
on its physical assets and against other business risks in such amounts and of
such types as are customarily carried by companies similar in size and nature
(including without limitation casualty and public liability and property damage
insurance), and in the event of acquisition of additional property, real or
personal, or of incurrence of additional risks of any nature, increase such
insurance coverage in such manner and to such extent as prudent business
judgment and present practice or any applicable Requirements of Law would
dictate; and in the case of all policies covering any Collateral, all such
insurance policies shall provide that the loss payable thereunder shall be
payable to Company, and to the Agent for the benefit of the Banks (Agent as
mortgagee, or, in the case of personal property interests, lender loss payee) as
their respective interests may appear, all said policies, copies thereof or
certificates evidencing the same, including all endorsements thereto, to be
deposited with Agent.
8.6 Inspection of Property; Books and Records, Discussions.
Permit Agent and each Bank, through their authorized attorneys,
accountants and representatives (a) to examine Company's and each Subsidiary's
books, accounts, records, ledgers and assets and properties of every kind and
description wherever located at all reasonable times during normal business
hours, upon oral or written request of Agent or such Bank; (b) at any time and
from time to time, at the request of the Majority Banks, to conduct full or
partial collateral audits of the Company and its Subsidiaries to be completed by
an appraiser as may be selected by Agent and the Majority Banks, with all
reasonable costs and expenses of such audits to be reimbursed by Company
(provided that Company shall not be required to reimburse for the cost of more
than one full audit per year, except to the extent of any audits conducted after
the occurrence and during the continuance of any Default or Event of Default);
and (c) permit Agent and each Bank or their authorized representatives, at
reasonable times and intervals, to visit all of their respective offices,
discuss their respective financial matters with their respective officers and
independent certified public accountants, and, by this provision, Company
authorizes such accountants to discuss the finances and affairs of Company and
its Subsidiaries (provided that Company is given an opportunity to participate
in such discussions) and examine any of its or their books and other corporate
records. Notwithstanding the foregoing, all information furnished to the Agent
or the Banks hereunder shall be subject to the undertaking of the Banks set
forth in Section 14.12 hereof.
8.7 Notices. Promptly give notice to the Agent of:
(a) the occurrence of any Default or Event of Default of which
the Company or any Subsidiaries has knowledge;
(b) any (i) default or event of default under any Contractual
Obligation of the Company or any Subsidiary or (ii) litigation,
investigation or proceeding which may exist at any time between the
Company or any Subsidiary and any Governmental Authority, which in
either case, if not cured or if adversely determined, as the case may
be, would have a Material Adverse Effect;
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EXHIBIT 10.1
(c) the following events, as soon as possible and in any event
within 30 days after the Company knows or has reason to know thereof:
(i) the occurrence or expected occurrence of any "reportable event" as
defined in ERISA with respect to any Pension Plan, or any withdrawal
from or the termination, reorganization or insolvency of any
Multiemployer Plan or (ii) the institution of proceedings or the taking
of any other action by the Pension Benefit Guaranty Corporation or the
Company or any Commonly Controlled Entity or any Multiemployer Plan
with respect to the withdrawal from or the terminating, reorganization
or insolvency of any Pension Plan;
(d) a material adverse change in the business, operations,
property, or financial condition of the Company or any of its
Subsidiaries taken as a whole;
(e) promptly after becoming aware of the taking by the
Internal Revenue Service or any foreign taxing jurisdiction of a
written tax position which could reasonably be expected to have a
Material Adverse Effect upon the Company (or any such tax position
taken by the Company) setting forth the details of such position and
the financial impact thereof; and
(f) not less than 30 days prior to the proposed effective date
thereof, copies of any proposed amendments, restatements or other
modification to the Initial Acquisition Documents, or the Parent
Operating Agreement.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Company proposes to take with respect thereto.
8.8 Hazardous Material Laws.
(a) Use and operate all of its facilities and properties in
material compliance with all material Hazardous Material Laws, keep all
necessary permits, approvals, certificates, licenses and other
authorizations relating to environmental matters in effect and remain
in material compliance therewith, and handle all Hazardous Materials in
material compliance with all applicable Hazardous Material Laws;
(b) Promptly notify Agent and provide copies upon receipt of
all written claims, complaints, notices or inquiries received by the
Company or any of its Subsidiaries of a material nature relating to its
facilities and properties or compliance with Hazardous Material Laws,
and shall promptly cure and have dismissed with prejudice to the
satisfaction of the Majority Banks any actions and proceedings relating
to compliance with Hazardous Material Laws to which the Company or any
of its Subsidiaries is named as a party;
(c) Provide such information and certifications which any Bank
may reasonably request from time to time to evidence compliance with
this Section 8.8; and
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EXHIBIT 10.1
(d) perform (or cause to be performed) and continue (or cause
to be continued) to completion, on or before the applicable compliance
date(s) set forth therein, all such actions as are described in
Schedules 8.8A and 8.8B hereof; provided however that Company
represents and warrants that those actions required to have been
completed by terms of Schedule 8.8A prior to the Effective Date have
been completed as of the Effective Date.
8.9 Maintain Base Tangible Net Worth. Maintain an Adjusted Consolidated
Tangible Net Worth at the end of each fiscal quarter of not less than the Base
Tangible Net Worth.
8.10 Fixed Charge Coverage Ratio. Maintain, as of the end of each
fiscal quarter, for the four fiscal quarters then ended, a Fixed Charge Coverage
Ratio of not less than 1.25 to 1.0
8.11 Senior Funded Debt to Consolidated EBITDA Ratio. Maintain, as of
the end of each fiscal quarter, for the four fiscal quarters then ended, a ratio
of Senior Funded Debt to Consolidated EBITDA of not more than 3.5 to 1.0.
8.12 [Reserved].
8.13 [Reserved].
8.14 Taxes. Pay and discharge all taxes and other governmental charges,
and all material contractual obligations calling for the payment of money,
before the same shall become overdue, unless and to the extent only that such
payment is being contested in good faith by appropriate proceedings and is
reserved for, as required by GAAP on its balance sheet, or where the failure to
pay any such matter could not have a Material Adverse Effect.
8.15 Governmental and Other Approvals. Apply for, obtain and/or
maintain in effect, as applicable, all authorizations, consents, approvals,
licenses, qualifications, exemptions, filings, declarations and registrations
(whether with any court, governmental agency, regulatory authority, securities
exchange or otherwise) which are necessary in connection with the execution,
delivery and performance: (i) by Company, of this Agreement, the other Loan
Documents, or any other documents or instruments to be executed and/or delivered
by Company in connection therewith or herewith; and (ii) by each of the
Subsidiaries, of the Loan Documents to which it is a party.
8.16 Compliance with ERISA. Comply in all material respects with all
requirements imposed by ERISA as presently in effect or hereafter promulgated or
the Internal Revenue Code, including, but not limited to, the minimum funding
requirements of any Pension Plan.
8.17 ERISA Notices. Promptly notify Agent upon the occurrence of any of
the following events:
(a) the termination of any Pension Plan subject to Subtitle C
of Title IV of ERISA;
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EXHIBIT 10.1
(b) the appointment of a trustee by a United States District
Court to administer any Pension Plan subject to Title IV of ERISA;
(c) the commencement by the Pension Benefit Guaranty
Corporation, or any successor thereto, of any proceeding to terminate
any Pension Plan subject to Title IV of ERISA;
(d) the failure of the Company or any Subsidiary to make any
payment in respect of any Pension Plan required under Section 412 of
the Internal Revenue Code;
(e) the withdrawal of the Company or any Subsidiary from any
multiemployer plan (as defined in Section 3(37) of ERISA; or
(f) the occurrence of a "reportable event" which is required
to be reported by the Company under Section 4043 of ERISA or a
"prohibited transaction" as defined in Section 406 of ERISA or Section
4975 of the Internal Revenue Code which is likely to have a Material
Adverse Effect.
8.18 Security. Take such actions as the Majority Banks may from time to
time reasonably request to establish and maintain first perfected security
interests in and Liens on all of its Collateral, subject only to Permitted Liens
and other liens permitted under Section 9.2 hereof.
8.19 Defense of Collateral. Defend the Collateral from any Liens other
than Liens permitted by Section 9.2.
8.20 Use of Proceeds. Use all Advances of the Revolving Credit for
working capital financing and for Permitted Acquisitions. Company shall not use
any portion of the proceeds of any such advances for the purpose of purchasing
or carrying any "margin stock" (as defined in Regulation G of the Board of
Governors of the Federal Reserve System) in any manner which violates the
provisions of Regulation G, T, U or X of said Board of Governors or for any
other purpose in violation of (x) any applicable statute or regulation or (y)
the terms and conditions of this Agreement.
8.21 Future Subsidiaries.
(a) With respect to each Person which becomes a Significant Subsidiary
subsequent to the Effective Date, (A) within thirty days of the date such
Significant Subsidiary is created or acquired, cause such new Subsidiary to
execute and deliver to the Agent (i) in the case of each Domestic Significant
Subsidiary, a Joinder Agreement whereby such Domestic Significant Subsidiary
becomes obligated as a Guarantor under the Guaranty, (ii) in the case of each
Domestic Subsidiary, a joinder agreement whereby each such Subsidiary becomes
obligated under the Security Agreement, in each case accompanied by such
supporting documentation, including without limitation corporate authority
items, certificates and opinions of counsel, as reasonably required by Agent and
the Majority Banks, (iii) in each case where the payee thereunder is the Company
or a
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EXHIBIT 10.1
Domestic Subsidiary, the executed original Intercompany Note(s) which shall
be substantially in the form of Exhibit K hereto (to perfect the pledge of such
notes pursuant to the Security Agreement) and (B) in the case of each Domestic
Significant Subsidiary described in clause (A) above which owns or acquires any
parcel of real estate located in the United States with an individual value in
excess of $500,000 (i) within thirty days of the date such Domestic Significant
Subsidiary is created or acquired or within thirty days of the date such real
estate is acquired, as the case may be, deliver to the Agent a written
environmental audit or risk assessment acceptable to the Agent and the Banks
prepared at the Company's expense by an engineer or auditing firm experienced in
such matters reasonably acceptable to the Agent and the Banks with respect to
the subject real estate; and (ii) within thirty days following the request of
the Majority Banks, a Mortgage together with the real estate documentation
listed on Schedule 8.21 hereof; and
(b) With respect to the share capital (or other ownership interests) of
each Domestic or direct Foreign Significant Subsidiary which is created or
acquired subsequent to the date hereof, the Company shall execute, or cause to
be executed, and deliver to the Agent a stock pledge encumbering (i) 100% of the
share capital of each Domestic Significant Subsidiary and (ii) 65% of the share
capital of each direct Foreign Significant Subsidiary, in each case, together
with such supporting documentation, including without limitation corporate
authority items, certificates and opinions of counsel, as reasonably required by
the Agent and the Majority Banks.
8.22 Financial Covenant Amendments. In the event that, at any time
while this Agreement is in effect, the Company shall issue any indebtedness for
borrowed money otherwise permitted under this Agreement and such indebtedness
shall include, or be issued pursuant to a trust indenture or other agreement
which includes, financial or other covenants which are not substantially similar
to the financial or other covenants set forth in this Agreement, the Company
shall so advise the Agent in writing; provided that the covenants in the
Subordinated Debt Documents shall be deemed not to constitute "More Favorable
Terms" (as such term is defined herein) for the purposes of this Section 8.22.
Such notice shall be accompanied by a copy of the applicable agreement
containing such financial or other covenants. The Agent shall promptly furnish a
copy of such notice and the applicable agreement to each of the Banks. If the
Majority Banks determine in their sole discretion that some or all of the
financial or other covenants set forth in such agreement are more favorable to
the lender thereunder than the financial or other covenants (as applicable) set
forth in this Agreement ("More Favorable Terms") and that the Majority Banks
desire that this Agreement be amended to incorporate the More Favorable Terms,
then the Agent shall give written notice of such determination to the Company.
Thereupon, and in any event within thirty (30) days following the date of notice
by Agent to the Company, Company and the Banks shall enter into an amendment to
this Agreement incorporating, on terms and conditions acceptable to the Majority
Banks, the More Favorable Terms.
8.23 Further Assurances. Execute and deliver or cause to be executed
and delivered to Agent within a reasonable time following Agent's request, and
at the Company's expense, such other documents or instruments as Agent may
reasonably require to effectuate more fully the purposes of this Agreement or
the other Loan Documents.
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EXHIBIT 10.1
9. NEGATIVE COVENANTS.
Company covenants and agrees that, until the Revolving Credit Maturity
Date and thereafter until expiration of all Letters of Credit and final payment
in full of the Indebtedness and the performance by Company and the Subsidiaries
of all other obligations under this Agreement and the other Loan Documents, it
will not, and will not permit any of the Subsidiaries, to:
9.1 Limitation on Debt. Create, incur, assume or suffer to exist any
Debt, except:
(a) Indebtedness in respect of the Notes, the Letters of
Credit and other obligations of the Company or any Subsidiary under
this Agreement and the other Loan Documents to which it is a party;
(b) any Debt set forth in Schedule 9.1(b) attached hereto and
any renewals or refinancing of such Debt in amounts not exceeding the
scheduled amounts (less any required amortization according to the
terms thereof), on substantially the same terms and otherwise in
compliance with this Agreement;
(c) Debt of the Company or a Subsidiary other than pursuant to
this Agreement and other than Debt set forth in Schedule 9.1(c)
attached hereto incurred to finance the acquisition of fixed or capital
assets(whether pursuant to a loan or a Capitalized Lease) in an
aggregate amount at any time outstanding not to exceed two and one-half
percent (2 1/2%) of Adjusted Consolidated Tangible Net Worth as of the
Applicable Evaluation Date, and any renewals or refinancing of such
Debt in amounts not exceeding the scheduled amounts (less any required
amortization according to the terms thereof), on substantially the same
terms and otherwise in compliance with this Agreement;
(d) Debt required to be repaid under Section 6.10 hereof and
covered by a cash escrow arrangement established thereunder, pending
the payment and discharge in full of such Debt and letters of credit
disclosed in Schedule 9.1(b) hereto and covered by a Letter of Credit
issued hereunder;
(e) Debt in respect of taxes, assessments or governmental
charges to the extent that payment thereof shall not at the time be
required to be made in accordance with Section 8.14;
(f) current unsecured trade, utility or nonextraordinary
accounts payable (including without limitation, short term Debt owed to
vendors), and payment or performance bonds, in each case arising in the
ordinary course of Company's or such Subsidiary's businesses;
(g) loans to officers and employees permitted under section
9.8(c) hereof;
(h) Permitted Subordinated Debt;
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EXHIBIT 10.1
(i) Indebtedness under any Interest Rate Protection
Agreements;
(j) Intercompany Loans from the Company to 100% Subsidiaries,
but only to the extent permitted under the other applicable terms and
limitations of this Agreement, including but not limited to Section 9.8
hereof;
(k) Non-current liabilities for post-employment health care
and other insurance benefits;
(l) Intercompany Loans from Aqua-Chem International, Inc. to
the Company but only to the extent permitted under the applicable terms
and limitations of this Agreement, including but not limited to Section
9.8 hereof;
(m) Debt assumed pursuant to a Permitted Acquisition, provided
that such Debt was not entered into, extended or renewed in
contemplation of such acquisition (including Debt secured by Liens
permitted by 9.2(c)), provided that the aggregate amount of all such
Debt at any time outstanding (excluding trade payables and other
liabilities which do not constitute Debt for money borrowed incurred in
the ordinary course of business) shall not exceed five percent (5%) of
Adjusted Consolidated Tangible Net Worth as of the Applicable
Evaluation Date;
(n) Unsecured overdraft line of credit or similar credit
arrangement maintained by any Foreign Subsidiary in the ordinary course
of business with a bank or other financial institution in a foreign
country, in an amount not to exceed $500,000 for each such Subsidiary;
and
(o) additional unsecured Debt not exceeding $5,000,000 in
aggregate principal amount at any one time outstanding.
9.2 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Permitted Liens;
(b) Liens securing Debt permitted by Section 9.1(c) incurred
to finance the acquisition of fixed or capital assets, provided that
(i) such Liens shall be created substantially simultaneously with the
acquisition of such fixed or capital assets, (ii) such Liens do not at
any time encumber any property other than the property financed by such
Debt, (iii) the amount of Debt secured thereby is not increased and
(iv) the principal amount of Debt secured by any such Lien shall at no
time exceed 100% of the original purchase price of such property;
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EXHIBIT 10.1
(c) any Lien securing indebtedness assumed pursuant to a
Permitted Acquisition, provided that such Lien is limited to the
property so acquired, and was not entered into, extended or renewed in
contemplation of such acquisition;
(d) Liens in favor of Agent, as security for the Indebtedness;
(e) attachments, judgments and other similar Liens, for sums
not exceeding, in the aggregate, $1,000,000 (excluding any portion
thereof which is covered by adequate insurance with a reputable carrier
and which insurer has accepted a tender of defense and indemnification
without reservation of rights) arising in connection with court
proceedings, provided that the execution or other enforcement of such
Liens is effectively stayed and claims secured thereby are being
actively contested in good faith and by appropriate proceedings);
(f) Liens securing Interest Rate Protection Agreements
permitted under Section 9.1(i); and
(g) other Liens, existing on the Effective Date, set forth on
Schedule 9.2.
9.3 Limitation on Guarantee Obligations. Create, incur, assume or
suffer to exist any Guarantee Obligation (i) except pursuant to the Loan
Documents, (ii) Guarantee Obligations in connection with payment or performance
bonds permitted under Section 9.1(f) hereof and (iii) guaranties made in the
ordinary course of its business by the Company or any of its Subsidiaries of
obligations of any of the Company's Subsidiaries, which obligations are
otherwise permitted under this Agreement.
9.4 Acquisitions. Other than Permitted Acquisitions, purchase or
otherwise acquire or become obligated for the purchase of all or substantially
all or any material portion of the assets or business interests of any Person,
firm or corporation, or any shares of stock (or other ownership interests) of
any corporation, trusteeship or association, or any business or going concern,
or in any other manner effectuate or attempt to effectuate an expansion of
present business by acquisition.
9.5 Limitation on Fundamental Changes and Sale of Assets. Make any
material change in its capital structure or enter into any merger or
consolidation or convey, sell, lease, assign, transfer or otherwise dispose of
any of its property, business or assets (including, without limitation,
receivables and leasehold interests), whether now owned or hereafter acquired,
except:
(a) inventory leased or sold in the ordinary course of
business or obsolete or worn out property, property no longer useful in
the conduct of Company's or any Subsidiary's business or property from
closed offices, in each case disposed of in the ordinary course of
business;
(b) the restructuring of the Company as a limited liability
company so long as (i) the Company gives the Agent 45 days prior
written notice of such restructuring, (ii) the
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EXHIBIT 10.1
surviving entity ("New Company") is a limited liability company
specially created for this restructuring, (iii) New Company assumes in
writing all of the obligations of the Company pursuant to this
Agreement on terms and conditions satisfactory to the Agent and the
Majority Banks and (iv) New Company delivers to the Agent such
authority documents, opinions of counsel and documents evidencing the
merger, together with financing statements, replacement notes and such
other documents as shall be required by the Agent and the Majority
Banks in connection therewith;
(c) so long as no Default or Event of Default has occurred and
is continuing, any Subsidiary may be merged or consolidated with or
into the Company (so long as Company shall be the continuing or
surviving corporation); any Domestic Subsidiary may be merged or
consolidated with or into any wholly owned Domestic Subsidiary (so long
as such wholly owned Domestic Subsidiary shall be the continuing or
surviving corporation); and any Foreign Subsidiary may be merged or
consolidated with or into any wholly owned Domestic Subsidiary or into
any wholly owned Foreign Subsidiary so long as such wholly owned
Domestic Subsidiary or such wholly owned Foreign Subsidiary shall be
the continuing or surviving corporation);
(d) merger of any Person into the Company or any Wholly-Owned
Subsidiary which otherwise satisfies the requirements for a "Permitted
Acquisition";
(e) (i) the sale, assignment, transfer, lease, conveyance or
other disposition of certain assets located in Lebanon, Pennsylvania,
Greenville, Mississippi, the research and development facility in
Milwaukee, Wisconsin; (ii) the Company's limited partnership interest
in the partnership which owns the office building that houses the
Company's Milwaukee offices; (iii) Asset Sales in which the sales price
is at least the fair market value of the assets sold (and at least 75%
thereof is payable in cash on the consummation of such sale) and the
aggregate value of the assets covered by such Asset Sales in any fiscal
year, determined on the basis of the net book value thereof, is less
than two and one-half percent (2 1/2%) of Adjusted Consolidated
Tangible Net Worth as of the Applicable Evaluation Date, and (iv) other
Asset Sales approved by the Banks; and
(f) the discounting of Accounts owing by Account Debtors
located outside the United States or incorporated in or primarily
conducting business in any jurisdiction outside the United States;
provided, however, that (i) each such discounting transaction shall be
at a discount rate no greater than the lesser of (x) the applicable
Eurocurrency-based Rate (such rate to be determined by calculating the
Eurocurrency-based Rate for an Interest Period equal to the number of
months before such Account is due) plus 3% and (y) an annualized
discount rate of 9%, without recourse and otherwise on normal and
customary terms and conditions for the discounting of foreign trade
receivables, as determined in the reasonable discretion of the Company,
and (ii) on the date of the consummation of each such discounting
transaction, both before and after giving effect thereto, no Default or
Event of Default shall have occurred and be continuing.
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EXHIBIT 10.1
9.6 Restricted Payments. Declare or make, or permit any Subsidiary to,
declare or make any distributions, dividend, payment or other distribution of
assets, properties, cash, rights, obligations or securities (collectively,
"Distributions") on account of any membership interests or any shares of any
class of its capital stock, as applicable, or purchase, redeem or otherwise
acquire for value any membership interests or any shares of its capital stock,
as applicable, or any warrants, rights or options to acquire such shares or
membership interests, now or hereafter outstanding; except:
(a) Company's Subsidiaries may make Distributions to Company;
(b) in the event the Company converts to a limited liability
company pursuant to Section 9.5 hereof, Company may declare and make
Distributions which do not exceed the tax liability of the Company's
members attributable to income of the Company (assuming the highest
marginal federal tax rate applicable to any member), as and to the
extent such liability is incurred, so long as the Company is a limited
liability company and has elected, for purposes of the Internal Revenue
Code, to be treated as a partnership;
(c) so long as no Default or Event of Default has occurred and
is continuing or would occur after giving effect thereto, purchases of
stock of former officers or employees of the Company;
(d) any indirect Foreign Subsidiary may make Distributions to
its shareholders (including any third party shareholders); provided
however that, both before and after giving effect thereto, no Default
or Event of Default shall have occurred and be continuing, and such
Distributions are declared and paid on substantially the same terms and
conditions and on a corresponding basis for all shareholders (except
that the dates of payment of such Distributions by such Foreign
Subsidiary may be adjusted for the respective accounting fiscal years
of its shareholders), and payment of all such Distributions to all
shareholders is made within a period of four months from the payment of
the first such Distribution to any shareholder; and
(e) so long as no Default or Event of Default has occurred and
is continuing, Company may redeem shares of its Series A Preferred
Stock and make distributions thereon as provided in the Restated
Articles.
9.7 Limitation on Capital Expenditures. Make or commit to make (by way
of the acquisition of securities of a Person or otherwise) any expenditure in
respect of the purchase or other acquisition of fixed or capital assets
(excluding any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations) except for:
(a) Permitted Acquisitions permitted by Section 9.4, to the
extent assets are acquired which constitute Capital Expenditures; and
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EXHIBIT 10.1
(b) expenditures in the ordinary course of business not
exceeding, in the aggregate for the Company during any fiscal year, an
amount equal to the CapEx Limit, determined on a non-cumulative basis
in accordance with GAAP; except that the unused amount of the CapEx
Limit in any fiscal year may be carried over and used in the next
succeeding fiscal year, provided that there shall be no carry over of
such unused amount in any subsequent year and provided further that for
purposes of calculating the amount which may be carried over, all
Capital Expenditures for a fiscal year shall be first applied to the
CapEx Limit for such year.
9.8 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities, of or any assets constituting a
business unit of, or make any other investment in, any Person, except:
(a) Permitted Investments;
(b) extensions of trade credit in the ordinary course of
business;
(c) loans and advances to officers and employees of the
Company or any Subsidiary in the ordinary course of business in an
aggregate amount, not to exceed $1,000,000 at any one time outstanding;
and
(d) Intercompany Loans, Advances or Investments to Company's
Domestic Significant Subsidiaries;
(e) Intercompany Loans, Advances, or Investments to Company's
Foreign Subsidiaries without regard to any repayment of such loans,
advances, or investments (other than the repayment or recovery of
capital or principal), in an aggregate amount at any time outstanding
not to exceed (absent the consent of the Majority Banks), 20% of the
Base Tangible Net Worth;
(f) loans, advances or investments (without regard to any
repayment of such loans, advances or investments, other than the
repayment of capital or principal) to any Joint Venture or Subsidiary
which does not constitute a 100% Subsidiary, including without
limitation (i) loans, advances or investments permitted under any other
provision of this Agreement and (ii) guaranties by the Company or any
Subsidiary (valued on the basis of the aggregate amount of such
indebtedness covered by a guaranty) of third-party indebtedness of any
such Joint Venture or non-100% Subsidiary, in an aggregate amount, for
all such loans, advances and investments under this subsection (f), at
any time not to exceed ten percent (10%) of Base Tangible Net Worth;
(g) purchases of Equity Interests permitted by Section 9.6 (b)
hereof;
(h) Intercompany Loans permitted by Section 9.1(j) or (l)
hereof; and
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EXHIBIT 10.1
(i) Permitted Acquisitions permitted pursuant to Section 9.4
and promissory notes or other instruments received from third parties
in connection with Asset Sales permitted under Section 9.5(e)(iii)
hereof.
In valuing any Investments for the purpose of applying the limitations set forth
in this Section 9.8 (except as otherwise expressly provided herein), such
Investment shall be taken at the original cost thereof, without allowance for
any subsequent write-offs or appreciation or depreciation, but less any amount
repaid or recovered on account of capital or principal.
9.9 Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any Affiliate of the Company or any
Subsidiary unless such transaction is in the ordinary course of the Company's or
such Subsidiary's business and is upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than it would obtain in a comparable
arms length transaction with a Person not a Subsidiary and is not otherwise
prohibited by this Agreement.
9.10 Sale and Leaseback. Except as permitted by Section 9.1(c), enter
into any arrangement with any Person providing for the leasing by the Company or
any Subsidiary of real or personal property which has been or is to be sold or
transferred by the Company or such Subsidiary to such Person or to any other
Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Company or such
Subsidiary, as the case may be.
9.11 Limitation on Negative Pledge Clauses. Except for any agreements,
documents or instruments pursuant to which Liens not prohibited by the terms of
this Agreement are created, entered into, or allow to exist, enter into any
agreement, document or instrument which would restrict or prevent Company and
its Subsidiaries from granting Agent on behalf of Banks liens upon, security
interests in and pledges of their respective assets which are senior in priority
to all other Liens.
9.12 Prepayment of Debts. Prepay, purchase, redeem or defease any Debt
for money borrowed (including Permitted Subordinated Debt) or any capital leases
excluding, subject to the terms hereof, the Indebtedness except:
(a) the defeasance, redemption, repurchase or prepayment of
any Permitted Subordinated Debt (other than the Subordinated Notes)
with the cash proceeds of new Permitted Subordinated Debt;
(b) where the consideration therefore consists of, or is
derived solely from, the sale of common stock of the Company or its
Subsidiaries;
provided, however, that the prepayment, purchase, redemption or defeasance
described above shall not be permitted if either a Default or Event of Default
shall have occurred and be continuing at the date of declaration or payment
thereof or would result therefrom.
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EXHIBIT 10.1
9.13 Subordinated Obligations and Subordinated Debt. (a) Other than as
permitted by Section 6(a) of the Subordination Agreement, amend or modify any
document evidencing any Subordinated Obligations (as such terms is defined in
the Subordination Agreement) Debt or make any payment with respect to the
Subordinated Obligations; and (b) amend or modify any document evidencing any
Subordinated Debt or make any payment with respect to the Subordinated Debt
except for regularly scheduled payments of principal and interest, subject to
the blockage provisions contained in the Subordinated Debt Documents.
9.14 Modification of Certain Agreements. Make, permit or consent to any
amendment or other modification to the constitutional documents of Company, the
Parent Operating Agreement or the Initial Acquisition Documents or the National
Dynamics Acquisition Documents, except to the extent that any such amendment (i)
does not violate the terms and conditions of this Agreement or any of the other
Loan Documents, (ii) does not adversely affect the interest of the Banks as
creditor under this Agreement, the other Loan Documents or any other document or
instrument in any respect and (iii) could not reasonably be expected to have a
material adverse effect upon Company and its Subsidiaries, taken as a whole or
Parent, as the case may be.
9.15 Management Fees. Pay or otherwise advance, directly or indirectly,
to any Affiliate in respect of any fiscal year, any management, consulting or
other fee, except for an annual management fee to Equity Partners in the amount
of $75,000 (the "Management Fee") payable (i) $50,000 in cash per year and (ii)
$25,000 per year to accrue to the account of Equity Partners until the
irrevocable payment and discharge in full of all Indebtedness. On or before the
date of payment of the portion of the Management Fee under clause (i) above, the
Company shall have delivered the annual financial statements required under
Section 8.1(a) for the applicable fiscal year. Notwithstanding the foregoing,
however, no such Management Fee shall be paid or otherwise advanced so long as
any Default or Event of Default has occurred and is continuing. In the event any
installment of the Management Fee in clause (i) for any period otherwise payable
in compliance with this Section is not paid because of the occurrence of a
Default or Event of Default, and such Default or Event of Default is
subsequently cured (or waived by the requisite Banks) in compliance with this
Agreement, Company may pay such installment upon not less than thirty (30) days
prior written notice to Agent of its intent to make such payment, provided that
no new Default or Event of Default has occurred and is continuing.
10. DEFAULTS
10.1 Events of Default. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
(a) non-payment when due of (i) the principal or interest
under any of the Notes issued hereunder in accordance with the terms
thereof, (ii) any Reimbursement Obligation, or (iii) any Fees, and in
the case of interest payments and Fees, continuance thereof for three
(3) Business Days;
(b) non-payment of any money by Company under this Agreement
or by Company or any Subsidiary under any of the Loan Documents to
which it is a party, other
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EXHIBIT 10.1
than as set forth in subsection (a), above within five Business Days
after notice from Agent that the same is due and payable;
(c) default in the observance or performance of any of the
conditions, covenants or agreements of Company set forth in Sections
2.7, 3.6, 8.1, 8.2, 8.4(a), 8.6, 8.7, 8.9 through 8.13, 8.19, 8.21,
8.22, or 9 (in its entirety);
(d) default in the observance or performance of any of the
other conditions, covenants or agreements set forth in this Agreement
by Company and continuance thereof for a period of thirty (30)
consecutive days;
(e) any representation or warranty made by Company or any
Subsidiary herein or in any instrument submitted pursuant hereto or by
any other party to the Loan Documents proves untrue or misleading in
any material adverse respect when made;
(f) default in the observance or performance of or failure to
comply with any of the conditions, covenants or agreements of Company
or any Subsidiary set forth in any of the other Loan Documents, and the
continuance thereof beyond any period of grace or cure specified in any
such document;
(g) (X) default (i) in the payment of any indebtedness for
borrowed money (other than Indebtedness hereunder or under the
Subordinated Debt Documents) of Company or any Subsidiary in excess of
One Million Dollars ($1,000,000) in the aggregate when due (whether by
acceleration or otherwise) and continuance thereof beyond any
applicable period of cure or (ii) failure to comply with the terms of
any other obligation of Company or any Subsidiary with respect to any
indebtedness for borrowed money (other than Indebtedness
hereunder or under the Subordinated Debt Documents) in excess of One
Million Dollars ($1,000,000) in the aggregate, which with the giving of
notice or passage of time or both would permit the holder or holders
thereto to accelerate such other indebtedness for borrowed money or
terminate its commitment thereunder, as applicable; or (Y) default by
Company under the Subordinated Debt Documents beyond any applicable
period of grace or cure.
(h) the rendering of any judgment(s) for the payment of money
in excess of the sum of One Million Dollars ($1,000,000) individually
or in the aggregate against Company or any Subsidiary, and such
judgments shall remain unpaid, unvacated, unbonded or unstayed by
appeal or otherwise for a period of forty five (45) consecutive days,
except as covered by adequate insurance with a reputable carrier and an
action is pending in which an active defense is being made with respect
thereto;
(i) the occurrence of a "reportable event", as defined in
ERISA, which is determined to constitute grounds for termination by the
Pension Benefit Guaranty Corporation of any Pension Plan subject to
Title IV of ERISA maintained or contributed to by or on behalf of the
Company or any of its Subsidiaries for the benefit of any of its
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EXHIBIT 10.1
employees or for the appointment by the appropriate United States
District Court of a trustee to administer such Pension Plan and such
reportable event is not corrected and such determination is not revoked
within sixty (60) days after notice thereof has been given to the plan
administrator of such Pension Plan (without limiting any of Agent's or
any Bank's other rights or remedies hereunder), or the institution of
proceedings by the Pension Benefit Guaranty Corporation to terminate
any such Pension Plan or to appoint a trustee by the appropriate United
States District Court to administer any such Pension Plan, which in
either case could reasonably be expected to have a Material Adverse
Effect;
(j) the Company or any Subsidiary shall be dissolved or
liquidated (or any judgment, order or decree therefor shall be entered)
or; if a creditors' committee shall have been appointed for the
business of Company or any Subsidiary; or if Company or any Subsidiary
shall have made a general assignment for the benefit of creditors or
shall have been adjudicated bankrupt, or shall have filed a voluntary
petition in bankruptcy or for reorganization or to effect a plan or
arrangement with creditors or shall fail to pay its debts generally as
such debts become due in the ordinary course of business (except as
contested in good faith and for which adequate reserves are made in
such party's financial statements); or shall file an answer to a
creditor's petition or other petition filed against it, admitting the
material allegations thereof for an adjudication in bankruptcy or for
reorganization; or shall have applied for or permitted the appointment
of a receiver or trustee or custodian for any of its property or
assets; or such receiver, trustee or custodian shall have been
appointed for any of its property or assets (otherwise than upon
application or consent of Company or any of its Subsidiaries); or if an
order shall be entered approving any petition for reorganization of
Company or any Subsidiary; or the Company or any Subsidiary shall take
any action (corporate or other) authorizing or in furtherance any of
the actions described above in this subsection;
(k) the Parent shall fail to own 100% of the issued and
outstanding shares of stock of the Company (other than preferred stock
owned by Lyonnaise and Gestra) or a "Change in Control" under and as
defined in the Subordinated Debt Documents shall have occurred;
(l) (i) Jeffrey A. Miller (or trusts, limited liability
companies or partnerships established for his benefit or the benefit of
his family members in which he is trustee, manager or managing general
partner) and Equity Partners shall fail to hold at least fifty one
percent (51%) of the aggregate ownership interests in the Parent, and
(ii) Equity Partners shall fail to hold at least thirty three and
one-third percent (33 1/3%) of the aggregate ownership interests in the
Parent; and
(m) any provision of any Collateral Document shall at any time
for any reason cease to be valid, binding and enforceable against the
Parent, the Company or any of its Subsidiaries, as applicable, or the
validity, binding effect or enforceability thereof shall be contested
by any Person, or the Parent, the Company or any of its Subsidiaries
shall deny that it has any or further liability or obligation under any
Collateral Document, or any such
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EXHIBIT 10.1
Loan Document shall be terminated, invalidated, revoked or set aside or
in any way cease to give or provide to the Banks and the Agent the
benefits purported to be created thereby.
10.2 Exercise of Remedies. If an Event of Default has occurred and is
continuing hereunder: (a) the Agent shall, upon being directed to do so by the
Majority Banks, declare the Revolving Credit Aggregate Commitment terminated;
(b) the Agent shall, upon being directed to do so by the Majority Banks, declare
the entire unpaid principal Indebtedness, including the Notes, immediately due
and payable, without presentment, notice or demand, all of which are hereby
expressly waived by Company; (c) upon the occurrence of any Event of Default
specified in subsection 10.1(j), above, and notwithstanding the lack of any
declaration by Agent under preceding clause (b), the entire unpaid principal
Indebtedness, including the Notes, shall become automatically and immediately
due and payable, and the Revolving Credit Aggregate Commitment shall be
automatically and immediately terminated; (d) the Agent shall, upon being
directed to do so by the Majority Banks, demand immediate delivery of cash
collateral, and the Company and each Account Party agrees to deliver such cash
collateral upon demand, in an amount equal to the maximum amount that may be
available to be drawn at any time prior to the stated expiry of all outstanding
Letters of Credit, and (e) the Agent shall, if directed to do so by the Majority
Banks or the Banks, as applicable (subject to the terms hereof), exercise any
remedy permitted by this Agreement, the other Loan Documents or law.
10.3 Rights Cumulative. No delay or failure of Agent and/or Banks in
exercising any right, power or privilege hereunder shall affect such right,
power or privilege, nor shall any single or partial exercise thereof preclude
any further exercise thereof, or the exercise of any other power, right or
privilege. The rights of Agent and Banks under this Agreement are cumulative and
not exclusive of any right or remedies which Banks would otherwise have.
10.4 Waiver by Company of Certain Laws. To the extent permitted by
applicable law, Company hereby agrees to waive, and does hereby absolutely and
irrevocably waive and relinquish the benefit and advantage of any valuation,
stay, appraisement, extension or redemption laws now existing or which may
hereafter exist, which, but for this provision, might be applicable to any sale
made under the judgment, order or decree of any court, on any claim for interest
on the Notes, or any security interest or mortgage contemplated by or granted
under or in connection with this Agreement. These waivers have been voluntarily
given, with full knowledge of the consequences thereof.
10.5 Waiver of Defaults. No Event of Default shall be waived by the
Banks except in a writing signed by an officer of the Agent in accordance with
Section 14.11 hereof. No single or partial exercise of any right, power or
privilege hereunder, nor any delay in the exercise thereof, shall preclude other
or further exercise of their rights by Agent or the Banks. No waiver of any
Event of Default shall extend to any other or further Event of Default. No
forbearance on the part of the Agent or the Banks in enforcing any of their
rights shall constitute a waiver of any of their rights. Company expressly
agrees that this Section may not be waived or modified by the Banks or Agent by
course of performance, estoppel or otherwise.
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EXHIBIT 10.1
10.6 Set Off.
Upon the occurrence and during the continuance of any Event of Default,
each Bank may at any time and from time to time, without notice to the Company
but subject to the provisions of Section 11.3 hereof, (any requirement for such
notice being expressly waived by the Company) set off and apply against any and
all of the obligations of the Company now or hereafter existing under this
Agreement, whether owing to such Bank or any other Bank or the Agent, any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Bank to or for the
credit or the account of the Company and any property of the Company from time
to time in possession of such Bank, irrespective of whether or not such deposits
held or indebtedness owing by such Bank may be contingent and unmatured and
regardless of whether any Collateral then held by Agent or any Bank is adequate
to cover the Indebtedness. Promptly following any such setoff, such Bank shall
give written notice to Agent and to Company of the occurrence thereof. The
Company hereby grants to the Banks and the Agent a lien on and security interest
in all such deposits, indebtedness and property as collateral security for the
payment and performance of all of the obligations of the Company under this
Agreement. The rights of each Bank under this Section 10.6 are in addition to
the other rights and remedies (including, without limitation, other rights of
setoff) which such Bank may have.
11. PAYMENTS, RECOVERIES AND COLLECTIONS
11.1 Payment Procedure.
(a) All payments by Company of principal of, or interest on, the
Notes, or of Fees, shall be made without setoff or counterclaim on the
date specified for payment under this Agreement not later than 12:00 noon
(Detroit time) in immediately available funds to Agent, for the ratable
account of the Banks, at Agent's office located at One Detroit Center,
Detroit, Michigan 48226-3289, (care of Agent's Eurocurrency Lending
Office, for Eurocurrency-based Advances). Upon receipt by the Agent of
each such payment, the Agent shall make prompt payment in like funds
received to each Bank as appropriate, or, in respect of Eurocurrency-based
Advances, to such Bank's Eurocurrency Lending Office.
(b) Unless the Agent shall have been notified by Company prior to
the date on which any payment to be made by Company is due that Company
does not intend to remit such payment, the Agent may, in its sole
discretion and without obligation to do so, assume that the Company has
remitted such payment when so due and the Agent may, in reliance upon such
assumption, make available to each Bank on such payment date an amount
equal to such Bank's share of such assumed payment. If Company has not in
fact remitted such payment to the Agent each Bank shall forthwith on
demand repay to the Agent the amount of such assumed payment made
available or transferred to such Bank, together with the interest thereon,
in respect of each day from and including the date such amount was made
available by the Agent to such Bank to the date such amount is repaid to
the Agent at a rate per annum equal to (i) for Prime-based Advances, the
Federal Funds Effective Rate (daily average), as the same may vary from
time to time, and (ii) with respect to Eurocurrency-
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EXHIBIT 10.1
based Advances, Agent's aggregate marginal cost (including the cost of
maintaining any required reserves or deposit insurance and of any fees,
penalties, overdraft charges or other costs or expenses incurred by
Agent) of carrying such amount.
(c) Subject to the definition of Interest Period, whenever any
payment to be made hereunder shall otherwise be due on a day which is not
a Business Day, such payment shall be made on the next succeeding Business
Day and such extension of time shall be included in computing interest, if
any, in connection with such payment.
(d) All payments to be made by the Company under this Agreement or
any of the Notes (including without limitation payments under the Swing
Line Note) shall be made without set-off or counterclaim, as aforesaid,
and without deduction for or on account of any present or future
withholding or other taxes of any nature imposed by any governmental
authority or of any political subdivision thereof or any federation or
organization of which such governmental authority may at the time of
payment be a member, unless Company is compelled by law to make payment
subject to such tax. In such event, Company shall:
(i) pay to the Agent for Agent's own account and/or, as the
case may be, for the account of the Banks (and, in the
case of Advances of the Swing Line, pay to the Swing
Line Bank which funded such Advances) such additional
amounts as may be necessary to ensure that the Agent
and/or such Bank or Banks receive a net amount equal to
the full amount which would have been receivable had
payment not been made subject to such tax; and
(ii) remit such tax to the relevant taxing authorities
according to applicable law, and send to the Agent or
the applicable Bank (including the Swing Line Bank) or
Banks, as the case may be, such certificates or
certified copy receipts as the Agent or such Bank or
Banks shall reasonably require as proof of the payment
by the Company, of any such taxes payable by the
Company.
As used herein, the terms "tax", "taxes" and "taxation" include all
existing or future income, stamp or other taxes (excluding, in the case of the
Agent and each Bank, net income and franchise taxes imposed on the Agent or such
Bank by the jurisdiction under the laws of which the Agent or such Bank is
organized or any political subdivision or taxing authority thereof or therein,
or by any jurisdiction in which such Bank's domestic lending office or
Eurocurrency Lending Office, as the case may be, is located or any political
subdivision or taxing authority thereof or therein) levies, imposts, duties,
charges, fees, deductions and withholdings and any restrictions or conditions
resulting in a charge together with interest thereon and fines and penalties
with respect thereto which may be imposed by reason of any violation or default
with respect to the law regarding such tax, assessed as a result of or in
connection with the transactions hereunder, or the payment and or receipt of
funds hereunder, or the payment or delivery of funds into or out of any
jurisdiction other than the United States (whether assessed against Company,
Agent or any of the Banks).
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EXHIBIT 10.1
11.2 Application of Proceeds of Collateral. Notwithstanding anything to
the contrary in this Agreement, after an Event of Default, the proceeds of any
Collateral, together with any offsets, voluntary payments by Company or any
Subsidiary or others and any other sums received or collected in respect of the
Indebtedness, shall be applied, first, to the Notes and any Reimbursement
Obligations on a pro rata basis (or in such order and manner as determined by
the Majority Banks; subject, however, to the applicable Percentages of the loans
held by each of the Banks), next, to any other Indebtedness on a pro rata basis,
and then, if there is any excess, to Company or the applicable Subsidiary, as
the case may be. The application of such proceeds and other sums to the Notes
and the Reimbursement Obligations shall be based on each Bank's Percentage of
the aggregate of the loans.
11.3 Pro-rata Recovery. If any Bank shall obtain any payment or other
recovery (whether voluntary, involuntary, by application of offset or otherwise)
on account of principal of, or interest on, any of the Indebtedness in excess of
its pro rata share of payments then or thereafter obtained by all Banks upon
principal of and interest on all Indebtedness, such Bank shall purchase from the
other Banks such participations in the Notes and/or Reimbursement Obligation
held by them as shall be necessary to cause such purchasing Bank to share the
excess payment or other recovery ratably in accordance with the Percentage with
each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing holder,
the purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
12. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS
12.1 Reimbursement of Prepayment Costs. If Company makes any payment of
principal with respect to any Eurocurrency-based Advance or Quoted Rate
Advance on any day other than the last day of the Interest Period applicable
thereto (whether voluntarily, by acceleration, or otherwise), or if Company
fails to borrow any Eurocurrency-based Advance or Quoted Rate Advance after
notice has been given by Company to Agent in accordance with the terms hereof
requesting such Advance, or if Company fails to make any payment of principal or
interest in respect of a Eurocurrency-based Advance or Quoted Rate Advance when
due, then Company shall reimburse Agent and Banks, as the case may be on demand
for any resulting loss, cost or expense incurred by Agent and Banks, as the case
may be as a result thereof, including, without limitation, any such loss,
cost or expense incurred in obtaining, liquidating, employing or redeploying
deposits from third parties, whether or not Agent and Banks, as the case may be
shall have funded or committed to fund such Advance. Such amount payable by
Company to Agent and Banks, as the case may be may include, without limitation,
an amount equal to the excess, if any, of (a) the amount of interest which would
have accrued on the amount so prepaid, or not so borrowed, refunded or
converted, for the period from the date of such prepayment or of such failure to
borrow, refund or convert, through the last day of the relevant Interest Period,
at the applicable rate of interest for said Advance(s) provided under this
Agreement, over (b) the amount of interest (as reasonably determined by Agent
and Banks, as the case may be) which would have accrued to Agent and Banks, as
the case may be on such amount by placing such amount on deposit for a
comparable period with leading banks in the interbank eurodollar market.
Calculation of any amounts payable
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EXHIBIT 10.1
to any Bank under this paragraph shall be made as though such Bank shall have
actually funded or committed to fund the relevant Advance through the purchase
of an underlying deposit in an amount equal to the amount of such Advance and
having a maturity comparable to the relevant Interest Period; provided, however,
that any Bank may fund any Eurocurrency-based Advance or Quoted Rate Advance, as
the case may be in any manner it deems fit and the foregoing assumptions shall
be utilized only for the purpose of the calculation of amounts payable under
this paragraph. Upon the written request of Company, Agent and Banks shall
deliver to Company a certificate setting forth the basis for determining such
losses, costs and expenses, which certificate shall be conclusively presumed
correct, absent manifest error.
12.2 Agent's Eurocurrency Lending Office. For any Advance to which the
Eurocurrency-based Rate is applicable, if Agent shall designate a Eurocurrency
Lending Office which maintains books separate from those of the rest of Agent,
Agent shall have the option of maintaining and carrying the relevant Advance on
the books of such Eurocurrency Lending Office.
12.3 Circumstances Affecting Eurocurrency-based Rate Availability. If with
respect to any Interest Period, Agent or the Banks (after consultation with
Agent) shall determine that, by reason of circumstances affecting the interbank
markets generally, deposits in eurodollars in the applicable amounts are not
being offered to the Agent for such Interest Period, then Agent shall forthwith
give notice thereof to the Company. Thereafter, until Agent notifies Company
that such circumstances no longer exist, the obligation of the Banks to make
Eurocurrency-based Advances, and the right of Company to convert an Advance to
or refund an Advance as a Eurocurrency-based Advance shall be suspended, and the
Company shall repay in full (or cause to be repaid in full) the then outstanding
principal amount of each such Eurocurrency-based Advance covered hereby together
with accrued interest thereon, any amounts payable (but not yet paid) under
Section 12.1, hereof, and all other amounts payable hereunder on the last day of
the then current Interest Period applicable to such Advance. Upon the date for
repayment as aforesaid and unless Company notifies Agent to the contrary within
two (2) Business Days after receiving a notice from Agent pursuant to this
Section, such outstanding principal amount shall be converted to a Prime-based
Advance as of the last day of such Interest Period.
12.4 Laws Affecting Eurocurrency-based Advance Availability. In the event
that any applicable law, rule or regulation (whether domestic or foreign) now or
hereafter in effect and whether or not currently applicable to any Bank or the
Agent or any interpretation or administration thereof by any governmental
authority charged with the interpretation or administration thereof, or
compliance by the Agent or any of the Banks (or any of their respective
Eurocurrency Lending Offices) with any request or directive (whether or not
having the force of law) of any such authority, shall make it unlawful or
impossible for any of the Banks (or any of their respective Eurocurrency Lending
Offices) to honor its obligations hereunder to make or maintain any Advance with
interest at the Eurocurrency-based Rate, such Bank or the Agent shall forthwith
give notice thereof to Company and the Agent. Thereafter the Agent shall so
notify Company and the right of Company to convert an Advance or refund an
Advance as a Eurocurrency-based Advance, shall be suspended and thereafter
Company may select as Applicable Interest Rates only those which remain
available and which are permitted to be selected hereunder, and if any of the
Banks may not lawfully continue
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EXHIBIT 10.1
to maintain an Advance to the end of the then current Interest Period
applicable thereto as a Eurocurrency-based Advance, Company shall immediately
prepay such Advance, together with interest to the date of payment, and any
amounts payable under Sections 12.1 or 12.6 with respect to such prepayment and
the applicable Advance shall immediately be converted to a Prime-based Advance
and the Prime-based Rate shall be applicable thereto.
12.5 Increased Cost of Eurocurrency-based Advances. In the event that any
change in applicable law, rule or regulation (whether domestic or foreign) now
or hereafter in effect and whether or not currently applicable to any Bank or
the Agent or any interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Agent or any of the Banks (or any of
their respective Eurocurrency Lending Offices) with any request or directive
(whether or not having the force of law) made by any such authority, central
bank or comparable agency after the date hereof:
(a) shall subject the Agent or any of the Banks (or any of their
respective Eurocurrency Lending Offices) to any tax, duty or other charge
with respect to any Advance or any Note or shall change the basis of
taxation of payments to the Agent or any of the Banks (or any of their
respective Eurocurrency Lending Offices) of the principal of or interest
on any Advance or any Note or any other amounts due under this Agreement
in respect thereof (except for changes in the rate of tax on the overall
net income or revenues of the Agent or of any of the Banks (or any of
their respective Eurocurrency Lending Offices) imposed by the United
States of America or the jurisdiction in which such Bank's principal
executive office is located); or
(b) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by the Agent or
any of the Banks (or any of their respective Eurocurrency Lending Offices)
or shall impose on the Agent or any of the Banks (or any of their
respective Eurocurrency Lending Offices) or the interbank markets any
other condition affecting any Advance or any of the Notes;
and the result of any of the foregoing is to increase the costs to the
Agent or any of the Banks of making, funding or maintaining any part of the
Indebtedness hereunder as a Eurocurrency-based Advance or to reduce the amount
of any sum received or receivable by the Agent or any of the Banks under this
Agreement or under the Notes in respect of a Eurocurrency-based Advance then
Agent or such Bank, as the case may be, shall promptly notify the Company of
such fact and demand compensation therefor and, within fifteen (15) days after
such notice, Company agrees to pay to Agent or such Bank such additional amount
or amounts as will compensate Agent or such Bank or Banks for such increased
cost or reduction. A certificate of Agent or such Bank setting forth the basis
for determining such additional amount or amounts necessary to compensate such
Bank or Banks shall accompany such demand for payment and shall be conclusively
presumed to be correct save for manifest error.
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EXHIBIT 10.1
For purposes of this Section, a change in law, rule, regulation,
interpretation, administration, request or directive shall include, without
limitation, any change made or which becomes effective on the basis of a law,
rule, regulation, interpretation, administration, request or directive presently
in force, the effective date of which change is delayed by the terms of such
law, rule, regulation, interpretation, administration, request or directive.
12.6 Indemnity. The Company will indemnify Agent and each of the Banks
against any loss or expense which may arise or be attributable to the Agent's
and each Bank's obtaining, liquidating or employing deposits or other funds
acquired to effect, fund or maintain the Advances (a) as a consequence of any
failure by the Company to make any payment when due of any amount due hereunder
in connection with a Eurocurrency-based Advance, (b) due to any failure of the
Company to borrow on a date specified therefor in a Request for Revolving Credit
Advance or (c) due to any payment or prepayment of any Eurocurrency-based
Advance on a date other than the last day of the Interest Period for such
Advance, whether required by another provision of this Agreement or otherwise.
The Agent's and each Bank's (as applicable) calculations of any such loss or
expense shall be furnished to the Company and shall be conclusively presumed
correct, absent manifest error.
12.7 Other Increased Costs. In the event that after the date hereof the
adoption of or any change in any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect and whether or not
presently applicable to any Bank or Agent, or any interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Bank or Agent
with any guideline, request or directive of any such authority (whether or not
having the force of law), including any risk based capital guidelines, affects
or would affect the amount of capital required or expected to be maintained by
such Bank or Agent (or any corporation controlling such Bank or Agent) and such
Bank or Agent, as the case may be, determines that the amount of such capital is
increased by or based upon the existence of such Bank's or Agent's obligations
or Advances hereunder and such increase has the effect of reducing the rate of
return on such Bank's or Agent's (or such controlling corporation's) capital as
a consequence of such obligations or Advances hereunder to a level below that
which such Bank or Agent (or such controlling corporation) could have achieved
but for such circumstances (taking into consideration its policies with respect
to capital adequacy) by an amount deemed by such Bank or Agent to be material
(collectively, "Increased Costs"), then Agent or such Bank shall notify the
Company, and thereafter the Company shall pay to such Bank or Agent, as the case
may be, from time to time, upon request by such Bank or Agent, additional
amounts sufficient to compensate such Bank or Agent (or such controlling
corporation) for any increase in the amount of capital and reduced rate of
return which such Bank or Agent reasonably determines to be allocable to the
existence of such Bank's or Agent's obligations or Advances hereunder; provided,
however that the Company shall not be obligated to reimburse any Bank for any
Increased Costs pursuant to this Section 12.7 unless such Bank notifies Company
and the Agent within 180 days after such affected Bank has obtained actual
knowledge of such Increased Costs (but in any event within 365 days after such
affected Bank is required to comply with the applicable change in law). A
statement as to the amount of such compensation, prepared in good faith and in
reasonable detail by such Bank or Agent, as the case may be, shall be submitted
by such Bank or by Agent to the
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EXHIBIT 10.1
Company, reasonably promptly after becoming aware of any event described in
this Section 12.7 and shall be conclusive, absent manifest error in computation.
12.8 Substitution of Banks. If (i) the obligation of any Bank to make
Eurocurrency-based Advances has been suspended pursuant to Section 12.3 or
Section 12.4 or (ii) any Bank has demanded compensation under Section 12.5 (in
each case, an "Affected Lender"), Company shall have the right, with the
assistance of the Agent, to seek a substitute lender or lenders (which may be
one or more of the Banks (the "Purchasing Lender" or "Purchasing Lenders") to
purchase the Notes and assume the commitment (including without limitation its
participations in Swing Line Advances and Letters of Credit) under this
Agreement of such Affected Lender. The Affected Lender shall be obligated to
sell its Notes and assign its commitment to such Purchasing Lender or Purchasing
Lenders within fifteen days after receiving notice from Company requiring it to
do so, at an aggregate price equal to the outstanding principal amount thereof
plus unpaid interest accrued thereon up to but excluding the date of the sale.
In connection with any such sale, and as a condition thereof, Company shall pay
to the Affected Lender all fees accrued for its account hereunder to but
excluding the date of such sale, plus, if demanded by the Affected Lender at
least two Business Days prior to such sale, (i) the amount of any compensation
which would be due to the Affected Lender under Section 12.1 if Company has
prepaid the outstanding Eurocurrency-based Advances of the Affected Lender on
the date of such sale and (ii) any additional compensation accrued for its
account under Section 12.5 to but excluding said date. Upon such sale, the
Purchasing Lender or Purchasing Lenders shall assume the Affected Lender's
commitment and the Affected Lender shall be released from its obligations
hereunder to a corresponding extent. If any Purchasing Lender is not already one
of the Banks, the Affected Lender, as assignor, such Purchasing Lender, as
assignee, Company and the Agent, with the subscribed consent of the Swing Line
Bank shall enter into an Assignment Agreement pursuant to Section 14.8 hereof,
whereupon such Purchasing Lender shall be a Bank party to this Agreement, shall
be deemed to be an assignee hereunder and shall have all the rights and
obligations of a Bank with a Percentage equal to its ratable share of the
Revolving Credit Aggregate Commitment of the Affected Lender. In connection with
any assignment pursuant to this Section 12.8, Company or the Purchasing Lender
shall pay to the Agent the administrative fee for processing such assignment
referred to in Section 14.8. Upon the consummation of any sale pursuant to this
Section 12.8, the Affected Lender, the Agent and Company shall make appropriate
arrangements so that, if required, each Purchasing Lender receives a new Notes,
as applicable.
13. AGENT
13.1 Appointment of Agent. Each Bank and the holder of each Note
irrevocably appoints and authorizes the Agent to act on behalf of such Bank or
holder under this Agreement and the other Loan Documents and to exercise such
powers hereunder and thereunder as are specifically delegated to Agent by the
terms hereof and thereof, together with such powers as may be reasonably
incidental thereto, including without limitation the power to execute or
authorize the execution of financing or similar statements or notices, and
other documents. In performing its functions and duties under this Agreement,
the Agent shall act solely as agent of the Banks and does not assume and shall
not be deemed to have assumed any obligation towards or relationship of agency
or trust with or for Company. Each Bank agrees (which agreement shall survive
any termination of this Agreement) to reimburse Agent for all reasonable
out-of-pocket expenses (including house and outside attorneys'
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EXHIBIT 10.1
fees and disbursements) incurred by Agent hereunder or in connection herewith or
with an Event of Default or in enforcing the obligations of Company under this
Agreement or the other Loan Documents or any other instrument executed pursuant
hereto, and for which Agent is not reimbursed by Company, pro rata according to
such Bank's Percentage, but excluding any such expense resulting from Agent's
gross negligence or wilful misconduct. Agent shall not be required to take any
action under the Loan Documents, or to prosecute or defend any suit in respect
of the Loan Documents, unless indemnified to its satisfaction by the Banks
against loss, costs, liability and expense (excluding liability resulting from
its gross negligence or wilful misconduct). If any indemnity furnished to Agent
shall become impaired, it may call for additional indemnity and cease to do the
acts indemnified against until such additional indemnity is given.
13.2 Deposit Account with Agent. Company hereby authorizes Agent, in
Agent's sole discretion, to charge its general deposit account(s), if any,
maintained with Agent for the amount of any principal, interest, or other
amounts or costs due under this Agreement when the same become due and payable
under the terms of this Agreement or the Notes.
13.3 Scope of Agent's Duties. The Agent shall have no duties or
responsibilities except those expressly set forth herein, and shall not, by
reason of this Agreement or otherwise, have a fiduciary relationship with any
Bank (and no implied covenants or other obligations shall be read into this
Agreement against the Agent). None of Agent, its Affiliates nor any of their
respective directors, officers, employees or agents shall be liable to any Bank
for any action taken or omitted to be taken by it or them under this Agreement
or any document executed pursuant hereto, or in connection herewith or therewith
with the consent or at the request of the Majority Banks (or all of the Banks
for those acts requiring consent of all of the Banks) (except for its or their
own wilful misconduct or gross negligence), nor be responsible for or have any
duties to ascertain, inquire into or verify (a) any recitals or warranties made
by the Company, or any Subsidiary or Affiliate of the Company, or any officer
thereof contained herein or therein, (b) the effectiveness, enforceability,
validity or due execution of this Agreement or any document executed pursuant
hereto or any security thereunder, (c) the performance by Company of its
obligations hereunder or thereunder, or (d) the satisfaction of any condition
hereunder or thereunder, including without limitation the making of any Advance
or the issuance of any Letter of Credit. Agent and its Affiliates shall be
entitled to rely upon any certificate, notice, document or other communication
(including any cable, telegraph, telex, facsimile transmission or oral
communication) believed by it to be genuine and correct and to have been sent or
given by or on behalf of a proper person. Agent may treat the payee of any Note
as the holder thereof. Agent may employ agents and may consult with legal
counsel (who may be counsel for Company), independent public accountants and
other experts selected by it and shall not be liable to the Banks (except as to
money or property received by them or their authorized agents), for the
negligence or misconduct of any such agent selected by it with reasonable care
or for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
13.4 Successor Agent. Agent may resign as such at any time upon at least
30 days prior notice to Company and all Banks. If Agent at any time shall resign
or if the office of Agent shall become vacant for any other reason, Majority
Banks shall, by written instrument, appoint successor
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EXHIBIT 10.1
agent(s) satisfactory to such Majority Banks, and, so long as no Default or
Event of Default has occurred and is continuing, to Company. Such successor
agent shall thereupon become the Agent hereunder, as applicable, and shall be
entitled to receive from the prior Agent such documents of transfer and
assignment as such successor Agent may reasonably request. Any such successor
Agent shall be a commercial bank organized under the laws of the United States
or any state thereof and shall have a combined capital and surplus of at least
$500,000,000. If a successor is not so appointed or does not accept such
appointment before the resigning Agent's resignation becomes effective, the
resigning Agent may appoint a temporary successor to act until such appointment
by the Majority Banks is made and accepted or if no such temporary successor is
appointed as provided above by the resigning Agent, the Majority Banks shall
thereafter perform all of the duties of the resigning Agent hereunder until such
appointment by the Majority Banks is made and accepted. Such successor Agent
shall succeed to all of the rights and obligations of the resigning Agent as if
originally named. The resigning Agent shall duly assign, transfer and deliver to
such successor Agent all moneys at the time held by the resigning Agent
hereunder after deducting therefrom its expenses for which it is entitled to be
reimbursed. Upon such succession of any such successor Agent, the resigning
agent shall be discharged from its duties and obligations hereunder, except for
its gross negligence or wilful misconduct arising prior to its resignation
hereunder, and the provisions of this Article 13 shall continue in effect for
the benefit of the resigning Agent in respect of any actions taken or omitted to
be taken by it while it was acting as Agent.
13.5 Agent in its Individual Capacity. Comerica Bank, its Affiliates and
their respective successors and assigns, shall have the same rights and powers
hereunder as any other Bank and may exercise or refrain from exercising the same
as though Comerica Bank were not the Agent. Comerica Bank and its Affiliates may
(without having to account therefor to any Bank) accept deposits from, lend
money to, and generally engage in any kind of banking, trust, financial advisory
or other business with Company (or its Subsidiaries) as if Comerica Bank were
not acting as Agent hereunder, and may accept fees and other consideration
therefor without having to account for the same to the Banks.
13.6 Credit Decisions. Each Bank acknowledges that it has, independently
of Agent and each other Bank and based on the financial statements of Company
and such other documents, information and investigations as it has deemed
appropriate, made its own credit decision to extend credit hereunder from time
to time. Each Bank also acknowledges that it will, independently of Agent and
each other Bank and based on such other documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any document
executed pursuant hereto.
13.7 Agent's Fees. Company shall pay to Agent the annual agency fee and
such other fees and charges in the amounts and at the times set forth in the
letter agreement between Company and Agent dated May 28, 1997, as such letter
may be amended or restated with the Company's prior written consent from time to
time. The Agent's Fees described in this Section 13.7 shall not be refundable
under any circumstances.
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EXHIBIT 10.1
13.8 Authority of Agent to Enforce Notes and This Agreement. Each Bank,
subject to the terms and conditions of this Agreement, authorizes the Agent with
full power and authority as attorney-in-fact to institute and maintain actions,
suits or proceedings for the collection and enforcement of the Notes and to file
such proofs of debt or other documents as may be necessary to have the claims of
the Banks allowed in any proceeding relative to Company, or any of its
Subsidiaries, or their respective creditors or affecting their respective
properties, and to take such other actions which Agent considers to be necessary
or desirable for the protection, collection and enforcement of the Notes, this
Agreement or the other Loan Documents.
13.9 Indemnification. The Banks agree to indemnify the Agent and its
Affiliates (to the extent not reimbursed by Company, but without limiting any
obligation of Company to make such reimbursement), ratably according to their
respective Percentages, from and against any and all claims, damages, losses,
liabilities, costs or expenses of any kind or nature whatsoever (including,
without limitation, fees and disbursements of counsel) which may be imposed on,
incurred by, or asserted against the Agent and its Affiliates in any way
relating to or arising out of this Agreement, any of the other Loan Documents or
the transactions contemplated hereby or any action taken or omitted by the Agent
and its Affiliates under this Agreement or any of the Loan Documents; provided,
however, that no Bank shall be liable for any portion of such claims, damages,
losses, liabilities, costs or expenses resulting from the Agent's or its
Affiliates's gross negligence or willful misconduct. Without limitation of the
foregoing, each Bank agrees to reimburse the Agent and its Affiliates promptly
upon demand for its ratable share of any reasonable out-of-pocket expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent and its Affiliates in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement or any of the other
Loan Documents, to the extent that the Agent and its Affiliates is not
reimbursed for such expenses by Company, but without limiting the obligation of
Company to make such reimbursement. Each Bank agrees to reimburse the Agent and
its Affiliates promptly upon demand for its ratable share of any amounts owing
to the Agent and its Affiliates by the Banks pursuant to this Section, provided
that, if the Agent or its Affiliates is subsequently reimbursed by the Company
for such amounts, it shall refund to the Banks on a pro rata basis the amount of
any excess reimbursement. If the indemnity furnished to the Agent and its
Affiliates under this Section shall, in the judgment of the Agent, be
insufficient or become impaired, the Agent may call for additional indemnity
from the Banks and cease, or not commence, to take any action until such
additional indemnity is furnished.
13.10 Knowledge of Default. It is expressly understood and agreed that the
Agent shall be entitled to assume that no Event of Default has occurred and is
continuing, unless the officers of the Agent immediately responsible for matters
concerning this Agreement shall have been notified in a writing specifying such
Event of Default and stating that such notice is a "notice of default" by a Bank
or by Company. Upon receiving such a notice, the Agent shall promptly notify
each Bank of such Event of Default and provide each Bank with a copy of such
notice and, shall endeavor to provide such notice to the Banks within three (3)
Business Days (but without any liability whatsoever in the event of its failure
to do so). Agent shall also furnish the Banks, promptly upon
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EXHIBIT 10.1
receipt, with copies of all other notices or other information required to be
provided by Company hereunder.
13.11 Agent's Authorization; Action by Banks. Except as otherwise expressly
provided herein, whenever the Agent is authorized and empowered hereunder on
behalf of the Banks to give any approval or consent, or to make any request, or
to take any other action on behalf of the Banks (including without limitation
the exercise of any right or remedy hereunder or under the other Loan
Documents), the Agent shall be required to give such approval or consent, or to
make such request or to take such other action only when so requested in writing
by the Majority Banks or the Banks, as applicable hereunder. Action that may be
taken by Majority Banks or all of the Banks, as the case may be (as provided for
hereunder) may be taken (i) pursuant to a vote at a meeting (which may be held
by telephone conference call) as to which all of the Banks have been given
reasonable advance notice, or (ii) pursuant to the written consent of the
requisite Percentages of the Banks as required hereunder, provided that all of
the Banks are given reasonable advance notice of the requests for such consent.
13.12 Enforcement Actions by the Agent. Except as otherwise expressly
provided under this Agreement or in any of the other Loan Documents and subject
to the terms hereof, Agent will take such action, assert such rights and pursue
such remedies under this Agreement and the other Loan Documents as the Majority
Banks or all of the Banks, as the case may be (as provided for hereunder), shall
direct; provided, however, that the Agent shall not be required to act or omit
to act if, in the judgment of the Agent, such action or omission may expose the
Agent to personal liability or is contrary to this Agreement, any of the Loan
Documents or applicable law. Except as expressly provided above or elsewhere in
this Agreement or the other Loan Documents, no Bank (other than the Agent,
acting in its capacity as agent) shall be entitled to take any enforcement
action of any kind under any of the Loan Documents.
14. MISCELLANEOUS
14.1 Accounting Principles. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, it shall be done, unless otherwise specified herein,
in accordance with GAAP. Furthermore, all financial statements required to be
delivered hereunder, subject to year-end audit adjustments thereto, shall be
prepared in accordance with GAAP.
14.2 Consent to Jurisdiction. Company, Agent and Banks hereby irrevocably
submit to the non-exclusive jurisdiction of any United States Federal Court or
Michigan state court sitting in Detroit, Michigan in any action or proceeding
arising out of or relating to this Agreement or any of the Loan Documents and
Company, Agent and Banks hereby irrevocably agree that all claims in respect of
such action or proceeding may be heard and determined in any such United States
Federal Court or Michigan state court. Company irrevocably consents to the
service of any and all process in any such action or proceeding brought in any
court in or of the State of Michigan by the delivery of copies of such process
to Company at its address specified on the signature page hereto or by
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EXHIBIT 10.1
certified mail directed to such address or such other address as may be
designated by Company in a notice to the other parties that complies as to
delivery with the terms of Section 14.6. Nothing in this Section shall affect
the right of the Banks and the Agent to serve process in any other manner
permitted by law or limit the right of the Banks or the Agent (or any of them)
to bring any such action or proceeding against Company or any Subsidiary or any
of its or their property in the courts with subject matter jurisdiction of any
other jurisdiction. Company hereby irrevocably waives any objection to the
laying of venue of any such suit or proceeding in the above described courts.
14.3 Law of Michigan. This Agreement and the Notes have been delivered at
Detroit, Michigan, and shall be governed by and construed and enforced in
accordance with the laws of the State of Michigan (without regard to its
conflict of laws provisions). Whenever possible each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
14.4 Interest. In the event the obligation of Company to pay interest on
the principal balance of the Notes is or becomes in excess of the maximum
interest rate which Company is permitted by law to contract or agree to pay,
giving due consideration to the execution date of this Agreement, then, in that
event, the rate of interest applicable with respect to such Bank's Percentage
shall be deemed to be immediately reduced to such maximum rate and all previous
payments in excess of the maximum rate shall be deemed to have been payments in
reduction of principal and not of interest.
14.5 Closing Costs and Other Costs; Indemnification. (a) Company agrees to
pay, or reimburse the Agent for payment of, on demand (i) all reasonable closing
costs and expenses, including, by way of description and not limitation, house
and outside attorney fees (but without duplication of fees and expenses for the
same services provided to the same party) and advances, appraisal and accounting
fees, and lien search fees incurred by Agent in connection with the commitment,
consummation and closing of the loans contemplated hereby or in connection with
the administration of this Agreement or any amendment, refinancing or
restructuring of the credit arrangements provided under this Agreement, (ii) all
stamp and other taxes and fees payable or determined to be payable in connection
with the execution, delivery, filing, recording or amendment of this Agreement
and the Loan Documents and the consummation of the transactions contemplated
hereby, and any and all liabilities with respect to or resulting from any delay
in paying or omitting to pay such taxes or fees, (iii) in connection with any
Default or Event of Default, all reasonable costs and expenses of the Agent or
any of the Banks (including reasonable fees and expenses of house and outside
counsel (but without duplication of fees and expenses for the same services) and
whether incurred through negotiations, legal proceedings or otherwise) in
connection with the amendment, waiver or enforcement of this Agreement, or the
Loan Documents or in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement and (iv) all reasonable costs
and expenses of the Agent or any of the Banks (including reasonable fees and
expenses of house and outside counsel (but without duplication of fees and
expenses for the same services) in connection with any action or proceeding
relating to a court order, injunction or other
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EXHIBIT 10.1
process or decree restraining or seeking to restrain the Agent or any of the
Banks from paying any amount under, or otherwise relating in any way to, any
Letter of Credit and any and all costs and expenses which any of them may incur
relative to any payment under any Letter of Credit. At Agent's option, all of
said amounts required to be paid by Company, if not paid when due, may be
charged by Agent as a Prime-based Advance against the Indebtedness.
(b) Company agrees to indemnify and save Agent and each of the Banks
harmless from all loss, cost, damage, liability or expenses, including
reasonable house and outside attorneys' fees and disbursements (but without
duplication of fees and expenses for the same services), incurred by Agent and
the Banks by reason of an Event of Default, or enforcing the obligations of
Company or any Subsidiary under this Agreement or any of the other Loan
Documents or in the prosecution or defense of any action or proceeding
concerning any matter growing out of or connected with this Agreement or any of
the Loan Documents, excluding, however, any loss, cost, damage, liability or
expenses arising solely as a result of the gross negligence or willful
misconduct of the party seeking to be indemnified under this Section 14.5(b).
(c) Company agrees to defend, indemnify and hold harmless Agent and each
of the Banks, and their respective employees, agents, officers and directors
from and against any and all claims, demands, penalties, fines, liabilities,
settlements, damages, costs or expenses of whatever kind or nature arising out
of or related to (i) the presence, disposal, release or threatened release of
any Hazardous Materials on, from or affecting any premises owned or occupied by
Company or any of its Subsidiaries, (ii) any personal injury (including wrongful
death) or property damage (real or personal) arising out of or related to such
Hazardous Materials, (iii) any lawsuit or other proceeding brought or
threatened, settlement reached or governmental order or decree relating to such
Hazardous Materials, (iv) the cost of removal of all Hazardous Materials from
all or any portion of any premises owned by Company or its Subsidiaries, (v) the
taking of necessary precautions to protect against the release of Hazardous
Materials on or affecting any premises owned by Company or any of its
Subsidiaries, (vi) complying with all Hazardous Material Laws and/or (vii) any
violation of Hazardous Material Laws, including without limitation, reasonable
attorneys and consultants fees, investigation and laboratory fees, environmental
studies required by Agent or any Bank in connection with the violation of
Hazardous Material Laws (whether before or after the occurrence of any Default
or Event of Default hereunder), court costs and litigation expenses, excluding
however, those arising as a result of its or their gross negligence or willful
misconduct. The obligations of Company under this Section 14.5(c) shall be in
addition to any and all other obligations and liabilities the Company may have
to Agent or any of the Banks at common law or pursuant to any other agreement.
14.6 Notices. Except as expressly provided otherwise in this Agreement, all
notices and other communications provided to any party hereto under this
Agreement or any other Loan Document shall be in writing and shall be given by
personal delivery, by mail, by reputable overnight courier, by telex or by
facsimile and addressed or delivered to it at its address set forth on Schedule
14.6 or at such other address as may be designated by such party in a notice to
the other parties that complies as to delivery with the terms of this Section
14.6. Any notice, if personally delivered or if mailed and properly addressed
with postage prepaid and sent by registered or certified
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mail, shall be deemed given when received or when delivery is refused; any
notice, if given to a reputable overnight courier and properly addressed, shall
be deemed given 2 Business Days after the date on which it was sent, unless it
is actually received sooner by the named addressee; and any notice, if
transmitted by telex or facsimile, shall be deemed given when received (answer
back confirmed in the case of telexes and receipt confirmed in the case of
telecopies). Agent may, but, except as specifically provided herein, shall not
be required to, take any action on the basis of any notice given to it by
telephone, but the giver of any such notice shall promptly confirm such notice
in writing or by telex or facsimile, and such notice will not be deemed to have
been received until such confirmation is deemed received in accordance with the
provisions of this Section set forth above. If such telephonic notice conflicts
with any such confirmation, the terms of such telephonic notice shall control.
14.7 Further Action. Company, from time to time, upon written request of
Agent will make, execute, acknowledge and deliver or cause to be made, executed,
acknowledged and delivered, all such further and additional instruments, and
take all such further action as may reasonably be required to carry out the
intent and purpose of this Agreement or the Loan Documents, and to provide for
Advances under and payment of the Notes, according to the intent and purpose
herein and therein expressed.
14.8 Successors and Assigns; Participations; Assignments.
(a) This Agreement shall be binding upon and shall inure to the benefit of
Company and the Banks and their respective successors and assigns.
(b) The foregoing shall not authorize any assignment by Company, of its
rights or duties hereunder, and no such assignment shall be made (or effective)
without the prior written approval of the Banks.
(c) The Company and Agent acknowledge that each of the Banks may at any
time and from time to time, subject to the terms and conditions hereof, assign
or grant participations in such Bank's rights and obligations hereunder and
under the other Loan Documents to any commercial bank, savings and loan
association, insurance company, pension fund, mutual fund, loan or debt fund,
commercial finance company or other similar financial institution, the identity
of which institution is approved by Company and Agent, such approval not to be
unreasonably withheld or delayed; provided, however, that (i) the approval of
Company shall not be required upon the occurrence and during the continuance of
a Default or Event of Default, and (ii) the approval of Company and Agent shall
not be required for any such sale, transfer, assignment or participation to the
Affiliate of an assigning Bank, any other Bank or any Federal Reserve Bank. The
Company authorizes each Bank to disclose to any prospective assignee or
participant, once approved by Company and Agent, any and all financial
information in such Bank's possession concerning the Company which has been
delivered to such Bank pursuant to this Agreement; provided that each such
prospective participant shall execute a confidentiality agreement consistent
with the terms of Section 14.12 hereof.
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EXHIBIT 10.1
(d) Each assignment by a Bank of any portion of its rights and obligations
hereunder and under the other Loan Documents shall be made pursuant to an
Assignment Agreement substantially (as determined by Agent) in the form attached
hereto as Exhibit I (with appropriate insertions acceptable to Agent) and shall
be subject to the terms and conditions hereof, and to the following
restrictions:
(i) each assignment shall cover all of the Notes issued by Company
hereunder to the assigning Bank (and not any particular note
or notes), and shall be for a fixed and not varying percentage
thereof, with the same percentage applicable to each such
Note;
(ii) each assignment shall be in a minimum amount of the lesser of
(X) Ten Million Dollars ($10,000,000) and (Y) the entire
remaining amount of assigning Bank's interest in the Revolving
Credit (and participations in any outstanding Letters of
Credit);
(iii) no assignment shall be effective unless Agent has received
from the assignee (or from the assigning Bank) an assignment
fee of $3,500 for each such assignment.
In connection with any assignment, Company and Agent shall be entitled to
continue to deal solely and directly with the assigning Bank in connection with
the interest so assigned until (x) the Agent shall have received a notice of
assignment duly executed by the assigning Bank and an Assignment Agreement (with
respect thereto) duly executed by the assigning Bank and each assignee; and (y)
the assigning Bank shall have delivered to the Agent the original of each Note
held by the assigning Bank under this Agreement. From and after the date on
which the Agent shall notify Company and the assigning Bank that the foregoing
conditions shall have been satisfied and all consents (if any) required shall
have been given, the assignee thereunder shall be deemed to be a party to this
Agreement. To the extent that rights and obligations hereunder shall have been
assigned to such assignee as provided in such notice of assignment (and
Assignment Agreement), such assignee shall have the rights and obligations of a
Bank under this Agreement and the other Loan Documents (including without
limitation the right to receive fees payable hereunder in respect of the period
following such assignment). In addition, the assigning Bank, to the extent that
rights and obligations hereunder shall have been assigned by it as provided in
such notice of assignment (and Assignment Agreement), but not otherwise, shall
relinquish its rights and be released from its obligations under this Agreement
and the other Loan Documents.
Within five (5) Business Days following Company's receipt of notice from the
Agent that Agent has accepted and executed a notice of assignment and the duly
executed Assignment Agreement, Company shall, to the extent applicable, execute
and deliver to the Agent in exchange for any surrendered Note, new Note(s)
payable to the order of the assignee in an amount equal to the amount assigned
to it pursuant to such notice of assignment (and Assignment Agreement), and with
respect to the portion of the Indebtedness retained by the assigning Bank, to
the extent applicable, new Note(s) payable to the order of the assigning Bank in
an amount equal to the amount retained by
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EXHIBIT 10.1
such Bank hereunder shall be executed and delivered by the Company. Agent, the
Banks and the Company acknowledge and agree that any such new Note(s) shall be
given in renewal and replacement of the surrendered Notes and shall not effect
or constitute a novation or discharge of the Indebtedness evidenced by any
surrendered Note, and each such new Note may contain a provision confirming such
agreement. In addition, promptly following receipt of such Notes, Agent shall
prepare and distribute to Company and each of the Banks a revised Schedule 1.2
to this Agreement setting forth the applicable new Percentages of the Banks
(including the assignee Bank), taking into account such assignment.
(e) Each Bank agrees that any participation agreement permitted hereunder
shall comply with all applicable laws and shall be subject to the following
restrictions (which shall be set forth in the applicable Participation
Agreement):
(i) such Bank shall remain the holder of its Notes hereunder,
notwithstanding any such participation;
(ii) except as expressly set forth in this Section 14.8(e) with
respect to rights of setoff and the benefits of Section 12
hereof, a participant shall have no direct rights or remedies
hereunder;
(iii) a participant shall not reassign or transfer, or grant any
sub-participations in its participation interest hereunder or
any part thereof; and
(iv) such Bank shall retain the sole right and responsibility to
enforce the obligations of the Company relating to the Notes
and the other Loan Documents, including, without limitation,
the right to proceed against any Guaranties, or cause Agent
to do so (subject to the terms and conditions hereof), and
the right to approve any amendment, modification or waiver of
any provision of this Agreement without the consent of the
participant, except for those matters covered by Section 14.11
(a) through (e) and (h) hereof (provided that a participant
may exercise approval rights over such matters only on an
indirect basis, acting through such Bank, and Company, Agent
and the other Banks may continue to deal directly with such
Bank in connection with such Bank's rights and duties
hereunder).
Company agrees that each participant shall be deemed to have the right of setoff
under Section 10.6 hereof in respect of its participation interest in amounts
owing under this Agreement and the other Loan Documents to the same extent as if
the Indebtedness were owing directly to it as a Bank under this Agreement, shall
be subject to the pro rata recovery provisions of Section 11.3 hereof and shall
be entitled to the benefits of Section 12 hereof. The amount, terms and
conditions of any participation shall be as set forth in the participation
agreement between the issuing Bank and the Person purchasing such participation,
and none of the Company, the Agent and the other Banks shall have any
responsibility or obligation with respect thereto, or to any Person to whom any
such participation may be issued. No such participation shall relieve any
issuing Bank of any of its
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EXHIBIT 10.1
obligations under this Agreement or any of the other Loan Documents, and all
actions hereunder shall be conducted as if no such participation had been
granted.
(f) Nothing in this Agreement, the Notes or the other Loan Documents,
expressed or implied, is intended to or shall confer on any Person other than
the respective parties hereto and thereto and their successors and assignees and
participants permitted hereunder and thereunder any benefit or any legal or
equitable right, remedy or other claim under this Agreement, the Notes or the
other Loan Documents.
14.9 Indulgence. No delay or failure of Agent and the Banks in exercising
any right, power or privilege hereunder shall affect such right, power or
privilege nor shall any single or partial exercise thereof preclude any further
exercise thereof, nor the exercise of any other right, power or privilege. The
rights of Agent and the Banks hereunder are cumulative and are not exclusive of
any rights or remedies which Agent and the Banks would otherwise have.
14.10 Counterparts. This Agreement may be executed in several counterparts,
and each executed copy shall constitute an original instrument, but such
counterparts shall together constitute but one and the same instrument.
14.11 Amendment and Waiver. No amendment or waiver of any provision of this
Agreement or any other Loan Document, nor consent to any departure by Company or
any Subsidiary therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Majority Banks (or by the Agent at the written
request of the Majority Banks) or, if this Agreement expressly so requires with
respect to the subject matter thereof, by all Banks (and, with respect to any
amendments to this Agreement or the other Loan Documents, by Company or the
Subsidiaries which are signatories thereto), and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by all the Banks, do any of the following: (a)
increase any Bank's commitments hereunder, (b) reduce the principal of, or
interest on, the Notes or any Fees or other amounts payable hereunder, (c)
postpone any date fixed for any payment of principal of, or interest on, the
Notes or any Fees or other amounts payable hereunder, (d) waive any Event of
Default specified in Sections 10.1(a) or (b) hereof, (e) except as expressly
permitted hereunder, or under the Collateral Documents, release or defer the
granting or perfecting of a lien or security interest in any Collateral or
release any guaranty or similar undertaking provided by any Person except as
shall be otherwise expressly permitted in this Agreement or any other Loan
Document, provided however that Agent shall be entitled to release any
Collateral which the Company or any Subsidiary is permitted to sell or transfer
under the terms of this Agreement or the other Loan Documents without notice to
or any further action or consent of the Banks (and without the paydown or other
reduction of Indebtedness, except to the extent expressly required hereunder);
(f) terminate or modify any indemnity provided to the Banks hereunder or under
the other Loan Documents, except as shall be otherwise expressly provided in
this Agreement or any other Loan Document, (g) take any action which requires
the approval or consent of all Banks pursuant to the terms of this Agreement or
any other Loan Document, (h) change the aggregate unpaid principal amount of the
Notes which shall be required for the Banks or any of them to take any action
under
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EXHIBIT 10.1
this Agreement or any Loan Document or (i) change the definition of "Majority
Banks" or this Section 14.11; provided further, that no amendment, waiver or
consent shall, unless in writing signed by the Swing Line Bank do any of the
following: (x) reduce the principal of, or interest on, the Swing Line Note or
(y) postpone any date fixed for any payment of principal of, or interest on, the
Swing Line Note; and provided further, however, that no amendment, waiver, or
consent shall, unless in writing and signed by the Agent in addition to all the
Banks, affect the rights or duties of the Agent under this Agreement or any
other Loan Document. All references in this Agreement to "Banks" or "the Banks"
shall refer to all Banks, unless expressly stated to refer to Majority Banks.
14.12 Confidentiality. Each Bank agrees that it will not disclose without
the prior consent of Company (other than to its employees, or to employees of
any of its Affiliates, its Subsidiaries, another Bank or to its auditors or
counsel) any information with respect to Company, which is furnished pursuant to
this Agreement or any of the other Loan Documents; provided that any Bank may
disclose any such information (a) as has become generally available to the
public or has been lawfully obtained by such Bank from any third party under no
duty of confidentiality to Company, (b) as may be required or appropriate in any
report, statement or testimony submitted to, or in respect to any inquiry, by,
any municipal, state or federal regulatory body having or claiming to have
jurisdiction over such Bank, including the Board of Governors of the Federal
Reserve System of the United States, the Office of the Comptroller of the
Currency or the Federal Deposit Insurance Corporation or similar organizations
(whether in the United States or elsewhere) or their successors, (c) as may be
required or appropriate in respect to any summons or subpoena or in connection
with any litigation, (d) in order to comply with any law, order, regulation or
ruling applicable to such Bank, and (e) to any permitted transferee or assignee
or to any approved participant of, or with respect to, the Notes, as aforesaid.
14.13 Withholding Taxes. If any Bank is not incorporated under the laws of
the United States or a state thereof, such Bank shall promptly deliver to the
Agent two executed copies of (i) Internal Revenue Service Form 1001 specifying
the applicable tax treaty between the United States and the jurisdiction of such
Bank's domicile which provides for the exemption from withholding on interest
payments to such Bank, (ii) Internal Revenue Service Form 4224 evidencing that
the income to be received by such Bank hereunder is effectively connected with
the conduct of a trade or business in the United States or (iii) other evidence
satisfactory to the Agent and Company that such Bank is exempt from United
States income tax withholding with respect to such income. Such Bank shall amend
or supplement any such form or evidence as required to insure that it is
accurate, complete and non-misleading at all times. Promptly upon notice from
the Agent of any determination by the Internal Revenue Service that any payments
previously made to such Bank hereunder were subject to United States income tax
withholding when made, such Bank shall pay to the Agent the excess of the
aggregate amount required to be withheld from such payments over the aggregate
amount actually withheld by the Agent.
14.14 Taxes and Fees. Should any tax (other than as a result of a Bank's
failure to comply with Section 14.13 or a tax based upon the net income or
capitalization of any Bank or the Agent by any jurisdiction where a Bank or
Agent is located), recording or filing fee become payable in respect of this
Agreement or any of the other Loan Documents or any amendment, modification or
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EXHIBIT 10.1
supplement hereof or thereof, the Company agrees to pay the same, together with
any interest or penalties thereon arising from the Company's act or omission,
and agrees to hold the Agent and the Banks harmless with respect thereto.
Notwithstanding the foregoing, nothing contained in this Section 14.14 shall
affect or reduce the rights of any Bank or the Agent under Section 12.7 hereof.
14.15 WAIVER OF JURY TRIAL. THE BANKS, THE AGENT AND THE COMPANY 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
RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTION OF ANY OF THEM. NEITHER THE BANKS, THE AGENT, NOR COMPANY
SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH 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 BANKS AND THE AGENT OR
COMPANY EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
14.16 Complete Agreement; Conflicts. This Agreement, the Notes, any
Requests for Revolving Credit Advance, and Requests for Swing Line Advance
hereunder, and the Loan Documents contain the entire agreement of the parties
hereto, superseding all prior agreements, discussions and understandings
relating to the subject matter hereof, and none of the parties shall be bound by
anything not expressed in writing. In the event of any conflict between the
terms of this Agreement and the other Loan Documents, this Agreement shall
govern.
14.17 Severability. In case any one or more of the obligations of Company
under this Agreement, the Notes or any of the other Loan Documents shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining obligations of Company shall not in any way
be affected or impaired thereby, and such invalidity, illegality or
unenforceability in one jurisdiction shall not affect the validity, legality or
enforceability of the obligations of Company under this Agreement, the Notes or
any of the other Loan Documents in any other jurisdiction.
14.18 Table of Contents and Headings. The table of contents and the
headings of the various subdivisions hereof are for convenience of reference
only and shall in no way modify or affect any of the terms or provisions hereof.
14.19 Construction of Certain Provisions. If any provision of this
Agreement or any of the Loan Documents refers to any action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
whether or not expressly specified in such provision.
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EXHIBIT 10.1
14.20 Independence of Covenants. Each covenant hereunder shall be given
independent effect (subject to any exceptions stated in such covenant) so that
if a particular action or condition is not permitted by any such covenant
(taking into account any such stated exception), the fact that it would be
permitted by an exception to, or would be otherwise within the limitations of,
another covenant shall not avoid the occurrence of a Default or an Event of
Default.
14.21 Reliance on and Survival of Various Provisions. All terms, covenants,
agreements, representations and warranties of Company or any party to any of the
Loan Documents made herein or in any of the Loan Documents or in any
certificate, report, financial statement or other document furnished by or on
behalf of Company or any Subsidiary in connection with this Agreement or any of
the Loan Documents shall be deemed to have been relied upon by the Banks,
notwithstanding any investigation heretofore or hereafter made by any Bank or on
such Bank's behalf, and those covenants and agreements of Company set forth in
Section 12.6 hereof (together with any other indemnities of Company or any
Subsidiary contained elsewhere in this Agreement or in any of the other Loan
Documents) and of Banks set forth in Section 13.9 hereof shall survive the
repayment in full of the Indebtedness and the termination of the Revolving
Credit Aggregate Commitment.
14.22 Complete Agreement; Amendment and Restatement. This Agreement, the
Notes, any Requests for Advance or Letters of Credit hereunder, the other Loan
Documents and any agreements, certificates, or other documents given to secure
the Indebtedness, contain the entire agreement of the parties hereto, and none
of the parties hereto shall be bound by anything not expressed in writing. This
Agreement constitutes an amendment and restatement of the Prior Credit
Agreement, which Prior Credit Agreement is fully superseded and amended and
restated in its entirety hereby; provided, however, that the Indebtedness
governed by the Prior Credit Agreement shall remain outstanding and in full
force and effect and provided further that this Agreement does not constitute a
novation of such Indebtedness.
* * *
[Signatures follow on succeeding pages]
90
<PAGE> 98
EXHIBIT 10.1
WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK, AQUA-CHEM, INC.
as Agent
By: /s/ James B. Haeffner By: /s/ J. Scott Barton
----------------------- ------------------------
Its: First Vice President Its: VP & CFO
----------------------- ------------------------
SWING LINE BANK: COMERICA BANK
By: /s/ James B. Haeffner
-------------------------
Its: First Vice President
-------------------------
BANKS: COMERICA BANK
By: /s/ James B. Haeffner
-------------------------
Its: First Vice President
-------------------------
[FIRST SIGNATURE PAGE TO CREDIT AGREEMENT]
<PAGE> 99
EXHIBIT 10.1
SCHEDULE 1.1
PRICING MATRIX
APPLICABLE FEE PERCENTAGE
AND REVOLVING CREDIT MARGINS
<TABLE>
<CAPTION>
BASIS FOR PRICING LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V**
========================= ================ ================ ================ ================ ================
<S> <C> <C> <C> <C> <C>
Consolidated Funded > 3.0 to 1 > 3.5 to 1 > 4.0 to 1 > 4.50 to 1
- - - -
Debt to Consolidated < 3.0 to 1 but but but
EBITDA Ratio < 3.5 to 1 < 4.0 to 1 < 4.50 to 1
Revolving Credit 0.25% 0.30% 0.35% 0.425% 0.50%
Facility Fee
Eurocurrency Margin -- 1.00% 1.20% 1.40% 1.575% 1.75%
Revolving Credit
Prime-based Margin -- 0% 0% 0% 0% .0%
Revolving Credit
Letter of Credit Fee
(exclusive of Facing Fee) 1.00% 1.20% 1.40% 1.575% 1.75%
- ------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
</TABLE>
** Anticipated Initial Level
<PAGE> 100
EXHIBIT 10.1
EXHIBIT A
REQUEST FOR REVOLVING CREDIT ADVANCE
No. Dated:
------------- ------------
To: Comerica Bank - Agent
Re: Aqua-Chem Revolving Credit and Term Loan Agreement dated as of July 31,
1997 (as amended or otherwise modified from time to time, the
"Agreement") by and among the lenders from time to time parties thereto
(collectively, the "Banks"), Comerica Bank, as Agent for the Banks (the
"Agent"), and Aqua-Chem, Inc. (the "Company")
Pursuant to the Agreement, the Company requests an Advance from Banks
as follows:
A. Date of Advance:
-------------
B. Amount of Advance:
$
----------------------
[ ] Comerica Bank Account No.
--------------
[ ] Other:
---------------------------------
---------------------------------
C. Type of Activity:
1. Advance [ ]
2. Refunding [ ]
of a Revolving Credit Advance [ ]
of a Swing Line Advance [ ]
3. Conversion [ ]
D. Interest Rate:
1. Prime-based Rate [ ]
2. Eurocurrency-based Rate [ ]
E. Interest Period (for Eurocurrency-based Advances only):
<PAGE> 101
EXHIBIT 10.1
1. One (1) Month [ ](1)
2. Two (2) Months [ ]
3. Three (3) Months [ ]
4. Six (6) Months [ ]
The Company certifies to the matters specified in Section 2.3(e) of the
Agreement.
AQUA-CHEM, INC.
By:_____________________________
Its:_____________________________
- ----------------------
(1) Until January 31, 1998, only one (1) month Interest Period available,
except as otherwise permitted by Agent.
<PAGE> 102
EXHIBIT 10.1
EXHIBIT B
REVOLVING CREDIT NOTE
$ July 31, 1997
--------------
On the Revolving Credit Maturity Date, FOR VALUE RECEIVED, Aqua-Chem,
Inc., a Delaware corporation ("Company"), promises to pay to the order of
[insert Bank] ("Bank") at Detroit, Michigan, in care of Agent, in lawful money
of the United States of America, the sum of [Insert amount derived from
Percentages] Dollars ($ ), or so much of said sum as may from time to
time have been advanced and then be outstanding hereunder pursuant to the
Aqua-Chem, Inc. Revolving Credit and Term Loan Agreement dated as of July 31,
1997, made by and among the Company, certain banks, including the Bank, and
Comerica Bank as Agent for such banks, as the same may be amended or otherwise
modified from time to time (the "Agreement"), together with interest thereon as
hereinafter set forth.
Each of the Advances made hereunder shall bear interest at the
Applicable Interest Rate from time to time applicable thereto under the
Agreement or as otherwise determined thereunder, and interest shall be computed,
assessed and payable as set forth in the Agreement.
This Note is a note under which advances (including refundings and
conversions), repayments and readvances may be made from time to time, but only
in accordance with the terms and conditions of the Agreement. This Note
evidences borrowings under, is subject to, is secured in accordance with, and
may be accelerated or matured under, the terms of the Agreement, to which
reference is hereby made. Definitions and terms of the Agreement are hereby
incorporated by reference herein.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of Michigan
(without regard to its conflict of laws principles).
Company hereby waives presentment for payment, demand, protest and
notice of dishonor and nonpayment of this Note and agrees that no obligation
hereunder shall be discharged by reason of any extension, indulgence, release,
or forbearance granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any property, real or
personal, which is now or hereafter security for this Note.
<PAGE> 103
EXHIBIT 10.1
Nothing herein shall limit any right granted Bank by any other
instrument or by law.
AQUA-CHEM, INC.
By:
-----------------------------
Its:
-----------------------------
Signature Page
Revolving Credit Note
2
<PAGE> 104
EXHIBIT 10.1
EXHIBIT C
NOTICE OF LETTERS OF CREDIT
TO: Members of the Bank Group
RE: Aqua-Chem Revolving Credit and Term Loan Agreement dated as of July 31,
1997 (as amended or otherwise modified from time to time, the
"Agreement") by and among the lenders from time to time parties thereto
(collectively, the "Banks"), Comerica Bank, as Agent for the Banks (the
"Agent"), and Aqua-Chem, Inc. (the "Company")
On , 19 ,(2) Issuing Bank, in accordance with Article 3 of
the Agreement, issued its Letter of Credit number , in favor of
(3) for the account of Company. The face amount of such Letter of Credit is
$ . The amount of each Bank's participation in the Letter of Credit is
as follows:(4)
Comerica Bank $
------------------
------------------------- $
------------------
------------------------- $
------------------
This notification is delivered this ___ day of _____, _____, pursuant
to Section 3.3 of the Agreement. Except as otherwise defined, capitalized terms
used herein have the meanings given them in the Agreement.
Signed:
COMERICA BANK, AS AGENT
By:
-------------------------
Its:
-------------------------
- --------------------
(2) Date of Issuance
(3) Beneficiary
(4) Amounts based on Percentages
<PAGE> 105
EXHIBIT 10.1
EXHIBIT D
REQUEST FOR SWING LINE ADVANCE
No. Dated:
To: Comerica Bank, as Swing Line Bank
Re: Aqua-Chem Revolving Credit and Term Loan Agreement dated as of July 31,
1997 (as amended or otherwise modified from time to time, the
"Agreement") by and among the lenders from time to time parties thereto
(collectively, the "Banks"), Comerica Bank, as Agent for the Banks (the
"Agent"), and Aqua-Chem, Inc. (the "Company")
Pursuant to the Agreement, the Company requests a Swing Line Advance
from the Swing Line Bank as follows:
A. Date of Advance:
-------------------
B. Amount of Advance:
$
----------------------
[ ] Comerica Bank Account No.
--------------
[ ] Other:
---------------------------------
---------------------------------
C. Interest Rate:
1. Prime-based Rate [ ]
2. Quoted Rate [ ]
D. Interest Period:
1. days(5)
-------
- -----------------
(5) Insert up to 30 days.
<PAGE> 106
EXHIBIT 10.1
The Company certifies to the matters specified in Section 4A.3(e) of
the Agreement.
AQUA-CHEM, INC.
By:
-----------------------------
Its:
-----------------------------
Swing Line Bank Approval:
----------------
2
<PAGE> 107
EXHIBIT 10.1
EXHIBIT E
SWING LINE NOTE
$2,500,000 July 31, 1997
On the Revolving Credit Maturity Date, FOR VALUE RECEIVED, Aqua-Chem,
Inc., a Delaware corporation ("Company"), promises to pay to the order of
Comerica Bank ("Bank") at 500 Woodward Avenue, Detroit, Michigan in lawful money
of the United States of America, the sum of Two Million Five Hundred Thousand
Dollars ($2,500,000), or so much of said sum as may from time to time have been
advanced and then be outstanding hereunder pursuant to Article 4A of the
Aqua-Chem Revolving Credit and Term Loan Agreement, dated as of July 31, 1997,
executed by and among the Company, certain banks, including the Bank, and
Comerica Bank as Agent for such banks, as the same may be amended or otherwise
modified from time to time (the "Agreement"), together with interest thereon as
hereinafter set forth.
The unpaid principal indebtedness from time to time outstanding under
this Note shall be due and payable on the last day of the Interest Period
applicable thereto or as otherwise set forth in the Agreement, provided that no
Swing Line Advance may mature or be payable on a day later than the Revolving
Credit Maturity Date.
Each of the Swing Line Advances made hereunder shall bear interest at
the Prime-based Rate or the Quoted Rate from time to time applicable thereto
under the Agreement or as otherwise determined thereunder, and interest shall be
computed, assessed and payable as set forth in the Agreement.
This Note is a note under which advances, repayments and readvances may
be made from time to time, but only in accordance with the terms and conditions
of the Agreement. This Note evidences borrowings under, is subject to, is
secured in accordance with, and may be accelerated or matured under, the terms
of the Agreement, to which reference is hereby made. Definitions and terms of
the Agreement are hereby incorporated by reference herein.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of Michigan
(without regard to its conflict of laws provisions).
Company hereby waives presentment for payment, demand, protest and
notice of dishonor and nonpayment of this Note and agrees that no obligation
hereunder shall be discharged by reason of any extension, indulgence, release,
or forbearance granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any property, real or
personal, which is now or hereafter security for this Note.
<PAGE> 108
EXHIBIT 10.1
Nothing herein shall limit any right granted Bank by any other
instrument or by law.
AQUA-CHEM, INC.
By:
-----------------------------
Its:
-----------------------------
Signature Page
Swing Line Note
2
<PAGE> 109
EXHIBIT 10.1
EXHIBIT F
SWING LINE BANK PARTICIPATION CERTIFICATE
------------------, ----
[Name of Bank]
- -------------------------
- -------------------------
Ladies and Gentlemen:
Pursuant to subsection 4A.5(b) of the Revolving Credit and Term Loan
Agreement dated as of July 31, 1997, among Aqua-Chem, Inc., the Banks named
therein and Comerica Bank, as Agent, the undersigned hereby acknowledges receipt
from you of $___________________ as payment for a participating interest in the
following Swing Line Loan:
Date of Swing Line Loan:
--------------------------------
Principal Amount of Swing Line Loan:
--------------------
The participation evidenced by this certificate shall be subject to the terms
and conditions of the Revolving Credit Agreement including without limitation
Section 4A.5(b) thereof.
Very truly yours,
COMERICA BANK, as Agent
By:
-------------------------------
Its:
------------------------------
<PAGE> 110
EXHIBIT 10.1
EXHIBIT G
TERM NOTE
Detroit, Michigan
$ July 31, 1997
-------------------
FOR VALUE RECEIVED, Aqua-Chem, Inc., a Delaware corporation (the
"Company") promises to pay to the order of [insert Bank] ("Bank"), in care of
Agent, at Detroit, Michigan, the principal sum of [insert amount derived from
Percentages] Dollars ($_____________) in lawful money of the United States of
America payable in quarterly principal installments each in the amount and on
the dates set forth in the Agreement (as defined below) until the Term Loan
Maturity Date, when the entire unpaid balance of principal and interest thereon
shall be due and payable. Interest shall be payable at the rate (including the
default rate) and on the dates provided in the Aqua-Chem Revolving Credit and
Term Loan Agreement (as amended or otherwise modified, the "Agreement") dated as
of July 31, 1997, made by and among the Company, certain banks including the
Bank, and Comerica Bank as agent for such banks. Capitalized terms used herein,
unless defined to the contrary, have the meanings given them in the Agreement.
This Note evidences borrowing under, is subject to, may be accelerated
or matured under, and may be prepaid in accordance with, the terms of the
Agreement, to which reference is hereby made.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan.
Company hereby waives presentment for payment, demand, protest and
notice of dishonor and nonpayment of this Note and agrees that no obligation
hereunder shall be discharged by reason of any extension, indulgence, release,
or forbearance granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any property, real or
personal, which is now or hereafter security for this Note. Any transferees of,
or endorser, guarantor or surety paying this Note in full shall succeed to all
rights of Bank, and Bank shall be under no further responsibility for the
exercise thereof or the loan evidenced hereby.
<PAGE> 111
EXHIBIT 10.1
Nothing herein shall limit any right granted Bank by any other
instrument or by law.
AQUA-CHEM, INC.
By:
-----------------------------
Its:
-----------------------------
Signature Page
Term Note
2
<PAGE> 112
EXHIBIT 10.1
EXHIBIT H
COVENANT COMPLIANCE REPORT
To: Comerica Bank, as Agent
Re: Aqua-Chem Revolving Credit and Term Loan Agreement dated as of
July 31, 1997 (as amended or otherwise modified from time to
time, the "Agreement") by and among the lenders from time to
time parties thereto (collectively, the "Banks"), Comerica
Bank, as Agent for the Banks (the "Agent"), and Aqua-Chem,
Inc. (the "Company")
This Covenant Compliance Report ("Report") is furnished pursuant to
Section 8.2 of the Agreement and sets forth various information as of
_____________, 19__ (the "Computation Date").
1. Base Tangible Net Worth. On the Computation Date, Adjusted
Consolidated Tangible Net Worth which is required to be not less than
$______________, was $________________ as computed in the supporting documents
attached hereto as Schedule 1.
2. Fixed Charge. On the Computation Date, the Fixed Charge Coverage
Ratio, which is required to be not less than _____ to 1.0 as of the fiscal month
then ending was _____ to 1.0 as computed in the supporting documents attached as
Schedule 2.
3. Senior Funded Debt to Consolidated EBITDA Ratio. On the Computation
Date, the Senior Funded Debt to Consolidated EBITDA Ratio, which is required to
be not more than _______________ to 1.0 as of the fiscal month then ending for
the twelve months then ended was ______ to 1.0, as computed in the supporting
documents attached hereto as Schedule 3.
4. Senior Funded Debt to Capitalization Ratio. On the Computation Date,
the ratio of Senior Funded Debt to Capitalization which is required to be not
more than ____________ to 1.0 as of the fiscal month then ending, was
__________ to 1.0, as computed in the supporting documents attached hereto as
Schedule 4.
5. Acquisition of Fixed or Capital Assets. On the Computation Date, the
aggregate amount of outstanding Debt used to finance fixed or capital assets,
which is required to be not more than $1,000,000 was $______________.
6. Debt. On the Computation Date,
(a) the aggregate amount of Debt assumed pursuant to a
Permitted Acquisition, which shall not exceed $1,500,000 at
any one time outstanding, was $_____, as described on Schedule
6(a);
<PAGE> 113
EXHIBIT 10.1
(b) the aggregate amount of Debt under the overdraft line of
credit maintained by Cleaver Brooks of Canada Limited with a
bank in Canada, which shall not exceed $500,000 at any one
time outstanding, was $ ;
(c) the aggregate amount of "additional Debt" pursuant to
Section 9.1(o) of the Agreement, which shall not exceed
$250,000 at any one time outstanding, was
$ .
7. Interest Coverage. On the Computation Date, the Interest Coverage
Ratio, which is required to be not less than _______ for the fiscal
quarter then ending, was _______, as computed in the supporting
documents attached hereto as Schedule 7.
The undersigned officer of Company hereby certifies that:
A. All of the information set forth in this Report (and in any Schedule attached
hereto) is true and correct in all material respects.
B. As of the Computation Date, the Company and its Subsidiaries have observed
and performed all of their covenants and other agreements contained in the
Agreement and in the Notes and any other Loan Documents to be observed,
performed and satisfied by them.
C. I have reviewed the Agreement and this Report is based on an examination
sufficient to assure that this Report is accurate.
D. Except as stated in Schedule D hereto (which shall describe any existing
Default or Event of Default and the notice and period of existence thereof and
any action taken with respect thereto or contemplated to be taken by Company),
no Default or Event or Default has occurred and is continuing on the date of
this Report.
Capitalized terms used in this Report and in the schedules hereto, unless
specifically defined to the contrary, have the meanings given to them in the
Agreement.
2
<PAGE> 114
EXHIBIT 10.1
IN WITNESS WHEREOF, Company has caused this Report to be executed and
delivered by its duly authorized officer this ___ day of _______________, 19___.
AQUA-CHEM, INC.
By:
----------------------------------
Its:
----------------------------------
3
<PAGE> 115
EXHIBIT 10.1
EXHIBIT I
ASSIGNMENT AGREEMENT
Date:
--------
To: COMERICA BANK, in its capacity as Agent ("Agent")
Re: Aqua-Chem Revolving Credit and Term Loan Agreement dated as of July 31,
1997 (as amended or otherwise modified from time to time, the "Credit
Agreement") by and among the lenders from time to time parties thereto
(collectively, the "Banks"), Comerica Bank, as Agent for the Banks (the
"Agent"), and Aqua-Chem, Inc. (the "Company")
Ladies and Gentlemen:
Reference is made to Sections 14.8 (c) and (d) of the Credit Agreement.
Unless otherwise defined herein or the context otherwise requires, all initially
capitalized terms used herein without definition shall have the meanings
specified in the Credit Agreement.
This Agreement constitutes notice to each of you of the proposed
assignment and delegation by ______________ (the "Assignor") to ____________
(the "Assignee"), and the Assignor hereby sells and assigns to the Assignee,
and the Assignee hereby purchases and assumes from the Assignor, as of the
Effective Date (as defined below), a __% undivided interest in each of
Assignor's rights and obligations under the Credit Agreement, its Notes
(including any participations in any outstanding Letters of Credit) and the
other Loan Documents such that, after giving effect to the foregoing assignment
and assumption, [and the other assignments by Assignor to ______________ on the
date hereof,] the Assignee's interest in the Revolving Credit shall equal
$______________ and in the Term Loan shall equal $______________ and the
Assignee's Percentage shall equal ___%.
The Assignor hereby instructs the Agent to make all payments from and
including the Effective Date hereof in respect of the interest assigned hereby,
directly to the Assignee. The Assignor and the Assignee agree that all interest
and fees accrued up to, but not including, the Effective Date of the assignment
and delegation being made hereby are the property of the Assignor, and not the
Assignee. The Assignee agrees that, upon receipt of any such interest or fees
accrued up to the Effective Date, or any other payments in respect of the
interest assigned hereby applicable to the period prior to the Effective Date,
the Assignee will promptly remit the same to the Assignor in the same funds
received by the Assignee.
The Assignor and the Assignee agree that all interest and fees accruing
from and after the Effective Date of the assignment and delegation being made
hereby are the property of the Assignee, and not the Assignor. The Assignor
agrees that, upon receipt of any such interest or fees accruing from and after
the Effective Date or any other payments in respect of the interest
assigned hereby
<PAGE> 116
EXHIBIT 10.1
applicable to the period from and after the Effective Date, the Assignor will
promptly remit the same to the Assignee in the same funds received by the
Assignor.
The Assignee hereby confirms that it has received a copy of the Credit
Agreement and the exhibits and schedules referred to therein, and all other Loan
Documents which it considers necessary, together with copies of the other
documents which were required to be delivered under the Credit Agreement as a
condition to the making of the loans thereunder. The Assignee acknowledges and
agrees that it: (a) has made and will continue to make such inquiries and has
taken and will take such care on its own behalf as would have been the case had
its Commitment been granted and its loans been made directly by such Assignee to
the Company without the intervention of the Agent, the Assignor or any other
Bank; and (b) has made and will continue to make, independently and without
reliance upon the Agent, the Assignor or any other Bank, and based on such
documents and information as it has deemed appropriate, its own credit analysis
and decisions relating to the Credit Agreement. The Assignee further
acknowledges and agrees that neither the Agent, nor the Assignor has made any
representations or warranties about the creditworthiness of the Company or any
other party to the Credit Agreement or any other of the Loan Documents, or with
respect to the legality, validity, sufficiency or enforceability of the Credit
Agreement, or any other of the Loan Documents. This assignment shall be made
without recourse to or warranty by the Assignor, except as set forth herein.
Assignee represents and warrants that it is a Person to which
assignments are permitted pursuant to Sections 14.8(c) and (d) of the Credit
Agreement.
Assignor represents and warrants, as of the Effective Date, that it is
the legal and beneficial owner of the interest being assigned and delegated by
it hereunder and that such interest is free and clear of any pledge, encumbrance
or other adverse claim or interest created by Assignor.
Except as otherwise provided in the Credit Agreement, effective as of
the Effective Date:
(a) the Assignee: (i) shall be deemed automatically to have become
a party to the Credit Agreement and the other Loan Documents,
to have assumed all of the Assignor's obligations thereunder
to the extent of the Assignee's percentage referred to in the
second paragraph of this Assignment Agreement, and to have all
the rights and obligations of a party to the Credit Agreement
and the other Loan Documents, as if it were an original
signatory thereto to the extent specified in the second
paragraph hereof; and (ii) agrees to be bound by the terms and
conditions set forth in the Credit Agreement and the other
Loan Documents as if it were an original signatory thereto;
and
(b) the Assignor's obligations under the Credit Agreement and the
other Loan Documents shall be reduced by the Percentage
referred to in the second paragraph of this Assignment
Agreement.
2
<PAGE> 117
EXHIBIT 10.1
As used herein, the term "Effective Date" means the date on which all
of the following have occurred or have been completed, as reasonably determined
by the Agent:
(1) the delivery to the Agent of an original of this Assignment
Agreement executed by the Assignor and the Assignee;
(2) the payment to the Agent, of all accrued fees, expenses and
other items for which reimbursement is then owing under the
Credit Agreement;
(3) payment to the Agent of the $3,500 assignment fee referred to
in Section 14.8(d)(iii) of the Credit Agreement;
(4) all other restrictions and items noted in Sections 14.8(c) and
(d) of the Credit Agreement have been completed.
On the Effective Date the Assignee shall pay to the Assignor an amount
equal to the outstanding principal amount of the indebtedness owed to it by the
Company under the Agreement in respect of the interest being assigned hereby.
The Agent shall notify the Assignor and the Assignee, along with
Company, of the Effective Date.
The Assignee hereby advises each of you of the following administrative
details with respect to the assigned loans:
(A) Address for Notices:
Institution Name:
Address:
Attention:
Telephone:
Facsimile:
(B) Payment Instructions:
(C) Proposed effective date of assignment.
The Assignor has delivered to the Agent (or is delivering to Agent
concurrently herewith), the original of each Note held by the Assignor under the
Credit Agreement.
3
<PAGE> 118
EXHIBIT 10.1
Please evidence your consent to and acceptance of the proposed
assignment and delegation set forth herein by signing and returning counterparts
hereof to the Assignor and the Assignee.
[ASSIGNOR BANK]
By:
-----------------------------------
Its:
----------------------------------
[ASSIGNEE BANK]
By:
-----------------------------------
Its:
----------------------------------
ACCEPTED AND CONSENTED TO
this____ day of _________
COMERICA BANK, as Agent
By:
-------------------------------
Its:
------------------------------
4
<PAGE> 119
EXHIBIT 10.1
EXHIBIT J
GUARANTY
This GUARANTY is made as of the 31st day of July, 1997 by each of the
undersigned guarantors (the "Guarantors"), to Comerica Bank, as Agent ("Agent")
for and on behalf of the Banks (as defined below).
RECITALS
A. Pursuant to that certain Aqua-Chem Revolving Credit and Term Loan
Agreement dated as of July 31, 1997(as amended or otherwise modified from time
to time, the "Credit Agreement") by and among Aqua-Chem, Inc., a Delaware
corporation (the "Company"), Agent and the banks which are named in and
signatories to the Credit Agreement ("Banks"), the Banks have agreed to extend
credit to Company on the terms set forth in the Credit Agreement, with such
credit consisting of (i) the Revolving Credit in an aggregate amount, subject to
the terms of the Credit Agreement, of up to Twenty Million Dollars ($20,00,000)
at any one time outstanding, to be evidenced by the Revolving Credit Note made
or to be made by the Company to the Banks ("Revolving Credit Notes"); (ii) the
Swing Line in an aggregate amount, subject to the terms of the Credit Agreement,
of up to Two Million Five Hundred Thousand Dollars ($2,500,000) at any one time
outstanding, to be evidenced by the Swing Line Note made or to be made by
Company ("Swing Line Note"); (iii) a facility for the issuance of letter(s) of
credit ("Letter(s) of Credit") for the account of the Company, individually, or
jointly and severally with other Account Parties pursuant to Section 3 of the
Credit Agreement, subject to specified availability thereunder; and (iv) the
Term Loan, in an aggregate amount, subject to the terms of the Credit Agreement
of Forty Million Dollars ($40,000,000), to be evidenced by the Term Notes made
by the Company to the Banks (the "Term Notes").
B. As a condition to entering into and performing their respective
obligations under the Credit Agreement, the Banks and the Agent have required
that the Guarantors provide to Agent, for and on behalf of the Banks, among
other guaranties, this Guaranty.
C. Each of the Guarantors desires to see the success of the Company and,
furthermore, shall receive direct and/or indirect benefits from extensions of
credit made or to be made pursuant to the Credit Agreement to the Company.
D. The Agent is acting as Agent for the Banks pursuant to Section 13 of
the Credit Agreement.
NOW, THEREFORE, as a continuing inducement to the Agent and the Banks to
enter into and perform its obligations under the Credit Agreement, each of the
Guarantors has executed and delivered this guaranty ("Guaranty").
<PAGE> 120
EXHIBIT 10.1
1. Definitions. Unless otherwise provided herein, all capitalized terms
used in this Guaranty shall have the meanings specified in the Credit Agreement.
The term "Banks" as used herein shall include any successors or permitted
assigns of the Banks, in accordance with the Credit Agreement.
2. Guaranty. Each of the Guarantors hereby guarantees to the Banks the
punctual payment to the Banks when due, whether by acceleration or otherwise, of
all amounts, including, without limitation, principal, interest (including
interest accruing on or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding by such
Guarantor, whether or not a claim for post-filing or post-petition interest is
allowed in such a proceeding), and all other liabilities and obligations, direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter incurred, which may arise under, out of, or in connection with:
(a) any and all Revolving Credit Notes made or to be made to the order
of the Banks (or any of them) by the Company, from time to time pursuant to
the terms and conditions of the Credit Agreement;
(b) the Swing Line Note made or to be made to the order of the Swing
Line Bank by the Company, from time to time pursuant to the terms and
conditions of the Credit Agreement;
(c) any and all Letter of Credit Agreements executed or to be executed
by the Company or the other Account Parties and any of them, from time to
time pursuant to the Credit Agreement, and any Letters of Credit issued or
to be issued thereunder;
(d) any and all Term Notes made or to be made to the order of the
Banks (or any of them) by the Company, from time to time pursuant to the
terms and conditions of the Credit Agreement;
(e) any Interest Rate Protection Agreements;
(f) all other Indebtedness (as defined in the Credit Agreement) of the
Company and/or any Account Party, under or in connection with the Credit
Agreement or the other Loan Documents, whether such Indebtedness is now
existing or hereafter arising; and
(g) all extensions, renewals and amendments of or to the Revolving
Credit Notes, the Swing Line Note and/or the Term Notes (collectively, and
any of such notes, the "Notes"), Letter of Credit Agreements, Letters of
Credit, Interest Rate Protection Agreements, or such other Indebtedness, or
any replacements or substitutions therefor;
whether on account of principal, interest, reimbursement obligations, fees,
indemnities, and reasonable costs and expenses (including without limitation,
all reasonable fees and disbursements
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EXHIBIT 10.1
of counsel to the Agent or any Bank) or otherwise, and hereby agrees that if
Company shall fail to pay any of such amounts when and as the same shall be due
and payable, or shall fail to perform and discharge any covenant, representation
or warranty in accordance with the terms of the Notes, the Credit Agreement, the
Letter of Credit Agreements, the Letters of Credit or any of the other Loan
Documents (subject, in each case, to any applicable periods of grace or cure),
each such Guarantor will forthwith pay to the Agent, on behalf of the Banks, an
amount equal to any such amount or cause Company to perform and discharge any
such covenant, representation or warranty, as the case may be, and will pay any
and all damages that may be incurred or suffered in consequence thereof by Agent
or any of the Banks and all reasonable expenses, including reasonable attorneys'
fees, that may be incurred by Agent in enforcing such covenant, representation
or warranty of Company, and in enforcing the covenants and agreements of this
Guaranty.
3. Unconditional Character of Guaranty. The obligations of each of the
Guarantors under this Guaranty, to the full extent of its guaranty of
Indebtedness hereunder, shall be absolute and unconditional, and shall be a
guaranty of payment and not of collection, irrespective of the validity,
regularity or enforceability of the Notes, the Credit Agreement, the Letter of
Credit Agreements, the Letters of Credit or any of the other Loan Documents, or
any provision thereof, the absence of any action to enforce the same, any waiver
or consent with respect to or any amendment of any provision thereof, the
recovery of any judgment against any Person or action to enforce the same, any
failure or delay in the enforcement of the obligations of Company under the
Notes, the Credit Agreement, the Letter of Credit Agreements, the Letters of
Credit or any of the other Loan Documents, or any setoff, counterclaim,
recoupment, limitation, defense or termination, whether with or without notice
to such Guarantor. Each of the Guarantors hereby waives diligence, demand for
payment, filing of claims with any court, any proceeding to enforce any
provision of the Notes executed by Company, or the Credit Agreement, the Letter
of Credit Agreements, the Letters of Credit or any of the other Loan Documents,
any right to require a proceeding first against Company, or against any other
guarantor or other party providing collateral, or to exhaust any security for
the performance of the obligations of Company, any protest, presentment, notice
or demand whatsoever, and such Guarantor hereby covenants that this Guaranty
shall not be terminated, discharged or released except, subject to Section 6.5
hereof, upon final payment in full (subject to no revocation or rescission) of
all amounts due and to become due from Company or any Account Party, as and to
the extent described above, and only to the extent of any such payment,
performance and discharge. Each of the Guarantors further covenants that no
security now or subsequently held by the Agent or the Banks for the payment of
the Indebtedness evidenced by the Notes made by Company, under the Credit
Agreement, or for the payment of any other Indebtedness of Company, to the Agent
or the Banks under the Credit Agreement, the Letter of Credit Agreements, the
Letters of Credit or the other Loan Documents, whether in the nature of a
security interest, pledge, lien, assignment, setoff, suretyship, guaranty,
indemnity, insurance or otherwise, and no act, omission or other conduct of
Agent or the Banks in respect of such security, shall affect in any manner
whatsoever the unconditional obligation of this Guaranty, and that the Agent and
each of the Banks, in their respective sole discretion and without notice to
Company, may release, exchange, enforce, apply the proceeds of and otherwise
deal with any such security without affecting in any manner the unconditional
obligation of this Guaranty.
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EXHIBIT 10.1
Without limiting the generality of the foregoing, such obligations, and the
rights of the Agent to enforce the same on behalf of the Banks, by proceedings,
whether by action at law, suit in equity or otherwise, shall not be in any way
affected by (i) any insolvency, bankruptcy, liquidation, reorganization,
readjustment, composition, dissolution, winding up or other proceeding involving
or affecting Company, or others, or (ii) any change in the ownership of the
capital stock of Company, or any other party providing collateral for any
indebtedness covered by this Guaranty, or any of their respective Affiliates.
Each of the Guarantors hereby waives to the fullest extent possible under
applicable law:
(a) any defense based upon the doctrine of marshaling of assets or
upon an election of remedies by Agent or the Banks, including, without
limitation, an election to proceed by non-judicial rather than judicial
foreclosure;
(b) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal;
(c) any duty on the part of Agent or any of the Banks to disclose to
such Guarantor any facts Agent or the Banks may now or hereafter know about the
Company, regardless of whether Agent or any Bank has reason to believe that any
such facts materially increase the risk beyond that which such Guarantor intends
to assume or has reason to believe that such facts are unknown to such Guarantor
or has a reasonable opportunity to communicate such facts to such Guarantor,
since such Guarantor acknowledges that it is fully responsible for being and
keeping informed of the financial condition of Company and of all circumstances
bearing on the risk of non-payment of any Indebtedness hereby guaranteed;
(d) any claim for reimbursement, contribution, exoneration, indemnity
or subrogation, or any other similar claim, which such Guarantor may have or
obtain against the Company, by reason of the existence of this Guaranty, or by
reason of the payment by such Guarantor of any Indebtedness or the performance
of this Guaranty or of any other Loan Documents, until the Indebtedness has been
repaid and discharged in full and no commitment to extend any credit under the
Credit Agreement or any of the Loan Documents (whether optional or obligatory),
or any Letter of Credit, remains outstanding, and any amounts paid to such
Guarantor on account of any such claim at any time when the obligations of such
Guarantor under this Guaranty shall not have been fully and finally paid shall
be held by such Guarantor in trust for Agent and the Banks, segregated from
other funds of such Guarantor, and forthwith upon receipt by such Guarantor
shall be turned over to Agent in the exact form received by such Guarantor (duly
endorsed to Agent by such Guarantor, if required), to be applied to such
Guarantor's obligations under this Guaranty, whether matured or unmatured, in
such order and manner as Agent may determine; and
(e) any other event or action (excluding compliance by such Guarantor
with the provisions hereof) that would result in the discharge by operation of
law or otherwise of such
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EXHIBIT 10.1
Guarantor from the performance or observance of any obligation, covenant or
agreement contained in this Guaranty.
The Agent and each of the Banks may deal with Company, and any security held
by them for the obligations of Company or any other Account Party (as
aforesaid), in the same manner and as freely as if this Guaranty did not exist
and the Agent shall be entitled, on behalf of Banks, without notice to the
Guarantors, among other things, to grant to the Company, such extension or
extensions of time to perform any act or acts as may seem advisable to such
Agent (on behalf of the Banks) at any time and from time to time, and to permit
the Company or any other Account Party to incur additional indebtedness to
Agent, the Banks, or any of them, without terminating, affecting or impairing
the validity or enforceability of this Guaranty or the obligations of the
Guarantors hereunder.
The Agent may proceed, either in its own name (on behalf of the Banks) or in
the name of any of the Guarantors, or otherwise, to protect and enforce any or
all of its rights under this Guaranty by suit in equity, action at law or by
other appropriate proceedings, or to take any action authorized or permitted
under applicable law, and shall be entitled to require and enforce the
performance of all acts and things required to be performed hereunder by the
Guarantors. Each and every remedy of the Agent and of the Banks shall, to the
extent permitted by law, be cumulative and shall be in addition to any other
remedy given hereunder or now or hereafter existing at law or in equity.
No waiver or release shall be deemed to have been made by the Agent or any
of the Banks of any of its rights hereunder unless the same shall be in writing
and signed by all of the Banks or on behalf of the Banks by the Agent, and any
such waiver shall be a waiver or release only with respect to the specific
matter involved and shall in no way impair the rights of the Agent or any of the
Banks or the obligations of the Guarantors under this Guaranty in any other
respect at any other time.
At the option of the Agent, any of the Guarantors may be joined in any
action or proceeding commenced by the Agent against Company, or any of the other
parties providing collateral for any indebtedness covered by this Guaranty in
connection with or based upon the Notes made by Company, the Credit Agreement,
the Letter of Credit Agreements, the Letters of Credit or any of the other Loan
Documents or other Indebtedness, or any provision thereof, and recovery may be
had against any such Guarantor in such action or proceeding or in any
independent action or proceeding against such Guarantor, without any requirement
that the Agent or the Banks first assert, prosecute or exhaust any remedy or
claim against Company, and/or any of the other parties providing collateral for
any Indebtedness covered by this Guaranty, or any other Indebtedness.
As a separate, additional and continuing obligation, each of the Guarantors
unconditionally and irrevocably undertakes and agrees with Agent that, should
the amounts referred to in Section 2 of this Guaranty not be recoverable from
such Guarantor in its capacity as a guarantor under this Guaranty for any reason
whatsoever (including, without limitation, by reason of any provision of the
Notes, the Credit Agreement, any Letter of Credit Agreement or Letter of Credit,
or any of the other
5
<PAGE> 124
EXHIBIT 10.1
Loan Documents being or becoming void, unenforceable, or otherwise invalid under
any applicable law) then, notwithstanding any knowledge thereof by the Agent and
the Banks or any of them at any time, such Guarantor as sole, original and
independent obligor, upon demand by Agent, will make payment to Agent of all
such amounts by way of a full indemnity.
4. Representations and Warranties. Each of the Guarantors (a) ratifies,
confirms and, by reference thereto (as fully as though such matters were
expressly set forth herein), represents and warrants with respect to itself
those matters set forth in Sections 7.1, 7.3, 7.4, 7.5, 7.6, 7.8, 7.9, 7.11,
7.12 through 7.19, inclusive, of the Credit Agreement, and (b) agrees not to
engage in any action or inaction, the result of which would cause a violation of
any term or condition of the Credit Agreement.
5. Collateral for Guaranty. The obligations of the Guarantors under this
Guaranty shall be secured by (i) in the case of each Guarantor which is a
Domestic Subsidiary of the Company, the Security Agreement and, if applicable, a
Pledge Agreement, executed and delivered by each of such Guarantors to Agent,
pursuant to the Credit Agreement, and (iii) in the case of the Guarantor which
is the Parent of the Company, by the Parent Pledge Agreement together with such
other Loan Documents as are required to be executed and delivered by one or more
of the Guarantors concurrently with or subsequent to the date hereof, all
pursuant to the terms and conditions of the Credit Agreement and/or any of the
other Loan Documents.
6. Miscellaneous.
6.1 Governing Law. This Guaranty has been delivered in Michigan and
shall be interpreted and the rights of the parties hereunder shall be determined
under the laws of, and be enforceable in, the State of Michigan (without regard
to its conflict of laws provisions), each of the Guarantors hereby consenting to
the jurisdiction of state and all federal courts sitting in such state.
6.2 Severability. If any term or provision of this Guaranty, or the
application thereof to any circumstance, shall, to any extent, be invalid or
unenforceable, the remainder of this Guaranty, or the application of such term
or provision to circumstances other than those as to which it is held invalid or
unenforceable, as the case may be, shall not be affected thereby, and each term,
provision and obligation of this Guaranty shall be valid and enforceable to the
fullest extent permitted by law.
6.3 Notice. All notices and other communications to be made or given
pursuant to this Guaranty shall be sufficient if made or given in conformity
with Section 14.6 of the Credit Agreement.
6.4 Right of Offset. Each of the Guarantors acknowledges the rights of
the Agent and of each of the Banks, upon the occurrence and during the
continuance of an Event of Default, to offset against the Indebtedness of such
Guarantor to the Banks under this Guaranty, any amount
6
<PAGE> 125
EXHIBIT 10.1
owing by the Agent or the Banks, or either or any of them to such Guarantor,
whether represented by any deposit of such Guarantor with the Agent or any of
the Banks or otherwise.
6.5 Release. Upon the satisfaction of the obligations of the
Guarantors hereunder, and when the Guarantors are not subject to any obligation
under the Credit Agreement or any of the other Loan Documents, the Agent shall
deliver to the Guarantors, upon written request therefor, a written release of
this Guaranty; provided however that the effectiveness of this Guaranty shall
continue or be reinstated, as the case may be, in the event that any payment
received or credit given by the Agent or the Banks, or any of them, is returned,
disgorged, rescinded or required to be recontributed to any party as an
avoidable preference, impermissible setoff, fraudulent conveyance, restoration
of capital or otherwise under any applicable state, federal or national law of
any jurisdiction, including without limitation laws pertaining to bankruptcy or
insolvency, and this Guaranty shall thereafter be enforceable against the
Guarantors as if such returned, disgorged, recontributed or rescinded payment or
credit had not been received or given by the Agent or the Banks, and whether or
not the Agent or any Bank relied upon such payment or credit or changed its
position as a consequence thereof.
6.6 Amendments. The terms of this Guaranty may not be waived, altered,
modified, amended, supplemented or terminated in any manner whatsoever except as
provided herein and in accordance with the Credit Agreement. In accordance with
Section 8.20 of the Credit Agreement, all Subsidiaries of the Company created or
otherwise acquired after the Effective Date shall become obligated as Guarantors
hereunder (each as fully as though an original signatory hereto) by executing
and delivering to Agent and the Banks that certain joinder agreement in the form
attached to this Guaranty as Exhibit A.
6.7 Consent to Jurisdiction. Each of the Guarantors and each of the
Agent and the Banks (by accepting the benefits hereof) hereby irrevocably submit
to the non-exclusive jurisdiction of any United States Federal Court or Michigan
state court sitting in Detroit, Michigan in any action or proceeding arising out
of or relating to this Guaranty and each of the Guarantors and the Agent and the
Banks hereby irrevocably agree that claims in respect of such action or
proceeding may be heard and determined in any such United States Federal Court
or Michigan state court. Each of the Guarantors irrevocably consents to the
service of any and all process in any such action or proceeding brought in any
court in or of the State of Michigan by the delivery of copies of such process
to such Guarantor at its address specified on the signature page hereto or by
certified mail directed to such address or such other address as may be
designated by the Guarantor in a notice to the other parties that complies as to
delivery with the terms of Section 6.3. Nothing in this Section shall affect the
right of the Banks and the Agent to serve process in any other manner permitted
by law or limit the right of the Banks or the Agent (or any of them) to bring
any such action or proceeding against any of the Guarantors or any of its or
their property in the courts of any other jurisdiction. Each of the Guarantors
hereby irrevocably waives any objection to the laying of venue of any such suit
or proceeding in the above described courts.
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EXHIBIT 10.1
6.8 Joint and Several Obligation, etc. The obligation of each of the
Guarantors under this Guaranty shall be several and also joint, each with all
and also each with any one or more of the others, and may be enforced against
each severally, any two or more jointly, or some severally and some jointly. Any
one or more of the Guarantors may be released from its obligations hereunder
with or without consideration for such release and the obligations of the other
Guarantors hereunder shall be in no way affected thereby. Agent, on behalf of
Banks, may fail or elect not to prove a claim against any bankrupt or insolvent
Guarantor and thereafter, Agent and the Bank may, without notice to any
Guarantors, extend or renew any part or all of any indebtedness of any of the
Guarantors, and may permit any of the Guarantors to incur additional
indebtedness, without affecting in any manner the unconditional obligation of
the remaining Guarantors. Such action shall not affect any right of contribution
among the Guarantors.
6.9 WAIVER OF JURY TRIAL. THE BANKS (BY ACCEPTING THE BENEFITS
HEREOF), THE AGENT (BY ACCEPTING THE BENEFITS HEREOF) AND EACH OF THE GUARANTORS
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 GUARANTY OR
ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT,
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTION OF ANY OF THEM. NEITHER
THE BANKS, THE AGENT, NOR ANY OF THE GUARANTORS SHALL SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY SUCH 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 BANKS AND THE AGENT OR THE GUARANTORS EXCEPT BY A WRITTEN
INSTRUMENT EXECUTED BY ALL OF THEM.
6.10 Limitation under Applicable Insolvency Laws. Notwithstanding
anything to the contrary contained herein, it is the intention of each of the
Guarantors, Agent and the Banks that the amount of each Guarantor's obligations
hereunder shall be in, but not in excess of, the maximum amount thereof not
subject to avoidance or recovery by operation of applicable law governing
bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors,
dissolution, insolvency, fraudulent transfers or conveyances or other similar
laws (collectively, "Applicable Insolvency Laws"). To that end, but only in the
event and to the extent that a Guarantor's obligations hereunder or any payment
made pursuant thereto would, but for the operation of the foregoing proviso, be
subject to avoidance or recovery under Applicable Insolvency Laws, the amount of
such Guarantor's obligations hereunder shall be limited to the largest amount
which, after effect thereto, would not, under Applicable Insolvency Laws, render
such Guarantor's respective obligations hereunder unenforceable or avoidable or
subject to recovery under Applicable Insolvency Laws. To the extent any payment
actually made hereunder exceeds the limitation contained in this Section 6.10,
then the amount of such excess shall, from and after the time of payment by the
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<PAGE> 127
EXHIBIT 10.1
Guarantors (or any of them), be reimbursed by the Banks upon demand by such
Guarantor. The foregoing proviso is intended solely to preserve the rights of
the Agent and the Banks hereunder against the Guarantors to the maximum extent
permitted by Applicable Insolvency Laws and neither Company nor any Guarantor
nor any other Person shall have any right or claim under this Section 6.10 that
would not otherwise be available under Applicable Insolvency Laws. To effectuate
the foregoing, the parties to this Agreement acknowledge and agree that the
provisions of this Section 6.10 only apply to Guarantors which are Domestic
Subsidiaries of the Company.
[signature follows on succeeding page]
9
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EXHIBIT 10.1
IN WITNESS WHEREOF, the undersigned each of the Guarantors has executed this
Guaranty as of the date first above written.
RUSH CREEK, LLC,
a Wisconsin limited liability company
By:__________________________________
Its:_________________________________
CB-KRAMER SALES AND SERVICE, INC., A
DELAWARE CORPORATION
By:__________________________________
Its:_________________________________
Signature Page Guaranty
10
<PAGE> 129
EXHIBIT 10.1
EXHIBIT A
to Guaranty
JOINDER AGREEMENT
THIS JOINDER AGREEMENT is dated as of ______________, 199_ by
_____________________, a ______________________ corporation ("New Guarantor").
WHEREAS, pursuant to Section 8.20 of that certain Aqua-Chem Revolving Credit
and Term Loan Agreement dated as of July 31, 1997 (as amended or otherwise
modified from time to time, the "Credit Agreement") by and among Aqua-Chem, Inc.
("Company"), the Banks signatory thereto and Comerica Bank, as Agent for the
Banks (in such capacity, "Agent"), and pursuant to Section 6.6 of that certain
Guaranty dated as of July 31, 1997 (as amended or otherwise modified from time
to time the "Guaranty") executed and delivered by the Guarantors named therein
("Guarantors") in favor of Agent, for and on behalf of the Banks, the New
Guarantor must execute and deliver a Joinder Agreement in accordance with the
Credit Agreement and the Guaranty.
NOW THEREFORE, as a further inducement to Banks to continue to provide
credit accommodations to Company and the Account Parties (as defined in the
Credit Agreement), New Guarantor hereby covenants and agrees as follows:
1. All capitalized terms used herein shall have the meanings assigned to
them in the Credit Agreement unless expressly defined to the contrary.
2. New Guarantor hereby enters into this Joinder Agreement in order to
comply with Section 8.20 of the Credit Agreement and Section 6.6 of the
Guaranty and does so in consideration of the Advances made or to be
made from time to time under the Credit Agreement (and the other Loan
Documents, as defined in the Credit Agreement), from which New
Guarantor shall derive direct and indirect benefit as with the other
Guarantors (all as set forth and on the same basis as in the Guaranty).
3. New Guarantor shall be considered, and deemed to be, for all purposes
of the Credit Agreement, the Guaranty and the other Loan Documents, a
Guarantor under the Guaranty as fully as though New Guarantor had
executed and delivered the Guaranty at the time originally executed and
delivered under the Credit Agreement and hereby ratifies and confirms
its obligations under the Guaranty, all in accordance with the terms
thereof.
4. No Default or Event of Default (each such term being defined in the
Credit Agreement) has occurred and is continuing under the Credit
Agreement.
5. This Joinder Agreement shall be governed by the laws of the State of
Michigan and shall be binding upon New Guarantor and its successors and
assigns.
<PAGE> 130
EXHIBIT 10.1
IN WITNESS WHEREOF, the undersigned New Guarantor has executed and delivered
this Joinder Agreement as of __________________, 199__.
[NEW GUARANTOR]
By:_____________________________
Its:____________________________
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EXHIBIT 10.1
SECURITY AGREEMENT
This SECURITY AGREEMENT ("Security Agreement") is made as of this 31st day
of July, 1997 by and among Aqua-Chem, Inc., a Delaware corporation (the
"Company"), CB - Kramer Sales and Service, Inc., a Delaware corporation, and
such other persons or entities which from time to time become parties hereto
(collectively, including the Company, the "Debtors" and individually each a
"Debtor") and Comerica Bank, a Michigan banking corporation, as Agent for and on
behalf of the Banks (as defined below) ("Secured Party").
RECITALS
A. WHEREAS, Pursuant to that certain Aqua-Chem Revolving Credit and Term
Loan Agreement dated as of July 31, 1997 (as amended or otherwise modified from
time to time, the "Credit Agreement"), among the Company, each of the financial
institutions party thereto (collectively, the "Banks") and Secured Party, as
Agent for the Banks, the Banks have agreed, subject to the satisfaction of
certain terms and conditions, to make Advances to Company of the Revolving
Credit, the Swing Line, the Term Loan and to provide for the issuance of Letters
of Credit for the account of Debtor, individually, or jointly and severally with
certain of the other Account Parties (as such terms are defined in the Credit
Agreement), as provided therein; and
B. WHEREAS, each of the Debtors (other than the Company) has executed and
delivered a guaranty (as amended or otherwise modified from time to time, the
"Guaranty") of the obligations of the Company under the Credit Agreement; and
C. WHEREAS, the obligations of the Company under the Credit Agreement and
the obligations of each other Debtor under the Guaranty are to be secured
pursuant to this Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
I. Creation of Security Interest
As security for the Indebtedness (hereinafter defined), each Debtor hereby
pledges and grants to Secured Party, as Agent for and on behalf of Banks, a
security interest in the following described property of Debtor (the
"Collateral"):
(a) all inventory, goods (including returned or repossessed goods and
all goods the sale of which gives rise to accounts receivable, contract
rights, chattel paper, general intangibles or instruments), merchandise and
other personal property, in each case whether
<PAGE> 132
EXHIBIT 10.1
now owned or hereafter produced, manufactured or acquired by such Debtor
which are held for sale or lease or are furnished or to be furnished under a
contract of service or are raw materials, work in process or materials used
or consumed or to be used or consumed in such Debtor's business;
(b) all accounts; accounts receivable; contract rights; general
intangibles; chattel paper and instruments (including without limitation
instruments evidencing any obligation to such Debtor for payment for goods
sold or leased or services rendered or otherwise); tax refunds; goodwill;
licenses, permits and privileges; customer lists; rights of indemnification;
(c) all machinery, equipment, furniture and other tangible personal
property and fixtures of such Debtor, together with all accessions,
additions, accessories, parts and equipment now or hereafter affixed thereto
or used in connection therewith;
(d) all patents, trademarks and other intellectual property and
proprietary rights, including without limitation those items of property
listed in Schedule 1 hereto;
(e) all Intercompany Notes issued in favor of such Debtor; and
(f) all deposit accounts of such Debtor and all amounts in any lockbox
or in any collateral account, including all funds on deposit therein, all
investments arising out of such funds, all claims thereunder or in
connection therewith, and all cash, instruments, securities, rights and
other property at any time and from time to time received, receivable, or
otherwise distributed in respect of such accounts, such funds or such
investments;
whether any such property is now owned or hereafter acquired or existing by such
Debtor, and all records (including computer software) pertaining to the
foregoing, and all substitutions for, all proceeds and all products of the
foregoing, including insurance proceeds, to the fullest extent permitted by law,
subject in each case only to the Permitted Liens. The pledge and grant of a
security interest in proceeds hereunder shall not be deemed to give such Debtor
any right to dispose of any of the Collateral. Nothing contained herein shall be
deemed to be an assignment of any "intent to use" trademark application.
II. Debtors' Obligations
A. Payment of Secured Indebtedness. The security interest created herein by
each Debtor is given as security for the discharge and performance of the
following obligations: all of such Debtor's obligations contained in or arising
under or in connection with the Credit Agreement, any Note, the Guaranty, any
Interest Rate Protection Agreements, any other Loan Document or any other
document or instrument executed in connection therewith, howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due to become due, together with interest thereon; and
also as security for all other indebtedness and liabilities, whether direct,
indirect, absolute or contingent, owing by such Debtor to the Banks in any
manner and at any
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<PAGE> 133
EXHIBIT 10.1
time pursuant to the Credit Agreement, whether due or hereafter to become due,
now owing or that may hereafter be incurred by such Debtor to or acquired by the
Banks, and any judgments that may hereafter be rendered on such indebtedness or
any part thereof, with interest according to the rates and terms specified, or
as provided by law, and any and all replacements, consolidations, amendments,
renewals or extensions of the foregoing (collectively herein called the
"Indebtedness").
B. Protection of Collateral. Each Debtor shall take any and all reasonable
steps required to protect the Collateral, and in pursuance thereof, each such
Debtor agrees that:
(1) The Collateral will not be misused, wasted or allowed to
deteriorate, except for the ordinary wear and tear of its intended primary use
or to the extent no longer useful or necessary to such Debtor's business, and
will at all times be maintained in accordance with the applicable terms of the
Credit Agreement.
(2) The Collateral described in Section I.(a) will be insured with
insurance coverage by financially sound and reputable insurers and in such forms
and amounts and against such risks as prudent business judgment and then current
practice would dictate for companies or professional enterprises engaged in the
same or a similar business and owning and operating similar properties. In the
case of all such insurance policies, each such Debtor shall designate the
Secured Party, on behalf of Banks, as mortgagee and loss payee and such policies
shall provide that any loss be payable to each such Debtor and Secured Party, on
behalf of Banks, as mortgagee and loss payee, as their respective interests may
appear. Further, upon the request of the Secured Party acting at the request of
the Banks, each such Debtor shall deliver copies of all said policies, including
all endorsements thereon and those required hereunder, to Secured Party; and
each such Debtor assigns to Secured Party, on behalf of Banks, as additional
security hereunder, all its rights to receive proceeds of insurance with respect
to the Collateral. All such insurance shall, by its terms, provide that no
cancellation, lapse (including without limitation any lapse for non-payment of
premiums) or material change in coverage shall become effective until thirty
(30) days after receipt by Secured Party of written notice from the applicable
carrier. Each Debtor further shall provide Secured Party upon request with
evidence reasonably satisfactory to Secured Party that each such Debtor is at
all times in compliance with this paragraph. During the continuance of an Event
of Default, Secured Party may act as each such Debtor's attorney-in-fact in
obtaining, adjusting, settling and compromising such insurance and endorsing any
drafts. Upon default in this covenant, Secured Party may procure such insurance
and its costs therefor shall be charged to Company, payable on demand, with
interest at the highest rate set forth in the Credit Agreement and added to the
Indebtedness secured hereby. The disposition of proceeds of any insurance on the
Collateral ("Insurance Proceeds") shall be governed by the following:
(i) provided that no Event of Default has occurred and is continuing
hereunder, (a) if the amount of Insurance Proceeds in respect of any loss or
casualty does not exceed Five Hundred Thousand Dollars ($500,000), such
Debtor shall be entitled, in the event of such loss or casualty, to receive
all such Insurance Proceeds and to apply the same toward the replacement of
the Collateral affected thereby; and (b) if the amount of Insurance
3
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EXHIBIT 10.1
Proceeds in respect of any loss or casualty exceeds Five Hundred Thousand
Dollars ($500,000), such Insurance Proceeds shall be paid to and received
by Secured Party, for release to such Debtor for the replacement of the
Collateral affected thereby or, upon written request of such Debtor
(accompanied by reasonable supporting documentation), for such other use or
purpose as approved by the Majority Banks, in their reasonable discretion,
it being understood and agreed in connection with any release of funds
under this subparagraph (B), that the Secured Party and Majority Banks may
impose reasonable and customary conditions on the disbursement of such
Insurance Proceeds; and
(ii) if an Event of Default has occurred or is continuing hereunder,
all Insurance Proceeds in respect of any loss or casualty shall be paid to
and received by the Secured Party, to be applied by the Secured Party
against the Indebtedness and/or to be held by the Secured Party as cash
collateral for the Indebtedness, as the Majority Banks may direct in their
sole discretion.
(3) The Collateral (except inventory currently under lease) is located
in the premises set forth on Schedule II, and will not be moved to premises
other than those set forth on Schedule II, and such other locations with respect
to which each such Debtor shall have executed and delivered to Secured Party all
financing statements and other documents and instruments necessary to perfect or
continue the perfection of the Secured Party's security interest in the
Collateral. Subject to the applicable terms of the Credit Agreement, upon
request therefor by the Secured Party, each such Debtor will inform the Secured
Party in writing of the whereabouts of the Collateral and Debtor will promptly
arrange for any inspections requested by the Secured Party, on behalf of Banks;
(4) Each such Debtor shall comply with all applicable laws, rules,
ordinances, regulations and orders of any governmental authority, whether
federal, state, local or foreign in effect from time to time with respect to the
Collateral, to the full extent required under the Credit Agreement.
(5) Secured Party, on behalf of the Banks, may, subject to the
applicable terms of the Credit Agreement, examine and inspect the Collateral at
any time wherever located.
C. Protection of Security Interest. Each Debtor agrees that:
(1) Except as permitted by the Credit Agreement, it will not sell,
transfer, lease or otherwise dispose of any of the Collateral or any interest
therein or offer to do so (other than the sale or lease of inventory in the
ordinary course of business and the sale or other disposition of worn-out or
other unusable items of tangible personal property or items no longer useful to
or necessary in each such Debtor's business) without the prior written consent
of Secured Party, given at the written direction or with the written approval of
Banks, and will not create, incur, assume or suffer to exist any mortgage,
pledge, encumbrance, security interest, lien or charge of any kind upon any
4
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EXHIBIT 10.1
of the Collateral (or any interest therein or portion thereof), other than in
favor of Secured Party, on behalf of the Banks and liens permitted under the
Credit Agreement.
(2) It will, to the full extent required under the Credit Agreement,
pay all taxes including, without limitation, any maintenance fees payable on any
registered patents and any fees in connection with any required filings in
connection with any pending or registered trademarks, assessments, governmental
charges and levies upon the Collateral or for its use or operation.
(3) It will sign and execute alone or with Secured Party any financing
statement or other document (including without limitation, filings required in
connection with any pending or registered trademark) or procure any documents
and pay all connected costs, necessary to protect the security interest under
this Security Agreement against the rights or interests of third persons.
(4) It will reimburse Secured Party for all reasonable costs,
including reasonable attorneys' fees, incurred for any action taken by Secured
Party to remedy an Event of Default of Debtor which Secured Party elects to
remedy pursuant to its rights under Paragraph IV hereof.
(5) It will,
(i) subject to Section 8.6 of the Credit Agreement, allow Secured
Party, or any Bank, to examine, audit and inspect such Debtor's books,
accounts, and other records relating to the Collateral wherever located at
all reasonable times during normal business hours, upon oral or written
request of Secured Party, and to make and take away copies of any and all
such books, accounts, records and ledgers;
(ii) punctually and properly perform all of its covenants and
duties under any other security agreement, mortgage, collateral document,
pledge agreement or contract of any kind now or hereafter existing as
security for or in connection with payment of the Indebtedness, or any part
thereof;
(iii) perform its obligations under and comply with the terms and
provisions of the Credit Agreement and the other Loan Documents to which it
is or may become a party;
(iv) keep, at the addresses designated on Schedule II and such
additional addresses as may be provided from time to time for its records,
all records concerning the Collateral, which records will be of such
character as will enable Secured Party or its designees to determine at any
time the status of the Collateral;
(v) give Secured Party not less than 30 days prior written
notice of all contemplated changes in such Debtor's name, legal structure,
or chief executive office, or in the location of the Collateral or such
Debtor's records concerning same and, prior to making any such changes,
file or cause to be filed all financing statements or amendments
5
<PAGE> 136
EXHIBIT 10.1
or other documents or instruments determined by Secured Party to be
necessary or appropriate to establish and maintain a valid first priority
security interest in all the Collateral in accordance with the terms hereof;
(vi) promptly furnish Secured Party with any information in
writing which Secured Party may reasonably request concerning the
Collateral;
(vii) to the extent required under the Credit Agreement, promptly
notify Secured Party of any material claim, action or proceeding affecting
the Collateral and title therein, or in any part thereof, or the security
interest created herein, and, at the request of the Secured Party, appear in
and defend, at such Debtor's expense, any such action or proceeding;
(viii) promptly, after being requested by Secured Party, pay to
Secured Party the amount of all reasonable expenses, including reasonable
attorneys' fees and other legal expenses, incurred by Secured Party pursuant
to and in accordance with the Credit Agreement in protecting and maintaining
the Collateral or its rights hereunder, or in connection with any audit or
inspection of the Collateral pursuant to the terms hereof, and in enforcing
the security interest created herein; and
(ix) allow Secured Party, upon and so long as there exists any
Default or Event of Default, to correspond with its account debtors to
confirm its accounts receivable and Obligors under any contracts.
(6) With respect to any Collateral of a kind requiring an additional
security agreement, financing statement, or other writing to perfect a security
interest therein in favor of Secured Party, on behalf of Banks, such Debtor will
forthwith upon demand by Secured Party execute and deliver to Secured Party on
behalf of Banks, whatever documentation the Secured Party or the requisite Banks
shall reasonably deem necessary or proper for such purpose. Should any covenant,
duty or agreement of such Debtor fail to be performed in accordance with its
terms hereunder resulting in an Event of Default, Secured Party may, but shall
never be obligated to, perform or attempt to perform such covenant, duty or
agreement on behalf of such Debtor, and any amount expended by Secured Party in
such performance or attempted performance shall become part of the Indebtedness,
and, at the request of Secured Party, such Debtor agrees to pay such amount to
Secured Party upon demand at Secured Party's office in Detroit, Michigan
together with interest thereon at the highest rate at which interest accrues on
amounts after the same become due pursuant to the terms of the Credit Agreement,
from the date of such expenditure by Secured Party until paid. With respect to
any Collateral (other than goods) in which such Debtor acquires any rights
subsequent to the date hereof and which, under applicable law, a security
interest is or can be perfected by possession, upon request of the Secured Party
or the Majority Banks, such Debtor agrees to deliver possession of such
Collateral to Secured Party immediately upon its acquisition of rights therein.
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EXHIBIT 10.1
(7) It will hold the proceeds of any of the Collateral (including
accounts receivable and contracts) which is sold other than in the ordinary
course of such Debtor's business (or otherwise as permitted under the Credit
Agreement or this Agreement, subject to the terms thereof) in trust for Secured
Party on behalf of the Banks, will not commingle said proceeds with any other
funds, and, after and during the continuance of an Event of Default, will
deliver such proceeds to Secured Party immediately upon its request.
(8) It will not, except as permitted under the Credit Agreement, grant
any rebate, refund, allowance or credit on any account receivable, or on any
amounts due under any accounts receivable, other than in the ordinary course of
business, without Secured Party's prior written consent.
(9) If Secured Party, acting in its sole discretion, redelivers any
Collateral to such Debtor or such Debtor's designee for the purpose of (i) the
ultimate sale or exchange thereof, or (ii)presentation, collection, renewal, or
registration of transfer thereof, or (iii) loading, unloading, storing,
shipping, transshipping, manufacturing, processing or otherwise dealing
therewith preliminary to sale or exchange; such redelivery shall not constitute
a release of Secured Party's security interest therein or in the proceeds
thereof unless Secured Party, with the consent of the Banks, specifically so
agrees in writing. If such Debtor requests any such redelivery, such Debtor will
deliver with such request a duly executed financing statement in form and
substance satisfactory to Secured Party.
(10) Subject to the applicable terms of the Credit Agreement, Debtor
shall take any and all other steps reasonably required under applicable law to
perfect the lien and security interest established hereby in favor of Secured
Party, on behalf of the Banks, including without limitation the execution,
delivery and/or performance of appropriate acknowledgments, governmental
acknowledgments, registrations or approvals, financing statements and other
documents and instruments, and the registration, recording and/or filing of such
instruments with such Persons and in such jurisdictions as necessary to perfect
the security interest and lien established hereby.
III. Default
The terms "Default" and "Event of Default", as used herein, shall mean the
occurrence of a Default or an Event of Default, as the case may be, under the
Credit Agreement.
IV. Secured Party's Rights and Remedies.
In addition to its rights and remedies under the Credit Agreement and the
other Loan Documents, and under applicable law, Secured Party shall have
available to it the following rights and remedies upon occurrence and during the
continuance of an Event of Default:
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EXHIBIT 10.1
A. Right to Discharge Debtor's Obligations. Secured Party may, with the
approval of the Majority Banks, discharge taxes, liens or security interests or
other encumbrances at any time levied or placed on the Collateral in violation
of the terms hereof, whether senior or junior to the security interest herein
granted, may remedy or cure any default of a Debtor under the terms of any
lease, rental agreement, land contract or other document which in any way
pertains to or affects such Debtor's title to or interest in any of the
Collateral, may pay for insurance on the Collateral, and may pay for the
maintenance and preservation of the Collateral, unless such Debtor is contesting
in good faith such obligations, and such Debtor agrees to reimburse Secured
Party, on demand, for any payment made or any expense incurred by Secured Party
pursuant to the foregoing authorization, with interest, which payments and
expenses shall be secured by the Collateral.
B. Remedies and Enforcement. Secured Party shall have and may exercise, at
the direction or with the approval of the Majority Banks, any and all rights of
enforcement and remedies afforded to a secured party under the Uniform
Commercial Code as adopted and in force in the State of Michigan or other
applicable uniform commercial code (or other applicable law), to the full extent
permitted by applicable law, on the date of this Security Agreement or the date
of such Debtor's default, together with any and all other rights and remedies
otherwise provided and available to Secured Party by applicable law unless such
application would result in the invalidity or unenforceability of any provision
hereof, in which case the law of the state in which any of the Collateral is
located shall apply to the extent necessary to render such provision valid and
enforceable; and, in conjunction with, in addition to, or substitution for those
rights, Secured Party may, at the direction or with the approval of the Majority
Banks, or with respect to subparagraph (3) below), all of the Banks:
(1) Enter upon such Debtor's premises to take possession of, assemble,
collect and/or dispose of the Collateral and, if Secured Party elects to do,
to apply any of the Collateral against any of the Indebtedness secured
hereby;
(2) Require such Debtor to assemble the Collateral and make it
available at a place Secured Party designates to allow Secured Party to take
possession or dispose of the Collateral;
(3) Waive any default, or remedy any default, without waiving its
rights and remedies upon default and without waiving any other prior or
subsequent default;
(4) Without any notice to Debtor, notify any parties obligated on any
of the Collateral to make payment to the Secured Party, on behalf of the
Banks, of any amounts due or to become due thereunder and enforce collection
of any of the Collateral by suit or otherwise and surrender, release or
exchange all or any part thereof, or compromise or extend or renew for any
period (whether or not longer than the original period) the indebtedness
thereunder or evidenced thereby. Upon request of the Secured Party, Debtor
will, at its own expense, notify any parties obligated to Debtor on any of
the Collateral to make payment to the Secured Party of any amounts due or to
become due thereunder, and indicate on all
8
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EXHIBIT 10.1
billings to such account debtors that their accounts must be paid to or
as directed by Secured Party. Debtor agrees that neither Secured Party
nor the Banks shall be liable for any loss or damage which Debtor
suffers or may suffer as a result of Secured Party's processing of
items or its exercise of any other rights or remedies under this
Security Agreement, including without limitation indirect, special or
consequential damages, loss of revenues or profits, or any claim,
demand or action by any third party not related to or affiliated with
Debtor arising out of or in connection with the processing of items
(excluding only the claims of such third parties in connection with the
processing of items based solely upon the gross negligence or willful
misconduct of Secured Party) or the exercise of any other rights or
remedies hereunder. Debtor further agrees to indemnify and hold Secured
Party and the Banks harmless from and against all such third party
claims, demands or actions, including without limitation litigation
costs and reasonable attorneys' fees, excepting only those claims,
demands and actions arising solely as a result of the gross negligence
or willful misconduct of Secured Party or any of the Banks;
(5) Appoint any officer or agent of Secured Party as Debtor's
true and lawful proxy and attorney-in-fact, with power, upon the
occurrence of any Event of Default (exercisable so long as such Event
of Default is continuing); to endorse such Debtor's name or any of its
officers or agents upon any notes, checks, drafts, money orders, or
other instruments of payment (including payments payable under any
policy of insurance on the Collateral) or Collateral that may come into
possession of the Secured Party in full or part payment of any amounts
owing to the Banks; to sign and endorse the name of such Debtor and/or
any of its officers or agents upon any invoice, freight or express
bill, bill of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with
accounts, and any instrument or document relating thereto or to such
Debtor's rights therein; to execute on behalf of such Debtor any
financing statements, amendments, subordinations or other filings
pursuant to the Credit Agreement, this Security Agreement or the other
Loan Documents; such Debtor hereby granting unto Secured Party on
behalf of the Banks, as the proxy and attorney-in-fact of Debtor, full
power to do any and all things necessary to be done in and about the
premises as fully and effectually as Debtor might or could do, and
hereby ratifying all that said proxy and attorney shall lawfully do or
cause to be done by virtue hereof. The proxy and power of attorney
described herein shall be deemed to be coupled with an interest and
shall be irrevocable for the entire term of the Credit Agreement, the
Notes and all transactions thereunder and thereafter as long as any
Indebtedness or any of the commitments to lend (whether optional or
obligatory) remain outstanding. The Secured Party shall have full power
to collect, compromise, endorse, sell or otherwise deal with the
Collateral or proceeds thereof on behalf of the Banks in its own name
or in the name of such Debtor, provided that Secured Party shall act in
a commercially reasonable manner.
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EXHIBIT 10.1
C. Right of Sale.
(1) Each Debtor agrees that upon the occurrence and
continuance of an Event of Default, Secured Party may, at its option,
sell and dispose of the Collateral at public or private sale without
any previous demand of performance. Each Debtor agrees that notice of
such sale sent to such Debtor's address, as set forth on the signature
pages attached hereto, by certified or registered mail sent at least
five (5) Business Days prior to such sale, shall constitute reasonable
notice of sale. The foregoing shall not require notice if none is
necessary under applicable law. The proceeds of sale shall be applied
in the following order:
(i) to all reasonable costs and charges incurred by
Secured Party in the taking and causing the removal and sale
of said property, including such reasonable attorneys' fees as
shall have been incurred by Secured Party;
(ii) to the Indebtedness, including without limitation
all accrued interest thereon, premiums and make whole amounts,
if any, in the order set forth in the Credit Agreement; and
(iii) any surplus of such proceeds remaining shall be
paid to such Debtor, or to such other party who shall lawfully
be entitled thereto.
(2) At any sale or sales made pursuant to this Security
Agreement or in a suit to foreclose the same, the Collateral may be
sold en masse or separately, at the same or at different times, at the
option of the Secured Party or its assigns. Such sale may be public or
private with notice as required by the Uniform Commercial Code as then
in effect in the state in which the Collateral is located, and the
Collateral need not be present at the time or place of sale. At any
such sale, the Secured Party may bid for and purchase any of the
property sold, notwithstanding that such sale is conducted by the
Secured Party or its attorneys, agents, or assigns.
D. Miscellaneous. Secured Party shall have the right at all times to
enforce the provisions of this Security Agreement, on behalf of Banks, in strict
accordance with the terms hereof, notwithstanding any conduct or custom on the
part of Secured Party or any of the Banks in refraining from so doing at any
time or times. The failure of Secured Party or any of the Banks at any time or
times to enforce its rights under said provisions strictly in accordance with
the same shall not be construed as having created a custom in any way or manner
contrary to the specific provisions of this Security Agreement or as having in
any way or manner modified the same. All rights and remedies of Secured Party
and Banks hereunder shall be cumulative and concurrent, and the exercise of one
right or remedy shall not be deemed a waiver or release of any other right or
remedy.
VI. Representations, Warranties and Covenants of Debtors.
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EXHIBIT 10.1
Each Debtor represents and warrants, and, after the date hereof,
covenants so long as any of the Credit Agreement, the Notes or Letter of Credit
Agreements remain in effect, that:
A. Such Debtor's chief executive office and principal place of business
are set forth in Schedule III hereto, and such Debtor has not maintained its
chief executive office and principal place of business at any other location
since March 1, 1997;
B. Each other location where Debtor maintains a place of
business is set forth on Schedule IV;
C. No financing statement covering the Collateral, or any part thereof,
has been or will be filed with any filing officer, except as permitted under the
Credit Agreement.
D. No other agreement, pledge or assignment covering the Collateral, or
any part thereof, has been or will be made and no security interest, other than
the one created hereby or pursuant to security agreements and pledges previously
made in favor of Secured Party on behalf of the Banks, has or will be attached
or has been or will be perfected in the Collateral or in any part thereof,
except as permitted under the Credit Agreement.
E. No material dispute, right of setoff, counterclaim or defenses exist
with respect to any part of the Collateral (excluding accounts, accounts
receivable and rights to payment for services rendered), except as permitted
under the Credit Agreement.
F. At the time Secured Party's security interest attaches to any of the
Collateral or its proceeds, such Debtor will be the lawful owner thereof with
the right to transfer any interest therein (except for such interests which in
the aggregate would not have a Material Adverse Effect), such Collateral is free
and clear of all liens other than the one created hereby or permitted by the
Credit Agreement and that such Debtor will make such further assurances to prove
its title to the Collateral as may be reasonably required, will keep such
Collateral free and clear of all liens other than the one created hereby and
liens permitted by the Credit Agreement, and will take such action to defend the
Collateral and its proceeds against the lawful claims and demands of all persons
whomsoever. The delivery at any time by such Debtor to Secured Party of
Collateral, or financing statements covering any Collateral shall constitute a
representation and warranty by such Debtor under this Security Agreement that,
with respect to such Collateral, and each item thereof, such Debtor is owner of
the Collateral and the matters heretofore warranted in this paragraph are true
and correct in all material respects.
G. The representations and warranties contained in any of the Credit
Agreement and the Guaranty are incorporated by reference herein and are all made
as of the date hereof.
H. It shall, if applicable, contemporaneously with the execution and
delivery of this Agreement, execute and deliver to the Agent an Agreement
(Trademark) in the form of Exhibit A hereto, and shall execute and deliver to
the Agent any other document required to acknowledge or
11
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EXHIBIT 10.1
register or perfect the Agent's and the Banks' interest in any of the
Collateral described in Section I(d).
VII. Mutual Agreements.
Each Debtor and Secured Party mutually agree as follows:
A. "Debtor" and "Secured Party" as used in this Security
Agreement include the successors and permitted assigns of those parties.
B. To the extent permitted by applicable law, except as otherwise
provided herein, the law governing this Security Agreement shall be that of the
State of Michigan.
C. This Security Agreement includes all amendments and supplements
hereto and all assignments hereof, provided, that such Debtor and Secured Party
shall not be bound by any amendment hereto unless such amendment is expressed in
a writing executed by each of them.
D. All capitalized or other terms not specifically defined herein are
used as defined in the Credit Agreement. To the extent not inconsistent
therewith, all such terms shall also be construed in conformity with the
Michigan or other applicable Uniform Commercial Code.
E. The security interest granted under this Security Agreement shall be
a continuing security interest in every respect (whether or not the outstanding
balance of the Indebtedness is from time to time temporarily reduced to zero)
and Secured Party's security interest in the Collateral as granted herein shall
continue in full force and effect for the entire duration that the Credit
Agreement remains in effect and until all of the Indebtedness is repaid and
discharged in full, and no commitment (whether optional or obligatory) to extend
any credit under the Credit Agreement or any of the Notes remains outstanding.
F. THE PARTIES HERETO ACKNOWLEDGE THAT THIS SECURITY
AGREEMENT IS SUBJECT TO THE MUTUAL WAIVER OF JURY TRIAL
CONTAINED IN THE APPLICABLE PROVISIONS OF THE CREDIT AGREEMENT
AND THE GUARANTY, AS APPLICABLE.
G. Each of the Debtors hereby irrevocably submits to the non-exclusive
jurisdiction of any United States Federal Court or Michigan state court sitting
in Detroit, Michigan in any action or proceeding arising out of or relating to
this Security Agreement and hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in any such United
States Federal Court or Michigan state court. Each Debtor irrevocably consents
to the service of any and all process in any such action or proceeding brought
in any court in or of the State of Michigan by the delivery of copies of such
process to such Debtor at its address specified in Schedule II hereto or by
certified mail directed to such address. Nothing in this paragraph shall affect
the right of the Banks and the Secured Party to serve process in any other
manner permitted by law or limit the right
12
<PAGE> 143
EXHIBIT 10.1
of the Banks or the Secured Party (or any of them) to bring any such action or
proceeding against any of the Debtors or any of its or their property in the
courts of any other jurisdiction. Each of the Debtors hereby irrevocably waives
any objection to the laying of venue of any such suit or proceeding in the above
described courts.
[SIGNATURES FOLLOW ON SUCCEEDING PAGES]
13
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EXHIBIT 10.1
IN WITNESS WHEREOF, each of the undersigned Debtors and Secured Party
have executed this Security Agreement as of the day and year first above
written.
DEBTORS:
AQUA-CHEM, INC.
By:__________________________________
Its:__________________________________
CB - KRAMER SALES AND SERVICE,
INC.
By:___________________________________
Its:___________________________________
ACCEPTED BY SECURED PARTY:
COMERICA BANK, as Agent for the Banks
By:______________________________________
Its:______________________________________
Signature Page
Security Agreement
14
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EXHIBIT 10.1
The undersigned are executing a
counterpart hereof for purposes of
becoming parties hereto:
[FUTURE SUBSIDIARY]
By:__________________________________
Its:__________________________________
15
<PAGE> 146
EXHIBIT 10.1
SCHEDULE I
Intellectual Property
ATTACHMENT 1
to
Agreement
(Trademark)
Item A. Trademarks
REGISTERED TRADEMARKS
Country Trademark Registration No.
U.S. AC Stylized Letters 932,238
AC-1 1,083,076
AC-2 1,089,496
AC-240 1,246,171
AC-3 1,092,594
AC-4 1,092,037
AC-5 1,083,075
AC-50 1,224,728
AC-60 1,224,726
AC-7 1,237,931
AC-70 1,246,136
AC-75 1,237,930
AC-8 1,094,147
AC-80 1,246,135
AC-85 1,224,725
AC-90 1,246,137
ACRO-PAC 1,261,625
AMERICAN BOILER &
CONTROL COMPANY 1,239,852
AQUA-CHEM 1,307,927
AQUA-CHEM 766,376
BOILERMATE 708,411
TOTAL PROTECTION PLAN
CB and Design 1,690,519
CB 987,858
CB-HAWK 1,717,786
16
<PAGE> 147
EXHIBIT 10.1
CB-HAWK and Design 1,715,306
CLEAVER BROOKS HIGH
EFFICIENCY EXL 1,673,210
CLEAVER BROOKS
and Design 1,418,155
CLEAVER BROOKS
and Design 1,415,740
CLEAVER-BROOKS
Stylized Letters 575,242
MONITOR 697,452
CLEAVER BROOKS
and Design 659,832
DATA 1 1,352,559
"EU" and Design 1,947,815
Design Only 1,416,407
HEV-E-DUTY 721,008
HEV-E-OIL 512,817
HIGHLANDER 763,507
IBC and Design 1,229,404
IBC and Design 1,229,405
IC and Design 1,529,586
PARACOIL
Stylized Letters 780,316
PEAK TEMP and Design 781,399
PROGRESS 655,506
SPRAY-FILM 822,373
SPRAYMASTER 892,464
SYNCHROFIRE 1,365,446
PENDING TRADEMARK APPLICATIONS
Country Trademark Serial No.
U.S. ORBIS 75/256,114
EXPIRED, ABANDONED OR CANCELLED TRADEMARKS
Country Trademark Registration No./Serial No.
U.S. SENS-OR-TRIM 1,125,158
AQUA-CHEM 963,945
17
<PAGE> 148
EXHIBIT 10.1
Flame in Hand
Circle Logo 588,997
EU W/Global Design 74/291,027
PERFORMER SERIES 74/442,454
WATER-PRO 1,370,006
TRADEMARK APPLICATIONS IN PREPARATION
Country Trademark Products/Services
U.S. CENTRE FIRE
EFD
EFE
ENHANCED FILM
Item B. Trademark Licenses
None
18
<PAGE> 149
EXHIBIT 10.1
Attachment 1
to Agreement (Patent)
Patents (including letters patent and applications for letters patent):
<TABLE>
<CAPTION>
Country Patent Patent No. Issue Date
- ------- ------ ---------- ----------
<S> <C> <C> <C>
U.S. Integrated 5,335,628 8/9/94
boiler/fuel
cell system
U.S. Membrane 5,348,651 9/20/94
simulator
U.S. Multiple- 5,522,696 6/4/96
shutter
throttle
characterizati
on assembly
for burners
U.S. Scale 4,713,195 12/15/87
inhibitor
U.S. Fine Gas 4,559,305 04/21/87
recirculation
system for
fire tube
boilers and
burner
U.S. Air atomizing 5,344,311 9/6/94
system for oil
burners
</TABLE>
Patent licenses:
19
<PAGE> 150
EXHIBIT 10.1
License between Y.T. Li Engineering, Inc. and Aqua-Chem, Inc. dated
July 27, 1995
<TABLE>
<CAPTION>
Country Patent Patent No. Issue Date
- ------- ------ ---------- ----------
<S> <C> <C> <C>
U.S. Distillation 4,441,963 4/10/84
apparatus
U.S. Wobble tube 4,618,399 10/21/86
evaporator
U.S. Orbital drive 4,762,592 8/9/88
evaporator
U.S. Orbital tube 5,221,439 6/22/93
evaporator
U.S. Orbital type 5,363,660 11/15/94
freezing
apparatus and
method
U.S. Heat transfer 5,385,645 1/31/95
apparatus
U.S. Apparatus 08/571,906 12/19/95
Process and (pending) (Filing Date)
System for
Tube and Whip
Rod Heat
Exchanger
U.S. Orbital type 5,363,660 11/15/94
freezing
apparatus and
method
U.S. Enhanced Film 60/046,917 05/16/97
Resalination (pending) (Filing Date)
Apparatus and
Process
U.S. Distillation 4,230,529 10/28/80
Apparatus
</TABLE>
20
<PAGE> 151
EXHIBIT 10.1
<TABLE>
<S> <C> <C> <C>
U.S. Orbital/ 07/388,248
Oscillation
Filtration
System with no
Rotary Seal
U.S. Chromato- 5,013,446 5/7/91
graphic Gel
Contactor and
Process
21
</TABLE>
<PAGE> 152
EXHIBIT 10.1
Schedule II
Location of Collateral
22
<PAGE> 153
EXHIBIT 10.1
Schedule III
Each Debtor's chief executive office
and principal place of business
23
<PAGE> 154
EXHIBIT 10.1
Schedule IV
Locations of Place of Business
24
<PAGE> 155
EXHIBIT 10.1
to Security Agreement
AGREEMENT
(Trademark)
THIS AGREEMENT (TRADEMARK) (this "Agreement"), dated as of July 31,
1997, among Aqua-Chem, Inc., also known as Aqua Chem, Inc., also known as
Aqua-Chem, also known as Aqua-Chem Incorporated, formerly known as Aqua-Chem
Holding, Inc., also known as Aqua Chem Holding, Inc. ("Company" and sometimes a
"Debtor"), and Comerica Bank in its capacity as agent for the Banks referred to
below.
WITNESSETH
D. WHEREAS, pursuant to that certain Aqua-Chem Revolving Credit and
Term Loan Agreement dated as of July 31, 1997 (as amended or otherwise modified
from time to time, the "Credit Agreement"), among the Company, each of the
financial institutions party thereto (collectively, the "Banks") and Secured
Party, as Agent for the Banks, the Banks have agreed, subject to the
satisfaction of certain terms and conditions, to make Advances to Company and to
provide for the issuance of Letters of Credit for the account of Company,
individually, or jointly and severally with certain of the other Account Parties
(as such terms are defined in the Credit Agreement), as provided therein; and
E. WHEREAS, in connection with the Credit Agreement, the Debtors have
executed and delivered a Security Agreement, dated as of the date hereof (as
amended or otherwise modified from time to time, the "Security Agreement"); and
F. WHEREAS, as a condition precedent to the making of the initial
Advances under the Credit Agreement, the Debtors are required to execute and
deliver this Agreement and to further confirm the grant to the Secured Party for
the benefit of the Banks a continuing security interest in all of the Trademark
Collateral (as defined below) to secure all Indebtedness.
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Banks to make Advances
(including the initial Advance) to the Company pursuant to the Credit Agreement,
each of the Debtors agrees, for the benefit of the Banks, as follows:
SECTION 1. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided in the Security Agreement.
SECTION 2. Grant of Security Interest. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, to
secure all of the Indebtedness, each of the Debtors does hereby mortgage, pledge
and hypothecate to the Secured Party for the benefit of the Banks, and
<PAGE> 156
EXHIBIT 10.1
grant to the Secured Party for the benefit of the Banks a security interest in,
all of the following property (the "Trademark Collateral"), whether now owned or
hereafter acquired or existing:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos, other source of business
identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of a like nature
(all of the foregoing items in this clause (a) being collectively
called a "Trademark") now existing anywhere in the world or hereafter
adopted or acquired, whether currently in use or not, all registrations
and recordings thereof and all applications in connection therewith,
whether pending or in preparation for filing, including registrations,
recordings and applications in the United States Patent and Trademark
Office or in any office or agency of the United States of America or
any State thereof or any foreign country, including those referred to
in Item A of Attachment 1 hereto;
(b) all Trademark licenses, including each Trademark license
referred to in Item B of Attachment 1 hereto;
(c) all renewals of any of the items described in clauses (a)
and (b);
(d) all of the goodwill of the business connected with the use
of, and symbolized by the items described in, clauses (a) and (b); and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by the Debtors against third parties for past,
present, or future infringement or dilution of any Trademark, Trademark
registration, or Trademark license, including any Trademark, Trademark
registration or Trademark license referred to in Item A and Item B of
Attachment 1 hereto, or for any injury to the goodwill associated with
the use of any Trademark or for breach or enforcement of any Trademark
license. Nothing contained herein shall be deemed to be an assignment
of any "intent to use" trademark application.
SECTION 3. Security Agreement. This Agreement has been executed and
delivered by the Debtors for the purpose of registering the security interest of
the Secured Party and the Banks in the Trademark Collateral with the United
States Patent and Trademark Office and corresponding offices in other countries
of the world. The security interest granted hereby has been granted as a
supplement to, and not in limitation of, the security interest granted to the
Secured Party and the Banks under the Security Agreement. The Security Agreement
(and all rights and remedies of the Secured Party and the Banks thereunder shall
remain in full force and effect in accordance with its terms.
SECTION 4. Release of Security Interest. Upon payment in full of all
Indebtedness and commitment (whether optional or obligatory) to extend any
credit under the Credit Agreement has been terminated, the Secured Party shall,
at the Debtors' expense, execute and deliver to the Debtors
2
<PAGE> 157
EXHIBIT 10.1
all instruments and other documents as may be necessary or proper to release the
lien on and security interest in the Trademark Collateral which has been granted
hereunder.
SECTION 5. Acknowledgment. Each of the Debtors does hereby further
acknowledge and affirm that the rights and remedies of the Secured Party for the
benefit of the Banks with respect to the security interest in the Trademark
Collateral granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which (including the remedies provided for therein)
are incorporated by reference herein as if fully set forth herein.
SECTION 6. Loan Documents, etc. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.
SECTION 7. Counterparts. This Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
3
<PAGE> 158
EXHIBIT 10.1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
DEBTORS:
AQUA-CHEM, INC.
By:_________________________________________
Its:________________________________________
Address: 7800 N. 113th Street
Milwaukee, WI 53224
Attention: _________________________________
Facsimile No.: _____________________________
COMERICA BANK, as Agent for the Banks
By:_________________________________________
Title:______________________________________
Address: One Detroit Center
9th Floor
Detroit, MI 48275-3280
Attention:__________________________________
Facsimile No: (313) 222-9434
Signature Page
Trademark Agreement
4
<PAGE> 159
EXHIBIT 10.1
ATTACHMENT 1
to
Agreement
(Trademark)
Item A. Trademarks
REGISTERED TRADEMARKS
<TABLE>
<CAPTION>
Country Trademark Registration No.
- ------- --------- ----------------
<S> <C> <C>
U.S. AC Stylized Letters 932,238
AC-1 1,083,076
AC-2 1,089,496
AC-240 1,246,171
AC-3 1,092,594
AC-4 1,092,037
AC-5 1,083,075
AC-50 1,224,728
AC-60 1,224,726
AC-7 1,237,931
AC-70 1,246,136
AC-75 1,237,930
AC-8 1,094,147
AC-80 1,246,135
AC-85 1,224,725
AC-90 1,246,137
ACRO-PAC 1,261,625
AMERICAN BOILER &
CONTROL COMPANY 1,239,852
AQUA-CHEM 1,307,927
AQUA-CHEM 766,376
BOILERMATE 708,411
TOTAL PROTECTION PLAN
CB and Design 1,690,519
CB 987,858
CB-HAWK 1,717,786
CB-HAWK and Design 1,715,306
CLEAVER BROOKS HIGH
EFFICIENCY EXL 1,673,210
CLEAVER BROOKS
and Design 1,418,155
</TABLE>
<PAGE> 160
EXHIBIT 10.1
<TABLE>
<S> <C> <C>
CLEAVER BROOKS
and Design 1,415,740
CLEAVER-BROOKS
Stylized Letters 575,242
MONITOR 697,452
CLEAVER BROOKS
and Design 659,832
DATA 1 1,352,559
"EU" and Design 1,947,815
Design Only 1,416,407
HEV-E-DUTY 721,008
HEV-E-OIL 512,817
HIGHLANDER 763,507
IBC and Design 1,229,404
IBC and Design 1,229,405
IC and Design 1,529,586
PARACOIL
Stylized Letters 780,316
PEAK TEMP and Design 781,399
PROGRESS 655,506
SPRAY-FILM 822,373
SPRAYMASTER 892,464
SYNCHROFIRE 1,365,446
WATER-PRO 1,370,006
</TABLE>
PENDING TRADEMARK APPLICATIONS
<TABLE>
<CAPTION>
Country Trademark Serial No.
- ------- --------- ----------
<S> <C> <C>
U.S. ORBIS 75/256,114
</TABLE>
EXPIRED, ABANDONED OR CANCELLED TRADEMARKS
<TABLE>
<CAPTION>
Country Trademark Registration No./Serial No.
- ------- --------- ---------------------------
<S> <C> <C>
U.S. SENS-OR-TRIM 1,125,158
AQUA-CHEM 963,945
Flame in Hand
Circle Logo 588,997
EU W/Global Design 74/291,027
PERFORMER SERIES 74/442,454
WATER-PRO 1,370,006
</TABLE>
2
<PAGE> 161
EXHIBIT 10.1
TRADEMARK APPLICATIONS IN PREPARATION
<TABLE>
<CAPTION>
Country Trademark Products/Services
- ------- --------- -----------------
<S> <C> <C>
U.S. CENTRE FIRE
EFD
EFE
ENHANCED FILM
Item B. Trademark Licenses
None
</TABLE>
3
<PAGE> 162
EXHIBIT 10.1
to Security Agreement
AGREEMENT
(Patent)
THIS AGREEMENT (PATENT) (this "Agreement"), dated as of July 31, 1997,
among Aqua-Chem, Inc. ("Company" and sometimes a "Debtor"), and Comerica Bank in
its capacity as agent for the Banks referred to below.
WITNESSETH
G. WHEREAS, pursuant to that certain Aqua-Chem Revolving Credit and
Term Loan Agreement dated as of July 31, 1997 (as amended or otherwise modified
from time to time, the "Credit Agreement"), among the Company, each of the
financial institutions party thereto (collectively, the "Banks") and Secured
Party, as Agent for the Banks, the Banks have agreed, subject to the
satisfaction of certain terms and conditions, to make Advances to Company and to
provide for the issuance of Letters of Credit for the account of Company,
individually, or jointly and severally with certain of the other Account Parties
(as such terms are defined in the Credit Agreement), as provided therein; and
H. WHEREAS, in connection with the Credit Agreement, the Debtors have
executed and delivered a Security Agreement, dated as of the date hereof (as
amended or otherwise modified from time to time, the "Security Agreement"); and
I. WHEREAS, as a condition precedent to the making of the initial
Advances under the Credit Agreement, the Debtors are required to execute and
deliver this Agreement and to further confirm the grant to the Secured Party for
the benefit of the Banks a continuing security interest in all of the Patent
Collateral (as defined below) to secure all Indebtedness.
NOW, THEREFORE, for good and valuable consideration the receipt of
which is hereby acknowledged, and in order to induce the Banks to make Advances
(including the initial Advance) to the Company pursuant to the Credit Agreement,
each of the Debtors agrees, for the benefit of the Banks, as follows:
SECTION 1. Definitions. Unless otherwise defined herein or the context
otherwise requires, terms used in this Agreement, including its preamble and
recitals, have the meanings provided in the Security Agreement.
SECTION 2. Grant of Security Interest. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, to
secure all of the Indebtedness, each of the Debtors does hereby mortgage, pledge
and hypothecate to the Secured Party for the benefit of the Banks, and grant to
the Secured Party for the benefit of the Banks a security interest in, all of
the following property (the "Patent Collateral"), whether now owned or hereafter
acquired or existing:
<PAGE> 163
EXHIBIT 10.1
(a) all letters patent and applications for letters patent
throughout the world, including all patent applications in preparation
for filing anywhere in the world and including each patent and patent
application referred to in Item A of Attachment 1 hereto;
(b) all patent licenses, including each patent license referred
to in Item B of Attachment 1 hereto;
(c) all reissues, divisions, continuations, continuations-in-
part, extensions, renewals and reexaminations of any of the items
described in the foregoing clauses (a) and (b); and
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceed of infringement suits), the
right to sue third parties for past, present or future infringements of
any patent or patent application, including any patent or patent
application referred to in Item A of Attachment 1 hereto, and for
breach or enforcement of any patent license, including any patent
license referred to in Item B of Attachment 1 hereto, and all rights
corresponding thereto throughout the world.
SECTION 3. Security Agreement. This Agreement has been executed and
delivered by the Debtors for the purpose of registering the security interest of
the Secured Party and the Banks in the Patent Collateral with the United States
Patent and Trademark Office and corresponding offices in other countries of the
world. The security interest granted hereby has been granted as a supplement to,
and not in limitation of, the security interest granted to the Secured Party and
the Banks under the Security Agreement. The Security Agreement (and all rights
and remedies of the Secured Party and the Banks thereunder) shall remain in full
force and effect in accordance with its terms.
SECTION 4. Release of Security Interest. Upon payment in full of all
Indebtedness and commitment (whether optional or obligatory) to extend any
credit under the Credit Agreement has been terminated, the Secured Party shall,
at the Debtors' expense, execute and deliver to the Debtors all instruments and
other documents as may be necessary or proper to release the lien on and
security interest in the Patent Collateral which has been granted hereunder.
SECTION 5. Acknowledgment. Each of the Debtors does hereby further
acknowledge and affirm that the rights and remedies of the Secured Party for the
benefit of the Banks with respect to the security interest in the Patent
Collateral granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which (including the remedies provided for therein)
are incorporated by reference herein as if fully set forth herein.
SECTION 6. Loan Documents, etc. This Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.
2
<PAGE> 164
EXHIBIT 10.1
SECTION 7. Counterparts. This Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
DEBTORS:
AQUA-CHEM, INC.
By:_________________________________________
Its:________________________________________
Address: 7800 N. 113th Street
Milwaukee, WI 53224
Attention: _________________________________
Facsimile No.: _____________________________
COMERICA BANK, as Agent for the Banks
By:__________________________________________
Title:_______________________________________
Address: One Detroit Center
9th Floor
Detroit, MI 48275-3280
Attention:___________________________________
Facsimile No: (313) 222-9434
Signature Page
Patent Agreement
3
<PAGE> 165
EXHIBIT 10.1
Attachment 1
to Agreement (Patent)
Patents (including letters patent and applications for letters patent):
<TABLE>
<CAPTION>
Country Patent Patent No. Issue Date
- ------- ------ ---------- ----------
<S> <C> <C> <C>
U.S. Integrated boiler/fuel 5,335,628 8/9/94
cell system
U.S. Membrane simulator 5,348,651 9/20/94
U.S. Multiple-shutter 5,522,696 6/4/96
throttle
characterization
assembly for burners
U.S. Scale inhibitor 4,713,195 12/15/87
U.S. Flue Gas 4,559,305 04/21/87
recirculation system
for fire tube boilers
and burner
U.S. Air atomizing 5,344,311 9/6/94
system for oil
burners
</TABLE>
4
<PAGE> 166
EXHIBIT 10.1
Patent licenses:
License between Y.T. Li Engineering, Inc. and Aqua-Chem, Inc. dated July 27,
1995
<TABLE>
<CAPTION>
Country Patent Patent No. Issue Date
- ------- ------ ---------- ----------
<S> <C> <C> <C>
U.S. Distillation apparatus 4,441,963 4/10/84
U.S. Wobble tube 4,618,399 10/21/86
evaporator
U.S. Orbital drive 4,762,592 8/9/88
evaporator
U.S. Orbital tube 5,221,439 6/22/93
evaporator
U.S. Orbital type freezing 5,363,660 11/15/94
apparatus and
method
U.S. Heat transfer 5,385,645 1/31/95
apparatus
U.S. Apparatus, Process 08/571,906 12/19/95
and System for Tube (pending) (Filing Date)
and Whip Rod Heat
Exchanger
U.S. Orbital type freezing 5,363,660 11/15/94
apparatus and
method
U.S. Distillation 4,230,529 10/28/80
Apparatus
U.S. Enhanced Film 60/046,917 05/16/97
Desalination (pending) (Filing Date)
Apparatus and
Process
U.S. Orbital/Oscillation 07/338,248 8/1/89
Filtration System (Filing Date)
with no Rotary Seal
U.S. Chromatographic 5,013,446 5/7/91
Gel Contactor and
Process
</TABLE>
5
<PAGE> 167
EXHIBIT 10.1
EXHIBIT L
FORM OF TERM LOAN RATE REQUEST
No._____________________ Dated:__________________
To: Comerica Bank - Agent
Re: Aqua-Chem Revolving Credit and Term Loan Agreement dated as of July 31,
1997 (as amended or otherwise modified from time to time, the
"Agreement") by and among the lenders from time to time parties thereto
(collectively, the "Banks"), Comerica Bank, as Agent for the Banks (the
"Agent"), and Aqua-Chem, Inc. (the "Company")
Pursuant to the Agreement, the Company hereby requests that the Banks
refund or convert, as applicable, an Advance from Banks as follows:
A. Date of Refunding or Conversion of Advance:___________________
B. Amount of Advance:
$_________________
C. Type of Activity:
1. Refunding [ ]
2. Conversion [ ]
D. Interest Rate:
1. Prime-based Rate [ ]
2. Eurocurrency-based Rate [ ]
E. Interest Period (for Eurocurrency-based Advances only):
<PAGE> 168
EXHIBIT 10.1
1. One (1) Month [ ](1)
2. Two (2) Months [ ]
3. Three (3) Months [ ]
4. Six (6) Months [ ]
- ---------------
AQUA-CHEM, INC.
By:_____________________________
Its:_____________________________
1Until January 31, 1998 only One (1) Month Interest Period available except
as otherwise permitted by Agent.
2
<PAGE> 169
EXHIBIT 10.1
EXHIBIT M-1
COMPANY PLEDGE AGREEMENT
(Aqua-Chem, Inc.)
THIS STOCK PLEDGE ("Stock Pledge") made as of this 31st day of July, 1997 by
and between Aqua-Chem, Inc., a Delaware corporation ("Company") and Comerica
Bank, a Michigan banking corporation, as Agent for and on behalf of the Banks
(as defined below) ("Secured Party").
RECITALS:
A. Pursuant to that certain Aqua-Chem Revolving Credit and Term Loan
Agreement dated as of July 31, 1997(as may be amended, or otherwise modified
from time to time, the "Credit Agreement") by and among Company, Secured Party
as Agent and the financial institutions which are named in and are signatories
to the Credit Agreement ("Banks"), the Banks have agreed to extend credit to
Company on the terms set forth in the Credit Agreement.
B. As a condition to the performance of their respective obligations
under the Credit Agreement, the Banks, and Secured Party, as Agent for the
Banks, have required that Company provide this Stock Pledge to Secured Party,
as Agent for the Banks, granting various security interests, liens and other
encumbrances as security for the Company's obligations under its Notes, the
Credit Agreement and the other Loan Documents.
C. Agent is acting as Agent for the Banks pursuant to Section 13.1 of
the Credit Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
I. Creation of Security Interest
Company hereby grants to Secured Party, on behalf of Banks and the
Agent, a security interest in the property described in paragraph II, below
("Collateral").
II. Collateral.
The Collateral consists of the following:
(a) 100% of the outstanding shares of each class of stock, (or other
ownership interest) of each Domestic Subsidiary listed on Schedule A-1 hereto
(as such Schedule may be revised
<PAGE> 170
EXHIBIT 10.1
pursuant to Section III B.1 hereof) and 65% of the outstanding shares of each
class of stock (or other ownership interest) of each Foreign Subsidiary listed
on Schedule A-2 (as such Schedule may be revised pursuant to Section III B.1
hereof) hereto, together with all of the certificates and/or instruments
representing such shares of stock (or other ownership interest), and all cash,
securities, dividends, rights and other property at any time and from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such shares;
(b) 100% of any additional shares of stock, (or other ownership interest)
of any of the Domestic Subsidiaries listed on Schedule A-1 hereto and 65% of any
additional shares of stock, (or other ownership interest) of any of the Foreign
Subsidiaries listed on Schedule A-2 hereto, at any time and from time to time
acquired by the Company in any manner, all of the cash, securities, dividends,
rights and other property at any time and from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of such
shares;
(c) All other property hereafter delivered to the Agent in substitution
for or in addition to the foregoing, all certificates and instruments
representing or evidencing such property, and all cash, securities, interest,
dividends, rights and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
thereof; and
(d) All products and proceeds of all of the foregoing.
III. Company's Obligations
A. Payment of Secured Indebtedness. The security interest created herein
is given as security for:
(1) All of Company's obligations contained in or arising under or in
connection with the Credit Agreement and the Notes issued by it from time to
time pursuant to the Credit Agreement, and all obligations of Company contained
in or arising under the other Loan Documents executed by Company;
(2) All of Company's obligations contained in or arising under any and
all Letter of Credit Agreements executed or to be executed by Company from time
to time pursuant to the Credit Agreement, and any Letters of Credit issued or to
be issued thereunder;
(3) All of Company's obligations contained in or arising under any
Interest Rate Protection Agreements;
(4) The obligations of Company for payment of all sums hereafter
loaned, paid out, expended or advanced by or for the account of the Banks (or
any of them) or by the Secured Party under the terms of this Stock Pledge, the
Credit Agreement, or the other Loan Documents, in connection with the Collateral
or any of the documents or instruments described in this Stock Pledge, the
Credit Agreement or the other Loan Documents;
2
<PAGE> 171
EXHIBIT 10.1
together with interest thereon as provided for herein or therein; and
also as security for all other indebtedness and liabilities, whether direct,
indirect, absolute or contingent, owing by the Company to the Banks in any
manner under the Credit Agreement or the Loan Documents, which hereafter become
due, or that may hereafter be incurred by the Company to or acquired (pursuant
to the Credit Agreement or the other Loan Documents) by the Banks, and all other
future obligations of the Company to the Banks, their successors and assigns,
howsoever created, arising or evidenced, whether joint or several, direct or
indirect, absolute or contingent, primary or secondary, and any judgments that
may hereafter be rendered on such indebtedness or any part thereof, with
interest according to the rates and terms specified, or as provided by law, and
any and all replacements, consolidations, amendments, renewals or extensions of
the foregoing (collectively herein called the "Indebtedness").
B. Protection of Security Interest.
(1) Company shall take any and all steps required to protect the
Collateral, and in pursuance thereof Company agrees that Company shall deliver
or caused to be delivered to Secured Party and Secured Party shall receive
possession, on behalf of Banks, of certificates representing all of the pledged
shares referred to in Schedule A-1 or A-2, as the case may be, properly endorsed
or with assignments separate from such certificates in blank for transfer. In
addition Secured Party shall receive proof that appropriate acknowledgments,
governmental approvals, share register entries, local pledge agreements,
financing statements, collateral and other documents covering the Collateral
have been executed and delivered by the appropriate parties and recorded on file
with such Persons and in such jurisdictions as necessary to perfect the security
interests, or other liens granted hereby and/or thereby. The Secured Party from
time to time shall revise Schedule A-1 and Schedule A-2 hereto and promptly
deliver a copy thereto to Company and the Banks, on the effective date of the
acquisition or creation by Company of a Domestic Subsidiary or a direct Foreign
Subsidiary (as the case may be), adding to Schedule A-1 the name of each such
Domestic Subsidiary or to Schedule A-2 each such direct Foreign Subsidiary (as
the use may be) so acquired or created, and upon such revision, Company shall be
deemed to have pledged 100% of the capital stock (or other ownership interests)
of each such Domestic Subsidiary and 65% of the capital stock (or other
ownership interests) of each such Foreign Subsidiary so acquired or created to
Secured Party for and on behalf of Banks.
(2) It will not sell, transfer, assign or otherwise dispose of any of
the Collateral or any interest therein or offer to do so without the prior
written consent of Secured Party, given at the direction of the Majority Banks,
or permit anything to be done that may materially impair the value of any of the
Collateral or the security intended to be afforded by this Stock Pledge.
(3) It will, subject to the applicable terms of the Credit Agreement,
pay all taxes and assessments upon the Collateral or for its use or operation
before any interest or penalty for nonpayment attaches thereto unless said
payment is being contested in good faith and it establishes a reserve as
required by generally accepted accounting principles.
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EXHIBIT 10.1
(4) It will, subject to the applicable terms of the Credit Agreement,
sign and execute alone or with Secured Party any financing statement or other
document or procure any documents and pay all reasonable connected costs,
necessary to protect the security interest under this Stock Pledge against the
rights or interests of third persons.
(5) It will, subject to the applicable terms of the Credit Agreement,
reimburse Secured Party for all reasonable costs, including reasonable
attorneys' fees, incurred for any action taken by Secured Party to remedy an
Event of Default which Secured Party elects to remedy pursuant to its rights
under Article VI hereof.
(6) It will:
(i) subject to the applicable terms of the Credit Agreement,
allow Secured Party to examine, audit and inspect Company's books, accounts,
records (including without limitation all records relating to the Collateral
or the Indebtedness), ledgers and assets and properties of every kind and
description wherever located at all reasonable times during normal business
hours, upon oral or written request of Secured Party, and to make and take
away copies of any and all such books, accounts, records and ledgers. An
examination of the records or properties of the Company may require
revealment of proprietary and/or confidential data and information, and the
provisions of Section 14.12 of the Credit Agreement are incorporated herein;
(ii) punctually and properly perform all of its covenants and
duties under any other security agreement, mortgage, collateral pledge
agreement or contract of any kind now or hereafter existing as security for
or in connection with payment of the Indebtedness, or any part thereof;
(iii) perform its obligations under the Loan Documents;
(iv) promptly furnish Secured Party with any information in
writing which Secured Party may reasonably request concerning the
Collateral;
(v) promptly notify Secured Party of any material change in any
fact or circumstances warranted or represented by Company in this Stock
Pledge or in any other writing furnished by Company to Secured Party in
connection with the Collateral or the Indebtedness;
(vi) promptly notify Secured Party of any material claim, action
or proceeding affecting the Collateral and title therein, or in any part
thereof, or the security interest created herein, and, at the request of the
Secured Party, appear in and defend, at Company's expense, any such action
or proceeding; and
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EXHIBIT 10.1
(vii) promptly, after being requested by Secured Party, pay to
Secured Party the amount of all reasonable expenses, including reasonable
attorneys' fees and other legal expenses, incurred by Secured Party in
protecting and maintaining the Collateral or its rights hereunder, or in
connection with any audit or inspection of the Collateral pursuant to the
terms hereof, and in enforcing the security interest created herein.
(7) With respect to any Collateral of a kind requiring an additional
security agreement, financing statement, or other writing to perfect a security
interest therein in favor of Secured Party, on behalf of Banks, Company will
forthwith execute and deliver to Secured Party on behalf of Banks, whatever the
Secured Party or the Majority Banks shall deem necessary or proper for such
purpose. Should any covenant, duty or agreement of Company fail to be performed
in accordance with its terms hereunder, Secured Party may, but shall never be
obligated to, perform or attempt to perform such covenant, duty or agreement on
behalf of Company, and any amount expended by Secured Party in such performance
or attempted performance shall become part of the Indebtedness, and, at the
request of Secured Party, Company agrees to pay such amount to Secured Party
upon demand at Secured Party's office in Detroit, Michigan together with
interest thereon at the highest rate which interest accrues on amounts after the
same become due pursuant to the terms of any note executed pursuant to the
Credit Agreement from the date of such expenditure by Secured Party until paid.
With respect to any Collateral in which Company acquires any rights subsequent
to the date hereof and which, under applicable law, a security interest is or
can be perfected by possession, Company agrees to deliver possession of such
Collateral to Secured Party immediately upon its acquisition of rights therein.
(8) Company will hold the proceeds of any of the Collateral in trust
for Secured Party on behalf of the Banks, will not commingle said proceeds with
any other funds, and, after an Event of Default, will deliver such proceeds to
Secured Party at its request.
(9) If Secured Party, acting in its sole discretion, redelivers any
Collateral to Company or Company's designee for the purpose of
(i) the ultimate sale or exchange thereof, or
(ii) presentation, collection, renewal, or registration of transfer
thereof,
such redelivery shall not constitute a release of Secured Party's security
interest therein or in the proceeds thereof unless Secured Party, with the
consent of the Majority Banks, specifically so agrees in writing.
(10) If Company requests any such redelivery, Company will deliver with
such request a duly executed financing statement in form and substance
satisfactory to Secured Party.
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EXHIBIT 10.1
IV. Default
The term "Event of Default", as used herein, means the occurrence of any
Event of Default under the Credit Agreement.
V. Consequence of Default.
Upon an Event of Default, Secured Party shall be entitled, subject to
applicable law, to all of its remedies specified herein, in the Credit
Agreement, or in any other document executed in connection with the Credit
Agreement or this Stock Pledge, or provided by law. Additionally, upon an Event
of Default and subject to applicable law, Secured Party will be entitled to
receive all dividends payable in respect of the pledged shares evidencing the
Collateral pledged under this Stock Pledge, and may change the registration of
any registerable Collateral to any other name or form and is hereby authorized
to appoint any officer or agent of Secured Party as Company's true and lawful
proxy and attorney-in-fact, with power, upon the occurrence of any Event of
Default (exercisable so long as such Event of Default is continuing), to
exercise all voting rights in respect of the shares evidencing the Collateral
pledged hereby; to endorse Company's name or any of its officers' names or
agents' names upon any notes, checks, drafts, money orders, or other instruments
of payment (including payments payable under any policy of insurance on the
Collateral) or Collateral that may come into possession of the Secured Party in
full or part payment of any amounts owing to the Banks; to give written notice
to such office and officials of the United States Post Office to effect such
change or changes of address so that all mail addressed to Company may be
delivered directly to Secured Party; to execute on behalf of Company any
financing statements, amendments, subordinations or other filings pursuant to
the Credit Agreement; granting unto Secured Party on behalf of the Banks, as the
proxy and attorney-in-fact of Company, full power to do any and all things
necessary to be done in and about the premises as fully and effectually as
Company might or could do, and hereby ratifying all that said proxy and attorney
shall lawfully do or cause to be done by virtue hereof. The proxy and power of
attorney described herein shall be deemed to be coupled with an interest and
shall be irrevocable for the term of the Credit Agreement, and all transactions
thereunder and thereafter as long as any Indebtedness or any of the commitments
to lend remain outstanding. The Secured Party shall have full power, subject to
applicable law to collect, compromise, endorse, sell or otherwise deal with the
Collateral or proceeds thereof on behalf of the Banks in its own name or in the
name of Company provided that Secured Party shall act in a commercially
reasonable manner.
VI. Secured Party's Rights and Remedies.
Secured Party shall have available to it (subject to applicable law)
the following rights and remedies upon occurrence of an Event of Default:
A. Right to Assign. Secured Party may assign this Stock Pledge only as
provided in the Credit Agreement and if Secured Party does assign this Stock
Pledge, the assignee shall be entitled
6
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EXHIBIT 10.1
to the performance of all of Company's obligations and agreements under this
Stock Pledge, and the assignee shall be entitled to all the rights and remedies
of Secured Party under this Stock Pledge.
B. Right to Discharge Company's Obligations. Secured Party may (i) with
the approval of the Majority Banks, discharge taxes, liens or security interests
or other encumbrances at any time levied or placed on the Collateral which are
superior to the security interest herein granted, (ii) remedy or cure any
default of Company under the terms of any lease, rental agreement, land contract
or other document which in any way pertains to or affects Company's title to or
interest in any of the Collateral, (iii) pay for insurance on the Collateral,
and (iv) pay for the maintenance and preservation of the Collateral, unless with
respect to the obligations under clauses (i) or (ii) Company is contesting in
good faith such obligations, and Company agrees to reimburse Secured Party, on
demand, for any payment made or any expense incurred by Secured Party pursuant
to the foregoing authorization, with interest, which payments and expenses shall
be secured by the security intended to be afforded by this Stock Pledge.
C. Remedies and Enforcement. Secured Party shall have and may exercise
any and all rights of enforcement and remedies afforded to a secured party under
the Uniform Commercial Code as adopted and in force in the State of Michigan, to
the extent permitted by applicable law, on the date of this Stock Pledge or the
date of Company's default together with any and all other rights and remedies
otherwise provided and available to Secured Party by law unless such application
would result in the invalidity or unenforceability of any provision hereof, in
which case the law of the state in which any of the Collateral is located shall
apply to the extent necessary to render such provision valid and enforceable;
and, in conjunction with, in addition to, or substitution for those rights, at
Secured Party's discretion, Secured Party may:
(1) Apply any of the Collateral against any of the Indebtedness
secured hereby;
(2) Waive any default, or remedy any default in any reasonable
manner, without waiving its rights and remedies upon default and without
waiving any other prior or subsequent default;
(3) Without any notice to Company, notify any parties
obligated on any of the Collateral to make payment to the Secured Party of
any amounts due or to become due thereunder and enforce collection of any of
the Collateral by suit or otherwise and surrender, release or exchange all
or any part thereof, or compromise or extend or renew for any period
(whether or not longer than the original period) the indebtedness thereunder
or evidenced thereby. Upon request of the Secured Party, Company will, at
its own expense, notify any parties obligated to Company on any of the
Collateral to make payment to the Secured Party of any amounts due or to
become due thereunder. Company agrees that Secured Party shall not be liable
for any loss or damage which Company suffers or may suffer as a result of
Secured Party's processing of items or its exercise of any other rights or
remedies under this Stock Pledge, including without limitation indirect,
special or consequential damages, loss of revenues or profits, or any claim,
demand or action by any third party not related to or
7
<PAGE> 176
EXHIBIT 10.1
affiliated with Company arising out of or in connection with the processing
of items (excluding only the claims of such third parties in connection with
the processing of items based solely upon the gross negligence or willful
misconduct of Secured Party) or the exercise of any other rights or remedies
hereunder. Company further agrees to indemnify and hold Secured Party
harmless from and against all such third party claims, demands or actions,
including without limitation litigation costs and reasonable attorneys'
fees.
D. Right of Sale.
(1) Company agrees that upon the occurrence of an Event of
Default (taking into account applicable periods of cure, if any), Secured
Party may, at its option, sell and dispose of the Collateral at public or
private sale without any previous demand of performance. Company agrees that
notice of such sale sent to Company's address, as set forth in the Credit
Agreement, by certified or registered mail sent at least five (5) days prior
to such sale, shall constitute reasonable notice of sale. The foregoing
shall not require notice if none is necessary under applicable law. The
proceeds of sale shall be applied in the following order:
(i) to all reasonable costs and charges incurred by Secured
Party in the taking and causing the removal and sale of said property,
including such reasonable attorneys' fees as shall have been incurred by
Secured Party;
(ii) to the Indebtedness, including all accrued interest thereon;
and
(iii) any surplus of such proceeds remaining shall be paid to the
Company, or to such other party who shall lawfully be entitled thereto.
(2) At any sale or sales made pursuant to this Stock Pledge or
in a suit to foreclose the same, the Collateral may be sold en masse or
separately, at the same or at different times, at the option of the Secured
Party or its assigns. Such sale may be public or private with notice as
required by the Uniform Commercial Code as then in effect in the state in
which the Collateral is located, and the Collateral need not be present at
the time or place of sale. At any such sale, the Secured Party or the holder
of any note hereby secured may bid for and purchase any of the property
sold, notwithstanding that such sale is conducted by the Secured Party or
its attorneys, agents, or assigns.
E. Miscellaneous. Secured Party shall have the right at all times to
enforce the provisions of this Stock Pledge on behalf of Banks in strict
accordance with the terms hereof, notwithstanding any conduct or custom on the
part of Secured Party in refraining from so doing at any time or times. The
failure of Secured Party at any time or times to enforce its rights under said
provisions strictly in accordance with the same shall not be construed as having
created a custom in any way or manner contrary to the specific provisions of
this Stock Pledge or as having in any way or manner modified the same. All
rights and remedies of Secured Party and Banks are cumulative and concurrent,
and
8
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EXHIBIT 10.1
the exercise of one right or remedy shall not be deemed a waiver or release of
any other right or remedy.
VII. Representations and Warranties of Company.
Company represents and warrants, as continuing representations and
warranties so long as the Guaranty remains in effect, that:
A. The individual signatory hereto has authority to execute and deliver
this Stock Pledge on behalf of Company.
B. No financing statement covering the Collateral, or any part thereof,
has been filed with any filing officer other than in favor of Secured Party.
C. No other agreement, pledge or assignment covering the Collateral, or
any part thereof, has been made and no security interest, other than the one
created hereby or pursuant to pledges and security agreements previously made in
favor of Secured Party on behalf of the Banks, has attached or been perfected in
the Collateral or in any part thereof.
D. No material dispute, right of setoff, counterclaim or defenses exist
with respect to any part of the Collateral.
E. All information supplied and statements made in any financial or
credit statements or application for credit prior to the execution of this Stock
Pledge are true and correct as of the date hereof in all material respects.
F. The Collateral, (1) in the case of each Domestic Subsidiary,
constitutes all the issued and outstanding capital stock (or other ownership
interests) of each of the Domestic Subsidiaries, (2) in the case of each Foreign
Subsidiary, constitutes no more than 65% of the issued and outstanding capital
stock (or other ownership interests) of each of the Foreign Subsidiaries, (3)
have been duly authorized and issued to Company, (3) is fully paid and
non-assessable, (4) is freely and validly assignable by Company, and (5) is not
subject to any option, warrant right to call or commitment of any kind or
nature.
G. At the time Secured Party's security interest attaches to any of the
Collateral or its proceeds, Company will be the lawful owner with the right to
transfer any interest therein, and that Company will make such further
assurances as to prove its title to the Collateral as may be reasonably required
and will defend the Collateral and its proceeds against the lawful claims and
demands of all persons whomsoever. The delivery at any time by Company to
Secured Party of Collateral or financing statements covering Collateral shall
constitute a representation and warranty by Company under this Stock Pledge
that, with respect to such Collateral, and each item thereof, Company is owner
of the Collateral and the matters heretofore warranted in this paragraph are
true and correct.
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EXHIBIT 10.1
VIII. Mutual Agreements.
Company and Secured Party mutually agree as follows:
A. "Company" and "Secured Party" as used in this Stock Pledge include
the successors and permitted assigns of those parties.
B. To the extent permitted by applicable law, except as otherwise
provided herein, the law governing this secured transaction shall be that of the
State of Michigan.
C. This Stock Pledge includes all amendments and supplements hereto and
assignments hereof and Company and Secured Party shall not be bound by any
amendment or undertaking not expressed in a writing executed by each of them.
D. All capitalized terms not specifically defined herein which are
defined in the Credit Agreement are used as defined in the Credit Agreement.
E. This Stock Pledge shall be a continuing security interest in every
respect (whether or not the outstanding balance of the Indebtedness is reduced
to zero) and Secured Party's security interest in the Collateral as granted
herein shall continue in full force and effect until all of the Indebtedness is
indefeasibly repaid and discharged in full and no commitment (whether optional
or obligatory) to extend any credit under the Credit Agreement remains
outstanding.
F. The parties hereto acknowledge that this Stock Pledge is subject to
the mutual waiver of jury trial contained in Section 14.15 of the Credit
Agreement and to the consent to jurisdiction provisions contained in Section
14.2 of the Credit Agreement.
G. This Stock Pledge has been executed and delivered pursuant to the
Credit Agreement and in the event of any conflict between this Stock Pledge and
the Credit Agreement, the Credit Agreement shall govern.
10
<PAGE> 179
EXHIBIT 10.1
IN WITNESS WHEREOF, Company and Secured Party have executed this Stock
Pledge on the day and year first above written.
COMPANY:
AQUA-CHEM, INC., a Delaware corporation
By:____________________________________
Its:__________________________________
ACCEPTED BY SECURED PARTY:
COMERICA BANK, as Agent for the Banks
By:___________________________________
Its:__________________________________
Signature Page
Company Pledge Agreement
11
<PAGE> 180
EXHIBIT 10.1
SCHEDULE A-1
Domestic Subsidiaries
CB-Kramer Sales and Service, Inc.
12
<PAGE> 181
EXHIBIT 10.1
SCHEDULE A-2
Foreign Subsidiaries
Aqua-Chem International, Inc., a U.S. Virgin Islands corporation
13
<PAGE> 182
EXHIBIT 10.1
EXHIBIT M-2
SUBSIDIARY PLEDGE AGREEMENT
(CB - Kramer Sales and Service, Inc.)
THIS SUBSIDIARY STOCK PLEDGE ("Stock Pledge") made as of this 31st day
of July, 1997 by and between CB - Kramer Sales and Service, Inc., a Delaware
corporation ("Pledgor") and Comerica Bank, a Michigan banking corporation, as
Agent for and on behalf of the Banks (as defined below) ("Secured Party").
RECITALS:
A. Pursuant to that certain Aqua-Chem Revolving Credit and Term Loan
Agreement dated as of July 31, 1997 (as may be amended, or otherwise modified
from time to time, the "Credit Agreement") by and among Aqua-Chem, Inc., a
Delaware corporation (the "Company"), Secured Party as Agent and the financial
institutions which are named in and are signatories to the Credit Agreement
("Banks"), the Banks have agreed to extend credit to Company on the terms set
forth in the Credit Agreement.
B. The Pledgor has executed and delivered a guaranty (as amended or
otherwise modified from time to time, the "Guaranty") of the obligations of the
Company under the Credit Agreement.
C. The obligations of the Company under the Credit Agreement and the
obligations of the Pledgor and each other Guarantor under the Guaranty are to be
secured pursuant to this Agreement.
D. The Pledgor desires to see the success of the Company, and
furthermore, shall receive direct and/or indirect benefits from extensions of
credit made or to be made pursuant to the Credit Agreement to the Company.
E. Agent is acting as Agent for the Banks pursuant to Section 13.1 of
the Credit Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises,
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
<PAGE> 183
EXHIBIT 10.1
I. Creation of Security Interest
Pledgor hereby grants to Secured Party, on behalf of Banks and the
Agent, a security interest in the property described in paragraph II, below
("Collateral").
II. Collateral.
The Collateral consists of the following:
(a) 100% of the outstanding shares of each class of stock (or other
ownership interest) of each Domestic Subsidiary of Pledgor listed on Schedule
A-1 hereto (as such Schedule may be revised pursuant to Section III B.1 hereof)
and 65% of the outstanding shares of each class of stock (or other ownership
interest) of each Foreign Subsidiary of Pledgor listed on Schedule A-2 (as such
Schedule may be revised pursuant to Section III B.1 hereof) hereto, together
with all of the certificates and/or instruments representing such shares of
stock (or other ownership interest), and all cash, securities, dividends, rights
and other property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares;
(b) 100% of any additional shares of stock (or other ownership
interest) of any of the Domestic Subsidiaries listed on Schedule A-1 hereto and
65% of any additional shares of stock (or other ownership interest) of any of
the Foreign Subsidiaries listed on Schedule A-2 hereto, at any time and from
time to time acquired by the Pledgor in any manner, all of the cash, securities,
dividends, rights and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares;
(c) All other property hereafter delivered to the Agent in substitution
for or in addition to the foregoing, all certificates and instruments
representing or evidencing such property, and all cash, securities, interest,
dividends, rights and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
thereof; and
(d) All products and proceeds of all of the foregoing.
III. Company's Obligations
A. Payment of Secured Indebtedness. The security interest created
herein is given as security for:
(1) The obligations of Pledgor contained in or arising under or in
connection with the Guaranty;
(2) All of Company's obligations contained in or arising under or
in connection with the Credit Agreement and the Notes issued by it from time to
time pursuant to the Credit Agreement,
<PAGE> 184
EXHIBIT 10.1
and all obligations of Company contained in or arising under the other Loan
Documents executed by Company;
(3) All of Company's obligations contained in or arising under any
and all Letter of Credit Agreements executed or to be executed by Company from
time to time pursuant to the Credit Agreement, and any Letters of Credit issued
or to be issued thereunder;
(4) All of Company's obligations contained in or arising under any
Interest Rate Protection Agreements;
(5) The obligations of Pledgor, any other Guarantor or the Company
for payment of all sums hereafter loaned, paid out, expended or advanced by or
for the account of the Banks (or any of them) or by the Secured Party under the
terms of this Stock Pledge, the Credit Agreement, or the other Loan Documents,
in connection with the Collateral or any of the documents or instruments
described in this Stock Pledge, the Credit Agreement or the other Loan
Documents;
together with interest thereon as provided for herein or therein; and
also as security for all other indebtedness and liabilities, whether direct,
indirect, absolute or contingent, owing by the Company to the Banks in any
manner under the Credit Agreement or the Loan Documents, which hereafter become
due, or that may hereafter be incurred by the Company to or acquired (pursuant
to the Credit Agreement or the other Loan Documents) by the Banks, and all other
future obligations of the Company to the Banks, their successors and assigns,
howsoever created, arising or evidenced, whether joint or several, direct or
indirect, absolute or contingent, primary or secondary, and any judgments that
may hereafter be rendered on such indebtedness or any part thereof, with
interest according to the rates and terms specified, or as provided by law, and
any and all replacements, consolidations, amendments, renewals or extensions of
the foregoing (collectively herein called the "Indebtedness").
B. Protection of Security Interest.
(1) Pledgor shall take any and all steps required to protect the
Collateral, and in pursuance thereof Pledgor agrees that Pledgor shall deliver
or caused to be delivered to Secured Party and Secured Party shall receive
possession, on behalf of Banks, of certificates representing all of the pledged
shares referred to in Schedule A-1 or A-2, as the case may be, properly endorsed
or with assignments separate from such certificates in blank for transfer. In
addition Secured Party shall receive proof that appropriate acknowledgments,
governmental approvals, share register entries, local pledge agreements,
financing statements, collateral and other documents covering the Collateral
have been executed and delivered by the appropriate parties and recorded on file
with such Persons and in such jurisdictions as necessary to perfect the security
interests, or other liens granted hereby and/or thereby. The Secured Party from
time to time shall revise Schedule A-1 and Schedule A-2 hereto and promptly
deliver a copy thereto to Pledgor and the Banks, on the effective date of the
acquisition or creation by Pledgor of a Domestic Subsidiary or a direct Foreign
Subsidiary (as the case may be), adding to Schedule A-1 the name of each such
Domestic Subsidiary or to Schedule
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<PAGE> 185
EXHIBIT 10.1
A-2 each such direct Foreign Subsidiary (as the use may be) so acquired or
created, and upon such revision, Pledgor shall be deemed to have pledged 100% of
the capital stock (or other ownership interests) of each such Domestic
Subsidiary and 65% of the capital stock (or other ownership interests) of each
such Foreign Subsidiary so acquired or created to Secured Party for and on
behalf of Banks.
(2) It will not sell, transfer, assign or otherwise dispose of any
of the Collateral or any interest therein or offer to do so without the prior
written consent of Secured Party, given at the direction of the Majority Banks,
or permit anything to be done that may materially impair the value of any of the
Collateral or the security intended to be afforded by this Stock Pledge.
(3) It will, subject to the applicable terms of the Credit
Agreement, pay all taxes and assessments upon the Collateral or for its use or
operation before any interest or penalty for nonpayment attaches thereto unless
said payment is being contested in good faith and it establishes a reserve as
required by generally accepted accounting principles.
(4) It will, subject to the applicable terms of the Credit
Agreement, sign and execute alone or with Secured Party any financing statement
or other document or procure any documents and pay all reasonable connected
costs, necessary to protect the security interest under this Stock Pledge
against the rights or interests of third persons.
(5) It will, subject to the applicable terms of the Credit
Agreement, reimburse Secured Party for all reasonable costs, including
reasonable attorneys' fees, incurred for any action taken by Secured Party to
remedy an Event of Default which Secured Party elects to remedy pursuant to its
rights under Article VI hereof.
(6) It will:
(i) subject to the applicable terms of the Credit Agreement,
allow Secured Party to examine, audit and inspect Company's books,
accounts, records (including without limitation all records relating to
the Collateral or the Indebtedness), ledgers and assets and properties
of every kind and description wherever located at all reasonable times
during normal business hours, upon oral or written request of Secured
Party, and to make and take away copies of any and all such books,
accounts, records and ledgers. An examination of the records or
properties of the Pledgor may require revealment of proprietary and/or
confidential data and information, and the provisions of Section 14.12
of the Credit Agreement are incorporated herein;
(ii) punctually and properly perform all of its covenants and
duties under any other security agreement, mortgage, collateral pledge
agreement or contract of any kind now or hereafter existing as security
for or in connection with payment of the Indebtedness, or any part
thereof;
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<PAGE> 186
EXHIBIT 10.1
(iii) perform its obligations under the Loan Documents;
(iv) promptly furnish Secured Party with any information in
writing which Secured Party may reasonably request concerning the
Collateral;
(v) promptly notify Secured Party of any material change in
any fact or circumstances warranted or represented by Pledgor in this
Stock Pledge or in any other writing furnished by Pledgor to Secured
Party in connection with the Collateral or the Indebtedness;
(vi) promptly notify Secured Party of any material claim,
action or proceeding affecting the Collateral and title therein, or in
any part thereof, or the security interest created herein, and, at the
request of the Secured Party, appear in and defend, at Company's
expense, any such action or proceeding; and
(vii) promptly, after being requested by Secured Party, pay to
Secured Party the amount of all reasonable expenses, including
reasonable attorneys' fees and other legal expenses, incurred by
Secured Party in protecting and maintaining the Collateral or its
rights hereunder, or in connection with any audit or inspection of the
Collateral pursuant to the terms hereof, and in enforcing the security
interest created herein.
(7) With respect to any Collateral of a kind requiring an additional
security agreement, financing statement, or other writing to perfect a security
interest therein in favor of Secured Party, on behalf of Banks, Pledgor will
forthwith execute and deliver to Secured Party on behalf of Banks, whatever the
Secured Party or the Majority Banks shall deem necessary or proper for such
purpose. Should any covenant, duty or agreement of Pledgor fail to be performed
in accordance with its terms hereunder, Secured Party may, but shall never be
obligated to, perform or attempt to perform such covenant, duty or agreement on
behalf of Pledgor, and any amount expended by Secured Party in such performance
or attempted performance shall become part of the Indebtedness, and, at the
request of Secured Party, Pledgor agrees to pay such amount to Secured Party
upon demand at Secured Party's office in Detroit, Michigan together with
interest thereon at the highest rate which interest accrues on amounts after the
same become due pursuant to the terms of any note executed pursuant to the
Credit Agreement from the date of such expenditure by Secured Party until paid.
With respect to any Collateral in which Pledgor acquires any rights subsequent
to the date hereof and which, under applicable law, a security interest is or
can be perfected by possession, Pledgor agrees to deliver possession of such
Collateral to Secured Party immediately upon its acquisition of rights therein.
(8) Pledgor will hold the proceeds of any of the Collateral in trust
for Secured Party on behalf of the Banks, will not commingle said proceeds with
any other funds, and, after an Event of Default, will deliver such proceeds to
Secured Party at its request.
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EXHIBIT 10.1
(9) If Secured Party, acting in its sole discretion, redelivers any
Collateral to Pledgor or Company's designee for the purpose of
(i) the ultimate sale or exchange thereof, or
(ii) presentation, collection, renewal, or registration of transfer
thereof,
such redelivery shall not constitute a release of Secured Party's security
interest therein or in the proceeds thereof unless Secured Party, with the
consent of the Majority Banks, specifically so agrees in writing.
(10) If Pledgor requests any such redelivery, Pledgor will deliver
with such request a duly executed financing statement in form and substance
satisfactory to Secured Party.
IV. Default
The term "Event of Default", as used herein, means the occurrence of
any Event of Default under the Credit Agreement.
V. Consequence of Default.
Upon an Event of Default, Secured Party shall be entitled, subject to
applicable law, to all of its remedies specified herein, in the Credit
Agreement, or in any other document executed in connection with the Credit
Agreement or this Stock Pledge, or provided by law. Additionally, upon an Event
of Default and subject to applicable law, Secured Party will be entitled to
receive all dividends payable in respect of the pledged shares evidencing the
Collateral pledged under this Stock Pledge, and may change the registration of
any registerable Collateral to any other name or form and is hereby authorized
to appoint any officer or agent of Secured Party as Company's true and lawful
proxy and attorney-in-fact, with power, upon the occurrence of any Event of
Default (exercisable so long as such Event of Default is continuing), to
exercise all voting rights in respect of the shares evidencing the Collateral
pledged hereby; to endorse Company's name or any of its officers' names or
agents' names upon any notes, checks, drafts, money orders, or other instruments
of payment (including payments payable under any policy of insurance on the
Collateral) or Collateral that may come into possession of the Secured Party in
full or part payment of any amounts owing to the Banks; to give written notice
to such office and officials of the United States Post Office to effect such
change or changes of address so that all mail addressed to Pledgor may be
delivered directly to Secured Party; to execute on behalf of Pledgor any
financing statements, amendments, subordinations or other filings pursuant to
the Credit Agreement; granting unto Secured Party on behalf of the Banks, as the
proxy and attorney-in-fact of Pledgor, full power to do any and all things
necessary to be done in and about the premises as fully and effectually as
Pledgor might or could do, and hereby ratifying all that said proxy and attorney
shall lawfully do or cause to be done by virtue hereof. The proxy and power of
attorney described herein shall be deemed to be coupled with an
6
<PAGE> 188
EXHIBIT 10.1
interest and shall be irrevocable for the term of the Credit Agreement, and all
transactions thereunder and thereafter as long as any Indebtedness or any of the
commitments to lend remain outstanding. The Secured Party shall have full power,
subject to applicable law to collect, compromise, endorse, sell or otherwise
deal with the Collateral or proceeds thereof on behalf of the Banks in its own
name or in the name of Pledgor provided that Secured Party shall act in a
commercially reasonable manner.
VI. Secured Party's Rights and Remedies.
Secured Party shall have available to it (subject to applicable law)
the following rights and remedies upon occurrence of an Event of Default:
A. Right to Assign. Secured Party may assign this Stock Pledge
only as provided in the Credit Agreement and if Secured Party does assign this
Stock Pledge, the assignee shall be entitled to the performance of all of
Company's obligations and agreements under this Stock Pledge, and the assignee
shall be entitled to all the rights and remedies of Secured Party under this
Stock Pledge.
B. Right to Discharge Company's Obligations. Secured Party may
(i) with the approval of the Majority Banks, discharge taxes, liens or security
interests or other encumbrances at any time levied or placed on the Collateral
which are superior to the security interest herein granted, (ii) remedy or cure
any default of Pledgor under the terms of any lease, rental agreement, land
contract or other document which in any way pertains to or affects Company's
title to or interest in any of the Collateral, (iii) pay for insurance on the
Collateral, and (iv) pay for the maintenance and preservation of the
Collateral, unless with respect to the obligations under clauses (i) or (ii)
Pledgor is contesting in good faith such obligations, and Pledgor agrees to
reimburse Secured Party, on demand, for any payment made or any expense
incurred by Secured Party pursuant to the foregoing authorization, with
interest, which payments and expenses shall be secured by the security intended
to be afforded by this Stock Pledge.
C. Remedies and Enforcement. Secured Party shall have and may
exercise any and all rights of enforcement and remedies afforded to a secured
party under the Uniform Commercial Code as adopted and in force in the State of
Michigan, to the extent permitted by applicable law, on the date of this Stock
Pledge or the date of Company's default together with any and all other rights
and remedies otherwise provided and available to Secured Party by law unless
such application would result in the invalidity or unenforceability of any
provision hereof, in which case the law of the state in which any of the
Collateral is located shall apply to the extent necessary to render such
provision valid and enforceable; and, in conjunction with, in addition to, or
substitution for those rights, at Secured Party's discretion, Secured Party
may:
(1) Apply any of the Collateral against any of the
Indebtedness secured hereby;
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EXHIBIT 10.1
(2) Waive any default, or remedy any default in any reasonable
manner, without waiving its rights and remedies upon default and without
waiving any other prior or subsequent default;
(3) Without any notice to Pledgor, notify any parties obligated on
any of the Collateral to make payment to the Secured Party of any amounts
due or to become due thereunder and enforce collection of any of the
Collateral by suit or otherwise and surrender, release or exchange all or
any part thereof, or compromise or extend or renew for any period (whether
or not longer than the original period) the indebtedness thereunder or
evidenced thereby. Upon request of the Secured Party, Pledgor will, at its
own expense, notify any parties obligated to Pledgor on any of the
Collateral to make payment to the Secured Party of any amounts due or to
become due thereunder. Pledgor agrees that Secured Party shall not be
liable for any loss or damage which Pledgor suffers or may suffer as a
result of Secured Party's processing of items or its exercise of any other
rights or remedies under this Stock Pledge, including without limitation
indirect, special or consequential damages, loss of revenues or profits, or
any claim, demand or action by any third party not related to or affiliated
with Pledgor arising out of or in connection with the processing of items
(excluding only the claims of such third parties in connection with the
processing of items based solely upon the gross negligence or willful
misconduct of Secured Party) or the exercise of any other rights or
remedies hereunder. Pledgor further agrees to indemnify and hold Secured
Party harmless from and against all such third party claims, demands or
actions, including without limitation litigation costs and reasonable
attorneys' fees.
D. Right of Sale.
(1) Pledgor agrees that upon the occurrence of an Event of Default
(taking into account applicable periods of cure, if any), Secured Party
may, at its option, sell and dispose of the Collateral at public or private
sale without any previous demand of performance. Pledgor agrees that notice
of such sale sent to Company's address, as set forth in the Credit
Agreement, by certified or registered mail sent at least five (5) days
prior to such sale, shall constitute reasonable notice of sale. The
foregoing shall not require notice if none is necessary under applicable
law. The proceeds of sale shall be applied in the following order:
(i) to all reasonable costs and charges incurred by Secured Party in
the taking and causing the removal and sale of said property, including
such reasonable attorneys' fees as shall have been incurred by Secured
Party;
(ii) to the Indebtedness, including all accrued interest thereon;
and
(iii)any surplus of such proceeds remaining shall be paid to the
Pledgor, or to such other party who shall lawfully be entitled thereto.
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EXHIBIT 10.1
(2) At any sale or sales made pursuant to this Stock Pledge or in a
suit to foreclose the same, the Collateral may be sold en masse or
separately, at the same or at different times, at the option of the Secured
Party or its assigns. Such sale may be public or private with notice as
required by the Uniform Commercial Code as then in effect in the state in
which the Collateral is located, and the Collateral need not be present at
the time or place of sale. At any such sale, the Secured Party or the
holder of any note hereby secured may bid for and purchase any of the
property sold, notwithstanding that such sale is conducted by the Secured
Party or its attorneys, agents, or assigns.
E. Miscellaneous. Secured Party shall have the right at all times to
enforce the provisions of this Stock Pledge on behalf of Banks in strict
accordance with the terms hereof, notwithstanding any conduct or custom on the
part of Secured Party in refraining from so doing at any time or times. The
failure of Secured Party at any time or times to enforce its rights under said
provisions strictly in accordance with the same shall not be construed as having
created a custom in any way or manner contrary to the specific provisions of
this Stock Pledge or as having in any way or manner modified the same. All
rights and remedies of Secured Party and Banks are cumulative and concurrent,
and the exercise of one right or remedy shall not be deemed a waiver or release
of any other right or remedy.
VII. Representations and Warranties of Pledgor.
Pledgor represents and warrants, as continuing representations and
warranties so long as the Guaranty, the Credit Agreement or any of the other
Loan Documents remain in effect and thereafter until the payment in full of all
Indebtedness, that:
A. The individual signatory hereto has authority to execute and deliver
this Stock Pledge on behalf of Pledgor.
B. No financing statement covering the Collateral, or any part thereof, has
been filed with any filing officer other than in favor of Secured Party.
C. No other agreement, pledge or assignment covering the Collateral, or any
part thereof, has been made and no security interest, other than the one created
hereby or pursuant to pledges and security agreements previously made in favor
of Secured Party on behalf of the Banks, has attached or been perfected in the
Collateral or in any part thereof.
D. No material dispute, right of setoff, counterclaim or defenses exist
with respect to any part of the Collateral.
E. All information supplied and statements made in any financial or credit
statements or application for credit prior to the execution of this Stock Pledge
are true and correct as of the date hereof in all material respects.
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EXHIBIT 10.1
F. The Collateral, (1) in the case of each Domestic Subsidiary, constitutes
all the issued and outstanding capital stock (or other ownership interests) of
each of the Domestic Subsidiaries, (2) in the case of each Foreign Subsidiary,
constitutes no more than 65% of the issued and outstanding capital stock (or
other ownership interests) of each of the Foreign Subsidiaries, (3) have been
duly authorized and issued to Pledgor, (3) is fully paid and non-assessable, (4)
is freely and validly assignable by Pledgor, and (5) is not subject to any
option, warrant right to call or commitment of any kind or nature.
G. At the time Secured Party's security interest attaches to any of the
Collateral or its proceeds, Pledgor will be the lawful owner with the right to
transfer any interest therein, and that Pledgor will make such further
assurances as to prove its title to the Collateral as may be reasonably required
and will defend the Collateral and its proceeds against the lawful claims and
demands of all persons whomsoever. The delivery at any time by Pledgor to
Secured Party of Collateral or financing statements covering Collateral shall
constitute a representation and warranty by Pledgor under this Stock Pledge
that, with respect to such Collateral, and each item thereof, Pledgor is owner
of the Collateral and the matters heretofore warranted in this paragraph are
true and correct.
VIII. Mutual Agreements.
Pledgor and Secured Party mutually agree as follows:
A. "Pledgor" and "Secured Party" as used in this Stock Pledge include the
successors and permitted assigns of those parties.
B. To the extent permitted by applicable law, except as otherwise provided
herein, the law governing this secured transaction shall be that of the State of
Michigan.
C. This Stock Pledge includes all amendments and supplements hereto and
assignments hereof and Pledgor and Secured Party shall not be bound by any
amendment or undertaking not expressed in a writing executed by each of them.
D. All capitalized terms not specifically defined herein which are defined
in the Credit Agreement are used as defined in the Credit Agreement.
E. This Stock Pledge shall be a continuing security interest in every
respect (whether or not the outstanding balance of the Indebtedness is reduced
to zero) and Secured Party's security interest in the Collateral as granted
herein shall continue in full force and effect until all of the Indebtedness is
indefeasibly repaid and discharged in full and no commitment (whether optional
or obligatory) to extend any credit under the Credit Agreement remains
outstanding.
F. The parties hereto acknowledge that this Stock Pledge is subject to the
mutual waiver of jury trial contained in Section 14.15 of the Credit Agreement
and to the consent to jurisdiction provisions contained in Section 14.2 of the
Credit Agreement.
10
<PAGE> 192
EXHIBIT 10.1
G. This Stock Pledge has been executed and delivered pursuant to the Credit
Agreement and in the event of any conflict between this Stock Pledge and the
Credit Agreement, the Credit Agreement shall govern.
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<PAGE> 193
EXHIBIT 10.1
IN WITNESS WHEREOF, Pledgor and Secured Party have executed this Stock
Pledge on the day and year first above written.
Pledgor:
CB - KRAMER SALES AND SERVICE,
INC., a Delaware corporation
By:___________________________________
Its:__________________________________
7800 North 113th Street
Milwaukee, Wisconsin 53224
ACCEPTED BY SECURED PARTY:
COMERICA BANK, as Agent for the Banks
By:___________________________________
Its:__________________________________
Signature Page
Subsidiary Pledge Agreement
12
<PAGE> 194
EXHIBIT 10.1
SCHEDULE A-1
Domestic Subsidiaries of Pledgor
None
13
<PAGE> 195
EXHIBIT 10.1
SCHEDULE A-2
Foreign Subsidiaries of Pledgor
Cleaver-Brooks of Canada, Ltd.
14
<PAGE> 196
EXHIBIT 10.1
EXHIBIT N
PARENT PLEDGE AGREEMENT
(Third Party Pledge)
THIS PARENT PLEDGE AGREEMENT ("Stock Pledge" or "Agreement"), made as of
this 31st day of July, 1997 by and between Rush Creek, LLC, a Wisconsin limited
liability company (the "Pledgor"), and Comerica Bank, a Michigan banking
corporation, in its capacity as Agent for and on behalf of the Banks (as defined
below) (in such capacity, the "Agent") located at 500 Woodward Avenue, Detroit,
Michigan 48226.
RECITALS:
J. WHEREAS, Pursuant to that certain Aqua-Chem Revolving Credit and Term
Loan Agreement dated as of July 31, 1997 (as amended or otherwise modified from
time to time, the "Credit Agreement"), among Aqua-Chem, Inc. (the "Company"),
each of the financial institutions party thereto (collectively, the "Banks") and
Secured Party, as Agent for the Banks, the Banks have agreed, subject to the
satisfaction of certain terms and conditions, to make Advances to Company of the
Revolving Credit, the Swing Line and the Term Loan and to provide for the
issuance of Letters of Credit for the account of Company, individually, or
jointly and severally with certain of the other Account Parties (as such terms
are defined in the Credit Agreement), as provided therein; and
K. WHEREAS, as a condition precedent to the making of the initial loans
and issuing letters of credit under the Credit Agreement, the Pledgor is
required to execute and deliver a pledge agreement in the form of this
Agreement.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
Pledgor hereby assigns, transfers, delivers and pledges to the Agent, on
behalf of the Banks, the following securities and stocks:
(i) all shares of Series C Preferred Stock of the Company,
together with all of the certificates and/or instruments representing such
shares of stock (or other ownership interest), and all cash, securities,
dividends, rights and other property at any time and from time to time
received, receivable or otherwise distributed in respect of or in exchange
for any or all of such shares;
(ii) the Warrant, dated July 31, 1997 to purchase 176,471 shares
of common stock of the Company issued to the Subordinated Debt Holder,
together with all of the certificates
<PAGE> 197
EXHIBIT 10.1
and/or instruments representing such shares of stock (or other ownership
interest), and all cash, securities, dividends, rights and other property
at any time and from time to time received, receivable or otherwise
distributed in respect of or in exchange for such Warrant;
(iii) all shares of common stock of the Company; together with all
of the certificates and/or instruments representing such shares of stock
(or other ownership interest), and all cash, securities, dividends, rights
and other property at any time and from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of
such shares;
(iv) All other property hereafter delivered to the Agent in
substitution for or in addition to the foregoing, all certificates and
instruments representing or evidencing such property, and all cash,
securities, interest, dividends, rights and other property at any time and
from time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all thereof; and
(v) and all other shares, warrants, and other rights to shares
of the Company owned or hereafter acquired by Pledgor, and all products and
proceeds of all of the foregoing.
Pledgor grants the Agent, for the benefit of the Banks, a security interest
in all of the above property, and all property substituted therefor or for any
part thereof, all records (including computer software) pertaining thereto and
all interest, dividends, increase, profits, new securities or other increments,
distributions or rights of any kind received on account of this property,
products or proceeds thereof (whether cash or non-cash proceeds) resulting from
any sale or exchange or transfer thereof or arising by virtue of ownership
thereof (such as, but not limited to, the rights to additional or other
securities or property upon any corporate reorganization, merger, consolidation,
liquidation or dissolution, offering of stock rights, stock split or stock or
liquidating dividend or the rights to any goods evidenced by such property or
insurance proceeds with respect thereto), and all subscription, voting and
preferential rights, all said property, products and proceeds herein called the
"Collateral." The creation of a security interest in proceeds is not to be
construed to give Pledgor any right to dispose of the Collateral. Pledgor
warrants that Pledgor has clear title to the Collateral, free from any liens,
claims or encumbrances except the security interest created by this Agreement,
and has full power and authority to execute and perform this Agreement.
The security interest created herein is given as security for:
(1) All obligations of Company contained in or arising under or in
connection with the Credit Agreement and the Notes issued by it from time to
time pursuant to the Credit Agreement, and all obligations of Company and each
of the Account Parties contained in or arising under the other Loan Documents
executed by it;
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EXHIBIT 10.1
(2) The obligations of Pledgor, Company or any Account Party for payment
of all sums loaned, paid out, expended or advanced by or for the account of the
Banks (or any of them) or by the Agent under the terms of this Stock Pledge, the
Credit Agreement, or the other Loan Documents, in connection with the Collateral
or any of the documents or instruments described in this Stock Pledge, the
Credit Agreement or the other Loan Documents;
together with interest thereon; and also as security for all other indebtedness
and liabilities, whether direct, indirect, absolute or contingent, owing by the
Company or any Account Party to the Agent or the Banks in any manner under the
Credit Agreement or the Loan Documents, which hereafter become due, or that may
hereafter be incurred by the Company or any Account Party to or acquired
(pursuant to the Credit Agreement or the other Loan Documents) by the Agent or
the Banks, and all other future obligations of the Pledgor or any Account Party
to the Agent or the Banks, their successors and assigns, howsoever created,
arising or evidenced, whether joint or several, direct or indirect, absolute or
contingent, primary or secondary, and any judgments that may hereafter be
rendered on such indebtedness or any part thereof, with interest according to
the rates and terms specified, or as provided by law, and any and all
replacements, consolidations, amendments, renewals or extensions of the
foregoing (collectively herein called the "Indebtedness").
All capitalized terms used but not defined herein shall have the meaning
set forth in the Credit Agreement. Except as otherwise provided herein, all
other terms used in this Agreement shall have the meanings given under Article 9
of the Michigan Uniform Commercial Code, or in any other article, if not defined
in Article 9. Michigan Uniform Commercial Code shall mean Act 174 of the
Michigan Public Acts of 1962, as amended from time to time.
Pledgor agrees to keep the Collateral free at all times from any and all
claims, liens, security interests, and encumbrances other than those in favor of
Agent, for the benefit of the Banks.
Pledgor will execute such endorsements or assignments of the Collateral as
Agent may reasonably request.
Agent agrees to use reasonable care in the custody and preservation of
Collateral in its possession but assumes no duty to take steps necessary to
preserve rights against prior parties.
So long as no Default (as defined below) shall have occurred and be
continuing, Pledgor shall be entitled to receive and collect by legal
proceedings or otherwise all dividends, interest, principal payments and other
sums and all other distributions at any time payable or receivable on account of
the Collateral.
At any time following the occurrence and during the continuance of Default
(as defined below) and without notice, Agent may, subject to the terms of the
Credit Agreement (a) cause the Collateral or any portion of it to be transferred
to its name or to the name of its nominee or nominees; (b) receive or collect by
legal proceedings or otherwise all dividends, interest, principal payments and
other sums and all other distributions at any time payable or receivable on
account of
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EXHIBIT 10.1
the Collateral, and hold the same as Collateral, or apply the same to the
Indebtedness, the manner and distribution of the application to be in accordance
with the terms of the Credit Agreement; and (c) enter into any extension,
subordination, reorganization, deposit, merger or consolidation agreement or any
other agreement relating to or affecting the Collateral, and deposit or
surrender control of the Collateral, and accept other property in exchange for
the Collateral and apply the property or money so received in accordance with
the provisions of this Agreement.
There shall be a default ("Default") under this Agreement if there shall
occur an Event of Default, as such term is defined in the Credit Agreement.
Following the occurrence and during the continuation of a Default, the Agent
may, to the extent permitted by applicable law, enforce its security interest in
the Collateral by retaining the Collateral in satisfaction of the Indebtedness,
by public or private sale of all or any part of the Collateral or by exercising
any other remedy provided by law or applicable agreement. The parties agree that
five days written notice sent by ordinary mail to Pledgor at the address
designated below shall be deemed reasonable notice of any disposition of the
Collateral, should notice be required by law.
Subject to the terms of the Credit Agreement, the Banks may assign any of
the Indebtedness and Agent may assign its interest as Agent and deliver all or
any part of the Collateral to its assignee, who then shall have with respect to
the Collateral so delivered all the rights and powers of the Agent under this
Agreement and after that the Agent shall be fully discharged from all liability
and responsibility with respect to the Collateral so delivered.
If Agent, acting in its sole discretion, redelivers Collateral to Pledgor
or Pledgor's designee for the purpose of
(a) the ultimate sale or exchange thereof, or
(b) presentation, collection, renewal, or registration of transfer thereof,
such redelivery shall be in trust for the benefit of Agent and the Banks and
shall not constitute a release of Agent's security interest therein or in the
proceeds or products thereof unless Agent specifically so agrees in writing. If
Pledgor requests any such redelivery, Pledgor will deliver with such request a
duly executed financing statement in form and substance satisfactory to Agent.
Any proceeds of Collateral coming into the Pledgor's possession as a result of
any such redelivery shall be held in trust for Agent for the benefit of the
Banks and forthwith delivered to Agent for application on the Indebtedness.
Subject to the terms of the Credit Agreement, Agent may (if, in its sole
discretion, it elects to do so) deliver the Collateral or any part of the
Collateral to Pledgor, and such delivery by Agent shall discharge Agent from any
and all liability or responsibility for such Collateral.
Pledgor waives notice of acceptance of this Agreement and presentment,
demand, protest, notice of protest, dishonor, notice of dishonor, notice of
demand, notice of intent to demand, notice of acceleration, notice of intent to
accelerate, notice of default and diligence in collecting any
4
<PAGE> 200
EXHIBIT 10.1
Indebtedness, and agrees that the Agent and the Banks may modify the terms of
borrowing, compromise, extend, increase, accelerate, renew or forbear to enforce
payment of any part or all of any Indebtedness, or permit the Company to incur
additional Indebtedness, all without notice to Pledgor and without affecting in
any manner the Agent's rights under this Agreement. Pledgor further waives any
and all other notices to which Pledgor might otherwise be entitled. Pledgor
acknowledges and agrees that the Agent's rights under this Agreement are not
conditioned upon pursuit by the Agent of any remedy the Agent or any of the
Banks may have against the Company or any other person or any other security. No
invalidity, irregularity or unenforceability of any part or all of the
Indebtedness or any documents evidencing the same, by reason of any bankruptcy,
insolvency or other law or order of any kind or for any other reasons, and no
defense or setoff available at any time to the Company, shall impair, affect or
be a defense or setoff to the Agent's rights under this Agreement.
Pledgor delivers this Agreement based solely on the Pledgor's independent
investigation of (or decision not to investigate) the financial condition of the
Company and the Account Parties and is not relying on any information furnished
by the Agent or any of the Banks. Pledgor assumes full responsibility for
obtaining any further information concerning the Company's and each of the
Account Parties' financial condition, the status of the Indebtedness or any
other matter which Pledgor may deem necessary or appropriate now or later.
Pledgor waives any duty on the part of the Agent and each of the Banks, and
agrees that it is not relying upon nor expecting the Agent or any of the Banks,
to disclose to Pledgor any fact now or later known by the Agent, whether
relating to the operations or condition of the Company or any Account Party, the
existence, liabilities or financial condition of any guarantor of the
Indebtedness, the occurrence of any default with respect to the Indebtedness, or
otherwise, notwithstanding any effect such fact may have upon Pledgor's risk
under this Agreement or the Pledgor's rights against the Company or any Account
Party. Pledgor knowingly accepts the full range of risk encompassed in this
Agreement, which risk includes without limit the possibility that Company or any
Account Party may incur Indebtedness to the Agent or any of the Banks after the
financial condition of the Company or any Account Party, or Company's or any
Account Party's ability to pay debts as they mature, has deteriorated.
Pledgor represents that: (a) neither the Agent nor any Bank has made any
representation to Pledgor as to the creditworthiness of the Company or any
Account Party; and (b) Pledgor has established adequate means of obtaining from
the Company or any Account Party on a continuing basis financial and other
information pertaining to the Company's or any Account Party's financial
condition. Pledgor acknowledges that neither Agent nor any Bank has any
obligation to keep Pledgor adequately informed of any facts, events or
circumstances which might in any way affect the risks of Pledgor under this
Agreement.
Pledgor acknowledges that the effectiveness of this Agreement is not
conditioned on any or all of the Indebtedness being guaranteed by anyone else.
Subject to the terms of the Credit Agreement, Agent, in its sole discretion,
without notice to Pledgor, may release, exchange, enforce and otherwise deal
with any security now or later held by the Agent for payment of the Indebtedness
without affecting in any manner the Agent's rights under this Agreement. Pledgor
acknowledges and
5
<PAGE> 201
EXHIBIT 10.1
agrees that neither the Agent nor any of the Banks has any obligation to acquire
or perfect any lien on or security interest in any asset(s), whether realty or
personalty, to secure payment of the Indebtedness, and Pledgor is not relying
upon assets in which Agent or any of the Banks has or may have a lien or
security interest for payment of the Indebtedness.
Pledgor irrevocably and absolutely waives any and all rights of
subrogation, contribution, indemnification, recourse, reimbursement and any
similar rights against the Company or any Account Party (or any other guarantor)
with respect to this Agreement, whether these rights arise under an express or
implied contract or by operation of law. It is the intention of the parties that
Pledgor shall not be (or be deemed to be) a "creditor" (as defined in Section
101 of the Federal Bankruptcy Code, as the same may be amended) of the Company
or any Account Party (or any other guarantor) by reason of the existence of this
Agreement in the event that the Company or any Account Party becomes a debtor in
any proceeding under the Federal Bankruptcy Code. This waiver is given to induce
the Agent and the Banks to enter into certain written contracts with the Company
and the Account Parties included in the Indebtedness. Pledgor warrants and
agrees that none of Agent's or any of the Banks' rights, remedies or interests
shall be directly or indirectly impaired because of any of Pledgor's status as
an "insider" or "affiliate" of the Company or any Account Party, and Pledgor
shall take any action, and shall execute any document, which the Agent may
request in order to effectuate this warranty to the Agent.
Notwithstanding any prior revocation, termination, surrender, or discharge
of this Agreement in whole or part, the effectiveness of this Agreement shall
automatically continue or be reinstated, as the case may be, in the event that
(a) any payment received or credit given by the Agent or any of the Banks in
respect of the Indebtedness is returned, disgorged, or rescinded as a
preference, impermissible setoff, fraudulent conveyance, diversion of trust
funds, or otherwise under any applicable state or federal law, including,
without limitation, laws pertaining to bankruptcy or insolvency, in which case
this Agreement shall be enforceable against Pledgor as if the returned,
disgorged, or rescinded payment or credit had not been received or given by the
Agent or such Bank, and whether or not the Agent or such Bank relied upon this
payment or credit or changed its position as a consequence of it; or (b) any
liability is imposed, or sought to be imposed, against the Agent or any of the
Banks relating to the environmental condition of, or the presence of hazardous
or toxic substances on, in or about, any property given as collateral to the
Agent or any of the Banks for the Indebtedness, whether this condition is known
or unknown, now exists or subsequently arises (excluding only conditions which
arise after any acquisition by the Agent or any of the Banks of any such
property, by foreclosure, in lieu of foreclosure or otherwise, to the extent due
to the wrongful act or omission of the Agent or any of the Banks), in which case
this Agreement shall be enforceable to the extent of all liability, costs and
expenses (including without limit reasonable attorneys' fees) incurred by the
Agent or any of the Banks as the direct or indirect result of any environmental
condition or hazardous or toxic substances. For purposes of this Agreement,
"environmental condition" includes, without limitation, conditions existing with
respect to the surface or ground water, drinking water supply, land surface or
subsurface and the air; and "hazardous or toxic substances" shall include any
and all substances now or subsequently determined by any federal, state or local
authority to be hazardous or toxic, or otherwise regulated by any of these
authorities.
6
<PAGE> 202
EXHIBIT 10.1
Pledgor will comply in all material respects with all statutes, laws, ordinances
and regulations relating to the Collateral, including without limitation any
registration requirements and all federal, state and local environmental
protection, toxic substance and other similar laws and regulations applicable to
Pledgor's business or to any of the Collateral or any premises where any of the
Collateral is located (Pledgor hereby representing and warranting that, as of
the date hereof, it is in compliance with all such laws and regulations), and
hold harmless and indemnify Agent and each of the Banks from and against any and
all liability or claims asserted against or suffered by Agent or any of the
Banks as a result of any failure by Pledgor to comply with this paragraph (or
any misrepresentation or breach of warranty hereunder), such indemnity to
survive any payoff and discharge of the Indebtedness.
Pledgor shall take or cause to be taken and execute or cause to be executed
all financing statements, endorsements, assignments and other writings requested
by Agent to establish, maintain, reinstate, and/or continue the perfected and
first priority status of the security interest of Agent in the Collateral or
implement or further effectuate the terms or purpose of this Agreement, although
the failure of Pledgor to do so shall not affect in any way Agent's perfected
and first priority security interest in the Collateral, and will on demand pay
all costs and expenses of filing and recording, including the costs of any
record searches, deemed necessary by Agent from time to time, to establish or
determine the validity and the priority of Bank's security interest. Pledgor
further makes, constitutes and appoints Agent its true and lawful
attorney-in-fact with full power of substitution to take any action in
furtherance of this Agreement, including, without limitation, the signing of
financing statements, endorsing of instruments, and the execution and delivery
of all documents and agreements necessary to obtain or accomplish any protection
for or collection or disposition of any part of the Collateral. Such appointment
shall be deemed irrevocable and coupled with an interest and may be exercised
only at any time following the occurrence and during the continuance of a
Default.
Pledgor waives any right to require the Agent or any of the Banks to: (a)
proceed against any person, including without limit the Company or any Account
Party; (b) proceed against or exhaust any security held from the Company or any
Account Party or any other person; (c) pursue any other remedy in the Agent's or
any of the Banks' power; or (d) make any presentments or demands for
performance, or give any notices of nonperformance, protests, notices of protest
or notices of dishonor in connection with any obligations or evidences of
Indebtedness held by the Agent or any of the Banks as security, in connection
with any other obligations or evidences of Indebtedness which continues in whole
or in part of the Indebtedness secured under this Agreement, or in connection
with the creation of new or additional Indebtedness.
Pledgor waives any defense based upon or arising by reason of (a) any
disability or other defense of the Company, any Account Party or any other
person; (b) the cessation or limitation from any cause, other than final and
irrevocable payment in full, of the Indebtedness; (c) any lack of authority of
any officer, director, partner, agent or any other person acting or purporting
to act on behalf of the Company or any Account Party or any defect in the
formation of the Company or any Account Party; (d) the application by the Debtor
of the proceeds of any Indebtedness for purposes
7
<PAGE> 203
EXHIBIT 10.1
other than the purposes represented by the Company or any Account Party to Agent
or any of the Banks or intended or understood by the Agent or any Account Party,
the Banks or Pledgor; (e) any act or omission by the Agent or any of the Banks
which directly or indirectly result in or aids the discharge of the Company or
any Account Party or any Indebtedness by operation of law or otherwise; or (f)
any modification of the Indebtedness, in any form, including without limit the
renewal, extension, acceleration or other change in time for payment of the
Indebtedness, or other change in the terms of Indebtedness or any part of it,
including without limit increase or decrease of the rate of interest. Pledgor
waives any defense Pledgor may have based upon any election of remedies by the
Agent or any of the Banks which destroys Pledgor's subrogation rights or
Pledgor's right to proceed against the Company or any Account Party for
reimbursement, including without limit any loss of rights Pledgor may suffer by
reason of any rights, powers or remedies of the Company of any Account Party in
connection with any anti-deficiency laws or any other laws limiting, qualifying
or discharging the Indebtedness.
Pledgor acknowledges that the Agent, subject to the terms of the Credit
Agreement, has the right to sell, assign, transfer, negotiate or grant
participations or any interest in, any or all of the Indebtedness and any
related obligations, including without limit this Agreement. To the extent and
in connection with the above, but without limiting its ability to make other
disclosures to the full extent allowable, the Agent or any of the Banks may
disclose all documents and information which the Agent or any of the Banks now
has or later acquires relating to Pledgor, the Indebtedness or this Agreement,
however obtained. Pledgor further agrees that the Agent or any of the Banks may
disclose the documents and information to the Company or any Account Party.
This Agreement constitutes the entire agreement of Pledgor and the Agent
with respect to the subject matter of this Agreement. No waiver, consent,
modification, or change of the terms of this Agreement shall bind Pledgor or
Agent unless in writing and signed by the waiving party or an authorized officer
of the waiving party, and then this waiver, consent, modification, or change
shall be effective only in the specific instance and for the specific purpose
given. This Agreement shall inure to the benefit of Agent, each of the Banks and
their successors and assigns. This Agreement shall be binding on Pledgor and
Pledgor's successors, and assigns, including without limit any debtor in
possession or trustee in bankruptcy for Pledgor. Pledgor has entered into this
Agreement in good faith for the purpose of inducing the Banks to extend credit
to make other financial accommodations to Company and the Account Parties and
Pledgor acknowledges that the terms of this Agreement are reasonable. If any
provision of this Agreement is unenforceable in whole or in part for any reason,
the remaining provisions shall continue to be effective. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN.
Pledgor agrees to reimburse the Agent for any and all costs and expenses
(including without limit court costs, legal fees, and reasonable attorney fees
whether inside or outside counsel is used, whether or not suit is instituted
and, if instituted, whether at the trial court level, appellate level, in a
bankruptcy, probate or administrative proceeding or otherwise and audit
expenses) incurred in enforcing any of the duties and obligations of Pledgor or
rights of the Agent under this Agreement,
8
<PAGE> 204
EXHIBIT 10.1
except, however, costs and expenses arising solely as a result of the gross
negligence or willful misconduct by Agent.
Pledgor's chief executive office is located at the address specified below.
Pledgor will give Agent not less than 30 days prior written notice of all
contemplated changes in Pledgor's name, legal structure, chief executive office,
or in the location of the Collateral or Pledgor's records concerning same and,
prior to making any such changes, file or cause to be filed all financing
statements or amendments necessary or appropriate to establish and maintain a
valid first priority security interest in all the Collateral for Agent.
Notices to the parties under this Agreement shall be given (and shall be
deemed given) in accordance with Section 14.6 of the Credit Agreement, at
address for each party set forth herein or at such other address of a party as
designated in writing by such party.
In the event of any express conflict between the terms and provisions of
this Agreement and the terms and provisions of the Credit Agreement, the terms
and provisions of the Credit Agreement shall control.
WAIVER OF JURY TRIAL. THE AGENT, THE BANKS (BY ACCEPTANCE OF THE BENEFITS
HEREUNDER) AND THE COMPANY 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 RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTION OF ANY OF THEM. NEITHER THE
AGENT, NOR COMPANY SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY
SUCH 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 AGENT OR
COMPANY EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
Pledgor hereby irrevocably submits to the non-exclusive jurisdiction of any
United States Federal or Michigan state court sitting in Detroit in any action
or proceeding arising out of or relating to this Agreement and Pledgor hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in any such United States Federal or Michigan state
court. Pledgor irrevocably consents to the service of any and all process in any
such action or proceeding brought in any court in or of the State of Michigan by
the delivery of copies of such process to Pledgor at its address specified below
or by certified mail directed to such address or such other address as may be
designated by Pledgor in any notice to that complies as to delivery with the
terms of Section 14.6 of the Credit Agreement. Nothing in this paragraph shall
affect the right of the
9
<PAGE> 205
EXHIBIT 10.1
Banks and the Agent to serve process in any other manner permitted by law or
limit the right of the Banks or the Agent (or any of them) to bring any such
action or proceeding against Pledgor or any of its property in the courts of any
other jurisdiction. Pledgor hereby irrevocably waives any objection to the
laying of venue of any such suit or proceeding in the above described courts.
* * *
(Signature pages follow on succeeding pages)
10
<PAGE> 206
EXHIBIT 10.1
Notwithstanding anything to the contrary set forth in this Agreement, the
total obligations of Pledgor hereunder shall be limited to Agent's enforcement
of its rights and remedies under this Agreement with respect to its liens and
security interests in the Collateral.
RUSH CREEK, LLC, a Wisconsin limited
liability company
By:
----------------------------------
Its:
---------------------------------
Address:
7800 North 113th Street
Milwaukee, Wisconsin 53224
Attention:
--------------------------
--------------------------
Accepted and Approved:
COMERICA BANK, as Agent
By:
---------------------------------
Its: Vice President
----------------------------
Signature Page
Parent Pledge Agreement
11
<PAGE> 207
EXHIBIT 10.1
EXHIBIT O-1
INTERCOMPANY NOTE
[SUBSIDIARY TO SUBSIDIARY]
[SUBSIDIARY TO COMPANY]
July __, 1997
ON DEMAND, FOR VALUE RECEIVED, ___________, a ____________ corporation
("MAKER") promises to pay to the order of_____, a ___________ corporation
("Holder") at such place as shall be designated from time to time by Maker to
Holder, in lawful money of the United States of America or in such other
currencies applicable to any particular advance made hereunder (each an
"Advance" and, collectively, the "Advances") which may, from time to time, be
outstanding hereunder, the sum of _____________________________________ Dollars
($__________), or so much of said sum as may from time to time have been
advanced by Holder to Maker and then be outstanding hereunder, together with
interest thereon as hereinafter set forth.
Each Advance shall bear interest at a per annum rate equal to
[______________________].
Interest on the unpaid balance of all Advances shall be payable in
immediately available funds quarterly commencing on _______________, 1997 and on
the first day of each calendar quarter thereafter. Interest accruing shall be
computed on the basis of a 360 day year and assessed for the actual number of
days elapsed.
This Note is a note under which advances, repayments and readvances may be
made from time to time.
Upon the occurrence and during the continuance of an Event of Default, as
defined in that certain Revolving Credit and Term Loan Agreement dated as of
July ____, 1997 (as amended, or otherwise modified from time to time, the
"Credit Agreement") by and among Aqua-Chem, Inc. ("Company"), certain financial
institutions from time to time signatory thereto (the "Banks") and Comerica
Bank, as Agent for the Banks (the "Agent"), and following receipt of notice from
the Agent, (A) no payments may be made of the principal of or interest on this
Note, and (B) this Note shall be fully subordinated in all respects to the
Indebtedness (as defined in the Credit Agreement).
During the period when payments of interest hereon are not permitted by the
preceding paragraph, interest shall accrue and be added to principal on each
interest payment date.
Maker agrees, and Holder by accepting this Note agrees, that: (A) the
obligations evidenced by this Note are subordinated in right of payment, to the
prior payment in full of all the
<PAGE> 208
EXHIBIT 10.1
Indebtedness; the subordination is for the benefit of the holders of the
Indebtedness, and each holder of Indebtedness whether now outstanding or
hereafter created, incurred, assumed or guaranteed shall be deemed to have
acquired Indebtedness in reliance upon the covenants and provisions contained in
this Note; (B) if Maker is prohibited by the terms of this Note from making any
payment of principal, interest or any other sum under or in respect of this Note
when due, and therefore the Maker shall fail to pay when due any such sum, such
failure shall not constitute a default or event of default under and in respect
of this Note (provided that interest shall continue to accrue as provided herein
and be added to principal as herein set forth); and (C) no revision to any
provision of this Note applicable or relevant to the subordination of this Note
to the Indebtedness shall be made or become effective until approved in writing
by the holders of the Indebtedness.
Upon any distribution (whether cash, securities or other property, by
setoff or otherwise) to creditors of Maker in a liquidation or dissolution of
Maker or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to Maker or its property: (A) holders of Indebtedness shall
be entitled to payment in full of all obligations with respect to the
Indebtedness (including interest after the commencement of any such proceeding
at the rates specified for the applicable Indebtedness) to the date of payment
of the Indebtedness before Holder shall be entitled to receive any payment of
any obligations with respect to this Note; and (B) until all obligations with
respect to the Indebtedness are paid in full, any distribution to which Holder
would be entitled shall be made to holders of Indebtedness as their interests
may appear.
No right of any holder of Indebtedness to enforce the subordination of the
indebtedness evidenced by this Note shall be impaired by any act or failure to
act by the Maker or by its failure to comply with the terms and conditions of
this Note.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan.
Maker hereby waives presentment for payment, demand, protest and notice of
dishonor and nonpayment of this Note and agrees that no obligation hereunder
shall be discharged by reason of any extension, indulgence, release, or
forbearance granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any property, real or
personal, which is now or hereafter security for this Note.
2
<PAGE> 209
EXHIBIT 10.1
Nothing herein shall limit any right granted Holder by any other instrument
or by law.
[AQUA-CHEM, INC.]
By:________________________________
Its:_______________________________
[CB-KRAMER SALES AND SERVICE,
INC.]
By:________________________________
Its:_______________________________
3
<PAGE> 210
EXHIBIT 10.1
EXHIBIT O-2
INTERCOMPANY NOTE
COMPANY AS MAKER
July __, 1997
ON DEMAND, FOR VALUE RECEIVED, Aqua-Chem, Inc. a Delaware corporation
("MAKER") promises to pay to the order of Aqua-Chem International, Inc., a U. S.
Virgin Islands corporation ("Holder") at such place as shall be designated from
time to time by Maker to Holder, in lawful money of the United States of America
or in such other currencies applicable to any particular advance made hereunder
(each an "Advance" and, collectively, the "Advances") which may, from time to
time, be outstanding hereunder, the sum of ___________________________________
Dollars ($ ________________), or so much of said sum as may from time to time
have been advanced by Holder to Maker and then be outstanding hereunder,
together with interest thereon as hereinafter set forth.
Each Advance shall bear interest at a per annum rate equal to
[___________].
Interest on the unpaid balance of all Advances shall be payable in
immediately available funds quarterly commencing on _______________, 1997 and on
the first day of each calendar quarter thereafter. Interest accruing shall be
computed on the basis of a 360 day year and assessed for the actual number of
days elapsed.
This Note is a note under which advances may be made from time to time.
So long as that certain Revolving Credit and Term Loan Agreement dated as
of the date hereof (as amended or otherwise modified from time to time, the
"Credit Agreement") by and among the Maker, certain financial institutions from
time to time signatory thereto (each a "Bank" and collectively the "Banks"), and
Comerica Bank as Agent for the Banks (the "Agent"), remains in effect, and
thereafter until the expiration of all Letters of Credit (as such term is
defined in the Credit Agreement) and the payment in full of all Indebtedness (as
such term is defined in the Credit Agreement) and the performance by Maker of
all other obligations under the Credit Agreement, no payments may be made of the
principal of or interest on this Note, and this Note shall be fully subordinated
in all respects to the Indebtedness (as defined in the Credit Agreement).
During the period when payments of interest hereon are not permitted by the
preceding paragraph, interest shall accrue and be added to principal on each
interest payment date.
Maker agrees, and Holder by accepting this Note agrees, that: (A) the
obligations evidenced by this Note are subordinated in right of payment, to the
prior payment in full of all the
<PAGE> 211
EXHIBIT 10.1
Indebtedness; the subordination is for the benefit of the holders of the
Indebtedness, and each holder of Indebtedness whether now outstanding or
hereafter created, incurred, assumed or guaranteed shall be deemed to have
acquired Indebtedness in reliance upon the covenants and provisions contained in
this Note; (B) if Maker is prohibited by the terms of this Note from making any
payment of principal, interest or any other sum under or in respect of this Note
when due, and therefore the Maker shall fail to pay when due any such sum, such
failure shall not constitute a default or event of default under and in respect
of this Note (provided that interest shall continue to accrue as provided herein
and be added to principal as herein set forth); and (C) no revision to any
provision of this Note applicable or relevant to the subordination of this Note
to the Indebtedness shall be made or become effective until approved in writing
by the holders of the Indebtedness.
Upon any distribution (whether cash, securities or other property, by
setoff or otherwise) to creditors of Maker in a liquidation or dissolution of
Maker or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to Maker or its property: (A) holders of Indebtedness shall
be entitled to payment in full of all obligations with respect to the
Indebtedness (including interest after the commencement of any such proceeding
at the rates specified for the applicable Indebtedness) to the date of payment
of the Indebtedness before Holder shall be entitled to receive any payment of
any obligations with respect to this Note; and (B) until all obligations with
respect to the Indebtedness are paid in full, any distribution to which Holder
would be entitled shall be made to holders of Indebtedness as their interests
may appear.
No right of any holder of Indebtedness to enforce the subordination of the
indebtedness evidenced by this Note shall be impaired by any act or failure to
act by the Maker or by its failure to comply with the terms and conditions of
this Note.
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan.
Maker hereby waives presentment for payment, demand, protest and notice of
dishonor and nonpayment of this Note and agrees that no obligation hereunder
shall be discharged by reason of any extension, indulgence, release, or
forbearance granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any property, real or
personal, which is now or hereafter security for this Note.
2
<PAGE> 212
EXHIBIT 10.1
Nothing herein shall limit any right granted Holder by any other
instrument or by law.
AQUA-CHEM, INC.
By:_________________________________
Its:________________________________
3
<PAGE> 1
EXHIBIT 10.2
$125,000,000
AQUA-CHEM, INC.
11 1/4% SENIOR SUBORDINATED NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
-----------------------------
June 18, 1998
Credit Suisse First Boston Corporation
Bear, Stearns & Co. Inc.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Dear Sirs:
Aqua-Chem, Inc., a Delaware corporation (the "Company"), proposes to
issue and sell to Credit Suisse First Boston Corporation and Bear, Stearns & Co.
Inc. (collectively, the "Initial Purchasers"), upon the terms set forth in a
purchase agreement of even date herewith (the "Purchase Agreement"),
$125,000,000 aggregate principal amount of its 11 1/4% Senior Subordinated Notes
Due 2008 (the "Initial Securities"). The Initial Securities will be issued
pursuant to an Indenture, dated as of June 23, 1998, (the "Indenture") among the
Company and United States Trust Company of New York (the "Trustee"). As an
inducement to the Initial Purchasers to enter into the Purchase Agreement, the
Company agrees with the Initial Purchasers, for the benefit of the holders of
the Initial Securities (including, without limitation, the Initial Purchasers),
the Exchange Securities (as defined below) and the Private Exchange Securities
(as defined below) (collectively the "Holders"), as follows:
1. Registered Exchange Offer. The Company shall, at its own cost,
prepare and, not later than 45 days after (or if the 45th day is not a business
day, the first business day thereafter) the date of original issue of the
Initial Securities (the "Issue Date"), file with the Securities and Exchange
Commission (the "Commission") a registration statement (the "Exchange Offer
Registration Statement") on an appropriate form under the Securities Act of
1933, as amended (the "Securities Act"), with respect to a proposed offer (the
"Registered Exchange Offer") to the Holders of the Initial Securities, who are
not prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer, to issue and deliver to such Holders, in exchange for
the Initial Securities, a like aggregate principal amount of debt securities
(the "Exchange Securities") of the Company issued under the Indenture and
identical in all material respects to the Initial Securities (except for the
transfer restrictions relating to the Initial Securities) that would be
registered under the Securities Act. The Company shall use its best efforts to
cause such Exchange Offer Registration Statement to become effective under the
Securities Act within 150 days (or if the 150th day is not a business day, the
first business day thereafter) after the Issue Date of the Initial Securities
and shall keep the Exchange Offer Registration Statement effective for not less
than 30 days (or longer, if required by applicable law) after the date notice of
the Registered Exchange Offer is mailed to the Holders (such period being called
the "Exchange Offer Registration Period").
If the Company effects the Registered Exchange Offer, the Company will
be entitled to close the Registered Exchange Offer 30 days after the
commencement thereof, provided, however, that the Company has accepted all the
Initial Securities theretofore validly tendered in accordance with the terms of
the Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the
<PAGE> 2
EXHIBIT 10.2
objective of such Registered Exchange Offer to enable each Holder of the Initial
Securities electing to exchange the Initial Securities for Exchange Securities
(assuming that such Holder is not an affiliate of the Company within the meaning
of the Securities Act, acquires the Exchange Securities in the ordinary course
of such Holder's business and has no arrangements with any person to participate
in the distribution of the Exchange Securities and is not prohibited by any law
or policy of the Commission from participating in the Registered Exchange Offer)
to trade such Exchange Securities from and after their receipt without any
limitations or restrictions under the Securities Act and without material
restrictions under the securities laws of the several states of the United
States.
The Company acknowledges that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Initial Securities, acquired for its own account as a
result of market-making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing the information set forth in (a) Annex A hereto on the cover, (b)
Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of
the Exchange Offer" section, and (c) Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Securities received by such Exchanging Dealer pursuant to the
Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell
Securities (as defined below) acquired in exchange for Initial Securities
constituting any portion of an unsold allotment is required to deliver a
prospectus containing the information required by Items 507 or 508 of Regulation
S-K under the Securities Act, as applicable, in connection with such sale.
The Company shall use its best efforts to keep the Exchange Offer
Registration Statement effective and to amend and supplement the prospectus
contained therein, in order to permit such prospectus to be lawfully delivered
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided, however, that (i) in the
case where such prospectus and any amendment or supplement thereto must be
delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be
the earlier of the 180th day after the consummation of the Registered Exchange
Offer and the date on which all Exchanging Dealers and the Initial Purchasers
have sold all Exchange Securities held by them (unless such period is extended
pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus
and any amendment or supplement thereto available to any broker-dealer for use
in connection with any resale of any Exchange Securities for a period of not
less than 90 days after the consummation of the Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser upon the written request of such Initial Purchaser, in
exchange (the "Private Exchange") for the Initial Securities held by such
Initial Purchaser, a like principal amount of debt securities of the Company
issued under the Indenture and identical in all material respects (including the
existence of restrictions on transfer under the Securities Act and the
securities laws of the several states of the United States) to the Initial
Securities (the "Private Exchange Securities"). The Initial Securities, the
Exchange Securities and the Private Exchange Securities are herein collectively
called the "Securities".
In connection with the Registered Exchange Offer, the Company shall:
(a) 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;
2
<PAGE> 3
EXHIBIT 10.2
(b) keep the Registered Exchange Offer open for not less than
30 days (or longer, if required by applicable law) after the date
notice thereof is mailed to the Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York, which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last business day
on which the Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange Offer
or the Private Exchange, as the case may be, the Company shall:
(x) accept for exchange all the Securities validly tendered
and not withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;
(y) deliver to the Trustee for cancelation all the Initial
Securities so accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly to
each Holder of the Initial Securities, Exchange Securities or Private
Exchange Securities, as the case may be, equal in principal amount to
the Initial Securities of such Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities will not be
subject to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Security and Private Exchange Security issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Initial Securities surrendered in exchange therefor or, if no interest has been
paid on the Initial Securities, from the date of original issue of the Initial
Securities.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Initial Securities or the Exchange Securities within the
meaning of the Securities Act, (iii) such Holder is not an "affiliate," as
defined in Rule 405 of the Securities Act, of the Company or if it is an
affiliate, such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (iv) if such Holder
is not a broker-dealer, that it is not engaged in, and does not intend to engage
in, the distribution of the Exchange Securities and (v) if such Holder is a
broker-dealer, that it will receive Exchange Securities for its own account in
exchange for Initial Securities that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Securities.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any
3
<PAGE> 4
EXHIBIT 10.2
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 Exchange Offer Registration Statement,
and any supplement to such prospectus, does not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated within
180 days of the Issue Date (or such additional number of days as the Registered
Exchange Offer is required to be kept open under applicable law in excess of
30), (iii) any Initial Purchaser so requests with respect to the Initial
Securities (or the Private Exchange Securities) not eligible to be exchanged for
Exchange Securities in the Registered Exchange Offer and held by it following
consummation of the Registered Exchange Offer or (iv) any Holder of Initial
Securities (other than an Exchanging Dealer) is not eligible to participate in
the Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer, such
Holder does not receive freely tradeable Exchange Securities on the date of the
exchange, the Company shall take the following actions:
(a) The Company shall, at its cost, as promptly as practicable
(but in no event more than 30 days after so required or requested
pursuant to this Section 2) file with the Commission and thereafter
shall use its best efforts to cause to be declared effective a
registration statement (the "Shelf Registration Statement" and,
together with the Exchange Offer Registration Statement, a
"Registration Statement") on an appropriate form under the Securities
Act relating to the offer and sale of the Transfer Restricted
Securities (as defined in Section 6(d) hereof) by the Holders thereof
from time to time in accordance with the methods of distribution set
forth in the Shelf Registration Statement and Rule 415 under the
Securities Act (hereinafter, the "Shelf Registration"); provided,
however, that no Holder (other than an Initial Purchaser) shall be
entitled to have the Securities held by it covered by such Shelf
Registration Statement unless such Holder agrees in writing to be bound
by all the provisions of this Agreement applicable to such Holder.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of
the relevant Securities, for a period of two years (or for such longer
period if extended pursuant to Section 3(j) below) from the date of its
effectiveness or such shorter period that will terminate when all the
Securities covered by the Shelf Registration Statement (i) have been
sold pursuant thereto or (ii) are eligible for sale under Rule 144(k)
(or any successor provision) under the Securities Act. The Company
shall be deemed not to have used its best efforts to keep the Shelf
Registration Statement effective during the requisite 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 such action is required by applicable law.
(c) Notwithstanding any other provisions of this Agreement to
the contrary, the Company shall cause the Shelf Registration Statement
and the related prospectus and any amendment or supplement thereto, as
of the effective date of the Shelf Registration Statement, amendment or
supplement, (i) to comply in all material respects with the applicable
requirements of the Securities Act and the rules and regulations of the
Commission and (ii) not to contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4
<PAGE> 5
EXHIBIT 10.2
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Company shall (i) furnish to each Initial Purchaser,
prior to the filing thereof with the Commission, a copy of the
Registration Statement and each amendment thereof and each supplement,
if any, to the prospectus included therein and, in the event that an
Initial Purchaser (with respect to any portion of an unsold allotment
from the original offering) is participating in the Registered Exchange
Offer or the Shelf Registration Statement, the Company shall use its
best efforts to reflect in each such document, when so filed with the
Commission, such comments as such Initial Purchaser reasonably may
propose; (ii) include the information set forth in Annex A hereto on
the cover, in Annex B hereto in the "Exchange Offer Procedures" section
and the "Purpose of the Exchange Offer" section, and in Annex C hereto
in the "Plan of Distribution" section of the prospectus forming a part
of the Exchange Offer Registration Statement and include the
information set forth in Annex D hereto in the Letter of Transmittal
delivered pursuant to the Registered Exchange Offer; (iii) if requested
by an Initial Purchaser, include the information required by Items 507
or 508 of Regulation S-K under the Securities Act, as applicable, in
the prospectus forming a part of the Exchange Offer Registration
Statement; (iv) include within the prospectus contained in the Exchange
Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a
summary statement of the positions taken or policies made by the staff
of the Commission with respect to the potential "underwriter" status of
any broker-dealer that is the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of Exchange Securities received by such broker-dealer
in the Registered Exchange Offer (a "Participating Broker-Dealer"),
whether such positions or policies have been publicly disseminated by
the staff of the Commission or such positions or policies, in the
reasonable judgment of the Initial Purchasers based upon advice of
counsel (which may be in-house counsel), represent the prevailing views
of the staff of the Commission; and (v) in the case of a Shelf
Registration Statement, include the names of the Holders who propose to
sell Securities pursuant to the Shelf Registration Statement as selling
securityholders.
(b) The Company shall give written notice to the Initial
Purchasers, the Holders of the Securities and any Participating
Broker-Dealer from whom the Company has received prior written notice
that it will be a Participating Broker-Dealer in the Registered
Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall
be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
(i) when the Registration Statement or any amendment
thereto has been filed with the Commission and when the
Registration Statement or any post-effective amendment thereto
has become effective;
(ii) of any request by the Commission for amendments
or supplements to the Registration Statement or the prospectus
included therein or for additional information;
(iii) 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;
(iv) of the receipt by the Company or its legal
counsel 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; and
5
<PAGE> 6
EXHIBIT 10.2
(v) of the happening of any event that requires the
Company to make changes in the Registration Statement or the
prospectus in order that neither the Registration Statement
nor the prospectus contains an untrue statement of a material
fact nor omits to state a material fact required to be stated
therein or necessary to make the statements therein (in the
case of the prospectus, in light of the circumstances under
which they were made) not misleading.
(c) The Company shall make every reasonable effort to obtain
the withdrawal at the earliest possible time of any order suspending
the effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities
included within the coverage of the Shelf Registration, without charge,
at least one copy of the Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits
thereto (including those, if any, incorporated by reference).
(e) The Company shall deliver to each Exchanging Dealer and
each Initial Purchaser, and to any other Holder who 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 any Initial Purchaser or any such
Holder requests, all exhibits thereto (including those incorporated by
reference).
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Securities included within the coverage of
the Shelf Registration, without charge, as many copies of the
prospectus (including each preliminary prospectus) included in the
Shelf Registration Statement and any amendment or supplement thereto as
such person may reasonably request. The Company consents, subject to
the provisions of this Agreement, to the use of the prospectus or any
amendment or supplement thereto by each of the selling Holders of the
Securities in connection with the offering and sale of the Securities
covered by the prospectus, or any amendment or supplement thereto,
included in the Shelf Registration Statement.
(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other
persons required to deliver a prospectus following the Registered
Exchange Offer, without charge, as many copies of the final prospectus
included in the Exchange Offer Registration Statement and any amendment
or supplement thereto as such persons may reasonably request. The
Company consents, subject to the provisions of this Agreement, to the
use of the prospectus or any amendment or supplement thereto by any
Initial Purchaser, if necessary, any Participating Broker-Dealer and
such other persons required to deliver a prospectus following the
Registered Exchange Offer in connection with the offering and sale of
the Exchange Securities covered by the prospectus, or any amendment or
supplement thereto, included in such Exchange Offer Registration
Statement.
(h) Prior to any public offering of the Securities, pursuant
to any Registration Statement, the Company shall register or qualify or
cooperate with the Holders of the Securities included therein and their
respective counsel in connection with the registration or qualification
of the Securities for offer and sale under the securities or "blue sky"
laws of such states of the United States as any Holder of the
Securities 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 shall not be required to (i)
qualify generally to do business in any jurisdiction where it is not
then so qualified or (ii) take any action which would subject it to
general service of process or to taxation in any jurisdiction where it
is not then so subject.
6
<PAGE> 7
EXHIBIT 10.2
(i) The Company shall cooperate with the Holders of the
Securities to facilitate the timely preparation and delivery of
certificates representing the Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders may request a
reasonable period of time prior to sales of the Securities pursuant to
such Registration Statement.
(j) Upon the occurrence of any event contemplated by
paragraphs (ii) through (v) of Section 3(b) above during the period for
which the Company is required to maintain an effective Registration
Statement, the Company shall promptly prepare and file a post-effective
amendment to the Registration Statement or a supplement to the related
prospectus and any other required document so that, as thereafter
delivered to Holders of the Securities or purchasers of Securities, the
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. If the Company notifies the
Initial Purchasers, the Holders of the Securities and any known
Participating Broker-Dealer in accordance with paragraphs (ii) through
(v) of Section 3(b) above to suspend the use of the prospectus until
the requisite changes to the prospectus have been made, then the
Initial Purchasers, the Holders of the Securities and any such
Participating Broker-Dealers shall suspend use of such prospectus, and
the period of effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange Offer Registration
Statement provided for in Section 1 above shall each be extended by the
number of days from and including the date of the giving of such notice
to and including the date when the Initial Purchasers, the Holders of
the Securities and any known Participating Broker-Dealer shall have
received such amended or supplemented prospectus pursuant to this
Section 3(j).
(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for the
Initial Securities, the Exchange Securities or the Private Exchange
Securities, as the case may be, and provide the applicable trustee with
printed certificates for the Initial Securities, the Exchange
Securities or the Private Exchange Securities, as the case may be, in a
form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all 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 (or otherwise provide in
accordance with Section 11(a) of the Securities Act) an earnings
statement satisfying the provisions of Section 11(a) of the Securities
Act, no later than 45 days after the end of a 12-month period (or 90
days, if such period is a fiscal year) beginning with the first month
of the Company's first fiscal quarter commencing after the effective
date of the Registration Statement, which statement shall cover such
12-month period.
(m) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act of 1939, as amended, in a timely manner
and containing such changes, if any, as shall be necessary for such
qualification. In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Company shall
appoint a new trustee thereunder pursuant to the applicable provisions
of the Indenture.
(n) The Company may require each Holder of Securities to be
sold pursuant to the Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of
the Securities as the Company may from time to time reasonably require
for inclusion in the Shelf Registration Statement, and the Company may
exclude from such registration the Securities of any Holder that
unreasonably fails to furnish such information within a reasonable time
after receiving such request.
7
<PAGE> 8
EXHIBIT 10.2
(o) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form)
and take all such other action, if any, as any Holder of the Securities
shall reasonably request in order to facilitate the disposition of the
Securities pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Company shall
(i) make reasonably available for inspection by the Holders of the
Securities, any underwriter participating in any disposition pursuant
to the Shelf Registration Statement and any attorney, accountant or
other agent retained by the Holders of the Securities or any such
underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and (ii) cause the
Company's officers, directors, employees, accountants and auditors to
supply all relevant information reasonably requested by the Holders of
the Securities or any such underwriter, attorney, accountant or agent
in connection with the Shelf Registration Statement, in each case, as
shall be reasonably necessary to enable such persons to conduct a
reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that the foregoing inspection and
information gathering shall be coordinated on behalf of the Initial
Purchasers by you and on behalf of the other parties, by one counsel
designated by and on behalf of such other parties as described in
Section 4 hereof.
(q) In the case of any Shelf Registration, the Company, if
requested by any Holder of Securities covered thereby, shall cause (i)
its counsel to deliver an opinion and updates thereof relating to the
Securities in customary form addressed to such Holders and the managing
underwriters, if any, thereof and dated, in the case of the initial
opinion, the effective date of such Shelf Registration Statement (it
being agreed that the matters to be covered by such opinion shall
include, without limitation, the due incorporation and good standing of
the Company and its subsidiaries; the qualification of the Company and
its subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery of the relevant agreement of the
type referred to in Section 3(o) hereof; the due authorization,
execution, authentication and issuance, and the validity and
enforceability, of the applicable Securities; the absence of material
legal or governmental proceedings involving the Company and its
subsidiaries; the absence of governmental approvals required to be
obtained in connection with the Shelf Registration Statement, the
offering and sale of the applicable Securities, or any agreement of the
type referred to in Section 3(o) hereof; the compliance as to form of
such Shelf Registration Statement and any documents incorporated by
reference therein and of the Indenture with the requirements of the
Securities Act and the Trust Indenture Act, respectively; and as of the
date of the opinion and as of the effective date of the Shelf
Registration Statement or most recent post-effective amendment thereto,
as the case may be, the absence from such Shelf Registration Statement
and the prospectus included therein, as then amended or supplemented,
and from any documents incorporated by reference therein of an untrue
statement of a material fact or the omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any such documents,
in light of the circumstances existing at the time that such documents
were filed with the Commission under the Exchange Act); (ii) its
officers to execute and deliver all customary documents and
certificates and updates thereof requested by any underwriters of the
applicable Securities and (iii) its independent public accountants and
the independent public accountants with respect to any other entity for
which financial information is provided in the Shelf Registration
Statement to provide to the selling Holders of the applicable
Securities and any underwriter therefor a comfort letter in customary
form and covering matters of the type customarily covered in comfort
letters in connection with primary underwritten offerings, subject to
receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
8
<PAGE> 9
EXHIBIT 10.2
(r) In the case of the Registered Exchange Offer, if requested
by any Initial Purchaser or any known Participating Broker-Dealer, the
Company shall cause (i) its counsel to deliver to such Initial
Purchaser or such Participating Broker-Dealer a signed opinion in the
form set forth in Section 6(c) of the Purchase Agreement with such
changes as are customary in connection with the preparation of a
Registration Statement and (ii) its independent public accountants and
the independent public accountants with respect to any other entity for
which financial information is provided in the Registration Statement
to deliver to such Initial Purchaser or such Participating
Broker-Dealer a comfort letter, in customary form, meeting the
requirements as to the substance thereof as set forth in Section 6(a)
and (f) of the Purchase Agreement, with appropriate date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to
be consummated, upon delivery of the Initial Securities by Holders to
the Company (or to such other Person as directed by the Company) in
exchange for the Exchange Securities or the Private Exchange
Securities, as the case may be, the Company shall mark, or caused to be
marked, on the Initial Securities so exchanged that such Initial
Securities are being canceled in exchange for the Exchange Securities
or the Private Exchange Securities, as the case may be; in no event
shall the Initial Securities be marked as paid or otherwise satisfied.
(t) The Company shall use its best efforts to (a) if the
Initial Securities have been rated prior to the initial sale of such
Initial Securities, confirm such ratings will apply to the Securities
covered by a Registration Statement, or (b) if the Initial Securities
were not previously rated, cause the Securities covered by a
Registration Statement to be rated with the appropriate rating
agencies, if so requested by Holders of a majority in aggregate
principal amount of Securities covered by such Registration Statement,
or by the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the
Exchange Act shall underwrite any Securities or participate as a member
of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the Conduct Rules (the "Rules") of
the National Association of Securities Dealers, Inc. ("NASD")) thereof,
whether as a Holder of such Securities or as an underwriter, a
placement or sales agent or a broker or dealer in respect thereof, or
otherwise, the Company shall assist such broker-dealer in complying
with the requirements of such Rules, including, without limitation, by
(i) if such Rules, including Rule 2720, shall so require, engaging a
"qualified independent underwriter" (as defined in Rule 2720) to
participate in the preparation of the Registration Statement relating
to such Securities, to exercise usual standards of due diligence in
respect thereto and, if any portion of the offering contemplated by
such Registration Statement is an underwritten offering or is made
through a placement or sales agent, to recommend the yield of such
Securities, (ii) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters
provided in Section 5 hereof and (iii) providing such information to
such broker-dealer as may be required in order for such broker-dealer
to comply with the requirements of the Rules.
(v) The Company shall use its best efforts to take all other
steps necessary to effect the registration of the Securities covered by
a Registration Statement contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
through 3 hereof (including the reasonable fees and expenses, if any, of
Cravath, Swaine & Moore, counsel for the Initial Purchasers, incurred in
connection with the Registered Exchange Offer), whether or not the Registered
Exchange Offer or a Shelf Registration is filed or becomes effective, and, in
the event of a Shelf Registration, shall bear or reimburse the Holders of the
Securities covered thereby for
9
<PAGE> 10
EXHIBIT 10.2
the reasonable fees and disbursements of one firm of counsel designated by the
Holders of a majority in principal amount of the Initial Securities covered
thereby to act as counsel for the Holders of the Initial Securities in
connection therewith.
5. Indemnification. (a) The Company agrees to indemnify and hold
harmless each Holder of the Securities, any Participating Broker-Dealer and each
person, if any, who controls such Holder or such Participating Broker-Dealer
within the meaning the Exchange Act (each Holder, any Participating
Broker-Dealer and such controlling persons are referred to collectively as the
"Indemnified Parties") from and against any losses, claims, damages or
liabilities, joint or several, or any actions in respect thereof (including, but
not limited to, any losses, claims, damages, liabilities or actions relating to
purchases and sales of the Securities) to which each Indemnified Party may
become subject under the Securities Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in a Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to a Shelf
Registration, 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 shall reimburse, as
incurred, the Indemnified Parties for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action in respect thereof; provided, however, that
(i) the Company shall not be liable in any such case to the extent that such
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration in reliance
upon and in conformity with written information pertaining to such Holder and
furnished to the Company by or on behalf of such Holder specifically for
inclusion therein and (ii) with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus relating
to a Shelf Registration Statement, the indemnity agreement contained in this
subsection (a) shall not inure to the benefit of any Holder or Participating
Broker-Dealer from whom the person asserting any such losses, claims, damages or
liabilities purchased the Securities concerned, to the extent that a prospectus
relating to such Securities was required to be delivered by such Holder or
Participating Broker-Dealer under the Securities Act in connection with such
purchase and any such loss, claim, damage or liability of such Holder or
Participating Broker-Dealer results from the fact that there was not sent or
given to such person, at or prior to the written confirmation of the sale of
such Securities to such person, a copy of the final prospectus, if the Company
had previously furnished copies thereof to such Holder or Participating
Broker-Dealer; provided further, however, that this indemnity agreement will be
in addition to any liability which the Company may otherwise have to such
Indemnified Party. The Company shall also indemnify underwriters, their officers
and directors and each person who controls such underwriters within the meaning
of the Securities Act or the Exchange Act to the same extent as provided above
with respect to the indemnification of the Holders of the Securities if
requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act from
and against any losses, claims, damages or liabilities or any actions in respect
thereof, to which the Company or any such controlling person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in a
Registration Statement or prospectus or in any amendment or supplement thereto
or in any preliminary prospectus relating to a Shelf Registration, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact necessary to make the statements therein not misleading, but in
each case only to the extent that the untrue statement or omission or alleged
untrue statement or omission was made in reliance upon and in conformity with
written information pertaining to such Holder and furnished to the Company by or
on behalf of such Holder specifically for inclusion therein; and, subject to
10
<PAGE> 11
EXHIBIT 10.2
the limitation set forth immediately preceding this clause, shall reimburse, as
incurred, the Company for any legal or other expenses reasonably incurred by the
Company or any such controlling person in connection with investigating or
defending any loss, claim, damage, liability or action in respect thereof. This
indemnity agreement will be in addition to any liability which such Holder may
otherwise have to the Company or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this Section 5
of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party 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. In case any
such action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in
subsections (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party on the other from the exchange of the Securities,
pursuant to the Registered Exchange Offer, or (ii) if the allocation provided by
the foregoing clause (i) is not permitted by applicable law in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified party, as the case may be, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid by
an indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim which is
the subject of this subsection (d). Notwithstanding any other provision of this
Section 5(d), the Holders of the Securities shall not be required to contribute
any amount in excess of the amount by which the net proceeds received by such
Holders from the sale of the Securities pursuant to a Registration Statement
exceeds the amount of damages which such Holders have otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. 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 paragraph (d), each person, if any, who controls such indemnified party
11
<PAGE> 12
EXHIBIT 10.2
within the meaning of the Securities Act or the Exchange Act shall have the same
rights to contribution as such indemnified party and each person, if any, who
controls the Company within the meaning of the Securities Act or the Exchange
Act shall have the same rights to contribution as the Company.
(e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancelation of this Agreement
or any investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "Additional Interest") with respect to the Initial Securities and
the Private Exchange Securities shall be assessed as follows if any of the
following events occur (each such event in clauses (i) through (iii) below a
"Registration Default"):
(i) If by August 7, 1998, neither the Exchange Offer
Registration Statement nor a Shelf Registration Statement has been
filed with the Commission;
(ii) If by December 21, 1998, neither the Registered Exchange
Offer is consummated nor, if required in lieu thereof, the Shelf
Registration Statement is declared effective by the Commission; or
(iii) If after either the Exchange Offer Registration
Statement or the Shelf Registration Statement is declared effective (A)
such Registration Statement thereafter ceases to be effective; or (B)
such Registration Statement or the related prospectus ceases to be
usable (except as permitted in paragraph (b)) in connection with
resales of Transfer Restricted Securities during the periods specified
herein because either (1) any event occurs as a result of which the
related prospectus forming part of such Registration Statement 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 (2) it
shall be necessary to amend such Registration Statement or supplement
the related prospectus to comply with the Securities Act or the
Exchange Act or the respective rules thereunder;
Additional Interest shall accrue on the Initial Securities and the Private
Exchange Securities over and above the interest set forth in the title of the
Securities, from and including the date on which any such Registration Default
shall occur to but excluding the date on which all such Registration Defaults
have been cured, at a rate of 0.50% per annum.
(b) A Registration Default referred to in Section 6(a)(iii) (B) hereof
shall be deemed not to have occurred and be continuing in relation to a
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Registration Statement to incorporate annual audited financial
information with respect to the Company where such post-effective amendment is
not yet effective and needs to be declared effective to permit Holders to use
the related prospectus or (y) other material events with respect to the Company
that would need to be described in such Registration Statement or the related
prospectus and (ii) in the case of clause (y), the Company is proceeding
promptly and in good faith to amend or supplement such Registration Statement
and related prospectus to describe such events; provided, however, that in any
case if such Registration Default occurs for a continuous period in excess of 30
days, Additional Interest shall be payable in accordance with the above
paragraph from the day such Registration Default occurs until such Registration
Default is cured.
(c) Any amounts of Additional Interest due pursuant to clause (i), (ii)
or (iii) of Section 6(a) above will be payable in cash on the regular interest
payment dates with respect to the Initial Securities. The amount of Additional
Interest will be determined by multiplying the
12
<PAGE> 13
EXHIBIT 10.2
applicable Additional Interest rate by the principal amount of the Initial
Securities or Private Exchange Securities, as the case may be, multiplied by a
fraction, the numerator of which is the number of days such Additional Interest
rate was applicable during such period (determined on the basis of a 360-day
year comprised of twelve 30-day months), and the denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security until (i) the
date on which such Transfer Restricted Security has been exchanged by a person
other than a broker-dealer for a freely transferable Exchange Security in the
Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the
Registered Exchange Offer of an Initial Security for an Exchange Security, the
date on which such Exchange Security is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Initial Security has been effectively registered under the Securities Act
and disposed of in accordance with the Shelf Registration Statement, or (iv) the
date on which such Security is distributed to the public pursuant to Rule 144
under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act.
7. Rules 144 and 144A. The Company shall use its best efforts to file
the reports required to be filed by it under the Securities Act and the Exchange
Act in a timely manner and, if at any time the Company is not required to file
such reports, it will, upon the request of any Holder of Transfer Restricted
Securities, make publicly available other information so long as necessary to
permit sales of its securities pursuant to Rules 144 and 144A. The Company
covenants that it will take such further action as any Holder of Transfer
Restricted Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Transfer Restricted Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including the requirements of Rule
144A(d)(4)). The Company will provide a copy of this Agreement to Holders of and
prospective purchasers of Transfer Restricted Securities upon request. Upon the
request of any Holder of Transfer Restricted Securities, the Company shall
deliver to such Holder a written statement as to whether it has complied with
such requirements. Notwithstanding the foregoing, nothing in this Section 7
shall be deemed to require the Company to register any of its securities
pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering (the "Managing Underwriters") will be selected
by the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
13
<PAGE> 14
EXHIBIT 10.2
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current
address given by such Holder to the Company.
(2) if to the Initial Purchasers:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Telephone: (212) 325-2107
Telecopy: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Telephone: (212) 474-1000
Telecopy: (212) 474-3700
Attention: Stephen L. Burns, Esq.
(3) if to the Company, at its address as follows:
Aqua-Chem, Inc.
7800 North 113th Street
P.O. Box 421
Milwaukee, WI 53201
Telephone: (414) 359-0600
Telecopy: (414) 577-2953
Attention: Jeffrey A. Miller
with a copy to:
Whyte Hirschboeck Dudek S.C.
111 East Wisconsin Avenue
Suite 2100
Milwaukee, WI 53202-4894
Telephone: (414) 273-2100
Telecopy: (414) 223-5000
Attention: James A. Feddersen, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.
(c) 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.
14
<PAGE> 15
EXHIBIT 10.2
(d) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.
(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 LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.
15
<PAGE> 16
EXHIBIT 10.2
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the several Initial Purchasers and the Company in accordance with its
terms.
Very truly yours,
AQUA-CHEM, INC.
by /s/ JA Miller
-------------------------------------------
Name: Jeffrey A. Miller
Title: Chairman of the Board, President and
Chief Executive Officer
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
BEAR, STEARNS & CO. INC.
by: CREDIT SUISSE FIRST BOSTON CORPORATION
by /s/ Joseph I. Carrabino
--------------------------------
Name: Joseph I. Carrabino, Jr.
Title: Managing Director
16
<PAGE> 17
EXHIBIT 10.2
ANNEX A
Each broker-dealer that receives Exchange Securities 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 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 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 Securities received in exchange for Initial Securities
where such Initial Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
17
<PAGE> 18
EXHIBIT 10.2
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account
in exchange for Initial Securities, where such Initial 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 Exchange Securities. See "Plan of Distribution."
18
<PAGE> 19
EXHIBIT 10.2
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities 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 Securities. 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 Securities received in
exchange for Initial Securities where such Initial Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after 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.(1)
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange 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 Exchange 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 or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities 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 Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission 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.
For a period of 180 days 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
Securities Act.
- --------------------
(1) 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.
19
<PAGE> 20
EXHIBIT 10.2
ANNEX D
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:
------------------------------
------------------------------
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
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Initial 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 Exchange 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 Securities Act.
20
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 31st day of July, 1997, by and between
AQUA-CHEM, INC., a Delaware corporation (the "Company") and JEFFREY A. MILLER
(the "Executive").
WITNESSETH:
WHEREAS, the Executive has been acting as the President and Chief
Executive Officer of the Company under independent contract; and
WHEREAS, the Executive has orchestrated a management buy-out of the
Company and currently owns a substantial equity interest in the Company; and
WHEREAS, the Company desires to employ the Executive as President and
Chief Executive Officer, and the Executive desires to serve in such capacities;
and
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. DEFINITIONS.
Whenever used in this Agreement, the following terms shall
have the meanings set forth below and, when the meaning is intended, the initial
letter of the word is capitalized:
(a) "Agreement" means this Employment Agreement.
(b) "Base Salary" means the salary paid to the Executive as
annual salary as set forth on Schedule A, excluding amounts received under
incentive or other bonus plans, whether or not deferred.
(c) "Beneficiary" means the persons or entities designated or
deemed designated by the Executive pursuant to Section 10 herein.
(d) "Board" means the Board of Directors of the Company.
(e) "Company" means Aqua-Chem, Inc., a Delaware corporation.
(f) "Effective Date" means the date this Agreement is executed
on behalf of the Company.
(g) "Executive" means Jeffrey A. Miller.
(h) "Permanent Disability" shall have the meaning set forth in
the Company's long-term disability program as in effect from time to time.
(i) "Third Party" means any person(s) and/or business
organization(s) of any type other than the present shareholders of the Company
and their affiliates.
<PAGE> 2
EXHIBIT 10.3
(j) "EBITDA" shall have the meaning ascribed thereto in that
certain Securities Purchase Agreement by and among Rush Creek, LLC, A-C
Acquisition Corp., CB-Kramer Sales and Service, Inc., Whitney Subordinated Debt
Fund, L.P., and Whitney Equity Partners, L.P. dated as of July 30, 1997.
2. EMPLOYMENT TERM.
The term of the Executive's employment shall be three (3)
years from the "Effective Date".
3. DUTIES.
(a) During the employment term, the Executive shall serve as
President and Chief Executive Officer of the Company, with such duties and
responsibilities as may reasonably be assigned or delegated to him from time to
time according to customary Company procedures. During his employment term, the
Executive shall devote his full time to the faithful and diligent performance of
his duties for the Company.
(b) Notwithstanding anything herein to the contrary, nothing
shall preclude the Executive from engaging in charitable and community affairs
and managing his personal investments (including J. Miller Management, Inc.), as
long as such activities do not interfere with his carrying out his duties and
responsibilities under this Agreement.
(c) During the period of Executive's employment, he shall
serve on the Board of Directors of the Company, provided that Executive may
resign from such directorship or refuse to stand for election at any time.
4. COMPENSATION.
(a) Base Salary. During the employment term, the Executive
shall be paid by the Company a Base Salary payable (after deduction of
applicable taxes) in accordance with the payroll practices of the Company.
Initially, the Base Salary shall be as set forth on Schedule A attached hereto.
(b) Incentive Compensation. The Executive shall, during the
employment term, participate in such incentive compensation programs as the
Company may, from time to time, make available to its senior executives, as more
specifically set forth on Schedule A.
5. OTHER EMPLOYEE BENEFITS.
(a) Benefit Plans. During the employment term, the Executive
shall be entitled to participate in the employee benefit programs as the Company
from time to time makes available to the Company's senior executives, including,
without limitation, medical, disability and life insurance, and retirement
plans. The Executive shall also be provided with the use of an automobile
entirely at the Company's expense, and shall be entitled to such other
perquisites as more specifically set forth on Schedule A attached hereto.
<PAGE> 3
EXHIBIT 10.3
(b) Vacation. The Executive shall be entitled to reasonable
paid annual vacation periods in accordance with the Company's policies as in
effect from time to time, but in no event shall such vacation period be less
than that set forth on Schedule A attached hereto.
(c) Regular Reimbursed Business Expenses. The Company shall
reimburse the Executive for all travel and other expenses reasonably incurred by
the Executive in the performance of his duties during the employment term,
including first class air travel. The Executive shall provide appropriate
documentation of expenses according to the Company's then current expense
reimbursement policy.
6. TERMINATION OF EMPLOYMENT.
(a) Either party may terminate this agreement upon 180 days
prior written notice from the Company's Board of Directors. Should the Executive
terminate the agreement prior to expiration of the three (3) year term, he shall
not be entitled to severance compensation. Should Employer terminate the
Executive prior to expiration of the three (3) year term, the Executive shall be
compensated 100% of all compensation and benefits under this agreement for the
remainder of the Term, as if said employment had not been terminated or twelve
(12) months compensation, whichever is greater. The reassignment of the
Executive to duties materially inconsistent with the Executive's present
authorities, duties, responsibilities, and status as an officer of the Company,
or the substantial reduction of Executive's Base Salary and/or exclusion of
Executive from the Company's standard incentive compensation programs, shall
constitute termination of employment by the Company.
(b) Notwithstanding the above, the employment term shall
terminate without notice and automatically upon the death or Permanent
Disability of the Executive, or if the Executive is convicted of a felony or
criminal fraud. Upon such termination of Executive's employment by reason of
death or Permanent Disability, the Executive or, in the event of his death, the
Executive's beneficiary shall be entitled to receive the Executive's then
current Base Salary through such date of termination, and incentive compensation
determined by determining the incentive compensation for the year in which the
date of termination occurred multiplied by a fraction, the numerator of which is
the number of complete months the Executive was employed during such year and
the denominator of which is twelve (12).
(c) Additionally, and notwithstanding the above, the Board
shall have the option to terminate the Executive's employment if the Company's
EBITA declines 50% during any 12-month period as compared to the 12-month period
prior to that. If the Executive is terminated under this paragraph, he shall be
entitled to 12 months compensation as severance.
7. RESTRICTIONS.
(a) The Executive acknowledges and agrees that the Company's
business is by its nature international, the Company's business and customer
contacts have been established and maintained at great expense, the Executive,
by virtue of his position with the Company, has and will continue to be privy to
the Company's most confidential business plans and strategies which, without the
restrictions hereinafter set forth, would enable the Executive to compete
unfairly with the Company and, accordingly, such restrictions are reasonable and
necessary to protect the legitimate interests of the
3
<PAGE> 4
EXHIBIT 10.3
Company. The Executive hereby covenants and agrees that the Executive will not
at any time subsequent to the date hereof, reveal, divulge, or make known to any
Person any Confidential Information (as hereinafter defined) made known to the
Executive or of which Executive has become aware, regardless of whether
developed, prepared, devised or otherwise created in whole or in part by the
efforts of the Executive and except to the extent so authorized in writing by
the Company in order to carry out the terms of this Agreement or except as
required by law. For purposes of this Agreement, the term "Confidential
Information" shall mean (i) any technical, scientific or engineering information
relating to the Company's products and/or services, (ii) information relating to
any customer of the Company, including without limitation, the names, addresses,
telephone numbers and sales records of, or pertaining to any such customer, and
(iii) price lists, methods of operation, financial data and other information
pertaining to the Company which the Company, in its sole discretion, regards as
confidential and in the nature of trade secrets. Notwithstanding anything
contained herein to the contrary, Confidential Information as used herein shall
not include that which (i) is or becomes generally available to the public other
than as a result of a disclosure by the Executive or its affiliates or
representatives, (ii) was available to the Executive prior to its disclosure to
the Executive by the Company or his representatives, or (iii) becomes available
to the Executive from a source other than the Company or its representatives,
provided that such source is not bound by a confidentiality agreement with the
Company or its representatives.
(b) The Executive hereby covenants and agrees that at no time
during the employment term and for a period of twelve (12) months following the
Effective Date of Termination will the Executive directly or indirectly in any
capacity whatsoever (whether as an employee, officer, director, consultant,
partner, member, joint venturer, agent, representative or otherwise) provide
service, advice or assistance of any nature to, or acquire an ownership interest
in (or acquire the right to acquire an ownership interest in) a competing
business (as hereinafter defined). A "Competing Business" shall mean and be
limited to any business, regardless of the form of organization, which (i) is
engaged in the design, manufacture and/or sale of products which are similar in
design or function to or otherwise compete with the products which were under
design by the Company or included in the Company's product lines during the
12-month period preceding the Effective Date of Termination (hereinafter
referred to as "Competing Products") or which (ii) sells, attempts to sell or
markets (or during the 12- month period preceding the Effective Date of
Termination sold, attempted to sell or marketed) any Competing Products within
the United States and/or any foreign country within which, during the 12- month
period preceding the Effective Date of Termination, the Company sold any of its
products (or was a party to an executory contract for the sale of any of its
products), attempted to sell, or marketed any of its products other than by
means of general advertising. Notwithstanding the preceding, the Executive shall
not be prohibited from (i) acquiring less than five percent (5%) of the stock of
any publicly traded company which may be engaged in a Competing Business, or
(ii) being employed by or otherwise providing services to a company which, among
its various businesses, is engaged in a Competing Business, provided that the
Executive is not directly or indirectly involved in any capacity whatsoever in
such Competing Business.
(c) The Executive shall not sell any products or services to,
or solicit any sales of products or services from, any customer of the Company
on behalf of a Competitor. The term "customer" shall mean any Person (including
any Person who controls, is under common control with or has the ability to
control any such Person) to whom the Company has provided goods or services
within the twenty-four (24) month period prior to the termination of the
Executive's employment hereunder or to whom the Executive or the Company had
actively solicited business in an attempt to
4
<PAGE> 5
EXHIBIT 10.3
develop such Person as a customer of the Company during the term hereof, or any
licensee of the Company who was a licensee of the Company at any time during the
twenty-four (24) month period prior to the termination of this Agreement.
(d) The Executive hereby covenants and agrees that, at all
times during the employment term and for a period of twelve (12) months
following the Effective Date of Termination, the Executive shall not directly or
indirectly, on behalf of himself or any other person, entity, or business,
employ or engage the services of or seek to employ or engage the services of any
person employed by the Company or any agent who represents the Company during
the period of six (6) months prior to the Effective Date of Termination, or
otherwise encourage or entice any such person to terminate or diminish their
relationship with the Company.
(e) The Executive hereby acknowledges and agrees (i) the
Executive's education and experience are such that the foregoing restrictions
will not unduly interfere with his ability to earn a livelihood, (ii) the
Company would suffer irreparable harm in the event of a violation of such
restrictions, and (iii) accordingly, in addition to any other remedies available
to it, the Company shall be entitled to injunctive relief without the posting of
bond or other collateral and the Executive shall not oppose the granting of such
relief. All costs, including reasonable attorneys' fees, incurred in enforcing
this provision such be reimbursed to the prevailing party.
(f) The Executive represents that he is not now under any
written agreement, nor has he previously, at any time, entered into any written
agreement with any person, firm or corporation, which would or could in any
manner preclude or prevent him from giving freely and the Company receiving the
exclusive benefits of the Executive's services.
8. INDEMNIFICATION.
Executive shall be entitled to be indemnified for any loss
suffered by him by reason of his acting as an officer, employee or agent of the
Company to the full extent provided by the Agreement attached hereto as Exhibit
B.
9. ASSIGNABILITY; BINDING NATURE.
This Agreement shall inure to the benefit of the Company and
the Executive and their respective successors, heirs (in the case of the
Executive) and permitted assigns. Except as specifically provided to the
contrary in this Agreement, no rights or obligations of the Company or Executive
under the Agreement may be assigned or transferred. Notwithstanding the
preceding, the rights and obligations of the Company may be assigned or
transferred if there is a change in ownership of the Company, provided that such
assignee or transferee assumes the liabilities, obligations and duties of the
Company, as contained in this Agreement, either contractually or as a matter of
law.
10. BENEFICIARIES.
The Executive may designate one or more persons or entities as
the primary and/or contingent Beneficiaries of any payments owing to the
Executive under this Agreement. Such designation must be in the form of a signed
writing reasonably acceptable to the Company. The
5
<PAGE> 6
EXHIBIT 10.3
Executive may make or change such designation by a similar written instrument
signed by the Executive and delivered to the Company at any time.
11. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the
Company and the Executive and supersedes all prior agreements, understandings,
discussions, negotiations and undertakings, whether written or oral, between
them with respect thereto.
12. AMENDMENT OR WAIVER.
This Agreement cannot be changed, modified or amended without
the prior written consent of both the Executive and the Company. No waiver by
either the Company or the Executive at any time of any breach by the other party
of any condition or provision of this Agreement shall be deemed a waiver of a
similar or dissimilar condition or provision at the same or at any prior or
subsequent time. Any waiver must be in writing and signed by the Executive and
an authorized officer of the Company, as the case may be.
13. SEVERABILITY.
In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, in whole or
in part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law. If any of the restrictions contained in Section 7 shall be deemed to be
unenforceable by reason of the extent, duration or geographical scope thereof or
otherwise, then the restrictions shall be reduced to such extent, duration,
geographical scope, or other provisions thereof pursuant to the provisions of
Section 13 hereof, and in its reduced form the restrictions contained in Section
7 shall then be enforceable in the manner contemplated hereby.
14. SURVIVORSHIP.
The respective rights and obligations of the parties hereunder
shall survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
15. GOVERNING LAW.
This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Wisconsin without
reference to principles of conflicts of laws.
16. NOTICES.
Any notice given to either party shall be in writing and shall
be deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested duly addressed to the
party concerned, if to the Company, at its principal office and, if to the
Executive, at the address of the Executive shown on the Company's records, or at
such other address as such party may give notice of.
6
<PAGE> 7
EXHIBIT 10.3
17. HEADINGS; CONSTRUCTION.
The headings of the paragraphs contained in this Agreement are
for convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
AQUA-CHEM, INC.
By: /s/ J. Scott Barton
-------------------------
Its: VP
-------------------------
EXECUTIVE:
/s/ JA Miller 7/31/97
----------------------------------
JEFFREY A. MILLER
7
<PAGE> 8
EXHIBIT 10.3
SCHEDULE A
Executive: Jeffrey A. Miller
Title: President and Chief Executive Officer
Base Salary: $475,115.00
Effective Date: August 1, 1997
Incentive Compensation:
Aqua-Chem's Management Incentive Plan
IC = Base Compensation x 100% participation rate x % payout where Base
Compensation is $475,115.00
100% payout percentage = % payout rate as defined in
Aqua-Chem's Management Incentive Plan of November 15, 1997
The Incentive Compensation shall be due and payable immediately upon
the close of Aqua-Chem's fiscal year-end, but no later than January
20th of the next year
OTHER EMPLOYEE BENEFITS:
Insurance: Health and dental insurance per Company plan.
Long term disability: 60% of Base Salary Benefit for five (5) years.
Life Insurance: $5,000,000 Term Life - owned by Executive, paid by
the Company.
Company Automobile: Company-paid Cadillac STS or equivalent.
Other: Annual physical exam at Company's expense.
Company-paid membership at Country Club of Executive's choice
(total cost not to exceed $50,000), Milwaukee Athletic Club,
and University Club
Annual Financial Planning/Tax Planning (up to $6,000).
Pension Plan: 4% of salary plus 3% salary matching.
Vacation: Five (5) weeks annually.
Professional Associations.
AQUA-CHEM, INC. EXECUTIVE:
By: /s/ J. Scott Barton /s/ JA Miller
------------------------------ ---------------------------
JEFFREY A. MILLER
Its: VP Date: 7/31/97
------------------------------ -------------------
<PAGE> 9
EXHIBIT 10.3
EXHIBIT B
INDEMNIFICATION AGREEMENT
AGREEMENT made and entered into this 31st day of July, 1997 by and
between Aqua-Chem, Inc., a Delaware corporation with principal offices in
Milwaukee, Wisconsin (hereinafter sometimes referred to as AQM) and Jeffrey A.
Miller, an individual resident of Michigan (hereinafter sometimes referred to as
"Mr. Miller").
WITNESSETH:
WHEREAS, the Company desires to enter into an Employment Agreement with
Mr. Miller; and
WHEREAS, as an inducement to Mr. Miller to enter into the Employment
Agreement, the Company has agreed to indemnify them as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises AQM and Mr. Miller
hereby agree as follows:
1. DEFINITIONS. As used herein, the following terms shall have
the following meanings:
(a) "Expenses" include fees, costs, charges, disbursements,
attorney fees and any other Expenses incurred in connection
with a Proceeding (as hereinafter defined).
(b) "Liability" includes the obligation to pay a judgment,
settlement, penalty, assessment, forfeiture or fine, including
an excise tax assessed with respect to any employee benefit
plan, and reasonable Expenses.
(c) "Party" includes an individual who was or is, or who is
threatened to be made, a named defendant or respondent in a
Proceeding.
(d) "Proceeding" means any threatened, pending or completed
civil, criminal, administrative or investigative action, suit,
arbitration or other Proceeding, whether formal or informal,
which involves foreign, federal, state or local law and which
is brought by or in the right of AQM or by any other person
relating to AQM.
(e) "Indemnified Party" means Jeffrey A. Miller.
2. MANDATORY INDEMNIFICATION.
(a) AQM shall indemnify Mr. Miller and in the event of his
death, his estate, personal representative and heirs
(hereinafter collectively referred to as the "Indemnified
Party"), to the extent that the Indemnified Party has been
successful on the merits or otherwise in the defense of a
Proceeding, for all reasonable Expenses
<PAGE> 10
EXHIBIT 10.3
incurred in the Proceeding if the Indemnified Party was a
party because Mr. Miller is or was a director and/or officer
of AQM.
(b) AQM shall also indemnify the Indemnified Party against
Liability incurred by the Indemnified Party in a Proceeding
the Indemnified Party was a party to because Mr. Miller was or
is a director and/or officer of AQM, unless Liability was
incurred because Mr. Miller breached or failed to perform a
duty that he or it owes to AQM and the breach or failure to
perform constitutes any of the following:
1. A willful failure to deal fairly with AQM, Inc. or
its shareholders in connection with a matter in which
Mr. Miller has a material conflict of interest.
2. A violation of the criminal law, unless Mr. Miller
had reasonable cause to believe that the conduct was
lawful or no reasonable cause to believe that the
conduct was unlawful.
3. A transaction from which Mr. Miller derived an
improper personal profit.
4. Willful misconduct.
(c) Determination of whether indemnification is required under
this Section 2 shall be made under Section 5 of this
Agreement.
(d) The termination of a Proceeding by judgment, order,
settlement or conviction, or upon a plea of no contest or an
equivalent plea, does not, by itself, create a presumption
that indemnification of the Indemnified Party is not required
under this section.
3. ALLOWANCE OF EXPENSES AS INCURRED. Upon written request by an
Indemnified Party who is a party to a Proceeding, AQM shall pay or
reimburse the Indemnified Party's reasonable Expenses as incurred if
the Indemnified Party provides AQM with all of the following:
(a) Written affirmation of the Indemnified Party's good faith
belief that Mr. Miller has breached or failed to perform
either of their duties to AQM.
(b) A written undertaking, executed personally or on behalf of
the Indemnified Party, to repay the allowance and to pay
interest (at an interest rate equal to the rate then currently
paid by AQM on borrowed funds) on the allowance to the extent
that it is ultimately determined under Section 5 of this
Agreement that indemnification under Section 2 of this
Agreement is not required and that indemnification is not
ordered by a court under Section 4 of this Agreement. The
undertaking under this Section shall be an unlimited and
unsecured general obligation of the Indemnified Party.
2
<PAGE> 11
EXHIBIT 10.3
4. COURT-ORDERED INDEMNIFICATION.
(a) An Indemnified Party who is a party to a Proceeding may
apply for indemnification to, or for a review of an adverse
determination under Section 5 of this Agreement by the court
conducting the Proceeding or to the Circuit Court for
Milwaukee County, Wisconsin and shall be entitled to
indemnification as hereinafter provided in Section 4 (b).
(b) The Indemnified Party shall be entitled to indemnification
if the court determines either of the following:
(i) That the Indemnified Party is entitled to
indemnification under Section 2 of this Agreement. If
the court also determines that AQM unreasonably
refused the request for indemnification, AQM shall
pay the Indemnified Party's reasonable Expenses
incurred to obtain the court-ordered indemnification.
(ii) That the Indemnified Party is fairly and
reasonably entitled to indemnification in view of all
the relevant circumstances, regardless of whether
indemnification is required under Section 2 of this
Agreement.
5. DETERMINATION OF RIGHT TO INDEMNIFICATION. The Indemnified Party
shall select one of the following means of determining his or her right
to indemnification:
(a) By a majority vote of a quorum of the Board of Directors
of AQM consisting of directors who are not at the time parties
to the same or related Proceedings. If a quorum of
disinterested directors cannot be obtained, by majority vote
of a committee duly appointed by the Board of Directors of AQM
and consisting solely of two or more directors who are not at
the time parties to the same or related Proceedings. Directors
who are parties to the same or related Proceedings may
participate in the designation of members of the committee.
(b) By independent legal counsel selected by a majority vote
of a quorum of the Board of Directors or its committee in the
manner prescribed in (a) above or, if unable to obtain such a
quorum or committee, by a majority vote of the full board of
directors, including directors who are parties to the same or
related Proceedings.
(c) By a panel of three arbitrators consisting of one
arbitrator selected by those directors entitled under (b)
above to select independent legal counsel, one arbitrator
selected by the Indemnified Party and one arbitrator selected
by the two arbitrators previously selected.
6. ADDITIONAL RIGHTS. In addition to the specific rights to
indemnification set forth herein, the Indemnified Party shall be
entitled to such additional rights to indemnification as may from time
to time be provided or permitted under AQM's Certificate of
Incorporation or by-laws or the general business corporation laws of
Delaware or Wisconsin; provided,
3
<PAGE> 12
EXHIBIT 10.3
however, that no provision under any of the foregoing shall serve to
diminish any rights of indemnification otherwise specifically granted
under this Agreement.
7. MISCELLANEOUS MATTERS. This Agreement shall be governed by the laws
of the State of Wisconsin, may only be amended by written instrument
signed by the parties and shall inure the benefit of and be binding
upon the parties and their heirs, personal representatives, successors
and assigns; provided, however, that no assignment by operation of law
or otherwise shall relieve a party of its obligations hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AQUA-CHEM, INC.
By: /s/ J. Scott Barton
---------------------------------
/s/ JA Miller 7/31/97
------------------------------------
Jeffrey A. Miller
4
<PAGE> 13
EXHIBIT 10.3
AMENDMENT TO EMPLOYMENT AGREEMENT
This AMENDMENT (this "AMENDMENT"), dated as of June 25, 1998, between
AQUA-CHEM, INC. (the "COMPANY"), a Delaware corporation, and JEFFREY A. MILLER
(the "EXECUTIVE") to the Employment Agreement (the "ORIGINAL AGREEMENT"), dated
as of July 31, 1997, by and between the Company and the Executive. The
Original Agreement, as amended by this Amendment, is hereinafter referred to as
the "AGREEMENT." All capitalized terms used herein without definition shall
have the respective meanings assigned to such terms in the Original Agreement.
WITNESSETH:
----------
WHEREAS, the parties desire to amend the Original Agreement in order to
extend the term of the Original Agreement from three (3) years to six (6) years
from the Effective Date.
NOW THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the sufficiency and receipt of which
is hereby acknowledged, the Company and the Executive agree as follows:
Section 1.1. Section 2 of the Original Agreement is hereby amended and
restated in its entirety as follows:
"The term of Executive's employment shall be six (6) years from the
Effective Date."
Section 1.2. Section 6(a) of the Original Agreement is hereby amended by
substituting the number "six (6)" in place of the number "five(5)" appearing in
the third and fourth lines thereof
Section 1.3. The terms and provisions set forth in this Amendment shall
modify and supersede all inconsistent terms and provisions set forth in the
Original Agreement and, except as expressly modified and superseded by this
Amendment, the terms and provisions set forth in the Original Agreement are
hereby ratified and confirmed and shall continue in full force and effect.
<PAGE> 14
EXHIBIT 10.3
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
AQUA-CHEM, INC.
By: /s/ J. Scott Barton
-------------------------
Name: J. SCOTT BARTON
Title: VICE-PRESIDENT
/s/ J A Miller
----------------------------
JEFFREY A. MILLER
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 5 day of February, 1997, by and
between Aqua-Chem, Inc., a Delaware corporation (the "Company"), and Rand
McNally (the "Executive").
WITNESSETH:
WHEREAS, the Executive has been employed by the Company as the
Executive Vice President and General Manager of the Company's Cleaver-Brooks
Division; and
WHEREAS, the Company desires to continue to employ Executive in his
capacity as Executive Vice President and General Manager of the Cleaver-Brooks
Division and Executive desires to continue to serve in such capacity; and
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. DEFINITIONS.
Whenever used in this Agreement, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized:
(a) "Agreement" means this Employment Agreement.
(b) "Base Salary" means the salary of record paid to the Executive
as annual salary as set forth on Schedule A, excluding amounts
received under incentive or other bonus plans, whether or not
deferred.
(c) "Beneficiary" means the persons or entities designated or
deemed designated by the Executive pursuant to Section 11
herein.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means any of the following as determined by the
Committee in the exercise of good faith and reasonable
judgment (i) the willful and continued refusal by the
Executive to perform his duties hereunder, other than by
reasons of health, after a written demand for such performance
is delivered to the Executive by the Company that identifies
the manner in which the Executive has refused to perform his
duties, (ii) the commission of an act by the Executive
constituting a felony under state or federal law, (iii) the
habitual abuse by the Executive of any substance (such as
narcotics or alcohol) which materially affects his ability to
perform his duties, or (iv) the Executive's engaging in an act
of fraud, dishonesty or gross misconduct in connection with
the business of the Company, or (v) conduct by the Executive
constituting a material breach of this Agreement.
1
<PAGE> 2
EXHIBIT 10.4
(f) "Change In Control" means (a) the consummation of a merger or
consolidation of the Company after which a Third Party (as
hereinafter defined) owns more than 50% of the outstanding
common stock of the Company or (b) a sale of the Division (as
hereinafter defined) or substantially all of the assets of the
Company to a Third Party or (c) a sale or other transfer to a
Third Party of more than 50% of the common stock of the
Company.
(g) "Committee" means the Compensation Committee of the Board.
(h) "Company" means Aqua-Chem, Inc., a Delaware corporation.
(i) "Division" means the Cleaver-Brooks Division of the Company.
(j) "Effective Date" means the date this Agreement is executed on
behalf of the Company.
(k) "Effective Date of Termination" means the date on which a
termination of the Executive's employment occurs for any
reason whatsoever.
(l) "Executive" means Rand McNally.
(m) "Good Reason" means, without the Executive's consent, the
occurrence of any one or more of the following:
(i) the reassignment of the Executive to duties
materially inconsistent with the Executive's present
authorities, duties, responsibilities, and status as
an officer of the Company, other than an act that is
remedied by the Company promptly after receipt of
written notice thereof given by the Executive, and
other than a promotion of the Executive to a position
accepted by the Executive which includes duties,
responsibilities, and status associated with the
position; or
(ii) a reduction by the Company of the Executive's Base
Salary as in effect on the Effective Date (other than
a reduction as part of an overall reduction in
compensation affecting all senior management of the
Company) or the exclusion of the Executive by the
Company from such incentive compensation programs as
the Company may, from time to time, make available to
the senior management of the Company.
(n) "Permanent Disability" shall have the meaning set forth in
the Company's long-term disability program as in effect from
time to time.
(o) "Third Party" means any person(s) and/or business
organization(s) of any type other than the present
shareholders of the Company and their affiliates.
2
<PAGE> 3
EXHIBIT 10.4
2. EMPLOYMENT TERM.
The employment term shall commence as of the Effective Date and shall
continue thereafter until the earlier of (i) 45 days after Executive's receipt
of written notice from the Company terminating employment pursuant to Section
6(b) of this Agreement; (ii) immediately upon Executive's receipt of written
notice terminating employment pursuant to Section 6(a) of this Agreement; (iii)
such date as the Company shall elect up to a maximum of 45 days after its
receipt of written notice from the Executive terminating employment pursuant to
Section 6(b) or 6(c) of this Agreement; or (iv) the Executive's death or
Permanent Disability.
3. DUTIES.
During the employment term, the Executive shall serve as Executive Vice
President and General Manager of the Cleaver-Brooks Division with such duties
and responsibilities as may reasonably be assigned or delegated to him from time
to time according to customary Company procedures. During his employment term,
the Executive shall devote his full time to the faithful and diligent
performance of his duties for the Company. Notwithstanding anything herein to
the contrary, nothing shall preclude the Executive from engaging in charitable
and community affairs and managing his personal investments so long as such
activities do not interfere with his carrying out his duties and
responsibilities under this Agreement.
4. COMPENSATION.
(a) BASE SALARY. During the employment term, the
Executive shall be paid by the Company a Base Salary
payable (after deduction of applicable taxes) in
accordance with the payroll practices of the
Company. Initially, the Base Salary shall be as set
forth on Schedule A attached hereto. It is agreed
between the parties that the Company shall review
the Base Salary annually and in light of such review
may, in the sole discretion of the Committee, adjust
such Base Salary taking into account any change in
the Executive's then responsibilities, increases in
the cost of living, performance of the Executive,
and other pertinent factors.
(b) INCENTIVE COMPENSATION. The Executive shall, during
the employment term, be eligible to participate in
such incentive compensation programs as the Company
may, from time to time, make available to its senior
executives.
5. OTHER EMPLOYEE BENEFITS.
(a) BENEFIT PLANS. During the employment term, the
Executive shall be entitled to participate in all
employee benefit programs as the Company, from time
to time, makes available to the Company's senior
executives, including, without limitation, medical,
disability and life insurance, and retirement
3
<PAGE> 4
EXHIBIT 10.4
plans. The Executive shall be provided with the use
of a leased car at the Company's expense and shall be
entitled to such other perquisites set forth on
Schedule A.
(b) VACATION. The Executive shall be entitled to
reasonable paid annual vacation periods in accordance
with the Company's policies as in effect from time to
time, but in no event shall such vacation period be
less than that set forth on Schedule A attached
hereto.
(c) REGULAR REIMBURSED BUSINESS EXPENSES. The Company
shall reimburse the Executive for all travel and
other expenses reasonably incurred by the Executive
in the performance of his duties during the
employment term, in accordance with the Company's
policies in effect from time to time.
6. TERMINATION OF EMPLOYMENT.
(a) TERMINATION BY THE COMPANY FOR CAUSE. In the event
the Executive's employment is terminated by the
Company for Cause, the Executive shall be entitled to
his then current Base Salary through the Effective
Date of Termination.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE
EXECUTIVE WITH GOOD REASON. In the event the
Executive's employment is terminated by the Company
without Cause or by the Executive with Good Reason,
then upon complying with the provisions of Section
6(f) of this Agreement, but only upon such
compliance, the Executive shall be entitled to the
following:
(i) SEVERANCE PAY. For a period of twelve (12)
months following the Effective Date of
Termination, the Executive shall continue to
be paid his then current Base Salary in
accordance with the Company's normal payroll
practices and subject to withholding as
required by law; provided, however, that if
at the end of such 12 month period the
Executive, despite continuing good faith and
reasonable efforts, has been unable to
obtain employment (including
self-employment), the Executive's Base
Salary will be continued until he obtains
employment (including self-employment) for
up to an additional six (6) months;
(ii) INCENTIVE COMPENSATION. The Executive shall
be paid an amount equal to the amount, if
any, which the Executive would have been
entitled to receive pursuant to any
incentive compensation plan in effect for
the year during which the Effective Date of
Termination occurred multiplied by a
fraction, the numerator of which is the
4
<PAGE> 5
EXHIBIT 10.4
number of complete months the Executive was
employed during such year and the
denominator of which is twelve (12), with
such amount subject to withholding as
required by law to be paid at such time as
such payments are made to the other
executives of the Company;
(iii) HEALTH AND DENTAL INSURANCE. If the
Executive exercises his COBRA rights with
respect to medical and dental insurance, the
Executive shall be entitled to receive such
coverage for the 12 month period following
the Effective Date of Termination (or, up to
18 months if the Executive has been unable
to obtain employment or become
self-employed) at a cost equal to the amount
paid by then current employees of the
Company for such coverage;
(iv) OUTPLACEMENT SERVICES. The Executive shall
be furnished with outplacement services for
a period of up to 12 months paid for by the
Company with such firm as the Company then
utilizes for such purposes; and
(v) COMPANY AUTOMOBILE. The Executive shall be
permitted to use his leased Company
automobile for 45 days following the
Effective Date of Termination and during
such period, shall have the right to
purchase such car from the leasing company
at the price specified in the lease.
In the event the Executive does not comply with the
provisions of Section 6(f) of this Agreement, the
Executive shall be entitled to his then current Base
Salary through the Effective Date of Termination.
(c) VOLUNTARY TERMINATION BY THE EXECUTIVE. In the event
of a termination of the Executive's employment by the
Executive on his own initiative other than for Good
Reason, the Executive shall be entitled to his then
current Base Salary through the Effective Date of
Termination.
(d) DEATH OR PERMANENT DISABILITY OF THE EXECUTIVE. The
employment term shall terminate without notice and
automatically upon the death or Permanent Disability
of Executive. Upon the termination of Executive's
employment by reason of death or Permanent
Disability, the Executive or, in the event of his
death, the Executive's Beneficiary shall be entitled
to receive the Executive's then current Base Salary
through the Effective Date of Termination and
incentive compensation determined in accordance with
Section 6 (b)(ii) of this Agreement.
5
<PAGE> 6
EXHIBIT 10.4
(e) BENEFITS. Except as and to the extent specifically
provided to the contrary in this Section 6 or in
Schedule A attached hereto, the Executive's
compensation and eligibility to participate in
programs or receive benefits provided by the Company
(other than those which have vested by virtue of
Executive's prior employment) shall terminate on the
Effective Date of Termination.
(f) RELEASE. As condition precedents to receiving the
severance benefits described in Section 6(b) of this
Agreement: (i) the Executive shall, within 30 days
after the Effective Date of Termination, execute a
Release in the form attached hereto as Exhibit A; and
(ii) the Executive shall not have revoked the Release
within the seven day revocation period provided by
the Older Workers Benefit Protection Act.
7. RESTRICTIONS.
(a) The Executive acknowledges and agrees that the
Division's business is by its nature international,
the Company's business and customer contacts have
been established and maintained at great expense, the
Executive, by virtue of his position with the
Company, has and will continue to be privy to the
Company's most confidential business plans and
strategies which, without the restrictions
hereinafter set forth, would enable the Executive to
compete unfairly with the Company and, accordingly,
such restrictions are reasonable and necessary to
protect the legitimate interests of the Company. As a
result, and in order to induce the Company to enter
into this Agreement and to provide the benefits
described in this Agreement, the Executive agrees to
the restrictions set forth in Section 7 and
simultaneous with the execution of this Agreement is
entering into the Employee Confidentiality and
Proprietary Information Agreement attached hereto as
Exhibit B.
(b) The Executive hereby covenants and agrees that at no
time during the employment term and for a period of
twelve (12) months following the Effective Date of
Termination will the Executive directly or indirectly
in any capacity whatsoever (whether as an employee,
officer, director, consultant, partner, member, joint
venturer, agent, representative or otherwise) provide
service, advice or assistance of any nature to or
acquire an ownership interest in (or acquire the
right to acquire an ownership interest in) a
Competing Business (as hereinafter defined). A
"Competing Business" shall mean and be limited to any
business, regardless of the form of organization,
which (i) is engaged in the design, manufacture
and/or sale of products which are similar in design
or function to and otherwise compete with the
products which were under design by the Division or
included in the Division's product lines during the
twelve month period preceding the Effective Date of
6
<PAGE> 7
EXHIBIT 10.4
Termination (hereinafter referred to as "Competing
Products") and which (ii) sells, attempts to sell or
markets (or during the twelve month period preceding
the Effective Date of Termination sold, attempted to
sell or marketed) any Competing Products within the
United States and/or any foreign country within
which, during the twelve (12) month period preceding
the Effective Date of Termination, the Division sold
any of its products (or was a party to an executory
contract for the sale of any of its products),
attempted to sell, or marketed any of its products
other than by means of general advertising.
Notwithstanding the preceding, the Executive shall
not be prohibited from (i) acquiring less than five
percent (5%) of the stock of any publicly traded
company which may be engaged in a Competing Business,
or (ii) being employed by or otherwise providing
services to a company which, among its various
businesses, is engaged in a Competing Business
provided that the Executive is not directly or
indirectly involved in any capacity whatsoever in
such Competing Business.
(c) The Executive hereby covenants and agrees that, at
all times during the employment term and for a period
of twelve (12) months following the Effective Date of
Termination, the Executive shall not directly or
indirectly, on behalf of himself or any other person,
entity, or business, employ or engage the services of
or seek to employ or engage the services of any
person employed by the Division or any agent who
represents the Division during the period of six
months prior to the Effective Date of Termination, or
otherwise encourage or entice any such person to
terminate or diminish their relationship with the
Division.
(d) The Executive hereby acknowledges and agrees (i) the
Executive's education and experience are such that
the foregoing restrictions will not unduly interfere
with his ability to earn a livelihood, (ii) the
Company would suffer irreparable harm in the event of
a violation of such restrictions, and (iii)
accordingly, in addition to any other remedies
available to it, the Company shall be entitled to
injunctive relief without the posting of bond or
other collateral and the Executive shall not oppose
the granting of such relief. The Company shall be
entitled to all costs, including reasonable
attorneys' fees, in enforcing such restrictions or
pursuing damages for breach.
8. CHANGE IN CONTROL.
In the event of a Change In Control, the Executive shall be eligible,
as hereinafter set forth, to receive from the Company (or its successor pursuant
to such Change In Control) a "Change In Control Bonus" as set forth in Schedule
A attached hereto. An amount equal to one-half of the Change In Control Bonus
shall be paid to the Executive on the date of the Change In Control if, but only
if, the Executive is either (i) then employed by the Company, or its successor
or (ii) his
7
<PAGE> 8
EXHIBIT 10.4
employment was terminated within the 90 days preceding the date of the Change In
Control at the election of the Company for reasons other than "Cause" or by the
Executive for "Good Reason." The remaining one-half of the Change in Control
Bonus shall be paid to the Executive 180 days after the date of the Change In
Control if, but only if, the Executive is either (i) then employed by the
Company or its successor or (ii) his employment was terminated within the 180
day period following the date of the Change In Control at the election of the
Company (or its successor pursuant to such Change In Control) for reasons other
than "Cause" or by the Executive for "Good Reason."
9. ASSIGNABILITY; BINDING NATURE.
This Agreement shall inure to the benefit of the Company and the
Executive and their respective successors, heirs (in the case of the Executive)
and permitted assigns. Except as specifically provided to the contrary in this
Agreement, no rights or obligations of the Company or Executive under the
Agreement may be assigned or transferred. Notwithstanding the preceding, the
rights and obligations of the Company may be assigned or transferred pursuant to
a Change In Control provided that such assignee or transferee assumes the
liabilities, obligations and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law.
10. BENEFICIARIES.
The Executive may designate one or more persons or entities as the
primary and/or contingent Beneficiaries of any payments owing to the Executive
under this Agreement. Such designation must be in the form of a signed writing
reasonably acceptable to the Company. The Executive may make or change such
designation by a similar written instrument signed by the Executive and
delivered to the Company at any time.
11. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the Company and
the Executive and supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between them with
respect thereto.
12. AMENDMENT OR WAIVER.
This Agreement cannot be changed, modified or amended without the prior
written consent of both the Executive and the Company. No waiver by either the
Company or the Executive at any time of any breach by the other party of any
condition or provision of this Agreement shall be deemed a waiver of a similar
or dissimilar condition or provision at the same or at any prior or subsequent
time. Any waiver must be in writing and signed by the Executive and an
authorized officer of the Company, as the case may be.
8
<PAGE> 9
EXHIBIT 10.4
13. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
14. SURVIVORSHIP.
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
15. GOVERNING LAW.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of Wisconsin without reference to
principles of conflicts of laws.
16. NOTICES.
Any notice given to either party shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the party concerned, if to the Company, at its principal office, and, if to the
Executive, at the address of the Executive shown on the Company's records, or at
such other address as such party may give notice of.
17. HEADINGS; CONSTRUCTION.
The headings of the paragraphs contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first written above.
/s/ Rand McNally
------------------------------------
Rand McNally, Individually
AQUA-CHEM, INC.
By: /s/ Jeffrey A. Miller 2/10/97
----------------------------------
Jeffrey A. Miller, President
December 13, 1996
9
<PAGE> 10
EXHIBIT 10.4
SCHEDULE A
Effective for Calendar Year 1997
Executive: Rand E. McNally
Title: Executive Vice President and General Manager
Grade: 31
Division: Cleaver-Brooks Division
Base Salary: $145,107
Effective Date: 11/24/94
Incentive Compensation:
Management Incentive Plan Target: 35% Salary Grade Mid-Point
Executive Management Incentive Plan Target: 30% Salary Grade Mid-Point
Change in Control: An amount equal to one (1) times the
annual base salary in effect at the time
of change in control.
Other Employee Benefits:
General:
- Participation in all employee benefit programs as the
Company, from time-to-time, makes available to the
Company's senior executives.
Life Insurance:
- Universal Life Policy: $450,000 - Owned by the
Executive, paid by the Company
Vacation:
- Four (4) weeks/annually
Company Automobile:
- Lease vehicle per plan guidelines.
Other:
- Company paid membership at Northshore Country Club.
- Includes cost of annual membership
fees (qtrly minimums excluded)
- Professional Association
- Outplacement services will be provided for a period
of up to twelve (12) months paid for by the Company
at a firm of the Executive's choice provided the
maximum cost of such outplacement program does not
exceed $15,000.
/s/ Rand McNally /s/ Jeffrey A. Miller 2/10/97
- --------------------------------- ----------------------------------
Date: 2/14/97
-----------
<PAGE> 11
EXHIBIT 10.4
Exhibit A
GENERAL RELEASE
_______________________, (the "Executive"), for good and valuable consideration,
the receipt of which is hereby acknowledged, does hereby release and forever
discharge Aqua-Chem, Inc. ("Aqua-Chem") and all of its past, present and future
officers, directors, agents, employees, attorneys, shareholders, employee
benefit plans, divisions, parent corporations, subsidiary corporations,
affiliated corporations, successors and assigns (collectively the "Released
Parties") from any and all actions, causes of action, claims, suits, debts,
covenants, contracts, demands or liabilities of any kind or character
whatsoever, whether known or unknown, which the Executive has had or now has
against the Released Parties (or any of them) related to anything occurring
prior to or on the present date.
Without limiting the generality of the foregoing, this release applies to any
claims, causes of action, demands or liabilities the Executive may have had or
now has:
1. Under or pursuant to the Age Discrimination in Employment Act, as
amended.
2. Under or pursuant to Title VII of the Civil Rights Act of 1964, as
amended; the Civil Rights Act of 1991; the Wisconsin Fair Employment
Act; the Employee Retirement Income Security Act, as amended, or any
other federal, state or local statute or regulation relating to
employment.
3. For libel, slander, defamation, damage to reputation, intentional or
negligent infliction of emotional distress, tortious interference with
the employment or business relationship or other tortious conduct or
for wrongful discharge or breach of contract whether express or
implied.
4. Regarding any right which the Executive might have to current or future
employment with Aqua-Chem, its divisions or affiliated companies, and
the Executive affirms that he will not seek employment in the future
with Aqua-Chem, its divisions or affiliated companies.
The Executive acknowledges that he has been advised in writing (1) to consult
with an attorney prior to executing this General Release, and (2) that he had at
least twenty-one (21) days to consider this General Release prior to executing
it.
For a period of seven (7) days following the execution of this General Release,
the Executive shall have the right to revoke this General Release, and this
General Release shall not become effective or enforceable until seven (7) days
following such execution.
IN WITNESS WHEREOF, the undersigned has executed this General Release this ____
day of _______________, 199__.
------------------------------------
<PAGE> 12
[AQUA-CHEM LOGO]
EXHIBIT 10.4
EMPLOYEE CONFIDENTIAL AND PROPRIETARY INFORMATION AGREEMENT
STATEMENT OF SUFFICIENCY OF CONSIDERATION
The attached Employee Confidential and Proprietary Information
Agreement is being signed contemporaneously with the execution of an employment
agreement between the company and myself. I acknowledge and agree that the
mutual considerations and promises contained in the employment agreement
constitute due and sufficient consideration to support the obligations contained
in the Employee Confidential and Proprietary Information Agreement. I understand
that by executing this document, I acknowledge the sufficiency of such
consideration.
/s/ Rand McNally
------------------------------
Employee Signature
(Include first name in full)
Date 2-5-97
--------------------------
Witness:
/s/ Jeffrey A. Miller
- ----------------------------
<PAGE> 13
EXHIBIT 10.4
(AQUA-CHEM LOGO)
EMPLOYEE CONFIDENTIAL AND PROPRIETARY INFORMATION AGREEMENT
Name Rand McNally Social Security No. ###-##-####
-------------------------------------- --------------
Place Milwaukee, WI Date 2-5-97
------------------------------------- -----------------------------
In consideration of my employment in any capacity and of the salary or
wages paid for my services in the course of employment by Aqua-Chem, Inc., or a
Division of Aqua-Chem, Inc., or a wholly-owned subsidiary of Aqua-Chem, Inc., or
any corporation owned or controlled by Aqua-Chem, Inc., hereinafter called
COMPANY, I agree as follows:
1. I agree that from the time of entering the COMPANY's employ until one
year after termination of my employment, I will promptly communicate to an
official of the COMPANY and/or such other persons as may be designated by the
COMPANY from time to time, all significant technical or business innovations and
all inventions, whether patentable or unpatentable, made or conceived by me
alone or jointly with others, capable of use in connection with the business,
work or investigations of the COMPANY or resulting from or suggested by any work
which I may do for or on behalf of the COMPANY, or at its request, and
improvements thereon, or inventions and innovations made on company time or with
company materials, and I agree to assign, and by these presents do hereby
assign, all of my right, title and interest in and to such inventions and
innovations to the COMPANY, and I agree upon request to execute specific
assignments to the COMPANY of such inventions and innovations, together with all
rights thereunder in the United States and all foreign countries, and I will
execute all papers and perform all other lawful acts which the COMPANY or its
nominees deems necessary or advisable, for the preparation, filing, prosecution
and maintenance of patent applications and/or patents of the United States and
foreign countries and for the transfer of any and all interests therein to the
COMPANY including the execution of original, divisional, continuing, extended
and reissue applications, preliminary statements, affidavits, and concessions
and the giving of testimony with respect to inventions, discoveries,
applications and patents and otherwise assist the COMPANY or its nominees in
every proper way to obtain for its benefit patents, copyrights or other legal
protection for such inventions or innovations or for publications pertaining to
them in any and all countries, said inventions and innovations to be the
exclusive property of the COMPANY or its nominees, whether or not patented or
copyrighted. It is understood that all expenses in connection with carrying on
any of the above are to be borne by the COMPANY.
2. I further agree to make and maintain adequate and current written
records of all such inventions and innovations in the form of notes, sketches,
drawings, or reports relating thereto, which records shall be and remain the
property of and available to the COMPANY at all times; and, upon any termination
of my employment, promptly to deliver to the COMPANY all drawings, blueprints,
manuals, letters, notes, notebooks, reports, models, computer programs, data and
disks, and other materials (including all copies) which are of a secret or
confidential nature relating to the business of the COMPANY or its affiliates,
and which are in my possession or under my control.
3. I hereby acknowledge that certain techniques, manufacturing equipment
and processes have been developed by the COMPANY which have achieved the status
of trade secrets, and that additional trade secrets may be developed during the
course of my employment; and I agree that I will not, without written approval
by the COMPANY, publish or otherwise disclose or authorize anyone else to
publish or disclose, or use to the detriment of the COMPANY, either during the
term of my employment or thereafter, any information, knowledge, or data of the
COMPANY or its customers, vendors or any other third party with whom the COMPANY
conducts business which I may receive or develop during the course of my
employment relating to inventions, discoveries, formulas, processes, machines,
manufacturers, compositions, computer programs, accounting methods, information
systems or business or financial plans or reports, marketing strategies, pricing
information, customer lists, prospective customer lists, or other matters which
are of a secret or confidential nature acquired in the course of my employment
under this Agreement or heretofore with any company controlled by Aqua-Chem,
Inc.
4. I represent that except as I have written on the reverse side of this
Agreement, I do not have (1) any agreement with or obligation to others in
conflict with this Agreement, and (2) any claim in any invention or idea either
(a) conceived by me or by me and others prior to my employment with the COMPANY
or (b) otherwise outside the scope of this Agreement and in the absence of any
such writing on the reverse side of this Agreement, the COMPANY may assume that
no such conflicting agreements or inventions or ideas exist, and that I will not
make any claim against the COMPANY with respect to the use of such inventions or
ideas in any work or the product of any work which I perform or cause to be
performed for or on behalf of the COMPANY. I understand that the COMPANY wants
me to use on my job all the information which is generally known and used by
persons of my training and experience and all information which is common
knowledge in the industry, but it does not want me to disclose any confidential
information belonging to any former employer of mine which I am legally or
ethically bound not to disclose.
5. I understand and agree that the obligations contained herein are
continuing and further agree that in the event my employment is terminated for
any reason, whether voluntarily or involuntarily, I shall continue to be
obligated under this Agreement not to use or disclose confidential or trade
secret information following the termination of my employment. I understand and
agree that the restrictions set forth in this Agreement shall have the following
duration: (1) with respect to trade secret information, the restrictions shall
EXHIBIT 10.4
remain in effect for as long as such information remains a trade secret; (2)
with respect to all other information identified herein as being confidential
information, the restrictions shall remain in effect for a period of two (2)
years following the termination of my employment.
6. I agree that the discharge of my undertakings in this Agreement shall be
an obligation of my executors, administrators, or other legal representatives or
assigns. This Agreement shall be governed by and construed under the laws of the
State of Wisconsin.
7. This Agreement shall be governed by and construed under the laws of the
State of Wisconsin. In the event of a violation of this Agreement, I agree that
the COMPANY shall be entitled, as a matter of right, in addition to other
remedies otherwise available to it, to injunctive relief restraining any further
violation of this Agreement, and to all costs, including reasonable attorneys'
fees, incurred in enforcing this Agreement or pursuing damages for breach.
8. Finally, I agree that this Agreement supersedes and replaces any
existing agreement which I have entered into with the COMPANY relating generally
to the same subject matter, and it may not, on behalf of or in respect to the
COMPANY be changed or modified, or released, discharged, abandoned or otherwise
terminated, in whole or in part, except by an instrument in writing signed by an
officer or authorized representative of the COMPANY.
(Signed) /s/ Rand McNally
-------------------------------------------------------
(Employee's signature - to include first name in full)
(Date) 2-5-97
---------------------------------------------------------
(To be written by employee)
Witness /s/ J. A. Miller
--------------------------------------------------------
Date: 2-10-97
---------------------------------------------------------
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 20th day of January, 1997, by and
between Aqua-Chem, Inc., a Delaware corporation (the "Company"), and J. Scott
Barton (the "Executive").
WITNESSETH:
WHEREAS, the Executive has been employed by the Company as Vice
President-Finance and Chief Financial Officer; and
WHEREAS, the Company desires to continue to employ Executive in his
capacity as Vice President-Finance and Executive desires to continue to serve in
such capacity; and
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. DEFINITIONS.
Whenever used in this Agreement, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized:
(a) "Agreement" means this Employment Agreement.
(b) "Base Salary" means the salary of record paid to the Executive
as annual salary as set forth on Schedule A, excluding amounts
received under incentive or other bonus plans, whether or not
deferred.
(c) "Beneficiary" means the persons or entities designated or
deemed designated by the Executive pursuant to Section 11
herein.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means any of the following as determined by the
Committee in the exercise of good faith and reasonable
judgment (i) the willful and continued refusal by the
Executive to perform his duties hereunder, other than by
reasons of health, after a written demand for such
performance is delivered to the Executive by the Company that
identifies the manner in which the Executive has refused to
perform his duties, (ii) the commission of an act by the
Executive constituting a felony under state or federal law,
(iii) the habitual abuse by the Executive of any substance
(such as narcotics or alcohol) which materially affects his
ability to perform his duties, or (iv) the Executive's
engaging in an act of fraud, dishonesty or gross misconduct
in connection with the business of the Company, or (v)
conduct by the Executive constituting a material breach of
this Agreement.
1
<PAGE> 2
EXHIBIT 10.5
(f) "Change In Control" means (a) the consummation of a merger or
consolidation of the Company after which a Third Party (as
hereinafter defined) owns more than 50% of the outstanding
common stock of the Company or (b) a sale of substantially all
of the assets of the Company to a Third Party or (c) a sale or
other transfer to a Third Party of more than 50% of the common
stock of the Company.
(g) "Committee" means the Compensation Committee of the Board.
(h) "Company" means Aqua-Chem, Inc., a Delaware corporation.
(i) "Effective Date" means the date this Agreement is executed on
behalf of the Company.
(j) "Effective Date of Termination" means the date on which a
termination of the Executive's employment occurs for any
reason whatsoever.
(k) "Executive" means J. Scott Barton.
(l) "Good Reason" means, without the Executive's consent, the
occurrence of any one or more of the following:
(i) the reassignment of the Executive to duties
materially inconsistent with the Executive's present
authorities, duties, responsibilities, and status
(including offices, titles and reporting
requirements) as an officer of the Company, or a
material reduction or material alteration in the
nature or status of the Executive's authorities,
duties or reponsibilities, other than an act that is
remedied by the Company promptly after receipt of
written notice thereof given by the Executive, and
other than a promotion of the Executive to a position
accepted by the Executive which includes duties,
responsibilities, and status associated with the
position; or
(ii) a reduction by the Company of the Executive's Base
Salary or bonus opportunity as in effect on the
Effective Date (other than a reduction as part of an
overall reduction in compensation affecting all
senior management of the Company) or the exclusion of
the Executive by the Company from such incentive
compensation programs as the Company may, from time
to time, make available to the senior management of
the Company.
(m) "Permanent Disability" shall have the meaning set forth in
the Company's long-term disability program as in effect from
time to time.
2
<PAGE> 3
EXHIBIT 10.5
(n) "Third Party" means any person(s) and/or business
organization(s) of any type other than the present
shareholders of the Company and their affiliates.
2. EMPLOYMENT TERM.
The employment term shall commence as of the Effective Date and shall
continue thereafter until the earlier of (i) 45 days after Executive's receipt
of written notice from the Company terminating employment pursuant to Section
6(b) of this Agreement; (ii) immediately upon Executive's receipt of written
notice terminating employment pursuant to Section 6(a) of this Agreement; (iii)
such date as the Company shall elect up to a maximum of 45 days after its
receipt of written notice from the Executive terminating employment pursuant to
Section 6(b) or 6(c) of this Agreement; or (iv) the Executive's death or
Permanent Disability.
3. DUTIES.
During the employment term, the Executive shall serve as Vice President
- - Finance with such duties and responsibilities as may reasonably be assigned or
delegated to him from time to time according to customary Company procedures.
During his employment term, the Executive shall devote his full time to the
faithful and diligent performance of his duties for the Company. Notwithstanding
anything herein to the contrary, nothing shall preclude the Executive from
engaging in charitable and community affairs and managing his personal
investments so long as such activities do not interfere with his carrying out
his duties and responsibilities under this Agreement.
4. COMPENSATION.
(a) BASE SALARY. During the employment term, the
Executive shall be paid by the Company a Base Salary
payable (after deduction of applicable taxes) in
accordance with the payroll practices of the Company.
Initially, the Base Salary shall be as set forth on
Schedule A attached hereto. It is agreed between the
parties that the Company shall review the Base Salary
annually and in light of such review may, in the sole
discretion of the Committee, adjust such Base Salary
taking into account any change in the Executive's
then responsibilities, increases in the cost of
living, performance of the Executive, and other
pertinent factors.
(b) INCENTIVE COMPENSATION. The Executive shall, during
the employment term, be eligible to participate in
such incentive compensation programs as the Company
may, from time to time, make available to its senior
executives.
3
<PAGE> 4
EXHIBIT 10.5
5. OTHER EMPLOYEE BENEFITS.
(a) BENEFIT PLANS. During the employment term, the
Executive shall be entitled to participate in all
employee benefit programs as the Company, from time
to time, makes available to the Company's senior
executives, including, without limitation, medical,
disability and life insurance, and retirement plans.
The Executive shall be provided with the use of a
leased car at the Company's expense and shall be
entitled to such other perquisites set forth on
Schedule A.
(b) VACATION. The Executive shall be entitled to
reasonable paid annual vacation periods in accordance
with the Company's policies as in effect from time to
time, but in no event shall such vacation period be
less than that set forth on Schedule A attached
hereto.
(c) REGULAR REIMBURSED BUSINESS EXPENSES. The Company
shall reimburse the Executive for all travel and
other expenses reasonably incurred by the Executive
in the performance of his duties during the
employment term, in accordance with the Company's
policies in effect from time to time.
6. TERMINATION OF EMPLOYMENT.
(a) TERMINATION BY THE COMPANY FOR CAUSE. In the event
the Executive's employment is terminated by the
Company for Cause, the Executive shall be entitled to
his then current Base Salary through the Effective
Date of Termination.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE
EXECUTIVE WITH GOOD REASON. In the event the
Executive's employment is terminated by the Company
without Cause or by the Executive with Good Reason,
then upon complying with the provisions of Section
6(f) of this Agreement, but only upon such
compliance, the Executive shall be entitled to the
following:
(i) SEVERANCE PAY. For a period of eighteen (18)
months following the Effective Date of
Termination, the Executive shall continue to
be paid his then current Base Salary in
accordance with the Company's normal payroll
practices and subject to withholding as
required by law.
(ii) INCENTIVE COMPENSATION. In addition
to the amount specified in Section
6(b)(i), the Executive shall also be
paid an amount (subject to withholding as
required by law) equal to the average
annual bonus payable under the Company's
annual bonus program for management
4
<PAGE> 5
EXHIBIT 10.5
for the two years ended prior to the
Effective Date of Termination,
payable at the Company's option in
equal installments (in accordance
with the Company's normal payroll
periods) over the eighteen month
period following the Effective Date
of Termination or in a lump sum
promptly following the Effective
Date of Termination.;
(iii) HEALTH AND DENTAL INSURANCE. If the
Executive exercises his COBRA rights
with respect to medical and dental
insurance, the Executive shall be
entitled to receive such coverage
for the 18 month period following
the Effective Date of Termination at
a cost equal to the amount paid by
then current employees of the
Company for such coverage;
(iv) OUTPLACEMENT SERVICES. The Executive
shall be furnished with outplacement
services for a period of up to 12
months paid for by the Company with
such firm as the Company then
utilizes for such purposes; and
(v) COMPANY AUTOMOBILE. The Executive
shall be permitted to use his leased
Company automobile for 45 days
following the Effective Date of
Termination and during such period,
shall have the right to purchase
such car from the leasing company at
the price specified in the lease.
In the event the Executive does not comply with the
provisions of Section 6(f) of this Agreement, the
Executive shall be entitled to his then current Base
Salary through the Effective Date of Termination.
(c) VOLUNTARY TERMINATION BY THE EXECUTIVE. In the event
of a termination of the Executive's employment by the
Executive on his own initiative other than for Good
Reason, the Executive shall be entitled to his then
current Base Salary through the Effective Date of
Termination.
(d) DEATH OR PERMANENT DISABILITY OF THE EXECUTIVE. The
employment term shall terminate without notice and
automatically upon the death or Permanent Disability
of Executive. Upon the termination of Executive's
employment by reason of death or Permanent
Disability, the Executive or, in the event of his
death, the Executive's Beneficiary shall be entitled
to receive the Executive's then current Base Salary
through the Effective Date of Termination and
incentive compensation determined in accordance with
Section 6 (b)(ii) of this Agreement.
5
<PAGE> 6
EXHIBIT 10.5
(E) BENEFITS. Except as and to the extent specifically
provided to the contrary in this Section 6 or in
Schedule A attached hereto, the Executive's
compensation and eligibility to participate in
programs or receive benefits provided by the Company
(other than those which have vested by virtue of
Executive's prior employment) shall terminate on the
Effective Date of Termination.
(F) RELEASE. As condition precedents to receiving the
severance benefits described in Section 6(b) of this
Agreement: (i) the Executive shall, within 30 days
after the Effective Date of Termination, execute a
Release in the form attached hereto as Exhibit A; and
(ii) the Executive shall not have revoked the Release
within the seven day revocation period provided by
the Older Workers Benefit Protection Act.
7. RESTRICTIONS.
(a) The Executive acknowledges and agrees that the
Company's business is by its nature international,
the Company's business and customer contacts have
been established and maintained at great expense, the
Executive, by virtue of his position with the
Company, has and will continue to be privy to the
Company's most confidential business plans and
strategies which, without the restrictions
hereinafter set forth, would enable the Executive to
compete unfairly with the Company and, accordingly,
such restrictions are reasonable and necessary to
protect the legitimate interests of the Company. As a
result, and in order to induce the Company to enter
into this Agreement and to provide the benefits
described in this Agreement, the Executive agrees to
the restrictions set forth in Section 7 and
simultaneous with the execution of this Agreement is
entering into the Employee Confidentiality and
Proprietary Information Agreement attached hereto as
Exhibit B.
(b) The Executive hereby covenants and agrees that at no
time during the employment term and for a period of
eighteen (18) months following the Effective Date of
Termination will the Executive directly or indirectly
in any capacity whatsoever (whether as an employee,
officer, director, consultant, partner, member, joint
venturer, agent, representative or otherwise) provide
service, advice or assistance of any nature to or
acquire an ownership interest in (or acquire the
right to acquire an ownership interest in) a
Competing Business (as hereinafter defined). A
"Competing Business" shall mean and be limited to any
business, regardless of the form of organization,
which (i) is engaged in the design, manufacture
and/or sale of products which are similar in design
or function to and otherwise compete with the
products which were under design by the Company or
included in the Company's product lines during the
twelve month period preceding the Effective Date of
6
<PAGE> 7
EXHIBIT 10.5
Termination. Notwithstanding the preceding, the
Executive shall not be prohibited from (i) acquiring
less than five percent (5%) of the stock of any
publicly traded company which may be engaged in a
Competing Business, or (ii) being employed by or
otherwise providing services to a company which,
among its various businesses, is engaged in a
Competing Business provided that the Executive is not
directly or indirectly involved in any capacity
whatsoever in such Competing Business.
(c) The Executive hereby covenants and agrees that, at
all times during the employment term and for a period
of eighteen (18) months following the Effective Date
of Termination, the Executive shall not directly or
indirectly, on behalf of himself or any other person,
entity, or business, employ or engage the services of
or seek to employ or engage the services of any
person employed by the Company or any agent who
represents the Company during the period of six
months prior to the Effective Date of Termination, or
otherwise encourage or entice any such person to
terminate or diminish their relationship with the
Company.
(d) The Executive hereby acknowledges and agrees (i) the
Executive's education and experience are such that
the foregoing restrictions will not unduly interfere
with his ability to earn a livelihood, (ii) the
Company would suffer irreparable harm in the event of
a violation of such restrictions, and (iii)
accordingly, in addition to any other remedies
available to it, the Company shall be entitled to
injunctive relief without the posting of bond or
other collateral and the Executive shall not oppose
the granting of such relief. The Company shall be
entitled to all costs, including reasonable
attorneys' fees, in enforcing such restrictions or
pursuing damages for breach.
8. CHANGE IN CONTROL.
In the event of a Change In Control, the Executive shall be eligible,
as hereinafter set forth, to receive from the Company (or its successor pursuant
to such Change In Control) a "Change In Control Bonus" as set forth in Schedule
A attached hereto. An amount equal to one-half of the Change In Control Bonus
shall be paid to the Executive on the date of the Change In Control if, but only
if, the Executive is either (i) then employed by the Company, or its successor
or (ii) his employment was terminated within the 90 days preceding the date of
the Change In Control at the election of the Company for reasons other than
"Cause" or by the Executive for "Good Reason." The remaining one-half of the
Change in Control Bonus shall be paid to the Executive 180 days after the date
of the Change In Control if, but only if, the Executive is either (i) then
employed by the Company or its successor or (ii) his employment was terminated
within the 180 day period following the date of the Change In Control at the
election of the Company (or its successor pursuant to such Change In Control)
for reasons other than "Cause" or by the Executive for "Good Reason."
7
<PAGE> 8
EXHIBIT 10.5
9. ASSIGNABILITY; BINDING NATURE.
This Agreement shall inure to the benefit of the Company and the
Executive and their respective successors, heirs (in the case of the Executive)
and permitted assigns. Except as specifically provided to the contrary in this
Agreement, no rights or obligations of the Company or Executive under the
Agreement may be assigned or transferred. Notwithstanding the preceding, the
rights and obligations of the Company may be assigned or transferred pursuant to
a Change In Control provided that such assignee or transferee assumes the
liabilities, obligations and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law.
10. BENEFICIARIES.
The Executive may designate one or more persons or entities as the
primary and/or contingent Beneficiaries of any payments owing to the Executive
under this Agreement. Such designation must be in the form of a signed writing
reasonably acceptable to the Company. The Executive may make or change such
designation by a similar written instrument signed by the Executive and
delivered to the Company at any time.
11. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the Company and
the Executive and supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between them with
respect thereto.
12. AMENDMENT OR WAIVER.
This Agreement cannot be changed, modified or amended without the prior
written consent of both the Executive and the Company. No waiver by either the
Company or the Executive at any time of any breach by the other party of any
condition or provision of this Agreement shall be deemed a waiver of a similar
or dissimilar condition or provision at the same or at any prior or subsequent
time. Any waiver must be in writing and signed by the Executive and an
authorized officer of the Company, as the case may be.
13. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
8
<PAGE> 9
EXHIBIT 10.5
14. SURVIVORSHIP.
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
15. GOVERNING LAW.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of Wisconsin without reference to
principles of conflicts of laws.
16. NOTICES.
Any notice given to either party shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the party concerned, if to the Company, at its principal office, and, if to the
Executive, at the address of the Executive shown on the Company's records, or at
such other address as such party may give notice of.
17. HEADINGS; CONSTRUCTION.
The headings of the paragraphs contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first written above.
/s/ J. Scott Barton
------------------------------------
J. Scott Barton, Individually
AQUA-CHEM, INC.
By: /s/ Jeffrey A. Miller
------------------------------------
Jeffrey A. Miller, President
January 17, 1997
9
<PAGE> 10
EXHIBIT 10.5
SCHEDULE A
Effective for Calendar Year 1997
Executive: J. Scott Barlon
Title: Vice President, and Chief Financial Officer
Grade: 28
Division: Corporate
Base Salary: $125,008
Effective Date: 1/19/96
Incentive Compensation:
Management Incentive Plan Target: 30% Salary Grade Mid-Point
Executive Management Incentive Plan Target: 25% Salary Grade Mid-Point
Change in Control: An amount equal to one (1) times the
annual base salary in effect at the time
of change in control.
Other Employee Benefits:
General:
- Participation in all employee benefit programs as the
Company, from time-to-time, makes available to the
Company's senior executives.
Life Insurance:
- Universal Life Policy: $450,000 - Owned by the
Executive, paid by the Company
Vacation:
- Four (4) weeks/annually
Company Automobile:
- Lease vehicle per plan guidelines.
Other:
- Professional Association
/s/ J.A. Miller /s/ J. Scott Barton
- -------------------------------- ----------------------------------
Date: 1/27/97
-----------
<PAGE> 11
EXHIBIT 10.5
Exhibit A
GENERAL RELEASE
_______________________, (the "Executive"), for good and valuable consideration,
the receipt of which is hereby acknowledged, does hereby release and forever
discharge Aqua-Chem, Inc. ("Aqua-Chem") and all of its past, present and future
officers, directors, agents, employees, attorneys, shareholders, employee
benefit plans, divisions, parent corporations, subsidiary corporations,
affiliated corporations, successors and assigns (collectively the "Released
Parties") from any and all actions, causes of action, claims, suits, debts,
covenants, contracts, demands or liabilities of any kind or character
whatsoever, whether known or unknown, which the Executive has had or now has
against the Released Parties (or any of them) related to anything occurring
prior to or on the present date.
Without limiting the generality of the foregoing, this release applies to any
claims, causes of cation, demands or liabilities the Executive may have had or
now has:
1. Under or pursuant to the Age Discrimination in Employment Act, as
amended.
2. Under or pursuant to Title VII of the Civil Rights Act of 1964, as
amended; the Civil Rights Act of 1991; the Wisconsin Fair Employment
Act; the Employee Retirement Income Security Act, as amended, or any
other federal, state or local statute or regulation relating to
employment.
3. For libel, slander, defamation, damage to reputation, intentional or
negligent infliction of emotional distress, tortious interference with
the employment or business relationship or other tortious conduct or
for wrongful discharge or breach of contract whether express or
implied.
4. Regarding any right which the Executive might have to current or future
employment with Aqua-Chem, its divisions or affiliated companies, and
the Executive affirms that he will not seek employment in the future
with Aqua-Chem, its divisions or affiliated companies.
The Executive acknowledges that he has been advised in writing (1) to consult
with an attorney prior to executing this General Release, and (2) that he had at
least twenty-one (21) days to consider this General Release prior to executing
it.
For a period of seven (7) days following the execution of this General Release,
the Executive shall have the right to revoke this General Release, and this
General Release shall not become effective or enforceable until seven (7) days
following such execution.
IN WITNESS WHEREOF, the undersigned has executed this General Release this ____
day of _______________, 199__.
------------------------------------
<PAGE> 12
EXHIBIT 10.5
[AQUA-CHEM LOGO]
AQUA-CHEM, INC.
EMPLOYEE CONFIDENTIAL AND PROPRIETARY INFORMATION AGREEMENT
STATEMENT OF SUFFICIENCY OF CONSIDERATION
The attached Employee Confidential and Proprietary Information
Agreement is being signed contemporaneously with the execution of an employment
agreement between the company and myself. I acknowledge and agree that the
mutual considerations and promises contained in the employment agreement
constitute due and sufficient consideration to support the obligations contained
in the Employee Confidential and Proprietary Information Agreement. I understand
that by executing this document, I acknowledge the sufficiency of such
consideration.
/s/ J. Scott Barton
------------------------------
Employee Signature
(Include first name in full)
Date 1-20-97
--------------------------
Witness:
/s/ Jeffrey A. Miller
- ----------------------------
<PAGE> 13
EXHIBIT 10.5
AQUA-CHEM, Inc.
EMPLOYEE CONFIDENTIAL AND PROPRIETARY INFORMATION AGREEMENT
Name J. Scott Barton Social Security No. ###-##-####
-------------------------------------- --------------
Place Milwaukee, WI Date 1-20-97
------------------------------------- -----------------------------
In consideration of my employment in any capacity and of the salary or
wages paid for my services in the course of employment by Aqua-Chem, Inc., or a
Division of Aqua-Chem, Inc., or a wholly-owned subsidiary of Aqua-Chem, Inc., or
any corporation owned or controlled by Aqua-Chem, Inc., hereinafter called
COMPANY, I agree as follows:
1. I agree that from the time of entering the COMPANY's employ until one
year after termination of my employment, I will promptly communicate to an
official of the COMPANY and/or such other persons as may be designated by the
COMPANY from time to time, all significant technical or business innovations and
all inventions, whether patentable or unpatentable, made or conceived by me
alone or jointly with others, capable of use in connection with the business,
work or investigations of the COMPANY or resulting from or suggested by any work
which I may do for or on behalf of the COMPANY, or at its request, and
improvements thereon, or inventions and innovations made on company time or with
company materials, and I agree to assign, and by these presents do hereby
assign, all of my right, title and interest in and to such inventions and
innovations to the COMPANY, and I agree upon request to execute specific
assignments to the COMPANY of such inventions and innovations, together with all
rights thereunder in the United States and all foreign countries, and I will
execute all papers and perform all other lawful acts which the COMPANY or its
nominees deems necessary or advisable, for the preparation, filing, prosecution
and maintenance of patent applications and/or patents of the United States and
foreign countries and for the transfer of any and all interests therein to the
COMPANY including the execution of original, divisional, continuing, extended
and reissue applications, preliminary statements, affidavits, and concessions
and the giving of testimony with respect to inventions, discoveries,
applications and patents and otherwise assist the COMPANY or its nominees in
every proper way to obtain for its benefit patents, copyrights or other legal
protection for such inventions or innovations or for publications pertaining to
them in any and all countries, said inventions and innovations to be the
exclusive property of the COMPANY or its nominees, whether or not patented or
copyrighted. It is understood that all expenses in connection with carrying on
any of the above are to be borne by the COMPANY.
2. I further agree to make and maintain adequate and current written
records of all such inventions and innovations in the form of notes, sketches,
drawings, or reports relating thereto, which records shall be and remain the
property of and available to the COMPANY at all times; and, upon any termination
of my employment, promptly to deliver to the COMPANY all drawings, blueprints,
manuals, letter, notes, notebooks, reports, models, computer programs, data and
disks, and other materials (including all copies) which are of a secret or
confidential nature relating to the business of the COMPANY or its affiliates,
and which are in my possession or under my control.
3. I hereby acknowledge that certain techniques, manufacturing equipment
and processes have been developed by the COMPANY which have achieved the status
of trade secrets, and that additional trade secrets may be developed during the
course of my employment; and I agree that I will not, without written approval
by the COMPANY, publish or otherwise disclose or authorize anyone else to
publish or disclose, or use to the detriment of the COMPANY, either during the
term of my employment or thereafter, any information, knowledge, or data of the
COMPANY or its customers, vendors or any other third party with whom the COMPANY
conducts business, which I may receive or develop during the course of my
employment relating to inventions, discoveries, formulas, processes, machines,
manufacturers, compositions, computer programs, accounting methods, information
systems or business or financial plans or reports, marketing strategies, pricing
information, customer lists, prospective customer lists, or other matters which
are of a secret or confidential nature acquired in the course of my employment
under this Agreement or heretofore with any company controlled by Aqua-Chem,
Inc.
4. I represent that except as I have written on the reverse side of this
Agreement, I do not have (1) any agreement with or obligation to others in
conflict with this Agreement, and (2) any claim in any invention or idea either
(a) conceived by me or by me and others prior to my employment with the COMPANY
or (b) otherwise outside the scope of this Agreement and in the absence of any
such writing on the reverse side of this Agreement, the COMPANY may assume that
no such conflicting agreements or inventions or ideas exist, and that I will not
make any claim against the COMPANY with respect to the use of such inventions or
ideas in any work or the product of any work which I perform or cause to be
performed for or on behalf of the COMPANY. I understand that the COMPANY wants
me to use on my job all the information which is generally known and used by
persons of my training and experience and all information which is common
knowledge in the industry, but it does not want me to disclose any confidential
information belonging to any former employer of mine which I am legally or
ethically bound not to disclose.
5. I understand and agree that the obligations contained herein are
continuing and further agree that in the event my employment is terminated for
any reason, whether voluntarily or involuntarily, I shall continue to be
obligated under this Agreement not to use or disclose confidential or trade
secret information following the termination of my employment. I understand and
agree that the restrictions set forth in this Agreement shall have the following
duration: (1) with respect to trade secret information, the restrictions shall
EXHIBIT 10.5
remain in effect for as long as such information remains a trade secret; (2)
with respect to all other information identified herein as being confidential
information, the restrictions shall remain in effect for a period of two (2)
years following the termination of my employment.
6. I agree that the discharge of my undertakings in this Agreement shall be
an obligation of my executors, administrators, or other legal representatives or
assigns. This Agreement shall be governed by and construed under the laws of the
State of Wisconsin.
7. This Agreement shall be governed by and construed under the laws of the
State of Wisconsin. In the event of a violation of this Agreement, I agree that
the COMPANY shall be entitled, as a matter of right, in addition to other
remedies otherwise available to it, to injunctive relief restraining any further
violation of this Agreement, and to all costs, including reasonable attorneys'
fees, incurred in enforcing this Agreement or pursuing damages for breach.
8. Finally, I agree that this Agreement supersedes and replaces any
existing agreement which I have entered into with the COMPANY relating generally
to the same subject matter, and it may not, on behalf of or in respect to the
COMPANY be changed or modified, or released, discharged, abandoned or otherwise
terminated, in whole or in part, except by an instrument in writing signed by an
officer or authorized representative of the COMPANY.
(Signed) /s/ J. Scott Barton
-------------------------------------------------------
(Employee's signature - to include first name in full)
(Date) 1-20-97
---------------------------------------------------------
(To be written by employee)
Witness /s/ J. A. Miller
--------------------------------------------------------
Date: 1-20-97
---------------------------------------------------------
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 7th day of January, 1997, by and
between Aqua-Chem, Inc., a Delaware corporation (the "Company"), and Charles
Norris (the "Executive").
WITNESSETH:
WHEREAS, the Executive has been employed by the Company as Vice
President-Management Information Systems and
WHEREAS, the Company desires to continue to employ Executive in his
capacity as Vice President - Management Information Systems and Executive
desires to continue to serve in such capacity; and
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. DEFINITIONS.
Whenever used in this Agreement, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized:
(a) "Agreement" means this Employment Agreement.
(b) "Base Salary" means the salary of record paid to the Executive
as annual salary as set forth on Schedule A, excluding amounts
received under incentive or other bonus plans, whether or not
deferred.
(c) "Beneficiary" means the persons or entities designated or
deemed designated by the Executive pursuant to Section 11
herein.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means any of the following as determined by the
Committee in the exercise of good faith and reasonable
judgment (i) the willful and continued refusal by the
Executive to perform his duties hereunder, other than by
reasons of health, after a written demand for such performance
is delivered to the Executive by the Company that identifies
the manner in which the Executive has refused to perform his
duties, (ii) the commission of an act by the Executive
constituting a felony under state or federal law, (iii) the
habitual abuse by the Executive of any substance (such as
narcotics or alcohol) which materially affects his ability to
perform his duties, or (iv) the Executive's engaging in an act
of fraud, dishonesty or gross misconduct in connection with
the business of the Company, or (v) conduct by the Executive
constituting a material breach of this Agreement.
<PAGE> 2
EXHIBIT 10.6
(f) "Change In Control" means (a) the consummation of a merger or
consolidation of the Company after which a Third Party (as
hereinafter defined) owns more than 50% of the outstanding
common stock of the Company or (b) a sale of substantially all
of the assets of the Company to a Third Party or (c) a sale or
other transfer to a Third Party of more than 50% of the common
stock of the Company.
(g) "Committee" means the Compensation Committee of the Board.
(h) "Company" means Aqua-Chem, Inc., a Delaware corporation.
(i) "Effective Date" means the date this Agreement is executed on
behalf of the Company.
(j) "Effective Date of Termination" means the date on which a
termination of the Executive's employment occurs for any
reason whatsoever.
(k) "Executive" means Charles Norris.
(l) "Good Reason" means, without the Executive's consent, the
occurrence of any one or more of the following:
(i) the reassignment of the Executive to duties
materially inconsistent with the Executive's present
authorities, duties, responsibilities, and status as
an officer of the Company, other than an act that is
remedied by the Company promptly after receipt of
written notice thereof given by the Executive, and
other than a promotion of the Executive to a position
accepted by the Executive which includes duties,
responsibilities, and status associated with the
position; or
(ii) a reduction by the Company of the Executive's Base
Salary as in effect on the Effective Date (other than
a reduction as part of an overall reduction in
compensation affecting all senior management of the
Company) or the exclusion of the Executive by the
Company from such incentive compensation programs as
the Company may, from time to time, make available to
the senior management of the Company.
(m) "Permanent Disability" shall have the meaning set forth in the
Company's long-term disability program as in effect from time
to time.
(n) "Third Party" means any person(s) and/or business
organization(s) of any type other than the present
shareholders of the Company and their affiliates.
2. EMPLOYMENT TERM.
2
<PAGE> 3
EXHIBIT 10.6
The employment term shall commence as of the Effective Date and shall
continue thereafter until the earlier of (i) 45 days after Executive's receipt
of written notice from the Company terminating employment pursuant to Section
6(b) of this Agreement; (ii) immediately upon Executive's receipt of written
notice terminating employment pursuant to Section 6(a) of this Agreement; (iii)
such date as the Company shall elect up to a maximum of 45 days after its
receipt of written notice from the Executive terminating employment pursuant to
Section 6(b) or 6(c) of this Agreement; or (iv) the Executive's death or
Permanent Disability.
3. DUTIES.
During the employment term, the Executive shall serve as Vice President
- - Management Information Systems with such duties and responsibilities as may
reasonably be assigned or delegated to him from time to time according to
customary Company procedures. During his employment term, the Executive shall
devote his full time to the faithful and diligent performance of his duties for
the Company. Notwithstanding anything herein to the contrary, nothing shall
preclude the Executive from engaging in charitable and community affairs and
managing his personal investments so long as such activities do not interfere
with his carrying out his duties and responsibilities under this Agreement.
4. COMPENSATION.
(a) BASE SALARY. During the employment term, the
Executive shall be paid by the Company a Base Salary
payable (after deduction of applicable taxes) in
accordance with the payroll practices of the Company.
Initially, the Base Salary shall be as set forth on
Schedule A attached hereto. It is agreed between the
parties that the Company shall review the Base Salary
annually and in light of such review may, in the sole
discretion of the Committee, adjust such Base Salary
taking into account any change in the Executive's
then responsibilities, increases in the cost of
living, performance of the Executive, and other
pertinent factors.
(b) INCENTIVE COMPENSATION. The Executive shall, during
the employment term, be eligible to participate in
such incentive compensation programs as the Company
may, from time to time, make available to its senior
executives.
5. OTHER EMPLOYEE BENEFITS.
(a) BENEFIT PLANS. During the employment term, the
Executive shall be entitled to participate in all
employee benefit programs as the Company, from time
to time, makes available to the Company's senior
executives, including, without limitation, medical,
disability and life insurance, and retirement plans.
The Executive shall be provided with the use of a
leased
3
<PAGE> 4
EXHIBIT 10.6
car at the Company's expense and shall be entitled to
such other perquisites set forth on Schedule A.
(b) VACATION. The Executive shall be entitled to
reasonable paid annual vacation periods in accordance
with the Company's policies as in effect from time to
time, but in no event shall such vacation period be
less than that set forth on Schedule A attached
hereto.
(c) REGULAR REIMBURSED BUSINESS EXPENSES. The Company
shall reimburse the Executive for all travel and
other expenses reasonably incurred by the Executive
in the performance of his duties during the
employment term, in accordance with the Company's
policies in effect from time to time.
6. TERMINATION OF EMPLOYMENT.
(a) TERMINATION BY THE COMPANY FOR CAUSE. In the event
the Executive's employment is terminated by the
Company for Cause, the Executive shall be entitled to
his then current Base Salary through the Effective
Date of Termination.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE
EXECUTIVE WITH GOOD REASON. In the event the
Executive's employment is terminated by the Company
without Cause or by the Executive with Good Reason,
then upon complying with the provisions of Section
6(f) of this Agreement, but only upon such
compliance, the Executive shall be entitled to the
following:
(i) SEVERANCE PAY. For a period of twelve (12)
months following the Effective Date of
Termination, the Executive shall continue to
be paid his then current Base Salary in
accordance with the Company's normal payroll
practices and subject to withholding as
required by law; provided, however, that if
at the end of such 12 month period the
Executive, despite continuing good faith and
reasonable efforts, has been unable to
obtain employment (including
self-employment), the Executive's Base
Salary will be continued until he obtains
employment (including self-employment) for
up to an additional six (6) months;
(ii) INCENTIVE COMPENSATION. The Executive shall
be paid an amount equal to the amount, if
any, which the Executive would have been
entitled to receive pursuant to any
incentive compensation plan in effect for
the year during which the Effective Date of
Termination occurred multiplied by a
fraction, the numerator of which is the
number of complete months the Executive was
employed during
4
<PAGE> 5
EXHIBIT 10.6
such year and the denominator of which is
twelve (12), with such amount subject to
withholding as required by law to be paid at
such time as such payments are made to the
other executives of the Company;
(iii) HEALTH AND DENTAL INSURANCE. If the
Executive exercises his COBRA rights with
respect to medical and dental insurance, the
Executive shall be entitled to receive such
coverage for the 12 month period following
the Effective Date of Termination (or, up to
18 months if the Executive has been unable
to obtain employment or become self-
employed) at a cost equal to the amount
paid by then current employees of the
Company for such coverage;
(iv) OUTPLACEMENT SERVICES. The Executive shall
be furnished with outplacement services for
a period of up to 12 months paid for by the
Company with such firm as the Company then
utilizes for such purposes; and
(v) COMPANY AUTOMOBILE. The Executive shall be
permitted to use his leased Company
automobile for 45 days following the
Effective Date of Termination and during
such period, shall have the right to
purchase such car from the leasing company
at the price specified in the lease.
In the event the Executive does not comply with the
provisions of Section 6(f) of this Agreement, the
Executive shall be entitled to his then current Base
Salary through the Effective Date of Termination.
(c) VOLUNTARY TERMINATION BY THE EXECUTIVE. In the event
of a termination of the Executive's employment by the
Executive on his own initiative other than for Good
Reason, the Executive shall be entitled to his then
current Base Salary through the Effective Date of
Termination.
(d) DEATH OR PERMANENT DISABILITY OF THE EXECUTIVE. The
employment term shall terminate without notice and
automatically upon the death or Permanent Disability
of Executive. Upon the termination of Executive's
employment by reason of death or Permanent
Disability, the Executive or, in the event of his
death, the Executive's Beneficiary shall be entitled
to receive the Executive's then current Base Salary
through the Effective Date of Termination and
incentive compensation determined in accordance with
Section 6 (b)(ii) of this Agreement.
5
<PAGE> 6
EXHIBIT 10.6
(e) BENEFITS. Except as and to the extent specifically
provided to the contrary in this Section 6 or in
Schedule A attached hereto, the Executive's
compensation and eligibility to participate in
programs or receive benefits provided by the Company
(other than those which have vested by virtue of
Executive's prior employment) shall terminate on the
Effective Date of Termination.
(f) RELEASE. As condition precedents to receiving the
severance benefits described in Section 6(b) of this
Agreement: (i) the Executive shall, within 30 days
after the Effective Date of Termination, execute a
Release in the form attached hereto as Exhibit A; and
(ii) the Executive shall not have revoked the Release
within the seven day revocation period provided by
the Older Workers Benefit Protection Act.
7. RESTRICTIONS.
(a) The Executive acknowledges and agrees that the
Company's business is by its nature international,
the Company's business and customer contacts have
been established and maintained at great expense, the
Executive, by virtue of his position with the
Company, has and will continue to be privy to the
Company's most confidential business plans and
strategies which, without the restrictions
hereinafter set forth, would enable the Executive to
compete unfairly with the Company and, accordingly,
such restrictions are reasonable and necessary to
protect the legitimate interests of the Company. As a
result, and in order to induce the Company to enter
into this Agreement and to provide the benefits
described in this Agreement, the Executive agrees to
the restrictions set forth in Section 7 and
simultaneous with the execution of this Agreement is
entering into the Employee Confidentiality and
Proprietary Information Agreement attached hereto as
Exhibit B.
(b) The Executive hereby covenants and agrees that at no
time during the employment term and for a period of
twelve (12) months following the Effective Date of
Termination will the Executive directly or indirectly
in any capacity whatsoever (whether as an employee,
officer, director, consultant, partner, member, joint
venturer, agent, representative or otherwise) provide
service, advice or assistance of any nature to or
acquire an ownership interest in (or acquire the
right to acquire an ownership interest in) a
Competing Business (as hereinafter defined). A
"Competing Business" shall mean and be limited to any
business, regardless of the form of organization,
which (i) is engaged in the design, manufacture
and/or sale of products which are similar in design
or function to and otherwise compete with the
products which were under design by the Company or
included in the Company's product lines during the
twelve month period
6
<PAGE> 7
preceding the Effective Date of Termination.
Notwithstanding the preceding, the Executive shall
not be prohibited from (i) acquiring less than five
percent (5%) of the stock of any publicly traded
company which may be engaged in a Competing Business,
or (ii) being employed by or otherwise providing
services to a company which, among its various
businesses, is engaged in a Competing Business
provided that the Executive is not directly or
indirectly involved in any capacity whatsoever in
such Competing Business.
(c) The Executive hereby covenants and agrees that, at
all times during the employment term and for a period
of twelve (12) months following the Effective Date of
Termination, the Executive shall not directly or
indirectly, on behalf of himself or any other person,
entity, or business, employ or engage the services of
or seek to employ or engage the services of any
person employed by the Company or any agent who
represents the Company during the period of six
months prior to the Effective Date of Termination, or
otherwise encourage or entice any such person to
terminate or diminish their relationship with the
Company.
(d) The Executive hereby acknowledges and agrees (i) the
Executive's education and experience are such that
the foregoing restrictions will not unduly interfere
with his ability to earn a livelihood, (ii) the
Company would suffer irreparable harm in the event of
a violation of such restrictions, and (iii)
accordingly, in addition to any other remedies
available to it, the Company shall be entitled to
injunctive relief without the posting of bond or
other collateral and the Executive shall not oppose
the granting of such relief. The Company shall be
entitled to all costs, including reasonable
attorneys' fees, in enforcing such restrictions or
pursuing damages for breach.
8. CHANGE IN CONTROL.
In the event of a Change In Control, the Executive shall be eligible,
as hereinafter set forth, to receive from the Company (or its successor pursuant
to such Change In Control) a "Change In Control Bonus" as set forth in Schedule
A attached hereto. An amount equal to one-half of the Change In Control Bonus
shall be paid to the Executive on the date of the Change In Control if, but only
if, the Executive is either (i) then employed by the Company, or its successor
or (ii) his employment was terminated within the 90 days preceding the date of
the Change In Control at the election of the Company for reasons other than
"Cause" or by the Executive for "Good Reason." The remaining one-half of the
Change in Control Bonus shall be paid to the Executive 180 days after the date
of the Change In Control if, but only if, the Executive is either (i) then
employed by the Company or its successor or (ii) his employment was terminated
within the 180 day period following the date of the Change In Control at the
election of the Company
7
<PAGE> 8
(or its successor pursuant to such Change In Control) for reasons other than
"Cause" or by the Executive for "Good Reason."
9. ASSIGNABILITY; BINDING NATURE.
This Agreement shall inure to the benefit of the Company and the
Executive and their respective successors, heirs (in the case of the Executive)
and permitted assigns. Except as specifically provided to the contrary in this
Agreement, no rights or obligations of the Company or Executive under the
Agreement may be assigned or transferred. Notwithstanding the preceding, the
rights and obligations of the Company may be assigned or transferred pursuant to
a Change In Control provided that such assignee or transferee assumes the
liabilities, obligations and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law.
10. BENEFICIARIES.
The Executive may designate one or more persons or entities as the
primary and/or contingent Beneficiaries of any payments owing to the Executive
under this Agreement. Such designation must be in the form of a signed writing
reasonably acceptable to the Company. The Executive may make or change such
designation by a similar written instrument signed by the Executive and
delivered to the Company at any time.
11. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the Company and
the Executive and supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between them with
respect thereto.
12. AMENDMENT OR WAIVER.
This Agreement cannot be changed, modified or amended without the prior
written consent of both the Executive and the Company. No waiver by either the
Company or the Executive at any time of any breach by the other party of any
condition or provision of this Agreement shall be deemed a waiver of a similar
or dissimilar condition or provision at the same or at any prior or subsequent
time. Any waiver must be in writing and signed by the Executive and an
authorized officer of the Company, as the case may be.
13. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
8
<PAGE> 9
14. SURVIVORSHIP.
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
15. GOVERNING LAW.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of Wisconsin without reference to
principles of conflicts of laws.
16. NOTICES.
Any notice given to either party shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the party concerned, if to the Company, at its principal office, and, if to the
Executive, at the address of the Executive shown on the Company's records, or at
such other address as such party may give notice of.
17. HEADINGS; CONSTRUCTION.
The headings of the paragraphs contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
/s/ Charles Norris
--------------------------------------
Charles Norris, Individually
AQUA-CHEM, INC.
By: /s/ J.A. Miller
-----------------------------------
Jeffrey A. Miller, President
9
<PAGE> 10
EXHIBIT 10.6
Schedule A
Effective for Calendar Year 1997
Executive: Charles J. Norris
-----------------------------------------------------
Title: Vice President, MIS and Chief Information Officer
-----------------------------------------------------
Grade: 25
-----------------------------------------------------
Division: Corporate
-----------------------------------------------------
Base Salary: $ 95,534
--------------------------------
Effective Date: 9/2/96
--------------------------------
Incentive Compensation:
Management Incentive Plan Target: 25% Salary Grade Mid-Point
Executive Management Incentive Plan Target: 20% Salary Grade Mid-Point
Change in Control: An amount equal to one-half (.5) times the annual base
salary in effect at the time of change in control.
Other Employee Benefits:
General:
- Participation in all employee benefit programs as the
Company, from time-to-time, makes available to the
Company's senior executives.
Vacation:
- Three (3) weeks/annually
Company Automobile:
- Lease vehicle per plan guidelines.
Other:
- Professional Associations
/s/ Charles Norris /s/ Jeffrey A. Miller
- -------------------------------- -----------------------------
Date: 1-7-97
-----------------
<PAGE> 11
Exhibit A
GENERAL RELEASE
_______________________, (the "Executive"), for good and valuable consideration,
the receipt of which is hereby acknowledged, does hereby release and forever
discharge Aqua-Chem, Inc. ("Aqua-Chem") and all of its past, present and future
officers, directors, agents, employees, attorneys, shareholders, employee
benefit plans, divisions, parent corporations, subsidiary corporations,
affiliated corporations, successors and assigns (collectively the "Released
Parties") from any and all actions, causes of action, claims, suits, debts,
covenants, contracts, demands or liabilities of any kind or character
whatsoever, whether known or unknown, which the Executive has had or now has
against the Released Parties (or any of them) related to anything occurring
prior to or on the present date.
Without limiting the generality of the foregoing, this release applies to any
claims, causes of action, demands or liabilities the Executive may have had or
now has:
1. Under or pursuant to the Age Discrimination in Employment Act, as
amended.
2. Under or pursuant to Title VII of the Civil Rights Act of 1964, as
amended; the Civil Rights Act of 1991; the Wisconsin Fair Employment
Act; the Employee Retirement Income Security Act, as amended, or any
other federal, state or local statute or regulation relating to
employment.
3. For libel, slander, defamation, damage to reputation, intentional or
negligent infliction of emotional distress, tortious interference with
the employment or business relationship or other tortious conduct or
for wrongful discharge or breach of contract whether express or
implied.
4. Regarding any right which the Executive might have to current or future
employment with Aqua-Chem, its divisions or affiliated companies, and
the Executive affirms that he will not seek employment in the future
with Aqua-Chem, its divisions or affiliated companies.
The Executive acknowledges that he has been advised in writing (1) to consult
with an attorney prior to executing this General Release, and (2) that he had at
least twenty-one (21) days to consider this General Release prior to executing
it.
For a period of seven (7) days following the execution of this General Release,
the Executive shall have the right to revoke this General Release, and this
General Release shall not become effective or enforceable until seven (7) days
following such execution.
IN WITNESS WHEREOF, the undersigned has executed this General Release this ____
day of _______________, 199__.
------------------------------------
<PAGE> 12
EXHIBIT 10.6
[LOGO AQUA-CHEM, INC.]
EMPLOYEE CONFIDENTIAL AND PROPRIETARY INFORMATION AGREEMENT
STATEMENT OF SUFFICIENCY OF CONSIDERATION
The attached Employee Confidential and Proprietary Information
Agreement is being signed contemporaneously with the execution of an employment
agreement between the company and myself. I acknowledge and agree that the
mutual considerations and promises contained in the employment agreement
constitute due and sufficient consideration to support the obligations contained
in the Employee Confidential and Proprietary Information Agreement. I understand
that by executing this document, I acknowledge the sufficiency of such
consideration.
/s/ Charles Norris
------------------------------------
Employee Signature
(Include first name in full)
Date 1-7-97
-------------------------------
Witness:
/s/ Jeffrey A. Miller 1/7/97
- -------------------------------
<PAGE> 13
EXHIBIT 10.6
AQUA-CHEM, Inc.
EMPLOYEE CONFIDENTIAL AND PROPRIETARY INFORMATION AGREEMENT
Name Charles Norris Social Security No. ###-##-####
-------------------------------- ----------------
Place Milwaukee, WI Date 1-7-97
-------------------------------- -------------------------------
In consideration of my employment in any capacity and of the salary or
wages paid for my services in the course of employment by Aqua-Chem, Inc., or a
Division of Aqua-Chem, Inc., or a wholly-owned subsidiary of Aqua-Chem, Inc., or
any corporation owned or controlled by Aqua-Chem, Inc., hereinafter called
COMPANY, I agree as follows:
1. I agree that from the time of entering the COMPANY's employ until one
year after termination of my employment, I will promptly communicate to an
official of the COMPANY and/or such other persons as may be designated by the
COMPANY from time to time, all significant technical or business innovations and
all inventions, whether patentable or unpatentable, made or conceived by me
alone or jointly with others, capable of use in connection with the business,
work or investigations of the COMPANY or resulting from or suggested by any work
which I may do for or on behalf of the COMPANY, or at its request, and
improvements thereon, or inventions and innovations made on company time or with
company materials, and I agree to assign, and by these presents do hereby
assign, all of my right, title and interest in and to such inventions and
innovations to the COMPANY, and I agree upon request to execute specific
assignments to the COMPANY of such inventions and innovations, together with all
rights thereunder in the United States and all foreign countries, and I will
execute all papers and perform all other lawful acts which the COMPANY or its
nominees deems necessary or advisable, for the preparation, filing, prosecution
and maintenance of patent applications and/or patents of the United States and
foreign countries and for the transfer of any and all interests therein to the
COMPANY including the execution of original, divisional, continuing, extended
and reissue applications, preliminary statements, affidavits, and concessions
and the giving of testimony with respect to inventions, discoveries,
applications and patents and otherwise assist the COMPANY or its nominees in
every proper way to obtain for its benefit patents, copyrights or other legal
protection for such inventions or innovations or for publications pertaining to
them in any and all countries, said inventions and innovations to be the
exclusive property of the COMPANY or its nominees, whether or not patented or
copyrighted. It is understood that all expenses in connection with carrying on
any of the above are to be borne by the COMPANY.
2. I further agree to make and maintain adequate and current written
records of all such inventions and innovations in the form of notes, sketches,
drawings, or reports relating thereto, which records shall be and remain the
property of and available to the COMPANY at all times; and, upon any termination
of my employment, promptly to deliver to the COMPANY all drawings, blueprints,
manuals, letters, notes, notebooks, reports, models, computer programs, data and
disks, and other materials (including all copies) which are of a secret or
confidential nature relating to the business of the COMPANY or its affiliates,
and which are in my possession or under my control.
3. I hereby acknowledge that certain techniques, manufacturing equipment
and processes have been developed by the COMPANY which have achieved the status
of trade secrets, and that additional trade secrets may be developed during the
course of my employment; and I agree that I will not, without written approval
by the COMPANY, publish or otherwise disclose or authorize anyone else to
publish or disclose, or use to the detriment of the COMPANY, either during the
term of my employment or thereafter, any information, knowledge, or data of the
COMPANY or its customers, vendors or any other third party with whom the COMPANY
conducts business which I may receive or develop during the course of my
employment relating to inventions, discoveries, formulas, processes, machines,
manufacturers, compositions, computer programs, accounting methods, information
systems or business or financial plans or reports, marketing strategies, pricing
information, customer lists, prospective customer lists, or other matters which
are of a secret or confidential nature acquired in the course of my employment
under this Agreement or heretofore with any company controlled by Aqua-Chem,
Inc.
4. I represent that except as I have written on the reverse side of this
Agreement, I do not have (1) any agreement with or obligation to others in
conflict with this Agreement, and (2) any claim in any invention or idea either
(a) conceived by me or by me and others prior to my employment with the COMPANY
or (b) otherwise outside the scope of this Agreement and in the absence of any
such writing on the reverse side of this Agreement, the COMPANY may assume that
no such conflicting agreements or inventions or ideas exist, and that I will not
make any claim against the COMPANY with respect to the use of such inventions or
ideas in any work or the product of any work which I perform or cause to be
performed for or on behalf of the COMPANY. I understand that the COMPANY wants
me to use on my job all the information which is generally known and used by
persons of my training and experience and all information which is common
knowledge in the industry, but it does not want me to disclose any confidential
information belonging to any former employer of mine which I am legally or
ethically bound not to disclose.
5. I understand and agree that the obligations contained herein are
continuing and further agree that in the event my employment is terminated for
any reason, whether voluntarily or involuntarily, I shall continue to be
obligated under this Agreement not to use or disclose confidential or trade
secret information following the termination of my employment. I understand and
EXHIBIT 10.6
agree that the restrictions set forth in this Agreement shall have the following
duration: (1) with respect to trade secret information, the restrictions shall
remain in effect for as long as such information remains a trade secret; (2)
with respect to all other information identified herein as being confidential
information, the restrictions shall remain in effect for a period of two (2)
years following the termination of my employment.
6. I agree that the discharge of my undertakings in this Agreement shall
be an obligation of my executors, administrators, or other legal representatives
or assigns. This Agreement shall be governed by and construed under the laws of
the State of Wisconsin.
7. This Agreement shall be governed by and construed under the laws of the
State of Wisconsin. In the event of a violation of this Agreement, I agree that
the COMPANY shall be entitled, as a matter of right, in addition to other
remedies otherwise available to it, to injunctive relief restraining any further
violation of this Agreement, and to all costs, including reasonable attorneys'
fees, incurred in enforcing this Agreement or pursuing damages for breach.
8. Finally, I agree that this Agreement supersedes and replaces any
existing agreement which I have entered into with the COMPANY relating generally
to the same subject matter, and it may not, on behalf of or in respect to the
COMPANY be changed or modified, or released, discharged, abandoned or otherwise
terminated, in whole or in part, except by an instrument in writing signed by an
officer or authorized representative of the COMPANY.
(Signed) /s/ Charles Norris
--------------------------------------------------------
(Employee's signature - to include first name in full)
(Date) 1/7/97
--------------------------------------------------------
(To be written by employee)
Witness /s/ JA Miller
--------------------------------------------------------
Date: 1/7/97
--------------------------------------------------------
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 1 day of September, 1997, by and
between Aqua- Chem, Inc., a Delaware corporation (the "Company"), and Daniel J.
Johnson (the "Executive").
WITNESSETH:
WHEREAS, the Executive desires to be employed by the Company as the
President of the Company's Water Technologies Division; and
WHEREAS, the Company desires to employ Executive in his capacity as
President of the Water Technologies Division; and
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. DEFINITIONS.
Whenever used in this Agreement, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized:
(a) "Agreement" means this Employment Agreement.
(b) "Base Salary" means the salary of record paid to the Executive
as annual salary as set forth on Schedule A, excluding amounts
received under incentive or other bonus plans, whether or not
deferred.
(c) "Beneficiary" means the persons or entities designated or
deemed designated by the Executive pursuant to Section 10
herein.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means any of the following as determined by the
Committee in the exercise of good faith and reasonable
judgment (i) the willful and continued refusal by the
Executive to perform his duties hereunder, other than by
reasons of health, after a written demand for such performance
is delivered to the Executive by the Company that identifies
the manner in which the Executive has refused to perform his
duties, (ii) the commission of an act by the Executive
constituting a felony under state or federal law, (iii) the
habitual abuse by the Executive of any substance (such as
narcotics or alcohol) which materially affects his ability to
perform his duties, or (iv) the Executive's engaging in an act
of fraud, dishonesty or gross misconduct in connection with
the business of the Company, or (v) conduct by the Executive
constituting a material breach of this Agreement.
<PAGE> 2
EXHIBIT 10.7
(f) "Committee" means the Compensation Committee of the Board.
(g) "Company" means Aqua-Chem, Inc., a Delaware corporation.
(h) "Division" means the Water Technologies Division of the
Company.
(i) "Effective Date" means the date this Agreement is executed on
behalf of the Company.
(j) "Effective Date of Termination" means the date on which a
termination of the Executive's employment occurs for any
reason whatsoever.
(k) "Executive" means Daniel J. Johnson.
(l) "Good Reason" means, without the Executive's consent, the
occurrence of any one or more of the following:
(i) the reassignment of the Executive to duties
materially inconsistent with the Executive's then
current authorities, duties, responsibilities, and
status as an officer of the Company, other than an
act that is remedied by the Company promptly after
receipt of written notice thereof given by the
Executive, and other than a promotion of the
Executive to a position accepted by the Executive
which includes duties, responsibilities, and status
associated with the position; or
(ii) a reduction by the Company of the Executive's Base
Salary as in effect on the Effective Date (other than
a reduction as part of an overall reduction in
compensation affecting all senior management of the
Company) or the exclusion of the Executive by the
Company from such incentive compensation programs as
the Company may, from time to time, make available to
the senior management of the Company.
(m) "Permanent Disability" shall have the meaning set forth in the
Company's long-term disability program as in effect from time
to time.
2. EMPLOYMENT TERM.
The employment term shall commence as of the Effective Date and shall
continue thereafter until the earlier of (i) 45 days after Executive's receipt
of written notice from the Company terminating employment pursuant to Section
6(b) of this Agreement; (ii) immediately upon Executive's receipt of written
notice terminating employment pursuant to Section 6(a) of this Agreement; (iii)
such date as the Company shall elect up to a maximum of 45 days after its
receipt of written notice from the Executive terminating employment pursuant to
Section 6(b) or 6(c) of this Agreement; or (iv) the Executive's death or
Permanent Disability.
2
<PAGE> 3
EXHIBIT 10.7
3. DUTIES.
During the employment term, the Executive shall serve as President of
the Water Technologies Division with such duties and responsibilities as may
reasonably be assigned or delegated to him from time to time according to
customary Company procedures. During his employment term, the Executive shall
devote his full time to the faithful and diligent performance of his duties for
the Company. Notwithstanding anything herein to the contrary, nothing shall
preclude the Executive from engaging in charitable and community affairs and
managing his personal investments so long as such activities do not interfere
with his carrying out his duties and responsibilities under this Agreement.
4. COMPENSATION.
(a) BASE SALARY. During the employment term, the
Executive shall be paid by the Company a Base Salary
payable (after deduction of applicable taxes) in
accordance with the payroll practices of the Company.
Initially, the Base Salary shall be as set forth on
Schedule A attached hereto. It is agreed between the
parties that the Company shall review the Base Salary
annually and in light of such review may, in the sole
discretion of the Committee, adjust such Base Salary
taking into account any change in the Executive's
then responsibilities, increases in the cost of
living, performance of the Executive, and other
pertinent factors.
(b) INCENTIVE COMPENSATION. The Executive shall, during
the employment term, be eligible to participate in
such incentive compensation programs as the Company
may, from time to time, make available to its senior
executives.
5. OTHER EMPLOYEE BENEFITS.
(a) BENEFIT PLANS. During the employment term, the
Executive shall be entitled to participate in all
employee benefit programs as the Company, from time
to time, makes available to the Company's senior
executives, including, without limitation, medical,
disability and life insurance, and retirement plans.
The Executive shall be provided with the use of a
leased car at the Company's expense and shall be
entitled to such other perquisites set forth on
Schedule A.
(b) VACATION. The Executive shall be entitled to
reasonable paid annual vacation periods in accordance
with the Company's policies as in effect from time to
time, but in no event shall such vacation period be
less than that set forth on Schedule A attached
hereto.
3
<PAGE> 4
EXHIBIT 10.7
(c) REGULAR REIMBURSED BUSINESS EXPENSES. The Company
shall reimburse the Executive for all travel and
other expenses reasonably incurred by the Executive
in the performance of his duties during the
employment term, in accordance with the Company's
policies in effect from time to time.
6. TERMINATION OF EMPLOYMENT.
(a) TERMINATION BY THE COMPANY FOR CAUSE. In the event
the Executive's employment is terminated by the
Company for Cause, the Executive shall be entitled to
his then current Base Salary through the Effective
Date of Termination.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE
EXECUTIVE WITH GOOD REASON. In the event the
Executive's employment is terminated by the Company
without Cause or by the Executive with Good Reason,
then upon complying with the provisions of Section
6(f) of this Agreement, but only upon such
compliance, the Executive shall be entitled to the
following:
(i) SEVERANCE PAY. For a period of twelve (12)
months following the Effective Date of
Termination, the Executive shall continue to
be paid his then current Base Salary in
accordance with the Company's normal payroll
practices and subject to withholding as
required by law; provided, however, that if
at the end of such 12 month period the
Executive, despite continuing good faith and
reasonable efforts, has been unable to
obtain employment (including
self-employment), the Executive's Base
Salary will be continued until he obtains
employment (including self-employment) for
up to an additional six (6) months;
(ii) INCENTIVE COMPENSATION. The Executive shall
be paid an amount equal to the amount, if
any, which the Executive would have been
entitled to receive pursuant to any
incentive compensation plan in effect for
the year during which the Effective Date of
Termination occurred multiplied by a
fraction, the numerator of which is the
number of complete months the Executive was
employed during such year and the
denominator of which is twelve (12), with
such amount subject to withholding as
required by law to be paid at such time as
such payments are made to the other
executives of the Company;
(iii) HEALTH AND DENTAL INSURANCE. If the
Executive exercises his COBRA rights with
respect to medical and dental insurance, the
Executive shall be entitled to receive such
coverage for the 12
4
<PAGE> 5
EXHIBIT 10.7
month period following the Effective Date of
Termination (or, up to 18 months if the
Executive has been unable to obtain
employment or become self-employed) at a
cost equal to the amount paid by then
current employees of the Company for such
coverage;
(iv) OUTPLACEMENT SERVICES. The Executive shall
be furnished with outplacement services for
a period of up to 12 months paid for by the
Company with such firm as the Company then
utilizes for such purposes; and
(v) COMPANY AUTOMOBILE. The Executive shall be
permitted to use his leased Company
automobile for 45 days following the
Effective Date of Termination and during
such period, shall have the right to
purchase such car from the leasing company
at the price specified in the lease.
In the event the Executive does not comply with the
provisions of Section 6(f) of this Agreement, the
Executive shall be entitled to his then current Base
Salary through the Effective Date of Termination.
(c) VOLUNTARY TERMINATION BY THE EXECUTIVE. In the event
of a termination of the Executive's employment by the
Executive on his own initiative other than for Good
Reason, the Executive shall be entitled to his then
current Base Salary through the Effective Date of
Termination.
(d) DEATH OR PERMANENT DISABILITY OF THE EXECUTIVE. The
employment term shall terminate without notice and
automatically upon the death or Permanent Disability
of Executive. Upon the termination of Executive's
employment by reason of death or Permanent
Disability, the Executive or, in the event of his
death, the Executive's Beneficiary shall be entitled
to receive the Executive's then current Base Salary
through the Effective Date of Termination and
incentive compensation determined in accordance with
Section 6 (b)(ii) of this Agreement.
(e) BENEFITS. Except as and to the extent specifically
provided to the contrary in this Section 6 or in
Schedule A attached hereto, the Executive's
compensation and eligibility to participate in
programs or receive benefits provided by the Company
(other than those which have vested by virtue of
Executive's prior employment) shall terminate on the
Effective Date of Termination.
(f) RELEASE. As condition precedents to receiving the
severance benefits described in Section 6(b) of this
Agreement: (i) the Executive shall,
5
<PAGE> 6
EXHIBIT 10.7
within 30 days after the Effective Date of
Termination, execute a Release in the form attached
hereto as Exhibit A; and (ii) the Executive shall not
have revoked the Release within the seven day
revocation period provided by the Older Workers
Benefit Protection Act.
7. RESTRICTIONS.
(a) The Executive acknowledges and agrees that the
Division's business is by its nature international,
the Company's business and customer contacts have
been established and maintained at great expense, the
Executive, by virtue of his position with the
Company, will be privy to the Company's most
confidential business plans and strategies which,
without the restrictions hereinafter set forth, would
enable the Executive to compete unfairly with the
Company and, accordingly, such restrictions are
reasonable and necessary to protect the legitimate
interests of the Company. As a result, and in order
to induce the Company to enter into this Agreement
and to provide the benefits described in this
Agreement, the Executive agrees to the restrictions
set forth in Section 7 and simultaneous with the
execution of this Agreement is entering into the
Employee Confidentiality and Proprietary Information
Agreement attached hereto as Exhibit B.
(b) The Executive hereby covenants and agrees that at no
time during the employment term and for a period of
twelve (12) months following the Effective Date of
Termination will the Executive directly or indirectly
in any capacity whatsoever (whether as an employee,
officer, director, consultant, partner, member, joint
venturer, agent, representative or otherwise) provide
service, advice or assistance of any nature to or
acquire an ownership interest in (or acquire the
right to acquire an ownership interest in) a
Competing Business (as hereinafter defined). A
"Competing Business" shall mean and be limited to any
business, regardless of the form of organization,
which (i) is engaged in the design, manufacture
and/or sale of products which are similar in design
or function to and otherwise compete with the
products which were under design by the Division or
included in the Division's product lines during the
twelve month period preceding the Effective Date of
Termination (hereinafter referred to as "Competing
Products") and which (ii) sells, attempts to sell or
markets (or during the twelve month period preceding
the Effective Date of Termination sold, attempted to
sell or marketed) any Competing Products within the
United States and/or any foreign country within
which, during the twelve (12) month period preceding
the Effective Date of Termination, the Division sold
any of its products (or was a party to an executory
contract for the sale of any of its products),
attempted to sell, or marketed any of its products
other than by means of general advertising.
6
<PAGE> 7
EXHIBIT 10.7
Notwithstanding the preceding, the Executive shall
not be prohibited from (i) acquiring less than five
percent (5%) of the stock of any publicly traded
company which may be engaged in a Competing Business,
or (ii) being employed by or otherwise providing
services to a company which, among its various
businesses, is engaged in a Competing Business
provided that the Executive is not directly or
indirectly involved in any capacity whatsoever in
such Competing Business.
(c) The Executive hereby covenants and agrees that, at
all times during the employment term and for a period
of twelve (12) months following the Effective Date of
Termination, the Executive shall not directly or
indirectly, on behalf of himself or any other person,
entity, or business, employ or engage the services of
or seek to employ or engage the services of any
person employed by the Division or any agent who
represents the Division during the period of six
months prior to the Effective Date of Termination, or
otherwise encourage or entice any such person to
terminate or diminish their relationship with the
Division.
(d) The Executive hereby acknowledges and agrees (i) the
Executive's education and experience are such that
the foregoing restrictions will not unduly interfere
with his ability to earn a livelihood, (ii) the
Company would suffer irreparable harm in the event of
a violation of such restrictions, and (iii)
accordingly, in addition to any other remedies
available to it, the Company shall be entitled to
injunctive relief without the posting of bond or
other collateral and the Executive shall not oppose
the granting of such relief. In the event the Company
prevails in such action, the Company shall be
entitled to all costs, including reasonable
attorneys' fees, in enforcing such restrictions or
pursuing damages for breach.
8. ASSIGNABILITY; BINDING NATURE.
This Agreement shall inure to the benefit of the Company and the
Executive and their respective successors, heirs (in the case of the Executive)
and permitted assigns. No rights or obligations of the Executive under the
Agreement may be assigned or transferred by the Executive. The rights and
obligations of the Company may be assigned or transferred by the Company.
9. BENEFICIARIES.
The Executive may designate one or more persons or entities as the
primary and/or contingent Beneficiaries of any payments owing to the Executive
under this Agreement. Such designation must be in the form of a signed writing
reasonably acceptable to the Company. The
7
<PAGE> 8
EXHIBIT 10.7
Executive may make or change such designation by a similar written instrument
signed by the Executive and delivered to the Company at any time.
10. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between the Company and
the Executive and supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, between them with
respect thereto.
11. AMENDMENT OR WAIVER.
This Agreement cannot be changed, modified or amended without the prior
written consent of both the Executive and the Company. No waiver by either the
Company or the Executive at any time of any breach by the other party of any
condition or provision of this Agreement shall be deemed a waiver of a similar
or dissimilar condition or provision at the same or at any prior or subsequent
time. Any waiver must be in writing and signed by the Executive and an
authorized officer of the Company, as the case may be.
12. SEVERABILITY.
In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect to the fullest extent permitted by law.
13. SURVIVORSHIP.
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
14. GOVERNING LAW.
This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of Wisconsin without reference to
principles of conflicts of laws.
15. NOTICES.
Any notice given to either party shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to
the party concerned, if to the Company, at its principal office, and, if to the
Executive, at the address of the Executive shown on the Company's records, or at
such other address as such party may give notice of.
8
<PAGE> 9
EXHIBIT 10.7
16. HEADINGS; CONSTRUCTION.
The headings of the paragraphs contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first written above.
/s/ Daniel J. Johnson
-----------------------------------
Daniel J. Johnson, Individually
AQUA-CHEM, INC.
By: /s/ JA Miller 9/22/97
--------------------------------
Jeffrey A. Miller, President
9
<PAGE> 10
EXHIBIT 10.7
EMPLOYEE CONFIDENTIAL AND PROPRIETARY INFORMATION AGREEMENT
STATEMENT OF SUFFICIENCY OF CONSIDERATION
The attached Employee Confidential and Proprietary Information Agreement
is being signed contemporaneously with the execution of an employment agreement
between the company and myself. I acknowledge and agree that the mutual
considerations and promises contained in the employment agreement constitute
due and sufficient consideration to support the obligations contained in the
Employee Confidential and Proprietary Information Agreement. I understand that
by executing this document, I acknowledge the sufficiency of such
consideration.
/s/ Daniel J. Johnson
---------------------------------------
Employee Signature
(Include first name in full)
Date 9/3/97
-----------------------------------
Witness:
/s/ Bruce Dickson
- ----------------------------------
<PAGE> 11
EXHIBIT 10.7
SCHEDULE A
Effective for Calendar Year 1997
Executive: Daniel J. Johnson
-------------------------------
Title: Division President
-------------------------------
Grade: 31
-------------------------------
Division: Water Technologies Division
-------------------------------
Base Salary: $160,000
--------------------
Effective Date: September 1, 1997
--------------------
Incentive Compensation:
Management Incentive Plan Target: 35% Salary Grade Mid-Point
---
Executive Management Incentive Plan Target: 30% Salary Grade Mid-Point
---
Other Employee Benefits:
General:
- Participation in all employee benefit programs as the
Company, from time-to-time, makes available to the
Company's senior executives.
Life Insurance:
- Term Life Policy: $1,000,000 - Owned by the Executive,
paid by the Company
- $200,000 Accidental Death and Dismemberment
Vacation:
- Four (4) weeks/annually
Company Automobile:
- Lease vehicle per plan guidelines.
Other:
- Company subsidized membership at a country club of choice.
- $5,000 annual maximum
- Includes cost of annual membership fees (qtrly
minimums excluded)
- Professional Associations
/s/ Daniel J. Johnson /s/ JA Miller 9/22/97
- --------------------------------- -----------------------------
Date: 9/3/97
------------------
<PAGE> 12
EXHIBIT 10.7
[LOGO AQUA-CHEM, INC.]
EMPLOYEE CONFIDENTIAL AND PROPRIETARY INFORMATION AGREEMENT
Name Daniel J. Johnson Social Security No. ###-##-####
------------------------------ ------------------
Place Milwaukee Date 9/3/97
------------------------------ ---------------------------------
In consideration of my employment in any capacity and of the salary or
wages paid for my services in the course of employment by Aqua-Chem, Inc., or a
Division of Aqua-Chem, Inc., or a wholly-owned subsidiary of Aqua-Chem, Inc., or
any corporation owned or controlled by Aqua-Chem, Inc., hereinafter called
COMPANY, I agree as follows:
1. I agree that from the time of entering the COMPANY's employ until one
year after termination of my employment, I will promptly communicate to an
official of the COMPANY and/or such other persons as may be designated by the
COMPANY from time to time, all significant technical or business innovations and
all inventions, whether patentable or unpatentable, made or conceived by me
alone or jointly with others, capable of use in connection with the business,
work or investigations of the COMPANY or resulting from or suggested by any work
which I may do for or on behalf of the COMPANY, or at its request, and
improvements thereon, or inventions and innovations made on company time or with
company materials, and I agree to assign, and by these presents do hereby
assign, all of my right, title and interest in and to such inventions and
innovations to the COMPANY, and I agree upon request to execute specific
assignment to the COMPANY of such inventions and innovations, together with all
rights thereunder in the United States and all foreign countries, and I will
execute all papers and perform all other lawful acts which the COMPANY or its
nominees deems necessary or advisable, for the preparation, filing, prosecution
and maintenance of patent applications and/or patents of the United States and
foreign countries and for the transfer of any and all interests therein to the
COMPANY including the execution of original, divisional, continuing, extended
and reissue applications, preliminary statements, affidavits, and concessions
and the giving of testimony with respect to inventions, discoveries,
applications and patents and otherwise assist the COMPANY or its nominees in
every proper way to obtain for its benefit patents, copyrights or other legal
protection for such inventions or innovations or for publications pertaining to
them in any and all countries, said inventions and innovations to be the
exclusive property of the COMPANY or its nominees, whether or not patented or
copyrighted. It is understood that all expenses in connection with carrying on
any of the above are to be borne by the COMPANY.
2. I further agree to make and maintain adequate and current written
records of all such inventions and innovations in the form of notes, sketches,
drawings, or reports relating thereto, which records shall be and remain the
property of and available to the COMPANY at all times; and, upon any termination
of my employment, promptly to deliver to the COMPANY all drawings, blueprints,
manuals, letter, notes, notebooks, reports, models, computer programs, data and
disks, and other materials (including all copies) which are of a secret or
confidential nature relating to the business of the COMPANY or its affiliates,
and which are in my possession or under my control.
3. I hereby acknowledge that certain techniques, manufacturing equipment
and processes have been developed by the COMPANY which have achieved the status
of trade secrets, and that additional trade secrets may be developed during the
course of my employment; and I agree that I will not, without written approval
by the COMPANY, publish or otherwise disclose or authorize anyone else to
publish or disclose, or use to the detriment of the COMPANY, either during the
term of my employment or thereafter, any information, knowledge, or data of the
COMPANY or its customers, vendors or any other third party with whom the COMPANY
conducts business which I may receive or develop during the course of my
employment relating to inventions, discoveries, formulas, processes, machines,
manufacturers, compositions, computer programs, accounting methods, information
systems or business or financial plans or reports, marketing strategies, pricing
information, customer lists, prospective customer lists, or other matters which
are of a secret or confidential nature acquired in the course of my employment
under this Agreement or heretofore with any company controlled by Aqua-Chem,
Inc.
4. I represent that except as I have written on the reverse side of this
Agreement, I do not have (1) any agreement with or obligation to others in
conflict with this Agreement, and (2) any claim in any invention or idea either
(a) conceived by me or by me and others prior to my employment with the COMPANY
or (b) otherwise outside the scope of this Agreement and in the absence of any
such writing on the reverse side of this Agreement, the COMPANY may assume that
no such conflicting agreements or inventions or ideas exist, and that I will not
make any claim against the COMPANY with respect to the use of such inventions or
ideas in any work or the product of any work which I perform or cause to be
performed for or on behalf of the COMPANY. I understand that the COMPANY wants
me to use on my job all the information which is generally known and used by
persons of my training and experience and all information which is common
knowledge in the industry, but it does not want me to disclose any confidential
information belonging to any former employer of mine which I am legally or
ethically bound not to disclose.
EXHIBIT 10.7
5. I understand and agree that the obligations contained herein are
continuing and further agree that in the event my employment is terminated for
any reason, whether voluntarily or involuntarily, I shall continue to be
obligated under this Agreement not to use or disclose confidential or trade
secret information following the termination of my employment. I understand and
agree that the restrictions set forth in this Agreement shall have the following
duration: (1) with respect to trade secret information, the restrictions shall
remain in effect for as long as such information remains a trade secret; (2)
with respect to all other information identified herein as being confidential
information, the restrictions shall remain in effect for a period of two (2)
years following the termination of my employment.
6. I agree that the discharge of my undertakings in this Agreement shall
be an obligation of my executors, administrators, or other legal representatives
or assigns. This Agreement shall be governed by and construed under the laws of
the State of Wisconsin.
7. This Agreement shall be governed by and construed under the laws of the
State of Wisconsin. In the event of a violation of this Agreement, I agree that
the COMPANY shall be entitled, as a matter of right, in addition to other
remedies otherwise available to it, to injunctive relief restraining any further
violation of this Agreement, and to all costs, including reasonable attorneys'
fees, incurred in enforcing this Agreement or pursuing damages for breach.
8. Finally, I agree that this Agreement supersedes and replaces any
existing agreement which I have entered into with the COMPANY relating generally
to the same subject matter, and it may not, on behalf of or in respect to the
COMPANY be changed or modified, or released, discharged, abandoned or otherwise
terminated, in whole or in part, except by an instrument in writing signed by an
officer or authorized representative of the COMPANY.
(Signed) /s/ Daniel J. Johnson
-----------------------------------------------------------------------
(Employee's signature - to include first name in full)
(Date) 9/3/97
-----------------------------------------------------------------------
(To be written by employee)
Witness /s/ James Winkelmann
-----------------------------------------------------------------------
Date: 9-3-97
-----------------------------------------------------------------------
<PAGE> 13
EXHIBIT 10.7
Exhibit A
GENERAL RELEASE
_______________________, (the "Executive"), for good and valuable consideration,
the receipt of which is hereby acknowledged, does hereby release and forever
discharge Aqua-Chem, Inc. ("Aqua-Chem") and all of its past, present and future
officers, directors, agents, employees, attorneys, shareholders, employee
benefit plans, divisions, parent corporations, subsidiary corporations,
affiliated corporations, successors and assigns (collectively the "Released
Parties") from any and all actions, causes of action, claims, suits, debts,
covenants, contracts, demands or liabilities of any kind or character
whatsoever, whether known or unknown, which the Executive has had or now has
against the Released Parties (or any of them) related to anything occurring
prior to or on the present date.
Without limiting the generality of the foregoing, this release applies to any
claims, causes of action, demands or liabilities the Executive may have had or
now has:
1. Under or pursuant to the Age Discrimination in Employment Act, as amended.
2. Under or pursuant to Title VII of the Civil Rights Act of 1964, as amended;
the Civil Rights Act of 1991; the Wisconsin Fair Employment Act; the
Employee Retirement Income Security Act, as amended, or any other federal,
state or local statute or regulation relating to employment.
3. For libel, slander, defamation, damage to reputation, intentional or
negligent infliction of emotional distress, tortious interference with the
employment or business relationship or other tortious conduct or for
wrongful discharge or breach of contract whether express or implied.
4. Regarding any right which the Executive might have to current or future
employment with Aqua-Chem, its divisions or affiliated companies, and the
Executive affirms that he will not seek employment in the future with
Aqua-Chem, its divisions or affiliated companies.
The Executive acknowledges that he has been advised in writing (1) to consult
with an attorney prior to executing this General Release, and (2) that he had at
least twenty-one (21) days to consider this General Release prior to executing
it.
For a period of seven (7) days following the execution of this General Release,
the Executive shall have the right to revoke this General Release, and this
General Release shall not become effective or enforceable until seven (7) days
following such execution.
IN WITNESS WHEREOF, the undersigned has executed this General Release this ____
day of _______________, 199__.
------------------------------------
<PAGE> 1
EXHIBIT 10.8
INTERIM MANAGEMENT AGREEMENT
This Agreement is made the 8th day of July, 1996 (the "Agreement")
between AQUA-CHEM, INC., a Delaware corporation, based in Milwaukee, Wisconsin
(hereinafter called the "Company"), J. MILLER MANAGEMENT, INC., a Michigan
corporation, based in Birmingham, Michigan (hereinafter called "JMM") and
Jeffrey A. Miller (hereinafter called "Miller").
IN CONSIDERATION of the mutual promises hereinafter set forth, the
Company, Miller and JMM do hereby agree as follows:
1. Interim Management Services.
During the term of this Agreement, JMM agrees to perform, in accordance
with ordinary prudent industry practice, interim management/consulting work for
the Company as the Board of Directors of the Company, through its designee
Patrick Babin, or Bill Stallworth may from time to time request. JMM shall
perform such interim management/consulting work at the Company's principal place
of business in Milwaukee, Wisconsin or at such other places and at such other
times as the Company and JMM shall agree upon. The scope of this interim
management/consulting work shall include, but not be limited to:
1.1 Chief Executive Officer.
As Interim Chief Executive Officer (CEO), Miller shall assume
full management responsibility, including profit and loss responsibility for the
Company's business worldwide (hereinafter called the "Business"), manage
resources, both human and financial, and direct the business operations and
activities of the Company on a day-to-day basis.
1.2 Commercial Relationship.
Manage the commercial relationship for the Business,
understand and satisfy customers' needs, solve customer related problems and
improve customer relationships.
1.3 Leadership.
Provide the necessary leadership to stabilize the Business,
improve profitability and to assure that the strategic and budgetary objectives
are being met.
1.4 Strategic Direction.
Review and analyze the strategic direction for the Business,
recommend changes, implement programs, projects in support of revised strategic
direction for the business.
<PAGE> 2
EXHIBIT 10.8
2. Term.
The term of this Agreement shall extend from July 8, 1996 through
December 20, 1996, unless extended by written agreement of the parties, or
unless terminated earlier in accordance with the terms hereof.
3. Compensation.
In consideration of such interim management/consulting work, the
Company agrees to pay JMM $10,000 per week, payable monthly, as follows:
Month Weeks Compensation
----- ----- ------------
July 4 $ 40,000
August 4 $ 40,000
September 4 $ 40,000
October 5 $ 50,000
November 4 $ 40,000
December 3 $ 30,000
- ------
Total 24 $ 240,000
== =======
Monthly billings will be submitted on the last day of each respective
month, due and payable by the Company within five days from receipt of JMM's
invoice.
Any day that Miller is not available to perform services under this
Agreement shall cause a reduction in the compensation at the rate of $2,000 per
day.
Should the Company require additional days above those contemplated in
this Agreement, they shall be compensated at the daily rate of $2,000. Payments
will be made no later than 10 days after receipt of the invoice from JMM.
The Company shall pay JMM a retainer of $10,000 upon execution hereof,
which retainer shall be applied to the last payment due under this Agreement.
4. Expenses.
The Company shall reimburse JMM for all reasonable, direct,
out-of-pocket expenses incurred by JMM on behalf of the Company, including
mutually agreeable expenses for use of Miller's company car (monthly lease and
mileage) and weekly travel to and from Birmingham. Statements will be submitted
by JMM at the first of each month with detail itemization of travel and living
expenses with supporting documentation.
2
<PAGE> 3
EXHIBIT 10.8
5. Living Accommodations.
The Company will provide mutually agreeable living accommodations to
include a furnished apartment or house for Miller in the Milwaukee, Wisconsin
area for his sole use during the term hereof.
6. Non-Disclosure and Confidentiality.
The work contemplated under this Agreement requires that JMM and Miller
have access to information which is proprietary and/or confidential to the
Company. JMM and Miller agree not to publish or otherwise disclose to persons
outside the Company, without specific permission from the Company, any Company
information acquired by JMM and Miller as a result of participation in studies
or work under this Agreement; nor to use said information in any way which might
be injurious to the interests of the Company. This agreement shall survive
termination of the Agreement.
Company and Miller agree to maintain the terms of this Agreement and
any other confidential information on a confidential basis except as disclosure
may be required by law.
7. Work Product.
JMM shall furnish, on request of Company, written reports of the work
performed by JMM under this Agreement, including findings, conclusions,
recommendations and supporting data and analysis, and any such reports shall
become the sole property of the Company.
8. Independent Contractor.
JMM is an independent contractor under this Agreement. Miller is not an
employee of the Company and will not be entitled to participation in, or receive
any benefit or rights as a company employee under any Company employee benefit
and welfare plans, including, without limitation, Company employee insurance,
pension, savings and security plans as a result of JMM, Miller and Company
entering into this Agreement.
9. Non-Assignability.
This is a personal service agreement and accordingly, assignment of
this Agreement or any interest therein or of any payment due or to become due
hereunder, without prior consent of JMM, Miller or the Company, shall be void.
10. Termination.
This Agreement may be terminated by either party for any reason
whatsoever on thirty days' written notice. Should the Company terminate this
Agreement without cause prior to the
3
<PAGE> 4
EXHIBIT 10.8
end of term, the Company will be required to pay all compensation under this
Agreement including paragraphs 3 and 4. In the event JMM terminates this
Agreement, or Company terminates this Agreement for good cause, including a
breach of this Agreement by JMM or its or Miller's failure or inability to
obtain necessary government security clearance, the Company shall be obligated
to pay JMM only for all accrued obligations through the date of termination.
11. Indemnification and Hold Harmless.
Simultaneous with the execution of this Agreement, the Company, JMM and
Jeffrey A. Miller are entering into an Indemnification Agreement in the form
attached hereto as Exhibit A.
12. Sole Agreement.
This Agreement is the sole agreement among JMM, Miller and the Company
with respect to services to be performed during the term of this Agreement and
it supersedes all prior agreements and understanding with respect thereto. No
change, modification, alteration or addition to any provision hereof shall be
binding unless in writing and signed by JMM, Miller and a duly authorized
representative of the Company.
13. Law and Enforceability.
This Agreement is governed by the laws of the state of Delaware. Any
dispute arising out of this Agreement shall be resolved by submitting the same
to binding arbitration with the American Arbitration Association - Commercial
Division, Milwaukee, Wisconsin.
14. Successors and Assigns.
This agreement shall be binding upon and shall inure to the benefit of
the Company and its successors and assigns.
4
<PAGE> 5
EXHIBIT 10.8
IN WITNESS WHEREOF, the Company, JMM and Miller have executed this
Agreement on the day and year first above written.
AQUA-CHEM, INC.
By: /s/ B.E. Stallworth
----------------------------------------
Name: B.E. Stallworth
-----------------------------
Title: Director
-----------------------------
J. MILLER MANAGEMENT, INC.
By: /s/ JA Miller
---------------------------------
Jeffrey A. Miller, President
JEFFREY A. MILLER
By: /s/ JA Miller
------------------------------------
Jeffrey A. Miller, Individually
<PAGE> 1
EXHIBIT 10.9
AQUA-CHEM, INC.
AMENDED AND RESTATED
1997 STOCK OPTION PLAN
<PAGE> 2
EXHIBIT 10.9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1
ESTABLISHMENT AND PURPOSES...............................................................................1
1.1 Establishment and Effective Date.......................................................1
1.2 Purposes...............................................................................1
ARTICLE 2
AWARDS...................................................................................................1
2.1 Form of Awards.........................................................................1
2.2 Maximum Shares Available; Maximum Annual Awards........................................2
2.3 Return of Prior Awards.................................................................2
ARTICLE 3
ADMINISTRATION...........................................................................................2
3.1 Board; Committee.......................................................................2
3.2 Powers of the Board and the Committee..................................................2
3.3 Delegation.............................................................................2
3.4 Interpretations........................................................................3
3.5 Liability; Indemnification.............................................................3
ARTICLE 4
ELIGIBILITY..............................................................................................3
ARTICLE 5
STOCK OPTIONS............................................................................................3
5.1 Grant of Options.......................................................................3
5.2 Designation as Non-Qualified Stock Option..............................................4
5.3 Purchase Price.........................................................................4
5.4 Exercise and Payment...................................................................4
5.5 Vesting................................................................................5
5.6 Rights as a Stockholder................................................................6
ARTICLE 6
RIGHT OF FIRST REFUSAL AND CALL OPTION; LEGENDS;
NONTRANSFERABILITY OF OPTIONS............................................................................6
6.1 Right of First Refusal and Call Option.................................................6
6.2 Legends................................................................................6
6.3 Nontransferability of Options..........................................................7
</TABLE>
i
<PAGE> 3
EXHIBIT 10.9
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 7
EFFECT OF TERMINATION OF EMPLOYMENT,
DISABILITY, RETIREMENT, OR DEATH.........................................................................7
7.1 General Rule...........................................................................7
7.2 Disability or Retirement...............................................................8
7.3 Death..................................................................................8
7.4 Termination of Unvested Options........................................................8
ARTICLE 8
ADJUSTMENT UPON CHANGES IN CAPITALIZATION................................................................9
ARTICLE 9
TERM; AMENDMENT AND TERMINATION..........................................................................9
ARTICLE 10
WRITTEN AGREEMENT........................................................................................9
ARTICLE 11
MISCELLANEOUS PROVISIONS................................................................................10
11.1 Tax Withholding.......................................................................10
11.2 Securities Laws.......................................................................10
11.3 Compliance with Section 16(b).........................................................10
11.4 Successors............................................................................10
11.5 General Creditor Status...............................................................11
11.6 No Right to Employment................................................................11
11.7 Notices...............................................................................11
11.8 Severability..........................................................................11
11.9 Governing Law.........................................................................11
</TABLE>
ii
<PAGE> 4
EXHIBIT 10.9
AQUA-CHEM, INC.
AMENDED AND RESTATED
1997 STOCK OPTION PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSES
1.1 ESTABLISHMENT AND EFFECTIVE DATE. Aqua-Chem, Inc., a Delaware
corporation ("Corporation"), hereby establishes a stock option plan to be known
as the "Aqua-Chem 1997 Stock Option Plan" ("Plan"). The Plan shall become
effective as of August 1, 1997, subject to the approval of the stockholders of
the Corporation (which is to be obtained within twelve (12) months from the
effective date of the Plan). Upon approval of the Plan by the Board of Directors
of the Corporation ("Board"), awards may be made directly by the Board or under
its supervision, through the agency of its Compensation Committee ("Committee"),
as provided herein. (References herein to the Board shall be deemed references
to the Committee the extent of any delegation by the Board to the Committee.) In
the event that timely stockholder approval is not obtained, any awards made
hereunder shall be canceled and all rights of employees with respect to such
awards shall thereupon automatically cease.
1.2 PURPOSES. The purposes of the Plan are: (i) to encourage and enable
key employees of the Corporation, its subsidiaries and its affiliates
("Employees") to acquire a proprietary interest in the growth and performance of
the Corporation, (ii) to generate an increased incentive for key Employees to
contribute to the Corporation's future success and prosperity (as well as the
success and prosperity of its subsidiaries and affiliates), thus enhancing the
value of the Corporation for the benefit of its stockholders, and (iii) to
enhance the ability of the Corporation, its subsidiaries and its affiliates to
attract and retain key Employees who are essential to the progress, growth and
profitability of the Corporation, its subsidiaries and its affiliates, in each
case through the ownership of the Corporation's $.01 par value common stock
("Common Stock"), and certain other rights relating to the Common Stock.
ARTICLE 2
AWARDS
2.1 FORM OF AWARDS. Awards under the Plan may be granted only as
non-statutory stock options ("Non-statutory Stock Options") and not as options
known as "Incentive Stock Options" meeting the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended ("Code"). References in the Plan
to "Options" shall include only Non-statutory Stock Options and shall not
include Incentive Stock Options.
<PAGE> 5
EXHIBIT 10.9
2.2 MAXIMUM SHARES AVAILABLE; MAXIMUM ANNUAL AWARDS. The maximum
aggregate number of shares of Common Stock available for award under the Plan is
61,919, subject to adjustment upon changes in capitalization pursuant to Article
8 hereof. Shares of Common Stock issued under the Plan (pursuant to the granting
of Options) may be either authorized but unissued shares or issued shares
reacquired by the Corporation. In the event that, prior to the end of the period
during which Options may be granted under the Plan, any Option under the Plan
expires unexercised or is terminated, surrendered or canceled without being
exercised in whole or in part for any reason, then such unexercised shares shall
be available for subsequent awards under the Plan, subject to such terms and
conditions as the Board may determine.
2.3 RETURN OF PRIOR AWARDS. As a condition to any subsequent award to
an Employee who is an optionee under the Plan ("Optionee"), the Board shall have
the right, in its sole discretion, to require Optionees to return to the
Corporation awards previously granted under the Plan. Subject to the provisions
of the Plan, such new award shall be upon such terms and conditions as are
specified by the Board at the time the new award is granted.
ARTICLE 3
ADMINISTRATION
3.1 BOARD; COMMITTEE. Awards of Options shall be determined, and the
Plan shall be administered under the supervision of the Board, which may
exercise its powers directly or, to the extent herein provided, through the
Committee. The Committee may be appointed from time to time by the Board, and
shall consist solely of two or more persons, each of whom shall qualify as (i) a
"Non-Employee Director", as that term is defined in subparagraph (b)(3)(i) of
Rule 16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934,
as amended ("1934 Act"), and (ii) an "outside director", within the meaning of
Section 162(m) of the Code. (References to specific provisions of law shall be
deemed to include references to amendments or supplements thereto or subsequent
provisions of law of similar import. To the extent the Committee is appointed by
the Board, all references herein to the Board shall also be deemed to be
references to the Committee, unless the context clearly indicates otherwise.)
3.2 POWERS OF THE BOARD AND THE COMMITTEE. Subject to the express
provisions of the Plan, the Board shall have the power and authority: (i) to
grant Options and to determine the term of each Option, the number of shares of
Common Stock to be covered by each Option, the time or times at which each
Option shall become exercisable and the duration of the exercise period
applicable to each Option; (ii) to determine the Employees to whom, and the time
or times at which, Options shall be granted or made and; and (iii) to take all
other actions contemplated to be taken by the Board under the Plan, including,
but not limited to, authorizing any written agreement relating to any award made
hereunder, as well as any amendment thereto.
3.3 DELEGATION. The Board and the Committee each may delegate to one or
more of its respective members or to any other person or persons such
ministerial duties hereunder as it may
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EXHIBIT 10.9
deem advisable; provided, however, that neither the Board nor the Committee may
delegate any of its responsibilities hereunder to any person who is not both a
"Non-Employee Director", as that term is defined in subparagraph (b)(3)(i) of
Rule 16b-3, and an "outside director", within the meaning of Section 162(m) of
the Code. The Board may also employ attorneys, consultants, accountants or other
professional advisors and shall be entitled reasonably to rely upon the advice
opinions or valuations of any such advisors.
3.4 INTERPRETATIONS. The Board shall have discretionary authority to
interpret the terms of the Plan, to adopt and revise rules, regulations and
policies to administer the Plan and to make any other factual determinations
which they believe to be necessary or advisable for the administration of the
Plan. All actions taken and interpretations and determinations made by the Board
in good faith shall be final and binding upon the Corporation, all Employees and
all other interested persons.
3.5 LIABILITY; INDEMNIFICATION. No member of the Board or the
Committee, nor any person to whom ministerial duties have been delegated, shall
be personally liable for any action, interpretation or determination made with
respect to the Plan or awards made thereunder, and each member of the Board and
Committee shall be fully indemnified, held harmless and protected by the
Corporation with respect to any liability he or she may incur with respect to
any such action, interpretation or determination, to the extent permitted by
applicable law and, in addition, to the extent provided in the Corporation's
articles of incorporation and by-laws, as amended from time to time, or under
any agreement between any such member and the Corporation.
ARTICLE 4
ELIGIBILITY
Awards may be made to all Employees, subject to such requirements as
may be prescribed by the Board. In determining the Employees to whom awards
shall be granted and the number of shares of Common Stock to be covered by each
award, the Board shall take into account the nature of the services rendered by
such Employees, their present and potential contributions to the success of the
Corporation, its subsidiaries and its affiliates and such other factors as the
Board in its sole discretion shall deem relevant.
ARTICLE 5
STOCK OPTIONS
5.1 GRANT OF OPTIONS. Options may be granted under the Plan for the
purchase of shares of Common Stock. Options shall be granted in such form and
upon such terms and conditions, including the satisfaction of corporate or
individual performance objectives and other vesting standards as the Board shall
from time to time determine.
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EXHIBIT 10.9
5.2 DESIGNATION AS NON-QUALIFIED STOCK OPTION. In connection with any
grant of Options, the Board in the written agreement required pursuant to
Article 10 hereof shall designate all Options granted as Non-statutory Stock
Options and not as Incentive Stock Options.
5.3 PURCHASE PRICE. Subject to adjustment upon changes in
capitalization as provided in Article 8, the purchase price per share of Common
Stock under each Option shall be not less than $ .03 nor more than the Market
Price (as defined in Section 5.4 below) as determined by the Board in its
discretion for each Award.
5.4 EXERCISE AND PAYMENT. Options granted hereunder may be exercised in
whole or in part. Shares of Common Stock purchased upon the exercise of Options
shall be paid for at the time of purchase. Such payment may be made as follows
(or by any combination of the following): (i) in United States currency by
delivery of a certified check, bank draft or postal or express money order
payable to the order of the Corporation, (ii) by surrender of a number of Mature
Shares (as defined below) of Common Stock held by the Optionee exercising the
Option equal to the quotient obtained by dividing (A) the aggregate purchase
price payable with respect to the Options then being exercised by (B) the Market
Price (as hereinafter defined) on the date of exercise or (iii) if the
Corporation has established a program for the cashless exercise of Options
through a broker or other similar arrangements or programs, then in accordance
with the terms and conditions of such programs and arrangements. Any shares so
delivered shall be valued at their Market Price on the date of exercise. Upon
receipt of a notice of exercise and payment in accordance with procedures set
forth above, the Corporation or its agent shall deliver to the Optionee
exercising the Option(s) (or his or her designee) a certificate for such Shares.
In the event that payment for exercised Options is made through the surrender of
Mature Shares of Common Stock, the Board in accordance with procedures
established by it, and the terms of the Plan, may grant Non-statutory Stock
Options ("Restoration Options") to the person exercising the Option(s) for the
purchase of a number of shares equal to the number of shares of Common Stock
delivered to the Corporation in connection with the payment of the exercise
price of the Option(s) and the payment of or surrender of shares for any
employment or income withholding taxes due upon such exercise. The purchase
price per share under each Restoration Option shall be the Market Price of the
Common Stock on the date the Restoration Option is granted. "Mature Shares"
shall mean shares of Common Stock owned by the Optionee for a period of at least
six consecutive months prior to the exercise of the Option(s) in question.
"Market Price" shall mean the per share value of the Common Stock and shall be
determined as follows: (i) if the Common Stock is not listed on a national stock
exchange, quoted on NASDAQ or reported on by the National Quotation Bureau,
Inc., the Market Price on any day shall be the fair market value of one share of
Common Stock on such day as determined by the Board, which shall take into
account any valuation of the Common Stock by an independent valuation firm made
within 90 days of such determination; (ii) if the Common Stock is listed on a
national securities exchange or quoted through the NASDAQ National Market
System, the Market Price on any day shall be, in the sole discretion of the
Board, either (x) the average of the high and low reported consolidated trading
sales prices, or if no such sale is made on such day, the average of the closing
bid and asked prices reported on the consolidated trading listing for such day
or (y) the closing price reported on the consolidated trading listing for such
day; (iii) if the Common Stock
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EXHIBIT 10.9
is quoted on the NASDAQ interdealer quotation system, the Market Price on any
day shall be the average of the representative bid and asked prices at the close
of business for such day; (iv) if the Common Stock is not listed on a national
stock exchange or quoted on NASDAQ, the Market Price on any day shall be the
average of the high bid and low asked prices reported by the National Quotation
Bureau, Inc. for such day, or (v) if none of the foregoing are applicable, then
the Company shall promptly appoint as an appraiser an individual who shall be a
member of a nationally recognized investment banking firm who shall be
instructed to, within 30 days of appointment, to determine the Market Price per
share of Common Stock which shall be deemed to be equal to the fair market value
per share of Common Stock as of such date.
5.5 VESTING. Vesting refers to an Option's becoming exercisable for the
first time. Subject to the provisions of Article Seven, Options shall vest as
follows:
(a) Any Option shall vest on the seventh anniversary of the
date of the grant of such Option.
(b) Notwithstanding subsection (a) of this Section 5.5, the
vesting of the Options shall be accelerated as follows in the event the
Corporation has met or surpassed the EBITDA Goal (as defined below). For each
fiscal year of the Corporation beginning with the fiscal year ending March 31,
1999 for which: (i) at least eighty percent (80%) of the EBITDA Goal is met, and
in which (ii) the Optionee has completed at least twelve (12) consecutive Months
of Service, a percentage of the aggregate number of shares of Common Stock which
are the subject of the Option shall vest and become exercisable on the
anniversary of the grant that follows the end of such fiscal year. The
percentage of the aggregate number of shares of Common Stock which are the
subject of the Option that shall vest and become exercisable shall be ten
percent (10%) at eighty percent (80%) of the EBITDA Goal and shall increase
proportionately to twenty percent (20%) at one hundred percent (100%) of the
EBITDA Goal. In the event that an installment does not fully vest (i.e., all
twenty percent) on an anniversary date because the EBITDA Goal is not fully met,
such installment shall vest on the next succeeding anniversary date as to which
(i) the Optionee has completed at least twelve (12) consecutive Months of
Service, and (ii) the Corporation has met or surpassed the current EBITDA Goal
by a cumulative amount greater than or equal to the prior cumulative EBITA Goal
shortfalls. "Month of Service" shall mean: any calendar month in which an
Employee worked 85 hours or more in the service of any of the Corporation, its
subsidiaries or its affiliates. "EBITDA Goal" shall be met or surpassed if the
Corporation's actual EBITDA for the fiscal year immediately preceding the
anniversary date in question equals or exceeds the following amounts:
Fiscal Year Ending March 31, 1999 - $18.3 million.
Fiscal Year Ending March 31, 2000 - $22.9 million.
Fiscal Year Ending March 31, 2001 - $28.7 million.
Fiscal Year Ending March 31, 2002 - $35.8 million.
Fiscal Year Ending March 31, 2003 - $39.9 million.
Fiscal Year Ending March 31, 2004 - $44.9 million.
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EXHIBIT 10.9
Each EBITDA Goal is subject to adjustment by the Board, in its discretion, based
on acquisitions or divestures by the Corporation or any of its subsidiaries or
affiliates.
5.6 RIGHTS AS A STOCKHOLDER. Subject to Section 1.1, an Optionee shall
have no rights as a stockholder with respect to any shares issuable or
transferable upon exercise thereof until the date a stock certificate
representing such shares is issued to such recipient. Except as otherwise
expressly provided in the Plan or by the Board, no adjustment shall be made for
cash dividends or other rights for which the record date is prior to the date
such stock certificate is issued.
ARTICLE 6
RIGHT OF FIRST REFUSAL AND CALL OPTION; LEGENDS;
NONTRANSFERABILITY OF OPTIONS
6.1 RIGHT OF FIRST REFUSAL AND CALL OPTION. The Corporation shall have
a right of first refusal with respect to any sale, transfer, gift, assignment,
pledge, encumbrance or other disposition by an Optionee of shares of Common
Stock issued to him or her upon the exercise of an Option ("Exercise Stock"). In
the event that an Optionee receives a bona fide offer to purchase, or desires to
sell, transfer, assign, pledge, encumber or otherwise dispose of, his or her
Exercise Stock, then such Optionee shall deliver a notice to the Corporation
stating the terms of such proposed sale, transfer, gift, assignment, pledge,
encumber or disposition, which notice must include the number of shares subject
to such action, the price per share, if any, and the name and address of the
transferee ("Optionee Notice"). The Corporation shall have fourteen (14) days
from its receipt of the Optionee Notice ("Purchase Period") to purchase up to
the number of shares stated therein at a price per share equal to (a) in the
case of a proposed pledge, encumbrance, gift or similar disposition, the Market
Price (as determined under Section 5.3 hereof) as of the date of the Optionee
Notice, or (b) in the case of a proposed sale, the lesser of Market Price on the
date of the Optionee Notice or the proposed purchase price as set forth in the
Optionee Notice. For a period of thirty (30) days after the expiration of the
Purchase Period, the Optionee may dispose of any and all shares not purchased by
the Corporation but only upon the terms and to the person set forth in the
Optionee Notice. In the event that any person who at any time was an Optionee
ceases for any reason to be an Employee then, from and after the date of such
Optionee's ceasing to be an Employee, the Corporation, by written notice to such
Optionee or any person who acquired Exercise Stock from such Optionee, shall
have the right (the "Call Option") to purchase and require the holder to sell
any Exercise Stock held by such Optionee or a transferee of such Optionee at the
Market Price as of the date of the Corporation's written notice. The right of
first refusal and Call Option set forth in this Section 6.1 shall terminate upon
the consummation of an initial public offering of the Common Stock.
6.2 LEGENDS. All certificates evidencing shares of Common Stock
acquired pursuant to the exercise of an Option granted hereunder shall bear (a)
a securities legend as follows:
The shares of Aqua-Chem, Inc. (The "Company") evidenced by this
certificate have not been registered under any securities laws and
may only be sold, transferred or
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EXHIBIT 10.9
otherwise disposed of in compliance with applicable securities
laws. In particular, the shares evidenced by this certificate
have not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and may not be sold,
transferred or otherwise disposed of unless (1) an effective
registration statement under the Securities Act shall then be
in effect with respect to such shares, or (2) the Company
shall have received an opinion of counsel reasonably
acceptable to the Company that any proposed sale, transfer or
other disposition of such shares is exempt from registration
under the Securities Act.
and (b) a legend regarding the "right of first refusal and call option" as
follows:
The shares of Aqua-Chem, Inc. evidenced by this certificate
are subject to a right of first refusal pursuant to the terms
of the Aqua-Chem, Inc. Amended and Restated 1997 Stock Option
Plan and cannot be transferred on the books of the Company
except in compliance therewith. The shares of Aqua-Chem, Inc.
evidenced by this certificate are also subject to a call
option (which grants the Company the right to repurchase the
shares under certain circumstances) pursuant to the terms of
the Aqua-Chem, Inc. Amended and Restated 1997 Stock Option
Plan. A copy of the Aqua-Chem, Inc. Amended and Restated 1997
Stock Option Plan is available for inspection at the offices
of the Company.
6.3 NONTRANSFERABILITY OF OPTIONS. No Option may be transferred,
assigned, pledged or hypothecated (whether by operation of law or otherwise),
except as provided by will or the applicable laws of descent and distribution,
and no Option shall be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of an
Option not specifically permitted herein shall be null and void and without
effect. An Option may be exercised only by the Optionee who received such Option
during his or her lifetime, or following his or her death pursuant to Section
7.3 hereof. Notwithstanding anything to the contrary in the preceding paragraph,
the Board may, in its sole discretion, cause the written agreement relating to
any Non-statutory Stock Options granted hereunder to provide that the recipient
of such Non-statutory Stock Options may transfer any of such Non-statutory Stock
Options other than by will or the laws of descent and distribution in any manner
authorized under applicable law; provided, however, that in no event may the
Board permit any transfers which would cause the Plan to fail to satisfy the
applicable requirements of Rule 16b-3 under the 1934 Act or which would cause
any recipient of awards hereunder to fail to be entitled to the benefits Rule
16b-3 or other exemptive rules under Section 16 of the 1934 Act or be subject to
liability thereunder.
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EXHIBIT 10.9
ARTICLE 7
EFFECT OF TERMINATION OF EMPLOYMENT,
DISABILITY, RETIREMENT, OR DEATH
7.1 GENERAL RULE. In the event that an Optionee ceases to be an
Employee for any reason other than Disability or Retirement (as hereinafter
defined) or death, any Options which were held by such Employee ("Terminated
Employee") on the date on which he or she ceased to be an Employee (the
"Termination Date") and which were otherwise exercisable on such date shall
terminate unless exercised within the period of 60 days following the
Termination Date, but in no event after the expiration of the exercise period of
such Options. An Option may be forfeited upon a Terminated Employee's
Termination Date if the Terminated Employee was terminated for "cause". For
purposes of this Section 7.1, the term "cause" shall mean any one (or more) of
the following: (i) the Terminated Employee's commission of any fraud,
misappropriation or misconduct which causes demonstrable injury to the
Corporation or a subsidiary or affiliate; or (ii) an act of dishonesty by the
Terminated Employee resulting or intended to result, directly or indirectly, in
gain or personal enrichment at the expense of the Corporation or a subsidiary or
affiliate; or (iii) as defined in any employment agreement between the
Terminated Employee in question and the Corporation. It shall be within the sole
discretion of either the Board to determine whether a Terminated Employee's
termination was for one of the foregoing reasons, and its decision shall be
final and conclusive.
7.2 DISABILITY OR RETIREMENT. In the event of a termination of
employment of a Terminated Employee due to the Disability (as defined below) or
Retirement (as defined below) of such Employee, any Options which were held by
such Terminated Employee on the Termination Date and which were otherwise
exercisable on such date shall expire unless exercised within the period of 365
days following such date, but in no event after the expiration date of the
exercise period of such Options. "Disability" shall have the meaning set forth
in Section 22(e)(3) of the Code. "Retirement" shall mean a termination of
employment with the Corporation or a subsidiary or affiliate with the written
consent of the Board, which may be granted or withheld in its sole discretion.
The decision of the Board whether Retirement has occurred shall be final and
conclusive.
7.3 DEATH. In the event of the death of an Optionee, any Options which
were held by such Terminated Employee at the date of death and which were
otherwise exercisable on such date shall be exercisable by the beneficiary
designated by the Optionee for such purpose ("Beneficiary"). An Optionee may
from time to time revoke or change his Beneficiary without the consent of any
prior Beneficiary by filing a new designation with the Committee. The last such
designation received by the Committee shall be controlling; provided, however,
that no designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Optionee's death, and in no event shall
any designation be effective as of a date prior to such receipt. If no such
Beneficiary designation is in effect at the time of the Optionee's death, or if
no designated Beneficiary survives, the Optionee or if such designation
conflicts with law, the Optionee's estate acting through his legal
representative, shall be entitled to exercise the Option, to the extent it is
exercisable for a period of two (2) years from the date of death, but in no
event later than the expiration date of the exercise
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EXHIBIT 10.9
period of such Options, at which time such Options shall expire. If the
Committee is in doubt as to the right of any person to exercise the Option, the
Corporation may refuse to recognize such exercise, without liability for any
interest or dividends on the Optioned Shares, until the Committee determines the
person entitled to exercise the Option, or the Corporation may apply to any
court of appropriate jurisdiction and such application shall be a complete
discharge of the liability of the Corporation therefor.
7.4 TERMINATION OF UNVESTED OPTIONS. All Options which were not
exercisable by a Terminated Employee as of the Termination Date of such
Terminated Employee shall terminate as of such date. Options shall not be
affected by any change of employment by an Optionee so long as such Optionee
continues to be employed by either the Corporation or its subsidiary or
affiliate.
ARTICLE 8
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Notwithstanding any other provision of the Plan, the Board may: (i) at
any time, make or provide for such adjustments to the Plan or to the number and
class of shares of Common Stock available thereunder or to the minimum purchase
price per share of Common Stock or (ii) at the time of grant of any Options,
provide for such adjustments to such Options, as the Board shall deem
appropriate, but only to prevent dilution or enlargement of rights, including,
without limitation, adjustments in the event of stock dividends, stock splits,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
separations, spin-offs, reorganizations, liquidations and the like.
ARTICLE 9
TERM; AMENDMENT AND TERMINATION
No Option shall be granted under the Plan after the earlier of (i) ten
(10) years from the effective date of the Plan, or (ii) the termination of the
Plan pursuant to this Article 10. However, unless otherwise expressly provided
in the Plan or in an applicable written agreement required pursuant to Article
10, any Option theretofore granted may extend beyond such date, and any
authority of the Board to amend, alter, suspend, discontinue or terminate any
such Option, or to waive any conditions or rights under any such Option and the
authority of the Board to amend the Plan, shall extend beyond such date. The
Board may suspend, terminate, modify or amend the Plan, provided that any
amendment that would: (i) materially increase the aggregate number of shares
which may be issued under the Plan, (ii) materially increase the benefits
accruing to Optionees, or (iii) materially modify the requirements as to
eligibility for participation in the Plan, shall be subject to the approval of
the Corporation's stockholders, except that any such increase or modification
that may result from adjustments authorized by Article 8 hereof shall not
require such stockholder approval. If the Plan is terminated, the terms of the
Plan shall, notwithstanding such termination, continue to apply to awards
granted prior to such termination. No suspension, termination, modification or
amendment
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EXHIBIT 10.9
of the Plan may, without the consent of the Optionee to whom an award shall
theretofore have been granted, adversely affect the rights of such Optionee
under such award.
ARTICLE 10
WRITTEN AGREEMENT
Each award of Options shall be evidenced by a written agreement
containing such restrictions, terms and conditions, if any, as the Board may
require. In the event of any conflict between a written agreement and the Plan,
the terms of the Plan shall govern.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 TAX WITHHOLDING. The Corporation shall have the right to require
Optionees or their beneficiaries or legal representatives to remit to the
Corporation an amount sufficient to satisfy Federal, state and local employment
and income tax withholding requirements, or to deduct from all payments under
the Plan amounts sufficient to satisfy all such requirements. Whenever payments
under the Plan are to be made to an Optionee in cash, such payments shall be net
of any amounts sufficient to satisfy all Federal, state and local employment and
income tax withholding requirements. The Board may, in its sole discretion,
permit an Optionee to satisfy his or her withholding obligations either by (i)
surrendering of Common Stock owned by the Optionee or (ii) having the
Corporation withhold from shares of Common Stock, or other compensation,
otherwise deliverable or payable to the Optionee. Shares of Common Stock
surrendered or withheld shall be valued at their Market Price as of the date on
which income is required to be recognized for Federal income tax purposes.
11.2 SECURITIES LAWS. Each Option granted under the Plan shall be
subject to the requirement that, if at any time the Board shall determine, in
its sole discretion, that the listing, registration or qualification of the
shares of Common Stock issuable or transferable upon exercise thereof upon any
securities exchange or under any state or Federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such Option or the issue,
transfer, or purchase of the shares of Common Stock thereunder, such Option may
not be exercised in whole or in part unless such listing, registration,
qualification, consent, or approval shall have been effected or obtained free of
any conditions not acceptable to the Board. The Board may, in connection with
the granting of any Option, require the Optionee to whom the Option is to be
granted to enter into an agreement with the Corporation stating that as a
condition precedent to each exercise of the Option, in whole or in part, such
Optionee shall, if then required by the Corporation, represent to the
Corporation in writing that such exercise is for investment only and not with a
view to distribution, and also setting forth such other terms and conditions as
the Board may prescribe.
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EXHIBIT 10.9
11.3 COMPLIANCE WITH SECTION 16(b). In the case of Optionees who are or
may be subject to Section 16 of the 1934 Act, it is the intent of the
Corporation that the Plan and any award granted hereunder satisfy and be
interpreted in a manner that satisfies the applicable requirements of Rule 16b-3
so that such Optionees will be entitled to the benefits of Rule 16b-3 or other
exemptive rules under Section 16 of the 1934 Act and will not be subjected to
liability thereunder. If any provision of the Plan or any award would otherwise
conflict with the intent expressed herein, that provision, to the extent
possible, shall be interpreted and deemed amended so as to avoid such conflict.
To the extent of any remaining irreconcilable conflict with such intent, such
provision shall be deemed void as applicable to Employees who are or may be
subject to Section 16 of the 1934 Act.
11.4 SUCCESSORS. The obligations of the Corporation under the Plan
shall be binding upon any successor corporation or organization resulting from
the merger, consolidation or other reorganization of the Corporation, or upon
any successor corporation or organization succeeding to all or substantially all
of the assets and business of the Corporation. In the event of any of the
foregoing, the Board may, in its discretion prior to the consummation of the
transaction and subject to Article 9 hereof purchase, exchange, adjust or modify
any outstanding Options, in such manner as the Board deems appropriate and in
accordance with applicable law and in the event the Board does not do so all
outstanding options shall become fully vested and exercisable.
11.5 GENERAL CREDITOR STATUS. Optionees shall have no right, title, or
interest whatsoever in or to any investments which the Corporation may make to
aid it in meeting its obligations under the Plan. Nothing contained in the Plan,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Corporation
and any Optionee or legal representative of such Optionee. To the extent that
any person acquires a right to receive payments from the Corporation under the
Plan, such right shall be no greater than the right of an unsecured general
creditor of the Corporation. All payments to be made hereunder shall be paid
from the general funds of the Corporation and no special or separate fund shall
be established and no segregation of assets shall be made to assure payment of
such amounts except as expressly set forth in the Plan.
11.6 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or in any written
agreement entered into pursuant to Article 10 hereof, nor the grant of any
award, shall confer upon any Employee any right to continue in the employ of the
Corporation or a subsidiary or affiliate or to be entitled to any remuneration
or benefits not set forth in the Plan or such written agreement or interfere
with or limit the right of the Corporation or a subsidiary or affiliate to
modify the terms of or terminate such Employee's employment at any time.
11.7 NOTICES. Notices required or permitted to be given under the Plan
shall be sufficiently given if in writing and personally delivered to an
Employee or sent by regular mail addressed: (a) to an Employee at the Employee's
address as set forth in the books and records of the Corporation or its
subsidiaries or affiliates, or (b) to the Corporation or the Board at the
principal office of the Corporation clearly marked "Attention: Board of
Directors - Compensation Committee."
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EXHIBIT 10.9
11.8 SEVERABILITY. In the event that any provision of the Plan shall be
held illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
11.9 GOVERNING LAW. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Wisconsin.
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EXHIBIT 10.11
AQUA-CHEM, INC.
EXECUTIVE MANAGEMENT INCENTIVE PLAN
SUBMITTED: /s/ J.A. Miller 11/11/96
--------------- --------
J.A. Miller Date
President & CEO
APPROVED: /s/ P. Babin 15/11/96
--------------- --------
P. Babin Date
Director & Chairman
Compensation Committee
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EXHIBIT 10.11
EXECUTIVE MANAGEMENT INCENTIVE PLAN
PURPOSE
The purpose of the Executive Management Incentive Plan (EMIP) is to focus the
Aqua-Chem, Inc. senior management team on achieving the strategic business plans
and financial performance goals of the Company so that our shareholders
investment will grow. In addition, the plan should encourage officers and key
employees of superior competence to remain in the employ of the Company and
contribute to the Company's long-term business strategies.
PLAN DESIGN
This plan is based on the concept of continuous economic improvement. The focus
of this concept is creating economic value for our shareholder and earning
appropriate Return on Equity (ROE) on a sustained basis. Each year a separate
Three-Year EMIP is approved by the board covering senior managers accountable
for planning and executing Aqua-Chem, Inc. strategic initiatives. This sustained
financial improvement will result in financial reward to the executive and
enhanced return to our shareholders.
RESPONSIBILITY
The Administrative Committee will be responsible for the administration of the
plan, subject to the review and final approval by the Compensation Committee of
the Board of Directors. Included in this responsibility will be the selection of
participants, setting of individual incentive opportunity, financial targets,
and the evaluation of the performance of the participants.
PARTICIPATION
Participation will be limited to senior level executives and officers of the
Company. Key executives who join the company will generally not be eligible to
participate until completing one full 3 year period.
Employees who terminate during the period will not participate in the year end
incentive and will not receive further payments under the Plan.
2
<PAGE> 3
EXHIBIT 10.11
EXECUTIVE MANAGEMENT INCENTIVE PLAN
INDIVIDUAL INCENTIVE OPPORTUNITY
Individual Incentive Opportunity will be set by the company and approved by the
Compensation Committee of the Board of Directors. Target incentive opportunity
will be expressed as a percent of a participants current years salary Grade
Mid-point. These opportunities range from 10% to 50% of Mid-point at targeted
levels of performance. In establishing the incentive opportunity consideration
is given but not limited to position, salary grade overall responsibilities,
market information and other incentive opportunity.
Participants will have the potential to earn a lessor or greater amount based on
corporate performances relative to ROE targets.
AWARD CRITERIA
RETURN ON EQUITY (ROE)
Cash flow is our most critical measurement influencing management decisions.
However, we believe ROE to be the best single accounting-based measure of
long-term Company performance and it is the most commonly used measure from a
shareholder perspective.
A target award opportunity will be established for the Company based on ROE. At
the start of each three-year period, the Company establishes what the target
will be at various average three-year ROE performance levels.
The three year plan requires ROE to average 8.6% or higher before any award is
provided. A three year average ROE perforemance of 8.6% approximates the 50th
percentile among the peer group and warrents a 50% of incentive opportunity
payout.
"Threshold" represents the minimum performance results that must be reached in
order to trigger in incentive awards. "Goal" or target represents desired
performance results for ROE.
Award opportunities as a percent of the ROE target will be as follows:
<TABLE>
<CAPTION>
Threshold Target Maximum
<C> <C> <C>
50 100 150
</TABLE>
3
<PAGE> 4
EXHIBIT 10.11
EXECUTIVE MANAGEMENT INCENTIVE PLAN
CALCULATING THE AWARD
Following completion of the three year period the average ROE will be
calculated. This average ROE will be compared to the target ROE for the
applicable three year period to determine the percent ROE target achieved.
The calculated award is the product of the individuals salary mid-point x
incentive opportunity x the percent ROE target achieved.
Example of award calculation and assumptions:
<TABLE>
<CAPTION>
==================================================================================================
Title Grade
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Grade Mid-Point $_____________
- --------------------------------------------------------------------------------------------------
Participation Rate ____________%
(Incentive Opportunity)
- --------------------------------------------------------------------------------------------------
Three-Year Avenge ROE ____________% Three Year Period _______
(Target Achieved)
- --------------------------------------------------------------------------------------------------
Award Calculation: $____________ Mid-Point
____________% Participation Rate
____________% Three-Year Average
ROE
$____________ =Award
==================================================================================================
</TABLE>
AWARD PAYMENT
Awards will be paid out in equal payments during the subsequent three year
period. In other words, the total award amount will be multiplied by 1/3 and
paid out in three equal payments during the three year period following the last
calendar year of the applicable period.
OTHER DETAILS
Earned incentive payments will be made on or about the end of the first quarter,
following the calender year of performance measurement. The Company may delay or
modify the manner in which payments are made in the event immediate payment is
not practicable. All payments will be made in cash with appropriate deductions
for social security, federal, state, local income taxes, other applicable
payroll deductions and 401(K). The Company reserves the right to make
adjustments in awards based on extenuating circumstances. In the event of
modification and/or termination of the Plan
4
<PAGE> 5
EXHIBIT 10.11
during the year, the Company, in its sole discretion, will determine and pay
pro-rata incentive payments.
An employee's incentive payment will be considered eligible compensation. This
compensation will be eligible for the 4% Retirement Plan contribution, provided
the employee otherwise qualifies for a Retirement Plan contribution.
While the Company expects this Plan to be permanent, it retains the right the
right to amend, modify, or terminate the Plan, or any provision of the Plan, at
any time upon notification to affected employees. There are no guarantees that
the incentive Plan will forever remain in effect. Participation in the plan
shall constitute no vested right, and participation shall be determined each
year.
The Administrative Committee (comprised of the Corporate President & CEO, Chief
Financial Officer, and the Vice President of Human Resources) has final
discretionary authority to interpret the Plan, to determine eligibility for
participation and entitlement to benefits and to resolve all issues with respect
to administration of the Plan subject to the review and final approval by the
Compensation Committee of the Board of Directors.
Employees who terminate due to retirement, death, or specific written agreement
will participate in that year/period award payment, if any, on a pro-rated basis
and will be eligible for any remaining prior period payments earned under the
Plan.
EXECUTIVE MANAGEMENT INCENTIVE PLAN
DEFINITIONS
For the purposes of this plan, the following definitions shall apply:
1) Return On Equity (ROE) = Net Income
----------------------------
Average Shareholders' Equity
Net Income and Shareholders' Equity are calculated as defined under
Generally Accepted Accounting Principles. Average Shareholders' Equity
represents the 12 month average for the year.
5
<PAGE> 6
EXHIBIT 10.11
2) Eligible Compensation - Wages eligible for the 4% Retirement Plan
contribution. Eligible wages include wages, salary, bonuses,
commissions, and overtime pay. Eligible wages are not reduced by
employee contributions made to the 401(K) Plan and/or applied to the
cost of health insurance under the employee salary reduction plan
pursuant to Section 125 of the Internal Revenue Code.
3) The ROE calculation excludes the effect of non-budgeted, discontinued
operations, extraordinary, unusual infrequent items, as deemed
appropriate by the Company.
6
<PAGE> 1
EXHIBIT 10.12
================================================================================
AQUA-CHEM, INC.
1998
PHANTOM STOCK PLAN
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
ARTICLE I
<S> <C> <C> <C>
ESTABLISHMENT, PURPOSE AND OVERVIEW....................................................................-1-
1.1 Establishment of the Plan.....................................................................-1-
1.2 Purpose of the Plan...........................................................................-1-
1.3 Overview of the Plan..........................................................................-1-
ARTICLE II
PHANTOM SHARE AWARDS...................................................................................-1-
2.1 Award Dates...................................................................................-1-
2.2 Initial Awards of Phantom Shares..............................................................-2-
2.3 Future Awards.................................................................................-2-
2.4 Minimum Performance Requirements..............................................................-2-
2.5 Payout of Awards..............................................................................-3-
(a) Payout of Initial Awards.............................................................-3-
(b) Delayed Payout Dates.................................................................-3-
(c) Effect of Death, Disability, Retirement, Termination.................................-3-
(d) Minimum Payout.......................................................................-4-
2.6 Determination of Maturity Value...............................................................-4-
2.7 Non-transferability of Awards.................................................................-5-
2.8 Award Certificates............................................................................-5-
ARTICLE III
ADMINISTRATION.........................................................................................-6-
3.1 Authority of Board............................................................................-6-
3.2 Delegation....................................................................................-6-
3.3 Liability; Indemnification....................................................................-6-
ARTICLE IV
MISCELLANEOUS..........................................................................................-7-
4.1 Status of Participants........................................................................-7-
4.2 Unfunded Status of Plan.......................................................................-7-
4.3 Tax Withholding...............................................................................-7-
4.4 Successors....................................................................................-7-
4.5 Notices.......................................................................................-8-
4.6 Severability..................................................................................-8-
4.7 Governing Law.................................................................................-8-
</TABLE>
-i-
<PAGE> 3
EXHIBIT 10.12
ARTICLE I
ESTABLISHMENT, PURPOSE AND OVERVIEW
1.1 ESTABLISHMENT OF THE PLAN
The Board of Directors (the "Board") of Aqua-Chem, Inc. ("Aqua-Chem")
approved the new Aqua-Chem, Inc. 1998 Phantom Stock Plan ("Plan") as a
substitute for the previous Executive Management Incentive Plan ("EMIP") which
was terminated as of December 31, 1997.
1.2 PURPOSE OF THE PLAN
The goal of the Plan is to provide certain senior level executives and
officers of Aqua-Chem selected by the Board to participate in the Plan
("Participants") with the opportunity to share in future increases in the value
of Aqua-Chem Common Stock without the necessity of using personal funds to
purchase stock. This goal is accomplished by awarding each Participant a
specified number of phantom shares ("Phantom Shares").
1.3 OVERVIEW OF THE PLAN
The Plan provides minimum performance requirements, measured in terms
of earnings before interest, taxes, depreciation and amortization ("EBITDA"). If
these requirements are met, a Participant, who is employed by the Company on the
scheduled payment dates (subject to certain exceptions described below), will be
entitled to receive the value as of specified maturity dates of the Phantom
Shares initially awarded to the Participant (the "Maturity Value"). Maturity
Value will be equal to (i) the number of Phantom Shares initially awarded to the
Participant, multiplied by (ii) the value of a share of Aqua-Chem Common Stock
as determined by the formula set forth in Section 2.6 below.
ARTICLE II
PHANTOM SHARE AWARDS
2.1 AWARD DATES
On April 1 of each year ("Award Date"), commencing April 1, 1998, the
Board shall grant to each Participant entitled thereto, as determined by the
Board, awards of Phantom Shares ("Awards").
-1-
<PAGE> 4
2.2 INITIAL AWARDS OF PHANTOM SHARES
On the initial Award Date, April 1, 1998, each Participant in the Plan
will receive three separate awards of Awards, subject to the conditions and
requirements set forth below:
- The first Award ("1999 Award") will entitle the Participant to
receive the Maturity Value as of March 31, 1999 ("Maturity
Date").
- The second Award ("2000 Award") will entitle the Participant
to receive the Maturity Value as of March 31, 2000.
- The third Award ("2001 Award") will entitle the Participant to
receive the Maturity Value as of March 31, 2001.
2.3 FUTURE AWARDS
The number of Phantom Shares to be included in future Awards, the dates
Awards will be paid out ("Payout Date") and the Budgeted EBITDA requirements
applicable thereto will be determined for each such future Award by the Board in
its discretion. Any future Awards will all have a Maturity Date ending on the
last day of the third fiscal year following the Award Date.
2.4 MINIMUM PERFORMANCE REQUIREMENTS
The right of a Participant to receive the Maturity Value of the 1999
Award is contingent upon Aqua-Chem and its subsidiaries, on a consolidated
basis, achieving during the fiscal year beginning April 1, 1998 and ending March
31, 1999 "Actual EBITDA" equal to ninety percent (90%) or more of "Budgeted
EBITDA" (as these terms are defined below) for such fiscal year.
The right of a Participant to receive the Maturity Value of the 2000
Award is contingent upon Aqua-Chem and its subsidiaries, on a consolidated
basis, during the fiscal year beginning April 1, 1999 and ending March 31, 2000)
achieving Actual EBITDA equal to eighty percent (80%) or more of the Budgeted
EBITDA for such fiscal year. The right of a Participant to receive the Maturity
Value of the 2001 Award is contingent upon Aqua-Chem and its subsidiaries on a
consolidated basis during the fiscal year beginning April 1, 2000 and ending
March 31, 2001) achieving Actual EBITDA equal to eighty percent (80%) or more of
the Budgeted EBITDA for such fiscal year.
"Actual EBITDA" for any fiscal year shall mean earnings (with
appropriate accruals for Awards under the Phantom Stock Plan) before interest,
depreciation and amortization as set forth on the annual year end audited
consolidated balance sheet of Aqua-Chem with such adjustments, for
-2-
<PAGE> 5
EXHIBIT 10.12
transactions not in the ordinary course of business or otherwise as the
Board, in its discretion, determines to be appropriate. "Budgeted EBITDA" shall
(subject to such adjustment as the Board, in its discretion determines, to be
appropriate in the event of any acquisitions, joint ventures or divestitures)
mean the following amounts for the fiscal years indicated:
<TABLE>
<CAPTION>
Fiscal Year Ending Budgeted EBITDA
------------------ ---------------
<S> <C>
March 31, 1999 $18,333,000
March 31, 2000 $22,909,000
March 31, 2001 $28,678,000
</TABLE>
2.5 PAYOUT OF AWARDS
(a) PAYOUT OF INITIAL AWARDS. Payout Dates for initial Awards
shall be as follows:
(i) Two-thirds (2/3) of the Maturity Value of the 1999
Award will be paid to Participants on June 1, 1999
and one-third (1/3) of the Maturity Value of the 1999
Award will be paid to Participants on June 1, 2000.
(ii) Two-thirds (2/3) of the Maturity Value of the 2000
Award will be paid to Participants on June 1, 2000
and one-third (1/3) of the Maturity Value of the 2000
Award will be paid to Participants on June 1, 2001.
(iii) Two-thirds (2/3) of the Maturity Value of the 2001
Award will be paid to Participants on June 1, 2001
and one-third (1/3) of the Maturity Value of the 2001
Award will be paid to Participants on June 1, 2002.
(b) DELAYED PAYOUT DATES. Payout Dates for any Award may be delayed, as
necessary, if the audited year-end financial statements of Aqua-Chem or any of
its subsidiaries are delayed for the fiscal year necessary to calculate the
Maturity Value (as defined in Section 2.6 below) of such Award.
(c) EFFECT OF DEATH, DISABILITY, RETIREMENT, TERMINATION. In order to
be entitled to receive any payment under the Plan, a Participant must be
employed by Aqua-Chem or its subsidiary on the Payout Date for such Award unless
the Participant's employment was previously terminated due to:
(i) death;
(ii) disability (as defined in the Aqua-Chem long-term disability
insurance policy as in effect from time to time);
-3-
<PAGE> 6
EXHIBIT 10.12
(iii) retirement (either normal retirement, as defined in the
Aqua-Chem qualified retirement plan as in effect from time to
time or early retirement, with the prior written consent of
Aqua-Chem); or
(iv) termination by Aqua-Chem or any of its subsidiaries for
reasons other than "Cause" (Cause includes such acts as
violation of confidentiality or noncompete agreements; acts of
fraud, dishonesty, or gross misconduct; and such other acts
which are deemed by the Board to constitute a material breach
of employment terms).
In the event of a Participant's termination of employment in accordance with
Subsections (i)-(iv) of this Section 2.5(c), such Participant shall be entitled
(on such Payout Dates as are specified in Section 2.5 or in future Awards) to
payout of the prorated Maturity Value of each Award granted to such Participant,
determined by multiplying the Maturity Value of the Award by a fraction, the
numerator of which is the number of months in the fiscal year ending on the
Maturity Date of such Award in which the Participant was employed by Aqua-Chem
or its subsidiary (including the month of separation) and the denominator of
which is twelve. If a Participant is for any other reason not employed by
Aqua-Chem or a subsidiary on the Payout Date for any Award, any and all amounts
otherwise payable to the Participant under such Award shall be forfeited.
(d) MINIMUM PAYOUT. In the event that for any Participant (i) the
amount (based upon performance for 1996 and 1997) that was scheduled to be paid
out at the end of the 1998 calendar year under the prior EMIP Plan is greater
than the amount that becomes payable to the Participant under the Plan on June
1, 1999 (i.e., two-thirds of the Maturity Value of the 1999 Award) then, in such
event the Participant shall, in lieu of the amount payable under the Plan, be
entitled to receive the amount that he or she would have received under the EMIP
Plan at the end of the 1998 calendar year and (ii) the amount (based upon
performance for 1997) that was scheduled to be paid out at the end of the 1999
calendar year under the prior EMIP Plan is greater than the amount that becomes
payable to the Participant under the Plan on June 1, 2000 (i.e., two-thirds of
the Maturity Value of the 2000 Award) then, in such event the Participant shall,
in lieu of the amount payable under the Plan, be entitled to receive the amount
that he or she would have received under the EMIP Plan at the end of the 1999
calendar year.
2.6 DETERMINATION OF MATURITY VALUE
The "Maturity Value" of an Award shall mean an amount equal to (i) the
number of Phantom Shares included in the Award, multiplied by (ii) the "Per
Share Stock Value" as defined below.
The "Per Share Stock Value" shall mean an amount, determined as of the
Maturity Date of an Award, equal to the following:
(i) six (6) times Actual EBITDA for the fiscal year ending on the
Maturity Date; plus
-4-
<PAGE> 7
(ii) the excess, if any, of the book value of cash and marketable
securities as reflected on Aqua-Chem's fiscal year end audited
balance sheet as of the Maturity Date over Eight Million
Dollars ($8,000,000); minus
(iii) the sum of the following as reflected on Aqua-Chem's fiscal
year end audited balance sheet as of the Maturity Date:
(a) the excess, if any, of amount of any indebtedness
pursuant to any short term or revolving credit
facility which is utilized to meet working capital
requirements over Eight Million Dollars ($8,000,000);
plus
(b) the amount of all other indebtedness arising in
connection with borrowed funds, but excluding
accounts payable and accrued expenses; plus
(c) the book value of the issued and outstanding Series
A, B and C Preferred Stock plus accrued dividends
thereon;
with the result so obtained, divided by
(iv) the number of shares of Aqua-Chem Common Stock outstanding or
reserved for issuance on the Valuation Date computed on a
fully-diluted basis, excluding the Phantom Shares awarded
under the Plan but including, without limitation, all shares
of Common Stock which may be issuable upon the exercise of any
and all stock options or warrants.
2.7 NON-TRANSFERABILITY OF AWARDS
Participants may not assign Awards other than by will or descent,
except that Participants may designate a beneficiary ("Beneficiary") to receive
any amounts payable with respect to Awards upon the death of a Participant. A
Participant may from time to time revoke or change his Beneficiary without the
consent of any prior Beneficiary by filing a new designation with the Committee.
The last such designation received by the Committee shall be controlling;
provided, however, that no designation or change or revocation thereof, shall be
effective unless received by the Committee prior to the Participant's death, and
in no event shall any designation be effective as of a date prior to such
receipt. If no such Beneficiary designation is in effect at the time of the
Participant's death, or if no designated Beneficiary survives the Participant,
or if such designation conflicts with law, the Participant's estate acting
through his legal representative, shall be entitled to payout. If the Committee
is in doubt as to the right of any person to payout, the Committee may refuse to
payout such Award, without liability, until the Committee determines the person
entitled to payout. The person applying to the Committee for payout or the
Committee may apply to any court of appropriate jurisdiction and such
application shall be a complete discharge of the liability of the Committee
therefor.
-5-
<PAGE> 8
2.8 AWARD CERTIFICATES
Any Awards made under the Plan will be evidenced by a Certificate
signed by the President of Aqua-Chem.
ARTICLE III
ADMINISTRATION
3.1 AUTHORITY OF BOARD
The Board, or any committee which the Board may appoint ("Committee",
unless context clearly indicates otherwise all references to the Board shall
also be deemed to be references to the Committee), shall have the sole and
exclusive right and authority to:
(a) select participants;
(b) make any and all determinations required in connection with
the operation and administration of the Plan;
(c) make any and all modifications to the terms of the Plan that
the Board, in its sole discretion, deems to be appropriate in
the event that there should occur a stock split, stock
dividend, recapitalization or any other event, which in the
sole and exclusive opinion of the Board equitably requires
that a modification be made; and
(d) terminate the Plan and any Awards previously made pursuant to
the Plan; provided, however, that any amounts payable in the
future to Participants, pursuant to Awards previously made
which have reached their scheduled Maturity Date, shall be
paid out in accordance with the terms of the Plan.
Any determination made or action by the Board pursuant to the preceding
provisions shall be final and binding on the Participants and Aqua-Chem.
3.2 DELEGATION
-6-
<PAGE> 9
The Board and the Committee each may delegate to one or more of its
respective members or to any other person or persons such ministerial duties
hereunder as it may deem advisable; provided, however, that neither the Board
nor the Committee may delegate any of its responsibilities hereunder to any
person who is not both a "Non-Employee Director", as that term is defined in
subparagraph (b)(3)(i) of Rule 16b-3, and an "outside director", within the
meaning of Section 162(m) of the Code. The Board may also employ attorneys,
consultants, accountants or other professional advisors and shall be entitled
reasonably to rely upon the advice opinions or valuations of any such advisors.
3.3 LIABILITY; INDEMNIFICATION
No member of the Board or the Committee, nor any person to whom
ministerial duties have been delegated, shall be personally liable for any
action, interpretation or determination made with respect to the Plan or Awards
made thereunder, and each member of the Board and Committee shall be fully
indemnified, held harmless and protected by Aqua-Chem with respect to any
liability he or she may incur with respect to any such action, interpretation or
determination, to the extent permitted by applicable law and, in addition, to
the extent provided in Aqua-Chem's articles of incorporation and by-laws, as
amended from time to time, or under any agreement between any such member and
Aqua-Chem.
ARTICLE IV
MISCELLANEOUS
4.1 STATUS OF PARTICIPANTS
Selection to be a Participant in the Plan does not confer upon any
Participant any right to continued employment with Aqua-Chem or any of its
subsidiaries or any right to receive any additional future Awards under the
Plan.
4.2 UNFUNDED STATUS OF PLAN
The Plan is an unfunded non-qualified deferred compensation plan for
those employees of Aqua-Chem who, in the sole and absolute discretion of the
Board, are selected to be Participants. Phantom Shares are only a vehicle for
measuring the amount to be paid to each Participant in the Plan. The Plan does
not involve the actual ownership of any stock of Aqua-Chem and shall not confer
upon any Participant any right to acquire or own any actual shares of Aqua-Chem
stock or any rights as a stockholder of Aqua-Chem The status of a Participant,
as to any and all amounts due under the Plan, shall be that of a general
unsecured creditor.
4.3 TAX WITHHOLDING
-7-
<PAGE> 10
EXHIBIT 10.12
Any and all amounts payable to Participants under the Plan shall be
subject to reduction for such withholding as may, from time to time, be required
under any applicable federal, state or local laws.
4.4 SUCCESSORS
The obligations of Aqua-Chem under the Plan shall be binding upon any
successor corporation or organization resulting from the merger, consolidation
or other reorganization of Aqua-Chem, or upon any successor corporation or
organization succeeding to all or substantially all of the assets and business
of Aqua-Chem. In the event of any of the foregoing, the Board may, in its
discretion prior to the consummation of the transaction and in accordance with
Sections 2.4 and 3.1 hereof, exchange, adjust or modify any outstanding Awards,
in such manner as the Board deems appropriate and in accordance with applicable
law.
4.5 NOTICES
Notices required or permitted to be given under the Plan shall be
sufficiently given if in writing and personally delivered to a Participant or
sent by regular mail addressed: to a Participant at the Participant's address as
set forth in the books and records of Aqua-Chem or its subsidiaries or
affiliates, or to Aqua-Chem or the Board at the principal office of Aqua-Chem
clearly marked "Attention: Board of Directors - Compensation Committee."
4.6 SEVERABILITY
In the event that any provision of the Plan shall be held illegal or
invalid for any reason, such illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.
4.7 GOVERNING LAW
To the extent not preempted by Federal law, the Plan, and all
agreements hereunder, shall be construed in accordance with and governed by the
laws of the State of Wisconsin.
-8-
<PAGE> 1
EXHIBIT 10.14
$125,000,000
AQUA-CHEM, INC.
11 1/4% SENIOR SUBORDINATED NOTES DUE 2008
PURCHASE AGREEMENT
------------------
June 18, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
BEAR, STEARNS & CO. INC.
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. Aqua-Chem, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell (the "Offering") to the several initial purchasers named in
Schedule A hereto (the "Purchasers") $125,000,000 principal amount of its 11
1/4% Senior Subordinated Notes Due 2008 (the "Offered Securities") to be issued
under an indenture, dated as of June 23, 1998 (the "Indenture"), between the
Company and United States Trust Company of New York, as Trustee. The United
States Securities Act of 1933 is herein referred to as the "Securities Act".
The Offered Securities are being issued and sold in connection with the
consummation of the transactions contemplated by the Asset Purchase Agreement,
dated as of May 28, 1998 (the "Asset Purchase Agreement"), among the Company,
National Dynamics Corporation, a Nebraska corporation ("NDC") and Roger L.
Swanson, Verlyn L. Westra and Daniel T. Scully (each a shareholder of NDC, and
collectively, the "NDC Shareholders"), pursuant to which the Company has agreed,
subject to certain conditions, to acquire substantially all of the assets of NDC
(the "Acquisition").
<PAGE> 2
EXHIBIT 10.14
In connection with the Acquisition and the Offering, the Company
proposes to: (i) pay in full all outstanding borrowings under the Existing
Credit Facility (as defined in the Offering Document (as defined below)); (ii)
repurchase the Company's existing subordinated indebtedness (the "Existing
Subordinated Debt"); (iii) retire a portion of the Company's Series A Preferred
Stock (the "Preferred Stock"); and (iv) repay an existing note payable. The
foregoing transactions described in clauses (i) to (iv) above are referred to
herein as the "Transactions".
Holders (including subsequent transferees) of the Offered Securities
will have the registration rights set forth in the Registration Rights Agreement
of even date herewith among the Company and the Purchasers (the "Registration
Rights Agreement"). Pursuant to the Registration Rights Agreement, the Company
has agreed to file with the Securities and Exchange Commission (the
"Commission") (i) a registration statement under the Securi ties Act,
registering an issue of a series of senior subordinated notes (the "Exchange
Notes") identical in all material respects to the Offered Securities (except
that the Exchange Notes will not contain terms with respect to transfer
restrictions) to be offered in exchange for the Offered Securities and (ii)
under certain circumstances, a shelf registration statement pursuant to Rule 415
under the Securities Act.
This Agreement, the Indenture and the Registration Rights Agreement are
referred to herein collectively as the "Operative Documents".
The Company hereby agrees with the several Purchasers as follows:
2. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the several Purchasers as follows:
2
<PAGE> 3
EXHIBIT 10.14
(a) A preliminary offering circular and an offering circular
relating to the Offered Securities to be offered by the Purchasers have
been prepared by the Company. Such preliminary offering circular and
offering circular, as supplemented as of the date of this Agreement,
together with any other document approved by the Company for use in
connection with the contemplated resale of the Offered Securities are
hereinafter collectively referred to as the "Offering Document". On the
date of this Agreement, the Offering Document does not include any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The preceding
sentence does not apply to statements in or omissions from the Offering
Document based upon written information furnished to the Company by any
Purchaser through Credit Suisse First Boston Corporation ("CSFBC")
specifically for use therein, it being understood and agreed that the
only such information is that described as such in Section 7(b).
(b) The Company and NDC have been duly incorporated and are
existing corporations in good standing under the laws of the State of
Delaware and the State of Nebraska, respectively, with power and
authority (corporate and other) to own their respective properties and
conduct their respective businesses as described in the Offering
Document; and the Company is duly qualified to do business as foreign
corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of business requires such
qualification except where the failure to so qualify would not have a
material adverse effect on the business or financial condition of the
Company and its Subsidiaries, taken as a whole.
(c) Each subsidiary which meets the definition of "Significant
Subsidiary" contained in Item 101(w) of
3
<PAGE> 4
EXHIBIT 10.14
Regulation S-X promulgated by the Commission (each, a "Subsidiary") of
the Company has been duly incorporated and is an existing corporation
in good standing under the laws of the jurisdiction of its
incorporation, with power and authority (corporate and other) to own
its properties and conduct its business as described in the Offering
Document; and each Subsidiary is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions in
which its ownership or lease of property or the conduct of its business
requires such qualification except where the failure to so qualify
would not have a material adverse effect on the business or financial
condition of the Company and its Subsidiaries taken as a whole; all of
the issued and outstanding capital stock of each Subsidiary has been
duly authorized and validly issued and is fully paid and nonassessable
except as Section 180.0622(2)(b) of the Wisconsin Statutes may be
applicable; and the capital stock of each subsidiary owned by the
Company, directly or through subsidiaries, is owned free from liens,
encumbrances and defects.
(d) The Indenture has been duly authorized; the Offered
Securities have been duly authorized; and when the Offered Securities
are delivered and paid for pursuant to this Agreement on the Closing
Date (as defined below), the Indenture will have been duly executed and
delivered, such Offered Securities will have been duly executed,
authenticated, issued and delivered and will conform to the description
thereof contained in the Offering Document and the Indenture and such
Offered Securities will constitute valid and legally binding
obligations of the Company, enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
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EXHIBIT 10.14
(e) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and conforms in all
material respects to the description thereof contained in the Offering
Document. The Registration Rights Agreement constitutes a valid and
legally binding obligation of the Company.
(f) Except as disclosed in the Offering Document, there are no
contracts, agreements or understandings between the Company and any
person that would give rise to a valid claim against the Company or any
Purchaser for a brokerage commission, finder's fee or other like
payment in connection with the issuance and sale of the Offered
Securities by the Company.
(g) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required
for the consummation of the transactions contemplated by this Agreement
in connection with the issuance and sale of the Offered Securities by
the Company.
(h) The execution, delivery and performance of the Operative
Documents and the issuance and sale of the Offered Securities and
compliance with the terms and provisions thereof will not result in a
material breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or order
of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, any Subsidiary, or NDC or any of
their properties, or any agreement or instrument to which the Company,
any Subsidiary or NDC is a party or by which the Company, any
Subsidiary or NDC is bound or to which any of the properties of the
Company, any Subsidiary or NDC is subject, or the charter or by-laws of
the Company, any Subsidiary or NDC, and the Company has full power and
authority to authorize, issue and sell the Offered Securities as
contemplated by this Agreement.
5
<PAGE> 6
EXHIBIT 10.14
(i) This Agreement has been duly authorized, executed and
delivered by the Company.
(j) Except as disclosed in the Offering Document, the Company,
the Subsidiaries and NDC have good and marketable title to all real
properties and all other properties and assets owned by them, in each
case free from liens, encumbrances and defects that would materially
affect the value thereof or materially interfere with the use made or
to be made thereof by them; and except as disclosed in the Offering
Document, the Company, the Subsidiaries and NDC hold any leased real or
personal property under valid and enforceable leases with no exceptions
that would materially interfere with the use made or to be made thereof
by them.
(k) The Company, the Subsidiaries and NDC possess adequate
certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by
them and have not received any notice of proceedings relating to the
revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company, any Subsidiary or NDC,
would individually or in the aggregate have a material adverse effect
on the Company and the Subsidiaries taken as a whole, or NDC.
(l) No labor dispute with the employees of the Company, any
Subsidiary or NDC exists or, to the knowledge of the Company, is
imminent that might have a material adverse effect on the Company and
the Subsidiaries taken as a whole or NDC.
(m) The Company, the Subsidiaries and NDC own, possess or can
acquire on reasonable terms, adequate trademarks, trade names and other
rights to inventions, know-how, patents, copyrights, confidential
information and other intellectual property (collectively,
6
<PAGE> 7
EXHIBIT 10.14
"intellectual property rights") necessary to conduct the business now
operated by them, or presently employed by them, and have not received
any notice of infringement of or conflict with asserted rights of
others with respect to any intellectual property rights that, if
determined adversely to the Company, the Subsidiaries or NDC would
individually or in the aggregate have a material adverse effect on the
Company and the Subsidiaries taken as a whole, or NDC.
(n) Except as disclosed in the Offering Document, neither the
Company, any of the Subsidiaries or NDC is in violation of any statute,
any rule, regulation, decision or order of any governmental agency or
body or any court, domestic or foreign, relating to the use, disposal
or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to
hazardous or toxic substances (collectively, "environmental laws"),
owns or operates any real property contaminated with any substance that
is subject to any environmental laws, is liable for any off-site
disposal or contamination pursuant to any environmental laws, or is
subject to any claim relating to any environmental laws, which
violation, contamination, liability or claim would individually or in
the aggregate have a material adverse effect on the Company and the
Subsidiaries taken as a whole or NDC; and the Company is not aware of
any pending investigation which might lead to such a claim.
(o) Except as disclosed in the Offering Document, there are no
pending actions, suits or proceedings against or affecting the Company,
the Subsidiaries of or NDC or any of their respective properties that,
if determined adversely to the Company, any Subsidiary of the Company
or NDC, would individually or in the aggregate have a material adverse
effect on the condition (financial or other), business, properties or
results of operations of the Company and the
7
<PAGE> 8
EXHIBIT 10.14
Subsidiaries taken as a whole or NDC or would materially and adversely
affect the ability of the Company to perform its obligations under any
of the Operative Documents, or which are otherwise material in the
context of the sale of the Offered Securities; and no such actions,
suits or proceedings are threatened or, to the Company's knowledge,
contemplated.
(p) The financial statements included in the Offering Document
present fairly the financial position of the Company and its
consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and, except as
otherwise disclosed in the Offering Document, such financial statements
have been prepared in conformity with the generally accepted accounting
principles in the United States applied on a consistent basis; and the
assumptions used in preparing the pro forma financial statements
included in the Offering Documents provide a reasonable basis for
presenting the significant effects directly attributable to the
transactions or events described therein, the related pro forma
adjustments give appropriate effect to those assumptions, and the pro
forma columns therein reflect the proper application of those
adjustments to the corresponding historical financial statement
amounts.
(q) The financial statements of NDC included in the Offering
Document present fairly the financial position of NDC as of the dates
shown and its results of operations and cash flows for the periods
shown, and such financial statements have been prepared in conformity
with the generally accepted accounting principles in the United States
applied on a consistent basis.
(r) Except as disclosed in the Offering Document, since the
date of the latest audited financial statements included in the
Offering Document there has been no material adverse change, nor any
development or
8
<PAGE> 9
EXHIBIT 10.14
event involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of
the Company and the Subsidiaries taken as a whole, and, except as
disclosed in or contemplated by the Offering Document, there has been
no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
(s) The Company is not an open-end investment company, unit
investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the United States
Investment Company Act of 1940 (the "Investment Company Act"); and the
Company is not and, after giving effect to the offering and sale of the
Offered Securities and the application of the proceeds thereof as
described in the Offering Document, will not be an "investment company"
as defined in the Investment Company Act.
(t) No securities of the same class (within the meaning of
Rule 144A(d)(3) under the Securities Act) as the Offered Securities are
listed on any national securities exchange registered under Section 6
of the United States Securities Exchange Act of 1934 ("Exchange Act")
or quoted in a U.S. automated inter-dealer quotation system.
(u) The offer and sale of the Offered Securities in the manner
contemplated by this Agreement will be exempt from the registration
requirements of the Securities Act; and it is not necessary to qualify
an indenture in respect of the Offered Securities under the United
States Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act").
(v) Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf (i) has, within the six-month
period prior to the date hereof, offered or sold in the United States
9
<PAGE> 10
EXHIBIT 10.14
or to any U.S. person (as such terms are defined in Regulation S under
the Securities Act) the Offered Securities, or any security of the same
class or series as the Offered Securities or (ii) has offered or will
offer or sell the Offered Securities (A) in the United States by means
of any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act or (B) with respect to
any such securities sold in reliance on Rule 903 of Regulation S
("Regulation S") under the Securities Act, by means of any directed
selling efforts within the meaning of Rule 902(b) of Regulation S. The
Company, its affiliates and any person acting on its or their behalf
have complied and will comply with the offering restrictions
requirement of Regulation S. The Company has not entered and will not
enter into any contractual arrangement with respect to the distribution
of the Offered Securities except for this Agreement.
(w) The execution, delivery and performance by the Company,
the Subsidiaries and NDC of their respective obligations under the
Asset Purchase Agreement and the Acquisition will not result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, rule, regulation or order of
any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, any Subsidiary or NDC or any of
their properties, or any agreement or instrument to which the Company,
any Subsidiary or NDC is a party or by which the Company, any
Subsidiary or NDC is bound or to which any of the properties of the
Company, any subsidiary of the Company or NDC is subject, or the
charter or by-laws of the Company, any subsidiary of the Company or
NDC.
(x) The Asset Purchase Agreement has been duly authorized,
executed and delivered by the Company and
10
<PAGE> 11
EXHIBIT 10.14
conforms in all material respects to the descriptions thereof in the
Offering Document.
(y) The Asset Purchase Agreement, assuming due execution and
delivery by the other parties thereto, constitutes a valid and legally
binding obligation of the Company and is enforceable against the
Company in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors'
rights and to general equity principles.
(z) The Company has delivered to the Purchasers true and
correct copies of the Asset Purchase Agreement, in the form as
originally executed, and there have been no amendments or waivers
thereto or in the exhibits or schedules thereto other than those as to
which the Purchasers shall have been advised.
(aa) The Transactions have been duly authorized and will not
result in a breach or violation of any of the terms and provisions of,
or constitute a default under, any statute, any rule, regulation or
order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company or any subsidiary of the
Company or any of their properties, or any agreement or instrument to
which the Company or any such subsidiary is a party or by which the
Company or any subsidiary is a party or by which the Company or any
subsidiary is bound or to which any of the properties of the Company or
any subsidiary is subject, or the charter or by-laws of the Company or
any such subsidiary.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company agrees to sell to the
Purchasers, and the Purchasers agree, severally and not
11
<PAGE> 12
EXHIBIT 10.14
jointly, to purchase from the Company, at a purchase price of 97% of the
principal amount thereof plus accrued interest from June 18, 1998 to the Closing
Date (as hereinafter defined), the respective principal amounts of Offered
Securities set forth opposite the names of the several Purchasers in Schedule A
hereto.
The Company will deliver against payment of the purchase price the
Offered Securities in the form of one or more permanent global securities in
definitive form (the "Global Securities") deposited with the Trustee as
custodian for The Depository Trust Company ("DTC") and registered in the name of
Cede & Co., as nominee for DTC. Interests in any Global Securities will be held
only in book-entry form through DTC, except in the limited circumstances
described in the Offering Document. Payment for the Offered Securities shall be
made by the Purchasers in Federal (same day) funds by official check or checks
or wire transfer to an account at a bank acceptable to CSFBC drawn to the order
of the Company at the office of Cravath, Swaine & Moore at 10:00 A.M. (New York
time), on June 23, 1998, or at such other time not later than seven full
business days thereafter as CSFBC and the Company determine, such time being
herein referred to as the "Closing Date", against delivery to the Trustee as
custodian for DTC and Euroclear of the Global Securities representing all of the
Offered Securities. The Global Securities will be made available for checking at
the above office of Cravath, Swaine & Moore at least 24 hours prior to the
Closing Date.
4. Representations by Purchasers; Resale by Purchasers. (a) Each
Purchaser severally represents and warrants to the Company that it is an
"accredited investor" within the meaning of Regulation D under the Securities
Act.
(b) Each Purchaser severally acknowledges that the Offered
Securities have not been 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
12
<PAGE> 13
EXHIBIT 10.14
Regulation S or pursuant to an exemption from the registration
requirements of the Securities Act. Each Purchaser severally represents
and agrees that it has offered and sold the Offered Securities, and
will offer and sell the Offered Securities as part of its distribution
or at any time only in accordance with Rule 903 or Rule 144A under the
Securities Act ("Rule 144A"). Accordingly, neither such Purchaser nor
its affiliates, nor any persons acting on its or their behalf, have
engaged or will engage in any directed selling efforts with respect to
the Offered Securities, and such Purchaser, its affiliates and all
persons acting on its or their behalf have complied and will comply
with the offering restrictions requirement of Regulation S. Each
Purchaser severally agrees that, at or prior to confirmation of sale of
the Offered Securities, other than a sale pursuant to Rule 144A, such
Purchaser will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that
purchases the Offered 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 in accordance with
Regulation S (or Rule 144A if available) under the Securities
Act. Terms used above have the meanings given to them by
Regulation S."
Terms used in this subsection (b) have the meanings given to them by
Regulation S.
(c) Each Purchaser severally agrees that it and each of its
affiliates has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities
except for
13
<PAGE> 14
EXHIBIT 10.14
any such arrangements with the other Purchasers or affiliates of the
other Purchasers or with the prior written consent of the Company.
(d) Each Purchaser severally agrees that it and each of its
affiliates will not offer or sell the Offered Securities in the United
States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act,
including, but not limited to (i) any advertisement, article, notice or
other communication published in any newspaper, magazine or similar
media or broadcast over television or radio, or (ii) any seminar or
meeting whose attendees have been invited by any general solicitation
or general advertising. Each Purchaser severally agrees, with respect
to resales made in reliance on Rule 144A of any of the Offered
Securities, to deliver either with the confirmation of such resale or
otherwise prior to settlement of such resale a notice to the effect
that the resale of such Offered Securities has been made in reliance
upon the exemption from the registration requirements of the Securities
Act provided by Rule 144A.
(e) Each of the Purchasers severally represents and agrees
that (i) it has not offered or sold and prior to the date six months
after the date of issue of the Offered Securities will not offer or
sell any Offered Securities to persons in the United Kingdom except to
persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect
to anything done by it in relation to the Offered Securities in, from
or otherwise involving the
14
<PAGE> 15
EXHIBIT 10.14
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 Offered Securities to a person who is
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to
whom such document may otherwise lawfully be issued or passed on.
5. Certain Agreements of the Company. The Company agrees with the
several Purchasers that:
(a) The Company will advise CSFBC promptly of any proposal to
amend or supplement the Offering Document and will not effect such
amendment or supplementation without CSFBC's consent (which consent
shall not be unreasonably withheld). If, at any time prior to the
completion of the resale of the Offered Securities by the Purchasers,
any event occurs as a result of which the Offering Document as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, the Company promptly will notify CSFBC of
such event and promptly will prepare, at its own expense, an amendment
or supplement which will correct such statement or omission. Neither
CSFBC's consent to, nor the Purchasers' delivery to offerees or
investors of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.
(b) The Company will furnish to CSFBC copies of any
preliminary offering circular, the offering circular and all amendments
and supplements to such documents, in each case as soon as available
and in such quantities as CSFBC requests, and the Company will furnish
to CSFBC on the date hereof three copies of the Offering Document
signed by a duly authorized officer
15
<PAGE> 16
EXHIBIT 10.14
of the Company, one of which will include the independent accountants'
reports therein manually signed by such independent accountants. At any
time when the Company is not subject to Section 13 or 15(d) of the
Exchange Act, the Company will promptly furnish or cause to be
furnished to CSFBC (and, upon request, to each of the other Purchasers)
and, upon request of holders and prospective purchasers of the Offered
Securities, to such holders and purchasers, copies of the information
required to be delivered to holders and prospective purchasers of the
Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act
(or any successor provision thereto) in order to permit compliance with
Rule 144A in connection with resales by such holders of the Offered
Securities. The Company will pay the expenses of printing and
distributing to the Purchasers all such documents.
(c) The Company will arrange for the qualification of the
Offered Securities for sale and the determination of their eligibility
for investment under the laws of such jurisdictions in the United
States and Canada as CSFBC designates and will continue such
qualifications in effect so long as required for the resale of the
Offered Securities by the Purchasers, provided that the Company will
not be required to qualify as a foreign corporation or to file a
general consent to service of process in any such state.
(d) During the period of ten years (or such lesser period as
the Offered Securities or Exchange Securities (as defined in the
Registration Rights Agreement) are outstanding) hereafter, the Company
will furnish to CSFBC and, upon request, to each of the other
Purchasers, as soon as practicable after the end of each fiscal year, a
copy of its annual report to shareholders for such year; and the
Company will furnish to CSFBC and, upon request, to each of the other
Purchasers (i) as soon as available, a copy of each report or other
document furnished to the
16
<PAGE> 17
EXHIBIT 10.14
Commission or mailed to its shareholders generally, and (ii) from time
to time, such other information concerning the Company as CSFBC may
reasonably request.
(e) During the period of two years (or such lesser period as
the Offered Securities or Exchange Securities are outstanding) after
the Closing Date, the Company will, upon request, furnish to CSFBC,
each of the other Purchasers and any holder of Offered Securities a
copy of the restrictions on transfer applicable to the Offered
Securities.
(f) During the period of two years (or such lesser period as
the Offered Securities or Exchange Securities are outstanding) after
the Closing Date, the Company will not, and will not permit any of its
affiliates (as defined in Rule 144 under the Securities Act) to, resell
any of the Offered Securities that have been reacquired by any of them.
(g) During the period of two years (or such lesser period as
the Offered Securities or Exchange Securities are outstanding) after
the Closing Date, the Company will not be or become, an open-end
investment company, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act.
(h) The Company will pay all expenses incidental to the
performance of its obligations under the Operative Documents, including
(i) the fees and expenses of the Trustee and its professional advisers;
(ii) all expenses in connection with the execution, issue,
authentication, packaging and initial delivery of the Offered
Securities, the preparation and printing of the Operative Documents,
the Offered Securities, the Offering Document and amendments and
supplements thereto, and any other document relating to the issuance,
offer, sale and delivery of the Offered
17
<PAGE> 18
EXHIBIT 10.14
Securities; (iii) the cost of qualifying the Offered Securities for
trading in The Portal(SM) Market ("PORTAL") and any expenses incidental
thereto; (iv) the cost of any advertising approved by the Company in
connection with the issue of the Offered Securities; (v) any expenses
(including fees and disbursements of counsel) incurred in connection
with qualification of the Offered Securities for sale under the laws of
such jurisdictions in the United States and Canada as CSFBC designates
and the printing of memoranda relating thereto; (vi) any fees charged
by investment rating agencies for the rating of the Offered Securities;
and (vii) expenses incurred in distributing preliminary offering
circulars and the offering circulars (including any amendments and
supplements thereto) to the Purchasers. The Company will also pay or
reimburse the Purchasers (to the extent incurred by them) for all
travel expenses of the Purchasers and the Company's officers and
employees and any other expenses of the Purchasers and the Company in
connection with attending or hosting meetings with prospective
purchasers of the Offered Securities from the Purchasers.
(i) In connection with the offering, until CSFBC shall have
notified the Company and the other Purchasers of the completion of the
resale of the Offered Securities, neither the Company nor any of its
affiliates has or will, either alone or with one or more other persons,
bid for or purchase for any account in which it or any of its
affiliates has a beneficial interest any Offered Securities or attempt
to induce any person to purchase any Offered Securities; and neither it
nor any of its affiliates will make bids or purchases for the purpose
of creating actual, or apparent, active trading in, or of raising the
price of, the Offered Securities.
(j) For a period of 180 days after the date of the initial
offering of the Offered Securities by the
18
<PAGE> 19
EXHIBIT 10.14
Purchasers, the Company will not offer, sell, contract to sell, pledge
or otherwise dispose of, directly or indirectly, any United States
dollar-denominated debt securities issued or guaranteed by the Company
and having a maturity of more than one year from the date of issue, or
publicly disclose the intention to make any such offer, sale, pledge or
disposition, without the prior written consent of CSFBC. The Company
will not at any time offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any securities under circumstances
where such offer, sale, pledge, 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 Offered Securities.
(k) The Company will use its best efforts to have the Offered
Securities become eligible for the PORTAL trading system.
6. Conditions of the Obligations of the Purchasers. The obligations of
the several Purchasers to purchase and pay for the Offered Securities will be
subject to the accuracy of the representations and warranties on the part of the
Company herein, to the accuracy of the statements of officers of the Company
made pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder and to the following additional conditions precedent:
(a) The Purchasers shall have received a letter, dated the
date of this Agreement, of Arthur Andersen LLP in form and substance
satisfactory to the Purchasers concerning the financial information
with respect to the Company set forth in the Offering Document.
(b) The Purchasers shall have received a letter, dated the
date of this Agreement, of KPMG Peat Marwick
19
<PAGE> 20
EXHIBIT 10.14
LLP (Milwaukee, WI) in form and substance satisfactory to the
Purchasers concerning the financial information with respect to the
Company set forth in the Offering Document.
(c) The Purchasers shall have received a letter, dated the
date of this Agreement, of KPMG Peat Marwick LLP (Omaha, NE) in form
and substance satisfactory to the Purchasers concerning the financial
information with respect to NDC set forth in the Offering Document.
(d) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) a change in U.S. or
international financial, political or economic conditions or currency
exchange rates or exchange controls as would, in the judgment of CSFBC,
be likely to prejudice materially the success of the proposed issue,
sale or distribution of the Offered Securities, whether in the primary
market or in respect of dealings in the secondary market, or (ii) (A)
any change, or any development or event involving a prospective change,
in the condition (financial or other), business, properties or results
of operations of the Company, the Subsidiaries or NDC which, in the
judgment of a majority in interest of the Purchasers including CSFBC,
is material and adverse and makes it impractical or inadvisable to
proceed with completion of the offering or the sale of and payment for
the Offered Securities; (B) any downgrading in the rating of any debt
securities of the Company by any "nationally recognized statistical
rating organization" (as defined for purposes of Rule 436(g) under the
Securities Act), or any public announcement that any such organization
has under surveillance or review its rating of any debt securities of
the Company (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading, of
such rating); (C) any suspension or limitation of trading in securities
generally on the New York Stock Exchange, or any setting of minimum
20
<PAGE> 21
EXHIBIT 10.14
prices for trading on such exchange, or any suspension of trading of
any securities of the Company or NDC on any exchange or in the
over-the-counter market; (D) any banking moratorium declared by U.S.
Federal or New York authorities; or (E) any outbreak or escalation of
major hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial national or
international calamity or emergency if, in the judgment of a majority
in interest of the Purchasers including CSFBC, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the offering
or sale of and payment for the Offered Securities.
(e) The Purchasers shall have received an opinion, dated the
Closing Date, of Whyte Hirschboeck Dudek S.C., counsel for the Company,
substantially in the form of Annex A.
(f) The Purchasers shall have received from Cravath, Swaine &
Moore, counsel for the Purchasers, such opinion or opinions, dated the
Closing Date, with respect to the incorporation of the Company, the
validity of the Offered Securities, the Offering Document, the
exemption from registration for the offer and sale of the Offered
Securities by the Company to the several Purchasers and the resales by
the several Purchasers as contemplated hereby and other related matters
as CSFBC may require, and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling them
to pass upon such matters.
(g) The Purchasers shall have received a certificate, dated
the Closing Date, of the President or any Vice President and a
principal financial or accounting officer of the Company in which such
officers, to the best of their knowledge after reasonable
investigation, shall state that the
21
<PAGE> 22
EXHIBIT 10.14
representations and warranties of the Company in this Agreement are
true and correct, that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date, and that, subsequent to the
dates of the most recent financial statements in the Offering Document,
there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of
the Company and its subsidiaries taken as a whole, or NDC, except as
set forth in or contemplated by the Offering Document or as described
in such certificate.
(h) The Purchasers shall have received a letter, dated the
Closing Date, of each of Arthur Andersen LLP and KPMG Peat Marwick LLP
(Omaha, NE) which meets the requirements of subsection (a), (b) or (c)
of this Section, as the case may be, except that the specified date
referred to in such subsection will be a date not more than two
business days prior to the Closing Date for the purposes of this
subsection.
(i) Concurrently with or prior to the issuance and sale of the
Offered Securities by the Company, the Company shall have consummated
the Acquisition on terms that conform in all material respects to the
description thereof in the Offering Document and the Purchasers shall
have received (i) true and correct copies of all documents pertaining
to the Acquisition and (ii) a certificate, dated the Closing Date, of
the President or any Vice President and a principal financial or
accounting officer of the Company in which such officers, to the best
of their knowledge after reasonable investigation, shall state that the
Acquisition has been consummated on terms that conform in all material
respects to the description thereof in the Offering Document.
22
<PAGE> 23
EXHIBIT 10.14
(j) The Purchasers shall have received from the Company a
signed copy of the letter agreement between the Company and Lyonnaise
American Holding, Inc. in form and substance satisfactory to the
Purchasers.
The Company will furnish the Purchasers with such conformed copies of
such opinions, certificates, letters and documents as the Purchasers reasonably
request. CSFBC may in its sole discretion waive on behalf of the Purchasers
compliance with any conditions to the obligations of the Purchasers hereunder,
whether in respect of an Optional Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Purchaser against any losses, claims, damages or liabilities,
joint or several, to which such Purchaser may become subject, under the
Securities Act or the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any breach of any of the representations and warranties of the Company
contained herein or any untrue statement or alleged untrue statement of any
material fact contained in the Offering Document, or any amendment or supplement
thereto, or any related preliminary offering circular, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and will reimburse
each Purchaser for any legal or other expenses reasonably incurred by such
Purchaser in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; 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 an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Purchaser through CSFBC specifically
for use therein, it
23
<PAGE> 24
EXHIBIT 10.14
being understood and agreed that the only such information consists of the
information described as such in subsection (b) below.
(b) Each Purchaser will severally and not jointly indemnify and hold
harmless the Company against any losses, claims, damages or liabilities to which
the Company may become subject, under the Securities Act or the Exchange Act 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 any material fact contained in the Offering Document, or any
amendment or supplement thereto, or any related preliminary offering circular,
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Purchaser through CSFBC specifically for use therein, and will reimburse any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred, it being understood and agreed that the only such
information furnished by any Purchaser consists of the following information in
the Offering Document furnished on behalf of each Purchaser: the last paragraph
at the bottom of the cover page concerning the terms of the offering by the
Purchasers, the legend concerning over-allotments and stabilizing on the inside
front cover page and the seventh paragraph under the caption "Plan of
Distribution".
(c) Promptly after receipt by an indemnified party under this Section
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
24
<PAGE> 25
EXHIBIT 10.14
subsection (a) or (b) above, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party unless such settlement includes an unconditional release of
such indemnified party from all liability on any claims that are the subject
matter of such action.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities referred to in subsection (a) or (b) above (i) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Purchasers on the other from the offering of the Offered
Securities or (ii) if the
25
<PAGE> 26
EXHIBIT 10.14
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Purchasers on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Purchasers on the other shall be
deemed to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company bear to the total discounts
and commissions received by the Purchasers from the Company under this
Agreement. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Purchasers and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Offered Securities purchased by it were
resold exceeds the amount of any damages which such Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. The Purchasers' obligations in this subsection (d) to
contribute are several in proportion to their respective purchase obligations
and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may
26
<PAGE> 27
EXHIBIT 10.14
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Purchaser within the meaning of the Securities
Act or the Exchange Act; and the obligations of the Purchasers under this
Section shall be in addition to any liability which the respective Purchasers
may otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act.
8. Default of Purchasers. If any Purchaser or Purchasers default in
their obligations to purchase Offered Securities hereunder and the aggregate
principal amount of Offered Securities that such defaulting Purchaser or
Purchasers agreed but failed to purchase does not exceed 10% of the total
principal amount of Offered Securities, CSFBC may make arrangements satisfactory
to the Company for the purchase of such Offered Securities by other persons,
including any of the Purchasers, but if no such arrangements are made by such
the Closing Date, the non-defaulting Purchasers shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Offered
Securities that such defaulting Purchasers agreed but failed to purchase. If any
Purchaser or Purchasers so default and the aggregate principal amount of Offered
Securities with respect to which such default or defaults occur exceeds 10% of
the total principal amount of Offered Securities and arrangements satisfactory
to CSFBC and the Company for the purchase of such Offered Securities by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Purchaser or the
Company, except as provided in Section 9. As used in this Agreement, the term
"Purchaser" includes any person substituted for a Purchaser under this Section.
Nothing herein will relieve a defaulting Purchaser from liability for its
default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
27
<PAGE> 28
EXHIBIT 10.14
Company or its officers and of the several Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation, or statement as to the results thereof, made by or on behalf
of any Purchaser, the Company or any of their respective representatives,
officers or directors or any controlling person, and will survive delivery of
and payment for the Offered Securities. If this Agreement is terminated pursuant
to Section 8 or if for any reason the purchase of the Offered Securities by the
Purchasers is not consummated, the Company shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Company and the Purchasers pursuant to Section 7 shall remain
in effect. If the purchase of the Offered Securities by the Purchasers is not
consummated for any reason other than solely because of the termination of this
Agreement pursuant to Section 8 or the occurrence of any event specified in
clause (C), (D) or (E) of Section 6(b)(ii), the Company will reimburse the
Purchasers for all out-of-pocket expenses (including fees and disbursements of
counsel) reasonably incurred by them in connection with the offering of the
Offered Securities.
10. Notices. All communications hereunder will be in writing and, if
sent to the Purchasers will be mailed, delivered or telegraphed and confirmed to
the Purchasers, c/o Credit Suisse First Boston Corporation, Eleven Madison
Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department--Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at 7800 North 113th Street,
Milwaukee, WI 53224, Attention: Jeffrey A. Miller; provided, however, that any
notice to a Purchaser pursuant to Section 7 will be mailed, delivered or
telegraphed and confirmed to such Purchaser.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
controlling persons referred to in Section 7, and no other person will have any
right or
28
<PAGE> 29
EXHIBIT 10.14
obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce the agreements for their benefit contained in the second and
third sentences of Section 5(b) hereof against the Company as if such holders
were parties thereto.
12. Representation of Purchasers. You will act for the several
Purchasers in connection with this purchase, and any action under this Agreement
taken by you jointly or by CSFBC will be binding upon all the Purchasers.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. This agreement shall be governed by, and construed
in accordance with, the laws of the State of New York without regard to
principles of conflicts of laws.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
29
<PAGE> 30
EXHIBIT 10.14
If the foregoing is in accordance with the Purchasers' understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement between the Company and the several
Purchasers in accordance with its terms.
Very truly yours,
AQUA-CHEM, INC.
by /s/ JA Miller
------------------------------
Name: Jeffrey A. Miller
Title: Chairman of the
Board, President and
Chief Executive
Officer
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
BEAR, STEARNS & CO. INC.
by CREDIT SUISSE FIRST BOSTON CORPORATION
by
-------------------------------
Name:
Title:
30
<PAGE> 31
EXHIBIT 10.14
SCHEDULE A
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
OFFERED
MANAGER SECURITIES
- ------- ----------
<S> <C>
Credit Suisse First Boston Corporation $81,250,000
Bear, Stearns & Co. Inc. ............. 43,750,000
============
Total...... $125,000,000
</TABLE>
31
<PAGE> 32
EXHIBIT 10.14
ANNEX A
32
Form of Legal Opinion
<PAGE> 1
EXHIBIT 10.15
[AQUA-CHEM, INC. LOGO]
P.O. BOX 421, MILWAUKEE, WISCONSIN 53201 - 414-577-2700 - FAX: 414-577-2953
JEFFREY A. MILLER
CHAIRMAN and CHIEF EXECUTIVE OFFICER
June 23, 1998
Mr. Verlyn L. Westra
7530 N. Hampton Road
Lincoln, Nebraska 68506
Dear Verlyn:
This letter will set forth the terms of the consulting arrangement
between Aqua-Chem, Inc. ("AQM") and you, which are as follows:
1. TERM. The term of the agreement will commence on the closing date of
AQM's acquisition of National Development corporation ("NDC") and continue
thereafter for such period as AQM determines to be necessary, but in no event
more than six months.
2. DUTIES. Your duties shall consist of consulting with and advising AQM
management on a part time basis as requested by AQM with respect to matters
pertaining to the historic business of NDC and generally assisting (in a manner
consistent with your status as the prior Chief Financial Officer of NDC) with
the transition and integration of that business into AQM.
3. INDEPENDENT CONTRACTOR STATUS. During the term of the consulting
arrangement, you would be a part-time independent contractor and not an employee
of AQM. Accordingly, AQM will not withhold income, social security or other
taxes from the payments to be made to you and you will be solely responsible for
and indemnify AQM with respect thereto. During the first one month of the
consulting arrangement, I would anticipate that your services would be required
on a more or less full time basis. For the next one month, the time required of
you will be no more than half-time. After the initial two month period, the time
commitment on your part will be minimal and your duties during this period will
be limited to consulting with respect to specific questions that may arise from
time to time. I am sure that after the initial two month period we will be able
to coordinate the performance of consulting services so as not to interfere with
any travel or other personal plans you may have.
4. COMPENSTION. During the initial two month period, you will be
compensated at the rate of $625.00 per day for services requested by AQM.
Thereafter, you will be compensated at the rate of $80.00 per hour for services
requested by AQM. In addition, AQM will provide you with an office and
secretarial support at NDC's office and reimburse you for any out of town travel
and related expenses incurred by you at AQM's request.
<PAGE> 2
EXHIBIT 10.15
Mr. Verlyn L. Westra
June 23, 1998
Page Two
If you are in agreement with the preceding, please so indicate by
signing and returning the enclosed copy of this letter.
Sincerely,
/s/ JA Miller
Jeffrey A. Miller
Agreed to and accepted this 19th day of June, 1998.
/s/ Verlyn L. Westra
-----------------------------------
Verlyn L. Westra
<PAGE> 1
EXHIBIT 10.16
[AQUA-CHEM, INC. LOGO]
P.O. BOX 421, MILWAUKEE, WISCONSIN 53201 - 414-577-2700 - FAX: 414-577-2953
JEFFREY A. MILLER
CHAIRMAN and CHIEF EXECUTIVE OFFICER
June 23, 1998
Mr. Roger L. Swanson
2485 Woodcrest
Lincoln, Nebraska 68502
Dear Roger:
This letter will set forth the terms of the consulting arrangement
between Aqua-Chem, Inc. ("AQM") and you, which are as follows:
1. TERM. The term of the agreement will commence on the closing date of
AQM's acquisition of National Development Corporation ("NDC") and
continue thereafter for such period as AQM determines to be necessary,
but in no event more than eighteen months.
2. DUTIES. Your duties shall consist of consulting with and advising
AQM management on a part time basis as requested by AQM with respect to
matters pertaining to the historic business of NDC and generally
assisting (in a manner consistent with your status as the prior senior
executive of NDC) with the transition and integration of that business
into AQM. As we have discussed, it is my intention to establish a
Boiler technical Advisory Group to provide overall guidance to all of
AQM's boiler and related businesses and, if and when that is
established, you would also serve as a member of the Boiler Technical
Advisory Group.
3. INDEPENDENT CONTRACTOR STATUS. During the term of the consulting
arrangement, you would be a part-time independent contractor and not an
employee of AQM. Accordingly, AQM will not withhold income, social
security or other taxes from the payments to be made to you and you
will be solely responsible for and indemnify AQM with respect thereto.
During the first two or three months of the consulting arrangement, I
would anticipate that your services would be required on a more or less
full time basis. For the next two or three months, the time required of
you will be no more than half-time. After the initial four to six month
period, the time commitment on your part will be minimal and your
duties during this period will be limited to consulting with respect to
specific questions that may arise from time to time. I am sure that
after the initial two to three month period we will be able to
coordinate the performance of consulting services at mutually
convenient times so as not to interfere with any travel or other
personal plans you may have.
4. COMPENSATION. During the initial four to six month period, you will
be compensated at the rate of $1000.00 per day for services requested
by AQM. Thereafter, you will be compensated at the rate of $125.00 per
hour for services requested by AQM. In addition, AQM will provide you
with an office and secretarial support at NDC's office and reimburse
you for any out of town travel and related expenses incurred by you at
AQM's request. In addition, you will be compensated for your duties
related to fulfilling your role with the ABMA. In the event you are
elected and agree to serve on the ABMA for a second one-year term, the
compensation terms of this arrangement will be extended to cover that
period.
<PAGE> 2
EXHIBIT 10.16
Mr. Roger L. Swanson
June 23, 1998
Page Two
If you are in agreement with the preceding, pleased so indicate by
signing and returning the enclosed copy of this letter.
Very truly yours,
/s/ JA Miller
Jeffrey A. Miller
Agreed and accepted this 19 day of June, 1998.
/s/ Roger L. Swanson
---------------------------
Roger L. Swanson
<PAGE> 1
EXHIBIT 10.17
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
RUSH CREEK, LLC,
AQUA-CHEM, INC.,
CB-KRAMER SALES AND SERVICE, INC.,
WHITNEY SUBORDINATED DEBT FUND, L.P.
AND
WHITNEY EQUITY PARTNERS, L.P.
-----------------------------
DATED AS OF DECEMBER 5, 1997
----------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS.................................................3
1.1 Definitions.................................................3
1.2 Accounting Terms: Financial Statements.....................14
1.3 Knowledge of the Company...................................15
ARTICLE 2 PURCHASE AND SALE OF THE SECURITIES........................15
2.1 Purchase and Sale of the WSDF Note.........................15
2.2 Purchase and Sale of WSDF Warrant..........................15
2.3 Purchase and Sale of the WEP Preferred Shares and the WEP
Shares.....................................................15
2.4 Fees at Closing; Annual Fees...............................15
2.5 Closing....................................................16
2.6 Financial Accounting Positions; Tax Reporting..............16
ARTICLE 3 CONDITIONS TO THE RESPECTIVE OBLIGATIONS
OF THE PURCHASERS TO PURCHASE THE SECURITIES...............17
3.1 Representations and Warranties.............................17
3.2 Compliance with this Agreement.............................17
3.3 Certificates...............................................17
3.4 Documents..................................................18
3.5 Purchase of Securities Permitted by Applicable Laws........18
3.6 Opinion of Counsel.........................................18
3.7 Approval of Counsel to the Purchasers......................18
3.8 Consents and Approvals.....................................18
3.9 Registration Rights Agreement..............................19
3.10 Operating Agreement........................................19
3.11 Certificate of Incorporation...............................19
3.12 Certificate of Organization................................19
3.13 No Material Judgment or Order..............................19
3.14 Pro Forma Balance Sheet....................................19
3.15 Goodstanding Certificates..................................19
3.16 Miller Employment Agreement................................19
3.17 Aqua-Chem Merger...........................................19
3.18 Senior Credit Facility; Subordination......................20
3.19 Management Capital Contribution............................20
i
<PAGE> 3
TABLE OF CONTENTS
Page
----
3.20 Stockholders' and Members' Agreement.......................20
3.21 Guaranty...................................................20
3.22 Payment of Thomasville Indebtedness and Release of Liens ..20
3.23 Payment of Monroe Indebtedness and Release of Liens .......20
3.24 Termination of 1982 Stockholders' Agreement................20
3.25 Termination of Special Security Agreement..................21
3.26 Termination of Interim Management Agreement................21
3.27 Amendment to Employment Agreements.........................21
3.28 Adoption of 1997 Stock Option Plan.........................21
ARTICLE 3A CONDITIONS TO THE RESPECTIVE OBLIGATIONS
OF THE PURCHASERS TO PURCHASE THE SECURITIES..............21
3A.1 Representations and Warranties.............................21
3A.2 Compliance with this Agreement.............................21
3A.3 Certificates...............................................21
3A.4 Documents..................................................22
3A.5 Purchase of Securities Permitted by Applicable Laws........22
3A.6 Opinion of Counsel.........................................22
3A.7 Approval of Counsel to the Purchasers......................22
3A.8 Consents and Approvals.....................................23
3A.9 No Material Judgment or Order..............................23
3A.10 Senior Credit Facility.....................................23
ARTICLE 4 CONDITIONS TO THE OBLIGATIONS OF THE LLC, THE
COMPANY AND CB-KRAMER......................................23
4.1 Representations and Warranties.............................23
4.2 Compliance with this Agreement.............................24
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............24
5.1 Existence and Power........................................24
5.2 Authorization; No Contravention............................24
5.3 Governmental Authorization; Third Party Consents...........24
5.4 Binding Effect.............................................25
5.5 No Legal Bar...............................................25
5.6 Litigation.................................................25
5.7 Compliance with Laws.......................................25
5.8 No Default or Breach.......................................25
ii
<PAGE> 4
EXHIBIT 10.17
TABLE OF CONTENTS
Page
----
5.9 Title to Properties........................................25
5.10 Use of Real Property.......................................26
5.11 Taxes......................................................27
5.12 Financial Condition........................................28
5.13 ERISA -- Prohibited Transactions...........................29
5.14 Disclosure.................................................29
5.15 Absence of Certain Changes or Events.......................29
5.16 Environmental Matters......................................30
5.17 Investment Company/Government Regulations..................30
5.18 Subsidiaries...............................................31
5.19 Capitalization.............................................32
5.20 Private Offering...........................................33
5.21 Broker's, Finder's or Similar Fees.........................33
5.22 Labor Relations............................................33
5.23 Employee Benefit Plans.....................................34
5.24 Patents, Trademarks, Etc...................................35
5.25 Potential Conflicts of Interest............................36
5.26 Trade Relations............................................37
5.27 Outstanding Borrowings.....................................37
5.28 Material Contracts.........................................37
5.29 Insurance..................................................37
5.30 Accounts Receivable........................................38
5.31 Inventory..................................................38
5.32 Products Liability.........................................38
5.33 Solvency...................................................38
5.34 Other Documents............................................38
5.35 Status of LLC..............................................39
5.36 Merger Agreement and Senior Loan Agreement; Representations
and Warranties.............................................39
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...........39
6.1 Authorization; No Contravention............................39
6.2 Binding Effect.............................................39
6.3 No Legal Bar...............................................39
6.4 Purchase for Own Account...................................39
6.5 ERISA......................................................40
6.6 Broker's, Finder's or Similar Fees.........................40
6.7 Governmental Authorization; Third Party Consent............40
iii
<PAGE> 5
TABLE OF CONTENTS
Page
----
ARTICLE 7 INDEMNIFICATION............................................40
7.1 Indemnification............................................40
7.2 Notification...............................................41
7.3 Registration Rights Agreement..............................42
7.4 Environmental Basket.......................................42
ARTICLE 8 AFFIRMATIVE COVENANTS......................................43
8.1 Financial Statements and Other Information.................43
8.2 Preservation of Corporate Existence........................46
8.3 Payment of Obligations.....................................47
8.4 Compliance with Laws.......................................47
8.5 Reservation of Common Stock................................47
8.6 Inspection.................................................47
8.7 Payment of Note............................................48
8.8 Insurance..................................................48
8.9 Books and Records..........................................48
8.10 Use of Proceeds............................................48
8.11 Board Nominees.............................................48
8.12 Granting of Management Options.............................49
8.13 Whitney Director's Indemnification.........................49
8.14 Title Insurance............................................49
8.15 Landlord Consents. ........................................50
8.16 Cook County Judgment.......................................50
ARTICLE 9 NEGATIVE COVENANTS.........................................50
9.1 Fundamental Changes; Consolidations, Mergers and
Acquisitions...............................................50
9.2 Transactions with Affiliates...............................50
9.3 No Inconsistent Agreements.................................51
9.4 Limitation on Indebtedness.................................51
9.5 Limitation on Liens........................................53
9.6 Dispositions of Assets.....................................54
9.7 Limitations on Restricted Payments.........................54
9.8 Financial Covenants........................................55
9.9 Employee Benefit Plans.....................................56
9.10 Limitation on Business of the Company......................56
9.11 Investments................................................56
9.12 Contingent Obligations.....................................57
iv
<PAGE> 6
TABLE OF CONTENTS
Page
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9.13 Management Fees and Compensation.............................57
9.14 Fiscal Year..................................................57
9.15 Press Release; Public Offering Materials.....................57
9.16 Subsidiaries.................................................57
9.17 No Negative Pledges..........................................57
9.18 No Restrictions on Subsidiary Distributions to the Company...57
9.19 Bank Accounts. .............................................58
ARTICLE 10 PREPAYMENT...................................................58
10.1 Optional Prepayment..........................................58
10.2 Mandatory Prepayment.........................................58
ARTICLE 11 MISCELLANEOUS................................................58
11.1 Survival of Representations and Warranties...................58
11.2 Notices......................................................58
11.3 Successors and Assigns.......................................60
11.4 Amendment and Waiver.........................................60
11.5 Signatures; Counterparts.....................................60
11.6 Headings.....................................................61
11.7 GOVERNING LAW................................................61
11.8 Determinations, Request or Consents..........................61
11.9 JURISDICTION.................................................61
11.10 Severability.................................................61
11.11 Rules of Construction........................................61
11.12 Entire Agreement.............................................61
11.13 Certain Expenses.............................................62
11.14 Publicity....................................................62
11.15 Further Assurances...........................................62
11.16 Obligations of the Purchasers................................62
EXHIBITS
A Form of WSDF Note
B Form of WSDF Warrant
C Certificate of Incorporation
D Form of Operating Agreement
v
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TABLE OF CONTENTS
Page
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E Financial Covenant Calculations
F Stockholders' and Members' Agreement
G Form of Registration Rights Agreement
H Form of Compliance Certificate
I Merger Agreement
J Contribution Agreement
K Miller Employment Agreement
L Guaranty
vi
<PAGE> 8
AMENDED AND RESTATED
SECURITIES PURCHASE AGREEMENT
AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT, dated as
of December 5, 1997, by and among RUSH CREEK LLC (the "LLC"), a Wisconsin
limited liability company, AQUA-CHEM, INC., ("AQUA-CHEM."), a Delaware
corporation (formerly known as A-C Acquisition Corp.), CB-KRAMER SALES AND
SERVICE, INC. ("CB- KRAMER"), a Delaware corporation, WHITNEY SUBORDINATED DEBT
FUND, L.P. ("WSDF"), a Delaware limited partnership, and WHITNEY EQUITY
PARTNERS, L.P., ("WEP" and together with WSDF, the "WHITNEY FUNDS"), a Delaware
limited partnership. The Whitney Funds are sometimes referred to herein as the
"PURCHASERS."
W I T N E S S E T H:
WHEREAS, Messrs. Jeffrey A. Miller, J. Scott Barton, Rand E.
McNally, Bruce Dickson and Charles Norris (collectively, "MANAGEMENT") currently
comprise the senior management team of Aqua-Chem;
WHEREAS, Aqua-Chem is a manufacturer of commercial and
industrial boilers, burners, combustion and emission controls, water
desalination and process evaporation systems for use in water treatment
facilities, process and utility industries and marine/military applications, and
other environmental and energy related machinery;
WHEREAS, Lyonnaise American Holding, Inc. ("LYONNAISE"), a
Delaware corporation, was the holder of eighty percent (80%) of the issued and
outstanding capital stock of Old Aqua-Chem, Inc. ("Old Aqua-Chem"), a Delaware
corporation, which merged with and into Aqua-Chem pursuant to the terms of the
Merger Agreement (as hereinafter defined), and Gestra Corp., N.V. ("GESTRA"), a
company organized in the Netherland Antilles, was the holder of the remaining
twenty percent (20%) of the same;
WHEREAS, Aqua-Chem was formed for the purpose of acquiring Old
Aqua-Chem;
WHEREAS, pursuant to the terms of the Securities Purchase
Agreement (the "Original Agreement"), dated as of July 31, 1997, by and among
the LLC, Aqua-Chem, CB-Kramer and the Purchasers, Aqua-Chem sold to WEP, and WEP
purchased from Aqua-Chem. (i) 2,281.825 shares (the "WEP PREFERRED SHARES") of
Series C Redeemable Preferred Stock, par value $.01 per share, of Aqua-Chem (the
"SERIES C PREFERRED STOCK"), the terms, limitations and relative rights and
preferences of which are set forth in the Certificate of Incorporation (as
hereinafter defined) and (ii) 510,000 shares (the "WEP COMMON SHARES," and
together with the WEP Preferred Shares, the "WEP SHARES") of common stock, $0.01
par value per share, of Acquisition Corp. (the "COMMON
<PAGE> 9
STOCK"), in each case, upon the terms and subject to the conditions set forth in
the Original Agreement;
WHEREAS, pursuant to the terms of the Original Agreement,
Aqua-Chem and CB-Kramer sold to WSDF, and WSDF purchased from Aqua-Chem and
CB-Kramer a subordinated promissory note (the "WSDF NOTE"), due July 30, 2004,
in the principal amount of $21,000,000, and in connection therewith, Aqua-Chem
sold to WSDF, and WSDF purchased from Aqua-Chem., a warrant (the "WSDF WARRANT")
to purchase 176,471 shares of Common Stock, in each case upon the terms and
subject to the conditions hereinafter set forth;
WHEREAS, prior to the date of the Original Agreement, the
Jeffrey A. Miller Family LLC, a Michigan limited liability company, and Jeffrey
A. Miller, Trustee of the Jeffrey A. Miller Trust u/a/d May 10, 1997
(collectively, the "MILLER RELATED ENTITIES") were the sole members of the LLC;
WHEREAS, each of the Purchasers, the Miller Related Entities
and the Managers, other than Miller, own the Membership Units set forth opposite
their names on Schedule A to the Operating Agreement;
WHEREAS, the equity securities set forth opposite each of the
names of Purchasers, the Miller Related Entities and the Managers, other than
Miller, have been allocated to their respective capital accounts;
WHEREAS, concurrently with the purchase and sale of the WEP
Shares, the WSDF Note and the WSDF Warrant pursuant to the terms of the Original
Agreement, Aqua-Chem entered into a Revolving Credit and Term Loan Agreement
(the "SENIOR LOAN AGREEMENT"), dated as of July 31, 1997, with Comerica Bank
("COMERICA"), a Michigan banking corporation, individually and as agent
thereunder, providing for a secured term credit facility, and a secured
revolving credit facility (collectively, the "SENIOR CREDIT FACILITY");
WHEREAS, concurrently with the purchase and sale of the WEP
Shares, the WSDF Note and the WSDF Warrant pursuant to the terms of the Original
Agreement, the contribution of the Series C Preferred Stock and the Common Stock
to the LLC in exchange for Membership Units pursuant to the Contribution
Agreement and the consummation of the Senior Credit Facility pursuant to the
terms of the Senior Loan Agreement, Old Aqua-Chem merged (the "AQUA-CHEM
MERGER") with and into Aqua-Chem., pursuant to the terms of the Agreement and
Plan of Reorganization (the "MERGER AGREEMENT"), dated as of July 31, 1997, by
and among Lyonnaise, Gestra, the LLC, Old Aqua-Chem, Aqua-Chem and Miller, a
copy of which is attached hereto as Exhibit I;
WHEREAS, the proceeds from (i) the purchase by the Purchasers
of the WEP Shares, the WSDF Note and the WSDF Warrant, and (ii) the Senior
Credit Facility were used in part to finance the Aqua-Chem Merger;
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<PAGE> 10
WHEREAS, on the date hereof, Aqua-Chem is entering into an
Amended and Restated Revolving Credit and Term Loan Agreement (the "AMENDED AND
RESTATED SENIOR LOAN AGREEMENT"), dated as of the date hereof, with Comerica, as
structuring, documentation and administrative agent for the financial
institutions from time to time signatory thereto (collectively, the "BANKS"),
and the Banks; and
WHEREAS, in connection with the entering into of the Amended
and Restated Senior Loan Agreement, the LLC, the Company, CB-Kramer and the
Purchasers desire to amend and restate the Original Agreement as set forth
herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"AFFILIATE" shall mean any Person (a) directly or indirectly
controlling, controlled by, or under common control with, the Company, (b)
directly or indirectly owning or holding five percent (5%) or more of any equity
interest in the Company, or (c) five percent (5%) or more of whose voting stock
or other equity interest is directly or indirectly owned or held by the Company.
For purposes of this definition, "control" (including with correlative meanings,
the terms "controlling", "controlled by" and under "common control with") means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"AFFILIATED GROUP" shall have the meaning set forth in Section
1504(a) of the Code.
"AGREEMENT" shall mean this amended and restated Agreement,
including the exhibits and schedules hereto, as the same may be amended,
supplemented or modified in accordance with the terms hereof; provided, however,
that with respect to the period from and after July 31, 1997 and ending on the
date hereof "AGREEMENT" shall mean the Original Agreement.
"ASSET DISPOSITION" shall mean the disposition, whether by
sale, lease, transfer, loss, damage, destruction, condemnation or otherwise of
any of the following: (a) any of the equity interest or stock of the Company or
any of its Subsidiaries or (b) any or all of the assets of the Company or its
Subsidiaries other than sales of inventory in the ordinary course of business.
"NET PROCEEDS" of any Asset Disposition means cash proceeds received by the
Company or any of its
3
<PAGE> 11
Subsidiaries from any Asset Disposition (including insurance proceeds, awards of
condemnation, and payments under notes or other debt securities received in
connection with any Asset Disposition), net of (x) the costs of such sale,
lease, transfer or other disposition (including taxes attributable to such sale,
lease or transfer), and (y) amounts applied to repayment of Indebtedness secured
by a Lien on the asset or property disposed.
"BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
"BY-LAWS" shall mean the by-laws of each of the Company and
CB-Kramer as in effect on the Closing Date.
"CANADIAN OVERDRAFT LOC" is defined in Section 9.4(j).
"CAPITAL EXPENDITURES" shall be determined as set forth in
Exhibit E hereto.
"CAPITAL LEASE OBLIGATIONS" of any Person shall mean the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP consistently applied.
"CASH" shall mean the currency of the United States of
America.
"CERTIFICATE OF INCORPORATION" shall mean the Certificate of
Incorporation of each of the Company and CB-Kramer as in effect on the Closing
Date.
"CERTIFICATE OF ORGANIZATION" shall mean the Certificate of
Organization of the LLC as in effect on the Closing Date.
"CLOSING" shall have the meaning assigned to that term in
Section 2.5.
"CLOSING DATE" shall have the meaning assigned to that term in
Section 2.5.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute thereto.
"COMERICA BANK" shall mean Comerica Bank, a Michigan banking
corporation.
"COMMISSION" shall mean the Securities and Exchange Commission
or any similar agency then having jurisdiction to enforce the Securities Act.
4
<PAGE> 12
"COMMON STOCK" shall have the meaning assigned to that term in
the fifth Whereas clause hereof, or any other capital stock of the Company into
which such stock is reclassified or reconstituted.
"COMPANY" shall mean Aqua-Chem, the surviving corporation of
the Aqua-Chem Merger; provided, however, that with respect to all periods prior
to the effective time of the Aqua-Chem Merger, "COMPANY" shall mean Old
Aqua-Chem.
"COMPLIANCE CERTIFICATE" shall have the meaning given in
Section 8.1(c).
"CONDITION OF THE COMPANY" shall mean the assets, business,
properties, operations or financial condition of the Company and its
Subsidiaries, taken as a whole.
"CONTINGENT OBLIGATION" as applied to any Person, shall mean
any direct or indirect liability, contingent or otherwise, of that Person: (i)
with respect to any indebtedness, lease, dividend or other obligation of another
Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such liability
will be protected (in whole or in part) against loss with respect thereto; (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings; or (iii)
under any foreign exchange contract, currency swap agreement, interest rate swap
agreement or other similar agreement or arrangement designed to alter the risks
of that Person arising from fluctuations in currency values or interest rates.
Contingent Obligations shall include (a) the direct or indirect guaranty,
endorsement (other than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, (b) the obligation to make take-or-pay or
similar payments if required regardless of nonperformance by any other party or
parties to an agreement, and (c) any liability of such Person for the
obligations of another through any agreement to purchase, repurchase or
otherwise acquire such obligation or any property constituting security
therefor, to provide funds for the payment or discharge of such obligation or to
maintain the solvency, financial condition or any balance sheet item or level of
income of another. The amount of any Contingent Obligation shall be equal to the
amount of the obligation so guaranteed or otherwise supported or, if not a fixed
and determined amount, the maximum amount so guaranteed.
"CONTRACTUAL OBLIGATIONS" shall mean as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument to
which such Person is a party or by which it or any of its property is bound.
"CONTRIBUTION AGREEMENT" shall mean the Contribution Agreement
in substantially the form attached hereto as Exhibit J.
5
<PAGE> 13
"DEFINED BENEFIT PLAN" shall mean a defined benefit plan
within the meaning of Section 3(35) of ERISA or Section 414(j) of the Code,
whether funded or unfunded, qualified or non-qualified (whether or not subject
to ERISA or the Code).
"EBITDA" shall be determined as set forth in Exhibit E hereto.
"ENVIRONMENTAL COSTS" shall mean (i) any costs, charges,
expenses, losses, payments, damages, obligations and liabilities arising out of
or attributable to response costs or the costs of corrective action, including
the cost of any investigation, monitoring, sampling, removal, restoration,
remediation, remedial response or remedial work or permit acquisition which is
undertaken, suffered, paid, awarded, assessed or otherwise incurred, arising out
of or attributable to violations of Environmental Laws or the presence or
migration of Hazardous Materials on, above, under or originating from any
property, plant, equipment or facility owned or used by the Company or any
Subsidiary, and (ii) any claims by Persons other than any Governmental Authority
for contribution or damages (including, without limitation, claims relating to
personal injury or death, property damage restitution, trespass, breach of duty,
strict liability, nuisance and claims commonly known as "toxic torts") arising
out of or attributable to any violation of Environmental Laws. Environmental
Costs shall not include any costs, charges, expenses, losses, payments, damages,
obligations, and liabilities arising out of or attributed to friable or damaged
asbestos, or asbestos containing material.
"ENVIRONMENTAL LAWS" shall mean any applicable past, present
or future Federal, state, territorial, provincial or local law, common law
doctrine, rule, order, decree, judgment, injunction, license, permit or
regulation relating to environmental matters, including those pertaining to land
use, air, soil, surface water, ground water (including the protection, cleanup,
removal, remediation or damage thereof), public or employee health or safety or
any other environmental matter, together with any other laws (Federal, state,
territorial, provincial or local) relating to emissions, discharges, releases or
threatened releases of any pollutant or contaminant including, without
limitation, medical, chemical, biological, biohazardous or radioactive waste and
materials, into ambient air, land, surface water, groundwater, personal property
or structures, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, discharge or
handling of any contaminant, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. 9601 et
seq.), the Hazardous Material Transportation Act (49 U.S.C. 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. 1251 et seq.), the Clean Air Act (42
U.S.C. 1251 et seq.), the Toxic Substances Control Act (15 U.S.C. 2601 et seq.),
and the Occupational Safety and Health Act (29 U.S.C. 651 et seq.), as such laws
have been, or are, amended, modified or supplemented heretofore or from time to
time hereafter and any analogous future Federal, or present or future state or
local laws, statutes and regulations promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
6
<PAGE> 14
"ERISA AFFILIATE" shall mean a corporation that is or was a
member of a controlled group of corporations with the Company within the meaning
of section 4001(a) or (b) of ERISA or section 414(b) of the Code, a trade or
business (including a sole proprietorship, partnership, trust, estate or
corporation) that is under common control with Company within the meaning of
section 414(m) of the Code, or a trade or business which together with Company
is treated as a single employer under section 414(o) of the Code.
"EVENT OF DEFAULT" shall have the meaning assigned to such
term in the Note.
"EXERCISABLE SHARES" shall have the meaning assigned to that
term in Section 8.5 hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder.
"FIXED CHARGE COVERAGE" shall be determined as set forth in
Exhibit E hereto.
"GAAP" shall mean generally accepted accounting principles in
effect from time to time within the United States.
"GOVERNMENTAL AUTHORITY" shall mean the government of any
nation, state, city, locality or other political subdivision of any thereof, any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"GUARANTY" shall mean the Guaranty in substantially the form
attached hereto as Exhibit L.
"HAZARDOUS MATERIALS" shall mean (i) any chemical pollutant,
contaminant, pesticide, petroleum or petroleum product or by product radioactive
substance, solid waste (hazardous or extremely hazardous), special, dangerous or
toxic waste, hazardous or toxic substance, chemical or material regulated,
listed, referred to, limited or prohibited under any Environmental Law,
including without limitation: (i) friable or damaged asbestos,
asbestos-containing material, polychlorinated biphenyls (PCBs), solvents and
waste oil; (ii) any "hazardous substance" as defined under CERCLA or any
environmental law, statute, regulation or rule; and (iii) any hazardous waste
defined under RCRA or any Environmental Law; and (iv) even if not prohibited,
listed, limited or regulated by an Environmental Law, all pollutants,
contaminants, hazardous, dangerous or toxic chemical materials, wastes or any
other substances, including without limitation, any industrial process or
pollution control waste (whether or not hazardous within the meaning of RCRA)
which could pose a hazard to the environment, or the health and safety of any
person or impair the use or value of any portion of the Property of the Company.
7
<PAGE> 15
"INDEBTEDNESS" shall mean as to any Person (a) all obligations
of such Person for borrowed money (including, without limitation, reimbursement
and all other obligations with respect to surety bonds, unfunded credit
commitments, letters of credit and bankers' acceptances, whether or not
matured), (b) all obligations of such Person evidenced by notes, bonds,
debentures or similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts payable
and accrued commercial or trade liabilities arising in the ordinary course of
business, (d) all interest rate and currency swaps, caps, collars and similar
agreements or hedging devices under which payments are obligated to be made by
such Person, whether periodically or upon the happening of a contingency, (e)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (f)
all obligations of such Person under leases which have been or should be, in
accordance with GAAP, recorded as capital leases, (g) all indebtedness secured
by any Lien (other than Liens in favor of lessors under leases other than leases
included in clause (f)) on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is non-recourse to the credit of that Person, and (h) any
Contingent Obligation of such Person.
"INITIAL PUBLIC OFFERING" shall mean the initial public
offering by either the Company or any of its subsidiaries of its capital stock
pursuant to a registration statement on Form S-1 or otherwise under the
Securities Act.
"INTEREST COVERAGE" shall be determined as set forth in
Exhibit E hereto.
"INTEREST EXPENSES" shall mean, with respect to the Company
and its Subsidiaries on a consolidated basis for any period, the sum of (a)
gross interest expenses of the Company and its Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP consistently applied,
including (i) the amortization of debt discounts, (ii) the amortization of all
fees payable in connection with the incurrence of Indebtedness to the extent
included in interest expense, (iii) the portion of any payments or accruals with
respect to Capital Lease Obligations allocable to interest expense and (iv) all
commissions paid to factors during such period, and (b) any other capitalized
interest of the Company and its Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP consistently applied.
"INVESTMENT" shall mean (i) any direct or indirect purchase or
other acquisition by the Company or any of its Subsidiaries of any beneficial
interest in, including stock, partnership interest or other equity securities
of, any other Person (other than a Person that prior to the relevant purchase or
acquisition was a Subsidiary of the Company) or (ii) any direct or indirect
loan, advance or capital contribution by the Company or any of its Subsidiaries
to any other Person (other than a Subsidiary of the Company), including all
indebtedness and accounts receivable from that other Person that are not current
assets or did not arise from sales to that other Person in the ordinary course
of business. The amount of any Investment shall be the original cost of such
Investment plus
8
<PAGE> 16
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-offs, write-downs or write-offs with respect to
such Investment.
"LIEN" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or preference,
priority, right or other security interest or preferential arrangement of any
kind or nature whatsoever (excluding preferred stock and equity related
preferences) including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a Capital Lease Obligation, or any financing lease
having substantially the same economic effect as any of the foregoing.
"LIQUIDITY EVENT" shall mean an Initial Public Offering and
any Organic Transaction, as defined in the Certificate of Incorporation.
"MEMBERSHIP UNITS" shall have the meaning assigned to such
term in the Operating Agreement.
"MERGER AGREEMENT" shall have the meaning set forth in the
eleventh Whereas clause.
"MERGER TRANSACTION DOCUMENTS" shall mean the Merger Agreement
and all agreements, instruments and other documents contemplated thereunder,
including without limitation, the certificate of merger evidencing the Aqua-Chem
Merger.
"MILLER EMPLOYMENT AGREEMENT" shall mean the Employment
Agreement between the Company and Jeffrey A. Miller, in substantially the form
attached hereto as Exhibit K.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan within
the meaning of Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the
Code.
"NET INCOME" shall mean, for any period, the net income (or
loss) of the Company and its Subsidiaries on a consolidated basis for such
period, as determined in accordance with GAAP consistently applied, but
excluding any extraordinary gains or losses and any insurance proceeds received
by the Company or any of its Subsidiaries.
"NET PROCEEDS" shall have the meaning set forth within the
definition of "Asset Disposition."
"NOTE" shall mean the WSDF Note.
"OLD AQUA-CHEM" shall have the meaning assigned to such term
in the third Whereas clause.
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<PAGE> 17
"OPERATING AGREEMENT" shall mean the LLC's operating agreement
substantially in the Form attached hereto as Exhibit D.
"OPERATING CASH FLOW" shall be determined as set forth in
Exhibit E hereto.
"ORIGINAL AGREEMENT" shall have the meaning set forth in the
fifth Whereas clause.
"OUTSTANDING BORROWINGS" shall mean all Indebtedness of the
Company and its Subsidiaries for money borrowed that is outstanding at the
relevant time of determination.
"PERMITTED ACQUISITION" shall mean any acquisition by purchase
or otherwise of all or substantially all of the business or assets of any other
Person, provided that with respect to such acquisition, the Company has obtained
the prior written consent of the Purchasers with respect to such acquisition
(such consent to be provided in the sole discretion of the Purchasers).
"PERMITTED INVESTMENTS" shall mean, with respect to any
Person:
(a) Noncallable direct general obligations of the
United States of America or obligations the payment of principal of interest on
which is unconditionally guaranteed by the United States of America.
(b) Obligations of a state of the United States, the
District of Columbia or any possession of the United States, or any political
subdivision thereof, which are described in Section 103(a) of the Code and are
graded in any of the highest three (3) major grades as determined by at least
one Rating Agency; or secured, as to payments of principal and interest, by a
letter of credit provided by a financial institution or insurance provided by a
bond insurance company which in each case is itself or its debt is rated in one
of the highest three (3) major grades as determined by at least one Rating
Agency;
(c) Banker's acceptances, commercial accounts, demand
deposit accounts, certificates of deposit, or depository receipts issued by or
maintained with any bank, trust company, savings and loan association, savings
bank or other financial institution whose deposits are insured by the Federal
Deposit Insurance Corporation and whose reported capital and surplus equal at
least $500,000,000, provided that such minimum capital and surplus requirement
shall not apply to demand deposit accounts maintained by the Company or any of
its Subsidiaries in the ordinary course of business;
(d) Commercial paper rated at the time of purchase
within the two highest classifications established by not less than two Rating
Agencies, and which matures within 270 days after the date of issue;
(e) Secured repurchase agreements against obligations
itemized in paragraph (a) above, and executed by a bank or trust company or by
members of the association of
10
<PAGE> 18
primary dealers or other recognized dealers in United States government
securities, the market value of which must be maintained at levels at least
equal to the amounts advanced; and
(f) Any fund or other pooling arrangement which
exclusively purchases and holds the investments itemized in (a) though (e)
above.
"PERSON" shall mean any individual, firm, corporation, limited
liability company, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, Governmental Authority or other
entity of any kind, and shall include any successor (by merger or otherwise) of
such entity.
"PLANS" shall have the meaning assigned to that term in
Section 5.23 of this Agreement.
"PRO FORMA BALANCE SHEET" shall mean the pro forma
consolidated balance sheet of the Company and its Subsidiaries delivered
pursuant to Section 3.14.
"RATING AGENCY" shall mean Moody's Investor Services, Standard
and Poor's Ratings Group or any other nationally reorganized statistical rating
organization which is acceptable to the Purchasers.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration
Rights Agreement substantially in the form attached hereto as Exhibit G.
"REQUIREMENTS OF LAW" shall mean as to any Person, the
Certificate of Incorporation, By-laws, Operating Agreement or other
organizational or governing documents of such Person, and any law, treaty, rule,
regulation, right, privilege, qualification, license or franchise or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable or binding upon such Person or any of its property or to
which such Person or any of its property is subject or pertaining to any or all
of the transactions contemplated or referred to herein.
"RESTRICTED PAYMENT"shall mean: (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock, limited liability company interest, or partnership interest of the
Company or any of its Subsidiaries now or hereafter outstanding, except a
dividend payable solely in shares of that class of stock, limited liability
company interest, or partnership interest to the holders of that class; (ii) any
redemption, conversion, exchange, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of
any class of stock, limited liability company interest or partnership interest
of the Company or any of its Subsidiaries now or hereafter outstanding; (iii)
any payment or prepayment of interest on, principal of, premium, if any,
redemption, conversion, exchange, purchase, retirement, defeasance, sinking fund
or similar payment with respect to, any Indebtedness subordinated to the
Indebtedness existing pursuant to the Note and this Agreement; (iv) any payment
made to retire, or to obtain the surrender of, any outstanding warrants, options
or other rights to
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acquire shares of any class of stock, limited liability company interest, or
partnership interest of the Company or any of its Subsidiaries now or hereafter
outstanding; and (v) any payment under any noncompete agreement.
"SECURITIES" shall mean, collectively, the Note, the Warrant
and the Shares.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations
thereunder as the same shall be in effect at the time.
"SENIOR CREDIT FACILITY" shall have the meaning assigned to it
in the tenth Whereas clause.
"SENIOR CREDIT FACILITY TRANSACTION DOCUMENTS" shall mean the
Senior Loan Agreement and all of the agreements instruments and other documents
contemplated thereunder, including, without limitation, the corresponding
promissory notes and the Subordination Agreement.
"SENIOR INDEBTEDNESS" shall mean all Indebtedness of the
Company and its Subsidiaries currently outstanding or incurred in the future
pursuant to any borrowing by the Company or any of its Subsidiaries from any
bank or institutional lender having total assets (together with its affiliates)
in excess of $500,000,000, and any renewals, extensions, refinancings or
refundings thereof.
"SENIOR LOAN AGREEMENT" shall mean the Senior Loan Agreement,
as defined in the tenth Whereas clause, with respect to the period from and
after July 31, 1997 and ending on the date hereof, and the Amended and Restated
Senior Loan Agreement with respect to all periods from and after the date
hereof.
"SERIES C PREFERRED STOCK" shall have the meaning ascribed to
such term in the fifth Whereas clause.
"SHARES" shall mean the WEP Shares.
"SOLVENT" shall mean, with respect to the Company and its
Subsidiaries considered as a whole, based on the Pro Forma Balance Sheet, (i)
the assets and the property of the Company and its Subsidiaries, considered as a
whole, exceed the aggregate liabilities (including contingent and unliquidated
liabilities) of the Company and its Subsidiaries, considered as a whole, (ii)
after giving effect to the transactions contemplated by this Agreement, the
Company and its Subsidiaries, considered as a whole, will not be left with
unreasonably small capital, and (iii) after giving effect to the transactions
contemplated by this Agreement, the Company and its Subsidiaries, considered as
a whole, are able to both service and pay their liabilities as they mature. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed as the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that is likely to
become an actual or matured liability.
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"STOCKHOLDERS' AND MEMBERS' AGREEMENT" shall mean the
Stockholders' and Members' Agreement substantially in the form attached hereto
as Exhibit F.
"SUBSIDIARY" shall mean, with respect to any Person, a
corporation or other entity of which 50% or more of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly, by
such Person. Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Company.
"SUBORDINATION AGREEMENT" shall have the meaning set forth in
the Senior Loan Agreement.
"TANGIBLE NET WORTH" shall mean, as of the date of
determination thereof, the difference between the aggregate sum of (i) the par
value of all classes of capital stock of the Company and its Subsidiaries (or
value stated on the books of the Company and its Subsidiaries), (ii) capital
contributed in excess of par of the capital stock of all classes of capital
stock of the Company and its Subsidiaries, and (iii) the amount of surplus (or
deficit) or retained earnings, whether capital, earned or otherwise, of the
Company and it Subsidiaries, less the sum of the stated value of treasury stock,
patents, trademarks, trade names, copyrights, goodwill and other like and
similar intangible assets of the Company and its Subsidiaries.
"TAX" shall mean any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on-minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"TAX RETURN" shall mean any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"TOTAL CONSIDERATION" shall mean the total consideration paid
with respect to any such acquisition, including without limitation (u) all
payments made in cash and property, (v) all payments made in stock, (w) the
amounts paid or to be paid pursuant to non-compete agreements and consulting
agreements, (x) the amount of debt assumed (and in the case of a stock
acquisition, the amount of debt of the Person to be acquired) (y) the amount of
seller subordinated indebtedness incurred in connection with such acquisition
and (z) the amount of all transaction fees.
"TOTAL FUNDED INDEBTEDNESS" shall be determined as set forth
in Exhibit E hereto.
"TRANSACTION DOCUMENTS" shall mean collectively, this
Agreement, the Note, the Guaranty, the Warrant, the Registration Rights
Agreement, the Stockholders' and Members' Agreement, the Operating Agreement,
the Contribution Agreement, the By-Laws, the Miller
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Employment Agreement, the Certificate of Incorporation, the Certificate of
Organization, the Senior Credit Facility Transaction Documents, and the Merger
Transaction Documents.
"WARRANT" shall mean the WSDF Warrant.
"WEP COMMON SHARES" shall have the meaning set forth in the
fifth Whereas clause.
"WEP SHARES" shall have the meaning set forth in the fifth
Whereas clause.
"WEP PREFERRED SHARES" shall have the meaning assigned to that
term in the fifth Whereas clause.
"WHITNEY" shall mean J.H. Whitney & Co.
"WSDF NOTE" shall mean the subordinated promissory note in the
principal amount of $21,000,000 referred to in the sixth Whereas clause hereof,
which promissory note is substantially in the form attached hereto as Exhibit A.
"WSDF WARRANT" shall mean the warrant referred to in the sixth
Whereas clause hereof, which warrant is substantially in the form attached as
hereto as Exhibit B.
1.2 ACCOUNTING TERMS: FINANCIAL STATEMENTS. All accounting
terms used herein and not expressly defined in this Agreement shall have the
respective meanings given to them in conformance with GAAP. Financial statements
and other information furnished pursuant to the Agreement or the other
Transaction Documents shall be prepared in accordance with GAAP as in effect at
the time of such preparation. No "Accounting Changes" (as defined below) shall
affect financial covenants, standards or terms in this Agreement; provided that
the Company shall prepare footnotes to each Compliance Certificate and the
financial statements required to be delivered hereunder that show the
differences between the financial statements delivered (which reflect such
Accounting Changes) and the basis for calculating financial covenant compliance
(without reflecting such Accounting Changes). "ACCOUNTING CHANGES" means: (a)
changes in accounting principles required by GAAP and implemented by the
Company; (b) changes in accounting principles recommended by the Company's
certified public accountants and implemented thereby; and (c) changes in
carrying value of the Company's or any of its Subsidiaries' assets, liabilities
or equity accounts resulting from (i) the application of purchase accounting
principles (A.P.B. 16 and/or 17 and EITF 88-16 and FASB 109) to the purchase and
sale of the Securities or their other transactions described in the Transaction
Documents, or (ii) as the result of any other adjustments that, in each case,
were applicable to, but not included in, the Pro Forma Balance Sheet. All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including, but not limited to, capitalization of costs and expenses or payment
of pre-Closing Date liabilities) shall be treated as expenses in the period the
expenditures are made.
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1.3 KNOWLEDGE OF THE COMPANY. All references to the knowledge
of the Company or to facts known by the Company shall mean actual knowledge or
notice of its Chairman, Chief Executive Officer, President, Chief Financial
Officer or other executive officer, including without limitation, Management or
any Chief Executive Officer, Chief Financial Officer or other executive officer
of any Subsidiary or division thereof or knowledge which such Person could
reasonably have acquired through the exercise of due inquiry.
ARTICLE 2
PURCHASE AND SALE OF THE SECURITIES
2.1 PURCHASE AND SALE OF THE WSDF NOTE. Subject to the terms
and conditions herein set forth: (a) the Company and CB-Kramer jointly issued
and sold to WSDF, and WSDF acquired from the Company and CB-Kramer on the
Closing Date, the WSDF Note substantially in the form attached hereto as Exhibit
A, appropriately completed in conformity therewith. The purchase price paid for
the WSDF Note was $20,900,000.
2.2 PURCHASE AND SALE OF WSDF WARRANT. Subject to the terms
and conditions herein set forth, the Company issued and sold to WSDF, and WSDF
acquired from the Company on the Closing Date, the WSDF Warrant substantially in
the form attached hereto as Exhibit B, appropriately completed in conformity
therewith. The purchase price paid for the WSDF Warrant was $100,000.
2.3 PURCHASE AND SALE OF THE WEP PREFERRED SHARES AND THE WEP
COMMON SHARES. Subject to the terms and conditions herein set forth, the Company
issued and sold to WEP and WEP acquired from the Company on the Closing Date,
the WEP Preferred Shares and the WEP Common Shares. The WEP Preferred Shares
shall have the powers, rights and preferences set forth in the Certificate of
Incorporation, a copy of which is attached hereto as Exhibit C. The aggregate
purchase price paid for the WEP Preferred Shares was $2,199,000 and the
aggregate purchase price paid for the WEP Common Shares was $ 51,000.
2.4 FEES AT CLOSING; ANNUAL FEES. Concurrently with the
execution of the Original Agreement, the Company (a) paid to Whitney a debt
placement fee of $630,000 and a transaction fee of $210,000 for an aggregate fee
amount of $840,000, and (b) reimbursed all of the Purchasers' reasonable
out-of-pocket expenses (including, without limitation, lawyers' fees, charges
and disbursements and consultants' fees and expenses and any other due diligence
expenses) incurred in connection with (i) the negotiation and execution and
delivery of the Original Agreement and the Transaction Documents and (ii) the
transactions contemplated by the Original Agreement and the Transaction
Documents, which payments were made by wire transfer of immediately available
funds to an account or accounts designated by the Purchasers. Concurrently with
the execution hereof, the Company shall reimburse all of the Purchasers'
reasonable out-of-pocket expenses (including, without limitation, lawyers' fees,
charges and disbursements and consultants'
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fees and expenses and any other due diligence expenses) incurred in connection
with (i) the negotiation and execution and delivery of this Agreement and the
Transaction Documents and (ii) the transactions contemplated by this Agreement
and the Transaction Documents, which payments shall be made by wire transfer of
immediately available funds to an account or accounts designated by the
Purchasers. Subject to the Senior Credit Facility Transaction documents, the
Company also shall pay Whitney an annual monitoring fee of $50,000 payable
annually on each January 1 of each year, or if any such date shall not be a
Business Day, on the next succeeding Business Day to occur after such date,
beginning on January 1, 1998 and ending upon consummation of an Initial Public
Offering. Upon consummation of an Initial Public Offering, the Company shall pay
any unpaid portion of the annual monitoring fees (calculated on a daily basis)
within five (5) Business Days after receipt by either the Company or any of its
Subsidiaries of the proceeds of such Initial Public Offering. The annual
monitoring fee shall be junior in right of payment to the Note. In addition to
the annual monitoring fee, the Company shall also be entitled to a recognition
fee which shall accrue at a rate of $25,000 per annum, beginning on the Closing
Date, and payable on a Liquidity Event.
2.5 CLOSING. The purchase and issuance of the Securities took
place at the closing (the "CLOSING") held at the offices of Whyte Hirschboeck
Dudek S.C., 2100 Bank One Plaza, Milwaukee, Wisconsin 53202 at 9:00 a.m.,
Central Daylight Time, on Thursday, July 31, 1997 (the "CLOSING DATE"). At the
Closing, (a) the Company and CB-Kramer delivered the WSDF Note against delivery
by WSDF to the Company of the purchase price therefor, (b) the Company delivered
the WSDF Warrant to WSDF against delivery by WSDF to the Company of the purchase
price therefor, (c) the Company delivered stock certificates representing the
WEP Shares to WEP against delivery by WEP to the Company of the purchase price
therefor, in each case such purchase price was paid by wire transfer of
immediately available funds, and (d) LLC executed and delivered the Guaranty.
2.6 FINANCIAL ACCOUNTING POSITIONS; TAX REPORTING. Each of the
parties hereto agrees to take reporting and other positions with respect to the
Securities which are consistent with the purchase price of the Securities set
forth herein for all financial accounting purposes, unless otherwise required by
applicable GAAP or Commission rules (in which case the parties agree only to
take positions inconsistent with the purchase price of the Securities set forth
herein provided that the Purchasers have consented thereto, which consent shall
not be unreasonably withheld). Each of the parties to this Agreement agrees to
take reporting and other positions with respect to the Securities which are
consistent with the purchase price of the Securities set forth herein for all
other purposes, including without limitation, for all Federal, state and local
tax purposes.
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ARTICLE 3
CONDITIONS TO THE RESPECTIVE OBLIGATIONS OF THE PURCHASERS
TO PURCHASE THE SECURITIES
The obligation of the Purchasers to purchase the Note, the
Warrant and the WEP Shares, to pay the purchase prices therefor at the Closing
and to perform any obligations hereunder were subject to the satisfaction as
determined by, or waived by, the Purchasers of the following conditions on or
before the Closing Date. WSDF shall not have been obligated to purchase either
the WSDF Note or the WSDF Warrant unless the purchase and sale of the WSDF Note
and the WSDF Warrant had occurred simultaneously with the purchase and sale of
the WEP Shares. WEP shall not have been obligated to purchase the WEP Shares
unless the purchase and sale of the WEP Shares had occurred simultaneously with
the purchase and sale of the WSDF Note and the WSDF Warrant.
3.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the LLC, the Company and CB-Kramer contained in Article 5 hereof
shall be true and correct at and as of the Closing Date as if made at and as of
such date.
3.2 COMPLIANCE WITH THIS AGREEMENT. The LLC, the Company and
CB-Kramer shall have performed and complied with all of its agreements and
conditions set forth or contemplated herein that are required to be performed or
complied with by the LLC, the Company or CB-Kramer on or before the Closing
Date.
3.3 CERTIFICATES.
(a) The Purchasers shall have received a certificate
from the LLC, dated the Closing Date and signed by a manager of the LLC
certifying (a) that the attached copies of the Certificate of Organization of
the Company, together with its Operating Agreement, which, among other things,
approves this Agreement and the other Transaction Documents to which the LLC is
a party and the transactions contemplated hereby and thereby, are all true,
complete and correct and remain unamended and in full force and effect, and (b)
as to the incumbency and specimen signature of each member and manager of the
LLC executing any Transaction Document to which the LLC is a party or any other
document delivered in connection herewith on behalf of the LLC.
(b) The Purchasers shall have received a certificate
from each of the Company and CB-Kramer, dated the Closing Date and signed by the
Secretary or an Assistant Secretary of each of the Company and CB-Kramer,
certifying (a) that the attached copies of the Certificate of Incorporation,
By-Laws and the resolutions of the Board of Directors of each of the Company and
CB-Kramer approving the Agreement and the other Transaction Documents to which
the Company is a party and the transactions contemplated hereby and thereby, are
all true, complete and correct and remain unamended and in full force and
effect, and (b) as to the incumbency and specimen signature of each officer of
each of the Company and CB-Kramer executing any
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Transaction Document to which the Company or CB-Kramer is a party or any other
document delivered in connection herewith on behalf of the Company or CB-Kramer.
3.4 DOCUMENTS. The Purchasers shall have received true,
complete and correct copies of such agreements, schedules, exhibits,
certificates, documents, financial information and filings as they may request
in connection with or relating to the transactions contemplated hereby, all in
form and substance satisfactory to the Purchasers.
3.5 PURCHASE OF SECURITIES PERMITTED BY APPLICABLE LAWS. The
acquisition of and payment for the Securities to be acquired by the Purchasers
hereunder and the consummation of the transactions contemplated hereby and by
the Transaction Documents (a) shall not be prohibited by any Requirement of Law,
(b) shall not subject the Purchasers to any penalty or other onerous condition
under or pursuant to any Requirement of Law, and (c) shall be permitted by all
Requirements of Law to which the Purchasers or the transactions contemplated by
or referred to herein or in the Transaction Documents are subject; and the
Purchasers shall have received such certificates or other evidence as they may
reasonably request to establish compliance with this condition.
3.6 OPINION OF COUNSEL. The Purchasers shall have received an
opinion of outside counsel to the LLC, the Company and its Subsidiaries, dated
as of the Closing Date, relating to the transactions contemplated by or referred
to herein, in form and substance acceptable to the Purchasers.
3.7 APPROVAL OF COUNSEL TO THE PURCHASERS. All actions and
proceedings hereunder and all agreements, schedules, exhibits, certificates,
financial information, filings and other documents required to be delivered by
the LLC and the Company and each of its Subsidiaries hereunder or in connection
with the consummation of the transactions contemplated hereby, and all other
related matters, shall have been in form and substance acceptable to Morrison
Cohen Singer & Weinstein, LLP, counsel to the Purchasers, in its reasonable
judgment (including, without limitation, the opinions of counsel referred to in
Sections 3.6 hereof).
3.8 CONSENTS AND APPROVALS. All consents, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons in respect of all Requirements of Law
and with respect to those Contractual Obligations of the LLC, or the Company or
any of its Subsidiaries necessary, desirable, or required in connection with the
execution, delivery or performance (including, without limitation, the payment
of interest on the Note and the issuance of Common Stock upon the exercise of
the Warrant) by the LLC, or the Company or any of its Subsidiaries, or
enforcement against the LLC, or the Company or any of its Subsidiaries, of the
Transaction Documents to which each is a party shall have been obtained and be
in full force and effect, and the Purchasers shall have been furnished with
appropriate evidence thereof, and all waiting periods shall have lapsed without
extension or the imposition of any conditions or restrictions.
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3.9 REGISTRATION RIGHTS AGREEMENT. The LLC and the Company
shall have duly executed and delivered the Registration Rights Agreement, in
form and substance satisfactory to the Purchasers.
3.10 OPERATING AGREEMENT. The Operating Agreement shall have
been duly executed and delivered by all of the parties thereto, in form and
substance satisfactory to the Purchasers.
3.11 CERTIFICATE OF INCORPORATION. The Company shall have
amended its Certificate of Incorporation and By-laws (among other things,
increasing the size of the Board of Directors of the Company to six members and
including an indemnification provision), in form and substance satisfactory to
the Purchasers.
3.12 CERTIFICATE OF ORGANIZATION. The LLC shall have amended
its Certificate of Organization, in form and substance satisfactory to the
Purchasers.
3.13 NO MATERIAL JUDGMENT OR ORDER. There shall not be on the
Closing Date any judgment or order of a court of competent jurisdiction or any
ruling of any Governmental Authority or any condition imposed under any
Requirement of Law which, in the judgment of the Purchasers, would prohibit the
consummation of the transactions contemplated under the Transaction Documents or
subject the Purchasers to any penalty or other onerous condition under or
pursuant to any Requirement of Law if the transactions contemplated under the
Transaction Documents were to be consummated.
3.14 PRO FORMA BALANCE SHEET. The Company shall have delivered
to the Purchasers as of the Closing Date a pro forma consolidated balance sheet
of the Company and its Subsidiaries, certified by the chief financial officer of
the Company that it fairly presents the pro forma adjustments reflecting the
consummation of the transactions contemplated in this Agreement, including all
material fees and expenses in connection therewith, subject to normal year-end
audit adjustments.
3.15 GOODSTANDING CERTIFICATES. The LLC, the Company and
CB-Kramer shall have delivered to the Purchasers as of the Closing Date,
goodstanding certificates for the LLC, Acquisition Corp., Old Aqua-Chem and each
of Old Aqua-Chem's Subsidiaries for each of their respective jurisdictions of
incorporation and all other jurisdictions where they do business.
3.16 MILLER EMPLOYMENT AGREEMENT. Jeffrey A. Miller shall have
duly executed and delivered to the Company an employment agreement between him
and the Company, in form satisfactory to the Purchasers.
3.17 AQUA-CHEM MERGER. The Aqua-Chem Merger shall have been
consummated on terms and conditions satisfactory to the Purchasers. The
Purchasers shall have received a certificate from each of Acquisition Corp. and
Old Aqua-Chem, dated the Closing Date, and signed
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EXHIBIT 10.17
by the Secretary or an Assistant Secretary of each of Acquisition Corp. and Old
Aqua-Chem certifying that the attached copies of the resolutions of the Board of
Directors and the stockholders of each of Acquisition Corp. and Old Aqua-Chem
approving the Aqua-Chem Merger, the execution and delivery of the Merger
Transaction Documents, and the performance of the obligations thereunder. The
Purchasers shall have also received a copy of a certificate of merger evidencing
the Aqua-Chem Merger and certified by the Secretary of State of Delaware.
3.18 SENIOR CREDIT FACILITY; SUBORDINATION. The Senior Credit
Facility shall have been consummated on terms and conditions satisfactory to the
Purchasers. The Whitney Funds shall have entered into the Subordination
Agreement, which such agreement shall be in form and substance satisfactory to
the Purchasers.
3.19 MANAGEMENT CAPITAL CONTRIBUTION. Management (other than
Miller) shall have delivered to the Purchasers, evidence of its aggregate
$505,000 subscription and capital contribution to the Company, and such evidence
shall be satisfactory to the Purchasers.
3.20 STOCKHOLDERS' AND MEMBERS' AGREEMENT. The Stockholders'
and Members' Agreement shall have been duly executed and delivered by all
parties thereto, in form and substance satisfactory to the Purchasers.
3.21 GUARANTY. The LLC shall have executed and delivered the
Guaranty.
3.22 PAYMENT OF THOMASVILLE INDEBTEDNESS AND RELEASE OF
LIENS. The Company shall have delivered evidence of payment in full into escrow
of the Indebtedness under the Loan Agreement, dated October 1, 1995, between
Old Aqua Chem and Thomasville Payroll Development Authority (entered into in
connection the issuance of the Thomasville Payroll Development Authority
$3,000,000 Adjustable Rate Industrial Development Revenue Bonds Series 1995, due
on October 1, 2007) (the "Thomasville IRBs") and the release of all Liens in
connection therewith, in form and substance satisfactory to the Purchasers.
3.23 PAYMENT OF MONROE INDEBTEDNESS AND RELEASE OF LIENS. The
Company shall have delivered evidence of payment in full into escrow of the
Indebtedness under the Loan Agreement, dated September 1, 1995, between Old
Aqua-Chem and the City of Monroe, Wisconsin (entered into in connection the
issuance of the City of Monroe, Wisconsin $1,900,000 Adjustable Rate Industrial
Development Revenue Bonds Series 1995, due on September 1, 2005) (the Monroe
IRBs") and the release of all Liens in connection therewith, in form and
substance satisfactory to the Purchasers.
3.24 TERMINATION OF 1982 STOCKHOLDERS' AGREEMENT. The Company
shall have delivered evidence of the termination of the Stockholders' Agreement,
dated February 1, 1982, between Lyonnaise and Gestra, as amended, in form and
substance satisfactory to the Purchasers.
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3.25 TERMINATION OF SPECIAL SECURITY AGREEMENT. The Company
shall have delivered evidence of the termination of the Special Security
Agreement, dated June 20, 1986, between Lyonnaise des Eaux, Lyonnaise, Rezayat
Trading Company, Dexin Investments N.V., Gestra, Old Aqua-Chem and the United
States Department of Defense, as amended, in form and substance satisfactory to
the Purchasers.
3.26 TERMINATION OF INTERIM MANAGEMENT AGREEMENT. The Company
shall have delivered evidence of the termination of the Interim Management
Agreement, made July 8, 1996, between the Company, J. Miller Management, Inc.
and Miller, as amended, in form and substance satisfactory to the Purchasers.
3.27 AMENDMENT TO EMPLOYMENT AGREEMENTS. The Company shall
have delivered evidence of execution and delivery by the Company and each of
Barton, McNally, Dickson and Norris of an amendment to their respective
employment agreements, as in effect on the Closing Date, with Old-Aqua Chem, in
form and substance satisfactory to the Purchasers.
3.28 ADOPTION OF 1997 STOCK OPTION PLAN. The Company shall
have delivered evidence of the adoption of the Aqua-Chem, Inc. 1997 Stock Option
Plan, in form and substance satisfactory to the Purchasers.
ARTICLE 3A
CONDITIONS TO THE RESPECTIVE OBLIGATIONS OF THE PURCHASERS
TO PURCHASE THE SECURITIES
The obligation of the Purchasers to perform any of their
obligations hereunder are subject to the satisfaction as determined by, or
waived by, the Purchasers of the following conditions on or before the date
hereof.
3A.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the LLC, the Company and CB-Kramer contained in Article 5 hereof
shall be true and correct at and as of the Closing Date and as of the date
hereof as if made at and as of such dates.
3A.2 COMPLIANCE WITH THIS AGREEMENT. The LLC, the Company and
CB-Kramer shall have performed and complied with all of its agreements and
conditions set forth or contemplated herein that are required to be performed or
complied with by the LLC, the Company or CB-Kramer on or before the date hereof.
3A.3 CERTIFICATES.
(a) The Purchasers shall have received a certificate
from the LLC, dated the date hereof and signed by a manager of the LLC
certifying (a) that the attached copies of the Certificate of Organization of
the Company, together with its Operating Agreement, which, among
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other things, approves this Agreement and the other Transaction Documents to
which the LLC is a party and the transactions contemplated hereby and thereby,
are all true, complete and correct and remain unamended and in full force and
effect, and (b) as to the incumbency and specimen signature of each member and
manager of the LLC executing any Transaction Document to which the LLC is a
party or any other document delivered in connection herewith on behalf of the
LLC.
(b) The Purchasers shall have received a certificate
from each of the Company and CB-Kramer, dated the date hereof and signed by the
Secretary or an Assistant Secretary of each of the Company and CB-Kramer,
certifying (a) that the attached copies of the Certificate of Incorporation,
By-Laws and the resolutions of the Board of Directors of each of the Company and
CB-Kramer approving the Agreement and the other Transaction Documents to which
the Company is a party and the transactions contemplated hereby and thereby, are
all true, complete and correct and remain unamended and in full force and
effect, and (b) as to the incumbency and specimen signature of each officer of
each of the Company and CB-Kramer executing any Transaction Document to which
the Company or CB-Kramer is a party or any other document delivered in
connection herewith on behalf of the Company or CB-Kramer.
3A.4 DOCUMENTS. The Purchasers shall have received true,
complete and correct copies of such agreements, schedules, exhibits,
certificates, documents, financial information and filings as they may request
in connection with or relating to the transactions contemplated hereby, all in
form and substance satisfactory to the Purchasers.
3A.5 PURCHASE OF SECURITIES PERMITTED BY APPLICABLE LAWS. The
acquisition of and payment for the Securities acquired by the Purchasers
hereunder and the consummation of the transactions contemplated hereby and by
the Transaction Documents (a) shall not be prohibited by any Requirement of Law,
(b) shall not subject the Purchasers to any penalty or other onerous condition
under or pursuant to any Requirement of Law, and (c) shall be permitted by all
Requirements of Law to which the Purchasers or the transactions contemplated by
or referred to herein or in the Transaction Documents are subject; and the
Purchasers shall have received such certificates or other evidence as they may
reasonably request to establish compliance with this condition.
3A.6 OPINION OF COUNSEL. The Purchasers shall have received an
opinion of outside counsel to the LLC, the Company and its Subsidiaries, dated
as of the date hereof, relating to the transactions contemplated by or referred
to herein, in form and substance acceptable to the Purchasers.
3A.7 APPROVAL OF COUNSEL TO THE PURCHASERS. All actions and
proceedings hereunder and all agreements, schedules, exhibits, certificates,
financial information, filings and other documents required to be delivered by
the LLC and the Company and each of its Subsidiaries hereunder or in connection
with the consummation of the transactions contemplated hereby, and all other
related matters, shall have been in form and substance acceptable to Morrison
Cohen Singer
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& Weinstein, LLP, counsel to the Purchasers, in its reasonable judgment
(including, without limitation, the opinions of counsel referred to in Sections
3A.6 hereof).
3A.8 CONSENTS AND APPROVALS. All consents, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons in respect of all Requirements of Law
and with respect to those Contractual Obligations of the LLC, or the Company or
any of its Subsidiaries necessary, desirable, or required in connection with the
execution, delivery or performance (including, without limitation, the payment
of interest on the Note and the issuance of Common Stock upon the exercise of
the Warrant) by the LLC, or the Company or any of its Subsidiaries, or
enforcement against the LLC, or the Company or any of its Subsidiaries, of the
Transaction Documents to which each is a party shall have been obtained and be
in full force and effect, and the Purchasers shall have been furnished with
appropriate evidence thereof, and all waiting periods shall have lapsed without
extension or the imposition of any conditions or restrictions.
3A.9 NO MATERIAL JUDGMENT OR ORDER. There shall not be on the
date hereof any judgment or order of a court of competent jurisdiction or any
ruling of any Governmental Authority or any condition imposed under any
Requirement of Law which, in the judgment of the Purchasers, would prohibit the
consummation of the transactions contemplated under the Transaction Documents or
subject the Purchasers to any penalty or other onerous condition under or
pursuant to any Requirement of Law if the transactions contemplated under the
Transaction Documents were to be consummated.
3A.10 SENIOR CREDIT FACILITY. The modification of the Senior
Credit Facility shall have been consummated on terms and conditions satisfactory
to the Purchasers.
ARTICLE 4
CONDITIONS TO THE OBLIGATIONS
OF THE LLC, THE COMPANY AND CB-KRAMER
The obligations of the Company to issue and sell the
Securities (and the obligation of CB-Kramer to issue and sell the Note), and the
obligations of the Company and the LLC to perform their other obligations
hereunder relating thereto were subject to the satisfaction as determined by, or
waived by, the LLC and the Company of the following conditions on or before the
Closing Date:
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchasers contained in Article 6 hereof shall be true and
correct at and as of the Closing Date as if made at and as of such date.
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4.2 COMPLIANCE WITH THIS AGREEMENT. The Purchasers shall have
performed and complied with all of their respective agreements and conditions
set forth or contemplated herein that are required to be performed or complied
with by the Purchasers on or before the Closing Date.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The LLC, the Company and CB-Kramer hereby jointly and
severally represent and warrant, as of the Closing Date and as of the date
hereof, to the Purchasers as follows:
5.1 EXISTENCE AND POWER. Each of the LLC, and the Company and
each of its Subsidiaries: (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization; (b) has all
requisite power and authority to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently, or is currently proposed to be, engaged; (c) is, duly qualified,
licensed and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification, except to the extent that the failure to do so
would not have a material adverse effect on the Condition of the Company; and
(d) has the power and authority to execute, deliver and perform its obligations
under each Transaction Document to which it is or will be a party and to borrow
hereunder.
5.2 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery
and performance by each of the LLC, the Company and CB-Kramer of each
Transaction Document to which it is a party and the consummation of the
transactions contemplated hereby and thereby, including without limitation the
issuance of the Securities: (a) has been duly authorized by all necessary
action; (b) does not contravene the terms of (i) the LLC's Certificate of
Organization, or any amendment thereof, (ii) the Company's Certificate of
Incorporation, By-laws or any amendment thereto, or any such documents of any of
the Company's Subsidiaries; and (c) will not violate, conflict with or result in
any breach or contravention of or the creation of any Lien under, any
Contractual Obligation of any of the LLC, or the Company or any of its
Subsidiaries or any Requirement of Law applicable to any of the LLC, or the
Company or any of its Subsidiaries.
5.3 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. No
approval, consent, compliance, exemption, authorization, or other action by, or
notice to, or filing with, any Governmental Authority or any other Person in
respect of any Requirement of Law, and no lapse of a waiting period under a
Requirement of Law, is necessary or required in connection with the execution,
delivery or performance by (including, without limitation, the payment of
interest on the Note and the issuance of Common Stock upon the exercise of the
Warrant), or enforcement against, any of the LLC, or the Company or its
Subsidiaries of the Transaction Documents to which it is a party or the
consummation of the transactions contemplated hereby or thereby, other than the
expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
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5.4 BINDING EFFECT. Each of the Transaction Documents to which
it is a party has been duly executed and delivered by the LLC, the Company or
CB-Kramer, as the case may be, and constitutes the legal, valid and binding
obligation of the LLC, the Company or CB-Kramer, as the case may be, enforceable
against the LLC, the Company or CB-Kramer, as the case may be, in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity relating to
enforceability.
5.5 NO LEGAL BAR. Neither the execution, delivery and
performance of the Transaction Documents nor the issuance of or performance of
the terms of the Securities will violate any Requirement of Law or any
Contractual Obligation of the LLC or the Company or any of its Subsidiaries.
Neither the LLC nor the Company (nor any of its Subsidiaries) has previously
entered into any agreement which is currently in effect or to which the LLC or
the Company or any of its Subsidiaries is currently bound, granting any rights
to any Person which are inconsistent with the rights to be granted by the LLC or
the Company or any of its Subsidiaries, as the case may be, in the Transaction
Documents.
5.6 LITIGATION. Except as set forth on Schedule 5.6, there are
no material legal actions, suits, proceedings, claims or disputes pending or
threatened, at law, in equity, in arbitration or before any Governmental
Authority against or affecting the LLC, or the Company or any of its
Subsidiaries (or, as applicable, to the Company's knowledge, any of their
respective shareholders, directors, officers, employees or agents). No
injunction, writ, temporary restraining order, decree or any order of any nature
has been issued by any court or other Governmental Authority purporting to
enjoin or restrain the execution, delivery or performance of the Transaction
Documents.
5.7 COMPLIANCE WITH LAWS. Except as set forth on Schedule 5.7,
the LLC, and the Company and each of its Subsidiaries are in compliance with all
Requirements of Law except where such non-compliance would not have a material
adverse effect on the Condition of the Company.
5.8 NO DEFAULT OR BREACH. No event has occurred and is
continuing or would result from the incurring of obligations by the LLC, or the
Company or any of its Subsidiaries under the Transaction Documents which
constitutes or, with the giving of notice or lapse of time or both, would
constitute an Event of Default. Neither the LLC, nor the Company (nor any of its
Subsidiaries) is in default under or with respect to any Contractual Obligation
in any material respect.
5.9 TITLE TO PROPERTIES.
(a) The Company and/or its Subsidiaries have good and
marketable title in and to all real property reflected on the Pro Forma Balance
Sheet or used in connection with their business free and clear of all liens,
encumbrances, liabilities, claims, rights and restrictions except as provided on
Schedule 5.9(a).
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(b) The Company and/or its Subsidiaries hold all of
the right, title and interest of the tenant under the leases reflected on the
Pro Forma Balance Sheet or used in connection with the business of the Company
free and clear of all liens, encumbrances, liabilities, claims, rights and
restrictions except as provided on Schedule 5.9(b) or except where the failure
to do so would not have a material adverse effect on the Condition of the
Company.
5.10 USE OF REAL PROPERTY. Except as set forth on Schedule
5.10, the owned and leased real properties reflected on the Pro Forma Balance
Sheet or used in connection with the business of the Company and its
Subsidiaries, are used and operated in compliance and conformity with all
applicable leases, contracts, commitments, licenses and permits, except to the
extent that the failure so to conform would not materially adversely affect the
Condition of the Company; neither the Company nor any of its Subsidiaries has
received notice of violation of any applicable zoning or building regulation,
ordinance or other law, order, regulation or requirement relating to the
operations of either the Company or any of its Subsidiaries; and there is no
such violation except to the extent that such violation would not have a
material adverse effect on the Condition of the Company. Except as set forth on
Schedule 5.10, all structures, improvements and other buildings that are owned
or covered by leases reflected on the Pro Forma Balance Sheet or used in
connection with the business of the Company and its Subsidiaries, comply with
all applicable ordinances, codes, regulations and requirements (except where non
compliance would not have a material adverse effect on the Condition of the
Company), have a valid and subsisting certificate of occupancy for their present
use (except where the failure to obtain such a certificate of occupancy would
not have a material adverse effect on the Condition of the Company), and neither
the Company nor any Subsidiary thereof has received any written notice from any
Governmental Authority which is still outstanding of any failure to obtain any
certificate, permit, license or approval with respect to the real property, or
any intended revocation, modification or cancellation of same, and no law or
regulation presently in effect or condition precludes or materially restricts
continuation of the present use of such properties. The Company enjoys peaceful
and undisturbed possession under each of the leased real properties reflected on
the Pro Forma Balance Sheet or used in connection with the business of the
Company and its Subsidiaries except where the failure to enjoy such possession
would not have a material adverse effect on the Condition of the Company. There
is no default on the part of the Company or any of its Subsidiaries or event or
condition which with notice or lapse of terms, or both, would constitute a
default on the part of the Company or any of its Subsidiaries under any such
lease except where such default would not have a material adverse effect on the
Condition of the Company. There are no material service contracts, maintenance
contracts, union contracts, concession agreements, licenses, agency agreements
or any other written contracts or agreements affecting the real property or the
leased property reflected on the Pro Forma Balance Sheet or used in connection
with the business of the Company and its Subsidiaries, or the operation thereof,
other than those listed on Schedule 5.10, except for contracts or agreements
(oral or written) which are cancelable on no more than thirty (30) days' notice.
There are no pending or, to the knowledge of the Company, threatened
condemnation or eminent domain proceedings that would affect any part of the
real property or the leased property reflected on the Pro Forma Balance Sheet or
used in connection with the business of the Company and its Subsidiaries. There
are no actions, suits or proceedings pending or, to the knowledge of the
Company, threatened against the real property or
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the leased property on the Pro Forma Balance Sheet or used in connection with
the business of the Company and its Subsidiaries, at law or in equity, before
any federal, state, municipal or governmental department, commission, board,
bureau, agency or instrumentality which would in any way affect title to such
real property or the leased property.
5.11 TAXES.
(a) Each of the Company and its Subsidiaries has
filed all Tax Returns that it was required to file. All such Tax Returns were
correct and complete in all material respects. All Taxes owed by the Company or
any of its Subsidiaries (whether or not shown on any Tax Return) have been paid
or reserved for on the Company's Financial Statements. The Company and all of
its Subsidiaries have timely filed all Tax Returns, or currently are the
beneficiaries of valid extensions of time within which to file any Tax Return
except as described on Schedule 5.11. No claim has ever been made by a
Governmental Authority in a jurisdiction where the Company or any of
Subsidiaries does not file Tax Returns that the Company or any of its
Subsidiaries is or may be subject to taxation by that jurisdiction which claim
has not currently been resolved, except as described on Schedule 5.11. There are
no Liens on any of the assets of the Company or any of its Subsidiaries that
arose in connection with any failure (or alleged failure) to pay any Tax.
(b) Except as set forth on Schedule 5.11, each of the
Company and its Subsidiaries has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractors, creditor, stockholder, or other third party.
(c) Neither the Company nor its Subsidiaries
reasonably expects any Governmental Authority to assess any additional Taxes for
any period for which Tax Returns have been filed. Except as set forth on
Schedule 5.11, there is no dispute or claim concerning any Tax Liability of the
Company or any of its Subsidiaries either (i) claimed or raised by any
Governmental Authority in writing or (ii) as to which the Company has knowledge
based upon personal contact with any agent of such authority. The Company has
made available to the Purchasers correct and complete copies of all federal
income Tax Returns, examination reports and statements of deficiencies assessed
against or agreed to by any of the Company and its Subsidiaries since December
31, 1992.
(d) Except as listed on Schedule 5.11, none of the
Company and its Subsidiaries has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) Neither the Company nor any of its Subsidiaries
has filed a consent under Code Section 341(f) concerning collapsible
corporations. Neither the Company nor any of its Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any agreement
that under certain circumstances could obligate it to make any payments that
will not be deductible under Code Section 280G. Neither the Company nor any
of its Subsidiaries has been a United
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States real property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). Each of the Company and its Subsidiaries has disclosed on its
federal income Tax Returns all positions taken therein that could reasonably
give rise to a substantial understatement of federal income Tax within the
meaning of Code Section 6621. Except as set forth on Schedule 5.11, immediately
following the Aqua-Chem Merger, neither the Company nor any of its Subsidiaries
shall be a party to any Tax allocation or sharing agreement, and neither the
Company nor any of its Subsidiaries shall be a member of an Affiliated Group
filing a consolidated federal income Tax Return other than a group consisting
of the Company and its Subsidiaries.
(f) Neither the Company nor any of its Subsidiaries
has any liability for the Taxes of any person or entity other than the Company
and its Subsidiaries (i) under Reg. Section 1.1502-6 (or any similar provision
of state, local or foreign law), (ii) as a transferee or successor, (iii) by
contract, or (iv) otherwise.
(g) To the Company's knowledge, no amounts will now
or in the future be due or owing by the Company or the LLC or any of their
respective Subsidiaries or Affiliates under the Tax Reporting and
Indemnification Agreement, dated as of the date hereof, among Lyonnaise, Gestra,
Old Aqua-Chem, A-C Acquisition Corp. and the LLC.
5.12 FINANCIAL CONDITION.
(a) The Company has furnished the Purchasers with
true and complete copies of (i) the audited consolidated balance sheets of the
Company and its Subsidiaries as of December 31, 1994, December 31, 1995 and
December 31, 1996 and the related consolidated statements of income,
Stockholders equity and cash flow, together with the notes thereto, of the
Company and its Subsidiaries for the years ended December 31, 1994, December 31,
1995 and December 31, 1996 (the "AUDITED FINANCIAL STATEMENTS"), and (ii) the
unaudited consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of June 30, 1997 and the related consolidated and consolidating
statements of income, Stockholders equity and cash flow, together with the notes
thereto, of the Company and its Subsidiaries for the six (6) month period ended
June 30, 1997 (the "1997 FINANCIAL STATEMENTS"). The Audited Financial
Statements and the 1997 Financial Statements fairly present, in all material
respects, the financial position of the Company and each of its Subsidiaries as
of the respective dates thereof, and the results of operations and cash flows of
the Company and each of its Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with GAAP consistently
applied during the periods involved, except as otherwise set forth in the notes
thereto and subject, in the case of the 1997 Financial Statements, to normal
year-end audit adjustments.
(b) The Pro Forma Balance Sheet delivered to the
Purchasers sets forth the assets and liabilities of the Company and each of its
Subsidiaries on a pro forma consolidated basis after taking into account the
consummation of the transactions contemplated in this Agreement as of the
Closing Date in question. The Pro Forma Balance Sheet has been prepared by the
Company in accordance with GAAP, consistently applied, and fairly presents in
all material respects the assets
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and liabilities of the Company and its Subsidiaries on a consolidated basis,
reflecting the consummation of the transactions contemplated in this Agreement,
based on the assumptions set forth therein as of the Closing Date, and subject
to normal year-end audit adjustments.
(c) The projections of the Company and its Subsidiaries
on a consolidated basis heretofore delivered to the Purchasers (i) were
prepared by the Company in the ordinary course of its operations consistent
with past practice, (ii) are the most current projections prepared by the
Company relating to the periods covered thereby, and (iii) are based on
assumptions which were reasonable when made and such assumptions and projections
are reasonable on the date hereof. Neither the Company not any of its
Subsidiaries have delivered to any Person any later dated projections.
5.13 ERISA -- PROHIBITED TRANSACTIONS. The execution and
delivery of the Transaction Documents, the purchase and sale of the Securities
hereunder and the consummation of the transactions contemplated hereby and
thereby will not result in any prohibited transaction within the meaning of
Section 406 of ERISA or Section 4975 of the Code.
5.14 DISCLOSURE.
(a) Agreement and Other Documents. This Agreement,
together with all exhibits and schedules hereto, and the agreements,
certificates and other documents furnished to the Purchasers by the Company and
its Subsidiaries at the Closing, do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which they were made, not misleading.
(b) Material Adverse Effects. There is no fact known
to the Company, which the Company has not disclosed to the Purchasers in writing
which materially adversely affects or, insofar as the Company can reasonably
foresee, could materially adversely affect, the Condition of the Company or the
ability of the Company or any of its Subsidiaries to perform their obligations
under the Transaction Documents, or any agreement or other document contemplated
thereby to which it is a party.
5.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1996, except as set forth on Schedule 5.15, neither the Company nor any of its
Subsidiaries has (i) issued any stock, bonds or other corporate securities, (ii)
borrowed any amount or incurred any liabilities (absolute or contingent), other
than in the ordinary course of business, in excess of $10,000, (iii) discharged
or satisfied any lien or incurred or paid any obligation or liability (absolute
or contingent), other than in the ordinary course of business, in excess of
$10,000, (iv) declared or made any payment or distribution to stockholders or
purchased or redeemed any shares of its capital stock or other securities, (v)
mortgaged, pledged or subjected to lien any of its assets, tangible or
intangible, (vi) sold, assigned or transferred any of its tangible assets, or
canceled any debts or claims, (vii) sold, assigned or transferred any patents,
trademarks, trade names, copyrights, trade secrets or other intangible assets,
(viii) suffered any losses of property, or waived any rights of substantial
value, (ix)
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suffered any adverse change in the Condition of the Company or its Subsidiaries,
(x) expended any material amount, granted any bonuses or extraordinary salary
increases, (xi) entered into any transaction not in the ordinary course of
business involving consideration in excess of $50,000 except as otherwise
contemplated hereby or (xii) entered into any agreement or transaction, or
amended or terminated any agreement, with an Affiliate. To the knowledge of the
Company, no adverse change in the Condition of the Company or its Subsidiaries
is threatened or reasonably likely to occur.
5.16 ENVIRONMENTAL MATTERS. Except as described on Schedule
5.16:
(a) The property, assets and operations of the Company
and its Subsidiaries are and have been in compliance with all applicable
Environmental Laws; there are no Hazardous Materials stored or otherwise
located in, on or under any of the property or assets of the Company or its
Subsidiaries including the groundwater except in compliance with applicable
Environmental Laws.
(b) None of the property, assets or operations of the
Company or its Subsidiaries is the subject of any Federal, state or local
investigation evaluating whether (i) any remedial action is needed to respond to
a release or threatened release of any Hazardous Materials into the environment
or (ii) any release or threatened release of any Hazardous Materials into the
environment is in contravention of any Environmental Law.
(c) Neither the Company nor its Subsidiaries has
received any notice or claim, nor are there pending, threatened or reasonably
anticipated, lawsuits or proceedings against any of them, with respect to
violations of an Environmental Law or in connection with the presence of or
exposure to any Hazardous Materials in the environment or any release or
threatened release of any Hazardous Materials into the environment, and neither
the Company nor its Subsidiaries is or was the owner or operator of any property
which (i) pursuant to any Environmental Law has been placed on any list of
Hazardous Materials disposal sites, including, without limitation, the "NATIONAL
PRIORITIES LIST" or "CERCLIS LIST," (ii) has, or had, any subsurface storage
tanks located thereon, or (iii) has ever been used as or for a waste disposal
facility, a mine, a gasoline service station or, other than for petroleum
substances stored in the ordinary course of business, a petroleum products
storage facility.
(d) Neither the Company nor any of its Subsidiaries
has any present or contingent liability in connection with the presence either
on or off the property or assets of the Company or its Subsidiaries of any
Hazardous Materials in the environment or any release or threatened release of
any Hazardous Materials into the environment.
5.17 INVESTMENT COMPANY/GOVERNMENT REGULATIONS. The Company is
not an "investment company" within the meaning of the Investment Company Act of
1940, as amended. Neither the Company nor its Subsidiaries is subject to
regulation under the Public Utility Holding
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Company Act of 1935, as amended, the Federal Power Act, the Interstate Commerce
Act, or any federal or state statute or regulation limiting its ability to incur
Indebtedness.
5.18 SUBSIDIARIES.
(a) As of the Closing Date and the date hereof after
giving effect to the transactions contemplated hereby and in the other
Transaction Documents, including without limitation, the Contribution
Agreement, Schedule 5.18 sets forth a complete and accurate list of all of the
Subsidiaries of the LLC together with their respective jurisdictions of
incorporation or organization. Except as set forth on Schedule 5.18, each such
Subsidiary is wholly owned by the LLC. All of the outstanding shares of capital
stock of the Subsidiaries that are corporations are validly issued, fully paid
and nonassessable. Except as set forth on Schedule 5.18, as of the Closing Date
and as of the date hereof, all of the outstanding shares of capital stock of,
or other ownership interests in, each of the Subsidiaries are owned by the LLC
or by a wholly owned Subsidiary free and clear of any Liens, claims, charges or
encumbrances. Except as set forth on Schedule 5.18, no Subsidiary has
outstanding options, warrants, subscriptions, calls, rights, convertible
securities or other agreements or commitments obligating the Subsidiary to
issue, transfer or sell any securities of the Subsidiary.
(b) Except for the Subsidiaries of the LLC set forth
in Schedule, the LLC does not own of record or beneficially, directly or
indirectly, (i) any shares of outstanding capital stock or securities
convertible into capital stock of any other corporation, and (ii) any equity,
voting or participating interest in any limited liability company, partnership,
joint venture or other non-corporate business enterprises.
(c) As of the Closing Date after giving effect to the
transactions contemplated hereby and in the other Transaction Documents,
including without limitation, the Merger Transaction Documents, Schedule 5.18
sets forth a complete and accurate list of all of the Subsidiaries of the
Company together with their respective jurisdictions of incorporation or
organization. Except as set forth on Schedule 5.18, each such Subsidiary is
wholly owned by the Company. All of the outstanding shares of capital stock of
the Subsidiaries that are corporations are validly issued, fully paid and
nonassessable (subject to Section 180.0622 of the Wisconsin Statutes). Except as
set forth on Schedule 5.18, as of the Closing Date and as of the date hereof and
the date hereof, all of the outstanding shares of capital stock of, or other
ownership interests in, each of the Subsidiaries are owned by the Company or by
a wholly owned Subsidiary free and clear of any Liens, claims, charges or
encumbrances. No Subsidiary has outstanding options, warrants, subscriptions,
calls, rights, convertible securities or other agreements or commitments
obligating the Subsidiary to issue, transfer or sell any securities of the
Subsidiary.
(d) Except for the Subsidiaries of the Company set
forth in Schedule 5.18, the Company does not own of record or beneficially,
directly or indirectly, (i) any shares of outstanding capital stock or
securities convertible into capital stock of any other corporation, and (ii)
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any equity, voting or participating interest in any limited liability company,
partnership, joint venture or other non-corporate business enterprises.
5.19 CAPITALIZATION.
(a) As of the Closing Date and as of the date hereof
after giving effect to the transactions contemplated hereby and in the other
Transaction Documents, including, without limitation, the Contribution
Agreement, the LLC shall have authorized: 1,742.55 Class A-1 Membership Units,
510,000 Class A-2 Membership Units, 176,471 Class B Membership Units, 722.247
Class C-1 Membership Units, 101.245 Class D-1 Membership Units, 118.086 Class
E-1 Membership Units, 37.09 Class F-1 Membership Units, 33.782 Class G-1
Membership Units, 349,500 Class C-2 Membership Units, 49,000 Class D-2
Membership Units, 57,200 Class E-2 Membership Units, 18,000 Class F-2 Membership
Units, and 16,300 Class G-2 membership Units. All of such Membership Units are
issued and outstanding. The Company has no Membership or other equity interests
held in treasury. All outstanding equity interests of the LLC are validly
issued, fully paid and nonassessable. Schedule 5.19 (a) provides an accurate
list of (A) all members owning the issued and outstanding equity interests in
the LLC, together with the number held by each immediately following the
Closing, and (B) all of the holders of warrants, options, rights and securities
convertible into equity interests in the LLC, together with the number of equity
interests in the LLC to be issued upon the exercise or conversion of such
warrants, options, rights and convertible securities.
(b) On the Closing Date and as of the date hereof,
except for the equity interests and securities set forth in Sections 5.19(a) and
5.19(c), there will be no outstanding securities convertible into or
exchangeable for equity interests in the LLC or any of its Subsidiaries or
options, warrants or other rights to purchase or subscribe to equity interests
in the LLC or any of its Subsidiaries or contracts, commitments, agreements,
understandings or arrangements of any kind to which the LLC or any of its
Subsidiaries is a party relating to the issuance of any equity interests in the
LLC or any of its Subsidiaries, any such convertible or exchangeable securities
or any such options, warrants or rights.
(c) As of the Closing Date and as of the date hereof,
after giving effect to the transactions contemplated hereby and in the
Transaction Documents, including without limitation, the Merger Transaction
Documents, the Company shall have authorized: 130 shares of Series A Preferred
Stock, par value $.01 per share ("SERIES A PREFERRED STOCK"), all of which are
issued and outstanding; 130 shares of Series B Redeemable Preferred Stock, par
value $.01 per share (the "SERIES B PREFERRED STOCK"), all of which are issued
and outstanding; 6,000 shares of Series C Redeemable Preferred Stock, 2,755 of
which are issued and outstanding; and 2,000,000 shares of Common Stock, of which
1,000,000 shares are issued and outstanding. 61,919 shares of Common Stock are
reserved for issuance pursuant to the exercise of stock options issuable in
accordance with the terms of one or more stock option plans of the Company,
which plans has been approved by the Board of Directors and by WEP and WSDF (the
"MANAGEMENT OPTIONS"). The Company has no shares of capital stock held in
Treasury. The Warrant, the Management Options and all outstanding
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of capital stock of the Company have been duly authorized by all necessary
corporate action. All outstanding shares of capital stock of the Company are,
and the shares of Common Stock issuable upon the exercise of the Warrant and the
Management Options, when issued in accordance with the terms thereof, will be
validly issued, fully paid and, subject to the provisions of Section 180.0622 of
the Wisconsin Statutes, non-assessable. Schedule 5.19(b) provides an accurate
list of (A) all stockholders owning the issued and outstanding Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Common
Stock, together with the number held by each immediately following the Closing,
and (B) all the holders of warrants, options, rights and securities convertible
into Common Stock, together with the number of shares of Common Stock to be
issued upon the exercise or conversion of such warrant, options, rights and
convertible securities.
(d) On the Closing Date and as of the date hereof,
except for the Warrant and Management Options, there will be no outstanding
securities convertible into or exchangeable for capital stock of the Company or
any of its Subsidiaries or options, warrants or other rights to purchase or
subscribe to capital stock of the Company or any of its Subsidiaries or
contracts, commitments, agreements, understandings or arrangements or any kind
to which the Company or any of its Subsidiaries is a party relating to the
issuance of any capital stock of the Company or any of its Subsidiaries, any
such convertible or exchangeable securities or any such options, warrants or
rights.
5.20 PRIVATE OFFERING. No form of general solicitation or
general advertising was used by the Company, its Subsidiaries, or its or their
representatives in connection with the offer or sale of the Securities. No
registration of the Securities or Common Stock issuable upon the exercise of the
Warrant pursuant to the provisions of the Securities Act or the state securities
or "blue sky" laws will be required by the offer, sale or exercise of the
Warrant. The Company agrees that neither it, nor anyone acting on its behalf,
will offer or sell the Securities or any other security so as to require the
registration of the Securities or Common Stock issuable upon the exercise of the
Warrant or Common Stock issuable upon conversion of the Shares pursuant to the
provisions of the Securities Act or any state securities or "blue sky" laws,
unless such Securities or Common Stock issuable upon the exercise of the Warrant
or Common Stock issuable upon conversion of the Shares are so registered.
5.21 BROKER'S, FINDER'S OR SIMILAR FEES. Except as provided in
Section 2.4 or as set forth on Schedule 5.21 there are no brokerage commissions,
finder's fees or similar fees or commissions payable in connection with the
transactions contemplated hereby or in any other Transaction Documents based on
any agreement, arrangement or understanding with the Company or any of its
Subsidiaries, or any action taken by any such entity. Any such brokerage
commissions, finders' fees or similar fees or commissions set forth on Schedule
5.21 shall be paid by the Company.
5.22 LABOR RELATIONS. Neither the Company nor any of its
Subsidiaries has committed or is engaged in any unfair labor practice. Except as
set forth in Schedule 5.22, there is
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(a) no unfair labor practice complaint pending or threatened against the Company
or any of its Subsidiaries before the National Labor Relations Board and no
grievance or arbitration proceeding arising out of or under collective
bargaining agreements is so pending or threatened, (b) no strike, labor dispute,
slowdown or stoppage pending or threatened against the Company or any of its
Subsidiaries, (c) no union representation question existing with respect to the
employees of the Company or any of its Subsidiaries and no union organizing
activities are taking place, and (d) no employment contract with any employee or
independent contractor of the Company or any Subsidiary. The Company and each
Subsidiary is in compliance in all material respects with all federal, state or
other applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours. Except as set forth on Schedule
5.22, neither the Company, nor any of its Subsidiaries, is a party to any
collective bargaining agreement.
5.23 EMPLOYEE BENEFIT PLANS.
(a) Employee Benefit Plans and Liabilities. Neither
the Company nor any ERISA Affiliate has contributed to nor has any actual or
contingent, direct or indirect, liability in respect of any employee benefit
plan (as defined in Section 3(3) of ERISA) or other employee benefit arrangement
(collectively, the "PLANS"), within the five-consecutive-year period immediately
preceding the first day of the year in which the Closing Date occurs other than
those liabilities with respect to such Plans specifically described on Schedule
5.23(a). Schedule 5.23(a) sets forth all Plans. Except as set forth on Schedule
5.23(a), at no time during such five year period has the Company or any ERISA
Affiliate participated in or contributed to any Multiemployer Plan, nor during
such period has the Company or any ERISA Affiliate had an obligation to
participate in or contribute to any such Multiemployer Plan. No agreement
subject to section 4204 of ERISA has been entered into in connection with the
transactions contemplated in this Agreement. There are no outstanding
liabilities of the Company or any ERISA Affiliate to any employee benefit plans
previously maintained by the Company or any ERISA Affiliate, and the Company is
not aware of any potential liabilities in connection therewith. There are no
actions, suits or claims, other than for benefits in the ordinary course,
pending or threatened against the Company or the Plans which might subject the
Company to any material liability. The Company has delivered to the Purchasers
accurate and complete copies of all of the Plans.
(b) Plan Compliance. The Company and its Subsidiaries
are in compliance in all material respects with all reporting, disclosure and
registration requirements applicable to it under the Code, as amended (the
"Code"), ERISA and all federal and state securities laws, and Department of
Labor, Internal Revenue Service and Commission rules and regulations promulgated
thereunder, with respect to all of the Plans, and is not subject to any
liability, whether asserted or not, for any penalties to any Governmental
Authority for late filing of any return, report or other governmental filing. No
civil or criminal action brought pursuant to the provisions of Title I, Subtitle
B, Part 5 of ERISA or any other federal or state law is pending or threatened
against any fiduciary of the Plans. No Plan, or any fiduciary thereof, has been,
or is currently, the direct or indirect subject of an audit, investigation or
examination by any Governmental Authority. All of the Plans comply currently,
and have complied in the past, both as to form and operation, in all
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material respects, with their terms and with all Requirements of Law. Each of
the Plans maintained by Company or a Subsidiary that is an "employee benefit
pension plan" (within the meaning of Section 3(2)(A) of ERISA) has obtained a
favorable determination (covering all changes or amendments applicable under
Requirements of Law) from the Internal Revenue Service as to its qualification
under Sections 401(a) and 501(a) of the Code or is within the remedial amendment
period (as provided in Section 401(b) of the Code) for making any required
changes or amendments, and nothing has occurred before or after the date of each
such determination letter a would adversely affect such qualification. All
amounts that are currently owing to plan participants, or contributions required
to be made to the Plans have been timely paid or contributed with respect to all
periods prior to the date hereof or provided for by adequate reserves on the Pro
Forma Balance Sheet
(c) Prohibited Transactions. Except as set forth on
Schedule 5.23(c), no Plan, nor any related trust, nor the Company, nor any
Subsidiary thereof, nor any trustee, administrator or other "party in interest"
or "disqualified person" (within the meaning of Section 3(14) of ERISA or
Section 4975(e)(2) of the Code, respectively) with respect to the Plans, has
engaged in any nonexempt "prohibited transaction" (within the meaning of Section
406 of ERISA or Section 4975(c) of the Code, respectively) with respect to the
participation of Company or its Subsidiaries therein, which could subject any of
the Plans or related trusts, or any trustee, administrator or other fiduciary of
any such Plan, or the Company, its Subsidiaries or the Purchasers, or any other
party dealing with the Plans, to the penalties or excise tax imposed on
prohibited transactions by Section 502 of ERISA or Section 4975 of the Code
which could have a material adverse effect on the Condition of the Company.
(d) COBRA. Except as set for in Schedule 5.23(d), (i)
the Company and each of its Subsidiaries has complied with the continuation
coverage requirements of group health plans provided in Section 4980B of the
Code, Sections 601 et seq. of ERISA, the Family and Medical Leave Act of 1994,
and the regulations promulgated thereunder, and (ii) to the knowledge of the
Company, there are no individual claims by any employee of the Company or any of
its Subsidiaries for any illness, medical condition or accident which is
expected, individually or in the aggregate with all other such illnesses,
medical conditions or accidents involving other employees of the company or its
Subsidiaries to have a material adverse effect on the Condition of the Company
within the twelve (12)-month period following the Closing Date.
(e) Miscellaneous. Except as set forth on Schedule
5.23(e), neither the Company, its Subsidiaries, nor any Plan provides for or
promises retiree medical, disability or life insurance benefits to any current
or former employee, officer or director of the Company or any of its
Subsidiaries, other than continuation coverage required by section 4980B of the
Code. Neither the Company nor any of its Subsidiaries is a party to or obligated
under any agreement, plan, contract or other arrangements that will result,
separately or in the aggregate, in the payment of any "excess parachute payment"
within the meaning of section 280G of the Code.
5.24 PATENTS, TRADEMARKS, ETC. The Company and its
Subsidiaries own or are licensed or otherwise have the right to use all patents,
trademarks, service marks, trade names,
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copyrights, licenses, franchises and other rights (collectively, the "RIGHTS")
being used to conduct their businesses as now operated (a complete list of
licenses or other contracts relating to the Company's and its Subsidiaries'
Rights and of registrations of patents, trademarks, service marks and copyrights
including any applications therefor constituting such Rights, is attached hereto
as Schedule 5.24). No Right or product, process, method, substance or other
material presently sold by or employed by the Company or any of its
Subsidiaries, or which the Company or any of its Subsidiaries contemplates
selling or employing, infringes upon the Rights that are owned by others except
where such infringement would not have a material adverse effect on the
condition of the Company. No litigation is pending and no claim has been made
against the Company or any of its Subsidiaries or is threatened, contesting the
right of the Company or any of its Subsidiaries to sell or use any Right or
product, process, method, substance or other material presently sold by or
employed by the Company or any of its Subsidiaries. Neither the Company nor any
of its Subsidiaries has asserted any claim of infringement, misappropriation or
misuse by any Person of any Rights owned by the Company or any of its
Subsidiaries or to which they have exclusive use. Except as set forth on
Schedule 5.24, no employee, officer or consultant of the Company or any of its
Subsidiaries has any proprietary, financial or other interest in any Rights
owned or used by the Company or its Subsidiaries in their businesses. Except as
set forth on Schedule 5.24, neither the Company nor any of its Subsidiaries has
any obligation to compensate any Person for the use of any Rights and neither
the Company nor any of its Subsidiaries has granted any license or other right
to use any of the Rights of the Company or it Subsidiaries, whether requiring
the payment of royalties or not. The Company and its Subsidiaries have taken all
reasonable measures to protect and preserve the security, confidentiality and
value of their Rights, including trade secrets and other confidential
information. All material trade secrets and other confidential information of
the Company and its Subsidiaries are not part of the public domain or knowledge,
nor have they been used, divulged or appropriated for the benefit of any Person
other than the Company or its Subsidiaries or otherwise to the detriment of the
Company or its Subsidiaries. No employee or consultant of the Company or its
Subsidiaries has used any material trade secrets or other material confidential
information of any other Person in the course of his work for the Company or its
Subsidiaries. No patent, invention, device, principle or any statute, law, rule,
regulation, standard or code is pending or proposed which would materially
restrict the Company's ability to use any of the Rights.
5.25 POTENTIAL CONFLICTS OF INTEREST. Except as set forth on
Schedule 5.25, no officer or director, stockholder or other security holder
(other than Lyonnaise and Gestra) of the Company or any of its Subsidiaries: (a)
owns, directly or indirectly, any interest in (excepting less than 5% stock
holdings for investment purposes in securities of publicly held and traded
companies), or is an officer, director, employee or consultant of, any Person
that is, or is engaged in business as, a competitor, lessor, lessee, supplier,
distributor, sales agent or customer of, or lender to or borrower from, the
Company or any of its Subsidiaries; (b) owns, directly or indirectly, in whole
or in part, any tangible or intangible property that the Company or any of its
Subsidiaries used in the conduct of business; or (c) has any cause of action or
other claim whatsoever against, or owes or has advanced any amount to, the
Company or any of its Subsidiaries, except for claims in the ordinary course of
business such as for accrued vacation pay, accrued benefits under employee
benefit plans, and similar matters and agreements existing on the date hereof.
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5.26 TRADE RELATIONS. Except for the John Deere flywheel and
pulley business, there exists no actual or threatened termination, cancellation
or limitation of, or any adverse modification or change in, the business
relationship of the Company, its Subsidiaries or their business with any
customer or any group of customers whose purchases are individually or in the
aggregate material to the business of the Company or any such Subsidiary, or
with any material supplier, and there exists no present condition or state of
facts or circumstances that would materially adversely affect the Condition of
the Company or prevent the Company or its Subsidiaries from conducting their
business after the consummation of the transactions contemplated by this
Agreement, in substantially the same manner in which such business has
heretofore been conducted. in substantially the same manner in which such
business has heretofore been conducted.
5.27 OUTSTANDING BORROWINGS. Schedule 5.27 lists (i) the
amount of all Outstanding Borrowings of the Company and its Subsidiaries (other
than Indebtedness under this Agreement or the Senior Loan Agreement) as of the
closing of the transactions contemplated hereby, (ii) the Liens that relate to
such Outstanding Borrowings and that encumber the assets of the Company and its
Subsidiaries, (iii) the name of each lender thereof, and (iv) the amount of any
unfunded commitments available to the Company in connection with any Outstanding
Borrowings.
5.28 MATERIAL CONTRACTS. Neither the Company nor any
Subsidiary is a party to any Contractual Obligation, or is subject to any
charge, corporate restriction, judgment, injunction, decree, or Requirement of
Law, materially adversely affecting the Condition of the Company. Schedule 5.28
lists all contracts, agreements and commitments of the Company and its
Subsidiaries as of the Closing Date and as of the date hereof, whether written
or oral, other than (a) the Transaction Documents, (b) purchase orders in the
ordinary course of business, and (c) any other contracts, agreements and
commitments of the Company that do not extend beyond one year and involve the
receipt or payment of not more than $500,000. Neither the LLC, nor the Company
or any of its Subsidiaries (i) is in default under any of the contracts,
agreements and commitments set forth on Schedule 5.28, or (ii) has notice of a
default involving any other party to such contracts, agreements or commitments.
5.29 INSURANCE. Schedule 5.29 accurately summarizes all of the
insurance policies or programs of the Company and each Subsidiary in effect as
of the date hereof, and indicates the insurer's name, policy number, expiration
date, amount of coverage, type of coverage, annual premiums, exclusions and
deductibles, and also indicates any self-insurance program that is in effect.
All such policies are in full force and effect, are underwritten by financially
sound and reputable insurers, are sufficient for all applicable Requirements of
Law and otherwise are in compliance with the criteria set forth in Section 8.8
hereof. Except as disclosed on Schedule 5.29, all such policies will remain in
full force and effect and will not in any way be affected by, or terminate or
lapse by reason of any of the transactions contemplated by the Transaction
Documents. The Company shall obtain and maintain insurance policies of
substantially equivalent coverage and from insurance providers of substantially
equivalent quality, in each case reasonably satisfactory to Purchasers, in
replacement of the insurance policies listed on Schedule 5.29.
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5.30 ACCOUNTS RECEIVABLE. Schedule 5.30 sets forth a true and
correct list of all accounts receivable of the Company and the Subsidiaries as
of June 30, 1997, which net of reserves and allowances, will be reflected on the
Company's financial statements dated as of such date. All such accounts
receivable of the Company and the Subsidiaries reflected in Schedule 5.30
represent transactions actually made in the ordinary course of business, and
were calculated in accordance with GAAP. All such accounts receivable are legal,
valid and binding obligations, of the respective amount debtors and are
collectible, net of such reserves and allowances.
5.31 INVENTORY. Schedule 5.31 sets forth an accurate summary
list of all inventory of the Company and the Subsidiaries as of June 30, 1997
and will be reflected on the Company's financial statements as of such date. To
the knowledge of the Company all work in process and finished goods inventory is
free of any material defect or other deficiency.
5.32 PRODUCTS LIABILITY. Except as set forth on Schedule 5.32,
there is no action, suit, proceeding or to the knowledge of the Company, inquiry
or investigation pending by or before any Governmental Authority against the
Company or any of the Subsidiaries relating to any product alleged to have been
sold by the Company or any of the Subsidiaries and alleged to have been sold by
the Company or any of the Subsidiaries and alleged to have been defective, or
improperly designed or manufactured, nor to the knowledge of the Company is
there any valid basis for any such action, proceeding or investigation.
5.33 SOLVENCY. The LLC, and the Company and its Subsidiaries,
taken as a whole, are Solvent.
5.34 OTHER DOCUMENTS. The LLC and the Company have delivered
or made available to the Purchasers true, complete and correct copies of all
agreements, schedules, exhibits, certificates, financial information, filings
and other documents relating to the LLC, and the Company and its Subsidiaries,
and all amendments and modifications thereto. Such documents comprise a full and
complete copy of all agreements and understandings between the parties thereto
with respect to the subject matter thereof and all transactions related thereto,
and there are no written agreements, understandings or side agreements, nor any
material oral agreements, understandings or side agreements not contained
therein that relate to or modify the substance thereof. Each of such documents
to which it is a party has been duly authorized by all necessary action on the
part of the LLC, and the Company and its Subsidiaries, was validly executed and
delivered by the LLC, and the Company and its Subsidiaries and is the legal,
valid and binding obligation of the LLC, and the Company and its Subsidiaries
and their successors, enforceable in accordance with its terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws affecting creditors' rights generally and by
general principles of equity relating to enforceability. Each of such documents
is in full force and effect, and none of their provisions have been waived by
any party thereto.
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5.35 STATUS OF LLC. For the period beginning on the date of
formation of the LLC and ending immediately prior to the Closing Date, the LLC
has conducted no business or operation (other than organizational activities),
owned no assets and had no liabilities.
5.36 MERGER AGREEMENT AND SENIOR LOAN AGREEMENT;
REPRESENTATIONS AND WARRANTIES. The representations and warranties made in each
of the Merger Agreement and the Senior Loan Agreement by the parties thereto are
true, correct and accurate as of the Closing Date and as of the date hereof.
5.37 COVENANTS. The Company and CB-Kramer have performed and
complied with all of its obligations contemplated herein that are required to be
performed or complied with by the LLC, the Company and CB-Kramer on or before
the date hereof.
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS
Each Purchaser, severally but not jointly, hereby represents
and warrants, as of the Closing Date and as of the date hereof, as to itself as
follows:
6.1 AUTHORIZATION; NO CONTRAVENTION. The execution, delivery
and performance by it of this Agreement: (a) is within its power and authority
and has been duly authorized by all necessary action; (b) does not contravene
the terms of its organizational documents or any amendment thereof; and (c) will
not violate, conflict with or result in any breach or contravention of any of
its Contractual Obligations, or any order or decree directly relating to it.
6.2 BINDING EFFECT. This Agreement has been duly executed and
delivered by it and this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
6.3 NO LEGAL BAR. The execution, delivery and performance of
this Agreement by it will not violate any Requirement of Law applicable to it.
6.4 PURCHASE FOR OWN ACCOUNT. The Securities acquired by it
pursuant to this Agreement were acquired for its own account and with no
intention of distributing or reselling such securities or any part thereof in
any transaction that would be in violation of the securities laws of the United
States of America, or any state, without prejudice, however, to its right at all
times to sell or otherwise dispose of all or any part of the WSDF Note or the
WSDF Warrant, in the case of WSDF, or the WEP Shares, in the case of WEP, under
an effective registration statement under the
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Securities Act, or under an exemption from such registration available under the
Securities Act, and subject, nevertheless, to the disposition of its property
being at all times within its control. If a Purchaser should in the future
decide to dispose of any of the Securities, such Purchaser understands and
agrees that it may do so only in compliance with the Securities Act and
applicable state securities laws, as then in effect. It agrees to the imprinting
of a legend on certificates representing all of the Securities to the following
effect: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF SUCH ACT AND SUCH LAWS."
6.5 ERISA. No part of the funds used by it to purchase the
Securities hereunder constitutes assets of any "employee benefit plan" (as
defined in Section 3(3) of ERISA) or "plan" (as defined in Section 4975 of the
Code) listed on Schedule 5.23(b).
6.6 BROKER'S, FINDER'S OR SIMILAR FEES. Except as set forth on
Schedule 5.21, there are no brokerage commissions, finder's fees or similar fees
or commissions payable in connection with the transactions contemplated hereby
based on any agreement, arrangement or understanding with it or any action taken
by it.
6.7 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENT. No
approval, consent, compliance, exemption, authorization, or other action by, or
notice to, or filing with, any Governmental Authority or any other Person in
respect of any Requirement of Law, and no lapse of a waiting period under a
Requirement of Law, is necessary or required in connection with the execution,
delivery or performance by it or enforcement against it of this Agreement or the
transactions contemplated hereby, other than the expiration of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
ARTICLE 7
INDEMNIFICATION
7.1 INDEMNIFICATION. In addition to all other sums due
hereunder or provided for in this Agreement, the LLC, the Company and CB-Kramer
jointly and severally agree to indemnify and hold harmless the Purchasers and
their respective Affiliates and each of their respective officers, directors,
agents, employees, subsidiaries, partners, attorneys, accountants and
controlling persons (each, an "INDEMNIFIED PARTY") to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including, without limitation, reasonable fees, disbursements and other charges
of counsel incurred by an Indemnified Party in any action or proceeding between
any of the LLC, the Company and the Company's Subsidiaries and such Indemnified
Party (or Indemnified Parties) or between an Indemnified Party (or Indemnified
Parties) and any third party
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or otherwise) or other liabilities, losses, or diminution in value
(collectively, "LIABILITIES") resulting from or arising out of (a) any breach of
any representation or warranty, covenant or agreement of the LLC, the Company,
or CB-Kramer in this Agreement, the Certificate of Incorporation, the
Registration Rights Agreement, the Stockholders' and Members' Agreement, the
Note, the Warrant, or the other Transaction Documents, including, without
limitation, the failure to make payment when due of amounts owing pursuant to
this Agreement, the Note, the Shares or the other Transaction Documents, on the
due date thereof (whether at the scheduled maturity, by acceleration or
otherwise) or any legal, administrative or other actions (including, without
limitation, actions brought by any of the Purchasers, the LLC, the Company, the
Company's Subsidiaries or any equity holders of the LLC or the Company or the
Company's Subsidiaries or derivative actions brought by any Person claiming
through or in the name of the LLC or the Company or the Company's Subsidiaries),
proceedings or investigations (whether formal or informal), or written threats
thereof, based upon, relating to or arising out of the Transaction Documents,
the transactions contemplated thereby, or any Indemnified Party's role therein
or in the transactions contemplated thereby and (b) all Environmental Costs
incurred by the LLC, or the Company or its Subsidiaries on or after the Closing
Date; provided, however, that the LLC, the Company and the Company's
Subsidiaries shall not be liable under this Section 7.1 to an Indemnified Party:
(i) for any amount paid by the Indemnified Party in settlement of claims by the
Indemnified Party without the LLC's, the Company's or CB-Kramer's consent
(which consent shall not be unreasonably withheld), as the case may be, (ii) to
the extent that it is finally judicially determined that such Liabilities
resulted primarily from the willful misconduct or gross negligence of such
Indemnified Party or (iii) to the extent that it is finally judicially
determined that such Liabilities resulted primarily from the breach by such
Indemnified Party of any representation, warranty, covenant or other agreement
of such Indemnified Party contained in this Agreement; provided, further, that
if and to the extent that such indemnification is unenforceable for any reason,
the LLC, the Company and the Company's Subsidiaries shall make the maximum
contribution to the payment and satisfaction of such Liabilities which shall be
permissible under applicable laws. In connection with the obligation of the LLC,
the Company or CB-Kramer to indemnify for expenses as set forth above, the LLC,
the Company and CB-Kramer further agree, upon presentation of appropriate
invoices containing reasonable detail, to reimburse each Indemnified Party for
all such expenses (including fees, disbursements and other charges of counsel
incurred by an Indemnified Party in any action or proceeding between the LLC,
the Company, or CB-Kramer and such Indemnified Party (or Indemnified Parties) or
between an Indemnified Party (or Indemnified Parties) and any third party or
otherwise) as they are incurred by such Indemnified Party; provided, however,
that if an Indemnified Party is reimbursed hereunder for any expenses, such
reimbursement of expenses shall be refunded to the extent it is finally
judicially determined that the Liabilities in question resulted primarily from
(x) the willful misconduct or gross negligence of such Indemnified Party or (y)
the breach by such Indemnified Party of any representation, warranty, covenant
or other agreement of such Indemnified Party contained in this Agreement or any
other Transaction Document.
7.2 NOTIFICATION. Each Indemnified Party under this Article 7
will, promptly after the receipt of notice of the commencement of any action,
investigation, claim or other proceeding against such Indemnified Party in
respect of which indemnity may be sought from the LLC, the
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Company or CB-Kramer under this Article 7, notify the LLC, the Company or
CB-Kramer, as the case may be, in writing of the commencement thereof. The
omission of any Indemnified Party so to notify the LLC, the Company or
CB-Kramer, as the case may be, of any such action shall not relieve the LLC, the
Company or the Company's Subsidiaries, as the case may be, from any liability
which it may have to such Indemnified Party unless, and only to the extent that,
such omission results in the forfeiture by the LLC, the Company or CB-Kramer, as
the case may be, of substantive rights or defenses. In case any such action,
claim or other proceeding shall be brought against any Indemnified Party and it
shall notify the LLC, the Company or CB-Kramer, as the case may be, of the
commencement thereof, the LLC, the Company or CB-Kramer, as the case may be,
shall be entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party in its reasonable judgment; provided,
however, that any Indemnified Party may, at its own expense, retain separate
counsel to participate in such defense. Notwithstanding the foregoing, in any
action, claim or proceeding in which the LLC, the Company or CB-Kramer, as the
case may be, on the one hand, and an Indemnified Party, on the other hand, is,
or is reasonably likely to become, a party, such Indemnified Party shall have
the right to employ separate counsel at the expense of the LLC, the Company or
CB-Kramer, as the case may be, and to control its own defense of such action,
claim or proceeding if, in the reasonable opinion of counsel to such Indemnified
Party, a conflict or potential conflict exists between the LLC, the Company or
CB-Kramer, as the case may be, on the one hand, and such Indemnified Party, on
the other hand, that would make such separate representation advisable;
provided, however, that in no event shall the LLC, the Company or CB-Kramer, as
the case may be, be required to pay fees and expenses under this Article 7 for
more than one firm of attorneys in any jurisdiction in any one legal action or
group of related legal actions. The LLC, the Company and CB-Kramer agree that
they will not, without the prior written consent of the Purchasers, settle,
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated hereby (if any
Indemnified Party is a party thereto or has been actually threatened to be made
a party thereto) unless such settlement, compromise or consent includes an
unconditional release of the Purchasers and each other Indemnified Party from
all liability arising or that may arise out of such claim, action or proceeding.
The LLC, the Company and CB-Kramer shall not be liable for any settlement of any
claim, action or proceeding effected against an Indemnified Party without its
written consent, which consent shall not be unreasonably withheld. The rights
accorded to Indemnified Parties hereunder shall be in addition to any rights
that any Indemnified Party may have at common law, by separate agreement or
otherwise.
7.3 REGISTRATION RIGHTS AGREEMENT. Notwithstanding anything to
the contrary in this Article 7, the indemnification and contribution provisions
of the Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or sales made thereunder.
7.4 ENVIRONMENTAL BASKET. Notwithstanding any other provision
in this Article 7, the LLC, the Company and CB-Kramer shall be obligated to
indemnify the Indemnified Partes with respect to any Liabilities resulting from
or arising out of (a) any breach of the representations or warranties set forth
in Section 5.16 of this Agreement, and (b) any Environmental Costs arising
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on or after the Closing Date, only after the aggregate amount of all such
Liabilities exceeds $3,000,000.
ARTICLE 8
AFFIRMATIVE COVENANTS
Until the payment by the Company of all principal of and
interest on the Note and all other amounts due at the time of payment of such
principal and interest to Purchasers under this Agreement and the other
Transaction Documents, including, without limitation, all fees, expenses and
amounts due at such time in respect of indemnity obligations under Article 7,
and for so long as any shares of WEP Preferred Shares are outstanding, the LLC
and the Company hereby covenant and agree with the Purchasers as follows:
8.1 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company
shall maintain, and cause each of its Subsidiaries to maintain, a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in conformity with GAAP
(it being understood that monthly financial statements are not required to have
footnote disclosures). The Company shall deliver to the Purchasers each of the
financial statements and other reports described below:
(a) Monthly and Quarterly Financial. As soon as
available and in any event within thirty (30) days after the end of each month,
the Company shall deliver (i) the consolidated and consolidating balance sheets
of the Company and its Subsidiaries, as at the end of such month and the related
consolidated and consolidating statements of income, Stockholders equity and
cash flow for such month and for the period from the beginning of the then
current fiscal year of the Company to the end of such month (and, with respect
to financial statements delivered for months that are also the last month of any
fiscal quarter, accompanied by the related consolidated and consolidating
statements of income, Stockholders equity and cash flow for such fiscal quarter)
and (ii) a schedule of the outstanding Indebtedness for borrowed money of the
Company and its Subsidiaries describing in reasonable detail each such debt
issue or loan outstanding and the principal amount and amount of accrued and
unpaid interest with respect to each such debt issue or loan.
(b) Year-End Financial. As soon as available and in
any event within ninety (90) days after the end of the fiscal year of the
Company, the Company shall deliver (i) the audited consolidated and Company
prepared consolidating balance sheets of the Company and its Subsidiaries as at
the end of such year and the related consolidated and consolidating statements
of income, Stockholders equity and cash flow for such fiscal year, (ii) a
schedule of the outstanding Indebtedness for borrowed money of the Company and
its Subsidiaries describing in reasonable detail each such debt issue or loan
outstanding and the principal amount and amount of accrued and unpaid interest
with respect to each such debt issue or loan, and (iii) a report with respect to
the financial statements from KPMG Peat Marwick, LLP or another "Big Six" firm
of certified public
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accountants selected by the Company and reasonably acceptable to the Purchasers,
which report shall be prepared in accordance with Statement of Auditing
Standards No. 58 (the "STATEMENT") entitled "Reports on Audited Financial
Statements" and such report shall be "Unqualified" (as such term is defined in
such Statement), other than with respect to qualifications regarding changes in
accounting policies. Together with each delivery of financial statements of the
Companies and their Subsidiaries pursuant to this subsection 8.1(b), the Company
shall deliver to the Purchasers a copy of a letter from the Company to such
accounting firm, which letter shall have been delivered to such accounting firm
prior to its delivery of such financial statements, stating that an intent of
the Company in engaging the accounting firm's professional services to prepare
the audit report relating to such financial statements was to benefit and
influence the Purchasers and their successors or assigns. Such letter shall
state that the Purchasers intend to rely on the audit report and the accounting
firm's professional services provided to the Companies and their Subsidiaries.
(c) Company's Compliance Certificate. Together with
each delivery of quarterly and annual financial statements of the Company and
its Subsidiaries pursuant to Sections 8.1(a) and 8.1(b) above, the Company shall
deliver or cause to be delivered a fully and properly completed compliance
certificate (in substantially the form attached hereto as Exhibit H and referred
to as a "COMPLIANCE CERTIFICATE") signed by the chief executive officer or chief
financial officer of the Company.
(d) Accountants' Reports. Promptly upon receipt
thereof, the Company shall deliver copies of all significant reports submitted
by the Company's firm of certified public accountants in connection with each
annual, interim or special audit or review of any type of the financial
statements or related internal control systems of the Company and its
Subsidiaries made by such accountants, including any comment letter submitted by
such accountants to managements in connection with their services.
(e) Management Reports. Together with each delivery
of financial statements of the Company and its Subsidiaries pursuant to
subsections 8.1(a) and 8.1(b), the Company will deliver a management report (i)
describing the operations and financial condition of the Company and its
Subsidiaries for the month then ended and the portion of the current fiscal year
then elapsed (or for the fiscal year then ended in the case of year-end
financial), (ii) setting forth in comparative form the corresponding figures for
the corresponding periods of the previous fiscal year and the corresponding
figures from the most recent projections for the current fiscal year delivered
pursuant to subsection 8.1(f) and (iii) discussing the reasons for any
significant variations. The information above shall be presented in reasonable
detail and shall be certified by the chief financial officer of the Company to
the effect that such information fairly presents the results of operations and
financial condition of the Company and its Subsidiaries as at the dates and for
the periods indicated.
(f) Projections. On or before December 31, 1997, the
Company shall prepare and deliver to the Purchasers projections of the Company
and its Subsidiaries for the three-month period ending on March 31, 1998, on a
month-to-month basis. On or before the earlier of (i)
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the first Board of Directors meeting of the Company held in March 1998 and (ii)
March 31, 1998, the Company shall prepare and deliver to the Purchasers
projections of the Company and its Subsidiaries for the next succeeding fiscal
year, on a month-to-month basis, and for the following two (2) fiscal years on a
quarter-to-quarter basis. Thereafter, no earlier than sixty (60) days prior nor
later than thirty (30) days prior to the end of each fiscal year beginning with
the fiscal year ending on March 31, 1999, the Company shall prepare and deliver
to the Purchasers projections of the Company and its Subsidiaries for the next
succeeding fiscal year, on a month-to-month basis and for the following two (2)
fiscal years on a quarter-to-quarter basis; provided, however, that if a meeting
of the Board of Directors shall have been duly called to be held on a day that
is within the thirty (30) day period prior to the end of such fiscal year, such
projections shall be prepared and delivered no earlier than sixty (60) days
prior to the end of such fiscal year nor later than the first such meeting of
the Board of Directors.
(g) SEC Filings and Press Releases. Promptly upon
their becoming available, the Company shall deliver copies of (i) all financial
statements, reports, notices and proxy statements sent or made available by the
Company or any of its Subsidiaries to their security holders, (ii) all regular
and periodic reports and all registration statements and prospectuses, if any,
filed by the Company or any of its Subsidiaries with any securities exchange or
with the Securities and Exchange Commission or any governmental or private
regulatory authority, and (iii) all press releases and other statements made
available by the Company or any of its Subsidiaries to the public concerning
material developments in the business the Company or any of its Subsidiaries.
(h) Events of Default, Etc. Promptly upon any officer
of the Company obtaining knowledge of any of the following events or conditions,
the Company shall deliver copies of all notices given or received by the Company
or any of its Subsidiaries with respect to any such event of condition and a
certificate of the Company's chief executive officer specifying the nature and
period of existence of such event or condition and what action the Company has
taken, is taking and proposes to take with respect thereto: (i) any condition or
event that constitutes an Event of Default; (ii) any notice that any Person has
given to the Company or any of its Subsidiaries or any other action taken with
respect to a claimed default or event or condition in any other agreement to
which the Company or any of its Subsidiaries is a party; or (iii) any event or
condition that could reasonably be expected to result in any material adverse
effect on the Condition of the Company.
(i) Litigation. Promptly upon any officer of the
Company obtaining knowledge of (i) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting the
Company or any of its Subsidiaries or any property of the Company or any of its
Subsidiaries not previously disclosed by the Company to the Purchasers or (ii)
any material development in any action, suit, proceeding, governmental
investigation or arbitration at any time pending against or affecting the
Company or any of its Subsidiaries or any property of the Company or any of its
Subsidiaries which, in each case (i.e. clause (i) and (ii)), is reasonably
likely to have a material adverse effect on the Condition of the Company, the
Company will promptly give notice thereof to the Purchasers and provide such
other information as may be
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reasonably available to them to enable the Purchasers and their respective
counsel to evaluate such matter.
(j) Subsidiaries. Not less than fifteen (15) days
prior to creating a Subsidiary or acquiring the stock of a Person, such that
such Person will become a Subsidiary, the Company shall notify the Purchasers of
the Company's or any of its Subsidiary's intention to create such Subsidiary or
acquire such stock, and following such notice, such Subsidiary will not be
created or acquired until the Company has caused such Subsidiary to execute a
joinder to this Agreement, the Note and the other Transaction Documents (other
than the Merger Transaction Documents and the Senior Credit Facility Documents)
in form and substance satisfactory to the Purchasers, or the Guaranty.
(k) Supplemented Schedules; Notice of Corporate
Changes. Within ninety (90) days after the end of the fiscal year of the
Company, the Company shall supplement in writing and deliver to the Purchasers
revisions of Schedules 5.6, 5.7, 5.16, 5.18, 5.19(a), 5.21, 5.22, 5.23, 5.24,
5.25, 5.27, 5.29, 5.30, 5.31 and 9.13 annexed to this Agreement to the extent
necessary to disclose new or changed facts or circumstances after the Closing
Date; provided that subsequent disclosures shall not constitute a cure or waiver
of any Event of Default resulting from the matters disclosed. The Company shall
provide prompt written notice to the Purchasers of (i) all jurisdictions in
which the Company or any of its Subsidiaries becomes qualified after the Closing
Date to transact business, and (ii) any material change after the Closing Date
in the authorized and issued capital stock or other equity interests of the
Company or any of its Subsidiaries or any other material amendment to their
charter, by-laws or other organization documents, such notice, in each case, to
identify the applicable jurisdictions or capital structures, as applicable.
(l) No Defaults. The Company shall deliver to the
Purchasers concurrently with the delivery of the financial statements referred
to in Section 8.1(b), a certificate of the Company's Chief Financial Officer
stating that to his or her knowledge no Event of Default shall have occurred
during the period covered thereby, except as specified in such certificate.
(m) Other Information. With reasonable promptness,
the Company shall deliver such other information and data with respect to the
Company or any of its Subsidiaries as from time to time may be reasonably
required by the Purchasers.
8.2 PRESERVATION OF CORPORATE EXISTENCE. The Company shall,
and shall cause each of its Subsidiaries to:
(a) preserve and maintain in full force and effect
its corporate existence, except as otherwise permitted by Section 9.1;
(b) conduct its business in accordance with sound
business practices, keep its properties in good working order and condition
(normal wear and tear excepted), and from time to time make all needed repairs
to, renewals of or replacements of its properties (except to the extent
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that any of such properties are obsolete or are being replaced) so that the
efficiency of its business operations shall be fully maintained and preserved;
and
(c) file or cause to be filed in a timely manner all
reports, applications, estimates and licenses that shall be required by a
Governmental Authority.
8.3 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause
each of its Subsidiaries to, pay and discharge as the same shall become due and
payable, all their respective obligations and liabilities, including without
limitation:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which the Company, and each of
its Subsidiaries is obligated to pay, which are due and which, if unpaid, might
by law become a Lien upon its property, unless the same are being contested in
good faith by appropriate proceedings and adequate reserves in accordance with
GAAP are being maintained by the Company or such Subsidiary; and
(c) all payments of principal, interest and other
amounts when due on Indebtedness, except with respect to trade payables which
may be paid in the ordinary course of business, consistent with past practices.
8.4 COMPLIANCE WITH LAWS. The Company shall comply, and shall
cause each of its Subsidiaries to comply, in all material respects with all
Requirements of Law (including all applicable Environmental Laws) and with the
directions of any Governmental Authority having jurisdiction over them or their
business or property (including all applicable Environmental Laws).
8.5 RESERVATION OF COMMON STOCK. The Company shall at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issuance or delivery upon exercise of the Warrant and the
Management Options, the maximum number of shares of Common Stock that may be
issuable or deliverable upon such exercise (the "EXERCISABLE SHARES"). The
Exercisable Shares shall, when issued or delivered in accordance with the
Warrant or the Management Options, as the case may be, be duly and validly
issued and fully paid and non-assessable. The Company shall issue such capital
stock in accordance with the provisions of the Warrant or the Management Options
with respect to the Common Stock, as the case may be, and shall otherwise
comply, in each case, with the terms thereof.
8.6 INSPECTION. The Company will permit, and will cause each
of its Subsidiaries to permit, representatives of the Purchasers to visit and
inspect any of their properties, to examine their corporate, financial and
operating records and make copies thereof or abstracts therefrom, and to discuss
their affairs, finances and accounts with their respective directors, officers
and
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independent public accountants, all at such reasonable times during normal
business hours and as often as may be reasonably requested, upon reasonable
advance notice.
8.7 PAYMENT OF NOTE. The Company shall pay the principal of,
interest on and other amounts due in respect of, the Note on the dates and in
the manner provided in the Note.
8.8 INSURANCE. The Company and its Subsidiaries shall maintain
or cause to be maintained in good repair, working order and condition all
material properties used in their respective businesses and will make or cause
to be made all appropriate repairs, renewals and replacements thereof. The
Company and its Subsidiaries will maintain or cause to be maintained with
financially sound and reputable insurers that have a rating of "A" or better as
established by Best's Rating Guide (or an equivalent rating with such other
publication of a similar nature as shall be in current use), public liability
and property damage insurance with respect to their respective businesses and
properties against loss or damage of the kinds customarily carried or maintained
by companies of established reputation engaged in similar businesses and in
amounts acceptable to Purchasers and will deliver evidence thereof to
Purchasers. Without limiting the foregoing, the Company and its Subsidiaries
will establish no later than two (2) months after the Closing Date and maintain
at all times thereafter (a) business interruption insurance in an amount
reasonably satisfactory to the Whitney Funds, and (b) directors' and officers'
liability insurance coverage for each of the members of the Boards of Directors
of the Company and its Subsidiaries, and the Managers of the LLC, in each case
in amounts reasonably satisfactory to the Whitney Funds; provided, however, that
the Company shall not be obligated to purchase such insurance in the event that
reasonable terms and pricing are not commercially available.
8.9 BOOKS AND RECORDS. The Company shall, and shall cause each
of its Subsidiaries to, keep proper books of record and account, in which full
and correct entries shall be made of all financial transactions and the assets
and business of the Company and each of its Subsidiaries in accordance with GAAP
consistently applied to the Company and its Subsidiaries taken as a whole.
8.10 USE OF PROCEEDS. The Company shall use the proceeds of
the sale of Securities hereunder only as follows: (i) for the payment of fees
and expenses in connection with the transactions contemplated hereunder and in
the other Transaction Documents, (ii) in connection with the Aqua-Chem Merger,
and (iii) for general corporate purposes.
8.11 BOARD NOMINEES.
(a) The Company shall maintain a six-member Board of
Directors, and the Company shall use its best efforts to have (i) two nominees
designated by Whitney (or the Whitney Funds) elected to the Company's Board of
Directors, (ii) two nominees designated by Management elected to the Company's
Board of Directors, (iii) two "independent" nominees who are agreeable to each
of Whitney (or the Whitney Funds) and Management elected to the Company's Board
of Directors, and (v) two nominees of Whitney (or the Whitney Funds) elected to
each of the
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Company's audit committee and compensation committee, in each case one of which
shall be elected as Chairman of such committee; provided, however, that if there
is a breach of any provision of any Transaction Document, at the option of
Whitney (or the Whitney Funds) the size of the Board of Directors of the Company
shall be increased to nine, and the Company shall use its best efforts to have
three additional nominees designated by Whitney (or the Whitney Funds) elected
to the Board of Directors of the Company. All such directors shall hold office
until their respective successors shall have been elected and shall have
qualified. The Company shall provide to such directors the same information
concerning the Company and its Subsidiaries, and access thereto, provided to
other members of the Company's Board of Directors. The reasonable travel
expenses incurred by any such director or manager in attending any such meetings
shall be reimbursed by the Company to the extent consistent with the Company's
then existing policy of reimbursing directors generally for such expenses.
(b) In the event that Whitney (or the Whitney Funds)
shall not have a designee serving on the Board of Directors of the Company for
any reason, the Company shall give Whitney and the Whitney Funds notice of (in
the same manner as notice is given to directors), and permit one Person
designated by Whitney (or the Whitney Funds) to attend as observer, all meetings
of the Company's Board of Directors and all executive and other committee
meetings of the Board of Directors and shall provide to Whitney and the Whitney
Funds the same information concerning the Company and its Subsidiaries, and
access thereto, provided to members of the Company's Board of Directors. The
reasonable travel expenses incurred by any such designee of Whitney (or the
Whitney Funds) in attending any board or committee meetings shall be reimbursed
by the Company to the extent consistent with the Company's then existing policy
of reimbursing directors generally for such expenses.
8.12 GRANTING OF MANAGEMENT OPTIONS. The Company may grant no
more than 61,919 Management Options. If the Management Options are granted, the
Company shall grant the Management Options at an exercise price equal to at
least the per share fair market value of the Common Stock (as determined by the
Company's Board of Directors) at the time of such grant or grants, as the case
may be.
8.13 WHITNEY DIRECTOR'S INDEMNIFICATION. The Company shall
indemnify the members of the Board of Directors of the Company designated by
Whitney (or the Whitney Funds) to the fullest extent permitted by applicable
law. The Company shall enter into indemnification agreements in form and
substance reasonably satisfactory to Whitney.
8.14 TITLE INSURANCE. The Company shall, within ninety (90)
days of the Closing Date, with respect to the properties described in clauses
(i) and (ii) below, and one hundred eighty (180) days of the Closing Date, with
respect to the property described in clause (iii) below, deliver, or cause to be
delivered, to the Purchasers, title insurance policies issued by First American
Title Insurance Company, or such other title insurance company reasonably
satisfactory to the Purchasers for the properties located at (i) 161 Lorne
Avenue, Stratford, Ontario, Canada, (ii) Lehman Street, Lebanon, Pennsylvania
(the "Lebanon Property"), and (iii) Poniente 148 No. 973, Col. Industrial
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Vallejo, Mexico City 02300, D.F., Mexico, insuring good and marketable title to
each such property in the name of the Company or the Subsidiary represented to
the Purchasers to be the owner of such property, which title policies shall
contain such endorsements as the Purchasers may reasonably request, and which
shall be subject only to the mortgage liens in connection with the Senior Credit
Facility and such other exceptions to coverage that do not render title
unmarketable, do not prevent or restrict the use of such properties for each of
their respective current uses, and are otherwise approved by the Purchasers,
such approval not to be unreasonably withheld or delayed.
8.15 LANDLORD CONSENTS. The Company shall, within ninety (90)
days of the Closing Date, deliver or cause to be delivered, to the Purchasers,
consents to the assignment by operation of law of the leases for the following
two premises in connection with the Aqua-Chem Merger: (a) the company's
headquarters, located at 7800 N. 113th Street, Milwaukee, Wisconsin 53224, and
(b) 1851 D. Howard Street, Elk Grove Village, Illinois 60007.
8.16 COOK COUNTY JUDGMENT Within forty five days after the
closing date, the Company will resolve all issues relating to the Cook County
Judgment referenced on Schedule 5.27 to the satisfaction of the Purchasers.
ARTICLE 9
NEGATIVE COVENANTS
Until the payment by the Company of all principal of and
interest on the Note and all other amounts due at the time of payment of such
principal and interest to the Purchasers under this Agreement and the other
Transaction Documents, including, without limitation, all fees, expenses and
amounts due at such time in respect of indemnity obligations under Article 7,
the Company hereby covenants and agrees with the Purchasers as follows:
9.1 FUNDAMENTAL CHANGES; CONSOLIDATIONS, MERGERS AND
ACQUISITIONS. The Company shall not, and shall not permit any of its
Subsidiaries directly or indirectly to: (a) amend, modify or waive any term or
provision of its certificate of incorporation, by-laws or other organization or
governing agreements and documents, unless required by law; (b) enter into any
transaction of merger or consolidation; (c) liquidate, wind-up or dissolve
itself (or suffer any liquidation or dissolution); or (d) acquire by purchase or
otherwise all or any substantial part of the business or assets of any other
Person, other than Permitted Acquisitions.
9.2 TRANSACTIONS WITH AFFILIATES. Except in the ordinary
course of business and consistent with past practices, the Company shall not,
and shall not permit any of its Subsidiaries to, (a) enter into any transaction
or agreement with, or make any payment (other than pursuant to agreements
existing on the date hereof or subsequently approved by the Purchasers) to, any
Affiliate, (b) amend or terminate any existing agreement with any Affiliate, (c)
purchase from or provide to an Affiliate any selling, general, management or
administrative services, (d) directly or indirectly
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make any sales to or purchases from an Affiliate or (e) increase the
compensation being paid to an Affiliate.
9.3 NO INCONSISTENT AGREEMENTS. Other than with respect to the
Senior Credit Facility, including without limitation the Senior Credit Facility
Transaction Documents, none of the Company nor any of its Subsidiaries shall
enter into any Contractual Obligation or enter into any amendment or other
modification to any currently existing Contractual Obligation of the Company, or
any of their Subsidiaries, which by its terms restricts or prohibits the ability
of the Company to pay the principal of or interest on the Note or to fully
satisfy all of the obligations under the Transaction Documents of the Company.
Subject to the Subordination Agreement, none of the Company nor any of its
Subsidiaries shall amend or modify any Senior Credit Facility Transaction
Document if such amendment or modification would materially adversely effect
either the Purchasers or the Condition of the Company.
9.4 LIMITATION ON INDEBTEDNESS. The Company shall not, and
shall not cause, suffer or permit any of its Subsidiaries to, directly or
indirectly, collectively and in the aggregate, issue, assume or otherwise incur
any Indebtedness, other than:
(a) Indebtedness created under the Transaction Documents
(other than the Senior Credit Facility Transaction Documents and the Merger
Transaction Documents);
(b) Senior Indebtedness, up to an aggregate outstanding
principal amount of $70,000,000; (less escrowed amounts with respect to the
Thomasville IRBs and the Monroe IRBs)
(c) Indebtedness listed on Schedule 5.27;
(d) Non-current liabilities for post-employment healthcare and
other insurance benefits;
(e) Trade payables, accrued expenses and payment and
performance bonds, in each case arising in the ordinary course of business;
(f) Indebtedness secured by a Lien permitted under Section
9.5;
(g) Indebtedness between and/or among the Company and its
Subsidiaries; provided that the obligations of such Indebtedness shall:
(i) be subordinated in right of payment to all
Indebtedness under the Note and this Agreement from and after such time
as any portion of the Indebtedness under the Note and this Agreement
shall become due and payable (whether at stated maturity, by
acceleration or otherwise); and
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(ii) have such other terms and provisions as the
Purchasers may reasonably require;
(h) Subject to the terms and conditions of the Subordination
Agreement, refinancings, refundings or extensions of the foregoing; provided,
that any such refinancings, refundings or extensions shall not:
(i) exceed the principal amount permitted under
Sections 9.4(b), 9.4(c) hereof;
(ii) shorten the maturity (or weighted average life
to maturity) of such Indebtedness or convert a revolving credit
facility into a facility which provides for the amortization of
principal;
(iii) increase the interest rate applicable to such
Indebtedness;
(iv) upon the occurrence and during the continuance
of an Event of Default, cause any covenants or undertakings (whether
affirmative or negative) of the Company or its Subsidiaries in respect
of such Indebtedness to be more restrictive than such covenants or
undertakings had been prior to such refinancing, refunding or
extension;
(v) facilitate the exercise or enforcement of any
remedies of any obligee of such Indebtedness in respect of any default
or event of default thereunder;
(vi) materially and adversely affect any obligations
under the Transaction Documents to Purchasers; or
(vii) result in any amendments or modifications of
any of the subordination provisions applicable to such Indebtedness;
(i) Indebtedness in an aggregate amount not to exceed $750,000
at any one time outstanding evidenced by notes of the Company issued to former
officers and employees of the Company;
(j) An unsecured overdraft line of credit or similar credit
arrangement maintained by the Company in the ordinary course of business with a
bank or other financial institution in Canada, in an amount not to exceed
$500,000 (the "Canadian Overdraft LOC");
(k) Indebtedness assumed in connection with Permitted
Acquisitions, provided that such Indebtedness was not entered into, extended or
renewed in contemplation of such acquisition (including Indebtedness secured by
Liens permitted by 9.5(e)), provided that the aggregate amount of all such
Indebtedness shall not exceed $1,500,000 at any one time outstanding; and
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(l) Additional Indebtedness not exceeding $250,000 in the
aggregate principal amount at any one time outstanding.
9.5 LIMITATION ON LIENS. The LLC and the Company will not, nor
will either permit any of its respective Subsidiaries, directly or indirectly,
to create, incur, assume or permit to exist any Lien on or with respect to any
property or asset (including any document or instrument with respect to goods or
accounts receivable) of the Company or its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, except Permitted
Encumbrances. "PERMITTED ENCUMBRANCES" means the following:
(a) Liens for taxes, assessments or other governmental charges
which are not yet due and payable or which are being contested in good faith
with a reserve or other appropriate provision having been made thereof;
(b) Liens of landlords, carriers, warehousemen, mechanics,
materialmen and other similar liens imposed by law, which are incurred in the
ordinary course of business for sums not more than thirty (30) days delinquent
or which are being contested in good faith; provided that a reserve or other
appropriate provision shall have been made therefor and the aggregate amount of
such Liens is less than $250,000;
(c) Deposits in an aggregate amount not to exceed $1,500,000
made in the ordinary course of business to secure liability to insurance
carriers in respect of workers' compensation insurance and other commercial
insurance;
(d) Liens for purchase money obligations to acquire assets;
provided that:
(i) such Lien attaches to such asset concurrently
with or within 10 days after the acquisition thereof;
(ii) does not exceed the purchase price of such
asset;
(iii) the Indebtedness secured by all such Liens,
shall not exceed $1,000,000; and
(iv) any such Lien encumbers only the asset so
purchased;
(e) Any attachment or judgment Lien not constituting an Event
of Default;
(f) Leases or subleases granted to others not interfering in
any material respect with the business of the Company or its Subsidiaries;
53
<PAGE> 61
(g) Easements, rights of way, restrictions and other similar
charges or encumbrances not interfering in any material respect with the
ordinary conduct of the business of the Company or any of its Subsidiaries;
(h) Liens existing on the date hereof (including, without
limitation, Liens under the Senior Credit Facility Transaction Documents) and
renewals and extensions thereof, which Liens are set forth on Schedule 5.27;
(i) Deposits to secure (i) the performance of bids, trade
contracts (other than for borrowed money), statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature in an
amount not to exceed $5,000,000 at any one time, or (iii) the performance of
leases permitted hereunder, in each case incurred on terms, in amounts and
otherwise in ordinary course of business; and
(j) Any Liens securing Indebtedness assumed pursuant to a
Permitted Acquisition, provided that such a Lien is limited to the property so
acquired, and was not entered into, extended or renewed in contemplation of such
acquisition.
9.6 DISPOSITIONS OF ASSETS. The Company will not, nor will it
permit any of its Subsidiaries, directly or indirectly, to: convey, sell
(pursuant to a sale/leaseback or otherwise), lease, sublease, transfer or
otherwise dispose of, or grant any Person an option to acquire, in one
transaction or a series of transactions, any of its property, business or
assets, or the capital stock of or other equity interests in any of its
Subsidiaries, whether now owned or hereafter acquired, except for:
(a) inventory leased or sold in the ordinary course of
business;
(b) obsolete or worn out property, property no longer useful
in the conduct of Company's or any Subsidiary's business or property from closed
offices, in each case disposed of in the ordinary course of business; and
(c) the lease or sale of the assets remaining at the Lebanon
Property for approximately $1,500,000, (ii) the sale of the John Deere line of
business located at the Company's Monroe, Wisconsin facility for approximately
$2,000,000, (iii) Asset Dispositions in which the sales price is at least the
fair market value of the assets sold and the aggregate amount of such Asset
Dispositions is less than One Million Five Hundred Thousand Dollars ($1,500,000)
in any fiscal year, and (iv) other Asset Dispositions approved by the
Purchasers.
9.7 LIMITATIONS ON RESTRICTED PAYMENTS. The Company shall not,
and shall not permit any of its Subsidiaries to declare, or make any Restricted
Payment, except: (a) as expressly permitted under the Transaction Documents, (b)
with respect to the Series C Preferred Stock, (c) that the Company's
Subsidiaries may make distributions and pay dividends to the Company, and (d) so
long as no Event of Default has occurred and is continuing or would occur after
giving effect thereto, the Company may redeem stock of former officers and
employees of the Company.
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<PAGE> 62
9.8 FINANCIAL COVENANTS. The Company covenants and agrees that
until payment in full of all Indebtedness hereunder and under the Note, the
Company shall comply with and shall cause each of its Subsidiaries to comply
with all covenants in this Section 9.8 applicable to such Person.
(a) Interest Coverage. The Company shall not permit Interest
Coverage for any twelve (12) month period ending on the last day of each fiscal
quarter during any of the periods set forth below to be less than the ratio set
forth below for such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date to and including December 31, 1997 2.50:1.00
January 1, 1998 to and including December 31, 1999 2.25:1.00
January 1, 2000 to and including December 31, 2000 3.00:1.00
January 1, 2001 and thereafter 3.25:1.00
</TABLE>
"INTEREST COVERAGE" will be calculated as illustrated on Exhibit E hereto.
(b) Fixed Charge Coverage. The Company shall not permit Fixed
Charge Coverage for any twelve (12) month period ending on the last day of each
fiscal quarter from and after the Closing Date to be less than 1.00:1.00.
"FIXED CHARGE COVERAGE" will be calculated as illustrated on Exhibit E hereto.
(c) Total Funded Indebtedness Leverage Test. The Company shall
not permit the ratio of Total Funded Indebtedness as of the last day of any
fiscal quarter during any of the periods set forth below to EBITDA for the
twelve (12) month period ending on the last day of such fiscal quarter to be
greater than the ratio set forth below for such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date to and including June 30, 1998 5.00:1.00
July 1, 1998 to and including December 31, 1999 4.50:1.00
January 1, 2000 and thereafter 3.75:1.00
</TABLE>
(d) Capital Expenditures. The Company shall not permit Capital
Expenditures (as defined in Exhibit E hereto) in any fiscal year to exceed the
amounts set forth below for each corresponding period:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Fiscal year ending March 31, 1998 $5,500,000
All fiscal years ending after March 31, 1998 $4,000,000
</TABLE>
55
<PAGE> 63
To the extent that Capital Expenditures in any fiscal year are less than the
applicable amounts set forth above, the difference may be carried over and used
in the next immediately succeeding fiscal year (in addition to the applicable
Capital Expenditure amount for such fiscal year), provided that there shall be
no carry-over of such unused amount in any subsequent fiscal year, and provided
further that for purposes of calculating the amount which may be carried over,
all Capital Expenditures shall be first applied to the Capital Expenditure
amount set forth above for the fiscal year in question (and if there are excess
expenditures, then and only then to the carry-over amount from the immediately
preceding fiscal year, if any).
(e) Minimum Tangible Net Worth Test. The Adjusted Tangible Net
Worth at the end of each fiscal quarter shall be equal to or greater than the
Base Tangible Net Worth amount for such fiscal quarter. Adjusted Tangible Net
Worth shall mean, as of the date in question, Tangible Net Worth as of such date
plus an amount equal to the aggregate outstanding principal amount of the Note
as of such date. Base Tangible Net Worth shall mean (A) $16,800,000, plus (B)
(on a cumulative basis) for each fiscal quarter, the sum of (I) fifty percent
(50%) of Net Income (if positive) earned in each fiscal quarter commencing after
the Closing Date and (II) one hundred percent (100%) of the cash proceeds of the
issuance of any and all shares, share capital, interests, participations,
warrants, options or other equivalents (however designated) if capital stock of
a corporation and any and all equivalent ownership interests of a Person other
than a corporation.
9.9 EMPLOYEE BENEFIT PLANS. The Company shall not, and shall
not permit any of its Subsidiaries or any ERISA Affiliate, without the prior
approval of the Purchasers, (a) to establish or contribute to any employee
benefit plan (within the meaning of Section 3(3) of ERISA) or other employee
benefit arrangement which (i) is subject to Title IV of ERISA or is otherwise a
Defined Benefit Plan, Multiemployer Plan or multiple employer plan (within the
meaning of Section 413(c) of the Code); or (ii) provides post-retirement welfare
benefits or "parachute payments" (within the meaning of Section 280G(b) of the
Code); or (b) to amend any Plan if the effect of such amendment would cause such
Plan to be a plan or arrangement described in clause (a)(i) hereof or to provide
any of the benefits described in clause (a)(ii) hereof.
9.10 LIMITATION ON BUSINESS OF THE COMPANY. Neither the
Company nor any of its Subsidiaries shall engage in any business or transaction
other than the business in which it or any of its Subsidiaries is currently
engaged and the transactions contemplated by, or permitted under, the
Transaction Documents.
9.11 INVESTMENTS. Except in the ordinary course of business
and consistent with past practices, the Company shall not, and it shall not
permit any of its respective Subsidiaries, directly or indirectly, to make or
own any Investment in any Person except: (a) Permitted Investments; (b) they may
make intercompany loans and investments to the extent permitted under Sections
9.2 or 9.4; and (c) they may make loans and advances to employees for moving,
relocation entertainment, travel and other similar expenses in the ordinary
course of business not to exceed $500,000 in the aggregate at any time
outstanding.
56
<PAGE> 64
9.12 CONTINGENT OBLIGATIONS. The Company shall not, nor shall
it permit any of its Subsidiaries directly or indirectly to create or become or
be liable with respect to any Contingent Obligation except those; (a) resulting
from endorsements of negotiable instruments for collection in the ordinary
course of business; (b) arising under the Transaction Documents; (c) arising
with respect to customary indemnification and purchase price adjustment
obligations incurred in connection with any Asset Dispositions; (d) incurred in
the ordinary course of business with respect to surety and appeal bonds,
performance and return-of-money bonds and similar obligations not exceeding any
time outstanding $5,000,000 in aggregate liability; (e) incurred with respect to
any Indebtedness permitted pursuant to Section 9.4 hereof; (f) not permitted by
clauses (a) through (f) above so long as any such Contingent Obligations, in the
aggregate at any time outstanding do not exceed $50,000.
9.13 MANAGEMENT FEES AND COMPENSATION. The Company shall not,
nor shall it permit any of its Subsidiaries, directly or indirectly, to pay any
management, consulting or similar fees to any Affiliate or to any director,
officer or employee of the Company or any of its Subsidiaries except reasonable
director's fees and expenses and except as set forth on Schedule 9.13.
Notwithstanding the foregoing, no payments may be made with respect to any items
set forth on Schedule 9.13 upon the incurrence and during the continuation of an
Event of Default.
9.14 FISCAL YEAR. The Company and its Subsidiaries shall not
change their fiscal year without the prior consent of the Purchasers.
9.15 PRESS RELEASE; PUBLIC OFFERING MATERIALS. The Company
shall not, nor shall the Company permit any of its Subsidiaries to, disclose a
name of either the Purchasers or any of their respective Affiliates in any press
release or in any prospectus, proxy statement or other materials filed with the
governmental entity relating to a public offering of the capital stock or other
equity interest of the Company or any of its Subsidiaries without such
Purchaser's or such Affiliate's prior written consent which shall not be
unreasonably withheld.
9.16 SUBSIDIARIES. Except as permitted in Section 8.1(j), the
Company shall not, nor shall any of the Subsidiaries be permitted to, directly
or indirectly, to establish, create or acquire any new Subsidiary.
9.17 NO NEGATIVE PLEDGES. Except pursuant to the Senior Credit
Facility Transaction Documents and the Canadian Overdraft LOC, the Company will
not and will not permit any of its Subsidiaries directly or indirectly to enter
into or assume any agreement prohibiting the creation or assumption of any Lien
upon its properties or assets, whether now owned or hereafter acquired.
9.18 NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO THE
COMPANY. Except pursuant to the Senior Credit Facility Transaction Documents and
except as otherwise provided herein, the Company will not and will not permit
any of its Subsidiaries directly or indirectly to create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or
57
<PAGE> 65
restriction of any kind on the ability of the Company or any such Subsidiary to:
(a) pay dividends or make any other distribution on any of such Subsidiary's
capital stock owned by the Company or any Subsidiary; (b) subject to
subordination provisions for the benefit of Purchasers, pay any Indebtedness
owed to the Company or any other Subsidiary; (c) make loans or advances to the
Company or any other Subsidiary; or (d) transfer any of its property or assets
to the Company or any other Subsidiary.
9.19 BANK ACCOUNTS. The Company will not and will not permit
any of its Subsidiaries to establish any new bank accounts without prior
telephonic or written notice to the Purchasers, which notice, if telephonic,
shall be followed by written confirmation.
ARTICLE 10
PREPAYMENT
10.1 OPTIONAL PREPAYMENT. The Company may prepay outstanding
principal (together with accrued interest) on the Note at any time without
penalty.
10.2 MANDATORY PREPAYMENT. Subject to Section 7 of the Note,
the Company shall prepay outstanding principal (together with accrued interest)
on the Note in accordance with the "MANDATORY PREPAYMENT" provisions set forth
in Section 3 of the Note.
ARTICLE 11
MISCELLANEOUS
11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of the Purchasers,
acceptance of the Securities and payment therefor, or termination of this
Agreement.
11.2 NOTICES. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
(a) if to WSDF:
Whitney Subordinated Debt Fund, L.P.
177 Broad Street
Stamford, Connecticut 06901
Telecopier No.: (203) 973-1422
Attention: Mr. James H. Fordyce
Mr. Daniel J. O'Brien
58
<PAGE> 66
with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Telecopier No.: (212) 735-8708
Attention: David A. Scherl, Esq.
(b) if to WEP:
Whitney Equity Partners, L.P.
177 Broad Street
Stamford, Connecticut 06901
Telecopier No.: (203) 973-1422
Attention: Mr. James H. Fordyce
Mr. Daniel J. O'Brien
with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Telecopier No.: (212) 735-8708
Attention: David A. Scherl, Esq.
(c) if to the LLC, the Company or CB-Kramer:
c/o Aqua-Chem, Inc.
7800 No. 113th Street
Milwaukee, Wisconsin 53224
Telecopier: (414) 577-2723
Attention: Mr. Jeffrey A. Miller
with a copy to:
Whyte Hirschboeck Dudek S.C.
Suite 2100
111 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Telecopier: (414) 273-1439
Attention: James A. Feddersen, Esq.
59
<PAGE> 67
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when delivered
by courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
11.3 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto. Subject to applicable securities laws and the terms of the
Operating Agreement and the Stockholders' and Members' Agreement, the Purchasers
may assign any of their respective rights under any of the Transaction Documents
to any Person and any holder of the Note, the Membership Units, the Shares, the
Warrant or the Common Stock issuable upon exercise of the Warrant may assign the
Note, the Membership Units, the Shares, the Warrant or the Common Stock issuable
upon exercise of the Warrant to any Person. The Company may not assign any of
its rights under this Agreement without the prior written consent of the
Purchasers. Except as provided in Article 7, no Person other than the parties
hereto and their successors and permitted assigns is intended to be a
beneficiary of any of the Transaction Documents.
11.4 AMENDMENT AND WAIVER.
(a) No failure or delay on the part of any of the
parties hereto in exercising any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
parties hereto at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or
to any provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by any party from the terms of any
provision of this Agreement, shall be effective (i) only if it is made or given
in writing and signed by all of the parties hereto, and (ii) only in the
specific instance and for the specific purpose for which made or given. Except
where notice is specifically required by this Agreement, no notice to or demand
on the Company in any case shall entitle the Company to any other or further
notice or demand in similar or other circumstances.
11.5 SIGNATURES; COUNTERPARTS. Telefacsimile transmissions of
any executed original document and/or retransmission of any executed
telefacsimile transmission shall be deemed to be the same as the delivery of an
executed original. At the request of any party hereto, the other parties hereto
shall confirm telefacsimile transmissions by executing duplicate original
documents and delivering the same to the requesting party or parties. 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.
60
<PAGE> 68
11.6 HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
11.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE.
11.8 DETERMINATIONS, REQUEST OR CONSENTS. All determinations,
requests, consents, waivers or amendments to be made by the Purchasers in their
respective opinions or judgments or with their approval or otherwise pursuant to
the Transaction Documents shall be made (i) with respect to the WSDF Note, by
the holder of the WSDF Note, (ii) with respect to the WSDF Warrant, by the
holder of the WSDF Warrant, and (iii) with respect to the WEP Units, by the
holder(s) of the WEP Units.
11.9 JURISDICTION. EACH PARTY TO THIS AGREEMENT HEREBY
IRREVOCABLY AGREES THAT THE ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, THE NOTE, THE MEMBERSHIP UNITS, THE SHARES, THE
WARRANT OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO
THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND
EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT THE SUCH COURTS
ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 11.2, SUCH SERVICE TO
BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.
11.10 SEVERABILITY. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, 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, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
11.11 RULES OF CONSTRUCTION. Unless the context otherwise
requires, "or" is not exclusive, and references to sections or subsections refer
to sections or subsections of this Agreement.
11.12 ENTIRE AGREEMENT. This Agreement, together with the
exhibits and schedules hereto and the other Transaction Documents, is intended
by the parties as a final expression of their
61
<PAGE> 69
agreement and intended to be a complete and exclusive statement of the agreement
and understanding of the parties hereto in respect of the subject matter
contained herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the exhibits and schedules hereto, and the other
Transaction Documents supersede all prior agreements and understandings between
the parties with respect to such subject matter.
11.13 CERTAIN EXPENSES. The Company will pay all expenses of
the Purchasers (including fees, charges and disbursements of counsel) in
connection with any amendment, supplement, modification or waiver of or to any
provision of this Agreement (including, without limitation, a response to a
request by the Company for the Purchasers' consent to any action otherwise
prohibited hereunder), the Operating Agreement, the Note, the Warrant or any
other Transaction Document, or consent to any departure by the Company from, the
terms of any provision of this Agreement, the Operating Agreement, the Note, the
Warrant or any other Transaction Document.
11.14 PUBLICITY. Except as may be required by applicable law,
none of the parties hereto shall issue a publicity release or announcement or
otherwise make any public disclosure concerning this Agreement or the
transactions contemplated hereby, without prior approval by the other party
hereto. If any announcement is required by law to be made by any party hereto,
prior to making such announcement such party will deliver a draft of such
announcement to the other parties and shall give the other parties an
opportunity to comment thereon.
11.15 FURTHER ASSURANCES. Each of the parties shall execute
such documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations, or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.
11.16 OBLIGATIONS OF THE PURCHASERS. Each Purchaser's
obligation and the obligations of the Company hereunder are subject to the
execution and delivery of this Agreement by the other Purchasers. The
obligations of each Purchaser shall be several and not joint and no Purchaser
shall be liable or responsible for the acts of any other Purchaser.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 70
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their respective officers hereunto
duly authorized as of the date first above written.
RUSH CREEK LLC
By: /s/ J. Scott Barton
--------------------------------------
Name: J. Scott Barton
Title: Manager
AQUA-CHEM, INC.
By: /s/ J. Scott Barton
--------------------------------------
Name: J. Scott Barton
Title: VP
CB-KRAMER SALES AND SERVICE, INC.
By: /s/ J. Scott Barton
--------------------------------------
Name: J. Scott Barton
Title: VP
WHITNEY SUBORDINATED DEBT FUND, L.P.
By: /s/ James H. Fordyce
--------------------------------------
Name: James H. Fordyce
A General Partner
WHITNEY EQUITY PARTNERS, L.P.
By: J.H. Whitney Equity Partners LLC,
Its General Partner
By: /s/ James H. Fordyce
--------------------------------------
Name: James H. Fordyce
Title: Attorney-in-Fact
[SIGNATURE PAGE TO AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT]
<PAGE> 71
EXHIBIT 10.17
EXHIBIT E
Financial Covenant Calculations
1. Calculation of INTEREST COVERAGE as set forth in Section 9.8(a).
EBITDA:
Net income (or loss) of the Company and its Subsidiaries,
for the period in question, on a consolidated basis determined
in accordance with GAAP, but excluding: (a) the income (or
loss) of any Person (other than Subsidiaries of the Company)
in which the Company or any of its Subsidiaries has an ownership
interest, unless received by the Company or its Subsidiaries in
a cash distribution; and (b) the income (or loss) of any Person
accrued prior to the date it became a Subsidiary of the Company
or is merged into or consolidated with the Company. $ __________
Plus: Any provision for (or less any benefit from) income and
franchise taxes included in the determination of net
income __________
Interest Expenses net of Interest Income, deducted in
the determination of net income __________
Depreciation deducted in the determination of net income __________
Amortization deducted in determining net income __________
Losses (or less gains) from Asset Dispositions or other
non-cash items included in the determination of net income
(excluding sales, expenses or losses related to current
assets) __________
Extraordinary losses (or less gains), as defined under GAAP,
net of related tax effects included in the determination of
net income __________
Other expenses (as set forth in the Company's financial
statements) __________
Expenses of the transactions completed pursuant to the
Transaction Documents included in the determination of net
income provided that such expenses were included in the Pro
Forma Balance Sheet, or disclosed in the notes thereto __________
Less: Other income __________
EBITDA $ __________
Interest Coverage:
Interest expenses, net of interest income, included in the
determination of net income of the Company and its Subsidiaries
on a consolidated basis $ __________
Less: Amortization of capitalized fees and expenses incurred
with respect to the Transaction Documents included in
interest expense __________
E-1
<PAGE> 72
EXHIBIT 10.17
Interest paid in kind (PIK) and included in interest
expense _______________
INTEREST EXPENSES $_______________
ACTUAL INTEREST COVERAGE (EBITDA DIVIDED BY INTEREST EXPENSES) _______________
Required Interest Coverage _______________
In Compliance _______________
Yes/No
2. Calculation of FIXED CHARGE COVERAGE as set forth
in Section 9.8(b).
FIXED CHARGES:
Interest Expenses $_______________
Plus: Any provision for (benefit from) income or
franchise taxes included in the determination of
net income _______________
Scheduled payments of principal with respect
to all Indebtedness (including the principal
portion of scheduled payments of Capital Lease
Obligations) of the Company and its Subsidiaries
on a consolidated basis _______________
All rental and lease expenses of the Company and
its Subsidiaries on a consolidated basis _______________
FIXED CHARGES $_______________
OPERATING CASH FLOW:
EBITDA (calculated in accordance with Section 9.8(a)). $_______________
Plus: All rental and lease expenses of the Company and its
Subsidiaries on a consolidated basis _______________
OPERATING CASH FLOW $_______________
ACTUAL FIXED CHARGE COVERAGE (OPERATING CASH FLOW DIVIDED
BY FIXED CHARGES) _______________
Required Fixed Charge Coverage _______________
In Compliance _______________
Yes/No
3. Calculation of Total Funded Indebtedness Leverage
as set forth in Section 9.8(c).
TOTAL FUNDED INDEBTEDNESS:
Senior Indebtedness $_______________
E-2
<PAGE> 73
EXHIBIT 10.17
Plus: Subordinated Indebtedness (as defined in the WSDF Note) _______
Less: All reimbursement obligations in respect of letters of credit _______
Total Funded Indebtedness $_______
EBITDA (calculated in accordance with Item No. 1 of this Exhibit): $_______
Actual Total Funded Indebtedness Leverage (Total Funded Indebtedness
divided by Adjusted Operating Cash Flow) _______
Required Total Funded Indebtedness Leverage _______
In Compliance _______
Yes/No
4. Calculation of Capital Expenditures
CAPITAL EXPENDITURES are defined as follows:
Amount capitalized as capital expenditures for the period in question,
under GAAP, as property, plant, and equipment or similar fixed asset
accounts
$_______
Plus: deposits made during such period in connection with
property, plant, and equipment; less deposits of a prior
period included above _______
CAPITAL EXPENDITURES _______
Less: Portion of Capital Expenditures financed under
capital leases or other Indebtedness _______
UNFINANCED CAPITAL EXPENDITURES/ACTUAL CAPITAL EXPENDITURES (used in
calculation of Fixed Charge Coverage) $_______
5. Calculation of Minimum Tangible Net Worth
ACTUAL TANGIBLE NET WORTH _______
REQUIRED MINIMUM TANGIBLE NET WORTH _______
IN COMPLIANCE _______
Yes/No
E-3
<PAGE> 1
EXHIBIT 10.18
FIRST AMENDMENT AND CONSENT AGREEMENT
This FIRST AMENDMENT AND CONSENT AGREEMENT (this "FIRST
AMENDMENT"), dated as of June 23, 1998, by and among RUSH CREEK LLC (the "LLC"),
a Wisconsin limited liability company, AQUA-CHEM, INC. ("AQUA-CHEM"), a Delaware
corporation, CB-KRAMER SALES AND SERVICES INC. ("CB-KRAMER"), a Delaware
corporation, WHITNEY SUBORDINATED DEBT FUND, L.P. ("WSDF"), a Delaware limited
partnership, and WHITNEY EQUITY PARTNERS, L.P. ("JHW II" and together with WSDF,
the "PURCHASERS"), a Delaware limited partnership, amends the Amended and
Restated Securities Purchase Agreement (the "AMENDED AND RESTATED AGREEMENT"),
dated as of December 5, 1997, by and among the LLC, Aqua-Chem, CB-Kramer and the
Purchasers.
W I T N E S S E T H:
WHEREAS, pursuant to the terms of the Securities Purchase
Agreement (the "ORIGINAL AGREEMENT"), dated as of July 31, 1997, by and among
the LLC, Aqua-Chem, CB-Kramer and the Purchasers, Aqua-Chem sold to JHW II, and
JHW II purchased from Aqua-Chem (i) 2,281.825 shares (the "JHW II PREFERRED
SHARES") of Series C Redeemable Preferred Stock, par value $.01 per share, of
Aqua-Chem (the "SERIES C PREFERRED STOCK") and (ii) 510,000 shares (the "JHW II
COMMON SHARES" and together with the JHW II Preferred Shares, the "JHW II
SHARES") of common stock, $0.01 par value per share, of Aqua-Chem (the "COMMON
STOCK"), in each case, upon the terms and subject to the conditions set forth in
the Original Agreement;
WHEREAS, pursuant to the terms of the Original Agreement,
Aqua-Chem and CB-Kramer sold to WSDF, and WSDF purchased from Aqua-Chem and
CB-Kramer a subordinated promissory note (the "WSDF NOTE"), due July 30, 2004,
in the principal amount of $21,000,000, and in connection therewith, Aqua-Chem
sold to WSDF, and WSDF purchased from Aqua-Chem., a warrant (the "WSDF WARRANT")
to purchase 176,471 shares of Common Stock, in each case upon the terms and
subject to the conditions hereinafter set forth;
WHEREAS, prior to the date of the Original Agreement, the
Jeffrey A. Miller Family LLC, a Michigan limited liability company, and Jeffrey
A. Miller, Trustee of the Jeffrey A. Miller Trust u/a/d May 10, 1997
(collectively, the "MILLER RELATED ENTITIES") were the sole members of the LLC;
WHEREAS, each of the Purchasers, the Miller Related Entities
and the Managers (as such term is used in the Original Agreement), other than
Miller, own the Membership Units set forth opposite their names on Schedule A to
the Operating Agreement;
WHEREAS, the equity securities set forth opposite each of the
names of the Purchasers, the Miller Related Entities and the Management, other
than Miller, have been allocated to their respective capital accounts;
<PAGE> 2
EXHIBIT 10.18
WHEREAS, concurrently with the purchase and sale of the JHW II
Shares, the WSDF Note and the WSDF Warrant pursuant to the terms of the Original
Agreement, Aqua-Chem entered into a Revolving Credit and Term Loan Agreement
(the "SENIOR LOAN AGREEMENT"), dated as of July 31, 1997, with Comerica Bank
("COMERICA"), a Michigan banking corporation, individually and as agent
thereunder, providing for a secured term credit facility, and a secured
revolving credit facility (collectively, the "SENIOR CREDIT FACILITY");
WHEREAS, concurrently with the purchase and sale of the JHW II
Shares, the WSDF Note and the WSDF Warrant pursuant to the terms of the Original
Agreement, the contribution of the Series C Preferred Stock and the Common Stock
to the LLC in exchange for Membership Units pursuant to the Contribution
Agreement and the consummation of the Senior Credit Facility pursuant to the
terms of the Senior Loan Agreement, Old Aqua-Chem merged (the "AQUA-CHEM
MERGER") with and into Aqua-Chem, pursuant to the terms of the Agreement and
Plan of Reorganization (the "MERGER AGREEMENT"), dated as of July 31, 1997, by
and among Lyonnaise, Gestra, the LLC, Old Aqua-Chem, Aqua-Chem and Miller;
WHEREAS, the proceeds from (i) the purchase by the Purchasers
of the JHW II Shares, the WSDF Note and the WSDF Warrant, and (ii) the Senior
Credit Facility were used in part to finance the Aqua-Chem Merger;
WHEREAS, Aqua-Chem subsequently entered into an Amended and
Restated Revolving Credit and Term Loan Agreement (the "AMENDED AND RESTATED
SENIOR LOAN AGREEMENT"), dated as of December 5, 1997, with Comerica, as
structuring, documentation and administrative agent for the financial
institutions from time to time signatory thereto (collectively, the "BANKS"),
and the Banks;
WHEREAS, in connection with entering into the Amended and
Restated Senior Loan Agreement, the LLC, Aqua-Chem, CB-Kramer and the Purchasers
entered into the Amended and Restated Agreement;
WHEREAS, concurrently with the execution and delivery of this
Amendment and Consent, the Company is entering into a Second Amended and
Restated Revolving Credit Agreement (the "SECOND AMENDED AND RESTATED SENIOR
LOAN AGREEMENT"), dated as of June 23, 1998, with Comerica, as structuring,
documentation and administrative agent for the Banks, and the Banks;
WHEREAS, concurrently with the execution and delivery of this
Amendment and Consent, the Company is issuing and its selling 11 1/4 % Senior
Subordinated Notes Due 2008 ("SENIOR NOTES"), in the aggregate principal amount
of $125,000,000, pursuant to the terms of the Confidential Offering Circular,
dated June 18, 1998, of the Company (the "CONFIDENTIAL OFFERING CIRCULAR");
2
<PAGE> 3
EXHIBIT 10.18
WHEREAS, a portion of the proceeds from the issuance and sale
of the Senior Notes shall be used to repay all of the outstanding principal and
accrued but unpaid interest on the WSDF Note, together with all other amounts
due in respect of the WSDF Note, and a portion of such proceeds shall be used to
repay borrowings outstanding under the Amended and Restated Senior Loan
Facility;
WHEREAS, pursuant to the Certificate of Incorporation of
Aqua-Chem (the "CERTIFICATE OF INCORPORATION"), the issuance and sale of the
Senior Notes requires the consent of the holders of a majority of the Series C
Preferred Stock; and
WHEREAS, Rush Creek, as the record owner of all, and JHW II as
the beneficial owner of a majority, of the Series C Preferred Stock desires to
consent to the execution and delivery of the Second Amended and Restated Senior
Loan Agreement and the issuance and sale of the Senior Notes as herein set forth
provided that the Amended and Restated Agreement is amended as set forth below
(the Amended and Restated Agreement, as amended by this First Amendment is
hereinafter referred to as the "AGREEMENT").
NOW THEREFORE, in consideration of the promises set forth
herein and for other good and valuable consideration, the sufficiency and
receipt of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms used in this
First Amendment but not defined herein shall have the meanings given to them in
the Original Agreement. The term "Acquisition Corp" as used in the Agreement
shall mean Aqua-Chem.
SECTION 2. AMENDMENTS TO THE AMENDED AND RESTATED AGREEMENT.
Effective as of the date hereof, the introductory paragraph of Article 8 of the
Amended and Restated Agreement is hereby amended by adding the following ", or
any portion of the WSDF Option is, " after the words "JHW II Preferred Shares"
appearing in the fifth line thereof. Effective as of the date of filing of the
Certificate of Amendment to the Certificate of Incorporation referred to in
Section 3 below, WSDF confirms that the provisions of Article 9 of the Amended
and Restated Agreement shall cease to be enforceable by WSDF following repayment
of the WSDF Note as herein provided.
SECTION 3. CONSENTS. The LLC and JHW II hereby consent to (i)
the execution and delivery of the Second Amended and Restated Senior Loan
Agreement by the Company, and (ii) subject to (x) effectiveness of the
amendments to the Amended and Restated Securities Purchase Agreement set forth
herein and the (y) filing by the Secretary of State of the State of Delaware of
the Certificate of Amendment to the Certificate of Incorporation in the form
attached hereto as Exhibit A (the "CERTIFICATE OF AMENDMENT"), the issuance and
sale of the Senior Notes pursuant to the Confidential Offering Circular.
SECTION 4. RATIFICATION; LIMITED AMENDED AND CONSENT. The
terms and provisions set forth in this First Amendment shall modify and
supersede all inconsistent terms and
3
<PAGE> 4
EXHIBIT 10.18
provisions set forth in the Amended and Restated Agreement and, except as
expressly modified and superseded by this First Amendment, the terms and
provisions set forth in the amended and Restated Agreement are hereby ratified
and confirmed and shall continue in full force and effect. The amendments and
consent set forth herein shall be limited precisely as provided for herein to
the provisions expressly amended herein and shall not be deemed to be an
amendment to, waiver of, consent to or modification of any other terms or
provisions of the Amended and Restated Securities Purchase Agreement or the
Certificate of Incorporation or of any transactions or further or future action
on the part of the LLC or JHW II which would require the consent of the parties
under the Amended and Restated Securities Purchase Agreement or the Certificate
of Incorporation.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The representations
and warranties made by Aqua-Chem in the Purchase Agreement, dated as of June 18,
1998, between Aqua-Chem and Credit Suisse First Boston and Bear, Stearns & Co.
Inc., as initial purchasers, are true, correct and accurate as of the date
hereof, shall survive the date hereof and any investigation at anytime made by
or on behalf of any party.
SECTION 6. NOTICES. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing and
shall be by registered or certified first-class mail, return receipt requested,
telecopier, courier service or personal delivery:
(a) if to WSDF:
Whitney Subordinated Debt Fund, L.P.
177 Broad Street
Stamford, Connecticut 06901
Telecopier No.: (203) 973-1422
Attention: Mr. James H. Fordyce
Mr. Daniel J. O'Brien
with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Telecopier No.: (212) 735-8708
Attention: David A. Scherl, Esq.
(b) if to JHW II:
Whitney Equity Partners, L.P.
177 Broad Street
Stamford, Connecticut 06901
Telecopier No.: (203) 973-1422
Attention: Messrs. James H. Fordyce and Daniel J. O'Brien
4
<PAGE> 5
EXHIBIT 10.18
with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Telecopier No.: (212) 735-8708
Attention: David A. Scherl, Esq.
(c) if to the LLC, the Company or CB-Kramer:
c/o Aqua-Chem, Inc.
7800 No. 113th Street
Milwaukee, Wisconsin 53224
Telecopier: (414) 577-2723
Attention: Mr. Jeffrey A. Miller
with a copy to:
Whyte Hirschboeck Dudek S.C.
Suite 2100
111 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Telecopier: (414) 273-1439
Attention: James A. Feddersen, Esq.
SECTION 7. MISCELLANEOUS.
(a) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors and permitted assigns
of the parties hereto.
(b) Headings. The headings in this First Amendment
are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(c) GOVERNING LAW. THE FIRST AMENDMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE.
(d) JURISDICTION. EACH PARTY TO THIS FIRST AMENDMENT
HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS FIRST AMENDMENT, THE WSDF NOTE, THE MEMBERSHIP UNITS, THE WSDF
SHARES, THE WSDF WARRANT OR AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR
5
<PAGE> 6
EXHIBIT 10.18
THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO THE PERSONAL
JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND EXPRESSLY
WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH COURTS ARE AN
INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE ADDRESS SET FORTH IN SECTION 6 OF THIS FIRST AMENDMENT,
SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.
(e) Severability. If any one or more of the
provisions contained herein, or the application thereof in any circumstance, 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,
unless the provisions held invalid, illegal or unenforceable shall substantially
impair the benefits of the remaining provisions hereof.
(f) Rules of Construction. Unless the context
otherwise requires, "or" is not exclusive, and references to sections or
subsections refer to sections or subsections of this First Amendment.
(g) Entire Agreement. The Agreement, together with
the exhibits and schedules thereto, the WSDF Note, the WSDF Warrant and the
other Transaction Documents, are intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to therein. The Agreement,
as amended by this First Amendment, together with the exhibits and schedules
thereto, the WSDF Note, the WSDF Warrant and the other Transaction Documents
supersede all prior agreements and understandings between the parties with
respect to such subject matter.
(h) Certain Expenses. The Company will pay all
expenses of the Purchasers (including fees, charges and disbursements of
counsel) in connection with this First Amendment, any other amendment,
supplement, modification or waiver of or to any provision of the Agreement, the
Certificate of Incorporation, the Certificate of Amendment, the WSDF Note, the
WSDF Warrant, or any consent to any departure by Aqua-Chem from the terms of any
provision of the Agreement or the WSDF Note.
(i) Further Assurances. Each of the parties shall
execute such documents and perform such further acts (including, without
limitation, obtaining any consents, exemptions, authorizations, or other actions
by, or giving any notices to, or making any filings with, any Governmental
Authority or any other Person) as may be reasonably required or desirable to
carry out or to perform the provisions of the Agreement.
6
<PAGE> 7
EXHIBIT 10.18
[INTENTIONALLY LEFT BLANK]
7
<PAGE> 8
EXHIBIT 10.18
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed and delivered by their respective officers hereunto
duly authorized as of the date first above written.
RUSH CREEK LLC
By: /s/ JA Miller
-----------------------------------
Name:
Title:
AQUA-CHEM, INC.
By: /s/ JA Miller
-----------------------------------
Name:
Title:
CB-KRAMER SALES AND SERVICE, INC.
By: /s/ JA Miller
-----------------------------------
Name:
Title:
WHITNEY SUBORDINATED DEBT FUND, L.P.
By: /s/ James H. Fordyce
-----------------------------------
James H. Fordyce
A General Partner
WHITNEY EQUITY PARTNERS, L.P.
By: J. H. Whitney Equity Partners LLC,
Its General Partner
By: /s/ James H. Fordyce
-----------------------------------
James H. Fordyce,
Attorney-in-Fact
[SIGNATURE PAGE TO FIRST AMENDMENT AND CONSENT AGREEMENT]
8
<PAGE> 1
EXHIBIT 10.19
[AQUA-CHEM, INC. LETTERHEAD]
JEFFREY A. MILLER
Chairman and Chief Executive Officer
December 17, 1997
Mr. William P. Killian
207 W. Miller Drive
Mequon, Wisconsin 53092
Dear Bill:
This letter will set forth our agreement in connection with your
serving as a member of the Board of Directors (and any Committees thereof) of
Aqua-Chem, Inc. ("AQM"). The arrangements set forth herein shall be effective as
of August 1, 1997 and shall continue in effect for so long as you continue to be
a director. In that regard, nothing contained herein shall obligate you to
continue to serve as a director of AQM for any specific period or term or confer
upon you any right to continue to serve as a director of AQM for any specific
period or term. Accordingly, AQM by majority vote of its Stockholders or Board
and you each have the right to terminate your being an AQM director at any time.
Cash Fee.
For so long as you are a member of the Board of Directors, AQM will pay
you Two Thousand Five Hundred Dollars ($2,500) on the first day of November,
February, April and July of each year. Simultaneous with your acceptance of the
terms set forth herein, AQM will pay you Two Thousand Five Hundred Dollars
($2,500), representing payment due on November 1, 1997.
Indemnification Agreement.
AQM hereby confirms that the Indemnification Agreement (a copy of which
is attached hereto) between you and the predecessor to AQM, which was merged
into AQM on July 31, 1997, shall continue in full force and effect and, in
accordance with its terms, shall continue to apply to liabilities or obligations
incurred as a director of AQM as well as its predecessor.
Grant of Options.
Effective as of August 1, 1997 and effective as of each August 1
thereafter for so long as you are a member of the Board of Directors, AQM hereby
grants you an option (subject to the vesting and anti-dilution provisions
hereinafter set forth) to purchase six hundred (600) shares of $.01 par value
common stock of AQM (hereinafter respectively referred to as the "Options" and
the "Stock") at a price of Three and 75/100 Dollars ($3.75) per share, which
shall be payable in full upon exercise of the Option. Except as hereinafter set
forth in the next paragraph, all Options granted hereunder shall expire and
terminate on August 1, 2007. Options granted hereunder are so called
Non-Qualified or Non-Statutory Options and do not constitute Incentive Stock
Options
<PAGE> 2
EXHIBIT 10.19
within the meaning of Section 423 of the Internal Revenue Code. You shall be
responsible for any and all taxes due in connection with the grant or exercise
of the Options and/or the subsequent sale or other disposition of Stock acquired
pursuant to the exercise of the Options. Options shall be exercised by written
notice addressed to AQM accompanied by a check for the full purchase price. As a
condition precedent to the exercise of any Option, AQM reserves the right to
require you to represent to it that such exercise is for investment only and not
with a view to distribution and such other matters as may be necessary to comply
with applicable laws or regulations. If at any time the Board of Directors of
AQM in its sole discretion determines that the listing, registration, or
qualification of shares of Stock issuable hereunder on any securities exchange
or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with the issue, transfer or purchase of Stock, the Options granted
hereunder may not be exercised in whole or in part unless such listing,
registration, qualification, consent, or approval shall have been effected or
obtained free of any conditions not acceptable to the AQM Board. The granting of
the Options shall not confer any rights as a stockholder unless and until an
Option is validly exercised and a certificate issued. Nothing contained herein
shall confer any security interest or other interest in any assets of AQM and
you shall be a general unsecured creditor of AQM with respect to any amounts
which may become due you pursuant to the terms hereof.
Vesting
Options which are granted effective as of August 1 of any calendar year
shall vest and become exercisable in full on July 31 of the subsequent calendar
year. Accordingly, the Option granted effective as of August 1, 1997 shall
become vested and exercisable on July 31, 1998, the Option granted effective as
of August 1, 1998 shall become vested and exercisable on July 31, 1999 and so
forth. Notwithstanding the foregoing, in the event that prior to July 31 of any
calendar year, (a) AQM becomes a party to an agreement that contemplates the
sale of all of the issued and outstanding stock of AQM ("Stock Sale"), (b) AQM
becomes a party to a merger or consolidation agreement that contemplates that
AQM will not be the surviving corporation of the merger or consolidation
("Reorganization"), or (c) you cease for any reason to be a member of the Board
of Directors ("Termination") then, in any of such events (hereinafter referred
to as a "Triggering Event"): (a) if the Stock Sale, Reorganization or
Termination actually occurs prior to February 1 of such calendar year, the
Option granted effective August 1 of the preceding calendar year shall be null
and void and (b) if the Stock Sale, Reorganization or Termination actually
occurs on or after February 1 of such calendar year, the Option granted
effective August 1 of the preceding calendar year shall become immediately
vested and exercisable in full upon the occurrence of the Triggering Event.
Notwithstanding anything to the contrary herein (a) upon the consummation of a
Stock Sale or Reorganization all Options previously granted which have not been
exercised shall expire and terminate and (b) all Options previously granted
which have not been exercised shall expire and terminate on the ninetieth (90th)
day following a Termination.
Anti-Dilution and Administration.
Notwithstanding anything to the contrary herein, the AQM Board of
Directors (or such Committee thereof as the Board may designate) shall have the
right to and shall: (a) adjust the number of shares, the price of shares and/or
the class of shares to which the Options apply, but only to prevent the dilution
or enlargement of rights, including, without limitation, adjustments in the
event of stock dividends, stock splits, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, separations, spin-offs,
reorganizations, liquidations and the like; (b) interpret, administer and, to
the extent necessary to comply with the provisions of Section 16 of
2
<PAGE> 3
EXHIBIT 10.19
the Securities Act of 1934, the requirements of Rule 16b-3 and other
applicable laws and regulations, modify the provisions set forth herein. Any
such action taken or determination made in good faith by the AQM Board of
Directors or such Committee as the Board may designate shall be final and
binding.
Nontransferability of Options.
No Option may be transferred, assigned, pledged or hypothecated
(whether by operation of law or otherwise), except as provided by will or the
applicable laws of descent and distribution, and no Option shall be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of an Option not specifically
permitted herein shall be null and void.
Put - Call Provisions
Upon your death or disability (as defined in Section 22 (e) (3) of the
Internal Revenue Code) and continuing thereafter at any time or times until the
consummation of an initial public offering of the Stock, (a) you, or in the
event of your death, your personal representative and/or heirs (hereinafter
referred to as the "Selling Stockholder") shall have the right ("Put"),
exercisable by written notice to AQM, to require AQM to purchase all or any
portion of the Stock acquired pursuant to the exercise of the Options and (b)
AQM shall have the right ("Call"), exercisable by written notice, to require
you, or in the event of your death, your personal representative and/or heirs
(hereinafter again referred to as the "Selling Stockholder") to sell all or any
portion of the Stock acquired pursuant to the exercise of the Options. The per
share price for the Stock purchased and sold pursuant to the exercise of a Put
or Call shall be "Market Price" as hereinafter defined. The closing of the
purchase and sale of Stock pursuant to the exercise of a Put or Call shall occur
at AQM's principal office at the date and time specified by AQM by written
notice to the Selling Stockholder, which shall be (a) not less than ten (10)
days after the date of receipt of the written notice specifying date and time of
closing and (b) not more than ninety (90) days after receipt of the initial
notice of exercise of the Put or Call. At the closing, the Selling Stockholder
shall deliver certificates duly endorsed for transfer evidencing ownership of
the Stock being purchased and sold and such other agreements as AQM may
reasonably require to confirm that it is acquiring the Stock free and clear of
any claims of any nature whatsoever, and against delivery of the same, AQM shall
pay the Selling Stockholder (by certified or bank cashier's check or wire
transfer of immediately available funds to such account as the Selling
Stockholder shall direct in writing) an amount equal to (a) the Market Price,
multiplied by (b) the number of shares of Stock being purchased and sold. As
used herein, "Market Price" shall mean the fair market value of one share of
Stock as of the date of receipt of written notice of exercise of a Put or Call
as determined by an independent appraiser (the "Independent Appraiser")
appointed by the Board of Directors of AQM. The Independent Appraiser shall be
appointed within ten (10) days of receipt of written notice of exercise of a Put
or Call and shall be instructed to complete the valuation within thirty (30)
days after appointment. The Selling Stockholder and AQM shall execute such
agreements as the Independent Appraiser shall require. The fees and expenses of
the Independent Appraiser shall be paid by AQM and the determination of the
Independent Appraiser shall be final and binding upon AQM and the Selling
Stockholder.
Right of First Refusal.
AQM shall have a right of first refusal with respect to any sale,
transfer, gift, assignment, pledge, encumbrance or other disposition of Stock
acquired pursuant to the exercise of an Option. In the event you receive a bona
fide offer to purchase or desire to sell, transfer, assign, pledge, encumber or
otherwise dispose of any Stock acquired pursuant to the exercise of an Option,
you shall deliver written notice thereof to AQM stating the terms of such
proposed sale, transfer, gift, assignment, encumbrance or disposition, which
notice shall also
3
<PAGE> 4
EXHIBIT 10.19
specify the number of shares of Stock involved, the price per share, if any, and
the name and address of the proposed transferee. AQM shall have the right
(exercisable by written notice to you during the thirty (30) day period
following the date of AQM's receipt the initial written notice from you) to
elect to purchase all or less than all of the shares of Stock specified in your
written notice at a per share price equal to (a) in the case of a proposed
pledge, encumbrance, gift or similar disposition, the Market Price (as defined
in the preceding paragraph and determined as of the date of AQM's receipt of the
written notice from you), or (b) in the case of a proposed sale, the lesser of
the Market Price or the price contained in the bona fide offer and specified in
your written notice. The time and place of closing and the deliveries at closing
shall be as specified in the preceding paragraph. In the event AQM does not
exercise the right of first refusal as to all of the shares of Stock specified
in your written notice, you may during the ninety (90) day period after the
expiration of AQM's right of first refusal, dispose of any shares of Stock
specified in your initial written notice which were not purchased by AQM but
only upon the terms and to the transferee specified in your initial written
notice to AQM. After the expiration of such ninety (90) day period, no shares of
Stock acquired upon exercise of an Option may thereafter be transferred or
encumbered without again complying with the provisions set forth herein. Any
attempted transfer not in compliance with the preceding provisions shall be null
and void. The right of first refusal set forth herein shall terminate upon the
consummation of an initial public offering of the Stock.
Legend.
All certificates evidencing shares of Stock acquired pursuant to the
exercise of an Option shall bear a legend as follows:
The shares of Aqua-Chem, Inc. evidenced by this certificate have not
been registered under any securities laws and may only be sold,
transferred or otherwise disposed of in compliance with applicable
securities laws. In particular, the shares evidenced by this
certificate have not been registered under the Securities Acts of 1933,
as amended (the "Securities Act") and may not be sold, transferred or
otherwise dispose of unless (1) an effective registration statement
under the Securities Act shall then be in effect with respect to such
shares, or (2) the Company shall have received an opinion of counsel
reasonably acceptable to the Company that any proposed sale, transfer
or other disposition of such shares is exempt from registration under
the Securities Act. The shares evidenced by this certificate are
further subject to a right of first refusal and call as set forth in a
letter agreement dated December , 1997, a copy of which is available
for inspection at the offices of the Company.
Miscellaneous Provisions.
Any notices required or permitted hereunder shall be sufficiently given
if in writing and personally delivered, sent by registered mail or facsimile
addressed: (a) if to you or any permitted transferee, to your address or, if to
a permitted transferee, to such permitted transferee's address, as set forth in
the books and records of AQM; or (b) if to AQM, at the principal office of AQM
clearly marked "Attention: Board of Directors". If any provision of this
agreement shall be determined to be invalid or unenforceable, such determination
shall not affect the validity or enforceability of any other provision of this
agreement and the same shall be enforced as if such invalid or unenforceable
provision had not been included. This agreement contains the entire agreement of
the parties and, except as expressly provided to the contrary herein, may only
be modified by a written instrument signed by AQM and you. This agreement shall
be governed by the laws of the State of Wisconsin and any dispute hereunder
shall be resolved in accordance with the rules of the American Arbitration
Association by binding arbitration in Milwaukee, Wisconsin, by a panel of three
arbitrators, with you and AQM each appointing one arbitrator and the two
arbitrators so appointed then appointing a third arbitrator.
4
<PAGE> 5
EXHIBIT 10.19
If you are in agreement with the preceding, please so indicate by
signing and returning the enclosed copy of this letter.
Very truly yours,
/s/ JA Miller
--------------------------
Jeffrey A. Miller
Agreed to and accepted this ___ day of Decembr, 1997.
/s/ William Killian
--------------------------
William Killian
5
<PAGE> 1
[AQUA-CHEM, INC. LETTERHEAD]
EXHIBIT 10.20
February 11, 1998
Mr. James W. Hook
2230 Nemeskal
Maple City, Michigan 49664
Dear Jay:
This letter will set forth our agreement in connection with your
serving as a member of the Board of Directors (and any Committees thereof) of
Aqua-Chem, Inc. ("AQM"). The arrangements set forth herein shall be effective as
of January 23, 1998 and shall continue in effect for so long as you continue to
be a director. In that regard, nothing contained herein shall obligate you to
continue to serve as a director of AQM for any specific period or term or confer
upon you any right to continue to serve as a director of AQM for any specific
period or term. Accordingly, AQM by majority vote of its Stockholders or Board
of Directors and you each have the right to terminate your being an AQM director
at any time.
CASH FEE.
Upon your acceptance of this Agreement, AQM will pay you a one time fee
of Twenty Thousand Dollars ($20,000.00). In addition, for so long as you are a
member of the Board of Directors, AQM will pay you Two Thousand Five Hundred
Dollars ($2,500) on the first day of February, April, July and November of each
year. Consistent with the preceding quarterly payment schedule, upon your
acceptance of this Agreement, AQM will pay you $2,500, representing the payment
due on February 1, 1998.
INDEMNIFICATION AGREEMENT.
Simultaneous with your acceptance of this Agreement, AQM will enter
into an Indemnification Agreement with you in the form attached hereto as
Exhibit A.
GRANT OF OPTIONS.
AQM hereby grants you an option (subject to the vesting and
anti-dilution provisions hereinafter set forth) to purchase one thousand one
hundred twenty-five (1,125) shares of $.01 par value common stock of AQM
(hereinafter respectively referred to as the "Options" and the "Stock")
<PAGE> 2
EXHIBIT 10.20
at a price of Three and 75/100 Dollars ($3.75) per share, which shall be payable
in full upon exercise of the Option. Except as hereinafter set forth in the next
paragraph, all Options granted hereunder shall expire and terminate ten years
from the date of this letter. Options granted hereunder are so called
Non-Qualified or Non-Statutory Options and do not constitute Incentive Stock
Options within the meaning of Section 423 of the Internal Revenue Code. You
shall be responsible for any and all taxes due in connection with the grant or
exercise of the Options and/or the subsequent sale or other disposition of Stock
acquired pursuant to the exercise of the Options. Options shall be exercised by
written notice addressed to AQM accompanied by a check for the full purchase
price. As a condition precedent to the exercise of any Option, AQM reserves the
right to require you to represent to it that such exercise is for investment
only and not with a view to distribution and such other matters as may be
necessary to comply with applicable laws or regulations. If at any time the
Board of Directors of AQM in its sole discretion determines that the listing,
registration, or qualification of shares of Stock issuable hereunder on any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with the issue, transfer or purchase of Stock,
the Options granted hereunder may not be exercised in whole or in part unless
such listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the AQM Board. The
granting of the Options shall not confer any rights as a stockholder unless and
until an Option is validly exercised and a certificate issued. Nothing contained
herein shall confer any security interest or other interest in any assets of AQM
and you shall be a general unsecured creditor of AQM with respect to any amounts
which may become due you pursuant to the terms hereof.
VESTING
The Options shall vest and become exercisable at the rate of two
hundred twenty-five (225) per year commencing on December 31, 1998 through and
including December 31, 2002. Notwithstanding the foregoing, in the event that
prior to December 31 of any calendar year, (a) AQM becomes a party to an
agreement that contemplates the sale of all of the issued and outstanding stock
of AQM ("Stock Sale"), (b) AQM becomes a party to a merger or consolidation
agreement that contemplates that AQM will not be the surviving corporation of
the merger or consolidation ("Reorganization"), or (c) you cease for any reason
to be a member of the Board of Directors ("Termination") then, in any of such
events (hereinafter referred to as a "Triggering Event"): (a) if the Stock Sale,
Reorganization or Termination actually occurs on or before June 30 of such
calendar year, all Options schedule to vest on December 31 of such calendar year
and all Options scheduled to vest in subsequent calendar years shall be null and
void and (b) if the Stock Sale, Reorganization or Termination actually occurs
after June 30 of such calendar year, the Options scheduled to vest during on
December 31 of such calendar year shall become immediately vested and
exercisable in full upon the occurrence of the Triggering Event and all Options
scheduled
2
<PAGE> 3
EXHIBIT 10.20
to vest in subsequent calendar years shall be null and void. Notwithstanding
anything to the contrary herein (a) upon the consummation of a Stock Sale or
Reorganization all Options previously granted which have not been exercised
shall expire and terminate and (b) all Options previously granted which have
not been exercised shall expire and terminate on the ninetieth (90th) day
following a Termination.
ANTI-DILUTION AND ADMINISTRATION.
Notwithstanding anything to the contrary herein, the AQM Board of
Directors (or such Committee thereof as the Board may designate) shall have the
right to and shall: (a) adjust the number of shares, the price of shares and/or
the class of shares to which the Options apply, but only to prevent the dilution
or enlargement of rights, including, without limitation, adjustments in the
event of stock dividends, stock splits, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, separations, spin-offs,
reorganizations, liquidations and the like; (b) interpret, administer and, to
the extent necessary to comply with the provisions of Section 16 of the
Securities Act of 1934, the requirements of Rule 16b-3 and other applicable laws
and regulations, modify the provisions set forth herein. Any such action taken
or determination made in good faith by the AQM Board of Directors or such
Committee as the Board may designate shall be final and binding.
NONTRANSFERABILITY OF OPTIONS.
No Option may be transferred, assigned, pledged or hypothecated
(whether by operation of law or otherwise), except as provided by will or the
applicable laws of descent and distribution, and no Option shall be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of an Option not specifically
permitted herein shall be null and void.
PUT - CALL PROVISIONS
Upon your death or disability (as defined in Section 22(e)(3) of the
Internal Revenue Code) and continuing thereafter at any time or times until the
consummation of an initial public offering of the Stock, (a) you, or in the
event of your death, your personal representative and/or heirs (hereinafter
referred to as the "Selling Stockholder") shall have the right ("Put"),
exercisable by written notice to AQM, to require AQM to purchase all or any
portion of the Stock acquired pursuant to the exercise of the Options and (b)
AQM shall have the right ("Call"), exercisable by written notice, to require
you, or in the event of your death, your personal representative and/or heirs
(hereinafter again referred to as the "Selling Stockholder") to sell all or any
portion of the Stock acquired pursuant to the exercise of the Options. The per
share price for the Stock purchased
3
<PAGE> 4
EXHIBIT 10.20
and sold pursuant to the exercise of a Put or Call shall be "Market Price" as
hereinafter defined. The closing of the purchase and sale of Stock pursuant to
the exercise of a Put or Call shall occur at AQM's principal office at the date
and time specified by AQM by written notice to the Selling Stockholder, which
shall be (a) not less than ten (10) days after the date of receipt of the
written notice specifying date and time of closing and (b) not more than ninety
(90) days after receipt of the initial notice of exercise of the Put or Call. At
the closing, the Selling Stockholder shall deliver certificates duly endorsed
for transfer evidencing ownership of the Stock being purchased and sold and such
other agreements as AQM may reasonably require to confirm that it is acquiring
the Stock free and clear of any claims of any nature whatsoever, and against
delivery of the same, AQM shall pay the Selling Stockholder (by certified or
bank cashier's check or wire transfer of immediately available funds to such
account as the Selling Stockholder shall direct in writing) an amount equal to
(a) the Market Price, multiplied by (b) the number of shares of Stock being
purchased and sold. As used herein, "Market Price" shall mean the fair market
value of one share of Stock as of the date of receipt of written notice of
exercise of a Put or Call as determined by an independent appraiser (the
"Independent Appraiser") appointed by the Board of Directors of AQM. The
Independent Appraiser shall be appointed within ten (10) days of receipt of
written notice of exercise of a Put or Call and shall be instructed to complete
the valuation within thirty (30) days after appointment. The Selling Stockholder
and AQM shall execute such agreements as the Independent Appraiser shall
require. The fees and expenses of the Independent Appraiser shall be paid by AQM
and the determination of the Independent Appraiser shall be final and binding
upon AQM and the Selling Stockholder.
RIGHT OF FIRST REFUSAL.
AQM shall have a right of first refusal with respect to any sale,
transfer, gift, assignment, pledge, encumbrance or other disposition of Stock
acquired pursuant to the exercise of an Option. In the event you receive a bona
fide offer to purchase or desire to sell, transfer, assign, pledge, encumber or
otherwise dispose of any Stock acquired pursuant to the exercise of an Option,
you shall deliver written notice thereof to AQM stating the terms of such
proposed sale, transfer, gift, assignment, encumbrance or disposition, which
notice shall also specify the number of shares of Stock involved, the price per
share, if any, and the name and address of the proposed transferee. AQM shall
have the right (exercisable by written notice to you during the thirty (30) day
period following the date of AQM's receipt the initial written notice from you)
to elect to purchase all or less than all of the shares of Stock specified in
your written notice at a per share price equal to (a) in the case of a proposed
pledge, encumbrance, gift or similar disposition, the Market Price (as defined
in the preceding paragraph and determined as of the date of AQM's receipt of the
written notice from you), or (b) in the case of a proposed sale, the lesser of
the Market Price or the price
4
<PAGE> 5
EXHIBIT 10.20
contained in the bona fide offer and specified in your written notice. The time
and place of closing and the deliveries at closing shall be as specified in the
preceding paragraph. In the event AQM does not exercise the right of first
refusal as to all of the shares of Stock specified in your written notice, you
may during the ninety (90) day period after the expiration of AQM's right of
first refusal, dispose of any shares of Stock specified in your initial written
notice which were not purchased by AQM but only upon the terms and to the
transferee specified in your initial written notice to AQM. After the expiration
of such ninety (90) day period, no shares of Stock acquired upon exercise of an
Option may thereafter be transferred or encumbered without again complying with
the provisions set forth herein. Any attempted transfer not in compliance with
the preceding provisions shall be null and void. The right of first refusal set
forth herein shall terminate upon the consummation of an initial public offering
of the Stock.
LEGEND.
All certificates evidencing shares of Stock acquired pursuant to the
exercise of an Option shall bear a legend as follows:
The shares of Aqua-Chem, Inc. evidenced by this certificate have not
been registered under any securities laws and may only be sold,
transferred otherwise disposed of in compliance with applicable
securities laws. In particular, the shares evidenced by this
certificate have not been registered under the Securities Acts of 1933,
as amended (the "Securities Act") and may not be sold, transferred or
otherwise dispose of unless (1) an effective registration statement
under the Securities Act shall then be in effect with respect to such
shares, or (2) the Company shall have received an opinion of counsel
reasonably acceptable to the Company at any proposed sale, transfer or
other disposition of such shares is exempt from registration under the
Securities Act. The shares evidenced by this certificate are further
subject to a right of first refusal and call as set forth in a letter
agreement dated February 9, 1998, a copy of which is available for
inspection at the offices of the Company.
MISCELLANEOUS PROVISIONS.
Any notices required or permitted hereunder shall be sufficiently given
if in writing and personally delivered, sent by registered mail or facsimile
addressed: (a) if to you or any permitted transferee, to your address or, if to
a permitted transferee, to such permitted transferee's address, as set forth in
the books and records of AQM; or (b) if to AQM, at the principal office of AQM
clearly marked "Attention: Board of Directors". If any provision of this
agreement shall be determined to be invalid or unenforceable, such determination
shall not affect the validity or enforceability of any other provision of this
agreement and the same shall be enforced as if such
5
<PAGE> 6
EXHIBIT 10.20
invalid or unenforceable provision had not been included. This agreement
contains the entire agreement of the parties and, except as expressly provided
to the contrary herein, may only be modified by a written instrument signed by
AQM and you. This agreement shall be governed by the laws of the State of
Wisconsin and any dispute hereunder shall be resolved in accordance with the
rules of the American Arbitration Association by binding arbitration in
Milwaukee, Wisconsin, by a panel of three arbitrators, with you and AQM each
appointing one arbitrator and the two arbitrators so appointed then appointing a
third arbitrator.
If you are in agreement with the preceding, please so indicate by
signing and returning the enclosed copy of this letter.
Very truly yours,
/s/ Jeffrey A. Miller
------------------------
Jeffrey A. Miller
Agreed to and accepted this 19 day of February, 1998.
/s/ James W. Hook
- ----------------------
James W. Hook
6
<PAGE> 7
EXHIBIT A EXHIBIT 10.20
AGREEMENT
AGREEMENT made and entered into effective as of the _____ day of
January, 1998 by and between Aqua-Chem, Inc., a Delaware corporation with
principal offices in Milwaukee, Wisconsin (hereinafter sometimes referred to as
AQM) and Jay Hook (hereinafter sometimes referred to as "Mr. Hook").
WITNESSETH:
WHEREAS, AQM desires Mr. Hook to become a member of the AQM Board of
Directors;
WHEREAS, as an inducement to Mr. Hook to become a director, AQM has
agreed to indemnify Mr. Hook and hold him harmless as hereinafter set forth in
this Agreement; and
WHEREAS, Mr. Hook, in reliance upon AQM's undertakings as hereinafter
set forth in this Agreement, is willing to serve as a director.
NOW, THEREFORE, in consideration of the premises AQM and Mr. Hook
hereby agrees as follows:
1. DEFINITIONS. As used herein, the following terms shall have the
following meanings:
(a) "Expenses" include fees, costs, charges, disbursements,
attorney fees and any other Expenses incurred in connection
with a Proceeding (as hereinafter defined).
(b) "Liability" includes the obligation to pay a judgment,
settlement, penalty, assessment, forfeiture or fine,
including an excise tax assessed with respect to any
employee benefit plan, and reasonable Expenses.
(c) "Party" includes an individual who was or is, or who is
threatened to be made, a named defendant or respondent in a
Proceeding.
(d) "Proceeding" means any threatened, pending or completed
civil, criminal, administrative or investigative action,
suit, arbitration or other Proceeding, whether formal or
informal, which involves foreign, federal, state or local
law and which is brought by or in the right of AQM or by any
other person.
2. MANDATORY INDEMNIFICATION.
(a) AQM shall indemnify Mr. Hook and in the event of his death,
his estate, personal representative and heirs (hereinafter
collectively referred to as the "Indemnified Party"), to the
extent that the Indemnified Party has been successful on the
merits or otherwise in the defense of a Proceeding, for all
reasonable Expenses incurred in the Proceeding if the
Indemnified Party was a party because Mr. Hook
<PAGE> 8
is or was a director and/or officer of AQM.
(b) AQM shall also indemnify the Indemnified Party against
Liability incurred by the Indemnified Party in a Proceeding
the Indemnified Party was a party to because Mr. Hook was or
is a director and/or officer of AQM, unless Liability was
incurred because Mr. Hook breached or failed to perform a
duty that he owes to AQM and the breach or failure to
perform constitutes any of the following:
1. A willful failure to deal fairly with AQM, Inc. or
its shareholders in connection with a matter in which
Mr. Hook has a material conflict of interest.
2. A violation of the criminal law, unless Mr. Hook
had reasonable cause to believe that his conduct was
lawful or no reasonable cause to believe that his
conduct was unlawful.
3. A transaction from which Mr. Hook derived an
improper personal profit.
4. Willful misconduct.
(c) Determination of whether indemnification is required under
this Section 2 shall be made under Section 5 of this
Agreement.
(d) The termination of a Proceeding by judgment, order,
settlement or conviction, or upon a plea of no contest or an
equivalent plea, does not, by itself, create a presumption
that indemnification of the Indemnified Party is not
required under this section.
3. ALLOWANCE OF EXPENSES AS INCURRED. Upon written request by an
Indemnified Party who is a party to a Proceeding, AQM shall pay or
reimburse the Indemnified Party's reasonable Expenses as incurred if
the Indemnified Party provides AQM with all of the following:
(a) Written affirmation of the Indemnified Party's good faith
belief that Mr. Hook has not breached or failed to perform
his duties to AQM.
(b) A written undertaking, executed personally or on behalf of
the Indemnified Party, to repay the allowance and to pay
interest (at an interest rate equal to the rate then
currently paid by AQM on borrowed funds) on the allowance to
the extent that it is ultimately determined under Section 5
of this Agreement that indemnification under Section 2 of
this Agreement is not required and that indemnification is
not ordered by a court under Section 4 of this Agreement.
The undertaking under this Section shall be an unlimited and
unsecured general obligation of the Indemnified
2
<PAGE> 9
EXHIBIT 10.20
Party.
4. COURT-ORDERED INDEMNIFICATION.
(a) An Indemnified Party who is a party to a Proceeding may
apply for indemnification to, or for a review of an adverse
determination under Section 5 of this Agreement by, the
court conducting the Proceeding or to the Circuit Court for
Milwaukee County, Wisconsin and shall be entitled to
indemnification as hereinafter provided in Section 4(b).
(b) The Indemnified Party shall be entitled to indemnification
if the court determines either of the following:
(i) That the Indemnified Party is entitled to
indemnification under Section 2 of this
Agreement. If the court also determines that
AQM unreasonably refused the request for
indemnification, AQM shall pay the Indemnified
Party's reasonable Expenses incurred to obtain
the court-ordered indemnification.
(ii) That the Indemnified Party is fairly and
reasonably entitled to indemnification in view
of all the relevant circumstances, regardless
of whether indemnification is required under
Section 2 of this Agreement.
5. DETERMINATION OF RIGHT TO INDEMNIFICATION. The Indemnified Party
shall select one of the following means of determining his or her right
to indemnification:
(a) By a majority vote of a quorum of the Board of Directors of
AQM consisting of directors who are not at the time parties
to the same or related Proceedings. If a quorum of
disinterested directors cannot be obtained, by majority vote
of a committee duly appointed by the Board of Directors of
AQM and consisting solely of two or more directors who are
not at the time parties to the same or related Proceedings.
Directors who are parties to the same or related Proceedings
may participate in the designation of members of the
committee.
(b) By independent legal counsel selected by a majority vote of
a quorum of the Board of Directors or its committee in the
manner prescribed in (a) above or, if unable to obtain such
a quorum or committee, by a majority vote of the full board
of directors, including directors who are parties to the
same or related Proceedings.
(c) By a panel of three arbitrators consisting of one arbitrator
selected by those directors entitled under (b) above to
select independent legal counsel, one arbitrator selected by
the Indemnified Party and one arbitrator selected by the two
arbitrators previously selected.
3
<PAGE> 10
EXHIBIT 10.20
6. ADDITIONAL RIGHTS. In addition to the specific rights to
indemnification set forth herein, the Indemnified Party shall be
entitled to such additional rights to indemnification as may from time
to time be provided or permitted under AQM's Certificate of
Incorporation or by-laws or the general business corporation laws of
Delaware or Wisconsin; provided, however, that no provision under any
of the foregoing shall serve to diminish any rights of indemnification
otherwise specifically granted under this Agreement.
7. MISCELLANEOUS MATTERS. This Agreement shall be governed by the
laws of the State of Wisconsin, may only be amended by written
instrument signed by Mr. Hook and AQM and shall inure the benefit of
and be binding upon the parties and their heirs, personal
representatives, successors and assigns; provided, however, that no
assignment by operation of law or otherwise shall relieve a party of
its obligations hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AQUA-CHEM, INC.
/s/ Jay Hook By: /s/ Jeffrey A. Miller
- ---------------------------------- --------------------------------
Jay Hook Chairman and CEO
/s/ James W. Hook By:
--------------------------------
4
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Domestic Subsidiaries
- AC BIOGAS Corp. (Nevada)
- Aqua-Chem International, Ltd. (Nevada)
- CB-Kramer Sales and Service, Inc. (Delaware)
- Cleaver-Brooks Company, Inc. (Wisconsin)
- Industrial Combustion, Inc. (Wisconsin)
Foreign Subsidiaries
- Cleaver Brooks of Canada Ltd. (Canada)
- Cleaver Brooks De Mexico S.A. (Mexico)
- Aqua Chem GmbH (Germany)
- Aqua Chem International, Inc. (U.S. Virgin Islands)
- ICI Burners, Ltd. (Canada)
<PAGE> 1
[ARTHUR ANDERSEN LLP LETTERHEAD]
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our firm included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
August 3, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Aqua-Chem, Inc.
We consent to the use of our report included herein and to the reference to
our firm under the heading "Independent Auditors" in the prospectus.
/s/ KPMG Peat Marwick LLP
Milwaukee, Wisconsin
August 3, 1998
<PAGE> 1
Exhibit 23.3
KPMG Peat Marwick LLP [LOGO}
<TABLE>
<S> <C> <C>
Two Central Park Plaza Telephone 402 348 1450 Telefax 402 348 0152
Suite 1501
Omaha, NE 68102
233 South 13th Street, Suite 1600 Telephone 402 476 1216 Telefax 402 476 1944
Lincoln, NE 68508-2041
</TABLE>
ACCOUNTANTS' CONSENT
The Board of Directors
Aqua-Chem, Inc.:
We consent to the use of our report on the financial statements of National
Dynamics Corporation included herein and to the references to our firm under the
headings "Selected Financial Data of NDC" and "Independent Auditors" in the
Prospectus.
/s/KPMG Peat Marwick LLP
Omaha, Nebraska
August 5, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF WHYTE HIRSCHBOECK DUDEK S.C.
August 5, 1998
Aqua-Chem, Inc.
7800 North 113th Street
Milwaukee, WI 53201
Re: Form S-4 Registration Statement for
Aqua-Chem, Inc.
$125,000,000 11-1/4% Senior Notes Due 2008
Gentlemen:
We consent to the reference to this firm under the caption "LEGAL
MATTERS" in the Prospectus which forms a part of the Registration Statement.
Very truly yours,
WHYTE HIRSCHBOECK DUDEK S.C.
By: /s/ Andrew J. Guzikowski
----------------------------
Andrew J. Guzikowski
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
Each of the undersigned officers and directors of Aqua-Chem, Inc.
(hereinafter the "Company") hereby severally constitutes Jeffrey A. Miller and
J. Scott Barton, and each of them, severally, our true and lawful
attorneys-in-fact with full power to them and each of them to sign for us, and
in our names as officers or directors, or both, of the Company, a Registration
Statement (and any and all amendments thereto, including post-effective
amendments) on Form S-4 to be filed with the Securities and Exchange Commission
for the purpose of registering under the Securities Act of 1933 up to a maximum
of $125,000,000 principal amount of the Company's 11-1/4% Senior Subordinated
Notes due 2008, granting unto said attorneys-in-fact, and each of them, full
power and authority to do and to perform each and every act and thing requisite
and necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact, or any of them, may lawfully do or cause to be
done by virtue hereof.
/s/ Jeffrey A. Miller 8/4/98 /s/ J. Scott Barton 8/4/98
- --------------------- ------ ------------------- ------
Jeffrey A. Miller Date J. Scott Barton Date
/s/ James W. Hook 8/3/98
- --------------------- ------ ------------------- ------
James H. Fordyce Date James W. Hook Date
/s/ William P. Killian 8/4/98 /s/ Michael R. Stone 8/4/98
- ---------------------- ------ -------------------- ------
William P. Killian Date Michael R. Stone Date
<PAGE> 1
EXHIBIT 25.1
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
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) [ ]
------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 13-3818954
- ---------------------------------------------------------------- ----------------------------------------------------------------
(Jurisdiction of Organization if not a U. S. National bank) (I.R.S. employer identification no.)
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036-1532
- ---------------------------------------------------------------- ----------------------------------------------------------------
(Address of principal executive office) (Zip Code)
AQUA-CHEM, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 39-1900496
- ---------------------------------------------------------------- ----------------------------------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. employer identification no.)
7800 NORTH 113TH STREET
P.O. BOX 421
MILWAUKEE, WISCONSIN 53201
- ---------------------------------------------------------------- ----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
11 1/4% SENIOR SUBORDINATED NOTES DUE 2008
- ------------------------------------------------------------------------------------------------------------------------------------
(Title of the indenture securities)
</TABLE>
<PAGE> 2
EXHIBIT 25.1
ITEM 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.
<TABLE>
<CAPTION>
Name Address
-------------------------------------------------- --------------------------
<S> <C>
Federal Reserve Bank of New York (2nd District) New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, New York
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
ITEMS 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
The obligor currently is not in default under any of its
outstanding securities for which United States Trust Company of
New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6,
7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required
under General Instruction B.
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as a part of this Statement of
Eligibility.
<TABLE>
<CAPTION>
Exhibit Incorporated by Filed
No. Description Reference From Herewith
------- ---------------------------- --------------------------- --------
<S> <C> <C> <C>
T-1.1 Organization Certificate, as Exhibit T-1.1 to Form T-1
amended, issued by the State filed on September 15, 1995
of New York Banking with the Commission
Department to transact pursuant to the Trust
business as a Trust Company Indenture Act of 1939, as
amended by the Trust
Indenture Reform Act of
1990 (Registration
No. 33-97056).
</TABLE>
2
<PAGE> 3
EXHIBIT 25.1
<TABLE>
<CAPTION>
Exhibit Incorporated by Filed
No. Description Reference From Herewith
------- ---------------------------- --------------------------- --------
<S> <C> <C> <C>
T-1.2 Copy of certificate of Included in Exhibit T-1.1.
authority of the Trustee to
commence business
T-1.3 Copy of authorization of the Included in Exhibit T-1.1.
Trustee to exercise corporate
trust powers
T-1.4 The By-Laws of United Exhibit T-1.4 to Form T-1
States Trust Company of filed on September 15, 1995
New York, as amended with the Commission
pursuant to the Trust
Indenture Act of 1939, as
amended by the Trust
Indenture Reform Act of
1990 (Registration No.
33-97056).
T-1.5 Not applicable.
T-1.6 Consent of the Trustee X
required by Section 321(b) of
the Trust Indenture Act of
1939, as amended by the
Trust Indenture Reform Act
of 1990
T-1.7 A copy of the latest report of X
condition of the trustee
pursuant to law or the
requirements of its
supervising or examining
authority.
T-1.8 Not applicable.
T-1.9 Not applicable.
</TABLE>
NOTE
As of July 14, 1998, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
3
<PAGE> 4
EXHIBIT 25.1
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, United States Trust Company of New York, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 29th day
of July, 1998.
UNITED STATES TRUST COMPANY OF NEW YORK
By: /s/ John Guiliano
---------------------------------
Name: John Guiliano
----------------
Title: Vice President
----------------
4
<PAGE> 5
EXHIBIT 25.1
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
January 7, 1997
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act
of 1939, as amended by the Trust Indenture Reform Act of 1990, and subject to
the limitations set forth therein, United States Trust Company of New York
("U.S. Trust") hereby consents that reports of examinations of U.S. Trust by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ Gerard F. Ganey
---------------------------
Senior Vice President
<PAGE> 6
EXHIBIT 25.1
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
MARCH 31, 1998
($ IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash and Due from Banks $ 303,692
Short-Term Investments 325,044
Securities, Available for Sale 650,954
Loans 1,717,101
Less: Allowance for Credit Losses 16,546
Net Loans 1,700,555
Premises and Equipment 58,868
Other Assets 120,865
----------
TOTAL ASSETS $3,159,978
==========
LIABILITIES
Deposits:
Non-Interest Bearing $ 602,769
Interest Bearing 1,955,571
Total Deposits 2,558,340
Short-Term Credit Facilities 293,185
Accounts Payable and Accrued Liabilities 136,396
----------
TOTAL LIABILITIES $2,987,921
==========
STOCKHOLDER'S EQUITY
Common Stock $ 14,995
Capital Surplus 49,541
Retained Earnings 105,214
Unrealized Gains on Securities Available for Sale (Net of Taxes) 2,307
----------
TOTAL STOCKHOLDER'S EQUITY $ 172,057
----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $3,159,978
==========
</TABLE>
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the
named bank do hereby declare that this Statement of Condition has been prepared
in conformance with the instructions issued by the appropriate regulatory
authority and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
May 6, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 183,368
<TOTAL-REVENUES> 186,361
<CGS> 148,650
<TOTAL-COSTS> 191,015
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,663
<INCOME-PRETAX> (6,317)
<INCOME-TAX> 189
<INCOME-CONTINUING> (6,454)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,454)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 8627
<SECURITIES> 0
<RECEIVABLES> 34305
<ALLOWANCES> 659
<INVENTORY> 21652
<CURRENT-ASSETS> 76272
<PP&E> 52326
<DEPRECIATION> 30460
<TOTAL-ASSETS> 101000
<CURRENT-LIABILITIES> 37351
<BONDS> 19688
0
0
<COMMON> 0
<OTHER-SE> 39960
<TOTAL-LIABILITY-AND-EQUITY> 101000
<SALES> 199552
<TOTAL-REVENUES> 200016
<CGS> 153446
<TOTAL-COSTS> 192930
<OTHER-EXPENSES> 806
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1448
<INCOME-PRETAX> 4832
<INCOME-TAX> 507
<INCOME-CONTINUING> 4094
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4094
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 99618
<TOTAL-REVENUES> 100068
<CGS> 73656
<TOTAL-COSTS> 95914
<OTHER-EXPENSES> 955
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 753
<INCOME-PRETAX> 2446
<INCOME-TAX> 421
<INCOME-CONTINUING> 1854
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1854
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> AUG-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 11936
<SECURITIES> 0
<RECEIVABLES> 33970
<ALLOWANCES> 638
<INVENTORY> 20814
<CURRENT-ASSETS> 76480
<PP&E> 34883
<DEPRECIATION> 3328
<TOTAL-ASSETS> 124661
<CURRENT-LIABILITIES> 48860
<BONDS> 58636
7365
0
<COMMON> 10
<OTHER-SE> 3628
<TOTAL-LIABILITY-AND-EQUITY> 124661
<SALES> 91541
<TOTAL-REVENUES> 91800
<CGS> 66333
<TOTAL-COSTS> 83469
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2559
<INCOME-PRETAX> 5772
<INCOME-TAX> 2289
<INCOME-CONTINUING> 3309
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3309
<EPS-PRIMARY> 3.05
<EPS-DILUTED> 2.59
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 9300
<SECURITIES> 0
<RECEIVABLES> 37921
<ALLOWANCES> 1331
<INVENTORY> 33443
<CURRENT-ASSETS> 89333
<PP&E> 40829
<DEPRECIATION> 2390
<TOTAL-ASSETS> 175734
<CURRENT-LIABILITIES> 42499
<BONDS> 125000
4704
0
<COMMON> 10
<OTHER-SE> (1621)
<TOTAL-LIABILITY-AND-EQUITY> 175734
<SALES> 76222
<TOTAL-REVENUES> 76457
<CGS> 55930
<TOTAL-COSTS> 78096
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3004
<INCOME-PRETAX> (4643)
<INCOME-TAX> (1448)
<INCOME-CONTINUING> (3331)
<DISCONTINUED> 0
<EXTRAORDINARY> (1260)
<CHANGES> 0
<NET-INCOME> (4591)
<EPS-PRIMARY> (4.90)
<EPS-DILUTED> (4.90)
</TABLE>
