<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FEDDERS NORTH AMERICA, INC.
(EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 3585 22-2103510
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
FEDDERS CORPORATION
(EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
DELAWARE 3585 22-2562390
<S> <C> <C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
505 MARTINSVILLE ROAD
LIBERTY CORNER, NEW JERSEY 07938-0813
(908)604-8686
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
CO-REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT N. EDWARDS, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
505 MARTINSVILLE ROAD
LIBERTY CORNER, NEW JERSEY 07938-0813
(908)604-8686
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH A COPY TO:
PAUL G. HUGHES, ESQ.
CUMMINGS & LOCKWOOD
FOUR STAMFORD PLAZA
P.O. BOX 120
STAMFORD, CT 06904
(203)327-1700
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the Securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE
SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------
9 3/8% Senior Subordinated
Notes due 2007............ $100,000,000 100% $100,000,000 $30,303.03
- ------------------------------------------------------------------------------------------------
Guarantee of 9 3/8% Senior
Subordinated Notes due
2007...................... -- -- -- (2)
================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is
payable for the Guarantee.
------------------------
THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE CO-REGISTRANTS
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 10, 1997
PROSPECTUS
$100,000,000
[FEDDERS NORTH AMERICA LOGO]
OFFER TO EXCHANGE
ALL OUTSTANDING
9 3/8% SENIOR SUBORDINATED NOTES
DUE 2007
($100,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
9 3/8% SENIOR SUBORDINATED NOTES
DUE 2007
AS FULLY AND UNCONDITIONALLY GUARANTEED ON A SENIOR SUBORDINATED BASIS AS
DESCRIBED HEREIN BY
FEDDERS CORPORATION
Fedders North America, Inc., a Delaware corporation (the "Company") hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal" and together with the Prospectus, the "Exchange Offer"), to
exchange its 9 3/8% Senior Subordinated Notes due 2007 (the "Notes") which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for each of the outstanding 9 3/8% Senior
Subordinated Notes due 2007 (the "Original Notes") of the Company, of which
$100,000,000 principal amount is outstanding.
The Notes will evidence the same debt as the Original Notes (which they
replace) and will be issued under and entitled to the benefits of the Indenture
dated August 18, 1997 (the "Indenture") relating to the Original Notes. The form
and terms of the Notes will be the same in all material respects as the form and
terms of the Original Notes, except that the Notes will have been registered
under the Securities Act and therefore, will not bear legends restricting their
transfer.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1997, UNLESS EXTENDED.
The Notes will be guaranteed (the "Guarantee") on a senior subordinated
basis by Fedders Corporation ("Fedders Corporation" or the "Guarantor"), the
sole stockholder of the Company. The Notes and the Guarantee will be general
unsecured obligations of the Company and the Guarantor, respectively. The Notes
will be subordinated in right of payment to all existing and future Senior
Indebtedness (as defined) of the Company and pari passu or senior in right of
payment to any other existing and future indebtedness of the Company. The
Guarantee will be subordinated in right of payment to all existing and future
Guarantor Senior Indebtedness (as defined) and pari passu or senior in right of
payment to any existing and future indebtedness of the Guarantor. As of June 30,
1997, after giving pro forma effect to the offering of the Original Notes, the
aggregate principal amount of Senior Indebtedness and Guarantor Senior
Indebtedness to which the Notes and the Guarantee would have been subordinated
would have been approximately $3.9 million and $10.1 million, respectively. The
Indenture governing the Notes will permit the Company and its Restricted
Subsidiaries (as defined) to incur additional indebtedness, subject to certain
limitations. See "Description of Notes." The Indenture will not place any
limitation on Fedders Corporation or its subsidiaries other than the Company.
The Company will accept for exchange any and all Original Notes that are
validly tendered and not withdrawn on or prior to 5:00 p.m. New York City time,
on , 1997, unless the Exchange Offer is extended (the "Expiration
Date"). The Exchange Offer is not conditioned upon any minimum principal amount
of Original Notes being tendered for exchange. However, the Exchange Offer is
subject to certain customary conditions which may be waived by the Company. The
Company has agreed to pay the expenses of the Exchange Offer. There will be no
cash proceeds to the Company from the Exchange Offer. See "Use of Proceeds."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS OF ORIGINAL NOTES WHO TENDER THEIR ORIGINAL
NOTES IN THE EXCHANGE OFFER.
THE NOTES DESCRIBED HEREIN HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION" OR "SEC") OR ANY OTHER
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY, NOR HAS THE SEC
OR ANY SUCH COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
The Date of this Prospectus is , 1997
<PAGE> 3
HOLDERS OF ORIGINAL NOTES ARE NOT TO CONSTRUE THE CONTENTS OF THIS
PROSPECTUS AS INVESTMENT, LEGAL OR TAX ADVICE. EACH SUCH HOLDER SHOULD CONSULT
ITS OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS AS TO LEGAL, TAX, BUSINESS,
FINANCIAL AND RELATED ASPECTS OF THE EXCHANGE OFFER. NEITHER THE COMPANY NOR THE
GUARANTOR IS MAKING ANY REPRESENTATIONS TO ANY HOLDER OF THE ORIGINAL NOTES
REGARDING THE LEGALITY OF AN EXCHANGE BY SUCH HOLDER UNDER APPROPRIATE LEGAL
INVESTMENT OR SIMILAR LAWS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY OF THE NOTES TO ANY PERSON IN ANY JURISDICTION WHERE IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. THE EXCHANGE OFFER IS NOT BEING
MADE TO, NOR WILL THE COMPANY AND THE GUARANTOR ACCEPT SURRENDERS FOR EXCHANGE
FROM, HOLDERS OF ORIGINAL NOTES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER
OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE
SKY LAWS OF SUCH JURISDICTION.
IN MAKING A DECISION REGARDING THE EXCHANGE OFFER, PROSPECTIVE INVESTORS
MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY, THE GUARANTOR AND THE TERMS
OF THE EXCHANGE OFFER, INCLUDING THE MERITS AND RISKS INVOLVED. THE EXCHANGE
OFFER IS BEING MADE ON THE BASIS OF THIS PROSPECTUS. ANY DECISION TO EXCHANGE
ORIGINAL NOTES FOR NOTES IN THE EXCHANGE OFFER MUST BE BASED ON THE INFORMATION
CONTAINED OR INCORPORATED HEREIN.
THE INFORMATION CONTAINED IN THIS PROSPECTUS WAS OBTAINED FROM THE COMPANY,
THE GUARANTOR AND OTHER SOURCES BELIEVED BY THE COMPANY AND THE GUARANTOR TO BE
RELIABLE. NOTHING CONTAINED IN THIS PROSPECTUS IS, OR SHALL BE RELIED UPON AS, A
PROMISE OR REPRESENTATION, WHETHER AS TO THE PAST OR THE FUTURE. THIS PROSPECTUS
CONTAINS SUMMARIES, BELIEVED TO BE ACCURATE, OF CERTAIN TERMS OF CERTAIN
DOCUMENTS, BUT REFERENCE IS MADE TO THE ACTUAL DOCUMENTS, COPIES OF WHICH WILL
BE MADE AVAILABLE UPON REQUEST, FOR THE COMPLETE INFORMATION CONTAINED THEREIN.
ALL SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY THIS REFERENCE.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE GUARANTOR.
THE INFORMATION CONTAINED HEREIN IS AS OF THE DATE HEREOF AND SUBJECT TO CHANGE,
COMPLETION OR AMENDMENT WITHOUT NOTICE. NEITHER THE DELIVERY OF THIS PROSPECTUS
AT ANY TIME NOR ANY EXCHANGE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET
FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY OR THE GUARANTOR SINCE THE DATE
HEREOF.
Notes issued upon consummation of the Exchange Offer will be represented by
one or more permanent Global Notes (as defined) in definitive, fully registered
form deposited with a custodian for, and registered in the name of a nominee of,
DTC. Beneficial interests in such permanent Global Notes will be shown on, and
transfers thereof will be effected through, records maintained by DTC and its
participants, including Euroclear and CEDEL. See "Description of Notes--Book
Entry, Delivery and Form."
Market data used throughout this Prospectus were obtained from internal
surveys and industry publications. Industry publications generally indicate that
the information contained therein has been obtained
i
<PAGE> 4
from sources believed to be reliable but that the accuracy and completeness of
such information is not guaranteed. The Company and Fedders Corporation have not
independently verified such market data. Similarly, internal surveys, while
believed to be reliable, have not been verified by any independent source.
------------------------
This Prospectus contains and incorporates by reference certain statements
that are "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Those statements include,
among other things, the discussions of the Company's and Fedders Corporation's
business strategy and expectations concerning the Company's and Fedders
Corporation's market position, future operations, margins, profitability,
liquidity and capital resources. Holders of Original Notes desiring to
participate in the Exchange Offer are cautioned that reliance on any
forward-looking statement involves risks and uncertainties and that, although
the Company and Fedders Corporation believe that the assumptions on which the
forward-looking statements contained herein and incorporated by reference are
based are reasonable, any of those assumptions could prove to be inaccurate, and
as a result, the forward-looking statements based on those assumptions also
could be incorrect. The uncertainties in this regard include, but are not
limited to, those identified herein under "Risk Factors." In light of these and
other uncertainties, the inclusion or incorporation of a forward-looking
statement herein should not be regarded as a representation by the Company or
Fedders Corporation that the Company's or Fedders Corporation's plans and
objectives will be achieved.
ii
<PAGE> 5
SUMMARY OF PROSPECTUS
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the pro forma and
historical financial statements, including the notes thereto, appearing
elsewhere or incorporated by reference in this Prospectus. The "Company"
includes Fedders North America, Inc. (a wholly owned subsidiary of Fedders
Corporation) and the Company's subsidiaries. References in this Prospectus to
international operations and operations of Melcor Corporation ("Melcor") refer
to the operations of Fedders Corporation and not to the operations of the
Company. In addition, such operations of Fedders Corporation will not be subject
to any of the covenants of the Notes.
THE COMPANY
The Company believes it is the largest manufacturer of room air
conditioners in North America based on unit sales. The Company markets a
complete line of room air conditioners and dehumidifiers, principally for the
U.S. residential market through its brand names, FEDDERS(R), EMERSON QUIET
KOOL(R) and AIRTEMP(R). The Company sells its products primarily to national and
regional retail chains, home improvement centers and buying groups, as well as
to distributors and, under private label, to retailers and original equipment
manufacturers ("OEM's"), including other U.S. room air conditioner
manufacturers. The Company's wholly owned subsidiary Rotorex Company, Inc.
("Rotorex") manufactures and sells a broad line of rotary compressors,
principally for use in the Company's room air conditioners but also for sale to
other manufacturers of air conditioners. The Company has positioned its brands
across most price points, emphasizing quality and value for retailers and
consumers.
The Company believes its share of the U.S. market for room air conditioners
was approximately 28.5% for fiscal 1996 and 26.7% and 24.0% in fiscal years 1995
and 1994, respectively. The Company believes its market share growth and
profitability have been primarily attributable to its: (i) low cost production
achieved through continuous manufacturing improvements, including a 1992
restructuring, and a global sourcing strategy; (ii) broad range of high quality
products with strong brand recognition; (iii) strong relationships with leading
retailers; (iv) accurate-response manufacturing and just-in-time delivery
capabilities; and (v) principal focus on one product.
Fedders Corporation, together with its predecessor corporations, has been a
leader in heat transfer technology for more than 100 years. Founded in Buffalo,
NY, Fedders Corporation originally manufactured automobile radiators and has
been producing room air conditioners for 50 years. Fedders Corporation's
operations are conducted through the Company (its principal subsidiary), Fedders
International, Inc. (which markets and sells room air conditioners outside North
America), Fedders Xinle Co. Ltd. (a Chinese manufacturing joint venture formed
in 1995 and 60% owned by Fedders Corporation) ("Fedders Xinle") and Melcor
(which manufactures thermoelectric heat/cool modules). Fedders Xinle intends to
market its products directly within China, to export markets around the world
through Fedders International, Inc. and to North America through the Company.
Over the past five years, Fedders Corporation has dramatically improved its
financial performance with an increase in net sales and EBITDA (as defined) from
$192.4 million and $2.7 million, respectively, in fiscal 1992 to net sales and
EBITDA of $371.8 million and $57.8 million, respectively, in fiscal 1996. The
Company believes that much of this improvement is the direct result of a 1992
restructuring (the "Restructuring") in which Fedders Corporation closed two
manufacturing facilities, aggressively accelerated cost reduction measures,
established a new strategy for diversifying its geographical distribution of
sales by focusing on large retail customers, including home improvement centers,
and implemented flexible accurate-response manufacturing to respond better to
its customers' demands.
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<PAGE> 6
COMPETITIVE STRENGTHS AND COMPANY STRATEGY
The Company's strategy is to continue to capitalize on its competitive
strengths, including the following:
LOW COST PRODUCER. The Company believes it has positioned itself as the
low cost producer in the United States. Significant cost savings achieved since
1992 were a key factor in the Company's ability to increase operating margins
from (4.9)% in fiscal 1992 to 13.7% in fiscal 1996. The Company has achieved
significant cost reduction through:
- Emphasis on global sourcing of components and raw materials to
reduce costs and ensure quality;
- Continuous improvement in manufacturing efficiencies and in
designing cost out of the product based, in part, on one of its core
competencies, expertise in heat transfer technology;
- Minimizing fixed costs while maximizing production flexibility, in
part as a result of the Restructuring, which included a reduction in its
manufacturing facilities after the acquisition of Emerson Quiet Kool and
the elimination of duplicative management and operational and
administrative departments;
- Low labor content and flexible manufacturing that allow the Company
to reduce variable costs dramatically when demand for its products
fluctuates. The direct labor cost component of the Company's products is
generally less than the cost of freight and duty to import air conditioners
into the United States from many offshore locations, resulting in favorable
price comparisons with imported goods.
HIGH QUALITY PRODUCTS WITH STRONG MULTIPLE BRANDS. The Company
manufactures a complete line of window and through-the-wall room air
conditioners to meet a broad range of consumer preferences. It believes it has
developed a reputation among its customers and consumers for producing high
quality products at competitive prices. The FEDDERS, EMERSON QUIET KOOL, and
AIRTEMP brands each has a long history and is well known in the marketplace. On
a private label basis, the Company also manufactures, in various sizes, a
portion of the room air conditioners of other U.S. OEM's. All of the Company's
U.S. manufacturing facilities, including Rotorex, have received the highest
level of quality certification, ISO 9001, for their quality management systems
from the International Standards Organization.
STRONG RELATIONSHIPS WITH LEADING RETAILERS. Beginning in the early
1990's, the Company recognized a significant shift in the U.S. market for room
air conditioners as major regional and national retailers began replacing
wholesale distributors as the primary customers for the industry. The Company
believes it has distinguished itself from its competitors by effectively
penetrating this rapidly growing customer base and by working closely with its
customers to improve their marketing of the Company's products. The Company
estimates that leading retailers currently represent more than 50% of the total
room air conditioner market in the United States.
ACCURATE-RESPONSE MANUFACTURING. During the 1990's, the Company
reengineered its manufacturing processes and distribution systems in order to
meet the delivery requirements, including "in-season" orders, of its major
retailing customers who increasingly sought to minimize their inventories. The
Company believes that its accurate-response manufacturing capability, by which
it can adjust both total production quantities and product mix on a timely
basis, has been a key factor in its ability to gain market share from its
competitors.
PRODUCT FOCUS. Fedders Corporation has a 100-year history of experience in
heat transfer technology, including 50 years of experience in the manufacturing
of room air conditioners. Many of the Company's competitors produce a broad
range of consumer products, and the Company believes that such competitors have
historically given less attention to the development and expansion of their room
air conditioning businesses than the Company. Room air conditioners have been,
and continue to be, the Company's primary business focus.
2
<PAGE> 7
INDUSTRY
The U.S. room air conditioner market is the third largest in the world with
average annual sales of 3.7 million units for the last ten calendar years. The
industry has experienced significant consolidation with a reduction from 18
major domestic manufacturing operations in 1975 to six in 1997.
Sales of room air conditioners in the domestic market vary from year to
year according to the weather which also affects shipments in the following year
due to carry-over inventory. The Company believes that demand is principally
driven by the replacement market. Unlike major household appliances and central
air conditioning systems, the sale of room air conditioners is not dependent on
the construction of new homes.
Fedders Corporation believes that the international market for room air
conditioners outside the United States is approximately five times the size of
the U.S. market, measured on a unit basis. Demand for air conditioners outside
of North America accelerated in recent years, including in the largest overseas
markets of Japan, China and the rest of Southeast Asia, and continues to grow
rapidly with the increasing disposable income of populous nations in hot weather
climates.
3
<PAGE> 8
THE EXCHANGE OFFER
Securities Offered......... $100,000,000 principal amount of 9 3/8% Senior
Subordinated Notes due 2007. The terms of the Notes
and the Original Notes are identical in all
material respects, except for certain transfer
restrictions and registration rights relating to
the Original Notes and except for certain
Liquidated Damages provisions relating to the
Original Notes described below under "--Summary
Description of the Notes."
Issuance of Original Notes;
Registration Rights...... The Original Notes were issued on August 18, 1997
to Donaldson, Lufkin & Jenrette Securities
Corporation and Goldman, Sachs & Co.,
(collectively, the "Initial Purchasers"), which
placed the Original Notes with "qualified
institutional buyers" (as such term is defined in
Rule 144A promulgated under the Securities Act). In
connection therewith, the Company and Fedders
Corporation executed and delivered for the benefit
of the holders of the Original Notes a certain
registration rights agreement (the "Registration
Rights Agreement"), pursuant to which the Company
and Fedders Corporation agreed (i) to file a
registration statement (the "Registration
Statement") on or prior to 45 days after August 18,
1997 with respect to the Exchange Offer and (ii) to
use their best efforts to cause the Registration
Statement to be declared effective by the
Commission on or prior to 120 days after August 18,
1997. In certain circumstances, the Company and
Fedders Corporation will be required to provide a
shelf registration statement (the "Shelf
Registration Statement") to cover resales of the
Original Notes by the holders thereof. If the
Company and Fedders Corporation do not comply with
their obligations under the Registration Rights
Agreement, the Company will be required to pay
Liquidated Damages to holders of the Original Notes
under certain circumstances. See "The Exchange
Offer--Registration Rights; Liquidated Damages."
Holders of Original Notes do not have any appraisal
rights in connection with the Exchange Offer.
The Exchange Offer......... The Notes are being offered in exchange for a like
principal amount of Original Notes. The issuance of
the Notes is intended to satisfy the obligations of
the Company and Fedders Corporation contained in
the Registration Rights Agreement. Based upon the
position of the staff of the Commission set forth
in no-action letters issued to third parties in
other transactions substantially similar to the
Exchange Offer, the Company and Fedders Corporation
believe that the Notes issued pursuant to the
Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof (other
than (i) any such holder that is an "affiliate" of
the Company or Fedders Corporation within the
meaning of Rule 405 under the Securities Act, (ii)
an Initial Purchaser who acquired the Original
Notes directly from the Company solely in order to
resell pursuant to Rule 144A of the Securities Act
or any other available exemption under the
Securities Act or (iii) a broker-dealer who
acquired the Original Notes as a result of market
making or other trading activities) without further
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that such Notes are acquired in the
ordinary course of such holder's business and such
4
<PAGE> 9
holder is not participating and has no arrangement
with any person to participate in a distribution
(within the meaning of the Securities Act) of such
Notes. Each broker-dealer that receives Notes for
its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale for such Notes. Although
there has been no indication of any change in the
staff's position, there can be no assurance that
the staff of the Commission would make a similar
determination with respect to the resale of the
Notes. See "Risk Factors."
Procedures for Tendering... Tendering holders of Original Notes must complete
and sign the Letter of Transmittal in accordance
with the instructions contained therein and forward
the same by mail, facsimile or hand delivery,
together with any other required documents, to the
Exchange Agent, either with the Original Notes to
be tendered or in compliance with the specified
procedures for guaranteed delivery of Original
Notes. Holders of the Original Notes desiring to
tender such Original Notes in exchange for Notes
should allow sufficient time to ensure timely
delivery. Certain brokers, dealers, commercial
banks, trust companies and other nominees may also
effect tenders by book-entry transfer. Holders of
Original Notes registered in the name of a broker,
dealer, commercial bank, trust company or other
nominee are urged to contact such person promptly
if they wish to tender Original Notes pursuant to
the Exchange Offer. Letters of Transmittal and
certificates representing Original Notes should not
be sent to the Company or Fedders Corporation. Such
documents should only be sent to the Exchange
Agent. Questions regarding how to tender and
requests for information should be directed to the
Exchange Agent. See "The Exchange Offer--Procedures
for Tendering Original Notes."
Tenders, Expiration Date;
Withdrawal............... The Exchange Offer will expire the earlier of (i)
5:00 p.m., New York City time, on ,
1997 or (ii) the date when all Original Notes have
been tendered, or such later date and time to which
it is extended, provided it may not be extended
beyond , 1997. The tender of Original
Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date.
Any Original Note not accepted for exchange for any
reason will be returned without expense to the
tendering holder thereof as promptly as practicable
after the expiration or termination of the Exchange
Offer. See "The Exchange Offer--Terms of the
Exchange Offer; Period for Tendering Original
Notes" and "--Withdrawal Rights."
Certain Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain customary
conditions, all of which may be waived by the
Company and Fedders Corporation, including the
absence of (i) threatened or pending proceedings
seeking to restrain the Exchange Offer or resulting
in a material delay to the Exchange Offer; (ii) a
general suspension of trading on any national
securities exchange or in the over-the-counter
market; (iii) a banking moratorium; (iv) a
commencement of war, armed hostilities or other
similar international calamity directly or
indirectly involving the United States; and (v)
change or threatened change in the business,
properties,
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<PAGE> 10
assets, liabilities, financial condition,
operations, results of operations or prospects of
the Company and its subsidiaries taken as a whole
or of Fedders Corporation and its subsidiaries
taken as a whole that, in the sole judgment of the
Company and Fedders Corporation, is or may be
adverse to the Company and Fedders Corporation.
The Company shall not be required to accept for
exchange, or to issue Notes in exchange for, any
Original Notes, if at any time before the
acceptance of such Original Notes for exchange or
the exchange of Notes for such Original Notes, any
of the foregoing events occurs which, in the sole
judgment of the Company and Fedders Corporation,
make it inadvisable to proceed with the Exchange
Offer and/or with such acceptance for exchange or
with such exchange. If the Company and Fedders
Corporation fail to consummate the Exchange Offer
because the Exchange Offer is not permitted by
applicable law or Commission policy, it will file
with the Commission a Shelf Registration Statement
to cover resales of the Transfer Restricted
Securities (as defined) by the holders thereof who
satisfy certain conditions. If the Company fails to
consummate the Exchange Offer or file a Shelf
Registration Statement in accordance with the
Registration Rights Agreement, the Company will pay
Liquidated Damages to each holder of Transfer
Restricted Securities until the cure of all
defaults. The Exchange Offer is not conditioned
upon any minimum aggregate principal amount of
Original Notes being tendered for exchange. See
"The Exchange Offer--Registration Rights;
Liquidated Damages" and "--Certain Conditions to
the Exchange Offer."
Federal Income Tax
Consequences............. For federal income tax purposes, the exchange
pursuant to the Exchange Offer will not result in
any income, gain or loss to the holders, the
Company or Fedders Corporation assuming the fair
market value of the Original Notes equals the fair
market value of the Notes. See "Federal Income Tax
Consequences."
Use of Proceeds............ There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer.
Appraisal Rights........... Holders of Original Notes will not have dissenters'
rights or appraisal rights in connection with the
Exchange Offer.
Exchange Agent............. State Street Bank and Trust Company is serving as
Exchange Agent in connection with the Exchange
Offer.
CONSEQUENCES OF NOT EXCHANGING THE ORIGINAL NOTES
Holders of Original Notes who do not exchange their Original Notes for
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes as set forth in the legend
thereon as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. The
Company and Fedders Corporation do not currently anticipate that they will
register the Original Notes under the Securities Act. See "Risk
Factors--Consequences of Exchange and Failure to Exchange" and "The Exchange
Offer--Consequences of Exchanging Original Notes."
6
<PAGE> 11
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the Notes and the Original Notes are identical in all material
respects, except (i) for certain transfer restrictions and registration rights
relating to the Original Notes and (ii) that, if the Exchange Offer is not
consummated by , 1997, subject to certain exceptions, with respect
to the first 90-day period immediately following thereafter, the Company will be
obligated to pay Liquidated Damages to each holder of Original Notes in an
amount equal to $.05 per week for each $1,000 principal amount of Original
Notes, as applicable, held by such holder. The amount of the Liquidated Damages
will increase by an additional $.05 per week with respect to each subsequent
90-day period until the Exchange Offer is consummated, or any other Registration
Default (as defined) is cured, up to a maximum of $.40 per week for each $1,000
principal amount of Original Securities, as applicable.
The Notes will bear interest from the most recent date to which interest
has been paid on the Original Notes or, if no interest has been paid on the
Original Notes, from August 18, 1997. Accordingly, registered holders of Notes
on the relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid
from August 18, 1997. Original Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
of Original Notes whose Original Notes are accepted for exchange will not
receive any payment in respect of interest on such Original Notes otherwise
payable on any interest payment date which occurs on or after consummation of
the Exchange Offer.
THE NOTES
Securities Offered......... $100,000,000 aggregate principal amount of 9 3/8%
Senior Subordinated Notes due 2007.
Maturity Date.............. August 15, 2007.
Interest Payment Dates..... Interest on the Notes will accrue at the rate of
9 3/8% per annum, payable semi-annually in cash in
arrears on February 15 and August 15 of each year,
commencing February 15, 1998.
Optional Redemption........ On or after August 15, 2002, the Company may redeem
the Notes, at the redemption prices set forth
herein, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
redemption. Notwithstanding the foregoing, at any
time prior to August 15, 2000, the Company may
redeem up to 30% of the aggregate principal amount
of the Notes originally issued with the net
proceeds of one or more Equity Offerings at a
redemption price equal to 109.375% of the principal
amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of
redemption; provided that at least 70% in aggregate
principal amount of the Notes originally issued
remains outstanding after each such redemption and
that any such redemption occurs within 60 days of
such Equity Offering. See "Description of
Notes--Redemption of Notes--Optional Redemption."
Ranking.................... The Notes will be subordinated in right of payment
to all existing and future Senior Indebtedness of
the Company, including all obligations under the
Credit Agreement (as defined), and pari passu or
senior in right of payment to any other existing
and future indebtedness of the Company. The
Indenture will limit the incurrence by the Company
and its Restricted Subsidiaries of additional
Indebtedness. At June 30, 1997, after giving pro
forma effect to the offering of the Original Notes,
the aggregate principal amount of Senior
Indebtedness outstanding would have been
approximately $3.9 million.
7
<PAGE> 12
Guarantee.................. The Notes will be fully and unconditionally
guaranteed on a senior subordinated basis by
Fedders Corporation. The Guarantee will be
subordinated in right of payment to all future
Guarantor Senior Indebtedness and pari passu or
senior in right of payment to any other existing or
future indebtedness of Fedders Corporation to the
same extent that the Notes are subordinated to
Senior Indebtedness of the Company. At June 30,
1997, after giving pro forma effect to the offering
of the Original Notes, the aggregate principal
amount of Guarantor Senior Indebtedness outstanding
would have been approximately $10.1 million.
Change of Control.......... Upon a Change of Control, the Company will be
required to make an offer to purchase all of the
outstanding Notes at a price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the
date of repurchase. See "Description of
Notes--Change of Control."
Certain Covenants.......... The Indenture contains certain covenants which,
among other things, limit the ability of the
Company and its Restricted Subsidiaries to: (i)
incur additional Indebtedness and issue preferred
stock; (ii) repay certain other Indebtedness; (iii)
pay dividends or make certain other distributions;
(iv) repurchase equity interests; (v) consummate
certain asset sales; (vi) enter into certain
transactions with affiliates; (vii) enter into sale
and leaseback transactions; (viii) incur liens;
(ix) merge or consolidate with any other person; or
(x) sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of
the assets of the Company. In addition, under
certain circumstances, the Company will be required
to make an offer to purchase the Notes at a price
equal to the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any,
to the date of purchase, with the proceeds of
certain Asset Sales. See "Description of Notes."
Use of Proceeds............ The Company will receive no proceeds from the
issuance of the Notes upon consummation of the
Exchange Offer. The net proceeds from the offering
of the Original Notes were used by the Company to
pay a dividend of approximately $72.3 million to
Fedders Corporation which will be used to redeem
its 8 1/2% Convertible Subordinated Debentures due
2012 in the aggregate amount of approximately $22.3
million (approximately $21.8 million aggregate
principal amount at June 30, 1997 and accrued
interest of approximately $0.5 million) and which
it is anticipated will be used to fund a stock
repurchase in an aggregate amount of approximately
$50.0 million. The remaining net proceeds will be
used by the Company (i) to prepay various capital
leases in an aggregate amount of up to
approximately $6.2 million and (ii) to reduce any
amounts outstanding under its revolving credit
facility and for general corporate purposes. See
"Use of Proceeds" and "Description of Certain
Indebtedness."
RISK FACTORS
Holders of the Original Notes should carefully consider all of the
information set forth in this Prospectus and, in particular, should evaluate the
specific factors set forth under "Risk Factors" in connection with the Exchange
Offer.
8
<PAGE> 13
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following table sets forth summary historical and pro forma consolidated
financial information of Fedders Corporation. The historical financial
information has been derived from and should be read in conjunction with the
audited consolidated financial statements (for amounts as of and for the years
ended August 31) and unaudited interim consolidated financial statements (for
amounts as of and for the nine months ended May 31) and related notes thereto
appearing elsewhere or incorporated by reference in this Prospectus and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition of Fedders Corporation." Unaudited interim data reflect, in the
opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of results for such
interim periods. The unaudited pro forma financial information for the fiscal
year ended August 31, 1996 and the nine months ended May 31, 1996 has been
derived from the unaudited pro forma condensed statements of operations included
elsewhere herein which give effect to the merger (the "1996 Merger") between
Fedders Corporation and NYCOR, Inc. ("NYCOR"), which occurred on August 13,
1996, as though such merger occurred on September 1, 1995. The pro forma
information and the results of operations for the unaudited interim periods are
not necessarily indicative of the future operating results of Fedders
Corporation for any other annual or interim period.
<TABLE>
<CAPTION>
TWELVE MONTHS
FISCAL YEAR ENDED AUGUST 31, NINE MONTHS ENDED MAY 31, ENDED MAY 31,
--------------------------------------------- ------------------------------------ -------------
PRO FORMA PRO FORMA PRO FORMA
1994 1995 1996 1996(1) 1996 1996(1) 1997 1997(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales.............. $231,572 $316,494 $371,772 $390,349 $290,004 $307,073 $ 237,456 $ 320,732
Gross profit........... 49,263 67,125 83,028 81,908 62,641 61,933 52,298 72,273
Selling, general and
administrative
expenses............. 25,358 29,472 32,040 39,740 22,686 29,284 28,904 39,360
Operating income....... 23,905 37,653 50,988 42,168 39,955 32,649 23,394 32,913
Net interest expense... 4,102 1,962 952 4,376 1,164 4,015 2,782 3,143
Income taxes........... 594 6,187 19,108 14,448 14,885 10,971 7,164 10,641
Net income(3).......... 20,989 29,504 31,158 23,574 24,143 17,900 13,905 19,579
OTHER DATA:
EBITDA(4).............. $ 32,252 $ 44,143 $ 57,796 $ 53,616 $ 43,473 $ 39,986 $ 31,284 $ 44,914
Depreciation and
amortization......... 9,374 7,519 6,578 11,218 3,281 7,100 7,433 11,551
Capital
expenditures(5)...... 2,634 9,041 7,043 8,296 6,379 7,407 6,574 7,463
Gross profit margin.... 21.3% 21.2% 22.3% 21.0 % 21.6% 20.2 % 22.0% 22.5%
DATA AS ADJUSTED(6):
Total interest
expense.............. $ 10,654
Ratio of EBITDA to
total interest
expense.............. 4.2x
Ratio of total debt to
EBITDA............... 2.7x
</TABLE>
<TABLE>
<CAPTION>
MAY 31, 1997
-----------------------------
ACTUAL AS ADJUSTED(6)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................................... $ 7,528 $ 7,528
Working capital..................................................................... 71,812 90,156
Total assets........................................................................ 305,275 308,775
Short-term borrowing................................................................ 26,271 9,747
Long-term debt (including current portion).......................................... 39,129 109,653
Total stockholders' equity.......................................................... 147,386 97,386
</TABLE>
9
<PAGE> 14
- ---------------
(1) Amounts represent the pro forma statements of operations data and other data
of Fedders Corporation after giving effect to the 1996 Merger in the manner
described under "Unaudited Pro Forma Condensed Consolidated Statements of
Operations."
(2) The unaudited pro forma financial information for the twelve months ended
May 31, 1997 has been derived from the historical records of Fedders
Corporation and NYCOR and give effect to the 1996 Merger as though the 1996
Merger occurred on June 1, 1996 and apply assumptions and adjustments
similar to those used in arriving at the unaudited pro forma condensed
consolidated statements of operations included elsewhere herein.
(3) During the first quarter of fiscal 1994, Fedders Corporation adopted
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" which resulted in a tax benefit of $1,780 from the cumulative effect
of an accounting change.
(4) EBITDA represents income before income taxes plus net interest expense and
depreciation and amortization (excluding amortization of debt discounts and
deferred financing costs). While EBITDA should not be construed as a
substitute for operating income or a better indicator of liquidity than cash
flow from operating activities, which are determined in accordance with
generally accepted accounting principles, it is included herein to provide
additional information with respect to the ability of Fedders Corporation
and the Company to meet their future debt service, capital expenditures and
working capital requirements. In addition, Fedders Corporation and the
Company believe that certain investors find EBITDA to be a useful tool for
measuring the ability of Fedders Corporation and the Company to service
their debt. EBITDA is not necessarily a measure of Fedders Corporation's or
the Company's ability to fund cash needs.
(5) Fiscal 1995 amount includes buyout of $1,750 of equipment under lease.
(6) Information presented reflects adjustments as if the offering of the
Original Notes had been completed at the beginning of the period presented
and the proceeds had been applied as described in "Use of Proceeds."
(7) The Company is a wholly owned subsidiary of Fedders Corporation. The
following table sets forth historical and unaudited pro forma financial
information of the Company which have been derived from and should be read
in conjunction with, the supplemental condensed consolidating financial
statements appearing in note 15 to the Fedders Corporation consolidated
financial statements appearing elsewhere or incorporated by reference in
this Prospectus. Historical information as of May 31, 1997, for the nine
months ended May 31, 1996 and 1997, and for the fiscal year ended August 31,
1994 is unaudited. The pro forma financial information is also unaudited and
gives effect to the acquisition of Rotorex (a company acquired as part of
the 1996 Merger) as though such acquisition occurred on September 1, 1995.
Note references in the following table are to the notes preceding this note.
<TABLE>
<CAPTION>
TWELVE MONTHS
FISCAL YEAR ENDED AUGUST 31, NINE MONTHS ENDED MAY 31, ENDED MAY 31,
------------------------------------------ ------------------------------- -----------
PRO FORMA PRO FORMA PRO FORMA
1994 1995 1996 1996 1996 1996 1997 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales...................... $230,074 $311,363 $356,392 $365,117 $281,524 $289,673 $208,298 $ 283,742
Gross profit................... 48,938 65,770 79,475 76,075 60,611 58,179 46,766 64,662
Operating income............... 24,825 39,255 54,208 45,430 42,229 34,998 27,807 38,239
OTHER DATA:
EBITDA......................... $ 31,804 $ 45,316 $ 60,279 $ 55,398 $ 45,380 $ 41,312 $ 33,797 $ 47,883
Capital expenditures(5)........ 2,564 4,286 4,983 6,236 4,197 5,225 5,458 6,469
Gross profit margin............ 21.3% 21.1% 22.3% 20.8 % 21.5% 20.1 % 22.5% 22.8%
DATA AS ADJUSTED(6):
Total interest expense......... $ 10,078
Ratio of EBITDA to total
interest expense............. 4.8x
Ratio of total debt to
EBITDA....................... 2.4x
</TABLE>
<TABLE>
<CAPTION>
MAY 31, 1997
------------------------
AS
ACTUAL ADJUSTED(6)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets...................................................................................... $242,525 $ 246,025
Long-term debt (including current portion)........................................................ 10,133 103,463
Total stockholders' equity........................................................................ 144,178 72,378
</TABLE>
10
<PAGE> 15
RISK FACTORS
Holders of the Original Notes should consider carefully the risk factors
set forth below, as well as other information contained herein and incorporated
by reference, before tendering their Original Notes in the Exchange Offer.
CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE
Issuance of the Notes in exchange for the Original Notes pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
such Original Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of the Original
Notes desiring to tender such Original Notes in exchange for Notes should allow
sufficient time to ensure timely delivery. The Company and Fedders Corporation
are under no duty to give notification of defects or irregularities with respect
to tenders of Original Notes for exchange. Holders of Original Notes who do not
exchange their Original Notes for Notes pursuant to the Exchange Offer will
continue to be subject to the restrictions on transfer of such Original Notes as
set forth in the legend thereon. In general, the Original Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company and Fedders Corporation do not
currently anticipate that they will register the Original Notes under the
Securities Act. In addition, upon the consummation of the Exchange Offer the
rights of holders of Original Notes which remain outstanding to have such
Original Notes registered under the Securities Act and such holders' other
rights under the Registration Rights Agreement will be very limited. To the
extent that Original Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered, or tendered but unaccepted, Original Notes
could be adversely affected. See "The Exchange Offer--Consequences of Not
Exchanging Original Notes."
Based on interpretations by the staff of the Commission, the Company and
Fedders Corporation believe that the Notes issued pursuant to the Exchange Offer
in exchange for Original Notes may be offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act, (ii) an Initial
Purchaser who acquired the Original Notes directly from the Company solely in
order to resell pursuant to Rule 144A under the Securities Act or any other
available exemption under the Securities Act or (iii) a broker-dealer who
acquired the Original Notes as a result of market making or other trading
activities) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Notes are
acquired in the ordinary course of such holder's business and that such holder
is not participating and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such Notes. The Company and Fedders Corporation have not, however, sought their
own no-action letter from the staff of the Commission. Although there has been
no indication of any change in the staff's position, there can be no assurance
that the staff of the Commission would make a similar determination with respect
to the resale of the Notes. Any holder that cannot rely upon such prior staff
interpretations must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction, unless such sale is made pursuant to an exemption from such
requirements. See "The Exchange Offer--Purpose of the Exchange Offer."
SUBORDINATION
The Notes will be general unsecured obligations of the Company, and both
payments under the Notes and payments under the Guarantee will be subordinated
in right of payment to all existing and future Senior Indebtedness and Guarantor
Senior Indebtedness, as the case may be. As of June 30, 1997, after giving pro
forma effect to the offering of the Original Notes the aggregate principal
amount of Senior Indebtedness and Guarantor Senior Indebtedness to which the
Notes and the Guarantee would have been subordinate would have been
approximately $3.9 million and $10.1 million, respectively. The Indenture will
limit the incurrence by the Company and its Restricted Subsidiaries of
additional Indebtedness, subject to certain financial condition tests, all of
which may be Senior Indebtedness. The Indenture will not limit the ability of
the
11
<PAGE> 16
Guarantor to incur additional Guarantor Senior Indebtedness. By reason of the
subordination provisions of the Indenture, in the event of the insolvency,
liquidation, reorganization, dissolution or other winding-up of the Company or
Fedders Corporation, other creditors who are holders of Senior Indebtedness and
Guarantor Senior Indebtedness must be paid in full before payment of amounts due
on the Notes. Accordingly, there may be insufficient assets remaining after such
payments to pay amounts due on the Notes.
In addition, the Company and the Guarantor may not pay principal of,
premium, if any, or interest on, or any other amounts owing in respect of, the
Notes, or purchase, redeem or otherwise retire the Notes, or make any deposit
pursuant to defeasance provisions for the Notes, if Designated Senior
Indebtedness (as defined in the Indenture) is not paid when due, unless such
default is cured or waived or has ceased to exist or such Designated Senior
Indebtedness has been repaid in full. Under certain circumstances, no payments
may be made for a specified period with respect to the principal of, premium, if
any, and interest on, and any other amounts owing in respect of, the Notes if a
default, other than a payment default, exists with respect to Designated Senior
Indebtedness unless such default is cured, waived or has ceased to exist or such
indebtedness has been repaid in full. If any Event of Default (as defined)
occurs and is continuing, the Trustee or the holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes due and
payable immediately. In such an event, the subordination provisions of the
Indenture would prohibit any payments to holders of the Notes unless and until
such obligations (and any other accelerated Senior Indebtedness) have been
repaid in full. See "Description of Notes--Subordination."
The Company's and Fedders Corporation's subsidiaries may in the future
incur Indebtedness. Holders of such Indebtedness will have a claim against the
assets of such subsidiaries that will rank prior to the claim of the holders of
the Notes and the Guarantee. As of June 30, 1997, subsidiaries of Fedders
Corporation (other than the Company and its subsidiaries) had $6.1 million of
outstanding Indebtedness.
Because of the subordination provisions of the Notes and the Guarantee, and
after the occurrence of certain events, creditors whose claims are senior to the
Notes or the Guarantee may recover more, ratably, than the holders of the Notes.
See "Description of Notes--Subordination."
SEASONALITY AND SUMMER WEATHER CONDITIONS
The Company's results of operations and financial condition are principally
dependent on the manufacture and sale of room air conditioners, the demand for
which is highly seasonal in North American markets. Seasonally low volume sales
are not sufficient to offset fixed costs, resulting in operating losses at
certain times of the year. In addition, the Company's working capital needs are
seasonal, with the greatest utilization of lines of credit occurring early in
the calendar year. See "Business--Seasonality of Business" and "Management's
Discussion and Analysis of Results of Operations and Financial Condition of
Fedders Corporation."
The Company's business is primarily dependent on the demand for room air
conditioners in North America. As a result, unseasonably cool temperatures
during the summer in principal domestic markets have an adverse effect on the
industry and on the Company's operations. While a cool summer in several major
markets in a given year would likely result in reduced sales and earnings for a
single fiscal year, consecutive cool summers in such major markets could have a
material adverse effect on the Company's business. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition of Fedders
Corporation."
DEPENDENCE ON PRINCIPAL CUSTOMERS
The Company's largest customer accounted for 30%, 26% and 28% of Fedders
Corporation's net sales in fiscal years 1996, 1995 and 1994, respectively. One
other customer accounted for 11% of Fedders Corporation's net sales in fiscal
1994, and another customer accounted for 10% of Fedders Corporation's net sales
in fiscal 1995. Two retailers each accounted for at least 10% of Fedders
Corporation's net sales in fiscal 1997. While the Company has done business with
most of its principal customers for a number of years, agreements with principal
customers are reached annually and are based on purchase orders. There can be no
assurance that sales to principal customers will continue at the same levels;
further, continuation of the relationships is
12
<PAGE> 17
dependent upon the customers' satisfaction with the price, quality and delivery
of the Company's products. While management believes its relationships with its
customers are satisfactory, in the event of the loss of a significant segment of
business that the Company were unable to replace with new orders, the Company
would be materially adversely affected. See "Business."
COMPETITION
The Company's business is highly competitive and the principal market in
which it participates is mature. The Company's competitors include a number of
domestic and foreign manufacturers of air conditioners and other appliances,
many of which are substantially larger and have greater financial resources than
the Company. Competitive factors could require price reductions or increased
spending on product development, marketing and sales that could adversely affect
the Company's profit margins. See "Business--Competition."
RESTRICTIVE COVENANTS LIMITING THE COMPANY'S ABILITY TO REPAY THE NOTES
The Indenture will restrict, among other things, the Company's and its
Restricted Subsidiaries' ability to pay dividends or make certain other
restricted payments, to incur additional Indebtedness, to encumber or sell
assets, to enter into transactions with affiliates, to enter into certain
guarantees of Indebtedness, to make restricted investments, to merge or
consolidate with any other entity and to transfer or lease all or substantially
all of their assets. The Indenture will not place any limitation on Fedders
Corporation or its subsidiaries other than the Company. The Company's revolving
credit facility requires the Company to satisfy certain financial condition
tests. The Company's ability to meet those tests can be affected by events
beyond its control, and there can be no assurance that the Company will meet
those tests. A breach of any of these covenants could result in a default under
the Company's revolving credit facility and the Indenture. Upon the occurrence
of an event of default under the Company's revolving credit facility, the
lenders thereunder could elect to declare all amounts outstanding under the
Company's revolving credit facility, together with accrued interest, to be
immediately due and payable. If the Company were unable to repay those amounts,
such lenders could proceed against the collateral granted to them to secure that
Indebtedness. If the Notes were to be accelerated, there can be no assurance
that the assets of the Company would be sufficient to repay the Notes in full.
Substantially all of the assets of Fedders Corporation, including the Company
and its subsidiaries, are pledged as security under the Company's revolving
credit facility. See "Description of Certain Indebtedness."
LEVERAGE AND DEBT SERVICE
As of May 31, 1997, adjusted for the offering of the Original Notes and the
application of the proceeds therefrom, the Company's total Indebtedness, on a
consolidated basis, was approximately $113.3 million, representing approximately
64% of the Company's total capitalization. The Company's leverage may have
important consequences for the Company including: (i) the ability of the Company
to obtain additional financing for acquisitions, working capital, capital
expenditures or other purposes, if necessary, may be impaired or such financing
may not be on terms favorable to the Company; (ii) a portion of the Company's
cash flow will be used to pay the Company's interest expense and under certain
conditions to repay Indebtedness, which will reduce the funds that would
otherwise be available to the Company for its operations and future business
opportunities; (iii) a substantial decrease in net operating cash flows or an
increase in expenses of the Company 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; and (v) the Company's leverage may make it
more vulnerable to a downturn in its business or the economy generally. Any
inability of the Company to service its Indebtedness or obtain additional
financing, as needed, would have a material adverse effect on the Company.
The Company's ability to pay interest and principal on the Notes and to
satisfy its other debt obligations will depend upon its future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond its control.
There can be no assurance that the Company will have adequate cash available to
make required principal and interest payments.
13
<PAGE> 18
WORKING CAPITAL REQUIREMENTS
Because of the seasonal nature of the Company's business, its working
capital requirements are significantly higher at certain times of the year. If
amounts required to fund the Company's working capital requirements are not
available from Fedders Corporation or under the Company's revolving credit
facility, the Company would need to seek an increase in the borrowing limit
under its revolving credit facility or an alternative source of working capital.
Such additional working capital may not be available on terms satisfactory to
the Company. Unavailability of needed working capital could have a material
adverse effect on the Company's business and its results of operations. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition of Fedders Corporation."
CHANGE OF CONTROL PROVISIONS; LIMITATION ON RIGHTS OF REPAYMENT
In the event of a Change of Control, the Company will be required to offer
to repurchase all of the outstanding Notes at 101% of the principal amount
thereof plus accrued and unpaid interest thereon and Liquidated Damages, if any,
to the date of repurchase. The exercise by the holders of the Notes of their
right to require the Company to repurchase the Notes upon a Change of Control
could also cause a default under other Indebtedness of the Company, even if the
Change of Control itself does not, because of the financial effect of such
repurchase on the Company. The Company's ability to pay cash to the holders of
the Notes upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that, in the event of a Change of
Control, the Company will have, or will have access to, sufficient funds or will
be contractually permitted under the terms of outstanding Indebtedness to pay
the required purchase price for all the Notes tendered by holders upon a Change
of Control. See "Description of Notes--Mandatory Offers to Purchase
Notes--Change of Control."
CONTROL BY PRINCIPAL STOCKHOLDERS
The Company is a wholly owned subsidiary of Fedders Corporation.
Approximately 99.8% of the Class B Stock of Fedders Corporation is beneficially
owned by Salvatore Giordano, Sal Giordano, Jr., Joseph Giordano and members of
their families. Through their holdings of Class B Stock, these persons will
have, under certain circumstances, the power to elect a majority of the Board of
Directors and to determine the policies of Fedders Corporation and of the
Company, the persons constituting the management of Fedders Corporation and of
the Company and the outcome of certain significant corporate actions requiring
stockholder approval. See "Security Ownership of Directors and Executive
Officers of Fedders Corporation."
DEPENDENCE ON KEY EXECUTIVES
Management believes that the performance of the Company has been, and will
continue to be, dependent upon the efforts of the principal executive officers
of the Company. Although the Company and Fedders Corporation have designed
incentive and compensation programs to retain key employees, including options
to purchase stock of Fedders Corporation, no assurance can be given as to the
continued availability of the principal executive officers. The Company believes
that its future success will depend in large part on its continued ability to
attract and retain highly skilled and qualified personnel, and the loss of some
or all of these principal executive officers could have a material adverse
effect on the Company. See "Management."
INTERNATIONAL OPERATIONS AND THE FOREIGN CORRUPT PRACTICES ACT
Fedders Corporation has dedicated resources to participating in the
international market by establishing operations in China through Fedders Xinle,
a joint venture entered into with Ningbo General Air Conditioner Factory, and
intends to continue such involvement through other production and joint venture
agreements. International manufacturing and sales are subject to inherent risks,
including labor unrest, political instability, restrictions on transfer of
funds, export duties and quotas, domestic and foreign customs and tariffs,
current and changing regulatory environments, difficulty in obtaining
distribution and support and potentially adverse
14
<PAGE> 19
tax consequences. There can be no assurance that these factors will not have a
material adverse effect on Fedders Corporation's international operations or
sales or upon its financial condition and results of operations.
To the extent that the Company and Fedders Corporation conduct operations
and sell their products outside the United States, the Company and Fedders
Corporation are subject to the Foreign Corrupt Practices Act (the "FCPA"), which
generally prohibits U.S. companies and their intermediaries from bribing foreign
officials for the purpose of obtaining or keeping business or licenses or
otherwise obtaining favorable treatment. Although the Company and Fedders
Corporation have taken precautions to comply with the FCPA, there can be no
assurance that such precautions will protect the Company and Fedders Corporation
against liability under the FCPA, particularly as a result of actions which may
in the past have been taken or which may be taken in the future by agents and
other intermediaries for whose actions the Company or Fedders Corporation may be
held liable under the FCPA. In particular, the Company and Fedders Corporation
may be held responsible for actions taken by its strategic or local partners
even though such strategic or local partners are themselves typically foreign
companies which are not subject to the FCPA, and the Company or Fedders
Corporation has no ability to control such strategic or local partners. Any
determination that the Company or Fedders Corporation has violated the FCPA
could have a material adverse effect on the Company and Fedders Corporation.
AVAILABILITY OF AND FLUCTUATION IN THE COST OF RAW MATERIALS
The Company's operations are dependent on the supply of various raw
materials, including steel, copper and aluminum, from domestic and foreign
suppliers. The Company obtains substantially all of its supply of steel, copper
and aluminum pursuant to purchase orders. The Company does not typically enter
into long-term supply contracts relating to these raw materials. Although to
date the Company has been able to obtain sufficient quantities of steel, copper
and aluminum for its manufacturing processes, supply interruptions or cost
increases, to the extent that the Company is not able to pass these costs on to
its customers, could adversely affect the Company's future results of
operations. See "Business--Raw Materials."
LABOR RELATIONS
Approximately 49% of the Company's employees in the United States are
represented by unions. The Company and the union representing employees of
Rotorex were unable to reach agreement prior to the expiration of their
collective bargaining agreement in August 1997, and the employees covered by the
collective bargaining agreement are on strike. Rotorex continues to operate
using management personnel, employees temporarily transferred from other
facilities of the Company and replacement workers. Two collective bargaining
agreements with the unions representing employees in the Company's Effingham,
Illinois plant are scheduled to expire in October 1998. There can be no
assurance as to the results of negotiations of future collective bargaining
agreements, whether future collective bargaining agreements will be negotiated
without production interruptions or the possible impact of future collective
bargaining agreements, or the negotiation thereof, on the Company's financial
condition and results of operations. See "Business--Employees."
GOVERNMENT REGULATION
The Company is subject to various federal, state and local laws affecting
its business. Room air conditioners are subject to federal regulations providing
for minimum energy efficiency rating ("EER") requirements. Achieving required
EER's results from a combination of an efficient compressor and the design of
the air conditioning system using the compressor. Current proposed rule-making
by the Energy Department under the National Appliance Energy Conservation Act
would have the effect of increasing minimum required EER's. In the event the new
regulations are adopted, the efficiency of certain air conditioner models would
have to be increased. It is not certain at present if the proposed regulations
will be adopted and, if they are, when the requirements would become effective.
Although the Company believes it is currently in material compliance with the
EER requirements and does not believe that the adoption of new EER regulations
will adversely affect the result of operations of the Company, there can be no
assurance that changes in
15
<PAGE> 20
government regulations which adversely affect the industry and the Company will
not occur in the future. See "Business -- Government Regulation."
IMPACT OF ENVIRONMENTAL REGULATION
The products manufactured by the Company currently use
hydrochlorofluorocarbons ("HCFC's") as the refrigerant. The production of HCFC's
for use in new equipment is currently scheduled to be phased out as of the year
2010 in the United States, and the production of HCFC's for the servicing of
existing equipment is currently scheduled to be phased out as of the year 2020
in the United States. Chemical producers are currently developing
environmentally acceptable alternative refrigerants for use in room air
conditioners that are expected to be available in advance of any now-proposed
phase-out deadlines for the current refrigerant. There can be no assurance that
the Company will be able to develop cost effective products that utilize
alternative refrigerants. See "Business -- Environmental Matters."
FRAUDULENT TRANSFER CONSIDERATIONS
A substantial portion of the proceeds of the offering of the Original Notes
has been used to pay a dividend to enable Fedders Corporation to repay certain
Indebtedness assumed in the 1996 Merger and to repurchase capital stock of
Fedders Corporation. Under fraudulent transfer law, if a court were to find, in
a lawsuit by an unpaid creditor or representative of creditors of the Company,
that the Company received less than fair consideration or reasonably equivalent
value for incurring the Indebtedness represented by the Original Notes or the
Notes, and, at the time of such incurrence, the Company (i) was insolvent or was
rendered insolvent by reason of such incurrence, (ii) was engaged or about to
engage in a business or transaction for which its remaining property constituted
unreasonably small capital or (iii) intended to incur, or believed it would
incur, debts beyond its ability to pay as such debts mature, such court could,
among other things, (a) void all or a portion of the Company's obligations to
the holders of the Notes and/or (b) subordinate the Company's obligations to the
holders of the Notes to other existing and future Indebtedness of the Company,
the effect of which would be to entitle such other creditors to be paid in full
before any payment could be made on the Notes. The measure of insolvency for
purposes of determining whether a transfer is avoidable as a fraudulent transfer
varies depending upon the law of the jurisdiction which is being applied.
Generally, however, a debtor would be considered insolvent if the sum of all of
its liabilities were greater than the value of all of its property at a fair
valuation, or if the present fair salable value of the debtor's assets were less
than the amount required to repay its probable liability on its debts as they
become absolute and mature. There can be no assurance as to what standard a
court would apply in order to determine solvency. To the extent that proceeds
from the sale of the Original Notes were used to pay a dividend to Fedders
Corporation, a court may find that the Company did not receive fair
consideration or reasonably equivalent value for the incurrence of the
Indebtedness represented thereby or for the incurrence of the Indebtedness
represented by the Original Notes.
On the basis of its historical financial information, its recent operating
history as discussed in "Management's Discussion and Analysis of Results of
Operations and Financial Condition of Fedders Corporation" and other factors,
the Company believes that, after giving effect to the offering of the Original
Notes and the Exchange Offer, the Company was and will be solvent, did and will
have sufficient capital for the business in which it is engaged and did not and
will not have incurred debts beyond its ability to pay such debts as they
mature. There can be no assurance, however, that a court would necessarily agree
with these conclusions.
ABSENCE OF A PUBLIC MARKET FOR THE NOTES; RESTRICTIONS ON TRANSFERS
The Notes are being offered to holders of the Original Notes. The Original
Notes were issued on August 18, 1997 to a small number of institutional
investors and are eligible for trading in the Private Offering, Resale and
Trading through Automated Linkages (PORTAL) Market, the National Association of
Securities Dealers' screen based, automated market for trading of securities
eligible for resale under Rule 144A. The Notes are new securities for which
there currently is no market. Although the Initial Purchasers have advised the
Company and Fedders Corporation that they currently intend to make a market in
the Notes, they are not
16
<PAGE> 21
obligated to do so and may discontinue such market making at any time without
notice. The Company and Fedders Corporation do not intend to list the Notes on
any national securities exchange or to seek the admission thereof to trading in
the National Association of Securities Dealers Automated Quotation System.
Accordingly, no assurance can be given that an active market will develop for
any of the Notes or as to the liquidity of the trading market for any of the
Notes. If a trading market does not develop or is not maintained, holders of the
Notes may experience difficulty in reselling such Notes or may be unable to sell
them at all. If a market for the Notes develops, any such market may be
discontinued at any time. If a trading market develops for the Notes, future
trading prices of such Notes will depend on many factors, including, among other
things, prevailing interest rates, the Company's and Fedders Corporation's
results of operations and the market for similar securities. Depending on
prevailing interest rates, the market for similar securities and other factors,
including the financial condition of the Company and Fedders Corporation, the
Notes may trade at a discount from their principal amount.
17
<PAGE> 22
SUMMARY ORGANIZATION CHART
[Chart Summarizing Corporate Structure]
- ---------------
(1) The Company and several of its subsidiaries manufacture and market room air
conditioners, dehumidifiers and rotary compressors primarily for sale to the
North American marketplace, which includes Canada and Mexico.
(2) Fedders International, Inc. markets and sells room air conditioners,
including split-type air conditioners, and rotary compressors in the
international marketplace, which includes all areas of the world other than
North America. Its Asian subsidiary also operates a research and development
center for developing new products for the international marketplace.
(3) Fedders Investment Corporation, through Fedders Xinle, manufactures room air
conditioners, including split-type air conditioners, for sale primarily to
all areas of the world other than North America.
(4) Melcor manufactures solid state heat pump modules that perform electrically
the same cooling and heating functions as refrigerant-based compressors and
absorption refrigerators. Melcor's customers are OEM's that primarily use
the modules for cooling purposes in applications such as refrigerators,
laboratory, scientific, medical and restaurant equipment, as well as
telecommunications and computer equipment.
18
<PAGE> 23
USE OF PROCEEDS
The Company will receive no proceeds from the issuance of the Notes upon
consummation of the Exchange Offer. The net proceeds of the offering of the
Original Notes were used by the Company to pay a dividend of approximately $72.3
million to Fedders Corporation which will be used to redeem its 8 1/2%
Convertible Subordinated Debentures due 2012 (which were assumed by Fedders
Corporation in August 1996 in connection with the 1996 Merger) in the aggregate
amount of approximately $22.3 million (approximately $21.8 million aggregate
principal amount at June 30, 1997 and accrued interest of approximately $0.5
million) and which it is anticipated will be used to fund a stock repurchase in
an aggregate amount of approximately $50.0 million. The remaining net proceeds
will be used by the Company (i) to prepay various capital leases in an aggregate
amount of up to approximately $6.2 million and (ii) to reduce any amounts
outstanding under its revolving credit facility and for general corporate
purposes.
CAPITALIZATION
The following table sets forth the cash and cash equivalents, short-term
borrowing and capitalization of Fedders Corporation as of May 31, 1997 as set
forth in the unaudited consolidated financial statements of Fedders Corporation
and as adjusted to give effect to the offering of the Original Notes and the
application of the net proceeds therefrom as described in "Use of Proceeds."
This table should be read in conjunction with the consolidated financial
statements, including notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MAY 31, 1997
---------------------------
(IN THOUSANDS)
ACTUAL AS ADJUSTED(1)
<S> <C> <C>
Cash and cash equivalents (2)...................................... $ 7,528 $ 7,528
======== ========
Short-term borrowing (3)(4)........................................ $ 26,271 $ 9,747
======== ========
Long-term debt (including current portion):
9 3/8% Senior Subordinated Notes due 2007, net of $480
discount (4)................................................. -- $ 99,520
8 1/2% Convertible Subordinated Debentures due 2012........... $ 22,806 --
Fedders Xinle 15.175% promissory note......................... 6,128 6,128
1% Promissory note payable to the State of Illinois (4)....... 3,943 3,943
Capital lease obligations (4)................................. 6,252 62
-------- --------
Total long-term debt.......................................... 39,129 109,653
Stockholders' equity............................................... 147,386 97,386
-------- --------
Total capitalization..................................... $186,515 $207,039
======== ========
</TABLE>
- ---------------
(1) Adjusted to reflect the offering of the Original Notes and the application
of the net proceeds therefrom as described in "Use of Proceeds."
(2) Prior to the consummation of the offering of the Original Notes, the Company
had transferred, on a daily basis in the regular course of business
consistent with the Company's cash management practice, all of its available
cash to the Guarantor and the intercompany receivable created by such
transfers was eliminated by declaration of a dividend from the Company to
the Guarantor in the amount of the intercompany balance.
(3) As of August 31, 1997, there was no short-term borrowing.
(4) These represent obligations of the Company, except for $62 of capital leases
which are the obligation of Fedders Corporation.
19
<PAGE> 24
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected historical and pro forma
consolidated financial information of Fedders Corporation. The historical
financial information has been derived from and should be read in conjunction
with the audited consolidated financial statements (for amounts as of and for
the years ended August 31) and unaudited interim consolidated financial
statements (for amounts as of and for the nine months ended May 31) and related
notes thereto appearing elsewhere or incorporated by reference in this
Prospectus, and "Management's Discussion and Analysis of Results of Operations
and Financial Condition of Fedders Corporation." Unaudited interim data reflect,
in the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of results for such
interim periods. The unaudited pro forma statement of operations data give
effect to the 1996 Merger, which occurred on August 13, 1996, as though such
merger occurred at September 1, 1995 and, for the pro forma balance sheet data
as of May 31, 1996, as though the Merger occurred on that date. The pro forma
statement of operations information and results of operations for the unaudited
interim periods are not necessarily indicative of the future operating results
of Fedders Corporation for any other annual or interim period.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31, NINE MONTHS ENDED MAY 31,
--------------------------------------------------------------------- ---------------------------------
PRO FORMA PRO FORMA
1992 1993 1994 1995 1996 1996(1) 1996 1996(1) 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF
OPERATIONS DATA:
Net sales........... $192,365 $158,602 $231,572 $316,494 $371,772 $ 390,349 $290,004 $ 307,073 $237,456
Gross profit........ 25,607 27,744 49,263 67,125 83,028 81,908 62,641 61,933 52,298
Selling, general and
administrative
expenses.......... 31,699 25,837 25,358 29,472 32,040 39,740 22,686 29,284 28,904
Operating income
(loss)(2)......... (9,392) 1,907 23,905 37,653 50,988 42,168 39,955 32,649 23,394
Net interest
expense........... 15,573 4,247 4,102 1,962 952 4,376 1,164 4,015 2,782
Income tax
(benefit)......... (34) (565) 594 6,187 19,108 14,448 14,885 10,971 7,164
Income (loss) before
cumulative effect
of an accounting
change............ (24,931) (1,775) 19,209 29,504 31,158 23,574 24,143 17,900 13,905
Net income
(loss)(3)......... (24,931) (1,775) 20,989 29,504 31,158 23,574 24,143 17,900 13,905
Net income (loss)
attributable to
common
stockholders...... (24,931) (1,775) 20,989 29,504 31,007 20,660 24,143 15,714 11,727
Net income (loss)
per share(3)...... (0.67) (0.05) 0.53 0.72 0.74 0.51 0.58 0.38 0.28
DIVIDENDS DECLARED PER
SHARE:
Preferred......... -- -- -- -- $ 0.050 $ 0.380 -- $ 0.190 $ 0.190
Common............ -- -- -- $ 0.020 0.080 0.080 $ 0.060 0.060 0.060
Class A........... -- -- -- 0.020 0.080 0.080 0.060 0.060 0.060
Class B........... -- -- -- 0.018 0.072 0.072 0.054 0.054 0.054
OTHER DATA:
EBITDA(4)........... $ 2,675 $ 6,317 $ 32,252 $ 44,143 $ 57,796 $ 53,616 $ 43,473 $ 39,986 $ 31,284
Depreciation and
amortization...... 14,876 5,646 9,374 7,519 6,578 11,218 3,281 7,100 7,433
Capital
expenditures(5)... 3,599 2,379 2,634 9,041 7,043 8,296 6,379 7,407 6,574
Ratio of earnings to
fixed
charges(6)........ -- -- 4.6x 11.5x 17.6x 6.3x 5.3x
Gross profit
margin............ 13.3% 17.5% 21.3% 21.2% 22.3% 21.0% 21.6% 20.2% 22.0%
</TABLE>
<TABLE>
<CAPTION>
MAY 31,
AUGUST 31, ----------------------
------------------------------------------------------- PRO FORMA
1992 1993 1994 1995 1996 1996(1) 1997
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $ 8,738 $ 8,553 $ 34,869 $ 57,707 $ 90,295 $ 25,441 $ 7,528
Working capital (deficit).................... (27,156) 16,959 38,373 56,123 86,817 74,621 71,812
Total assets................................. 179,249 81,285 100,653 136,775 290,220 312,884 305,275
Long-term debt (including current portion)... 49,588 25,590 17,943 5,106 40,406 40,434 39,129
Total stockholders' equity(7)................ 19,039 24,229 49,317 82,542 159,751 153,384 147,386
</TABLE>
20
<PAGE> 25
- ---------------
(1) Amounts represent the pro forma statement of operations data and other data
of Fedders Corporation after giving effect to the 1996 Merger in the manner
described under "Pro Forma Unaudited Condensed Statements of Operations,"
and, for the pro forma balance sheet data as of May 31, 1996 as though the
1996 Merger occurred on that date.
(2) Includes a net restructuring charge in 1992 of $3,300 for costs associated
with the shutdown of the Company's New Jersey production facilities offset,
in part, by the benefit from the sale of its compressor business.
(3) During the first quarter of fiscal 1994, Fedders Corporation adopted
Statement of Financial Accounting Standard No. 109 "Accounting for Income
Taxes" which resulted in a tax benefit of $1,780 or $0.04 per share from the
cumulative effect of an accounting change.
(4) EBITDA represents income before income taxes plus net interest expense and
depreciation and amortization (excluding amortization of debt discounts and
deferred financing costs). While EBITDA should not be construed as a
substitute for operating income or a better indicator of liquidity than cash
flow from operating activities, which are determined in accordance with
generally accepted accounting principles, it is included herein to provide
additional information with respect to the ability of Fedders Corporation
and the Company to meet their future debt service, capital expenditures and
working capital requirements. In addition, Fedders Corporation and the
Company believe that certain investors find EBITDA to be a useful tool for
measuring the ability of Fedders Corporation and the Company to service
their debt. EBITDA is not necessarily a measure of Fedders Corporation's or
the Company's ability to fund cash needs.
(5) Fiscal 1995 amount includes buyout of $1,750 of equipment under lease.
(6) The ratio of earnings to fixed charges is determined by dividing the sum of
net income, income taxes and fixed charges (consisting of interest expense,
the estimated interest component of rent expense and amortization of fees
related to debt financing) by fixed charges. For the fiscal years ended
August 31, 1992 and 1993 earnings were insufficient to cover fixed charges
by approximately $24,965 and $2,340, respectively.
(7) In September 1996, Fedders Corporation announced a stock repurchase of up to
$25,000 of Common and/or Class A Stock. During the nine months ended May 31,
1997, Fedders Corporation repurchased approximately 4.0 million shares of
Class A Stock at an average price of $5.75 per share for a total of $23,300.
21
<PAGE> 26
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
The accompanying pro forma unaudited condensed consolidated statements of
operations are based upon the historical consolidated financial statements of
Fedders Corporation, adjusted to give effect to the 1996 Merger, which occurred
on August 13, 1996, as though such merger occurred on September 1, 1995. The
unaudited pro forma condensed statements of operations for the year ended August
31, 1996 and nine months ended May 31, 1996 combine the historical consolidated
statements of operations of Fedders Corporation for those periods with the
historical consolidated statements of operations of NYCOR for the period from
September 1, 1995 to August 12, 1996, and the nine months ended June 30, 1996,
respectively. The pro forma condensed statements of operations are not
necessarily indicative of the results that would have been obtained if the 1996
Merger had occurred on September 1, 1995 or for any future period. The pro forma
adjustments give effect to available information and assumptions that Fedders
Corporation believes are reasonable. The pro forma condensed financial
information should be read in conjunction with Fedders Corporation's historical
consolidated financial statements and notes thereto appearing elsewhere or
incorporated by reference herein, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Fedders Corporation."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31, 1996 NINE MONTHS ENDED MAY 31, 1996
------------------------------------------------- -------------------------------------------------
FEDDERS FEDDERS
CORPORATION NYCOR PRO FORMA CORPORATION NYCOR PRO FORMA
AUGUST 31, AUGUST 12, ADJUST- MAY 31, JUNE 30, ADJUST-
1996 1996(a) MENTS(b) PRO FORMA 1996 1996 MENTS(b) PRO FORMA
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $ 371,772 $ 79,517 $(60,940) (c) $390,349 $ 290,004 $ 73,492 $(56,423) (c) $307,073
Cost of sales.......... 288,744 80,637 (60,940) (d) 308,441 227,363 74,049 (56,272) (d) 245,140
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit (loss).... 83,028 (1,120) -- 81,908 62,641 (557) (151) 61,933
Selling, general and
administrative
expenses............. 32,040 8,200 (500) (e) 39,740 22,686 6,975 (377) (e) 29,284
-------- -------- -------- -------- -------- -------- -------- --------
Operating income
(loss)............... 50,988 (9,320) 500 42,168 39,955 (7,532) 226 32,649
Minority interest in
joint venture........ 230 -- -- 230 237 -- -- 237
Net interest expense... (952) (2,446) (978) (f) (4,376) (1,164) (1,873) (978) (f) (4,015)
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes......... 50,266 (11,766) (478) 38,022 39,028 (9,405) (752) 28,871
Income tax provision
(benefit)............ 19,108 195 (4,855) (g) 14,448 14,885 238 (4,152) (h) 10,971
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)...... 31,158 (11,961) 4,377 23,574 24,143 (9,643) 3,400 17,900
Preferred stock
dividend
requirement.......... 151 978 1,785 (f)(i) 2,914 -- 978 1,208 (f)(i) 2,186
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)
attributable to
common
stockholders......... $ 31,007 $ (12,939) $ 2,592 $ 20,660 $ 24,143 $(10,621) $ 2,192 $ 15,714
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
- ---------------
(a) Amounts represent historical results for NYCOR for the period from September
1, 1995 to August 12, 1996 after which date NYCOR results are included in
Fedders Corporation historical amounts for the fiscal year ended August 31,
1996.
(b) Pro forma amounts of Fedders Corporation for the year ended August 31, 1996
and the nine months ended May 31, 1996 include adjustments to give effect to
the 1996 Merger as though such transaction occurred on September 1, 1995.
(c) Reflects the elimination of Rotorex intercompany sales to Fedders
Corporation.
(d) Reflects the elimination of Fedders Corporation intercompany purchases from
Rotorex.
(e) Reflects the elimination of redundant costs related to the existence of a
separate public company. Such redundant costs include franchise taxes,
reports to stockholders, audit fees, bank fees and others.
(f) Reflects the increase in interest expense and a corresponding reduction in
preferred stock dividends related to NYCOR's exchange of its preferred stock
for 8 1/2% Convertible Subordinated Debentures due 2012 which occurred on
March 15, 1996, as though such exchange occurred on September 1, 1995.
(g) Reflects the tax benefit of entries (c), (d), (e) and (f) above totaling
$182 and the tax benefit of NYCOR's losses offsetting Fedders Corporation's
income amounting to $4,673.
(h) Reflects the tax benefits of entries (c), (d), (e) and (f) above totaling
$286 and the tax benefits of NYCOR's losses offsetting Fedders Corporation's
income amounting to $3,866.
(i) Reflects the increase in preferred stock dividend requirement of $2,763 for
the fiscal year ended August 31, 1996 and $2,186 for the nine months ended
May 31, 1996, related to the issuance of Fedders Corporation Convertible
Preferred Stock in connection with the 1996 Merger.
22
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION OF FEDDERS CORPORATION
The Company believes it is the largest manufacturer of room air
conditioners in North America based on units sold and markets a complete line of
room air conditioners and dehumidifiers, principally for the U.S. residential
market. The Company sells its products primarily to national and regional retail
chains, home improvement centers and buying groups, as well as to distributors
and OEM's. Based on statistics compiled by an industry trade association, the
Company believes its share of the U.S. market for room air conditioners was
approximately 28.5% for the fiscal year ended August 31, 1996 and 26.7% and
24.0% in fiscal years 1995 and 1994, respectively.
The Company's sales were the basis for record net sales and income of
Fedders Corporation in fiscal 1996 and for significant gains in net sales and
income in the two previous fiscal years. The growth trend in sales reflects the
Company's strong relationships with retailers resulting from concentration on
flexible, accurate-response manufacturing to accommodate customers' increasingly
seasonal just-in-time delivery requirements.
The Company's business is conducted primarily in North America, including
Canada and Mexico, and is affected by summer weather in major North American
markets, with product shipped predominantly in the second half of the fiscal
year. Cool summer weather in key U.S. markets in fiscal 1996 increased industry
inventories at some manufacturers, excluding the Company, and at retailers at
the beginning of fiscal 1997. As indicated by Fedders Corporation in previous
SEC filings, these higher industry inventories have reduced domestic industry
shipments in 1997 and are impacting the Company's 1997 revenues and earnings.
Fedders Corporation's sales for full fiscal 1997 declined from fiscal 1996, even
including international sales in excess of $40 million and domestic sales of
operations acquired in August 1996.
In August 1996, Fedders Corporation acquired NYCOR which, through its
subsidiary Rotorex, manufactured rotary compressors principally for use in room
air conditioners, and, through Melcor, manufactured thermoelectric modules.
Rotorex, which has been the primary supplier of compressors to the Company for
use in its room air conditioners for 25 years, was transferred to the Company as
a capital contribution by Fedders Corporation. The Company believes that a
dedicated supply of compressors improves its ability to manufacture and deliver
products on a just-in-time basis.
In November 1995, Fedders Corporation entered into the Fedders Xinle joint
venture to manufacture air conditioners for export and for sale in the Chinese
market. International sales of Fedders Corporation totaled $24.5 million, $12.9
million and $8.3 million in fiscal years 1996, 1995 and 1994, respectively,
including sales of some products built in the United States by the Company.
RESULTS OF OPERATIONS
The following table sets forth certain financial results of Fedders
Corporation, expressed as a percentage of net sales, for the indicated fiscal
periods. International sales comprised 6.6% of net sales in fiscal 1996, 4.1% in
1995 and 3.6% in 1994. (See also note 15 to the Consolidated Financial
Statements of Fedders Corporation included elsewhere in this Prospectus for
financial information pertaining to the Company.)
OPERATING RESULTS OF FEDDERS CORPORATION AS A PERCENT OF NET SALES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS
AUGUST 31, ENDED MAY 31,
-------------------------- ---------------
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Gross profit.................................... 21.3% 21.2% 22.3% 21.6% 22.0%
Selling, general and administrative expenses.... 11.0 9.3 8.6 7.8 12.2
Operating income................................ 10.3 11.9 13.7 13.8 9.9
Net interest expense............................ 1.8 0.6 0.3 0.4 1.2
Pre-tax income.................................. 8.6 11.3 13.5 13.5 8.9
</TABLE>
23
<PAGE> 28
NINE MONTHS FISCAL 1997 VERSUS NINE MONTHS FISCAL 1996
For the first nine months of fiscal 1997, net sales of Fedders Corporation
totaled $237.5 million, a decline of 18% from $290.0 million in the comparable
1996 period, but similar to the $238.4 million of net sales in the 1995
nine-month period. The sales decrease during the 1997 nine-month period reflects
the large end-of-season industry inventories of room air conditioners at some
manufacturers, excluding the Company, and at retailers as fiscal 1997 began, due
to cool summer weather in 1996. This compared to the prior year when industry
inventory levels were low following three consecutive hot summers. The domestic
sales decline in the 1997 period was partially offset by an increase in other
sales, primarily international.
Gross profit of Fedders Corporation decreased by $10.3 million during the
first nine months of fiscal 1997 compared to the prior year due to the decline
in sales. However, the gross profit margin as a percentage of net sales
increased slightly, compared to the same period in fiscal 1996, due primarily to
changes in customer and product mix offset, in part, by lower absorption of
factory overhead expense as a result of lower production levels.
Selling, general and administrative expenses ("SG&A") of Fedders
Corporation increased to 12.2% as a percentage of net sales in the first nine
months of 1997 due, in part, to lower sales. SG&A increased by $6.2 million from
the prior year primarily as a result of expenses related to operations acquired
in the 1996 Merger, including $1.2 million of amortization of goodwill and $1.5
million of research and development expense. SG&A also increased in fiscal 1997
due to expanding infrastructure to support the future growth of international
business.
Net interest expense of Fedders Corporation increased during the fiscal
1997 period by $1.6 million primarily due to interest paid on the 8.5%
Convertible Subordinated Debentures due 2012 assumed in the 1996 Merger.
Fedders Corporation net income decreased to $13.9 million in the first nine
months of fiscal 1997 from $24.1 million in fiscal 1996 and reflects an
estimated tax rate of 34% versus 38% in the prior year.
Net income attributable to common stockholders reflects the dividend
requirement of $2.2 million on the Fedders Corporation Convertible Preferred
Stock issued in connection with the 1996 Merger.
FISCAL YEAR ENDED AUGUST 31, 1996 VERSUS FISCAL YEAR ENDED AUGUST 31, 1995
At the beginning of fiscal 1996, domestic industry inventories had been
depleted by three consecutive hot summers. Net sales of Fedders Corporation
increased 17% during fiscal 1996, to a record level, for the third consecutive
year of significant gains. Industrywide, unit shipments for the domestic market
increased by 14% during fiscal 1996, according to an industry trade association.
The gross profit margin of Fedders Corporation increased by more than one
full percentage point during fiscal 1996 to 22.3%, primarily as a result of
increased efficiency in plant utilization due to the higher sales volume and
somewhat lower commodity prices, compared with fiscal 1995 when copper costs had
increased sharply.
SG&A of Fedders Corporation increased by $2.6 million, or 9% in fiscal
1996, including a $2.0 million provision for an early retirement program. SG&A
decreased as a percent of sales for the third consecutive year to 8.6% from 9.3%
in fiscal 1995.
Net interest expense of Fedders Corporation in fiscal 1996 decreased by
$1.0 million and as a percent of sales to 0.3% from 0.6% in the prior year as
long-term debt was minimal prior to the 1996 Merger and because cash on hand
increased compared with fiscal 1995.
In fiscal 1996, Fedders Corporation returned to a full federal tax rate
after utilizing its net operating loss carryforwards during fiscal 1995. As a
result, the effective tax rate was 38.0% in fiscal 1996 compared with 17.3% in
fiscal 1995.
24
<PAGE> 29
FISCAL YEAR ENDED AUGUST 31, 1995 VERSUS FISCAL YEAR ENDED AUGUST 31, 1994
Net sales of Fedders Corporation increased 37% in fiscal 1995, following a
46% rise in fiscal 1994. The 1995 increase was due to larger orders from
existing customers and the addition of new customers, attributable to the
Company's ability to meet just-in-time delivery requirements of major retailers
and to its accurate-response production program. Domestic industry unit
shipments increased 16% and 33% during fiscal 1995 and 1994, respectively,
according to an industry trade association.
The gross profit margin of Fedders Corporation remained strong in fiscal
1995 at 21.2% versus 21.3% in the prior year. Profitability benefited in fiscal
1995 from a $3.5 million reduction in warranty provisions, which reflects
continuing improvements in the quality of the Company's products, and from the
Company's continuous programs to reduce product costs. These favorable factors
were offset, in part, by a $2.8 million write-down of idle equipment and higher
copper costs. The gross profit margin of Fedders Corporation had increased in
fiscal 1994 to 21.3%, compared with 17.5% a year earlier, due to the Company's
higher plant efficiency on higher sales volume, product cost reduction, warranty
expense reduction and savings in purchasing components and raw materials.
SG&A of Fedders Corporation increased by $4.1 million but decreased as a
percent of net sales to 9.3% in fiscal 1995 from 11.0% a year earlier due to the
increase in sales offset, in part, by a $2.0 million provision for
implementation of an early retirement program. In fiscal 1994, SG&A reflected
the benefit of the Company's consolidation of its sales and marketing function
near the end of fiscal 1993.
Net interest expense decreased by $2.1 million in fiscal 1995 as Fedders
Corporation repaid $12.2 million of debentures, reducing long-term debt by 74%,
and cash on hand increased.
The effective tax rate was 17.3% in fiscal 1995 versus 3.0% in fiscal 1994
due to utilization of net operating loss carryforwards in both years.
LIQUIDITY AND CAPITAL RESOURCES
Fedders Corporation ended fiscal 1996 with cash increasing to $90.3 million
at August 31, up from $57.7 million a year earlier. Working capital requirements
historically are seasonal with cash balances peaking in August and the greatest
utilization of its lines of credit occurring early in the calendar year. As of
May 31, 1997, Fedders Corporation's cash on hand of $7.5 million included $4.1
million at Fedders Xinle.
Net cash used in operations by Fedders Corporation for the nine months
ended May 31, 1997 amounted to $74.6 million. The principal use of this cash was
to produce finished goods for the seasonal sales requirements, which are
heaviest in the third fiscal quarter. Inventories increased to $90.6 million at
May 31, 1997 versus $50.7 million a year earlier. The increase includes $20.0
million of inventory related to the 1996 Merger and inventory supporting
international requirements.
Net cash provided by operations of Fedders Corporation in fiscal 1996
amounted to $41.9 million. Accounts receivable declined by $0.9 million
reflecting normal, seasonally low, year-end levels. Ending inventories increased
by $24.4 million with $12.3 million of the increase related to Fedders Xinle and
$13.3 million related to Rotorex and Melcor. Excluding the inventories of these
acquired entities, inventories decreased by $1.2 million, despite a cooler than
normal summer. Accounts payable, excluding accounts payable of the acquired
operations, also changed little. Accrued expenses increased in fiscal 1995 as a
result of higher marketing accruals related to higher sales and in fiscal 1996
from acquired operations.
Net cash used in investing activities by Fedders Corporation in the first
nine months of fiscal 1997 consisted primarily of capital expenditures of $6.6
million. For all of fiscal 1997, Fedders Corporation anticipates capital
expenditures of approximately $9.0 million. Net cash used in investing
activities during fiscal 1996 included capital expenditures of $7.0 million, and
Fedders Corporation also made a cash investment of $8.4 million in Fedders
Xinle, which was initially capitalized on November 7, 1995.
In August 1996, NYCOR was merged into Fedders Corporation. The Company had
an agreement with Rotorex for the supply of up to 800,000 compressors annually,
through the year 2003. Fedders Corporation's rotary compressor requirements were
approximately 1.4 million in fiscal 1996, and Fedders Corporation's requirements
are expected to increase as it increases its international business. The 1996
Merger provides a
25
<PAGE> 30
dedicated supply of compressors that is critical to the Company's
accurate-response manufacturing and just-in-time delivery of its seasonal
product. The 1996 Merger also will support Fedders Corporation's plans for
international growth, which will lessen its dependence on hot weather in the
North American market. The purchase price of the 1996 Merger was paid through
the issuance of 7,643,000 shares of Convertible Preferred Stock of Fedders
Corporation with a value of approximately $47.8 million.
Net cash used by Fedders Corporation in financing activities during the
nine-month period ended May 31, 1997 amounted to $1.3 million. The Fedders
Corporation revolving credit facility was increased to $50 million from $40
million and the rate of interest on the facility decreased to the prime rate
from the prime rate plus 1.5%. The revolving credit facility is collateralized
by substantially all of Fedders Corporation's assets. See "Description of
Certain Indebtedness." Dividend payments amounted to $4.2 million in the first
nine months of fiscal 1997. In September 1996, Fedders Corporation announced its
intention to repurchase up to $25 million of Class A and/or Common Stock;
through May 1997, it had acquired approximately 4.0 million shares of Class A
Stock at an average price of approximately $5.75 per share or a total of $23.3
million. At May 31, 1997, Fedders Corporation had $26.3 million outstanding
under the revolving credit facility, all of which was repaid as of June 30,
1997.
Net cash used in financing activities in fiscal 1996 by Fedders Corporation
amounted to $2.8 million. At its formation, Fedders Xinle borrowed $10.3 million
from a People's Republic of China bank for expansion. The long-term loan is not
guaranteed by Fedders Corporation or its subsidiaries. Fedders Xinle repaid $4.0
million during fiscal 1996. The loan matures in 2008, carries an interest rate
of 15.175% and is secured by certain Fedders Xinle assets. Fedders Corporation
assumed a total of $28.9 million of debt in connection with the 1996 Merger,
which will be repaid with proceeds of the offering of the Original Notes.
Management believes that the cash, earnings and borrowing capacity of the
Company and Fedders Corporation are adequate to meet the needs of their
respective operations and long-term credit requirements, including capital
expenditures and debt maturities.
Upon completion of the offering of the Original Notes, the debt of Fedders
Corporation and the Company as a percentage of their respective total
capitalization increased and their net interest expense increased. Management
anticipates that cash flow from operations and availability under the revolving
credit facility will be sufficient to finance the liquidity needs of Fedders
Corporation and the Company for the foreseeable future.
Following consummation of the offering of the Original Notes and the
payment by the Company of a dividend to Fedders Corporation in the amount of
$72.3 million, Fedders Corporation deposited approximately $22.3 million with
the trustee for its 8 1/2% Convertible Subordinated Debentures due 2012 and
called such Debentures for redemption on September 17, 1997. Fedders Corporation
also purchased 705,277 shares of its Convertible Preferred Stock for a cash
purchase price of $6.25 per share. The remaining shares of Fedders Convertible
Preferred Stock have been called for redemption on September 19, 1997 at a
redemption price of 1.022 shares of Class A Stock of Fedders Corporation for
each share of Convertible Preferred Stock.
RECENT ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which
establishes standards for computing and presenting earnings per share. The
standard is effective on December 15, 1997. Pro forma basic and diluted earnings
per share using this standard would have been $0.30 and $0.36, respectively, for
the nine months ended May 31, 1997. In the prior year, pro forma basic and
diluted earnings per share would have been $0.60 and $0.58, respectively, for
the nine months ended May 31, 1996.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" and SFAS No.
131, "Disclosure about Segments of an Enterprise and Related Information," were
issued. SFAS No. 130 addresses standards for reporting and display of
comprehensive income and its components and SFAS No. 131 requires disclosure of
reportable operating segments. Both statements are effective for Fedders
Corporation's 1999 fiscal year. Fedders Corporation will be reviewing these
pronouncements to determine their applicability, if any.
26
<PAGE> 31
BUSINESS
GENERAL
The Company believes it is the largest manufacturer of room air
conditioners in the United States based on units sold. An industry innovator for
the past 50 years, the Company has increased its U.S. market share to
approximately 28.5% in fiscal 1996 from approximately 10% in fiscal 1985. The
Company manufactures and sells a complete line of room air conditioners,
including window and through-the-wall units, and dehumidifiers, principally for
use in U.S. residential markets. The Company's products are marketed under the
FEDDERS, EMERSON QUIET KOOL and AIRTEMP brand names primarily to national and
regional retail chains, home improvement centers, and buying groups, as well as
to distributors and, under private label, to retailers and other OEM's,
including other U.S. room air conditioner manufacturers.
Based primarily on the Company's results, Fedders Corporation has achieved
significant increases in net sales and EBITDA in recent years. From fiscal 1994
through fiscal 1996, Fedders Corporation's net sales increased from $231.6
million to $371.8 million, and EBITDA increased from $32.3 million to $57.8
million, representing compound annual growth rates of 26.7% and 33.9%,
respectively.
The Company believes its market share growth and profitability have been
primarily attributable to its: (i) low cost production achieved through
continuous manufacturing improvements, including the Restructuring, and a global
sourcing strategy; (ii) broad range of high quality products with strong brand
recognition; (iii) strong relationships with leading retailers; (iv)
accurate-response manufacturing and just-in-time delivery capabilities; and (v)
principal focus on one product.
In August 1996, Fedders Corporation acquired NYCOR which, through its
subsidiary Rotorex, manufactured rotary compressors principally for use in room
air conditioners and, through its subsidiary Melcor, manufactured specialized
thermoelectric heating and cooling modules. Prior to the acquisition, Rotorex
was the primary supplier of compressors to the Company for use in its room air
conditioners for 25 years. After the 1996 Merger, all of the capital stock of
Rotorex was transferred to the Company as a capital contribution by Fedders
Corporation. The Company believes that a dedicated supply of compressors is
critical to the Company's accurate-response and just-in-time delivery of its
seasonal products.
Fedders Corporation is leveraging its expertise in room air conditioning to
penetrate the much larger and rapidly expanding global market. In November 1995,
Fedders Corporation entered into the Fedders Xinle joint venture with the Ningbo
General Air Conditioner Factory of Ningbo, China. Fedders Xinle is 60% owned by
Fedders Corporation and intends to market its products both within China and,
through Fedders International, Inc., to export markets around the world. Fedders
Xinle also may produce product for the Company to sell to U.S. customers, which
further enhances the sales and marketing flexibility of the Company through
another source of capacity.
COMPETITIVE STRENGTHS AND COMPANY STRATEGY
The Company's strategy is to continue to capitalize on its competitive
strengths, including the following:
LOW COST PRODUCER. The Company believes it has positioned itself as the
low cost producer in the United States. Significant cost savings achieved since
1992 were a key factor in the Company's ability to increase operating margins
from (4.9)% in fiscal 1992 to 13.7% in fiscal 1996. The Company has achieved
significant cost reduction through:
- Emphasis on global sourcing of components and raw materials to
reduce costs and ensure quality;
- Continuous improvement in manufacturing efficiencies and in
designing cost out of the product based, in part, on one of its core
competencies, expertise in heat transfer technology;
- Minimizing fixed costs while maximizing production flexibility, in
part as a result of the Restructuring, which included a reduction in its
manufacturing facilities after the acquisition of Emerson
27
<PAGE> 32
Quiet Kool and the elimination of duplicative management and operational
and administrative departments;
- Low labor content and flexible manufacturing that allow the Company
to reduce variable costs dramatically when demand for its products
fluctuates. The direct labor cost component of the Company's products is
generally less than the cost of freight and duty to import air conditioners
into the United States from many offshore locations, resulting in favorable
price comparisons with imported goods.
HIGH QUALITY PRODUCTS WITH STRONG MULTIPLE BRANDS. The Company
manufactures a complete line of window and through-the-wall room air
conditioners to meet a broad range of consumer preferences. It believes it has
developed a reputation among its customers and consumers for producing high
quality products at competitive prices. The FEDDERS, EMERSON QUIET KOOL, and
AIRTEMP brands each has a long history and is well known in the marketplace. On
a private label basis, the Company also manufactures, in various sizes, a
portion of the room air conditioners of other U.S. OEM's. All of the Company's
U.S. manufacturing facilities, including Rotorex, have received the highest
level of quality certification, ISO 9001, for their quality management systems
from the International Standards Organization.
STRONG RELATIONSHIPS WITH LEADING RETAILERS. Beginning in the early
1990's, the Company recognized a significant shift in the U.S. market for room
air conditioners as major regional and national retailers began replacing
wholesale distributors as the primary customers for the industry. The Company
believes it has distinguished itself from its competitors by effectively
penetrating this rapidly growing customer base and by working closely with its
customers to improve their marketing of the Company's products. The Company
estimates that leading retailers currently represent more than 50% of the total
room air conditioner market in the United States.
ACCURATE-RESPONSE MANUFACTURING. During the 1990's, the Company
reengineered its manufacturing processes and distribution systems in order to
meet the delivery requirements, including "in-season" orders, of its major
retailing customers, who increasingly sought to minimize their inventories. The
Company believes that its accurate-response manufacturing capability, by which
it can adjust both total production quantities and product mix on a timely
basis, has been a key factor in its ability to gain market share from its
competitors.
PRODUCT FOCUS. Fedders Corporation has a 100-year history of experience in
heat transfer technology, including 50 years of experience in the manufacturing
of room air conditioners. Many of the Company's competitors produce a broad
range of consumer products, and the Company believes that such competitors have
historically given less attention to the development and expansion of their room
air conditioning businesses than the Company. Room air conditioners have been,
and continue to be, the Company's primary business focus.
INDUSTRY
The U.S. room air conditioner market is the third largest in the world with
average annual sales of 3.7 million units for the last 10 calendar years.
Domestically, room air conditioners are marketed in two basic styles: the window
unit which is installed directly into a window and the through-the-wall unit
which is installed through an outside wall of the consumer's residence.
Sales of room air conditioners in the domestic market vary from year to
year according to the weather, especially in the major markets of the Northeast
and the upper Midwest. Unusual summer weather affects manufacturers' shipments
primarily in the following year. A cool summer reduces consumer demand and
unsold inventory is carried over to the following year. An unusually hot summer
depletes industry inventories, and the distribution system must be refilled to
meet the following year's demand. The Company believes that demand is
principally driven by the replacement market. Unlike major household appliances
and central air conditioning systems, the sale of room air conditioners is not
dependent on the construction of new homes.
The distribution of air conditioners in North America changed significantly
in the early 1990's. Sales are now made primarily directly to retailers, in
contrast to the 1980's, when wholesale distributors accounted for
28
<PAGE> 33
the majority of the industry's business. Additionally, in recent years the
Company's customers, now primarily retailers, changed their purchasing patterns
to minimize inventories. In response to these changes, the Company developed
accurate-response manufacturing and just-in-time delivery, to accommodate
customers' requirements in this highly seasonal business, while simultaneously
minimizing the Company's need to carry large inventories of finished goods.
The room air conditioning industry grew rapidly in the 1950's and 1960's
and then experienced substantial consolidation in the 1970's and 1980's. In the
early 1990's, two cold summers encouraged other domestic competitors to withdraw
from the business. In 1975 there were 18 major manufacturing operations
competing in the industry domestically, which have been reduced to six in 1997.
Fedders Corporation believes that the international market for room air
conditioners outside the United States is approximately five times the size of
the U.S. market, measured on a unit basis. Demand for air conditioners outside
of North America accelerated in recent years, including in the largest overseas
markets of Japan, China and the rest of Southeast Asia, and continues to grow
rapidly with the increasing disposable income of populous nations in hot weather
climates. Because freight costs to ship room air conditioners are high relative
to the product cost, international markets are often most efficiently served by
local production. While international room air conditioner sales in units
exceeded those of the United States by an almost 5-to-1 ratio in 1996, the
international dollar volume is estimated by the Company to be 15 times greater,
due to preference abroad for more expensive split-type units. The dollar value
of the entire world market was estimated by the Company to be approximately $18
billion in 1996--of which the U.S. share was estimated to be approximately $1.25
billion.
ESTIMATED ROOM AIR CONDITIONER FACTORY SHIPMENTS
(MILLIONS OF UNITS)
<TABLE>
<CAPTION>
SOUTHEAST ASIA EUROPE, MIDDLE
UNITED (EXCLUDING EAST,
STATES(1) JAPAN(2) JAPAN)(2) AFRICA(2) OTHER(2)
<S> <C> <C> <C> <C> <C>
1988........................ 4.4 4.6 2.8 1.8 1.1
1989........................ 4.7 4.8 3.1 2.3 0.8
1990........................ 3.8 6.3 2.9 2.4 1.0
1991........................ 2.5 7.2 4.1 2.4 0.9
1992........................ 2.6 5.9 5.5 2.9 0.9
1993........................ 2.8 5.1 5.8 2.6 0.9
1994........................ 3.9 7.1 6.8 2.6 1.1
1995........................ 4.4 7.7 7.3 2.6 1.3
1996........................ 4.5 8.1 8.4 2.8 1.5
</TABLE>
- ------------------------------
(1) Source: Association of Home Appliance Manufacturers, Chicago, Illinois
(2) Source: Japan Refrigeration & Air Conditioning Industry Association as
reported by Japan Air Conditioning, Heating and Refrigeration News
PRODUCTS
The Company manufactures and sells a complete line of window and
through-the-wall room air conditioners domestically, principally for the
residential market. The Company's air conditioners are manufactured in
capacities ranging from 5,000 BTU (British Thermal Units) to 32,000 BTU. These
models comprise distinct product lines marketed by the Company primarily under
the brands FEDDERS, EMERSON QUIET KOOL and AIRTEMP. The Company also
manufactures products under various private labels. The Company has positioned
its brands across most price points, emphasizing quality and value for retailers
and consumers.
29
<PAGE> 34
The Company also manufactures and markets a line of household
dehumidifiers, ranging in capacity from 30 to 50 pints per 24 hours, and its
Rotorex subsidiary manufactures and sells a broad line of rotary compressors,
principally for use in the Company's room air conditioners but also for sale to
other manufacturers of air conditioners. Third party sales of compressors are
expected to represent less than 2% of total sales of Fedders Corporation in
fiscal 1997.
Fedders Xinle also manufactures split-type room air conditioners, in which
the condensing unit is installed separately outdoors, in capacities from 7,000
to 40,000 BTU, for both residential and commercial use in international markets.
MARKETS AND DISTRIBUTION
In North America, the Company markets room air conditioners and
dehumidifiers principally to national and regional retail chains, home
improvement centers and retail buying groups. These retail chains and retail
buying groups (comprising retailers which negotiate as groups the prices at
which they will purchase the Company's products) represent approximately 10,000
retail outlets marketing room air conditioners throughout the United States. The
Company also markets its air conditioners under private label to both retailers
and OEM's.
The Company's sales, marketing and service departments are headquartered in
Whitehouse, New Jersey. The 25 sales persons, in conjunction with marketing
employees, are proactive in working with customers to assist them in maximizing
their profitability and market share through responsive changes in product mix
and marketing. Utilizing eight regional distribution centers, the Company
provides next-day delivery to all major U.S. markets, which is critical during
heat waves that stimulate retail sales. Additionally, the Company has instituted
computerized systems, including electronic data interchange (EDI), to
accommodate major high-volume retailers that require suppliers to replenish
inventories frequently and on short notice.
To support and service its customers and the ultimate consumer, the Company
has established a network of more than 3,000 independent servicers throughout
the United States. These independent servicers are local tradespeople who are
screened and monitored by the Company.
The Company promotes its FEDDERS and EMERSON QUIET KOOL brands of air
conditioners through advertising, primarily in trade publications. Many of the
Company's customers advertise and promote the Company's products at their own
expense.
Fedders Corporation expects to increase its participation overseas through
strategic alliances, primarily under production and joint venture agreements,
based in part on its expertise, technological capability and well-established
global sourcing program. With the establishment of Fedders Xinle, Fedders
Corporation is strategically positioned to: sell FEDDERS brand products in China
and to low-import-duty markets outside of China; provide private label products
for OEM's with established sales and service organizations worldwide, including
China; and establish assembly operations within each major trading block that
has protective duties in order to import subassemblies or semi-finished goods
from the China facility.
PRODUCTION AND PROPERTIES
The Company currently manufactures its air conditioners in two owned
facilities in the United States--a 650,000 square foot facility in Effingham,
Illinois and a 232,000 square foot facility in Columbia, Tennessee with a
combined annual capacity of approximately 2,000,000 units. The Company has
sufficient production capacity for domestic needs for the foreseeable future.
Fedders Corporation also manufactures air conditioners, through Fedders
Xinle, in a facility owned by the joint venture in Ningbo, People's Republic of
China. Capacity of the facility, which currently is approximately 200,000 air
conditioners, is being increased to 500,000 units in fiscal 1998.
Rotorex currently manufactures all of its compressors in a 200,000 square
foot facility owned by Rotorex in Walkersville, Maryland. Rotorex recently made
several investments to enhance manufacturing efficiencies,
30
<PAGE> 35
including automation of the assembly process. The current capacity of
approximately 1,500,000 units is sufficient to meet compressor requirements of
the Company and Rotorex's other compressor customers.
The Company owns or leases the following principal facilities:
<TABLE>
<CAPTION>
APPROXIMATE SQUARE
LOCATION PRINCIPAL FUNCTION FEET OF FLOOR AREA
<S> <C> <C>
Effingham, Illinois........... Manufacturing of air conditioners 650,000
(Owned)
Manufacturing of air conditioners
Columbia, Tennessee(1)........ and 232,000
(Owned) dehumidifiers
Walkersville, Maryland(2)..... Manufacturing of rotary compressors 200,000
(Owned)
Whitehouse, NJ................ Sales and marketing headquarters 17,000
(Leased)
Princeton, NJ................. Research and design center 6,000
(Leased)
</TABLE>
- ------------------------------
(1) Owned by Columbia Specialities, Inc., a wholly owned subsidiary of the
Company.
(2) Owned by Rotorex.
Fedders Corporation leases facilities in Liberty Corner, New Jersey, as its
corporate and international headquarters and leases a research and design center
in Singapore. In Lawrence Township, New Jersey, Melcor owns one facility and
leases another one for the manufacture and assembly, respectively, of its
thermoelectric modules.
RAW MATERIALS
The principal raw materials used for production of room air conditioners
are steel, copper and aluminum, which the Company obtains from domestic and
foreign suppliers. The Company also purchases from other domestic and foreign
manufacturers certain components, including thermostats, compressors, motors and
electrical controls, used in its products. The Company endeavors to obtain the
lowest possible cost in its purchases of raw materials and components, which
must meet specified quality standards, through an active global sourcing
program.
QUALITY ASSURANCE
One of the key elements of the Company's and Fedders Corporation's strategy
is a commitment to a single worldwide standard of quality. Each of the Company's
manufacturing facilities has earned the highest level of certification--ISO
9001--for its quality management system under the International Standards
Organization. The ISO 9000 program is an internationally recognized benchmark of
quality management systems within a production facility. The same level of
quality will be required at all international manufacturing facilities as well,
including Fedders Xinle.
The Company's product is backed by a warranty policy that generally
provides five-year coverage for sealed systems including compressors, two-year
coverage on motors and one-year coverage on all other parts and labor related to
air conditioners sold in North America. Fedders Corporation's total warranty
claim expense decreased significantly from fiscal 1992 to fiscal 1996 while
sales nearly doubled during the period.
SEASONALITY OF BUSINESS
The Company's results of operations and financial condition are principally
dependent on the manufacture and sale of room air conditioners, the demand for
which is highly seasonal in North American markets. Seasonally low volume sales
are not sufficient to offset fixed costs, resulting in seasonal operating losses
at certain times of the year. In addition, the Company's working capital needs
are seasonal, with greatest utilization of its lines of credit occurring early
in the calendar year. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition of Fedders Corporation." Fedders Corporation
regularly reviews working capital components with a view to maintaining the
lowest level consistent with
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<PAGE> 36
requirements of anticipated levels of operations. The Company's sales are
predominantly made directly to retailers, who typically require just-in-time
delivery, primarily in April through July. Production is weighted towards the
retail selling season to minimize borrowing earlier in the fiscal year, although
room air conditioners may be produced throughout much of the rest of the year at
a lower rate of production. The Company's fiscal year end, August 31, coincides
with the end of the seasonal room air conditioner sales cycle. Accordingly,
backlog at that time of the year is insignificant. The backlog of net sales at
May 31, 1997 was $60 million, compared with $54 million one year earlier. The
realization of the backlog for the remainder of the fiscal year will be heavily
dependent on the weather.
COMPETITION
Domestically, the Company's competitors include a number of domestic and
foreign manufacturers of air conditioners and appliances, including Frigidaire
Company, Whirlpool Corporation, Matsushita Electric Industrial Co., Ltd. and
Sharp Corporation. Many of the Company's competitors are substantially larger
and have greater resources than the Company. The Company competes principally on
the basis of price, quality and its ability to deliver product and service to
its customers on a just-in-time basis. The Company believes that it competes
effectively with its multiple brand strategy of providing competitively priced,
high quality products on a just-in-time basis.
Internationally, the competitors of Fedders Corporation vary depending on
the market. Some markets, such as China, are served by many local manufacturers.
Other markets are dominated by foreign manufacturers of air conditioners and
electronics products including Matsushita Electric Industrial Co., Ltd., Toshiba
Corporation, Hitachi, Ltd., Mitsubishi Electric Corporation and Sanyo Electric
Trading Co., Ltd., all of which also manufacture compressors. Fedders
Corporation believes that it can compete effectively with its strategy of
manufacturing low cost air conditioners locally, controlling its supply of
compressors and utilizing its global sourcing network.
GOVERNMENT REGULATION
The Company and Fedders Corporation are subject to various federal, state
and local laws affecting its business. Room air conditioners are subject to
federal regulations providing for EER requirements. The Company and Fedders
Corporation believe they are currently in material compliance with the EER
requirements. Achieving required EER's results from a combination of an
efficient compressor and the design of the air conditioning system using the
compressor. Current proposed rule-making by the Energy Department under the
National Appliance Energy Conservation Act would have the effect of increasing
minimum required EER's. In the event the new regulations are adopted, the
efficiency of certain air conditioner models would have to be increased. It is
not certain at present if the proposed regulations will be adopted and, if they
are, when the requirements would become effective. Regardless of the adoption of
these proposed regulations, the Company and Fedders Corporation are continually
seeking to improve the efficiency of their air conditioners and compressors in
order to remain competitive in the markets they serve. The Company and Fedders
Corporation do not believe that the adoption of currently contemplated EER
regulations will adversely affect the results of operations of Fedders
Corporation.
EMPLOYEES
The Company has approximately 2,300 employees. The total number of
employees of Fedders Corporation, including the Company, is approximately 3,000,
including approximately 500 at Fedders Xinle. The current contracts with two
unions representing employees of the Effingham, Illinois plant are scheduled to
expire in October 1998. The Company and the union representing employees of
Rotorex were unable to reach agreement prior to the expiration of their
collective bargaining agreement in August 1997, and the employees covered by the
collective bargaining agreement are on strike. Rotorex continues to operate
using management personnel, employees temporarily transferred from other
facilities of the Company and replacement workers. The Company believes that
this strike will not have a material adverse effect on its financial condition
or results of operations. The Company considers its relations with employees to
be generally satisfactory.
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<PAGE> 37
RESEARCH AND DEVELOPMENT
Research and development of room air conditioner technology and design is
conducted at the Effingham facility, and compressor research and development is
based at Rotorex. During fiscal 1996, the Company established a research and
design center in Princeton, New Jersey for the development of innovative, non-
vapor compression products that will take advantage of the Company's domestic
distribution strengths. In fiscal 1996, Fedders Corporation spent approximately
$3.9 million on research and development, including activities at its Singapore
facility which focuses on products for the international market.
INTELLECTUAL PROPERTY
Fedders Corporation attempts to register its material trademarks and trade
names both domestically and in key foreign markets. While the Company believes
that its trademarks such as FEDDERS, EMERSON QUIET KOOL, AIRTEMP and ROTOREX are
well known and enhance the marketing of its products, the Company does not
consider the successful conduct of its business to be dependent upon such
trademarks. Fedders Corporation aggressively protects its trademarks and other
intellectual property rights worldwide.
ENVIRONMENTAL MATTERS
The Company's and Fedders Corporation's operations are subject to various
United States and foreign environmental statutes and regulations, including laws
and regulations dealing with storage, treatment, discharge and disposal of
hazardous materials, substances and wastes and that affect the production of
chemical refrigerants used in the operation of some of the Company's products.
The refrigerant used in room air conditioners is an HCFC that is to be phased
out of use in new products on January 1, 2010 in the United States. Chemical
producers are currently developing environmentally acceptable alternative
refrigerants for use in room air conditioners that are expected to be available
in advance of any now-proposed phase-out deadlines for the current refrigerant.
Modifications to the design of the Company's products may be necessary in order
to utilize alternative refrigerants. The cost of the substitution of alternative
refrigerants is not currently expected to have a material adverse impact on
Fedders Corporation.
The Company and Fedders Corporation believe they are currently in material
compliance with applicable environmental laws and regulations. Fedders
Corporation did not make capital expenditures on environmental matters during
the year ended August 31, 1996 that are material to its total capital
expenditures, earnings and competitive position and does not anticipate making
material capital expenditures on such items in the fiscal year ending August 31,
1997.
The Company has recently been identified as a potentially responsible party
("PRP") by the federal Environmental Protection Agency under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), at the PCB Treatment Inc. Site (the "Site") located in Kansas City,
Kansas and in Kansas City, Missouri, based on the delivery there of certain
materials from its Effingham, Illinois facility. CERCLA imposes strict and, in
certain circumstances, joint and several liability on PRP's for response costs
and natural resource damages at waste sites. In view of the substantial number
of other PRP's at the Site and the relatively small volume of material sent by
the Company to the Site, the Company does not believe it will incur any material
liability for this matter.
The Company has identified a groundwater problem at its Walkersville,
Maryland facility and has been advised of a potential air pollution problem at
its Effingham, Illinois facility. Based upon available information, the Company
does not expect the cost of investigation or any required remediation relating
to these matters to have a material adverse effect on its results of operations.
LITIGATION
Fedders Corporation is a party to various litigation matters incidental to
the conduct of its business. Fedders Corporation does not believe that the
outcome of any of the matters in which it is currently involved will have a
material adverse effect on its financial condition or results of its operations.
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<PAGE> 38
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following sets forth certain information with respect to the directors
and executive officers of the Company as of the date of this Offering
Memorandum:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Salvatore Giordano......... 86 Chairman of the Board
Sal Giordano, Jr........... 59 President and Chief Executive Officer and Director
Joseph Giordano............ 64 Director
S. A. Muscarnera........... 57 Director
C. A. Keen................. 72 Director
Howard S. Modlin........... 66 Director
William J. Brennan......... 69 Director
Clarence Russel Moll....... 83 Director
Anthony E. Puleo........... 62 Director
Robert L. Laurent, Jr...... 42 Executive Vice President, Finance and Administration
and Chief Financial Officer
Gerald C. Senion........... 50 Group Vice President and Chief Operating Officer
Kent E. Hansen............. 50 Senior Vice President and Secretary
Thomas A. Kroll............ 42 Controller
Robert N. Edwards.......... 51 Vice President and General Counsel
</TABLE>
Salvatore Giordano has been Chairman of the Board of Directors of the
Company since 1976 and Chairman of the Board of Directors of Fedders Corporation
since 1945. Mr. Giordano is the father of Sal Giordano, Jr. and Joseph Giordano
and the uncle of S. A. Muscarnera.
Sal Giordano, Jr. has been President and Chief Executive Officer of the
Company since 1997 and was previously President and Chief Operating Officer of
the Company, a position he held for more than five years. Mr. Giordano has also
been Vice Chairman, President and Chief Executive Officer of Fedders Corporation
since 1988. He has been a Director of the Company since 1976 and a Director of
Fedders Corporation since 1965.
Joseph Giordano has served as a Director of the Company since 1976 and was
Senior Vice President of the Company and Fedders Corporation for more than five
years prior to his retirement from that position in August 1992.
S. A. Muscarnera has been a Director of the Company and of Fedders
Corporation since 1983. Mr. Muscarnera was Senior Vice President and Secretary
of the Company and Fedders Corporation from 1986 to August 1996. Mr. Muscarnera
joined Fedders Corporation over 39 years ago and has served in capacities
including legal and human resources.
C. A. Keen has been a Director of the Company and of Fedders Corporation
since August 1996. Mr. Keen was a Vice President of the Company for over 20
years, with responsibilities including treasury, marketing and international
sales and sourcing.
Howard S. Modlin has served as a Director of the Company and of Fedders
Corporation since 1977. Mr. Modlin has been a partner or officer at Weisman,
Celler Spett & Modlin P.C., and predecessors, a law firm that has rendered legal
services to the Company and/or to Fedders Corporation for more than 25 years. He
is also a Director of General DataComm Industries, Inc. and Trans-Lux
Corporation.
William J. Brennan has served as a Director of the Company and of Fedders
Corporation from 1980 to 1987 and 1989 to the present. He is also a Director of
CSM Environmental Systems, Inc. He has been a financial consultant since 1988.
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<PAGE> 39
Clarence Russel Moll has served as a Director of the Company since 1976 and
of Fedders Corporation since 1967. Dr. Moll has also been President Emeritus of
Widener University since 1991 and is a Director of Ironworkers Savings Bank.
Anthony E. Puleo has served as a Director of the Company and of Fedders
Corporation since 1994. Mr. Puleo has also been President of Puleo Tree Co., an
importer of Christmas items and garden furniture, since 1992. Prior thereto, he
was President of Boulderwood Corporation, a retailer of summer and Christmas
products.
Robert L. Laurent, Jr. has been Executive Vice President, Finance and
Administration and Chief Financial Officer of the Company and of Fedders
Corporation since 1993. Mr. Laurent joined Fedders Corporation in 1980 and has
served as internal auditor, plant controller, corporate controller and Vice
President, Finance. He has been Chief Financial Officer of the Company and
Fedders Corporation since 1989.
Gerald C. Senion became Group Vice President and Chief Operating Officer of
the Company in July 1997. Prior to joining the Company, Mr. Senion was employed
by Frigidaire Corporation for approximately 20 years, most recently as Group
Vice President of the Frigidaire Home Products Company, Home Comfort Division
and the Electrolux Global Home Comfort Products Division.
Kent E. Hansen has been Senior Vice President and Secretary of the Company
and of Fedders Corporation since August 1996. Mr. Hansen also served as Vice
President and General Counsel of the Company and of Fedders Corporation from
October 1989 to September 1992. From September 1992 to August 1996, he was Vice
President, Finance and General Counsel and Chief Financial Officer of NYCOR.
Thomas A. Kroll was Controller of the Company from 1992 to 1995 and has
been Controller since 1997. He has been Controller of Fedders Corporation since
1995. Prior to 1992, he was Controller of Emerson Quiet Kool.
Robert N. Edwards joined the Company and Fedders Corporation in 1992 as
Senior Counsel. He was promoted to General Counsel of the Company and of Fedders
Corporation in 1994 and Vice President in 1995. Prior to joining the Company,
Mr. Edwards was Vice President, General Counsel and Secretary of Information
Science Incorporated, a manufacturer of computer software.
35
<PAGE> 40
SECURITY OWNERSHIP OF DIRECTORS AND
EXECUTIVE OFFICERS OF FEDDERS CORPORATION
The following table lists beneficial security ownership of each director
and executive officer of Fedders Corporation named in the Summary Compensation
Table under "Executive Compensation" and of all directors and executive officers
of Fedders Corporation as a group as of August 31, 1997. The Convertible
Preferred Stock is convertible into Class A Stock on a share for share basis.
Fedders Corporation's Class A Stock and Convertible Preferred Stock do not have
voting rights. The Class B Stock has increased voting rights under certain
circumstances and must separately approve certain significant corporate actions.
See "Risk Factors -- Control by Principal Stockholders."
<TABLE>
<CAPTION>
COMMON,
CLASS A CONVERTIBLE
AND CLASS B % OF SHARES PREFERRED % OF SHARES COMMON AND % OF SHARES
NAME STOCK OUTSTANDING STOCK(1) OUTSTANDING CLASS B STOCK OUTSTANDING
<S> <C> <C> <C> <C> <C> <C>
Salvatore Giordano.... 3,441,590(2)(3) 9.2% 452,388(4) 6.4% 2,263,666(3) 10.7%
Sal Giordano, Jr...... 2,958,530(2)(3)(5) 7.9% 526,120(4) 7.7% 2,263,666(3) 10.7%
Joseph Giordano....... 3,156,165(2)(3)(5) 8.5% 251,825(4) 3.7% 2,276,476(3) 10.7%
Howard S. Modlin...... 481,501 1.3% 84,024 1.1%
Clarence Russel
Moll................ 124,388 Less than 1% 30,410 Less than 1%
William J. Brennan.... 9,375 Less than 1% 129,402 1.9%
Anthony E. Puleo...... 2,000 Less than 1% -- --
S.A. Muscarnera....... 103,125 Less than 1% 56,500 Less than 1%
C. A. Keen............ 11,100 Less than 1% 28,000 Less than 1%
Robert L. Laurent,
Jr.................. 566,215 1.5% 1,200 Less than 1%
Gordon E. Newman...... 46,845 Less than 1% -- --
All directors and
executive
officers............ 5,659,940 15.2% 1,294,376 19.0%
</TABLE>
- ------------------------------
(1) Fedders Corporation has called all of its outstanding Convertible Preferred
Stock for redemption on September 18, 1997. Each share of Convertible
Preferred Stock outstanding on that date will be redeemed for 1.022 shares
of Class A Stock of Fedders Corporation.
(2) Includes 2,454,541 shares as to which Messrs. Salvatore Giordano, Sal
Giordano, Jr. and Joseph Giordano, share voting and investment power.
(3) The shares include 99.8% of the outstanding Class B Stock of Fedders
Corporation. Because of special voting rights afforded under certain
circumstances to the holders of Class B Stock under the Certificate of
Incorporation of Fedders Corporation, Salvatore Giordano, Sal Giordano, Jr.
and Joseph Giordano, as the owners of 99.8% of the outstanding Class B
Stock, would have the power to elect all of the directors of Fedders
Corporation in the event of an election contest.
(4) Includes 148,480 shares as to which Messrs. Salvatore Giordano, Sal
Giordano, Jr. and Joseph Giordano share voting and investment power.
(5) Includes 345,625 shares as to which Messrs. Sal Giordano, Jr. and Joseph
Giordano share voting and investment power.
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<PAGE> 41
EXECUTIVE COMPENSATION
The following information is furnished as to all compensation paid by
Fedders Corporation and its subsidiaries during fiscal 1996, 1995 and 1994 to
each of the five highest paid executive officers of Fedders Corporation as of
August 31, 1996 whose aggregate direct compensation for fiscal 1996 exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION ALL OTHER
ANNUAL COMPENSATION AWARDS COMPENSATION(1)
-------------------------- ------------ ---------------
NAME AND FISCAL SALARY BONUS OPTIONS
PRINCIPAL POSITION YEAR ($) ($) (#) ($)
<S> <C> <C> <C> <C> <C>
Salvatore Giordano................................ 1996 268,258 492,660 120,000 22,827
Chairman of the Board of 1995 245,354 520,365 77,314 3,097,691(2)
Directors of Fedders 1994 252,150 282,045 150,000 15,753
Corporation and the Company
Sal Giordano, Jr.................................. 1996 352,007 492,660 120,000 35,634
Chief Executive Officer, President 1995 341,530 520,365 139,066 32,424
and Chief Operating Officer 1994 335,375 282,045 180,000 17,548
of Fedders Corporation and
the Company
Robert L. Laurent, Jr. ........................... 1996 250,000 246,330 30,000 16,003
Executive Vice President 1995 226,489 260,183 50,590 15,281
Finance and Administration and 1994 209,725 141,023 95,000 8,425
Chief Financial Officer of Fedders
Corporation and the Company
S. A. Muscarnera.................................. 1996 186,000 153,956 35,000 13,590
Senior Vice President and 1995 191,144 260,183 18,750 16,726
Secretary of Fedders 1994 181,875 141,023 15,000 7,641
Corporation and the Company
Gordon E. Newman.................................. 1996 140,000 61,583 10,000 7,570
Senior Vice President, 1995 122,498 48,072 22,782 5,123
Supply Chain of the Company 1994 100,016 21,456 -- 3,205
</TABLE>
- ------------------------------
(1) Includes Fedders Corporation's contribution to savings and investment
retirement plans up to the 3% offered to all employees of Fedders
Corporation in 1996 and the dollar value of the benefit of premiums paid for
split-dollar life insurance policies projected on an actuarial basis which
cost is recovered by Fedders Corporation from the proceeds of such policies
(Mr. Sal Giordano, Jr. $10,294; Mr. Robert L. Laurent, Jr. $1,114; Mr. S. A.
Muscarnera $3,391 and Mr. Gordon Newman $1,523).
(2) Includes a special award granted to Mr. Giordano in recognition of over
fifty years of extraordinary and exemplary service to Fedders Corporation
and the Company as its President or Chairman, overseeing the significant
growth of Fedders Corporation.
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<PAGE> 42
DESCRIPTION OF CERTAIN INDEBTEDNESS
The Company entered into its revolving credit facility (the "Credit
Agreement") on December 23, 1992. The Company and all of its direct and indirect
subsidiaries, each of which will be a Restricted Subsidiary as of the date of
issuance of the Notes, are parties to the Credit Agreement as borrowers or
guarantors of the borrowers' obligations. The Credit Agreement provides for
loans to the Company of up to $50 million based upon certain customary
percentages of accounts receivable and inventory of the Company. The obligations
of the Company under the Credit Agreement are guaranteed by Fedders Corporation.
Substantially all of the assets of Fedders Corporation, the Company and its
subsidiaries are pledged as collateral under the Credit Agreement. While the
Credit Agreement is intended principally to provide financing for the Company's
working capital requirements, the Company may use up to $15 million of the
amount available thereunder for general corporate purposes.
At the option of the Company, borrowings under the Credit Agreement bear
interest at a rate per annum (i) based upon the London interbank offered rate
("LIBOR") plus 2 3/4% (provided that not more than 80% of loans outstanding at
any time may be based upon LIBOR) or (ii) equal to the prime rate of CoreStates
Bank, N.A. In addition, the Company must pay (i) an unused line fee of 0.5% per
month on the amount by which $40 million exceeds the average outstanding daily
principal balance of loans outstanding, (ii) an early termination fee equal to
1% of the maximum availability if the Credit Agreement is terminated on or
before February 1, 1998 and 0.5% of the maximum availability if the Credit
Agreement is terminated after such date and prior to February 1, 2000, the
expiration date of the Credit Agreement and (iii) a service fee of $60,000
annually.
Borrowings under the Credit Agreement are secured by collateral assignments
or other security interests in (i) all material contracts to which the Company
and the Restricted Subsidiaries are parties, (ii) substantially all property,
plant, equipment and other tangible assets of the Company and the Restricted
Subsidiaries, (iii) all receivables of the Company and the Restricted
Subsidiaries, (iv) all intellectual property and other intangible assets of the
Company and the Restricted Subsidiaries and (v) the capital stock of the
Restricted Subsidiaries.
The Credit Agreement contains negative covenants that limit the ability of
the Company and the Restricted Subsidiaries to (i) create liens and other
encumbrances, (ii) incur indebtedness, (iii) enter into transactions with
affiliates, (iv) make loans, investments or guarantees and (v) pay dividends. In
addition, the Company must maintain (i) consolidated net worth of not less than
$10 million and (ii) consolidated working capital of not less than $6 million.
The Credit Agreement contains customary events of default, including, but
not limited to (i) non-payment of principal or interest, (ii) breach of any
term, covenant, condition or provision of the Credit Agreement, (iii) material
breach of representations and warranties, (iv) bankruptcy, insolvency or
assignment for the benefit of creditors, (v) material adverse change in the
business, assets or financial condition of the Company and (vi) a change in
control of the Company.
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<PAGE> 43
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Exchange Offer is being made by the Company and Fedders Corporation to
satisfy their obligations pursuant to the Registration Rights Agreement, which
requires the Company and Fedders Corporation to use their best efforts to effect
the Exchange Offer. See "--Registration Rights; Liquidated Damages."
The Company and Fedders Corporation are making the Exchange Offer in
reliance upon the position of the staff of the Commission set forth in certain
no-action letters addressed to other parties in other transactions. However, the
Company and Fedders Corporation have not sought their own 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.
Based on these interpretations by the staff of the Commission, the Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than (i) any such holder that is an
"affiliate" of the Company or Fedders Corporation within the meaning of Rule 405
under the Securities Act, (ii) an Initial Purchaser who acquired the Original
Notes directly from the Company solely in order to resell pursuant to Rule 144A
under the Securities Act or any other available exemption under the Securities
Act, or (iii) a broker-dealer who acquired the Original Notes as a result of
market making or other trading activities) without compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such Notes are acquired in the ordinary course of such holder's
business and such holder is not participating and has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Notes. Any holder who tenders Original
Notes in the Exchange Offer for the purpose of participating in a distribution
of the Notes could not rely on such interpretations by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction, unless such sale is made pursuant to an exemption from such
requirements.
Holders of Original Notes not tendered will not have only limited
continuing registration rights and the Original Notes not exchanged will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the markets for the Original Notes could be adversely affected.
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY OR FEDDERS CORPORATION NOR
THE COMPANY OR FEDDERS CORPORATION MAKES ANY RECOMMENDATION TO HOLDERS OF
ORIGINAL NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY
PORTION OF THEIR ORIGINAL NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO
ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF ORIGINAL
NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE
OFFER AND, IF SO, THE AGGREGATE AMOUNT OF ORIGINAL NOTES TO TENDER AFTER READING
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING THEIR ADVISERS, IF
ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the issuance of the Original Notes, the Company entered
into the Registration Rights Agreement with the Initial Purchasers of the
Original Notes.
Holders of Notes (other than as set forth below) are not entitled to any
registration rights with respect to the Notes. Pursuant to the Registration
Rights Agreement, holders of Original Notes are entitled to certain registration
rights. Under the Registration Rights Agreement, the Company and Fedders
Corporation have agreed, for the benefit of the holders of the Original Notes,
that they will, at their cost, (i) within 45 days after the date of the original
issue of the Original Notes, file the Registration Statement with the Commission
and (ii) within 150 days after the date of original issuance of the Original
Notes, use their best efforts to cause
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<PAGE> 44
such Registration Statement to be declared effective under the Securities Act.
The Registration Statement of which this Prospectus is a part constitutes the
Registration Statement. If (i) the Company and Fedders Corporation are not
permitted to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy or (ii) any holder of Transfer
Restricted Securities (as defined) notifies the Company and Fedders Corporation
within the specified time period that (A) due to a change in law or policy it is
not entitled to participate in the Exchange Offer, (B) due to a change in law or
policy it may not resell the Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and this Prospectus is not appropriate or
available for such resales by such holder or (C) it is a broker-dealer and
acquired the Notes directly from the Company or an affiliate of the Company, the
Company will file with the Commission the Shelf Registration Statement to cover
resales of the Transfer Restricted Securities by the holders thereof who satisfy
certain conditions relating to the provision of information in connection with
the Shelf Registration Statement. The Company and Fedders Corporation will use
their best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing, "Transfer Restricted Securities" means each Original Note, until (i)
the date of which such Transfer Restricted Security has been exchanged in the
Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange
Offer of a Transfer Restricted Security for a Note, the date on which such Note
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 Registration
Statement, (iii) the date on which such 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
pursuant to Rule 144 under the Act.
The Registration Rights Agreement also provides that, (i) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company and Fedders Corporation will commence the Exchange Offer and use
their best efforts to issue on or prior to 30 business days after the date on
which the Registration Statement was declared effective by the Commission, Notes
in exchange for all Transfer Restricted Securities tendered prior thereto in the
Exchange Offer and (ii) if obligated to file the Shelf Registration Statement,
the Company and Fedders Corporation will file the Shelf Registration Statement
with the Commission on or prior to 45 days after such filing obligation arises
and use their best efforts to cause the Shelf Registration Statement to be
declared effective by the Commission on or prior to 120 days after such
obligation arises. The Company and Fedders Corporation shall use their best
efforts to keep such Shelf Registration Statement continuously effective,
supplemented and amended until the second anniversary of the date on which the
Shelf Registration Statement becomes effective or such shorter period that will
terminate when all the Notes covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement. If (a) the Company and
Fedders Corporation fail to file any of the registration statements required by
the Registration Rights Agreement on or before the date specified for such
filing, (b) any of such registration statements are not declared effective by
the Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (c) the Company fails to consummate the Exchange
Offer within 30 business days of the Effectiveness Target Date with respect to
the Registration Statement, or (d) the Shelf Registration Statement or the
Registration Statement is declared effective but thereafter, subject to certain
exceptions, ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then the Company will pay Liquidated Damages to each
holder of Transfer Restricted Securities, with respect to the first 90-day
period immediately following the occurrence of such Registration Default in an
amount equal to $.05 per week for each $1,000 principal amount of Notes held by
such holder. The amount of the Liquidated Damages will increase by an additional
$.05 per week with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of $.40 per week for each $1,000 principal amount of Notes, as
applicable. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
Holders of Transfer Restricted Securities will be required to deliver
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within
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<PAGE> 45
the time periods set forth in the Registration Rights Agreement in order to have
their Transfer Restricted Securities included in the Shelf Registration
Statement and benefit from the provisions regarding Liquidated Damages set forth
above.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING ORIGINAL NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Original Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means the earlier of
(i) 5:00 p.m., New York City time, on , 1997 or (ii) the date
when all Original Notes have been tendered; provided, however, that if the
Company and Fedders Corporation, in their sole discretion, have extended the
period of time for which the Exchange Offer is open, the term "Expiration Date"
means the latest time and date to which the Exchange Offer is extended; provided
further that in no event will the Exchange Offer be extended beyond
, 1997. The Company and Fedders Corporation may extend the
Exchange Offer at any time and from time to time by giving oral or written
notice to the Exchange Agent and by timely public announcement. Without limiting
the manner in which the Company and Fedders Corporation may choose to make any
public announcement and subject to applicable law, the Company and Fedders
Corporation shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to an
appropriate news agency. During any extension of the Exchange Offer, all
Original Notes previously tendered pursuant to the Exchange Offer will remain
subject to the Exchange Offer. The Company and Fedders Corporation intend to
conduct the Exchange Offer in accordance with the applicable requirements of the
Exchange Act and the rules and regulations thereunder.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of the Original Notes is outstanding. This Prospectus, together with the Letter
of Transmittal, is first being sent on or about , 1997, to all
holders of Original Notes known to the Company. The Company's obligation to
accept Original Notes for exchange pursuant to the Exchange Offer is subject to
certain conditions as set forth under "--Certain Conditions to the Exchange
Offer" below.
The terms of the Notes and the Original Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Original Notes and certain rights to receive Liquidated Damages.
See "--Registration Rights; Liquidated Damages." The Original Notes were, and
the Notes will be, issued under the Indenture and both the Original Notes and
the Notes are entitled to the benefits of the Indenture.
Original Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof. Any Original Notes
not accepted for exchange for any reason will be returned without expense to the
tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Original Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified below under "--Certain Conditions to the Exchange
Offer." The Company and Fedders Corporation will give oral or written notice of
any amendment, nonacceptance or termination to the holders of the Original Notes
as promptly as practicable. Any amendment to the Exchange Offer will not limit
the right of holders to withdraw tendered Original Notes prior to the Expiration
Date. See "--Withdrawal Rights."
PROCEDURES FOR TENDERING ORIGINAL NOTES
The tender to the Company and Fedders Corporation of Original Notes by a
holder thereof as set forth below and the acceptance thereof by the Company and
Fedders Corporation will constitute a binding agreement between the tendering
holder and the Company and Fedders Corporation upon the terms and subject to the
conditions set forth in this Prospectus and in the accompanying Letter of
Transmittal. Except as
41
<PAGE> 46
set forth below, a holder who wishes to tender Original Notes for exchange
pursuant to the Exchange Offer must transmit a properly completed and duly
executed Letter of Transmittal, including all other documents required by such
Letter of Transmittal, to State Street Bank and Trust Company (the "Exchange
Agent") at one of the addresses set forth below under "Exchange Agent" on or
prior to the Expiration Date. In addition, either (i) certificates for such
Original Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Original Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date or (iii) the holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF ORIGINAL NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT TO THE COMPANY OR FEDDERS
CORPORATION.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Original Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the
Original Notes who has not completed the box entitled "Special Issuance and
Delivery Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution (as defined
below). In the event that signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by a firm which is a member of an approved Signature Guarantee Medallion
Program (collectively, "Eligible Institutions"). If Original Notes are
registered in the name of a person other than the signer of the Letter of
Transmittal, the Original Notes surrendered for exchange must be endorsed by, or
be accompanied by a written instrument or instruments of transfer or exchange,
in satisfactory form as determined by the Company and Fedders Corporation in
their sole discretion, duly executed by the registered holder with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Original Notes tendered for exchange will be
determined by the Company and Fedders Corporation in their sole discretion,
which determination shall be final and binding. The Company and Fedders
Corporation reserve the absolute right to reject any and all tenders of any
particular Original Notes not properly tendered or to not accept any particular
Original Notes which acceptance might, in the judgment of the Company, Fedders
Corporation or their counsel, be unlawful. The Company and Fedders Corporation
also reserve the absolute right to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Original Notes either
before or after the Expiration Date (including the right to waive the
ineligibility of any holder who seeks to tender Original Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer as
to any particular Original Notes either before or after the Expiration Date
(including the Letter of Transmittal and the instructions thereto) by the
Company and Fedders Corporation shall be final and binding on all parties.
Unless waived, all defects or irregularities in connection with tenders of
Original Notes for exchange must be cured within such reasonable period of time
as the Company and Fedders Corporation shall determine. Neither the Company,
Fedders Corporation, the Exchange Agent nor any other person shall be under any
duty to give notification of any defect or irregularity with respect to any
tender of Original Notes for exchange, nor shall any of them incur any liability
for failure to give such notification. The Exchange Agent intends to use
reasonable efforts to give notification of such defects and irregularities.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Original Notes, such Original 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 that appear on
the Original Notes.
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<PAGE> 47
If the Letter of Transmittal or any Original Notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of a corporation or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company and Fedders Corporation, proper evidence satisfactory to the Company
and Fedders Corporation of their authority to so act must be submitted.
By tendering, each holder will represent to the Company and Fedders
Corporation that, among other things, the Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Notes, whether or not such person is the holder and such
person has no arrangement with any person to participate in the distribution of
the Notes. If any holder or any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company or Fedders Corporation, is
engaged in or intends to engage in or has an arrangement or understanding with
any person to participate in a distribution of such Notes to be acquired
pursuant to the Exchange Offer, or acquired the Original Notes as a result of
market making or other trading activities, such holder or any such other person
(i) could not rely on the applicable interpretations of the staff of the
Commission and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives 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 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.
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Original Notes
properly tendered and will issue the Notes promptly after acceptance of the
Original Notes. See "--Certain Conditions to the Exchange Offer." For purposes
of the Exchange Offer, the Company and Fedders Corporation shall be deemed to
have accepted properly tendered Original Notes for exchange when, as and if the
Company and Fedders Corporation have given oral or written notice thereof to the
Exchange Agent, with written confirmation of any oral notice to be given
promptly thereafter.
For each Original Note accepted for exchange, the holder of such Original
Note will receive a Note having a principal amount equal to that of the
surrendered Original Note. Accordingly, registered holders of Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid on the Original Notes, or, if no
interest has been paid on the Original Notes, from August 18, 1997. Original
Notes accepted for exchange will cease to accrue interest from and after the
date of consummation of the Exchange Offer. Holders of Original Notes whose
Original Notes are accepted for exchange will not receive any payment in respect
of accrued interest on such Original Notes otherwise payable on any interest
payment date, the record date for which occurs on or after consummation of the
Exchange Offer.
In all cases, issuance of Notes for Original Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of (i) certificates for such Original Notes or a timely
Book-Entry Confirmation of such Original Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility, (ii) a properly completed and duly executed
Letter of Transmittal and (iii) all other required documents. If any tendered
Original Notes are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer, or if Original Notes are submitted for a
greater amount than the holder desires to exchange, such unaccepted or
nonexchanged Original Notes will be returned without expense to the tendering
holder thereof (or, in the case of Original Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry procedures described below, such nonexchanged
Original Notes will be credited to an account maintained with such Book-Entry
Transfer Facility) designated by the tendering holder as promptly as practicable
after the expiration or termination of the Exchange Offer.
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<PAGE> 48
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Original Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Original Notes by causing the
Book-Entry Transfer Facility to transfer such Original Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Original Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "--Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Original Notes desires to tender such
Original Notes and the Original Notes are not immediately available, or time
will not permit such holder's Original Notes or other required documents to
reach the Exchange Agent before the Expiration Date, or the procedure for
book-entry transfer cannot be completed on a timely basis, the tender may be
effected if (i) the tender is made through an Eligible Institution, (ii) prior
to the Expiration Date, the Exchange Agent has received from such Eligible
Institution a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form
of the corresponding exhibit to the Registration Statement of which this
Prospectus constitutes a part (by telegram, telex, facsimile transmission, mail
or hand delivery), setting forth the name and address of the holder of Original
Notes and the amount of Original Notes tendered, stating that the tender is
being made thereby and guaranteeing that within three New York Stock Exchange
("NYSE") trading days after the date of execution of the Notice of Guaranteed
Delivery, the certificates for all physically tendered Original Notes, in proper
form for transfer, or a Book-Entry Confirmation, as the case may be, and any
other documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent and (iii) the certificates for all
physically tendered Original Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal, are received by the Exchange Agent within three NYSE trading
days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Original Notes may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"--Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Original Notes to be withdrawn, identify the Original
Notes to be withdrawn (including the amount of such Original Notes), and (where
certificates for Original Notes have been transmitted) specify the name in which
such Original Notes are registered, if different from that of the withdrawing
holder. If certificates for Original Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Original Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Original Notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company and Fedders Corporation, whose determination shall be final and
binding on all parties. Any Original Notes which have been tendered for exchange
but which are not exchanged for any reason will be returned to the holder
thereof without cost to such holder (or, in the case of Original Notes tendered
by book-entry transfer
44
<PAGE> 49
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described above, such Original Notes will
be credited to an account with such Book-Entry Transfer Facility specified by
the holder) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Original Notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering Original Notes" above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company and
Fedders Corporation shall not be required to accept for exchange, or to issue
Notes in exchange for, any Original Notes and may terminate or amend the
Exchange Offer, if at any time before the acceptance of such Original Notes for
exchange or the exchange of the Notes for such Original Notes, any of the
following events shall occur:
(a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission, (i) seeking to restrain
or prohibit the making or consummation of the Exchange Offer or any other
transaction contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (ii) resulting in a material delay in the
ability of the Company and Fedders Corporation to accept for exchange or
exchange some or all of the Original Notes pursuant to the Exchange Offer;
or any statute, rule, regulation, order or injunction shall be sought,
proposed, introduced, enacted, promulgated or deemed applicable to the
Exchange Offer or any of the transactions contemplated by the Exchange
Offer by any government or governmental authority, domestic or foreign, or
any action shall have been taken, proposed or threatened, by any
government, governmental authority, agency or court, domestic or foreign,
that in the sole judgment of the Company and Fedders Corporation might
directly or indirectly result in any of the consequences referred to in
clauses (i) or (ii) above or, in the sole judgment of the Company and
Fedders Corporation, might result in the holders of Notes having
obligations with respect to resales and transfers of Notes which are
greater than those described in the interpretation of the Commission
referred to on the cover page of this Prospectus, or would otherwise make
it inadvisable to proceed with the Exchange Offer; or
(b) there shall have occurred (i) 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, (ii) any limitation
by any governmental agency or authority which may adversely affect the
ability of the Company and Fedders Corporation to complete the transactions
contemplated by the Exchange Offer, (iii) 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 (iv) 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; or
(c) any change (or development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole or of
Fedders Corporation and its subsidiaries taken as a whole that, in the sole
judgment of the Company or Fedders Corporation, is or may be adverse to the
Company or Fedders Corporation, or the Company or Fedders Corporation shall
have become aware of facts that, in the sole judgment of the Company or
Fedders Corporation, have or may have an adverse effect on the value of the
Original Notes or the Notes.
Holders of Original Notes will have registration rights and the right to
Liquidated Damages as described under "--Registration Rights; Liquidated
Damages" if the Company fails to consummate the Exchange Offer.
To the Company's and Fedders Corporation's knowledge as of the date of this
Prospectus, none of the above events has occurred.
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<PAGE> 50
The foregoing conditions are for the sole benefit of the Company and
Fedders Corporation and may be asserted by the Company and Fedders Corporation
regardless of the circumstances giving rise to any such condition or may be
waived by the Company and Fedders Corporation in whole or in part at any time
and from time to time in their sole discretion. The failure by the Company and
Fedders Corporation at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
In addition, the Company and Fedders Corporation will not accept for
exchange any Original Notes tendered, and no Notes will be issued in exchange
for any such Original 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.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal and Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the addresses
set forth below. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notices of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
Deliver to: State Street Bank and Trust Company, Exchange Agent:
<TABLE>
<S> <C> <C>
By Hand Delivery: By Overnight Courier: By Mail:
State Street Bank and State Street Bank and State Street Bank and
Trust Company Trust Company Trust Company
Corporate Trust Department Corporate Trust Department Corporate Trust Department
Two International Place Two International Place, P.O. Box 778
Fourth Floor, 4th Floor Boston, Massachusetts 02110
Corporate Trust Window Boston, Massachusetts 02110
Boston, Massachusetts 02110
</TABLE>
DELIVERY OF A LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
The Company will, however, pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for 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 document to
the beneficial owners of Original Notes, and in handling tenders for their
customers. The expenses to be incurred in connection with the Exchange Offer,
including the fees and expenses of the Exchange Agent and printing, accounting,
registration, and legal fees, will be paid by the Company and are estimated to
be approximately $ .
TRANSFER TAXES
Holders who tender their Original Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register Notes in the name of, or request that Original
Notes not tendered or not accepted in the Exchange Offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
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<PAGE> 51
APPRAISAL RIGHTS
HOLDERS OF ORIGINAL NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL
RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER.
CONSEQUENCES OF NOT EXCHANGING ORIGINAL NOTES
Holders of Original Notes who do not exchange their Original Notes for
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes as set forth in the legend
thereon as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. The
Company and Fedders Corporation do not currently anticipate that they will
register the Original Notes under the Securities Act. Based upon no-action
letters issued by the staff of the Commission to third parties, the Company and
Fedders Corporation believe the Original Notes issued pursuant to the Exchange
Offer in exchange for the Original Notes may be offered for resale, resold or
otherwise transferred by a Holder thereof (other than any (i) holder which is an
"affiliate" of the Company or Fedders Corporation within the meaning of Rule 405
under the Securities Act, (ii) an Initial Purchaser who acquired the Original
Notes directly from the Company solely in order to resell pursuant to Rule 144A
under the Securities Act or any other available exemption under the Securities
Act, or (iii) a broker-dealer who acquired the Original Notes as a result of
market making or other trading activities) without compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such Notes are acquired in the ordinary course of such holder's
business and such holder is not participating and has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such Notes. However, the Company and Fedders
Corporation have not sought their own 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 holder,
other than a broker-dealer, must acknowledge that it is not engaged in, and does
not intend to engage in, a distribution of Notes, and has no arrangement or
understanding to participate in a distribution of Notes. If any holder is an
affiliate of the Company or Fedders Corporation, is engaged in or intends to
engage in or has any arrangement or understanding with respect to the
distribution of the Notes to be acquired pursuant to the Exchange Offer, or
acquired the Original Notes as a result of market making or other trading
activities, such holder (i) could not rely on the relevant determinations of the
staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction. Each broker-dealer that receives Notes for its own
account in exchange for Original Notes must acknowledge that such Original 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 Notes. See "Plan of Distribution." In addition, to
comply with the securities laws of certain jurisdictions, if applicable, the
Notes may not be offered or sold unless they have been registered or qualified
for sale in such jurisdiction or an exemption from registration or qualification
is available and is complied with. The Company and Fedders Corporation have
agreed to register or qualify the sale of the Notes in such jurisdictions only
in limited circumstances and subject to certain conditions.
ACCOUNTING TREATMENT
The exchange of the Notes for the Original Notes will have no impact on the
Company's accounting records on the date of the exchange. Accordingly, no gain
or loss for accounting purposes will be recognized. Expenses of the Exchange
Offer and expenses related to the Original Notes will be amortized, pro rata,
over the term of the Notes.
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<PAGE> 52
DESCRIPTION OF NOTES
GENERAL
The Notes will be issued pursuant to the Indenture among the Company, the
Guarantor and State Street Bank and Trust Company, as trustee (the "Trustee").
As used under this caption "Description of Notes" other than "-- Book Entry,
Delivery and Form," the term "Notes" refers collectively to the Notes issued
upon consummation of the Exchange Offer and the Original Notes. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), as in effect on the date of original issuance of the Notes. The
Notes are subject to all such terms, and holders of the Notes are referred to
the Indenture and the Trust Indenture Act for a statement thereof. The following
summary of the provisions of the Indenture does not purport to be complete and
is qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below.
As of the date of the Indenture, all of the Company's Subsidiaries were
Restricted Subsidiaries. However, under certain circumstances, the Company will
be able to designate each of its existing Subsidiaries, Subsidiaries formed by
the Company or Subsidiaries acquired by the Company after the original issuance
of the Notes as Non-Restricted Subsidiaries. Non-Restricted Subsidiaries will
not be subject to any of the covenants set forth in the Indenture.
The Notes will be limited to $100,000,000 in aggregate principal amount and
will mature on August 15, 2007. The Notes will bear interest at the rate set
forth on the front cover of this Prospectus. Interest on the Notes is payable
semi-annually in cash in arrears on February 15 and August 15 in each year,
commencing February 15, 1998, to holders of record of Notes at the close of
business on the February 1 or August 1 immediately preceding such interest
payment date. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance of the Original Notes. Interest will be computed on the basis of a
360-day year of twelve 30-day months. The Notes will be issued in denominations
of $1,000 and integral multiples thereof.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be presented for registration of transfer or exchange, at the
office of the Paying Agent and Registrar in New York, New York. Holders of Notes
must surrender their Notes to the Paying Agent to collect principal payments,
and the Company may pay principal and interest by check and may mail checks to a
holder's registered address; provided that all payments with respect to Global
Notes and Certificated Notes, the holders of which have given wire transfer
instructions to the Company, will be required to be made by wire transfer of
immediately available funds to the accounts specified by the holders thereof.
The Registrar may require payment of a sum sufficient to cover any transfer tax
or similar governmental charge payable in connection with certain transfers or
exchanges. See "--Transfer and Exchange." The Trustee will initially act as
Paying Agent and Registrar. The Company may change the Paying Agent or Registrar
without prior notice to holders of Notes, and the Company or any of its
Subsidiaries may act as Paying Agent or Registrar.
SUBORDINATION
The payment of principal of, and premium, interest and Liquidated Damages,
if any, on the Notes will be subordinated in right of payment, as set forth in
the Indenture, to the prior payment in full of all Senior Indebtedness, whether
outstanding on the date of the Indenture or thereafter incurred. The Indenture
permits the incurrence of additional Senior Indebtedness in the future.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full of all Obligations due in respect of such Senior
Indebtedness (including interest after the commencement of any such proceeding
at the rate specified in the applicable Senior Indebtedness) before the holders
of Notes will be entitled to receive any payment with respect to the Notes, and
until all Obligations with respect to Senior Indebtedness are paid in full, any
distribution to which the holders of Notes would be entitled shall be made to
the holders of Senior
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<PAGE> 53
Indebtedness (except that holders of Notes may receive payments made from the
trust described under "--Satisfaction and Discharge of the Indenture") if (i) a
default in the payment of the principal of or premium, if any, or interest on
Senior Indebtedness occurs and is continuing beyond any applicable period of
grace or (ii) any other default occurs and is continuing with respect to
Designated Senior Indebtedness that permits holders of the Designated Senior
Indebtedness as to which such default relates to accelerate its maturity and the
Trustee receives a written notice (with a copy to the Company) of such other
default (a "Payment Blockage Notice") from the Company or the holders of any
Designated Senior Indebtedness; payments on the Notes shall be resumed (a) in
the case of a payment default, upon the date on which such default is cured or
waived and (b) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or 179 days after the date on which
the applicable Payment Blockage Notice is received by the Trustee, unless the
maturity of any Designated Senior Indebtedness has been accelerated. No new
period of payment blockage may be commenced unless and until 360 days have
elapsed since the date of receipt by the Trustee of the immediately prior
Payment Blockage Notice. No nonpayment default that existed or was continuing on
the date of delivery of any Payment Blockage Notice to the Trustee shall be, or
be made, the basis for a subsequent Payment Blockage Notice (it being understood
that any subsequent action, or any breach of any covenant for a period
commencing after the date of receipt by the Trustee of such Payment Blockage
Notice, that, in either case, would give rise to such a default pursuant to any
provisions under which a default previously existed or was continuing shall
constitute a new default for this purpose).
The Indenture requires that the Company promptly notify holders of Senior
Indebtedness if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Indebtedness. On a pro forma
basis, after giving effect to the offering of the Original Notes, the aggregate
principal amount of Senior Indebtedness outstanding at June 30, 1997 would have
been approximately $3.9 million. The Indenture limits, subject to certain
financial tests, the amount of additional Indebtedness, including Senior
Indebtedness, that the Company and its subsidiaries can incur. See "--Certain
Covenants--Limitation on Incurrence of Indebtedness."
GUARANTEE
The Guarantor irrevocably and unconditionally guarantees on a senior
subordinated basis the performance and punctual payment when due, whether at
stated maturity, by acceleration or otherwise, of all obligations of the Company
under the Indenture and the Notes, whether for principal of, or interest or
Liquidated Damages, if any, on the Notes, expenses, indemnification or otherwise
(all such obligations guaranteed by the Guarantor being herein called the
"Guaranteed Obligations"). The Guarantor's assets consist primarily of the
common stock of the Company and of the common stock of its Subsidiaries which
conduct the international operations of the Guarantor and the operations of
Melcor and, accordingly, its ability to perform under its Guarantee will be
dependent on the financial condition and net worth of its Subsidiaries,
including the Company.
The Guarantee is a continuing guarantee and shall (a) remain in full force
and effect until payment in full of all the Guaranteed Obligations, (b) be
binding upon the Guarantor and its successors, transferees and assigns and (c)
inure to the benefit of and be enforceable by the Trustee, the holders of the
Notes and their successors, transferees and assigns.
SUBORDINATION OF GUARANTEE
Payments on the Guarantee will be subordinated, as set forth in the
Indenture, in right of payment to the prior payment in full of all Guarantor
Senior Indebtedness. The terms of such subordination will be substantially
similar to the subordination terms applicable to the Notes.
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<PAGE> 54
"Guarantor Senior Indebtedness" means, with respect to the Guarantor, the
Guarantor's guarantee of the Company's obligations under the Credit Agreement
and any other Indebtedness of the Guarantor (other than as otherwise provided in
this definition), whether outstanding on the date of the Indenture or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Guarantee. Notwithstanding the
foregoing, "Guarantor Senior Indebtedness" will not include (i) Indebtedness
evidenced by the Guarantee; (ii) Indebtedness of the Guarantor that is
subordinate or junior in right of payment to any other Indebtedness of the
Guarantor; (iii) Indebtedness of the Guarantor which, when incurred and without
respect to any other election under Section 1111(b) of Title 11, United States
Code, is without recourse to the Guarantor; (iv) Indebtedness which is
represented by Disqualified Stock of the Guarantor; (v) any liability for
foreign, federal, state, local or other taxes owed or owing by the Guarantor;
(vi) Indebtedness of the Guarantor to a Subsidiary or any other Affiliate of the
Guarantor or any of such Affiliate's subsidiaries; (vii) that portion of any
Indebtedness which, when incurred, is issued in violation of the Indenture; and
(viii) trade payables owed or owing by the Guarantor.
REDEMPTION OF NOTES
Optional Redemption. The Notes may not be redeemed at the option of the
Company prior to August 15, 2002. During the 12-month period beginning on August
15 of the years indicated below, the Notes will be redeemable, at the option of
the Company, in whole or in part, on at least 30 but not more than 60 days'
notice to each holder of Notes to be redeemed, at the redemption prices
(expressed as percentages of the principal amount) set forth below, plus any
accrued and unpaid interest and Liquidated Damages, if any, to the redemption
date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002.............................................. 104.688%
2003.............................................. 103.125%
2004.............................................. 101.563%
2005 and thereafter............................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or before August 15, 2000,
the Company may (but will not have the obligation to) redeem for cash up to 30%
of the original aggregate principal amount of the Notes at a redemption price of
109.375% of the principal amount thereof, in each case plus any accrued and
unpaid interest and Liquidated Damages, if any, thereon to the redemption date,
with the net proceeds of an Equity Offering; provided that at least 70% of the
original principal amount of the Notes remains outstanding immediately after the
occurrence of such redemption; and provided, further, that such redemption will
occur within 60 days of the date of the closing of such Equity Offering.
Mandatory Redemption. Except as set forth below under "--Mandatory Offers
to Purchase Notes--Change of Control" and "--Asset Sales," the Company is not
required to make any mandatory redemption, purchase or sinking fund payments
with respect to the Notes.
MANDATORY OFFERS TO PURCHASE NOTES
Change of Control. Upon the occurrence of a Change of Control (such date
being the "Change of Control Trigger Date"), each holder of Notes shall have the
right to require the Company to purchase all or any part (equal to $1,000 or an
integral multiple thereof) of such holder's Notes pursuant to an Offer (as
defined) at a purchase price in cash equal to 101% of the aggregate principal
amount thereof, plus any accrued and unpaid interest and Liquidated Damages, if
any, to the date of purchase. The Company shall furnish to the Trustee, at least
14 days before notice of an Offer is mailed to all holders of Notes pursuant to
the procedures described below under "--Procedures for Offers," notice that the
Offer is being made. Transactions constituting a Change of Control are not
limited to hostile takeover transactions not approved by the current management
of the Company. Except as described under "--Change of Control," the Indenture
does
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<PAGE> 55
not contain provisions that permit the holders of Notes to require the Company
to purchase or redeem the Notes in the event of a takeover, recapitalization or
similar restructuring, including an issuer recapitalization or similar
transaction with management. Consequently, the Change of Control provisions will
not afford any protection in a highly leveraged transaction, including such a
transaction initiated by the Company, management of the Company or an affiliate
of the Company, if such transaction does not result in a Change of Control. In
addition, because the obligations of the Company with respect to the Notes are
subordinated to all Senior Indebtedness of the Company and all obligations of
the Company's subsidiaries, existing or future Senior Indebtedness of the
Company or obligations of the Company's subsidiaries may prohibit the Company
from repurchasing the Notes upon a Change of Control. Moreover, the ability of
the Company to repurchase Notes following a Change of Control will be limited by
the Company's then-available resources. The Change of Control provisions may not
be waived by the Board of Directors of the Company or the Trustee without the
consent of holders of at least a majority in principal amount of the Notes. See
"--Amendment, Supplement and Waiver."
The Company expects that prepayment of the Notes following a Change of
Control would, and the exercise by holders of Notes of the right to require the
Company to purchase Notes may, constitute a default under the Credit Agreement
or under Senior Indebtedness of the Company. In the event a Change of Control
occurs, the Company will likely be required to refinance the Senior Indebtedness
outstanding under the Credit Agreement and the Notes. If there is a Change of
Control, any Senior Indebtedness under the Credit Agreement could be
accelerated. Moreover, there can be no assurance that sufficient funds will be
available at the time of any Change of Control to make any required repurchases
of the Notes. The financing of the purchases of Notes could additionally result
in a default under the Credit Agreement or other indebtedness of the Company.
The occurrence of a Change of Control may also have an adverse impact on the
ability of the Company to obtain additional financing in the future.
Asset Sales. The Indenture provides that the Company may not, and may not
permit any Restricted Subsidiary to, directly or indirectly, consummate an Asset
Sale (including the sale of any of the Capital Stock of any Restricted
Subsidiary) providing for Net Proceeds in excess of $5,000,000 unless the Net
Proceeds from such Asset Sale are applied (in any manner otherwise permitted by
the Indenture) to one or more of the following purposes in such combination as
the Company shall elect: (a) an investment in another asset or business in the
same line of business as, or a line of business similar to that of, the line of
business of the Company and its Restricted Subsidiaries at the time of the Asset
Sale; provided that such investment occurs on or prior to the 365th day
following the date of such Asset Sale (the "Asset Sale Disposition Date"), (b)
to reimburse the Company or its Subsidiaries for expenditures made, and costs
incurred, to repair, rebuild, replace or restore property lost, damaged or taken
to the extent that the Net Proceeds consist of insurance proceeds received on
account of such loss, damage or taking, (c) the purchase, redemption or other
prepayment or repayment of outstanding Senior Indebtedness or Indebtedness of
the Company's Restricted Subsidiaries on or prior to the 365th day following the
Asset Sale Disposition Date or (d) an Offer expiring on or prior to the Purchase
Date (as defined herein). The Indenture also provides that the Company may not,
and may not permit any Restricted Subsidiary to, directly or indirectly,
consummate an Asset Sale unless at least 70% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash,
cash equivalents or marketable securities; provided that, solely for purposes of
calculating such 70% of the consideration, the amount of (x) any liabilities (as
shown on the Company's or such Restricted Subsidiary's most recent balance sheet
or in the notes thereto, excluding contingent liabilities and trade payables) of
the Company or any Restricted Subsidiary (other than liabilities that are by
their terms subordinated to the Notes) that are assumed by the transferee of any
such assets and (y) any notes or other obligations received by the Company or
any such Restricted Subsidiary from such transferee that are promptly, but in no
event more than 30 days after receipt, converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received), shall be
deemed to be cash and cash equivalents for purposes of this provision. Any Net
Proceeds from any Asset Sale that are not applied or invested as provided in the
first sentence of this paragraph shall constitute "Excess Proceeds."
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<PAGE> 56
When the aggregate amount of Excess Proceeds exceeds $6,500,000 (such date
being an "Asset Sale Trigger Date"), the Company shall make an Offer (an "Asset
Sale Offer") to all holders of Notes to purchase the maximum principal amount of
the Notes then outstanding that may be purchased out of Excess Proceeds, at an
offer price in cash in an amount equal to 100% of principal amount thereof plus
any accrued and unpaid interest to the Purchase Date in accordance with the
procedures set forth in the Indenture. Notwithstanding the foregoing, to the
extent that any or all of the Net Proceeds of an Asset Sale are prohibited or
delayed by applicable local law from being repatriated to the United States, the
portion of such Net Proceeds so affected will not be required to be applied as
described in this or the preceding paragraph, but may be retained for so long,
but only for so long, as the applicable local law prohibits repatriation to the
United States.
To the extent that any Excess Proceeds remain after completion of an Asset
Sale Offer, the Company may use such remaining amount for general corporate
purposes. Upon completion of an Asset Sale Offer, the amount of Excess Proceeds
shall be reset at zero.
Although the Credit Agreement will permit the Company to pay interest on
the Notes, dividends for other purposes, such as repurchases of Notes by the
Company upon an Asset Sale, will not be permitted under the terms of the Credit
Agreement. Accordingly, the Company would need to seek the consent of its
lenders under the Credit Agreement in order to repurchase Notes with the Net
Proceeds of an Asset Sale.
Procedures for Offers. Within 30 days following any Change of Control
Trigger Date or Asset Sale Trigger Date, subject to the provisions of the
Indenture, the Company shall mail a notice to each holder of Notes at such
holder's registered address stating: (a) that an offer (an "Offer") is being
made pursuant to a Change of Control or an Asset Sale Trigger Date, as the case
may be, the length of time the Offer shall remain open and the maximum principal
amount of Notes that will be accepted for payment pursuant to such Offer, (b)
the purchase price, the amount of accrued and unpaid interest as of the purchase
date, and the purchase date (which shall be no earlier than 30 days and no later
than 60 days from the date such notice is mailed (the "Purchase Date")), and (c)
such other information required by the Indenture and applicable law and
regulations.
On the Purchase Date for any Offer, the Company will, to the extent
required by the Indenture and such Offer, (1) in the case of an Offer resulting
from a Change of Control, accept for payment all Notes or portions thereof
tendered pursuant to such Offer and, in the case of an Offer resulting from an
Asset Sale Trigger Date, accept for payment the maximum principal amount of
Notes or portions thereof tendered pursuant to such Offer that can be purchased
out of Excess Proceeds, (2) deposit with the Paying Agent the aggregate purchase
price of all Notes or portions thereof accepted for payment and any accrued and
unpaid interest on such Notes as of the Purchase Date, and (3) deliver or cause
to be delivered to the Trustee all Notes tendered pursuant to the Offer. The
Paying Agent shall promptly mail to each holder of Notes or portions thereof
accepted for payment an amount equal to the purchase price for such Notes plus
any accrued and unpaid interest thereon, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book entry) to such holder
of Notes accepted for payment in part a new Note equal in principal amount to
any unpurchased portion of the Notes and any Note not accepted for payment in
whole or in part shall be promptly returned to the holder thereof. The Company
will publicly announce the results of the Offer on or as soon as practicable
after the Purchase Date.
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable, including Rule 14e-1, in connection with an offer
required to be made by the Company to repurchase the Notes as a result of a
Change of Control or an Asset Sale Trigger Date. To the extent that the
provisions of any securities laws or regulations conflict with provisions of the
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
Indenture by virtue thereof.
Selection and Notice. In the event of a redemption or purchase of less
than all of the Notes, the Notes to be redeemed or purchased will be chosen by
the Trustee pro rata, by lot or by any other method that the Trustee considers
fair and appropriate and, if the Notes are listed on any securities exchange, by
a method that complies with the requirements of such exchange; provided that, if
less than all of a holder's Notes are to be
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<PAGE> 57
redeemed or accepted for payment, only principal amounts of $1,000 or multiples
thereof may be selected for redemption or accepted for payment. On and after any
redemption or purchase date, interest shall cease to accrue on the Notes or
portions thereof called for redemption or accepted for payment. Notice of any
redemption or offer to purchase will be mailed at least 30 days but not more
than 60 days before the redemption or purchase date to each holder of Notes to
be redeemed or purchased at such holder's registered address.
CERTAIN COVENANTS
The Indenture contains, among other things, the following covenants:
Limitation on Restricted Payments. The Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on account
of the Company's or such Restricted Subsidiary's Capital Stock or other Equity
Interests (other than dividends or distributions payable in Capital Stock or
other Equity Interests (other than Disqualified Stock) of the Company and
dividends or distributions payable by a Restricted Subsidiary to a Restricted
Subsidiary or to the Company); (ii) purchase, redeem or otherwise acquire or
retire for value any Capital Stock or other Equity Interests of the Company or
any of its Restricted Subsidiaries; (iii) make any principal payment on,
purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for
value, prior to any scheduled final maturity, scheduled repayment or scheduled
sinking fund payment, any Indebtedness of the Company that is subordinate or
junior in right of payment to the Notes; or (iv) make any Restricted Investment
(all such dividends, distributions, purchases, redemptions, acquisitions,
retirements, prepayments and Restricted Investments being collectively referred
to as "Restricted Payments"), if, at the time of such Restricted Payment:
(a) a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence thereof; or
(b) immediately after such Restricted Payment and after giving pro
forma effect thereto, the Company shall not be able to issue $1.00 of
additional Indebtedness pursuant to the first sentence of the "Limitation
on Incurrence of Indebtedness" covenant; or
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after the date of original issuance of the Notes,
without duplication, exceeds the sum of (1) 50% of the aggregate
Consolidated Net Income (including, for this purpose, gains or losses from
Asset Sales) of the Company (or, in case such aggregate is a loss, 100% of
such loss) for the period (taken as one accounting period) from the
beginning of the fiscal quarter commencing March 1, 1997 and ended as of
the Company's most recently ended fiscal quarter at the time of such
Restricted Payment; plus (2) 100% of the aggregate net cash proceeds and
the fair market value of any property or securities (as determined by the
Board of Directors in good faith) received by the Company from the issue or
sale of Capital Stock or other Equity Interests of the Company subsequent
to the date of original issuance of the Notes (other than (x) Capital Stock
or other Equity Interests issued or sold to a Restricted Subsidiary and (y)
the issuance or sale of Disqualified Stock); plus (3) the amount by which
the principal amount of and any accrued interest on either (A) Indebtedness
of the Company or (B) any Indebtedness of any Restricted Subsidiary is
reduced on the Company's consolidated balance sheet upon the conversion or
exchange other than by a Restricted Subsidiary subsequent to the date of
original issuance of the Notes of any Indebtedness of the Company or any
Restricted Subsidiary (not held by the Company or any Restricted
Subsidiary) for Capital Stock or other Equity Interests (other than
Disqualified Stock) of the Company (less the amount of any cash, or the
fair market value of any other property or securities (as determined by the
Board of Directors in good faith), distributed by the Company or any
Restricted Subsidiary (to persons other than the Company or any other
Restricted Subsidiary) upon such conversion or exchange); plus (4) if any
Non-Restricted Subsidiary is redesignated as a Restricted Subsidiary, the
value of the Restricted Payment that would result if such Subsidiary were
redesignated as a Non-Restricted Subsidiary at such time, as determined in
accordance with the second paragraph of the "Designation of
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<PAGE> 58
Restricted and Non-Restricted Subsidiaries" covenant; provided, however,
that for purposes of this clause (4), the value of any redesignated
Non-Restricted Subsidiary shall be reduced by the amount that any such
redesignation replenishes or increases the amount of Restricted Investments
permitted to be made pursuant to clause (ii) of the next sentence.
Notwithstanding the foregoing, clauses (b) and (c) shall not prohibit as
Restricted Payments:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration, such payment would
comply with all covenants of such Indenture (including, but not limited to,
the "Limitation on Restricted Payments" covenant); provided that payments
made pursuant to this paragraph shall count as a Restricted Payment for
purposes of the calculation in paragraph (c) of this covenant;
(ii) the payment by the Company of a dividend to the Guarantor on the
date of issuance of the Original Notes from the proceeds received from the
issuance of the Original Notes not to exceed $72 million in cash; provided
that payments made pursuant to this paragraph (ii) shall not count as a
Restricted Payment for purposes of the calculation in paragraph (c) of this
covenant;
(iii) any payment by the Company of a dividend to the Guarantor on the
date of issuance of the Original Notes or prior to the date of issuance of
the Original Notes in an amount equal to the intercompany receivable on
such date from Fedders Corporation; provided that payments made pursuant to
this paragraph (iii) shall not count as a Restricted Payment for purposes
of the calculation in paragraph (c) of this covenant;
(iv) the redemption, repurchase, retirement or other acquisition of
any Capital Stock or other Equity Interests of the Company or any
Restricted Subsidiary in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the Company)
of other Capital Stock or other Equity Interests of the Company (other than
any Disqualified Stock) or the redemption, repurchase, retirement or other
acquisition of any Capital Stock or other Equity Interests of any
Restricted Subsidiary in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to the Company or a Subsidiary of
the Company) of other Capital Stock or other Equity Interests of such
Restricted Subsidiary; provided that, in each case, any net cash proceeds
that are utilized for any such redemption, repurchase, retirement or other
acquisition, and any Net Income resulting therefrom, shall be excluded from
paragraph (c) of this covenant;
(v) Restricted Investments made or received in connection with the
sale, transfer or disposition of any business, properties or assets of the
Company or any Restricted Subsidiary; provided that, if such sale, transfer
or disposition constitutes an Asset Sale, the Company complies with the
"Asset Sale" provisions of the Indenture, and such Restricted Investments
shall not count as a Restricted Payment for purposes of the calculation in
paragraph (c) of this covenant;
(vi) the payment of a dividend to the Guarantor in order to allow the
Guarantor to pay its regular quarterly dividend in respect of the
Guarantor's Convertible Preferred Stock, Common Stock, Class A Stock and
Class B Stock; provided that payments made pursuant to this paragraph (vii)
shall count as a Restricted Payment for purposes of the calculation in
paragraph (c) of this covenant;
(vii) cash dividends or loans from the Company to the Guarantor
pursuant to the Services Agreement but in no event exceeding 4% of the
revenues of the Company and its Restricted Subsidiaries for the immediately
preceding four fiscal quarters; provided, that payments made pursuant to
this paragraph (vii) shall not count as a Restricted Payment for purposes
of the calculation in paragraph (c) of this covenant;
(viii) payments to the Guarantor in an amount equal to the amount of
income tax that the Company would have paid had it filed consolidated tax
returns on a separate company basis in any given tax year; provided that
payments made pursuant to this paragraph (viii) shall not count as a
Restricted Payment for purposes of the calculation in paragraph (c) of this
covenant; and
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<PAGE> 59
(ix) $3,000,000; provided that payments made pursuant to this
paragraph (ix) shall count as a Restricted Payment for purposes of the
calculation in paragraph (c) of this covenant.
Limitation on Incurrence of Indebtedness. The Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary to, issue any
Indebtedness (other than the Indebtedness represented by the Notes) unless the
Company's Cash Flow Coverage Ratio for its four full fiscal quarters next
preceding the date such additional Indebtedness is issued would have been at
least 2.0 to 1 on or prior to August 31, 1999 and at least 2.25 to 1 thereafter
determined on a Pro Forma Basis (including, for this purpose, any other
Indebtedness incurred since the end of the applicable four-quarter period) as if
such additional Indebtedness and any other Indebtedness issued since the end of
such four-quarter period had been issued at the beginning of such four-quarter
period.
The foregoing limitations will not apply to the issuance of:
(i) Indebtedness of the Company and/or its Restricted Subsidiaries
under the Credit Agreement as measured on such date of issuance in an
aggregate principal amount outstanding on any such date of issuance not
exceeding the greater of (x) the sum of (A) 75% of the book value of the
accounts receivable of the Company and its Restricted Subsidiaries on a
consolidated basis and (B) 60% of the book value of the inventory of the
Company and its Restricted Subsidiaries on a consolidated basis or (y)
$50,000,000;
(ii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with capital leases, purchase money obligations, capital
expenditures or similar financing transactions relating to their
properties, assets and rights up to $10,000,000 in aggregate principal
amount;
(iii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount of up to $10,000,000; and
(iv) Other Permitted Indebtedness.
Notwithstanding the foregoing, no Restricted Subsidiary shall under any
circumstances issue a guarantee of any Indebtedness of the Company except for
guarantees issued by Restricted Subsidiaries pursuant to the "Limitation on
Guarantees of Company Indebtedness by Restricted Subsidiaries" covenant;
provided, however, that the foregoing will not limit or restrict guarantees
issued by Restricted Subsidiaries in respect of Indebtedness of other Restricted
Subsidiaries.
Sale and Leaseback Transactions. The Indenture provides that the Company
will not, and will not permit any of its Restricted Subsidiaries to, enter into
any sale and leaseback transaction; provided that the Company may enter into a
sale and leaseback transaction if (i) the Company could have incurred
Indebtedness in an amount equal to the Attributable Debt relating to such sale
and leaseback transaction pursuant to the Company's Cash Flow Coverage Ratio
test set forth in the first sentence of the covenant "Limitation on Incurrence
of Indebtedness", and (ii) the net cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in good
faith by the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee) of the property that is the subject of such sale and
leaseback transaction and (iii) the transfer of assets in such sale and
leaseback transaction is permitted by, and the proceeds of such transaction are
applied in compliance with, the covenant "Asset Sales."
Limitation on Liens. The Indenture provides that the Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
create, incur, assume or suffer to exist any Lien (other than Permitted Liens)
upon any property or asset now owned or hereafter acquired by them, or any
income or profits therefrom, or assign or convey any right to receive income
therefrom; provided, however, that in addition to creating Permitted Liens on
its properties or assets, the Company and any of its Restricted Subsidiaries may
create any Lien upon any of their properties or assets (including, but not
limited to, any Capital Stock of its Subsidiaries) if the Notes are equally and
ratably secured.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that the Company will not, and will not
permit any of its Restricted Subsidiaries to,
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<PAGE> 60
directly or indirectly, create or otherwise cause or suffer to exist or become
effective, any encumbrance or restriction on the ability of any Restricted
Subsidiary to: (a) pay dividends or make any other distributions on its Capital
Stock or any other interest or participation in, or measured by, its profits,
owned by the Company or any Restricted Subsidiary, or pay any Indebtedness owed
to, the Company or any Restricted Subsidiary, (b) make loans or advances to the
Company, or (c) transfer any of its properties or assets to the Company, except
for such encumbrances or restrictions existing under or by reason of:
(i) applicable law,
(ii) Indebtedness permitted (A) under the first sentence of the first
paragraph of the "Limitation on Incurrence of Indebtedness" covenant, (B)
under clauses (i) or (iii) of the second paragraph of the "Limitation on
Incurrence of Indebtedness" covenant or clauses (i), (v), (vi) or (viii) of
the definition of Other Permitted Indebtedness, or (C) by agreements and
transactions permitted under the "Limitation on Restricted Payments"
covenant,
(iii) customary provisions restricting subletting or assignment of any
lease or license of the Company or any Restricted Subsidiary,
(iv) any instrument governing Indebtedness or any other encumbrance or
restriction of a person acquired by the Company or any Restricted
Subsidiary at the time of such acquisition, which encumbrance or
restriction is not applicable to any person, or the properties or assets of
any person, other than the person, or the property or assets of the person,
so acquired,
(v) the Credit Agreement,
(vi) any Refinancing Indebtedness permitted under the "Limitation on
Incurrence of Indebtedness" covenant or clauses (i), (v) or (viii) of the
definition of Other Permitted Indebtedness; provided that the encumbrances
and restrictions created in connection with such Refinancing Indebtedness
are no more restrictive in any material respect with regard to the
interests of the holders of Notes than the encumbrances and restrictions in
the refinanced Indebtedness, or
(vii) the terms of purchase money obligations, but only to the extent
such purchase money obligations restrict or prohibit the transfer of the
property so acquired.
Nothing contained in this covenant shall prevent the Company from entering
into any agreement or instrument providing for the incurrence of Permitted Liens
or restricting the sale or other disposition of property or assets of the
Company or any of its Restricted Subsidiaries that are subject to Permitted
Liens.
Limitation on Transactions With Affiliates. The Indenture provides that
neither the Company nor any of its Restricted Subsidiaries may make any loan,
advance, guarantee or capital contribution to, or for the benefit of, or sell,
lease, transfer or dispose of any properties or assets to, or for the benefit
of, or purchase or lease any property or assets from, or enter into or amend any
contract, agreement or understanding with, or for the benefit of, an Affiliate
(each such transaction or series of related transactions that are part of a
common plan are referred to as an "Affiliate Transaction"), except in good faith
and on terms that are no less favorable to the Company or the relevant
Restricted Subsidiary than those that would have been obtained in a comparable
transaction on an arm's length basis from an unrelated person.
The Indenture further provides that the Company will not, and will not
permit any Restricted Subsidiary to, engage in any Affiliate Transaction
involving aggregate payments or other transfers by the Company and its
Restricted Subsidiaries in excess of $3,500,000 (including cash and non-cash
payments and benefits valued at their fair market value by the Board of
Directors of the Company in good faith) unless the Company delivers to the
Trustee:
(i) a resolution of the Board of Directors of the Company stating that
the Board of Directors (including a majority of the disinterested
directors, if any) has, in good faith, determined that such Affiliate
Transaction complies with the provisions of the Indenture, and
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(ii) (A) with respect to any Affiliate Transaction involving the
incurrence of Indebtedness, a written opinion of a nationally recognized
investment banking or accounting firm experienced in the review of similar
types of transactions, (B) with respect to any Affiliate Transaction
involving the transfer of real property, fixed assets or equipment, either
directly or by a transfer of 50% or more of the Capital Stock of a
Restricted Subsidiary which holds any such real property, fixed assets or
equipment, a written appraisal from a nationally recognized appraiser,
experienced in the review of similar types of transactions or (C) with
respect to any Affiliate Transaction not otherwise described in (A) and (B)
above, a written certification from a nationally recognized professional or
firm experienced in evaluating similar types of transactions, in each case,
stating that the terms of such transaction are fair to the Company or such
Restricted Subsidiary, as the case may be, from a financial point of view.
Notwithstanding the foregoing, this Affiliate Transactions covenant will
not apply to:
(i) transactions between the Company and any wholly owned Restricted
Subsidiary or between wholly owned Restricted Subsidiaries;
(ii) transactions permitted by the covenant "Limitation on Restricted
Payments";
(iii) compensation paid to officers, employees or consultants of the
Company or any subsidiary as determined in good faith by the Company's
Board of Directors or executives; or
(iv) transactions between the Company and the Guarantor or between the
Company and a Subsidiary of the Guarantor in the ordinary course of
business on terms substantially consistent with past practice.
Limitation on Senior Subordinated Indebtedness. The Company will not,
directly or indirectly, incur any Indebtedness that by its terms would expressly
rank senior in right of payment to the Notes and expressly rank subordinate in
right of payment to any Senior Indebtedness.
Limitation on Guarantees of Company Indebtedness by Restricted
Subsidiaries. The Indenture provides that the Company will not permit any
Restricted Subsidiary, directly or indirectly, to guarantee any Indebtedness of
the Company other than the Notes (the "Other Company Indebtedness") unless (A)
such Restricted Subsidiary contemporaneously executes and delivers a
supplemental indenture to the Indenture providing for a guarantee of payment of
the Notes then outstanding by such Restricted Subsidiary to the same extent as
the guarantee of payment (the "Other Company Indebtedness Guarantee") of the
Other Company Indebtedness (including waiver of subrogation, if any) and (B) if
the Other Company Indebtedness guaranteed by such Restricted Subsidiary is
Senior Indebtedness, the guarantee for the Notes shall be subordinated in right
of payment with the Other Company Indebtedness Guarantee provided, however, that
the provisions of this covenant do not apply to guarantees by any Restricted
Subsidiary of the Company's Indebtedness under the Credit Agreement as in effect
on the date of issuance of the Original Notes.
Each guarantee of the Notes created by a Restricted Subsidiary pursuant to
the provisions described in the foregoing paragraph shall be in form and
substance satisfactory to the Trustee and shall provide, among other things,
that it will be automatically and unconditionally released and discharged upon
(i) any sale, exchange or transfer permitted by the Indenture of (a) all of the
Company's Capital Stock in such Restricted Subsidiary or (b) the sale of all or
substantially all of the assets of the Restricted Subsidiary and upon the
application of the Net Proceeds from such sale in accordance with the
requirements of the "Asset Sales" provisions described herein or (ii) the
release or discharge of the Other Company Indebtedness Guarantee that resulted
in the creation of such guarantee of the Notes.
Designation of Restricted and Non-Restricted Subsidiaries. The Indenture
provides that, subject to the exceptions described below, from and after the
date of original issuance of the Notes, the Company may designate any existing
or newly formed or acquired Subsidiary as a Non-Restricted Subsidiary; provided
that either (A) the Subsidiary to be so designated has total assets of
$1,000,000 or less or (B) immediately before and after giving effect to such
designation: (1) the Company could incur $1.00 of additional Indebtedness
pursuant to the first sentence of the "Limitation on Incurrence of Indebtedness"
covenant determined on a Pro
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Forma Basis; (2) no Default or Event of Default shall have occurred and be
continuing; and (3) all Investments made by the Company or by a Restricted
Subsidiary of the Company in such Restricted Subsidiary which is being
designated a Non-Restricted Subsidiary prior to or on the date such Restricted
Subsidiary is being designated a Non-Restricted Subsidiary shall have been
permitted pursuant to the covenant "Limitation on Restricted Payments" as if all
of such Restricted Payments had been made on the day such Restricted Subsidiary
is designated a Non-Restricted Subsidiary (to the extent not previously included
as a Restricted Payment) in the amount of the greater of (i) the fair market
value (as determined by the Board of Directors of the Company in good faith) of
the Equity Interests of such Subsidiary held by the Company and its Restricted
Subsidiaries on such date or (ii) the amount of the Investments determined in
accordance with GAAP made by the Company and any of its Restricted Subsidiaries
in such Restricted Subsidiary; and (4) all transactions between the Subsidiary
to be so designated and its Affiliates remaining in effect are permitted
pursuant to the "Limitation on Transactions with Affiliates" covenant.
A Non-Restricted Subsidiary may be redesignated as a Restricted Subsidiary.
The Company may not, and may not permit any Restricted Subsidiary to, take any
action or enter into any transaction or series of transactions that would result
in a Person becoming a Restricted Subsidiary (whether through an acquisition,
the redesignation of a Non-Restricted Subsidiary or otherwise, but not including
through the creation of a new Restricted Subsidiary) unless, immediately before
and after giving effect to such action, transaction or series of transactions,
(a) the Company could incur at least $1.00 of additional Indebtedness pursuant
to the first sentence of "Limitation on Incurrence of Indebtedness" on a Pro
Forma Basis and (b) no Default or Event of Default shall have occurred and be
continuing.
The designation of a Subsidiary as a Restricted Subsidiary or the removal
of such designation is required to be made by a resolution adopted by a majority
of the Board of Directors of the Company stating that the Board of Directors has
made such designation in accordance with the Indenture, and the Company is
required to deliver to the Trustee such resolution together with an Officers'
Certificate certifying that the designation complies with the Indenture. Such
designation will be effective as of the date specified in the applicable
resolution which may not be before the date the applicable Officers' Certificate
is delivered to the Trustee.
MERGER OR CONSOLIDATION
The Indenture provides that each of the Company and the Guarantor shall not
consolidate or merge with or into, or sell, lease, convey or otherwise dispose
of all or substantially all of its assets to, any person (any such
consolidation, merger or sale being a "Disposition") unless: (a) the successor
corporation of such Disposition or the corporation to which such Disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (b) the
successor corporation of such Disposition or the corporation to which such
Disposition shall have been made expressly assumes the Obligations of the
Company or the Guarantor, as the case may be, pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee, under the Indenture
and the Notes; (c) immediately after such Disposition, no Default or Event of
Default shall exist; and (d) the corporation formed by or surviving any such
Disposition, or the corporation to which such Disposition shall have been made,
shall (i) have Consolidated Net Worth (immediately after the Disposition but
prior to giving any pro forma effect to purchase accounting adjustments
resulting from the Disposition) equal to or greater than the Consolidated Net
Worth of the Company or the Guarantor, as the case may be, immediately preceding
the Disposition, and (ii) be permitted immediately after the Disposition by the
terms of the Indenture to issue at least $1.00 of additional Indebtedness
pursuant to the first sentence of the covenant "Limitation on Incurrence of
Indebtedness" determined on a Pro Forma Basis. The limitations in the Indenture
on the Company's ability to make a Disposition described in this paragraph do
not restrict the Company's ability to sell less than all or substantially all of
its assets, such sales being governed by the "Asset Sales" provisions of the
Indenture as described herein.
Prior to the consummation of any proposed Disposition, the Company shall
deliver to the Trustee an Officers' Certificate to the foregoing effect and an
opinion of counsel stating that the proposed Disposition and such supplemental
indenture comply with the Indenture.
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PROVISION OF FINANCIAL INFORMATION TO HOLDERS OF NOTES
So long as the Notes are outstanding, whether or not the Guarantor is
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Guarantor shall submit for filing with the Commission the annual
reports, quarterly reports and other documents relating to the Guarantor and its
Subsidiaries that the Guarantor would have been required to file with the
Commission pursuant to Section 13 or 15(d) if the Guarantor were subject to such
reporting requirements. The Guarantor will also provide to all holders of Notes
and file with the Trustee copies of such annual reports, quarterly reports and
other documents required to be furnished to stockholders generally under the
Exchange Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that an Event of Default is: (a) a default for 30
days in payment of interest on the Notes; (b) a default in payment when due of
principal or premium, if any, with respect to the Notes; (c) failure by the
Company to comply with the provisions described under the captions "--Mandatory
Offers to Purchase Notes--Change of Control," "--Certain Covenants--Limitation
on Restricted Payments," "--Certain Covenants--Limitation on Incurrence of
Indebtedness" or "--Merger or Consolidation;" (d) the failure of the Company to
comply with any of its other agreements or covenants in, or provisions of, the
Indenture or the Notes and the Default continues for the period, if applicable,
and after the notice specified in the next paragraph; (e) a default by the
Company, the Guarantor or any Restricted Subsidiary under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
Restricted Subsidiary (or the payment of which is guaranteed by the Company or
any Restricted Subsidiary), whether such Indebtedness or guarantee now exists or
shall be created hereafter, if (1) either (A) such default results from the
failure to pay principal of or interest on any such Indebtedness (after giving
effect to any extensions thereof) or (B) as a result of such default the
maturity of such Indebtedness has been accelerated prior to its expressed
maturity, and (2) the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to pay
principal or interest thereon, or, because of the acceleration of the maturity
thereof, aggregates in excess of $2,500,000; (f) a failure by the Company or any
Restricted Subsidiary to pay final judgments (not covered by insurance)
aggregating in excess of $2,500,000 which judgments a court of competent
jurisdiction does not rescind, annul or stay within 45 days after their entry;
and (g) certain events of bankruptcy or insolvency involving the Company, the
Guarantor or any Significant Subsidiary. In the case of any Event of Default
pursuant to clause (a) or (b) above occurring by reason of any willful action
(or inactions) taken (or not taken) by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have to pay
pursuant to a redemption of Notes as described under "--Redemption of
Notes--Optional Redemption," an equivalent premium shall also become and be
immediately, due and payable to the extent permitted by law.
A Default or Event of Default under clause (d) is not an Event of Default
under the Indenture until the Trustee or the holders of at least 25% in
principal amount of the Notes then outstanding notify the Company of the Default
and the Company does not cure the Default within 30 days after receipt of the
notice. A Default or Event of Default under clause (g) of the preceding
paragraph will result in the Notes automatically becoming due and payable
without further action or notice.
Upon the occurrence of an Event of Default, the Trustee or the holders of
at least 25% in principal amount of the then outstanding Notes may declare all
Notes to be due and payable by notice in writing to the Company and the Trustee
specifying the respective Event of Default and that it is a "notice of
acceleration" (the "Acceleration Notice") and the same shall become immediately
due and payable. The holders of a majority in principal amount of the Notes then
outstanding under the Indenture, by notice to the Trustee, may rescind any
declaration of acceleration of such Notes and its consequences (if the
rescission would not conflict with any judgment or decree) if all existing
Events of Default (other than the nonpayment of principal of or interest on such
Notes that shall have become due by such declaration) shall have been cured or
waived. Subject to certain limitations, holders of a majority in principal
amount of the Notes then outstanding may direct the Trustee in its exercise of
any trust or power. Holders of the Notes may not enforce the Indenture,
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except as provided therein. The Trustee may withhold from holders of Notes
notice of any continuing Default or Event of Default (except a Default or an
Event of Default in payment of principal, premium, if any, or interest) if the
Trustee determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the Notes then
outstanding may on behalf of all holders of such Notes waive any existing
Default or Event of Default under the Indenture and its consequences, except a
continuing Default in the payment of the principal of, or premium, if any, or
interest on, such Notes, which may only be waived with the consent of each
holder of the Notes affected.
Upon any payment or distribution of assets of the Company and its
subsidiaries in a total or partial liquidation, dissolution, reorganization or
similar proceeding, including a Default under clause (g) above involving certain
events of bankruptcy or insolvency of the Company or a Significant Subsidiary,
there may not be sufficient assets remaining to satisfy the claims of any
holders of Notes given the effective structural subordination of the Notes to
the obligations of the Subsidiaries of the Company.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and upon an executive officer of the
Company becoming aware of any Default or Event of Default, a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF OFFICERS, DIRECTORS, EMPLOYEES AND STOCKHOLDERS
No officer, employee, director or stockholder of the Company shall have any
liability for any Obligations of the Company under the Notes or the Indenture,
or for any claim based on, in respect of, or by reason of, such Obligations or
the creation of any such Obligation. Each holder of the Notes by accepting a
Note waives and releases all such liability, and such waiver and release is part
of the consideration for issuance of the Notes. The foregoing waiver may not be
effective to waive liabilities under the federal securities laws and the
Commission is of the view that such a waiver is against public policy.
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Company at any time may terminate all its obligations under the Notes,
the Guarantor's Guaranteed Obligations and the Indenture ("legal defeasance
option"), except for certain obligations (including those with respect to the
defeasance trust (as defined herein) 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 (1) its obligations under the "Change of Control" and
"Asset Sales" provisions described herein and the covenants described under
"Certain Covenants" and certain other covenants in the Indenture, (2) the
operation of clauses (c), (d), (e), and (f) contained in the first paragraph of
the "Events of Default and Remedies" provisions described herein and (3) the
limitations contained in clauses (c) and (d) under the "Merger or Consolidation"
provisions described herein (collectively, a "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 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 shall not be accelerated because of an
Event of Default specified in clauses (c), (d), (e) or (f) in the first
paragraph under the "Events of Default and Remedies" provisions described herein
or because of the Company's failure to comply with clauses (c) and (d) under the
"Merger or Consolidation" provisions described herein.
To exercise either defeasance option with respect to the Notes outstanding,
the Company must irrevocably deposit in trust (the "defeasance trust") with the
Trustee money or U.S. Government Obligations (as defined in the Indenture) for
the payment of principal of, premium, if any, and unpaid interest on the Notes
then outstanding to redemption or maturity, as the case may be, and must comply
with certain other conditions, including the passage of 91 days and the delivery
to the Trustee of an opinion of counsel to the effect that holders of such Notes
will not recognize income, gain or loss for federal income tax purposes as a
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result of such deposit and defeasance and will be subject to federal income tax
on the same amount 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).
TRANSFER AND EXCHANGE
Holders of Notes may transfer or exchange their Notes in accordance with
the Indenture, but the Registrar may require a holder, among other things, to
furnish appropriate endorsements and transfer documents, and to pay any taxes
and fees required by law or permitted by the Indenture, in connection with any
such transfer or exchange. Neither the Company nor the Registrar is required to
issue, register the transfer of, or exchange (i) any Note selected for
redemption or tendered pursuant to an Offer, or (ii) any Note during the period
between (a) the date the Trustee receives notice of a redemption from the
Company and the date the Notes to be redeemed are selected by the Trustee or (b)
a record date and the next succeeding interest payment date. The registered
holder of a Note will be treated as its owner for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture may be amended or supplemented
with the consent of the holders of at least a majority in principal amount of
the Notes then outstanding under the Indenture, and any existing Default or
Event of Default (other than a payment default) or compliance with any provision
may be waived with the consent of the holders of a majority in principal amount
of the Notes then outstanding under the Indenture. Without the consent of any
holder of Notes, the Company and the Trustee may amend or supplement the
Indenture or the Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption by a successor corporation of the Company's
obligations to the holders of Notes in the case of a Disposition, to comply with
the Trust Indenture Act, or to make any change that does not materially
adversely affect the legal rights of any holder of Notes.
Without the consent of each holder of Notes affected, the Company may not
(i) reduce the principal amount of Notes whose holders must consent to an
amendment to the Indenture or a waiver under the Indenture; (ii) reduce the rate
on or change the interest payment time of the Notes, or alter the redemption
provisions with respect thereto (other than the provisions relating to the
covenants described above under the caption "--Mandatory Offers to Purchase
Notes--Change of Control" and "--Asset Sales") or the price at which the Company
is required to offer to purchase the Notes; (iii) reduce the principal of or
change the fixed maturity of the Notes; (iv) make the Notes payable in money
other than stated in the Notes; (v) make any change in the provisions concerning
waiver of Defaults or Events of Default by holders of the Notes, or rights of
holders of the Notes to receive payment of principal or interest; or (vi) waive
any default in the payment of principal of, premium, if any, or unpaid interest
on, and Liquidated Damages, if any, with respect to the Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee, if
it becomes 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; however, if it acquires any conflicting interest (as defined in
the Trust Indenture Act) it must eliminate such conflict or resign.
The holders of a majority in principal amount of the Notes then outstanding
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 has not been cured), the Trustee will be required, in the exercise of its
power, to use the degree of care and skill of a prudent person in similar
circumstances in the conduct of its own affairs. Subject to the provisions of
the Indenture, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at
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the request of any of the holders of the Notes, unless such holders shall have
offered to the Trustee security and indemnity satisfactory to it.
CERTAIN DEFINITIONS
Set forth below are certain of the defined terms used in the Indenture.
Reference is made to the Indenture for the definition of all other terms used in
the Indenture.
"Affiliate" means any of the following: (i) any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, (ii) any spouse, immediate family member or other
relative who has the same principal residence as any person described in clause
(i) above, (iii) any trust in which any such persons described in clause (i) or
(ii) above has a beneficial interest, and (iv) any corporation or other
organization of which any such persons described above collectively owns 10% or
more of the equity of such entity.
"Asset Sale" means the sale, lease, conveyance or other disposition by the
Company or a Restricted Subsidiary of assets or property whether owned on the
date of original issuance of the Notes or thereafter acquired, in a single
transaction or in a series of related transactions; provided that Asset Sales
will not include such sales, leases, conveyances or dispositions in connection
with (i) the surrender or waiver of contract rights or the settlement, release
or surrender of contract, tort or other claims of any kind, (ii) the sale of
inventory in the ordinary course of business, (iii) a sale-leaseback of assets
within one year following the acquisition of such assets, (iv) the grant of any
license of patents, trademarks, registration therefor and other similar
intellectual property, (v) a transfer of assets by the Company or a Restricted
Subsidiary to the Company or a Restricted Subsidiary, (vi) the designation of a
Restricted Subsidiary as a Non-Restricted Subsidiary pursuant to the
"Designation of Restricted and Non-Restricted Subsidiaries" covenant, (vii) the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Company as permitted under "--Merger or Consolidation," (viii) the
sale or disposition of obsolete equipment or other obsolete assets, (ix)
Restricted Payments permitted by the "Limitations on Restricted Payments"
covenant, or (x) the exchange of assets for other non-cash assets that (a) are
useful in the business of the Company and its Restricted Subsidiaries and (b)
have a fair market value at least equal to the fair market value of the assets
being exchanged (as determined in good faith by the Board of Directors or the
board of directors of the Restricted Subsidiary which owns such assets).
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Board of Directors" means the Company's board of directors or any
authorized committee of such board of directors.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock, including any
Preferred Stock.
"Cash Flow" means, for any given period and person, the sum of, without
duplication, Consolidated Net Income, plus (a) any provision for taxes based on
income or profits to the extent such income or profits were included in
computing Consolidated Net Income, plus (b) Consolidated Interest Expense, to
the extent deducted in computing Consolidated Net Income, plus (c) the
amortization of all intangible assets, to the extent such amortization was
deducted in computing Consolidated Net Income (including, but not limited to,
inventory write-ups, goodwill, debt and financing costs), plus (d) all
depreciation and all other non-cash charges (including, without limitation,
those charges relating to purchase accounting adjustments and LIFO adjustments),
to the extent deducted in computing Consolidated Net Income, plus (e) any
interest income, to the extent such income was not included in computing
Consolidated Net Income, plus (f) all dividend payments on Preferred Stock
(whether or not paid in cash) to the extent deducted in computing Consolidated
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Net Income; provided, however, that, if any such calculation includes any period
during which an acquisition or sale of a person or the incurrence or repayment
of Indebtedness occurred, then such calculation for such period shall be made on
a Pro Forma Basis.
"Cash Flow Coverage Ratio" means, for any given period and person, the
ratio of: (i) Cash Flow, divided by (ii) the sum of Consolidated Interest
Expense (except dividends paid or payable in additional shares of Capital Stock
(other than Disqualified Stock)) in each case, without duplication; provided,
however, that if any such calculation includes any period during which an
acquisition or sale of a person or the incurrence or repayment of Indebtedness
occurred, then such calculation for such period shall be made on a Pro Forma
Basis.
"Change of Control" means the occurrence of any of the following: (i) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act), excluding the Existing Stockholders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that 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 50% of the total Voting Stock of the Company or of the
Guarantor; or (ii) the Company or the Guarantor consolidates with, or merges
with or into, another person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any person, or
any person consolidates with, or merges with or into, the Company or the
Guarantor, in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company or of the Guarantor is converted into or exchanged
for cash, securities or other property, other than any such transaction where
(A) the outstanding Voting Stock of the Company or of the Guarantor is converted
into or exchanged for (1) Voting Stock (other than Disqualified Stock) of the
surviving or transferee corporation or (2) cash, securities and other property
in an amount which could be paid by the Company as a Restricted Payment under
the Indenture and (B) immediately after such transaction no "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act),
excluding the Existing Stockholders, is the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that 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 50% of the total
Voting Stock of the surviving or transferee corporation; or (iii) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors of the Company or of the Guarantor (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the stockholders of the Company was approved by a
vote of a majority of the directors then still in office who are entitled to
vote to elect such new director and were either directors at the beginning of
such period or persons whose election as directors or nomination for election
was previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company or of the Guarantor then in office.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the Company's assets. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of Notes to require the Company to repurchase such Notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of the Company and its Subsidiaries to another person may be uncertain.
"Commission" means the Securities and Exchange Commission.
"Consolidated Interest Expense" means, for any given period and person, the
aggregate of (i) the interest expense in respect of all Indebtedness of such
person and its Restricted Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP (including amortization of original issue
discount on any such Indebtedness, all non-cash interest payments, the interest
portion of any deferred payment obligation and the interest component of capital
lease obligations, but excluding amortization of deferred financing fees if such
amortization would otherwise be included in interest expense) and (ii) the
product of (a) all cash dividend payments (and non-cash dividend payments in the
case of a Person that is a Restricted
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Subsidiary) on any series of Preferred Stock of such Person and its Restricted
Subsidiaries payable to a party other than the Company or a wholly owned
Subsidiary, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, on a
consolidated basis and in accordance with GAAP; provided, however, that for the
purpose of the Cash Flow Coverage Ratio, Consolidated Interest Expense shall be
calculated on a Pro Forma Basis.
"Consolidated Net Income" means, for any given period and person, the
aggregate of the Net Income of such person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that: (i) the Net Income of any person acquired in a pooling
of interests transaction for any period prior to the date of such acquisition
shall be excluded, (ii) the Net Income (but not loss) of any Person that is not
a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person, (iii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Restricted Subsidiary of
that Net Income is not at the date of determination permitted without any prior
governmental approval (which has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, (iv) the cumulative effect of a
change in accounting principles shall be excluded, (v) income or loss
attributable to discontinued operations shall be excluded; and (vi) all other
extraordinary, unusual or nonrecurring gains or losses shall be excluded;
provided, however, that for purposes of determining the Cash Flow Coverage
Ratio, Consolidated Net Income shall be calculated on a Pro Forma Basis.
"Consolidated Net Worth" means, with respect to any person at any date, the
sum of (i) the consolidated stockholders' equity of such person less the amount
of such stockholders' equity attributable to Disqualified Stock of such person
and its Subsidiaries (Restricted Subsidiaries, in the case of the Company), as
determined on a consolidated basis in accordance with GAAP consistently applied
and (ii) the amount of any Preferred Stock of such person not included in the
stockholders' equity of such person in accordance with GAAP, which Preferred
Stock does not constitute Disqualified Stock.
"Credit Agreement" means collectively, the Accounts Financing Agreement
between Columbia Specialties, Inc., and Congress Financial Corporation dated
December 23, 1992 and the Accounts Financing Agreement by and among Fedders
North America, Inc., Emerson Quiet Kool Corporation and Congress Financial
Corporation dated December 23, 1992, together with all loan documents and
instruments thereunder (including, without limitation, any guarantee agreements,
covenant supplements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including,
without limitation, increasing the amount of available borrowings thereunder,
and all Obligations with respect thereto, in each case, to the extent permitted
by the "Limitation on Incurrence of Indebtedness" covenant or adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) any Indebtedness outstanding
under the Credit Agreement and (ii) any other Senior Indebtedness permitted
under the Indenture the principal amount of which is $20,000,000 or more and
that has been designated by the Company as Senior Indebtedness.
"Disqualified Stock" with respect to any person means any Capital Stock or
Equity Interests that 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, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or
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otherwise, or is redeemable at the option of the holder thereof, in whole or in
part on, or prior to, the maturity date of the Notes, or any Capital Stock or
Equity Interests in any Restricted Subsidiary of such person.
"Equity Interests" means Capital Stock or partnership interests or
warrants, options or other rights to acquire Capital Stock or partnership
interests (but excluding (i) any debt security that is convertible into, or
exchangeable for, Capital Stock or partnership interests, and (ii) any other
Indebtedness or Obligation).
"Equity Offering" means a public or private offering by the Company or
Fedders Corporation for cash of Capital Stock or other Equity Interests and all
warrants, options or other rights to acquire Capital Stock, other than an
offering of Disqualified Stock.
"Existing Stockholders" means the officers and directors of each of the
Company and the Guarantor on the date of issuance of the Original Notes and
their respective Affiliates and family members and trusts for the benefit of any
of the foregoing.
"GAAP" means generally accepted accounting principles, consistently
applied, as in effect in the United States from time to time. All financial and
accounting determinations and calculations under the Indenture will be made in
accordance with GAAP.
"Hedging Obligations" means, with respect to any person, the Obligations of
such persons under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements, (ii) foreign exchange contracts,
currency swap agreements or similar agreements, and (iii) other agreements or
arrangements designed to protect such person against fluctuations, or otherwise
to establish financial hedges in respect of, exchange rates, currency rates or
interest rates.
"Indebtedness" means, with respect to any person, (i) any indebtedness,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the deferred and unpaid balance
of the purchase price of any property (including pursuant to capital leases),
except any such balance that constitutes an accrued expense or a trade payable,
and any Hedging Obligations, if and to the extent such indebtedness (other than
a Hedging Obligation) would appear as a liability upon a balance sheet of such
person prepared on a consolidated basis in accordance with GAAP, and also
includes, to the extent not otherwise included, the guarantee of items that
would be included within this definition; (ii) Disqualified Stock of such
person; or (iii) Preferred Stock issued by a Restricted Subsidiary of such
person.
"Investment" means any capital contribution to, or other debt or equity
investment in, any Person. For the purposes of the "Limitation on Restricted
Payments" covenant, the amount of any Investment shall be the original cost of
such Investment plus the cost of all additional Investments by the Company or
any of its Restricted Subsidiaries, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment, reduced by the payment of dividends or distributions in connection
with such Investment or any other amounts received by the Company or any
Restricted Subsidiary in respect of such Investment to the extent not included
in Consolidated Net Income.
"issue" means create, issue, assume, guarantee, incur or otherwise become
directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
person existing at the time such person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be issued
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
For this definition, the terms "issuing," "issuer," "issuance" and "issued" have
meanings correlative to the foregoing.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell and any filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
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"Net Income" means, with respect to any person, the net income (loss) of
such person, determined in accordance with GAAP, excluding, however, any gain or
loss, together with any related provision for taxes, realized in connection with
any Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions).
"Net Proceeds" means, with respect to any Asset Sale, the aggregate amount
of cash proceeds (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, and including
any amounts received as disbursements or withdrawals from any escrow or similar
account established in connection with any such Asset Sale, but, in either such
case, only as and when so received) received by the Company or any of its
Restricted Subsidiaries in respect of such Asset Sale, net of: (i) the cash
expenses of such Asset Sale (including, without limitation, the payment of
principal of, and premium, if any, and interest on, Indebtedness required to be
paid as a result of such Asset Sale (other than the Notes) and legal,
accounting, management and advisory and investment banking fees and sales
commissions), (ii) taxes paid or payable as a result thereof, (iii) any portion
of cash proceeds that the Company determines in good faith should be reserved
for post-closing adjustments, it being understood and agreed that on the day
that all such post-closing adjustments have been determined, the amount (if any)
by which the reserved amount in respect of such Asset Sale exceeds the actual
post-closing adjustments payable by the Company or any of its Restricted
Subsidiaries shall constitute Net Proceeds on such date.
"Non-Restricted Subsidiary" means any Subsidiary of the Company other than
a Restricted Subsidiary.
"Obligations" means, with respect to any Indebtedness, all principal,
interest, premiums, penalties, fees, indemnities, expenses (including legal fees
and expenses), reimbursement obligations and other liabilities payable to the
holder of such Indebtedness under the documentation governing such Indebtedness,
and any other claims of such holder arising in respect of such Indebtedness.
"Other Permitted Indebtedness" means:
(i) Indebtedness of the Company and its Restricted Subsidiaries
existing as of the date of original issuance of the Notes and all
related Obligations as in effect on such date;
(ii) Indebtedness of the Company and its Restricted Subsidiaries in
respect of bankers acceptances and letters of credit (including, without
limitation, letters of credit in respect of workers' compensation
claims) issued in the ordinary course of business, or other Indebtedness
in respect of reimbursement-type obligations regarding workers'
compensation claims;
(iii) Refinancing Indebtedness; provided that: (A) the principal
amount of such Refinancing Indebtedness shall not exceed the outstanding
principal amount of Indebtedness (including unused commitments)
extended, refinanced, renewed, replaced, substituted or refunded plus
any amounts incurred to pay premiums, fees and expenses in connection
therewith, and (B) the Refinancing Indebtedness shall have a Weighted
Average Life to Maturity equal to or greater than the Weighted Average
Life to Maturity of the Indebtedness being extended, refinanced,
renewed, replaced, substituted or refunded;
(iv) intercompany Indebtedness of and among the Company and its
wholly owned Restricted Subsidiaries (excluding guarantees by Restricted
Subsidiaries of Indebtedness of the Company not issued in compliance
with the "Limitation on Guarantees of Company Indebtedness by Restricted
Subsidiaries" covenant);
(v) Indebtedness of any Non-Restricted Subsidiary created after the
date of original issuance of the Notes; provided that such Indebtedness
is nonrecourse to the Company and its Restricted Subsidiaries and the
Company and its Restricted Subsidiaries have no Obligations with respect
to such Indebtedness;
(vi) Indebtedness of the Company and its Restricted Subsidiaries
under Hedging Obligations;
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(vii) Indebtedness of the Company and its Restricted Subsidiaries
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, which will not be, and will not be deemed to be,
inadvertent) drawn against insufficient funds in the ordinary course of
business;
(viii) guarantees by a Restricted Subsidiary of Indebtedness of the
Company if the Indebtedness so guaranteed is permitted under the
Indenture and the Notes are guaranteed by such Restricted Subsidiary to
the extent required by the "Limitation on Guaranties of Company
Indebtedness by Restricted Subsidiaries" covenant;
(ix) Indebtedness of the Company and its Restricted Subsidiaries in
connection with performance, surety, statutory, appeal or similar bonds
in the ordinary course of business; and
(x) intercompany Indebtedness of the Company to the Guarantor;
provided such Indebtedness does not bear interest.
"Permitted Liens" means: with respect to the Company and its
Restricted Subsidiaries,
(1) Liens for taxes, assessments, governmental charges or claims which
are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have
been made therefor;
(2) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceedings,
if a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made therefor;
(3) Liens incurred on deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;
(4) Liens incurred on deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance and return of money bonds and other
obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money);
(5) easements, rights-of-way, zoning or other restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the business of
the Company or any of its Restricted Subsidiaries incurred in the ordinary
course of business;
(6) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(7) judgment and attachment Liens not giving rise to an Event of
Default;
(8) leases or subleases granted to others not interfering in any
material respect with the business of the Company or any of its Restricted
Subsidiaries;
(9) Liens securing Indebtedness under Hedging Obligations;
(10) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements;
(11) Liens arising out of consignment or similar arrangements for the
sale of goods entered into by the Company or its Restricted Subsidiaries in
the ordinary course of business;
(12) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
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(13) Liens existing on the date of original issuance of the Original
Notes and any extensions, refinancings, renewals, replacements,
substitutions or refundings thereof;
(14) any Lien granted to the Trustee and any substantially equivalent
Lien granted to any trustee or similar institution under any indenture for
Senior Indebtedness permitted by the terms of the Indenture;
(15) Liens securing Senior Indebtedness or Indebtedness of a
Restricted Subsidiary if such Indebtedness is incurred pursuant to the
Credit Agreement or is permitted to be incurred pursuant to the first
sentence of the covenant "Limitation on Incurrence of Indebtedness";
(16) Liens securing Indebtedness of the Company and its Restricted
Subsidiaries in connection with capital leases, sale and leaseback
transactions, purchase money obligations, capital expenditures or similar
financing transactions, which Indebtedness is permitted under the covenant
"Limitation on Incurrence of Indebtedness" or "Sale and Leaseback
Transactions";
(17) Liens on property existing at the time of acquisition thereof by
the Company or a Restricted Subsidiary of the Company; provided that such
Liens were in existence prior to the contemplation of such acquisition; and
(18) additional Liens at any one time outstanding in respect of
properties or assets where aggregate fair market value does not exceed
$2,000,000 (the fair market value to be determined on the date such Lien is
granted on such properties or assets).
"Preferred Stock" of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"Pro Forma Basis" means, for purposes of determining Consolidated Net
Income in connection with the Cash Flow Coverage Ratio (including in connection
with the "Limitation on Restricted Payments" covenant, the "Designation of
Restricted and Non-Restricted Subsidiaries" covenant, the "Merger or
Consolidation" covenant, the incurrence of Indebtedness pursuant to the first
sentence of the "Limitation on Incurrence of Indebtedness" covenant and
Consolidated Net Worth for purposes of the "Merger or Consolidation" covenant),
giving pro forma effect to (x) any acquisition or sale of a Person, business or
asset, related incurrence, repayment or refinancing of Indebtedness or other
related transactions, including any Restructuring Charges which would otherwise
be accounted for as an adjustment permitted by Regulation S-X under the
Securities Act or on a pro forma basis under GAAP, or (y) any incurrence,
repayment or refinancing of any Indebtedness and the application of the proceeds
therefrom, in each case, as if such acquisition or sale and related
transactions, restructurings, consolidations, cost savings, reductions,
incurrence, repayment or refinancing were realized on the first day of the
relevant period permitted by Regulation S-X under the Securities Act or on a pro
forma basis under GAAP. Furthermore, in calculating the Cash Flow Coverage
Ratio, (1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the determination date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the determination date;
(2) if interest on any Indebtedness actually incurred on the determination date
may optionally be determined at an interest rate based upon a factor of a prime
or similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the determination date will be deemed to have been in
effect during the relevant period; and (3) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by agreements relating to interest rate swaps or similar
interest rate protection Hedging Obligations, shall be deemed to accrue at the
rate per annum resulting after giving effect to the operation of such
agreements.
"Refinancing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries issued or given in exchange for, or the proceeds of
which are used to, extend, refinance, renew, replace, substitute for or refund
the Notes or Indebtedness contemplated by clause (i) of the definition of Other
Permitted
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Indebtedness or any Indebtedness issued to so extend, refinance, renew, replace,
substitute for or refund such Indebtedness.
"Restricted Investment" means any Investment in any person; provided that
Restricted Investments will not include: (i) Investments in marketable
securities and other negotiable instruments permitted by the Indenture; (ii)
Investments in the Company; (iii) Investments in any Restricted Subsidiary or in
a Person that becomes a Restricted Subsidiary as a result of such investment
(provided that any Investment in a Restricted Subsidiary or in a Person that
becomes a Restricted Subsidiary is made for fair market value (as determined by
the Board of Directors in good faith)); or (iv) Investments which exist on the
date of the issuance of the Original Notes. The amount of any Restricted
Investment shall be the amount of cash and the fair market value at the time of
transfer of all other property (as determined by the Board of Directors in good
faith) initially invested or paid for such Restricted Investment, plus all
additions thereto, without any adjustments for increases or decreases in value
of or write-ups, write-downs or write-offs with respect to, such Restricted
Investment.
"Restricted Subsidiary" means: (i) any Subsidiary of the Company existing
on the date of issuance of the Original Notes, and (ii) any other Subsidiary of
the Company formed, acquired or existing after the date of issuance of the
Original Notes that is designated as a "Restricted Subsidiary" by the Company
pursuant to a resolution approved by a majority of the Board of Directors;
provided, however, that the term Restricted Subsidiary shall not include any
Subsidiary of the Company that has been redesignated by the Company pursuant to
a resolution approved by a majority of the Board of Directors as a
Non-Restricted Subsidiary in accordance with the "Designation of Restricted and
Non-Restricted Subsidiaries" covenant unless such Subsidiary shall have
subsequently been redesignated a Restricted Subsidiary in accordance with clause
(ii) of this definition.
"Restructuring Charges" means any charges or expenses in respect of
restructuring or consolidating any business, operations or facilities, any
compensation or headcount reduction, or any other cost savings, of any persons
or businesses either alone or together with the Company or any Restricted
Subsidiary, as permitted by GAAP or Regulation S-X under the Securities Act.
"Senior Indebtedness" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the date of issuance of the
Notes or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall also
include the principal of, premium, if any, interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all other amounts
owing in respect of, all monetary obligations (including guarantees thereof) of
every nature of the Company under the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement obligations
under letters of credit, fees, expenses and indemnities. "Senior Indebtedness"
shall not include (i) any Indebtedness of the Company to a Subsidiary of the
Company, (ii) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of the Company or any Subsidiary of the Company
(including, without limitation, amounts owed for compensation), (iii)
Indebtedness to trade creditors and other amounts incurred in connection with
obtaining goods, materials or services, (iv) Indebtedness represented by
Disqualified Stock, (v) any liability for federal, state, local or other taxes
owed or owing by the Company, (vi) that portion of any Indebtedness incurred in
violation of the Indenture provisions set forth under "Limitation on Incurrence
of Indebtedness" and (vii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company.
"Services Agreement" means the Services Agreement dated as of July 31, 1997
between the Company and Fedders Corporation.
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"Significant Subsidiary" means any Restricted Subsidiary of the Company
that would be a "significant subsidiary" as defined in clause (2) of the
definition of such term in Rule 1-02 of Regulation S-X under the Securities Act
and the Exchange Act.
"Subsidiary" of any person means any entity of which the Equity Interests
entitled to cast at least a majority of the votes that may be cast by all Equity
Interests having ordinary voting power for the election of directors or other
governing body of such entity are owned by such person (regardless of whether
such Equity Interests are owned directly by such person or through one or more
Subsidiaries).
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect the board of directors.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the then outstanding
principal amount of such Indebtedness into (ii) the sum of the product(s)
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) which will elapse between such date and
the making of such payment.
BOOK-ENTRY, DELIVERY AND FORM
The Notes initially will be in the form of one or more registered global
notes without interest coupons (collectively, the "Global Notes"). Upon
issuance, the Global Notes will be deposited with the Trustee, as custodian for
DTC, in New York, New York, and registered in the name of DTC or its nominee, in
each case for credit to the accounts of DTC's Direct and Indirect Participants
(as defined below).
Transfer of beneficial interests in any Global Notes will be subject to the
applicable rules and procedures of DTC and its Direct or Indirect Participants
(including, if applicable, those of Euroclear and CEDEL), which may change from
time to time.
The Global Notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the Global Notes may be exchanged
for Notes in certificated form. See "--Transfers of Interests in Global Notes
for Certificated Notes."
Initially, the Trustee will act as Paying Agent and Registrar. The Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
Depositary Procedures
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in accounts of Participants. The Direct Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations, including
Euroclear and CEDEL. Access to DTC's system is also available to other entities
that clear through or maintain a direct or indirect, custodial relationship with
a Direct Participant (collectively, the "Indirect Participants"). DTC may hold
securities beneficially owned by other persons only through the Direct
Participants or Indirect Participants and such other persons' ownership interest
and transfer of ownership interest will be recorded only on the records of the
Direct Participants and/or Indirect Participants, and not on the records
maintained by DTC.
DTC has also advised the Company that, pursuant to DTC's procedures, (i)
upon deposit of the Global Notes, DTC will credit the accounts of the Direct
Participants designated by the Company with portions of the principal amount of
the Global Notes allocated by the Company to such Direct Participants, and (ii)
DTC will maintain records of the ownership interests of such Direct Participants
in the Global Notes and the
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transfer of ownership interests by and between Direct Participants. DTC will not
maintain records of the ownership interests of, or the transfer of ownership
interests by and between, Indirect Participants or other owners of beneficial
interests in the Global Notes. Direct Participants and Indirect Participants
must maintain their own records of the ownership interests of, and the transfer
of ownership interests by and between, Indirect Participants and other owners of
beneficial interests in the Global Notes.
Investors in the Global Notes may hold their interests therein directly
through DTC if they are Direct Participants in DTC or indirectly through
organizations that are Direct Participants in DTC. All ownership interests in
any Global Notes, including those of customers' securities accounts held through
Euroclear or CEDEL, may be subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery
in definitive, certificated form, of securities that they own. This may limit or
curtail the ability to transfer beneficial interests in a Global Note to such
persons. Because DTC can act only on behalf of Direct Participants, which in
turn act on behalf of Indirect Participants and others, the ability of a person
having a beneficial interest in a Global Note to pledge such interest to persons
or entities that are not Direct Participants in DTC, or otherwise to take
actions in respect of such interests, may be affected by the lack of physical
certificates evidencing such interests. For certain other restrictions on the
transferability of the Notes see "--Transfers of Interests in Global Notes for
Certificated Notes."
Except as described in "--Transfers of Interests in Global Notes for
Certificated Notes," owners of beneficial interests in the Global Notes will not
have Notes registered in their names, will not receive physical delivery of
Notes in certificated form and will not be considered the registered owners or
holders thereof under the Indenture for any purpose.
Under the terms of the Indenture, the Company, the Guarantor and the
Trustee will treat the persons in whose names the Notes are registered
(including Notes represented by Global Notes) as the owners thereof for the
purpose of receiving payments and for any and all other purposes whatsoever.
Payments in respect of the principal, premium, Liquidated Damages, if any, and
interest on Global Notes registered in the name of DTC or its nominee will be
payable by the Trustee to DTC or its nominee as the registered holder under the
Indenture. Consequently, neither the Company, the Trustee nor any agent of the
Company or the Trustee has or will have any responsibility or liability for (i)
any aspect of DTC's records or any Direct Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any of DTC's records or any Direct Participant's or Indirect
Participant's records relating to the beneficial ownership interests in any
Global Notes or (ii) any other matter relating to the actions and practices of
DTC or any of its Direct Participants or Indirect Participants.
DTC has advised the Company that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
Notes is to credit the accounts of the relevant Direct Participants with such
payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Notes as shown on
DTC's records. Payments by Direct Participants and Indirect Participants to the
beneficial owners of the Notes will be governed by standing instructions and
customary practices between them and will not be the responsibility of DTC, the
Trustee, the Company or the Guarantor. Neither the Company, the Guarantor nor
the Trustee will be liable for any delay by DTC or its Direct Participants or
Indirect Participants in identifying the beneficial owners of the Notes, and the
Company and the Trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee as the registered owner of the
Notes for all purposes.
The Global Notes will trade in DTC's Same-Day Funds Settlement System and,
therefore, transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures and will be settled in immediately available
funds. Transfers between Indirect Participants (other than Indirect Participants
who hold an interest in the Notes through Euroclear or CEDEL) who hold an
interest through a Direct Participant will be effected in accordance with the
procedures of such Direct Participant but generally will settle in immediately
available funds. Transfers between and among Indirect Participants who hold
interests in the
71
<PAGE> 76
Notes through Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the Notes through Euroclear or CEDEL
purchasing an interest in a Global Note from a Direct Participant in DTC will be
credited, and any such crediting will be reported to Euroclear or CEDEL during
the European business day immediately following the settlement date of DTC in
New York. Although recorded in DTC's accounting records as of DTC's settlement
date in New York, Euroclear and CEDEL customers will not have access to the cash
amount credited to their accounts as a result of a sale of an interest in a
Global Note to a DTC Participant until the European business day for Euroclear
or CEDEL immediately following DTC's settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Direct
Participants to whose account interests in the Global Notes are credited and
only in respect of such portion of the aggregate principal amount of the Notes
as to which such Direct Participant or Direct Participants has or have given
direction. However, if there is an Event of Default under the Notes, DTC
reserves the right to exchange Global Notes (without the direction of one or
more of its Direct Participants) for Notes in certificated form, and to
distribute such certificated forms of Notes to its Direct Participants. See
"--Transfers of Interests in Global Notes for Certificated Notes."
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Global Notes among Direct
Participants, Euroclear and CEDEL, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be discontinued at
any time. None of the Company, the Guarantor or the Trustee will have any
responsibility for the performance by DTC, Euroclear or CEDEL or their
respective Direct Participants and Indirect Participants of their respective
obligations under the rules and procedures governing any of their operations.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Transfers of Interests in Global Notes for Certificated Notes
An entire Global Note may be exchanged for definitive Notes in registered,
certificated form without interest coupons ("Certificated Notes") if (i) DTC (x)
notifies the Company that it is unwilling or unable to continue as depositary
for the Global Notes and the Company thereupon fails to appoint a successor
depositary within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of Certificated Notes or (iii)
there shall have occurred and be continuing a Default or an Event of Default
with respect to the Notes. In any such case, the Company will notify the Trustee
in writing that, upon surrender by the Direct Participants and Indirect
Participants of their interest in such Global Note, Certificated Notes will be
issued to each person that such Direct Participants and Indirect Participants
and the DTC identify as being the beneficial owner of the related Notes.
Beneficial interests in Global Notes held by any Direct Participant or
Indirect Participant may be exchanged for Certificated Notes upon request to
DTC, by such Direct Participant (for itself or on behalf of an Indirect
Participant), to the Trustee in accordance with customary DTC procedures.
Certificated Notes delivered in exchange for any beneficial interest in any
Global Note will be registered in the names, and issued in any approved
denominations, requested by DTC on behalf of such Direct Participants or
Indirect Participants (in accordance with DTC's customary procedures).
Neither the Company, the Guarantor nor the Trustee will be liable for any
delay by the holder of the Global Notes or DTC in identifying the beneficial
owners of Notes, and the Company, the Guarantor and the Trustee may conclusively
rely on, and will be protected in relying on, instructions from the holder of
the Global Notes or DTC for all purposes.
72
<PAGE> 77
Same Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available same day
funds to the accounts specified by the holder of interests in such Global Note.
With respect to Certificated Notes, the Company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available same day 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. The Company expects that secondary
trading in the Certificated Notes will also be settled in immediately available
funds.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Notes for its own account as a result of
market-making activities or other trading activities in connection with the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such 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 Notes received in exchange for Original Notes where such
Original Notes were acquired as a result of market-making activities or other
trading activities.
The Company and Fedders Corporation will receive no proceeds in connection
with the Exchange Offer. 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 Notes or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Notes. Any broker-dealer that
resells Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act.
FEDERAL INCOME TAX CONSEQUENCES
TO EXCHANGING AND NONEXCHANGING HOLDERS
The exchange of an Original Note for a Note pursuant to the Exchange Offer
will not be taxable to the exchanging holders for federal income tax purposes
assuming the fair market value of the Original Note equals the fair market value
of the Note. As a result (i) an exchanging holder will not recognize any gain or
loss on the exchange, (ii) the holding period for the Note will include the
holding period for the Original Note and (iii) the basis of the Note will be the
same as the basis of the Original Note.
The Exchange Offer will result in no federal income tax consequences to a
nonexchanging holder.
The preceding discussion reflects the opinion of Cummings & Lockwood,
counsel to the Company, as to the material federal income tax consequences
expected to result from the Exchange Offer. The discussion is for general
information only and does not constitute tax advice. Each holder should consult
its own tax adviser as to these and any other federal income tax consequences of
the Exchange Offer as well as any tax consequences to it under state, local or
other law. This summary is based on the current provisions of the Internal
Revenue Code of 1986, as amended, and applicable Treasury regulations, judicial
authority and administrative rulings and practice. Those consequences could be
modified by future changes in the relevant law (which changes could be applied
retroactively).
73
<PAGE> 78
LEGAL MATTERS
Certain legal matters with respect to the legality of the Notes will be
passed upon for the Company by Cummings & Lockwood, Stamford, Connecticut.
Certain legal matters relating to the Notes will be passed upon for the Initial
Purchasers by Cahill Gordon & Reindel (a partnership including a professional
corporation), New York, New York.
EXPERTS
The consolidated balance sheets of Fedders Corporation as of August 31,
1996 and 1995, and the related consolidated statements of operations, cash flows
and stockholders' equity for the years then ended which are included or
incorporated herein, have been audited by BDO Seidman, LLP, independent
certified public accountants as set forth in their report thereon included or
incorporated herein. The consolidated statements of operations, stockholders'
equity and cash flows of Fedders Corporation for the year ended August 31, 1994
included or incorporated herein have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included or
incorporated herein. Such consolidated financial statements are included or
incorporated herein in reliance upon such reports given upon the authority of
such firms as experts in accounting and auditing.
AVAILABLE INFORMATION
Fedders Corporation is subject to the information requirements of the
Exchange Act, and in accordance therewith files reports and other information
with the Commission. Reports, proxy and information statements and other
information filed by Fedders Corporation can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material may
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material also
can be reviewed through the Commission's Electronic Data Gathering, Analysis,
and Retrieval System, which is publicly available through the Commission's Web
site (http://www.sec.gov). In addition, certain classes of securities of Fedders
Corporation are listed on the New York Stock Exchange, and such material can be
inspected at the public reference facilities of such exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Fedders Corporation
are incorporated by reference in this Prospectus: (1) its Annual Report on Form
10-K for the fiscal year ended August 31, 1996; (2) its Quarterly Reports on
Form 10-Q for the quarterly periods ended November 30, 1996, February 28, 1997
and May 31, 1997; and (3) its Proxy Statement dated January 13, 1997. Any
statement contained in any such reports shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein, or in a subsequent such report, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
Fedders Corporation will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of any such person, a copy
of any or all of the documents incorporated herein by reference (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents). Written or telephone requests should be directed
to the Secretary of Fedders Corporation at its principal executive offices,
which are located at 505 Martinsville Road, P.O. Box 813, Liberty Corner, New
Jersey 07938; telephone number: (908) 604-8686; facsimile number: (908)
604-0715.
74
<PAGE> 79
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Consolidated Statements of Operations for the Years Ended August 31, 1994, 1995 and
1996 and for the Nine Months Ended May 31, 1996 (unaudited) and 1997 (unaudited).... F-2
Consolidated Balance Sheets as of August 31, 1995 and 1996 and May 31, 1997
(unaudited)......................................................................... F-3
Consolidated Statements of Cash Flows for the Years Ended August 31, 1994, 1995 and
1996 and for the Nine Months Ended May 31, 1996 (unaudited) and 1997 (unaudited).... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended August 31, 1994,
1995 and 1996 and for the Nine Months Ended May 31, 1997 (unaudited)................ F-5
Notes to Consolidated Financial Statements............................................ F-6
Report of Independent Certified Public Accountants.................................... F-23
Report of Independent Auditors........................................................ F-24
</TABLE>
F-1
<PAGE> 80
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED MAY 31,
YEARS ENDED AUGUST 31, (UNAUDITED)
-------------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales................................. $231,572 $316,494 $371,772 $290,004 $237,456
Costs and expenses:
Cost of sales........................... 182,309 249,369 288,744 227,363 185,158
Selling, general and administrative..... 25,358 29,472 32,040 22,686 28,904
-------- -------- -------- -------- --------
207,667 278,841 320,784 250,049 214,062
-------- -------- -------- -------- --------
Operating income.......................... 23,905 37,653 50,988 39,955 23,394
Minority interest in joint venture........ -- -- 230 237 457
Interest expense (net of interest income
of $223, $751 and $1,410 for the years
ended August 31, 1994, 1995 and 1996 and
$1,496 and $1,410 for the nine months
ended May 31, 1996 and 1997,
respectively)........................... (4,102) (1,962) (952) (1,164) (2,782)
-------- -------- -------- -------- --------
Income before income taxes................ 19,803 35,691 50,266 39,028 21,069
Federal, state and foreign income tax..... 594 6,187 19,108 14,885 7,164
-------- -------- -------- -------- --------
Income before cumulative effect of an
accounting change....................... 19,209 29,504 31,158 24,143 13,905
Cumulative effect of an accounting
change.................................. 1,780 -- -- -- --
-------- -------- -------- -------- --------
Net income................................ 20,989 29,504 31,158 24,143 13,905
Preferred stock dividend requirement...... -- -- 151 -- 2,178
-------- -------- -------- -------- --------
Net income attributable to common
stockholders............................ $ 20,989 $ 29,504 $ 31,007 $ 24,143 $ 11,727
======== ======== ======== ======== ========
Primary earnings per share:
Income before cumulative effect of an
accounting change.................... $ 0.49 $ 0.72 $ 0.74 $ 0.58 $ 0.28
Cumulative effect of an accounting
change............................... 0.04 -- -- -- --
-------- -------- -------- -------- --------
Net income per share...................... $ 0.53 $ 0.72 $ 0.74 $ 0.58 $ 0.28
======== ======== ======== ======== ========
Dividends declared per share:
Preferred............................... -- -- $ 0.050 -- $ 0.190
Common.................................. -- $ 0.020 0.080 $ 0.060 0.060
Class A................................. -- 0.020 0.080 0.060 0.060
Class B................................. -- 0.018 0.072 0.054 0.054
</TABLE>
See accompanying notes.
F-2
<PAGE> 81
FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
--------------------- 1997
1995 1996 (UNAUDITED)
-------- -------- -----------
(DOLLARS IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 57,707 $ 90,295 $ 7,528
Accounts receivable (less allowances of $872, $1,952 and
$2,133 at August 31, 1995 and 1996 and May 31, 1997,
respectively)........................................ 8,847 7,975 67,506
Inventories............................................. 29,020 53,446 90,595
Deferred income taxes................................... 2,954 3,584 3,584
Other current assets.................................... 893 3,366 4,541
-------- -------- --------
Total current assets...................................... 99,421 158,666 173,754
Net property, plant and equipment......................... 29,803 62,872 63,271
Deferred income taxes..................................... 1,277 7,364 7,364
Goodwill.................................................. 5,517 58,556 57,329
Other assets.............................................. 757 2,762 3,557
-------- -------- --------
$136,775 $290,220 $ 305,275
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowing.................................... $ -- $ -- $ 26,271
Current portion of long-term debt....................... 590 1,889 1,843
Accounts payable........................................ 5,591 16,514 20,891
Income taxes payable.................................... 9,131 15,391 10,361
Accrued expenses........................................ 27,986 38,055 42,576
-------- -------- --------
Total current liabilities................................. 43,298 71,849 101,942
Long-term debt............................................ 4,516 38,517 37,286
Other long-term liabilities:
Warranty................................................ 3,962 3,679 3,678
Other................................................... 2,457 10,816 9,832
Minority interest in joint venture........................ -- 5,608 5,151
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $1 par value, 15,000,000 shares
authorized, 7,643,061 and 7,514,461 issued at August
31, 1996 and May 31, 1997, respectively.............. -- 7,643 7,514
Common Stock, $1 par value, 80,000,000 shares
authorized, 18,988,598, 18,989,798 and 18,989,798
issued at August 31, 1995 and 1996 and May 31, 1997,
respectively......................................... 18,989 18,990 18,990
Class A Stock, $1 par value, 60,000,000 shares
authorized, 18,831,376, 19,415,916 and 19,944,987
shares issued at August 31, 1995 and 1996 and May 31,
1997, respectively................................... 18,831 19,416 19,945
Class B Stock, $1 par value, 7,500,000 shares
authorized, 2,267,206, 2,266,706 and 2,266,606 issued
and outstanding at August 31, 1995 and 1996 and May
31, 1997, respectively............................... 2,267 2,267 2,267
Additional paid-in capital.............................. 46,481 87,728 88,595
Retained earnings (deficit)............................. (4,041) 23,865 33,579
Treasury stock, at cost, 4,052,600 shares of Class A
Stock at May 31, 1997................................ -- -- (23,323)
Cumulative translation adjustment......................... 15 (158) (181)
-------- -------- --------
Total stockholders' equity................................ 82,542 159,751 147,386
-------- -------- --------
$136,775 $290,220 $ 305,275
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 82
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED MAY 31,
YEARS ENDED AUGUST 31, (UNAUDITED)
---------------------------- -----------------------------
1994 1995 1996 1996 1997
------- -------- ------- -------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income............................. $20,989 $ 29,504 $31,158 $ 24,143 $ 13,905
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization..... 9,374 7,519 6,578 3,281 7,433
Tax benefit related to stock
options exercised.............. -- 2,900 437 -- --
Deferred income taxes............. (962) (5,406) (1,717) -- --
Changes in operating assets and
liabilities (net of the effect of
the merger):
Accounts receivable, net.......... (3,939) 3,993 4,402 (76,335) (59,531)
Inventories....................... 1,222 (10,972) (7,856) (15,972) (37,149)
Other current assets.............. 243 (219) (628) (1,213) (1,175)
Other assets...................... (59) 175 (568) (721) (900)
Accounts payable.................. 141 276 (2,887) 15,790 4,377
Accrued expenses.................. 4,370 6,617 3,784 22,092 4,521
Income taxes payable.............. 573 8,373 6,243 -- (5,030)
Other long-term liabilities....... 1,687 1,643 3,151 123 (985)
Other............................. (39) 184 (226) (404) (480)
------- -------- ------- --------
Net cash provided by (used in)
operations............................. 33,600 44,587 41,871 (29,216) (75,014)
------- -------- ------- --------
Investing activities:
Additions to property, plant and
equipment........................... (2,634) (9,041) (7,043) (6,379) (6,574)
Disposal of property, plant and
equipment........................... 441 521 535 34 74
------- -------- ------- --------
Net cash used in investing activities.... (2,193) (8,520) (6,508) (6,345) (6,500)
------- -------- ------- --------
Financing activities:
Increase in short-term borrowing....... -- -- -- -- 26,271
Repayments of NYCOR short-term
borrowing........................... -- -- (3,000) -- --
Repayments of long-term debt........... (9,229) (13,866) (678) (493) (1,277)
Proceeds from stock options
exercised........................... 4,138 692 1,868 1,498 1,267
Net proceeds from Fedders Xinle
financing........................... -- -- 6,282 6,710 --
Repayment of Fedders Xinle short-term
debt................................ -- -- (3,396) (3,396) --
Repurchase of Class A Stock............ -- -- -- -- (23,323)
Cash dividends......................... -- (797) (3,252) (2,401) (4,191)
Expenses related to the NYCOR merger... -- -- (599) -- --
Proceeds from notes due on common stock
purchases........................... -- 742 -- -- --
------- -------- ------- --------
Net cash (used in) provided by financing
activities............................. (5,091) (13,229) (2,775) 1,918 (1,253)
------- -------- ------- --------
Net increase (decrease) in cash and cash
equivalents............................ 26,316 22,838 32,588 (33,643) (82,767)
Cash and cash equivalents at beginning of
period................................. 8,553 34,869 57,707 57,707 90,295
------- -------- ------- --------
Cash and cash equivalents at end of
period................................. $34,869 $ 57,707 $90,295 $ 24,064 $ 7,528
======= ======== ======= ========
Supplemental disclosures:
Net interest paid........................ $ 3,766 $ 1,904 $ 2,249 $ 1,824 $ 1,996
Net income taxes paid (refunded)......... (1,196) 492 13,513 1,989 12,047
Noncash investing and financing
activities:
The issuance of 7,643,036 shares of
Convertible Preferred Stock at a price
of $6.25 in exchange for all the
outstanding shares of Common, Class A
and Class B shares of NYCOR............ -- -- $47,769 -- --
</TABLE>
See accompanying notes.
F-4
<PAGE> 83
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL RETAINED CUMULATIVE NOTES DUE ON
PREFERRED COMMON CLASS A CLASS B PAID-IN EARNINGS TRANSLATION COMMON STOCK TREASURY
STOCK STOCK STOCK STOCK CAPITAL (DEFICIT) ADJUSTMENTS PURCHASES STOCK
--------- ------- ------- ------- ---------- -------- ----------- ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
August 31, 1993.............. -- $18,614 -- $2,268 $ 47,571 $(35,128) $(130) -- $ (8,966)
------ ------- ------- ------ ------- ------- ---- ---- ------
Net income................... -- -- -- -- -- 20,989 -- -- --
Stock dividend............... -- -- $10,625 -- -- (10,625) -- -- --
Stock options exercised...... -- 1,028 -- -- 3,852 -- -- $ (742) --
Foreign currency
translation................ -- -- -- -- -- -- (39) -- --
------ ------- ------- ------ ------- ------- ---- ---- ------
August 31, 1994.............. -- $19,642 $10,625 $2,268 $ 51,423 $(24,764) $(169) $ (742) $ (8,966)
Net income................... -- -- -- -- -- 29,504 -- -- --
Stock dividend............... -- -- 7,984 -- -- (7,984) -- -- --
Conversion of Class B to
Common Stock............... -- 1 -- (1) -- -- -- -- --
Dividends declared........... -- -- -- -- -- (797) -- -- --
Stock options exercised...... -- -- 222 -- 470 -- -- -- --
Tax benefit related to stock
options exercised.......... -- -- -- -- 2,900 -- -- -- --
Repayment of common stock
notes...................... -- -- -- -- -- -- -- 742 --
Retirement of treasury
stock...................... -- (654) -- -- (8,312) -- -- -- 8,966
Foreign currency
translation................ -- -- -- -- -- -- 184 -- --
------ ------- ------- ------ ------- ------- ---- ---- ------
August 31, 1995.............. -- $18,989 $18,831 $2,267 $ 46,481 $(4,041) $ 15 $ -- $ --
Net income................... -- -- -- -- -- 31,158 -- -- --
Issuance of Preferred
Stock...................... $ 7,643 -- -- -- 40,126 -- -- -- --
Expenses related to the NYCOR
merger..................... -- -- -- -- (599) -- -- -- --
Tax benefit related to stock
options exercised.......... -- -- -- -- 437 -- -- -- --
Conversion of Class B to
Common Stock............... -- 1 -- -- -- -- -- -- --
Dividends declared........... -- -- -- -- -- (3,252) -- -- --
Stock options exercised...... -- -- 585 -- 1,283 -- -- -- --
Foreign currency
translation................ -- -- -- -- -- -- (173) -- --
------ ------- ------- ------ ------- ------- ---- ---- ------
August 31, 1996.............. $ 7,643 $18,990 $19,416 $2,267 $ 87,728 $23,865 $(158) -- --
Nine months ended May 31,
1997 (unaudited):
Net income................... -- -- -- -- -- 13,905 -- -- --
Dividends declared........... -- -- -- -- -- (4,191) -- -- --
Purchase of treasury stock... -- -- -- -- -- -- -- -- (23,323)
Stock options exercised...... -- -- 400 -- 867 -- -- -- --
Conversion of Preferred
Stock...................... (129) -- 129 -- -- -- -- -- --
Foreign currency
translation................ -- -- -- -- -- -- (23) -- --
------ ------- ------- ------ ------- ------- ---- ---- ------
May 31, 1997 (unaudited)..... $ 7,514 $18,990 $19,945 $2,267 $ 88,595 $33,579 $(181) $ -- $(23,323)
====== ======= ======= ====== ======= ======= ==== ==== ======
</TABLE>
See accompanying notes.
F-5
<PAGE> 84
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO MAY 31, 1997 AND THE NINE MONTHS ENDED MAY 31, 1996
AND 1997 IS UNAUDITED; DOLLAR AND STOCK OPTION AMOUNTS, EXCEPT PER SHARE AND
MARKET DATA, ARE IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The accompanying consolidated financial statements include the accounts of
Fedders Corporation and all of its wholly-owned and majority-owned subsidiaries.
All significant intercompany accounts and transactions are eliminated in
consolidation.
Net sales
Sales are recorded at time of shipment, net of provisions for sales
allowances, warranty and similar items.
Warranty and return policy
Fedders Corporation's warranty policy generally provides five-year coverage
for sealed systems including compressors, two-year coverage on motors and
one-year coverage on all other parts and labor related to air conditioners sold
in North America. Fedders Corporation's policy is to accrue the estimated cost
of warranty coverage and returns at the time the sale is recorded. The policy
with respect to sales returns generally provides that a customer may not return
inventory except at Fedders Corporation's option.
Foreign currency translation
Assets and liabilities of Fedders Corporation's foreign subsidiaries are
translated at the rate of exchange in effect at the end of the period. Net sales
and expenses are translated at the average rate of exchange for the period.
Translation adjustments are reflected as a separate component of stockholders'
equity.
Cash and cash equivalents
Fedders Corporation considers all highly liquid investments purchased with
an initial maturity of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of the first-in, first-out (FIFO) cost
or market. Fedders Corporation reviews inventory periodically for slow-moving
and obsolete items. Write downs, which have historically been insignificant, are
recorded in the period in which they are identified. Inventories consist of the
following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------- MAY 31,
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Finished goods................................ $14,592 $21,711 $53,633
Work in process............................... 2,540 6,652 5,929
Raw materials and supplies.................... 11,888 25,083 31,033
------- ------- -------
$29,020 $53,446 $90,595
======= ======= =======
</TABLE>
F-6
<PAGE> 85
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property, plant and equipment
Replacements, betterments and additions to property, plant and equipment
are capitalized at cost. Expenditures for maintenance and repairs are charged to
expense as incurred. Upon sale or retirement of property, plant and equipment,
the cost and related accumulated depreciation are removed from the respective
accounts and any gain or loss is reflected in income. Property, plant and
equipment at cost consist of the following:
<TABLE>
<CAPTION>
AUGUST 31,
ESTIMATED -------------------- MAY 31,
USEFUL LIFE 1995 1996 1997
--------------- ------- -------- ----------
<S> <C> <C> <C> <C>
Land and improvements............... $ 1,369 $ 3,830 $ 3,929
Buildings........................... 20 to 30 years 12,888 23,915 24,117
Machinery and equipment............. 5 to 12 years 53,302 84,887 85,271
Machinery and equipment under
capital leases.................... 12 years -- 8,191 8,191
------- -------- --------
Property, plant and equipment....... 67,559 120,823 121,508
Accumulated depreciation............ 37,756 57,951 58,237
------- -------- --------
$29,803 $ 62,872 $ 63,271
======= ======== ========
</TABLE>
Depreciation is provided on the straight-line basis over the estimated
useful life of each asset as noted above. Depreciation expense includes a write
down of certain idle fixed assets to estimated realizable value amounting to
$2,860 and $2,694 in 1995 and 1996, respectively. At August 31, 1996 accumulated
depreciation includes $297 of depreciation related to equipment under capital
leases.
Goodwill and other assets
Other assets consist primarily of intangible assets which, other than
goodwill, are amortized over periods from one to eight years using the
straight-line method. Goodwill is amortized over 40 years using the straight-
line method and recoverability is evaluated periodically based on the expected
undiscounted net cash flows of the related businesses. Goodwill and other assets
are net of accumulated amortization of $8,473 and $8,640 at August 31, 1995 and
1996, respectively. At August 31, 1996, goodwill includes $53,192 resulting from
the merger with NYCOR, Inc. ("NYCOR") on August 13, 1996 (note 13).
Accrued expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------- MAY 31,
1995 1996 1997
------- ------- ----------
<S> <C> <C> <C>
Warranty............................................. $ 3,442 $ 4,019 $ 5,651
Marketing programs................................... 10,685 16,345 14,971
Salaries and benefits................................ 7,143 7,964 8,973
Other................................................ 6,716 9,727 12,981
------- ------- -------
$27,986 $38,055 $ 42,576
======= ======= =======
</TABLE>
Income taxes
During the first quarter of fiscal 1994, Fedders Corporation adopted
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." The cumulative effect of adopting the new
F-7
<PAGE> 86
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
standard as of September 1, 1993 resulted in a tax benefit of $1,780. Deferred
income taxes are provided to reflect the tax effects of "temporary differences"
between assets and liabilities for financial reporting purposes and income tax
purposes. Provisions are also made for U.S. income taxes on undistributed
earnings of foreign subsidiaries not considered to be indefinitely reinvested
(note 7).
Research and development costs
All research and development costs are charged to expense as incurred and
amounted to $2,233, $2,742, $3,891, $2,658 and $4,581 in 1994, 1995, 1996 and
the nine months ended May 31, 1996 and 1997, respectively.
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.
Risks and uncertainties
Approximately 15% of Fedders Corporation's employees are covered by a three
year collective bargaining agreement, which expires in August 1997. Another 34%
of the employees are covered by collective bargaining agreements which expire in
October 1998.
The Company and the union representing employees of Rotorex were unable to
reach agreement prior to the expiration of their collective bargaining agreement
in August 1997, and the employees covered by the collective bargaining agreement
are on strike. Rotorex continues to operate using management personnel,
employees temporarily transferred from other facilities of the Company and
replacement workers. The Company believes that this strike will not have a
material adverse effect on its financial condition or results of operations.
Effect of new accounting pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," which establishes accounting standards
for, among other things, the impairment of long-lived assets and certain
identifiable intangibles. The adoption of this pronouncement on September 1,
1996 did not have a material effect on Fedders Corporation's consolidated
financial statements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." On September 1, 1996, Fedders Corporation adopted SFAS No. 123
and chose to continue the application of APB Opinion 25 and related
interpretations in accounting for its stock options. As a result, the adoption
of SFAS No. 123 did not have a material effect on Fedders Corporation's
consolidated financial statements.
In February 1997, the FASB issued SFAS 128 "Earnings Per Share", which
establishes standards for computing and presenting earnings per share. SFAS 128
replaces the presentation of primary and fully diluted earnings per share with
basic and diluted earnings per share, respectively. Basic earnings per share are
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share are computed similarly to fully diluted earnings per share. The standard
is effective for financial statements for periods ending after December 15,
1997, with earlier application not permitted. For the nine month period ended
May 31, 1997, basic earnings per share would have been $0.30 under the
provisions of SFAS 128 and diluted earnings per share would have been $0.36.
F-8
<PAGE> 87
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," and SFAS No.
131, "Disclosure about Segments of an Enterprise and Related Information," were
issued. SFAS No. 130 addresses standards for reporting and display of
comprehensive income and its components and SFAS No. 131 requires disclosure of
reportable operating segments. Both statements are effective for Fedders
Corporation's 1999 fiscal year. Fedders Corporation will be reviewing these
pronouncements to determine their applicability, if any.
Amounts per share
Primary earnings per share are computed by dividing net income attributable
to common stockholders by the weighted average number of shares of Common, Class
A and Class B Stock and other common stock equivalents outstanding during the
year: 39,386,000, 41,001,000, 41,997,000 and 41,250,000 in 1994, 1995, 1996 and
the nine months ended May 31, 1997, respectively. Fully diluted earnings per
share were not materially dilutive for all periods presented and, accordingly,
are not presented.
Reclassifications
Certain items in the 1995 financial statements have been reclassified to
conform to the 1996 presentation.
Unaudited Interim Information
The consolidated balance sheet of Fedders Corporation as of May 31, 1997,
the consolidated statements of operations and cash flows for the nine months
ended May 31, 1996 and 1997, the consolidated statement of stockholders' equity
for the nine months ended May 31, 1997, and the notes to such financial
statements are unaudited. However, in the opinion of management, such financial
statements contain all adjustments (consisting solely of normal recurring
adjustments) necessary for a fair presentation. The results of operations for
the interim periods are not necessarily indicative of the results to be expected
for any other interim or annual period.
2. TRANSACTIONS WITH NYCOR
Fedders Corporation had an agreement with NYCOR for the supply of up to
800,000 compressors annually through 2003 with two renewable options. Purchases
from NYCOR, at negotiated market prices, amounted to $52,108, $52,381 and
$53,878 in 1994, 1995 and 1996, respectively. Certain officers and directors of
Fedders Corporation were also officers and/or directors of NYCOR and had
significant stockholdings in both companies. On August 13, 1996, upon receiving
over two-thirds majority approval of all Common and Class B Stockholders,
Fedders Corporation merged with NYCOR. One share of Fedders Convertible
Preferred Stock was issued for each share of NYCOR Common, Class A and Class B
stock (note 13).
3. LITIGATION
Fedders Corporation is involved in litigation, both as plaintiff and
defendant, incidental to the conduct of its business. It is the opinion of
management, after consultation with counsel, that the outcome of such litigation
will not have a material adverse effect on the accompanying financial
statements.
4. SHORT-TERM BORROWING
At August 31, 1995 and 1996, Fedders Corporation had no short-term
borrowing under its $40,000 revolving credit facility with a commercial finance
company. Availability under the facility is based on accounts receivable and
inventory and requires maintenance of certain financial covenants. The maximum
amount outstanding under the credit facility was $21,512 and $37,877 during
fiscal 1995 and 1996, respectively. The average amount outstanding and average
rate of interest charged on outstanding borrowings under the credit facility
were $4,602 at 11% in fiscal 1995 and $5,596 at 9.8% in fiscal 1996. The credit
facility is collateralized by substantially all of Fedders Corporation's assets
and is in effect until December 1997. The rate of interest on the facility was
at the prime rate plus 1.5%.
F-9
<PAGE> 88
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During the second quarter of fiscal 1997, Fedders Corporation's revolving
credit facility was increased to $50,000. The rate of interest charged on
outstanding borrowings under the credit facility was reduced to the prime rate
of interest from the prime rate plus 1.5% and the expiration of the facility was
extended to February 1, 2000. Short-term borrowing at May 31, 1997 was $26,271.
5. LONG-TERM DEBT
The recorded value of long-term debt approximates the fair value based on
current rates available to Fedders Corporation for debt of the same remaining
maturities and consists of the following:
<TABLE>
<CAPTION>
AUGUST 31,
------------------- MAY 31,
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
8.5% Convertible Subordinated Debentures....... -- $ 22,806 $ 22,806
Fedders Xinle 15.175% promissory note.......... -- 6,299 6,128
Promissory note payable to the State of
Illinois, interest at 1%..................... $ 4,527 4,196 3,943
Capital lease obligations and other............ 579 7,105 6,252
------ ------- -------
5,106 40,406 39,129
Less current maturities........................ 590 1,889 1,843
------ ------- -------
$ 4,516 $ 38,517 $ 37,286
====== ======= =======
</TABLE>
Aggregate amounts of long-term debt, excluding capital leases and other of
$7,105, maturing in each of the years ended August 31 are: 1997 - $335,
1998 - $338, 1999 - $342, 2000 - $346, 2001 - $349, and thereafter $31,591.
The 8.5% Convertible Subordinated Debentures ("Convertible Subordinated
Debentures") due in 2012, assumed in connection with the NYCOR merger, are
convertible into Fedders Corporation's Convertible Preferred Stock at any time
prior to maturity at 2.22 shares per $20 principal amount of debenture (note
13).
The $6,299 long-term promissory note of Fedders Xinle is payable to a
People's Republic of China bank and matures in 2008. The loan is secured by
certain joint venture assets and is not guaranteed by Fedders Corporation or its
other subsidiaries.
The loan from the State of Illinois has an interest rate of 1%, is to be
paid over the next 12 years, and is collateralized by a mortgage on the Illinois
facility.
6. LEASES
Capital Leases
Aggregate future minimum rental payments under capital leases primarily
assumed in connection with the NYCOR merger (note 13) for the years ended August
31 are as follows: 1997 - $2,288, 1998 - $2,017, 1999 - $2,139, 2000 - $2,162,
2001 - $144 and thereafter $215. The present value of net minimum lease payments
is $7,105 excluding the interest portion of $1,860.
Operating Leases
Fedders Corporation leases certain property and equipment under operating
leases which expire over the next five years. Most of these operating leases
contain one of the following options: (a) Fedders Corporation may, at the end of
the initial lease term, purchase the property at the then fair market value or
(b) Fedders Corporation may renew its lease at the then fair rental value for a
period of one month to four years. Minimum payments for operating leases having
initial or remaining non-cancelable terms are as follows: $3,896, $3,507,
$3,247, $2,016 and $1,752 in 1997, 1998, 1999, 2000 and 2001, respectively, and
total $14,418. Total rent expense for all operating leases amounted to $3,559,
$2,083 and $2,025 in 1994, 1995 and 1996, respectively.
F-10
<PAGE> 89
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1995, an equipment lease expiring in February 1996 was bought out by Fedders
Corporation for $3,000, of which $1,250 related to the prepayment of rental and
interest expense.
7. INCOME TAXES
The provision for income tax (benefit) consists of the following
components:
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
----------------------------
1994 1995 1996
---- ------- -------
<S> <C> <C> <C>
Current:
Federal................................................ $396 $ 6,258 $18,047
State.................................................. 198 2,378 2,253
Foreign................................................ -- 57 88
---- ------- -------
594 8,693 20,388
---- ------- -------
Charge in lieu of income taxes........................... -- 2,900 437
---- ------- -------
Deferred:
Federal................................................ -- (4,392) (1,530)
State.................................................. -- (1,014) (187)
---- ------- -------
-- (5,406) (1,717)
---- ------- -------
$594 $ 6,187 $19,108
==== ======= =======
</TABLE>
In 1996 and prior years, the exercise of stock options to acquire shares of
Fedders Corporation's Common and Class A Stock resulted in a compensation
deduction for income tax purposes for which no corresponding expense was
required for financial reporting purposes. The tax benefits related to these
deductions, which were realized in 1995 and 1996, are reflected as a charge in
lieu of income taxes and a credit to additional paid-in capital.
Deferred income taxes result from "temporary differences" between assets
and liabilities for financial reporting purposes and income tax purposes. The
principal temporary differences and carryforwards giving rise to deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
AUGUST 31,
-------------------
1995 1996
------- -------
<S> <C> <C>
Warranty......................................................... $ 2,822 $ 3,065
Depreciation..................................................... (1,826) 392
Employee benefit programs........................................ 1,550 3,525
Inventory........................................................ 854 1,710
Net operating loss and tax credit carryforwards.................. 1,500 7,598
Other............................................................ 1,556 1,683
------ -------
6,456 17,973
Valuation allowance.............................................. (2,225) (7,025)
------ -------
$ 4,231 $10,948
====== =======
</TABLE>
At August 31, 1996 net deferred tax assets include $5,000, net of a
valuation allowance of $6,584, attributable to temporary differences, tax loss,
and tax credit carryforwards of NYCOR which Fedders Corporation expects to
utilize over the carryforward periods.
The decrease in the deferred tax asset valuation allowance in 1995 resulted
from the utilization of net operating loss carryforwards and, in 1995, a change
in Fedders Corporation's estimate of the utilization of temporary differences
based primarily on improved operating results.
F-11
<PAGE> 90
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The difference between the United States statutory income tax rate and the
consolidated effective income tax rate is due to the following items:
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31,
---------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Expected tax at statutory rate...................... $ 6,733 $12,492 $17,593
Valuation allowance reflected in current income..... (6,799) (7,851) (325)
Alternative minimum tax............................. 396 -- --
State taxes, less federal income tax benefit........ 198 887 1,343
Other............................................... 66 659 497
------- ------- -------
$ 594 $ 6,187 $19,108
======= ======= =======
</TABLE>
At August 31, 1996, Fedders Corporation had Canadian net operating loss
carryforwards of approximately $726 that expire in the years 2002 through 2003,
and U.S. net operating loss and tax credit carryforwards related to NYCOR of
approximately $17,000 and $1,400, respectively, which are restricted as to use
and expire in the years 2001 through 2011. All prior U.S. net operating loss and
credit carryforwards were utilized at August 31, 1995.
8. SEGMENT INFORMATION
Fedders Corporation operates in one industry segment and sells its room air
conditioners primarily direct to retailers and also through private label
arrangements and distributors. One customer accounted for 28% of net sales in
1994, 26% of net sales in 1995 and 30% of net sales in 1996. No other customer
accounted for more than 10% of net sales in 1996. One other customer accounted
for 11% of net sales in 1994, and another customer accounted for 10% of net
sales in 1995.
International sales were approximately $8,250 in 1994, $12,892 in 1995 and
$24,458 in 1996 and were made principally in Canada, Mexico and China.
9. CAPITAL STOCK
In September 1996, Fedders Corporation announced a stock repurchase of up
to $25 million of Common and/or Class A Stock. During the nine months ended May
31, 1997, Fedders Corporation repurchased 4.0 million shares of Class A Stock at
an average price of $5.75 per share for a total of $23.3 million.
Preferred Stock: On August 13, 1996, 7,643,036 shares of Convertible
Preferred Stock ("Preferred Stock") were issued to NYCOR's stockholders on a
share-for-share basis in exchange for their Common, Class A and Class B Stock to
consummate the merger with NYCOR (notes 2 and 13). The Preferred Stock is
convertible into Class A Stock on a share-for-share basis at any time subject to
certain adjustments. The Preferred Stock is redeemable in whole or in part, at
the sole option of Fedders Corporation, at the price of $6.25 in cash or
equivalent value of Class A Stock. The holders of Preferred Stock are entitled
to receive upon liquidation, $6.25 per share, plus unpaid dividends to the date
of distribution, before any distribution is made on the Common, Class A or Class
B Stock. At August 31, 1996, 2,534,000 shares of Preferred Stock are reserved
for conversion of the Convertible Subordinated Debentures.
Common Stock: Shares of Common Stock are reserved for the conversion of
Class A and Class B Stock as indicated herein. At August 31, 1996, 1,050,000
shares of Common Stock are reserved under Fedders Corporation's stock option
plans.
Class A Stock: In 1994 and 1995, Fedders Corporation issued 10,625,029 and
7,984,000 shares respectively of Class A Stock through a stock dividend. At
August 31, 1996, 10,177,036 shares are reserved for conversion of Fedders
Corporation's Convertible Preferred Stock and Convertible Subordinated
Debentures. At August 31, 1996, 10,631,000 shares of Class A Stock are reserved
under Fedders Corporation's stock option plans. Class A Stock has rights,
including dividend rights, substantially identical to the Common Stock,
F-12
<PAGE> 91
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
except that the Class A Stock will not be entitled to vote except to the extent
provided under Delaware law. Class A Stock is immediately convertible into
Common Stock on a share-for-share basis upon conversion of all of the Class B
Stock and accordingly, at August 31, 1996, 40,223,952 shares of Common Stock are
reserved for such conversion.
Class B Stock: Class B Stock is immediately convertible into Common Stock
on a share-for-share basis and accordingly, at August 31, 1996, 2,266,706 shares
of Common Stock are reserved for such conversion. Class B Stock has greater
voting power, in certain circumstances, ten-to-one, in the election of directors
but receives a lower dividend, if declared, equal to 90% of the dividend on
Common Stock and has limited transferability. Class B Stock also votes
separately, as a class, on certain significant issues.
10. STOCK OPTION PLANS
All stock option plans, as approved by the stockholders, provide for the
granting to employees and officers of incentive stock options (as defined under
current tax laws) and non-qualified stock options. All of the plans provide for
the granting of non-qualified stock options to directors who are not employees.
Stock options are exercisable one year after the date of grant and, if not
exercised, will expire five years from the date of grant. Certain options are
only exercisable at the end of five years.
For options exercised during a six-week period in early 1994, optionees
were given the opportunity to pay two-thirds of the exercise price upon exercise
and to defer the remaining balance until the earlier of July 31, 1995 or upon
the sale of such stock. Such optionees executed non-recourse interest bearing
notes, which were repaid in 1995. The stock option plan summary is as follows:
<TABLE>
<CAPTION>
NINE
MONTHS
YEARS ENDED AUGUST 31, ENDED
----------------------------- MAY 31,
1994 1995 1996 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Options outstanding beginning of period.................. 2,987 3,903 4,715 4,852
Granted.................................................. 752 403 752 1,711
Canceled................................................. (109) (300) (30) (67)
Exercised................................................ (1,028) (218) (585) (400)
------- ------- ------- -------
Options outstanding prior to stock dividend-related
adjustments............................................ 2,602 3,788 4,852 6,096
Stock dividend-related adjustments(a).................... 1,301 927 -- --
------- ------- ------- -------
Options outstanding at end of period..................... 3,903 4,715 4,852 6,096
======= ======= ======= =======
Options exercisable at end of period..................... 1,862 3,336 3,682 3,514
======= ======= ======= =======
Exercise price per share................................. $ 2.90 $ 2.33 $ 1.69 $ 1.69
to 5.66 to 4.70 to 4.87 to 4.87
</TABLE>
- ------------------------------
(a) In connection with stock dividends distributed in 1994 and 1995, all Class A
options were adjusted to reflect a 50% and 25% increase, respectively.
11. PENSION PLANS AND OTHER RETIREMENT BENEFITS
Fedders Corporation maintains a 401(k) defined contribution plan covering
all U.S. employees. Fedders Corporation matching contributions under the plan
are based on the level of individual participant contributions and amounted to
$726 in 1994, $756 in 1995 and $1,171 in 1996. Fedders Corporation terminated
its defined pension plan that was curtailed in 1993 with no material gain or
loss recognized.
Fedders Corporation has an agreement with an officer that has a term of ten
years from any point in time and provides for salary during the employment
period, a disability program, postretirement benefits and a death benefit in an
amount equal to ten times the prior year's compensation, payable by Fedders
Corporation over ten years. Following the merger of NYCOR into Fedders
Corporation on August 13, 1996 (note 13) the
F-13
<PAGE> 92
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
agreement was adjusted to take into account the terms of the merger agreement
which stated that the employees and directors of NYCOR were to be placed in the
same economic position following the merger as they were immediately prior to
the date of the execution of the merger agreement with respect to salaries and
all other benefits provided by NYCOR. The estimated present value of future
non-salary benefits payable under the agreement has been determined based upon
certain assumptions and is being amortized over the expected remaining years of
service to Fedders Corporation.
Fedders Corporation provides a portion of health care and life insurance
benefits for retired employees who elect to participate in Fedders Corporation's
plan. During fiscal 1994, Fedders Corporation adopted SFAS No. 106, which
requires accrual accounting for all postretirement benefits other than pension.
At August 31, 1995 and 1996 postretirement benefits were fully accrued. The
effect of adoption in 1994 of SFAS No. 106 was not material.
12. JOINT VENTURE
On November 7, 1995, Fedders Corporation entered into a joint venture with
the Ningbo General Air Conditioner Factory ("Ningbo"), Ningbo City, Zhejiang
Province, People's Republic of China ("P.R.C.") to manufacture room air
conditioners in China. The joint venture, Fedders Xinle Co., Ltd., was
capitalized with Fedders Corporation's contribution of approximately $8,400 of
cash plus know-how for a 60% interest in the joint venture. Ningbo contributed
the factory, equipment and other assets valued at $5,600 for a 40% interest. The
equivalent of approximately $10,300 in long-term financing was provided by a
P.R.C. bank for the joint venture which is not guaranteed by Fedders
Corporation. Of this long-term financing, $4,000 was repaid during fiscal 1996.
The financial statements of the joint venture are consolidated herein.
13. MERGER
On August 13, 1996, Fedders Corporation merged with NYCOR, a manufacturer
of rotary compressors and thermoelectric heating and cooling modules.
Consideration consisted of 7,643,000 shares of Preferred Stock with a total
value of approximately $47,769. The merger was accounted for using the purchase
method, with the consideration allocated to the assets acquired based on their
estimated fair values as of the merger date. The purchase price plus the fair
value of net liabilities assumed was allocated to goodwill which is being
amortized on a straight line basis over 40 years.
Fedders Corporation's consolidated financial statements include the
operating results of NYCOR since August 13, 1996. The following table presents
the unaudited pro forma results of operations as if these transactions occurred
on September 1, 1994. The pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what would have actually
occurred had the merger been consummated at the beginning of fiscal 1995 or of
results which may occur in the future.
<TABLE>
<CAPTION>
YEARS ENDED AUGUST
31,
---------------------
1995 1996
--------(PRO --------
FORMA -- UNAUDITED)
<S> <C> <C>
Net sales.................................................... $329,516 $390,349
Operating income............................................. 35,747 42,168
Net income................................................... 26,472 23,574
Income per share:
Primary.................................................... 0.57 0.51
Fully diluted.............................................. 0.54 0.47
</TABLE>
F-14
<PAGE> 93
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FISCAL YEAR
----------------- ----------------- ------------------- ------------------- -------------------
1995 1996 1995 1996 1995 1996 1995 1996 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $20,125 $27,809 $72,357 $88,327 $145,869 $173,868 $78,143 $81,768 $316,494 $371,772
Gross profit............ 4,306 6,777 13,686 18,005 30,489 37,859 18,644(a) 20,387 67,125 83,028
Income (loss) before
income taxes.......... (1,440) 554 6,694 10,274 21,536 28,200 8,901 11,238 35,691 50,266
Net income (loss)....... $(1,217) $ 343 $ 5,567 $ 6,370 $ 17,806 $ 17,430 $ 7,348 $ 7,015 $ 29,504 $ 31,158
Net income (loss) per
share(b).............. $ (0.03) $ 0.01 $ 0.13 $ 0.15 $ 0.44 $ 0.42 $ 0.18 $ 0.16 $ 0.72 $ 0.74
Market price per share:
Preferred Stock (FJAPr)
High.................. -- -- -- -- -- -- -- 5 7/8 -- 5 7/8
Low................... -- -- -- -- -- -- -- 5 1/8 -- 5 1/8
Common Stock (FJC)
High.................. 6 1/4 6 3/4 6 1/8 6 3/4 6 1/8 7 7 7/8 7 1/4 7 7/8 7 1/4
Low................... 3 7/8 5 1/4 5 5 5 1/4 6 5 3/8 5 1/2 3 7/8 5
Class A Stock (FJA)
High.................. 4 3/8 5 4 3/4 5 5/8 4 3/4 6 1/4 5 3/8 6 3/8 5 3/8 6 3/8
Low................... 3 1/4 3 3/4 3 5/8 3 7/8 4 5 3/8 4 1/8 4 7/8 3 1/4 3 3/4
</TABLE>
- ------------------------------
(a) Includes a $3.5 million reduction in warranty provision and a $2.8 million
write down of idle equipment.
(b) Quarterly earnings per share may not add to earnings per share for the year
due to rounding and changes in the number of weighted average shares
outstanding.
15. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Fedders North America, Inc. (the "Company") is a wholly owned subsidiary of
Fedders Corporation. The Company and Fedders Corporation were the Issuer and the
Guarantor, respectively, of $100,000 principal amount of 9 3/8% Senior
Subordinated Notes due 2007 issued in an offering which was consummated on
August 18, 1997 (the "Offering"). The following condensed consolidating
financial statements present separate information for the Company and for
Fedders Corporation and its subsidiaries other than the Company ("Fedders") and
should be read in connection with the consolidated financial statements of
Fedders Corporation. Such condensed financial statements are unaudited for the
fiscal year ended August 31, 1994 and as of May 31, 1997 and the nine months
ended May 31, 1996 and 1997.
The amounts shown for the Company (presented under the caption "Fedders
North America") in the following historical condensed consolidating financial
statements include the accounts of Rotorex Company, Inc. ("Rotorex") since
August 13, 1996. The amounts shown for Fedders (presented under the caption
"Other Fedders") include the accounts of NYCOR and its subsidiaries other than
Rotorex ("NYCOR and Subsidiaries") since August 13, 1996. August 13, 1996 was
the date of the merger between Fedders Corporation and NYCOR (see note 13). The
amounts shown for Fedders and the Company reflect the elimination of the
$20,000, 10% note payable by Rotorex to NYCOR as a contribution to the capital
of Rotorex retroactive to August 13, 1996, and present the intercompany
receivable by the Company from Fedders Corporation for all periods as a
reduction of stockholders' equity, since it is not the intent of the parties to
repay these respective amounts. Upon completion of the Offering, the note
payable was contributed to Rotorex's capital and the intercompany receivable of
the Company from Fedders Corporation was eliminated by declaration of a dividend
from the Company to Fedders Corporation in the amount of the intercompany
balance.
The following unaudited pro forma condensed consolidating financial
statement amounts give effect to the acquisition of Rotorex in the Company
amounts, and to the merger of NYCOR and Subsidiaries in the Fedders amounts as
though such transactions had occurred at the beginning of the periods presented.
The pro forma results have been presented for comparative purposes only and do
not purport to be indicative of what would have actually occurred had the
transactions been consummated at the beginning of the periods presented or of
results which may occur in the future.
F-15
<PAGE> 94
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31, 1994 FISCAL YEAR ENDED AUGUST 31, 1995
(HISTORICAL-UNAUDITED) (HISTORICAL)
------------------------------------ ------------------------------------
FEDDERS FEDDERS
NORTH OTHER FEDDERS NORTH OTHER FEDDERS
AMERICA FEDDERS CORPORATION AMERICA FEDDERS CORPORATION
-------- ------- ----------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales......................................... $230,074 $ 1,498 $ 231,572 $311,363 $ 5,131 $ 316,494
Cost of sales..................................... 181,136 1,173 182,309 245,593 3,776 249,369
Selling, general and administrative expenses(a)... 24,113 1,245 25,358 26,515 2,957 29,472
-------- ------- -------- -------- ------- -------
Operating income (loss)........................... 24,825 (920) 23,905 39,255 (1,602) 37,653
Net interest income (expense)(b).................. (2,632) (1,470) (4,102) (2,608) 646 (1,962)
-------- ------- -------- -------- ------- -------
Income (loss) before income taxes................. 22,193 (2,390) 19,803 36,647 (956) 35,691
Income taxes (benefit)............................ 734 (140) 594 6,340 (153) 6,187
-------- ------- -------- -------- ------- -------
Income (loss) before cumulative effect of an
accounting change............................... 21,459 (2,250) 19,209 30,307 (803) 29,504
Cumulative effect of an accounting change......... 1,780 -- 1,780 -- -- --
-------- ------- -------- -------- ------- -------
Net income(loss).................................. $ 23,239 $(2,250) $ 20,989 $ 30,307 $ (803) $ 29,504
======== ======= ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31, 1996 FISCAL YEAR ENDED AUGUST 31, 1996
(HISTORICAL) (PRO FORMA-UNAUDITED)
------------------------------------ ------------------------------------
FEDDERS FEDDERS
NORTH OTHER FEDDERS NORTH OTHER FEDDERS
AMERICA FEDDERS CORPORATION AMERICA FEDDERS CORPORATION
-------- ------- ----------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales........................................... $356,392 $15,380 $ 371,772 $365,117 $25,232 $ 390,349
Cost of sales....................................... 276,917 11,827 288,744 289,042 19,399 308,441
Selling, general and administrative expenses(a)..... 25,267 6,773 32,040 30,645 9,095 39,740
-------- ------- -------- -------- ------- -------
Operating income (loss)............................. 54,208 (3,220) 50,988 45,430 (3,262) 42,168
Minority interest in joint venture.................. -- 230 230 -- 230 230
Net interest income (expense)(b).................... (3,941) 2,989 (952) (4,766) 390 (4,376)
-------- ------- -------- -------- ------- -------
Income (loss) before income taxes................... 50,267 (1) 50,266 40,664 (2,642) 38,022
Income taxes (benefit).............................. 19,108 -- 19,108 15,452 (1,004) 14,448
-------- ------- -------- -------- ------- -------
Net income (loss)................................... 31,159 (1) 31,158 25,212 (1,638) 23,574
Preferred stock dividend requirement................ -- 151 151 -- 2,914 2,914
-------- ------- -------- -------- ------- -------
Net income (loss) attributable to common
stockholders...................................... $ 31,159 $ (152) $ 31,007 $ 25,212 $(4,552) $ 20,660
======== ======= ======== ======== ======= =======
</TABLE>
- ---------------
(a)(b) See page F-22.
F-16
<PAGE> 95
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED MAY 31, 1996 NINE MONTHS ENDED MAY 31, 1996
(HISTORICAL-UNAUDITED) (PRO FORMA-UNAUDITED)
------------------------------------ ------------------------------------
FEDDERS FEDDERS
NORTH OTHER FEDDERS NORTH OTHER FEDDERS
AMERICA FEDDERS CORPORATION AMERICA FEDDERS CORPORATION
-------- ------- ----------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales........................................... $281,524 $ 8,480 $ 290,004 $289,673 $17,400 $ 307,073
Cost of sales....................................... 220,913 6,450 227,363 231,494 13,646 245,140
Selling, general and administrative expenses(a)..... 18,382 4,304 22,686 23,181 6,103 29,284
-------- ------- -------- -------- ------- --------
Operating income (loss)............................. 42,229 (2,274) 39,955 34,998 (2,349) 32,649
Minority interest in joint venture.................. -- 237 237 -- 237 237
Net interest income (expense)(b).................... (3,239) 2,075 (1,164) (4,013) (2) (4,015)
-------- ------- -------- -------- ------- --------
Income (loss) before income taxes................... 38,990 38 39,028 30,985 (2,114) 28,871
Income taxes (benefit).............................. 14,871 14 14,885 11,837 (866) 10,971
-------- ------- -------- -------- ------- --------
Net income (loss)................................... 24,119 24 24,143 19,148 (1,248) 17,900
Preferred stock dividend requirement................ -- -- -- -- 2,186 2,186
-------- ------- -------- -------- ------- --------
Net income (loss) attributable to common
stockholders...................................... $ 24,119 $ 24 $ 24,143 $ 19,148 $(3,434) $ 15,714
======== ======= ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED MAY 31, 1997
(HISTORICAL-UNAUDITED)
------------------------------------
FEDDERS
NORTH OTHER FEDDERS
AMERICA FEDDERS CORPORATION
-------- ------- -----------
<S> <C> <C> <C>
Net sales.................................................................................. $208,298 $29,158 $ 237,456
Cost of sales.............................................................................. 161,532 23,626 185,158
Selling, general and administrative expenses(a)............................................ 18,959 9,945 28,904
-------- ------- --------
Operating income (loss).................................................................... 27,807 (4,413) 23,394
Minority interest in joint venture......................................................... -- 457 457
Net interest income (expense)(b)........................................................... (3,493) 711 (2,782)
-------- ------- --------
Income (loss) before income taxes.......................................................... 24,314 (3,245) 21,069
Income taxes (benefit)..................................................................... 8,267 (1,103) 7,164
-------- ------- --------
Net income (loss).......................................................................... 16,047 (2,142) 13,905
Preferred stock dividend requirement....................................................... -- 2,178 2,178
-------- ------- --------
Net income (loss) attributable to common stockholders...................................... $ 16,047 $(4,320) $ 11,727
======== ======= ========
</TABLE>
- ---------------
(a)(b) See page F-22.
F-17
<PAGE> 96
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, 1995 AUGUST 31, 1996
----------------------------------------------- ------------------------------------------------
FEDDERS FEDDERS
NORTH OTHER ELIMINATION FEDDERS NORTH OTHER ELIMINATION FEDDERS
AMERICA FEDDERS ENTRIES CORPORATION AMERICA FEDDERS ENTRIES CORPORATION
-------- -------- ----------- ----------- -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash....................... $ -- $ 57,707 $ -- $ 57,707 $ -- $ 90,295 $ -- $ 90,295
Net accounts receivable.... 8,764 83 -- 8,847 3,464 4,511 -- 7,975
Inventories................ 27,107 1,913 -- 29,020 38,998 14,448 -- 53,446
Other current assets....... 351 3,496 -- 3,847 1,020 5,930 -- 6,950
------- -------- --------- -------- -------- -------- -------- --------
Total current assets......... 36,222 63,199 -- 99,421 43,482 115,184 -- 158,666
Investments in
subsidiaries............... -- 41,956 (41,956) -- -- 104,306 (104,306) --
Net property, plant and
equipment.................. 26,974 2,829 -- 29,803 52,041 10,831 -- 62,872
Goodwill..................... 5,517 -- -- 5,517 51,704 6,852 -- 58,556
Other long-term assets....... 220 1,814 -- 2,034 4,597 5,529 -- 10,126
------- -------- --------- -------- -------- -------- -------- --------
$ 68,933 $109,798 $ (41,956) $ 136,775 $151,824 $ 242,702 $ (104,306) $ 290,220
======= ======== ========= ======== ======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of
long-term debt.......... $ 332 $ 258 $ -- $ 590 $ 1,670 $ 219 $ -- $ 1,889
Accounts and income taxes
payable................. 6,398 8,324 -- 14,722 15,924 15,981 -- 31,905
Accrued expenses........... 24,913 3,073 -- 27,986 29,431 8,624 -- 38,055
------- -------- --------- -------- -------- -------- -------- --------
Total current liabilities.... 31,643 11,655 -- 43,298 47,025 24,824 -- 71,849
Net due to affiliate......... -- 102,059 (102,059) -- -- 133,286 (133,286) --
Long-term debt............... 4,195 321 -- 4,516 9,322 29,195 -- 38,517
Other long-term
liabilities................ 4,082 2,337 -- 6,419 4,309 15,794 -- 20,103
Stockholders' equity:
Preferred Stock............ -- -- -- -- -- 7,643 -- 7,643
Common, Class A and Class B
Stock................... 5 40,082 -- 40,087 5 40,668 -- 40,673
Paid-in capital............ 47,287 46,316 (47,122) 46,481 109,637 87,563 (109,472) 87,728
Retained earnings
(deficit)............... 83,776 (92,983) 5,166 (4,041) 114,935 (96,236) 5,166 23,865
Net due from affiliate..... (102,059) -- 102,059 -- (133,286) -- 133,286 --
Cumulative translation
adjustments............. 4 11 -- 15 (123) (35) -- (158)
------- -------- --------- -------- -------- -------- -------- --------
Total stockholders' equity... 29,013 (6,574) 60,103 82,542 91,168 39,603 28,980 159,751
------- -------- --------- -------- -------- -------- -------- --------
$ 68,933 $109,798 $ (41,956) $ 136,775 $151,824 $ 242,702 $ (104,306) $ 290,220
======= ======== ========= ======== ======== ======== ======== ========
</TABLE>
F-18
<PAGE> 97
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
MAY 31, 1997 (UNAUDITED)
------------------------------------------------
FEDDERS
NORTH OTHER ELIMINATION FEDDERS
AMERICA FEDDERS ENTRIES CORPORATION
-------- --------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash......................................................................... $ -- $ 7,528 $ -- $ 7,528
Net accounts receivable...................................................... 62,730 4,776 -- 67,506
Inventories.................................................................. 71,469 19,126 -- 90,595
Other current assets......................................................... 960 7,165 -- 8,125
-------- ------- -------
--
Total current assets........................................................... 135,159 38,595 173,754
--
Investments in subsidiaries.................................................... -- 104,306 --
(104,306)
Net property, plant and equipment.............................................. 52,102 11,169 63,271
--
Goodwill....................................................................... 50,713 6,616 57,329
--
Other long-term assets......................................................... 4,551 6,370 10,921
--
-------- ------- -------
--
$242,525 $ 167,056 $ 305,275
$ (104,306)
======== ======= =======
==
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowing......................................................... $ 26,271 $ -- $ -- $ 26,271
Current portion of long-term debt............................................ 1,820 23 -- 1,843
Accounts and income taxes payable............................................ 24,068 7,184 -- 31,252
Accrued expenses............................................................. 33,608 8,968 -- 42,576
-------- ------- -------
--
Total current liabilities...................................................... 85,767 16,175 101,942
--
Net due to affiliate........................................................... -- 96,304 --
(96,304)
Long-term debt................................................................. 8,313 28,973 37,286
--
Other long-term liabilities.................................................... 4,267 14,394 18,661
--
Stockholders' equity:
Preferred Stock........................................................... -- 7,514 -- 7,514
Common, Class A, Class B Stock............................................ 5 41,197 -- 41,202
Paid-in capital........................................................... 109,637 88,430 (109,472) 88,595
Retained earnings (deficit)............................................... 130,982 (102,569) 5,166 33,579
Net due from affiliate.................................................... (96,304) -- 96,304 --
Treasury stock............................................................ -- (23,323) -- (23,323)
Cumulative translation adjustments........................................ (142) (39) -- (181)
-------- ------- -------
--
Total stockholders' equity..................................................... 144,178 11,210 147,386
(8,002)
-------- ------- -------
--
$242,525 $ 167,056 $ 305,275
$ (104,306)
======== ======= =======
==
</TABLE>
F-19
<PAGE> 98
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31, 1994
(UNAUDITED) FISCAL YEAR ENDED AUGUST 31, 1995
------------------------------------- ------------------------------------
FEDDERS FEDDERS
NORTH OTHER FEDDERS NORTH OTHER FEDDERS
AMERICA FEDDERS CORPORATION AMERICA FEDDERS CORPORATION
-------- ------- ------------ -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by operations.................. $ 22,150 $11,450 $ 33,600 $ 41,805 $ 2,782 $ 44,587
-- --
-------- -------- -------- --------
Net additions to property, plant and equipment,
being cash used in investing activities........ (2,123) (70) (2,193) (4,807) (3,713) (8,520)
-- --
-------- -------- -------- --------
Net (repayments) proceeds from short and
long-term borrowings........................... (23) (9,206) (9,229) (522) (13,344) (13,866)
Cash dividends................................... -- -- -- -- (797) (797)
Proceeds from stock options exercised............ -- 4,138 4,138 -- 692 692
Other............................................ -- -- -- -- 742 742
Change in net due to (from) affiliate............ (20,004) 20,004 -- (36,476) 36,476 --
-- --
-------- -------- -------- --------
Net cash (used in) provided by financing
activities..................................... (20,027) 14,936 (5,091) (36,998) 23,769 (13,229)
-- --
-------- -------- -------- --------
Net increase in cash and cash equivalents........ -- 26,316 26,316 -- 22,838 22,838
Cash and cash equivalents at beginning of year... -- 8,553 8,553 -- 34,869 34,869
-- --
-------- -------- -------- --------
Cash and cash equivalents at end of year......... $ -- $34,869 $ 34,869 $ -- $57,707 $ 57,707
======== ======== == ======== ======== ==
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31, 1996
------------------------------------
FEDDERS
NORTH OTHER FEDDERS
AMERICA FEDDERS CORPORATION
-------- ------- -----------
<S> <C> <C> <C>
Net cash provided by operations......................................................... $ 36,073 $ 5,798 $ 41,871
--
-------- --------
Net additions to property, plant and equipment, being cash used in investing
activities............................................................................ (4,448) (2,060) (6,508)
--
-------- --------
Net (repayment) proceeds from short and long-term borrowings............................ (398) (394) (792)
Cash dividends.......................................................................... -- (3,252) (3,252)
Proceeds from stock options exercised................................................... -- 1,868 1,868
Other................................................................................... -- (599) (599)
Change in net due to (from) affiliate................................................... (31,227) 31,227 --
--
-------- --------
Net cash (used in) provided by financing activities..................................... (31,625) 28,850 (2,775)
--
-------- --------
Net increase in cash and cash equivalents............................................... -- 32,588 32,588
Cash and cash equivalents at beginning of year.......................................... -- 57,707 57,707
--
-------- --------
Cash and cash equivalents at end of year................................................ $ -- $90,295 $ 90,295
======== ======== ==
</TABLE>
F-20
<PAGE> 99
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED MAY 31, 1996 NINE MONTHS ENDED MAY 31, 1997
(UNAUDITED) (UNAUDITED)
------------------------------------- -------------------------------------
FEDDERS FEDDERS
NORTH OTHER FEDDERS NORTH OTHER FEDDERS
AMERICA FEDDERS CORPORATION AMERICA FEDDERS CORPORATION
-------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net cash provided by (used in) operations....... $(31,597) $ 2,381 $ (29,216) $(57,010) $(18,004) $ (75,014)
--
-------- -------- --------
Net additions to property, plant and equipment,
cash being used in investing activities....... (4,163) (2,182) (6,345) (5,384) (1,116) (6,500)
--
-------- -------- --------
Net (repayment) proceeds from short and
long-term borrowings.......................... (249) 3,070 2,821 25,412 (418) 24,994
Cash dividends.................................. -- (2,401) (2,401) -- (4,191) (4,191)
Proceeds from stock options exercised........... -- 1,498 1,498 -- 1,267 1,267
Other........................................... -- -- -- -- (23,323) (23,323)
Change in net due to (from) affiliate........... 36,009 (36,009) -- 36,982 (36,982) --
--
-------- -------- --------
Net cash (used in) provided by financing
activities.................................... 35,760 (33,842) 1,918 62,394 (63,647) (1,253)
--
-------- -------- --------
Net decrease in cash and cash equivalents....... -- (33,643) (33,643) -- (82,767) (82,767)
Cash and cash equivalents at beginning of
period........................................ -- 57,707 57,707 -- 90,295 90,295
--
-------- -------- --------
Cash and cash equivalents at end of period...... $ -- $ 24,064 $ 24,064 $ -- $ 7,528 $ 7,528
======== ======== == ========
</TABLE>
F-21
<PAGE> 100
FEDDERS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
INTERCOMPANY TRANSACTIONS
The historical condensed consolidating financial statements presented above
include the following transactions between the Company and Fedders;
a) Fedders charges corporate overhead to the Company essentially on a cost basis
allocated in proportion to sales. Such charges to the Company amounted to
$8,518, $9,294 and $10,247 for the years ended August 31, 1994, 1995 and
1996, and $7,511 and $6,783 for the nine months ended May 31, 1996 and 1997,
respectively. Such charges on a pro forma (unaudited) basis amounted to
$11,267 and $8,276 for the year ended August 31, 1996 and the nine months
ended May 31, 1996, respectively.
b) Fedders allocates interest expense to the Company based upon the level of the
Company's working capital at the prime rate of interest. Such interest
charges amounted to $1,566, $1,627 and $2,751 for the years ended August 31,
1994, 1995 and 1996, and $2,378 and $1,868 for the nine months ended May 31,
1996 and 1997, respectively. Such charges on a pro forma (unaudited) basis
amounted to $3,072 and $2,605 for the year ended August 31, 1996 and the nine
months ended May 31, 1996, respectively.
c) The Company's depreciation and amortization for the years ended August 31,
1994, 1995 and 1996 and the nine months ended May 31, 1996 and 1997 amounted
to $6,979, $6,061, $6,071, $3,151 and $5,990, respectively. Capital
expenditures of the Company for the same periods amounted to $2,564, $4,286,
$4,983, $4,197 and $5,458, respectively.
d) Fedders guarantees the Company's obligations under the Company's revolving
credit facility.
e) Fedders stock option plans include the Company employees.
16. SUBSEQUENT EVENTS
The net proceeds from the Offering (note 15) were used to pay a dividend of
approximately $72,300 to Fedders which will be used to redeem its 8 1/2%
Convertible Subordinated Debentures due 2012 in the aggregate amount of
approximately $22,300, including accrued interest, and which is anticipated will
be used to fund a stock repurchase in an aggregate amount of approximately
$50,000. The remaining net proceeds will be used to repay various capital leases
in an aggregate amount of up to approximately $6,200 and for general corporate
purposes, including the reduction of any amounts outstanding under the revolving
credit facility. At the consummation of the Offering, there was no balance
outstanding under the revolving credit facility.
Also in August 1997, Fedders Corporation announced it will redeem its
Convertible Preferred Stock on September 19, 1997 for shares of its Class A
Stock equivalent to $6.25 per share of Preferred Stock. Each share of Preferred
Stock will be redeemed for 1.022 shares of Class A Stock based on the average
closing price of $6.113 of the Class A Stock for the 10 trading days ended
August 18, 1997. No further dividend is payable on the Convertible Preferred
Stock subsequent to the final dividend paid on July 1, 1997.
F-22
<PAGE> 101
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF FEDDERS CORPORATION
We have audited the accompanying consolidated balance sheets of Fedders
Corporation as of August 31, 1995 and 1996, and the related consolidated
statements of operations, cash flows and stockholders' equity for the years then
ended. These financial statements are the responsibility of Fedders
Corporation'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 1995 and 1996 financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Fedders Corporation as of August 31, 1995 and 1996, and the consolidated results
of its operations and its cash flows for the years then ended, in conformity
with generally accepted accounting principles.
/s/ BDO SEIDMAN, LLP
Woodbridge, New Jersey
September 30, 1996
F-23
<PAGE> 102
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF FEDDERS CORPORATION
We have audited the accompanying consolidated statements of operations,
cash flows and stockholders' equity of Fedders Corporation for the year ended
August 31, 1994. These financial statements are the responsibility of Fedders
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects the consolidated results of operations and cash flows
of Fedders Corporation for the year ended August 31, 1994 in conformity with
generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, in 1994
Fedders Corporation changed its method of accounting for income taxes.
ERNST & YOUNG LLP
MetroPark, New Jersey
October 6, 1994
F-24
<PAGE> 103
=========================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR FEDDERS CORPORATION. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED
HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION TO SUCH PERSON. 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 DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary of Prospectus.................... 1
Risk Factors............................. 11
Summary Organization Chart............... 18
Use of Proceeds.......................... 19
Capitalization........................... 19
Selected Historical and Pro Forma
Consolidated Financial Information..... 20
Unaudited Pro Forma Condensed
Consolidated Statements of
Operations............................. 22
Management's Discussion and Analysis of
Results of Operations and Financial
Condition of Fedders Corporation....... 23
Business................................. 27
Management............................... 34
Security Ownership of Directors and
Executive Officers of Fedders
Corporation............................ 36
Executive Compensation................... 37
Description of Certain Indebtedness...... 38
The Exchange Offer....................... 39
Description of Notes..................... 48
Plan of Distribution..................... 73
Federal Income Tax Consequences.......... 73
Legal Matters............................ 74
Experts.................................. 74
Available Information.................... 74
Incorporation of Certain Documents by
Reference.............................. 74
Index to Financial Statements............ F-1
</TABLE>
=========================================================
=========================================================
$100,000,000
[FEDDERS NORTH AMERICA LOGO]
9 3/8% SENIOR SUBORDINATED NOTES
DUE 2007
AS FULLY AND UNCONDITIONALLY GUARANTEED
ON A SENIOR SUBORDINATED BASIS BY
FEDDERS CORPORATION
--------------------
PROSPECTUS
--------------------
, 1997
=========================================================
<PAGE> 104
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the Delaware General Corporation Law (the "DGCL"), a
corporation may indemnify any person in connection with any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than a derivative action by or in the right of such
corporation), who is or was a director, officer, employee or agent of such
corporation, or serving at the request of such corporation in such capacity for
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 such person in connection with
such action, suit or proceeding, if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of such corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The DGCL also permits indemnification by a corporation under similar
circumstances for expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of a
derivative action, 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 such corporation unless the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
The DGCL provides that the indemnification described above shall not be
deemed exclusive of other indemnification that may be granted by a corporation
pursuant to its By-Laws, disinterested directors' vote, stockholders' vote,
agreement or otherwise.
The DGCL also provides corporations with the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
in a similar capacity for another corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him or her in any
such capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such liability
as described above.
In addition, the Certificate of Incorporation of the Company provides that
the Company shall, to the fullest extent permitted by Section 145 of the DGCL,
indemnify any and all persons whom it shall have power to indemnify under said
Section from and against any and all of the expenses, liabilities or other
matters referred to in or covered by said Section, and the indemnification
provided for therein shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who have ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
The By-Laws of the Guarantor provide that any person made a party to an
action by or in the right of the Guarantor to procure a judgment in its favor,
or made, or threatened to be made, a party to an action or proceeding other than
one by or in the right of the Guarantor to procure a judgment in its favor, by
reason of the fact that he, his testator or intestate is or was a director or
officer of the Guarantor, or of any other corporation, domestic or foreign,
which he, his testator or intestate served in any capacity at the request of the
Guarantor, shall be indemnified by the Guarantor against judgments, fines,
amounts paid in settlement and the reasonable expenses (including attorneys'
fees) actually incurred by him as a result of such action or proceeding, or any
appeal therein, to the full extent permissible under the DGCL.
II-1
<PAGE> 105
As permitted by the DGCL, the Guarantor maintains liability and
indemnification insurance policies covering all officers and directors of the
Guarantor and its subsidiaries (including the Company) which are renewed on an
annual basis.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
A list of exhibits included as part of this registration statement is set
forth in the Exhibit Index that immediately precedes such exhibits and is
incorporated herein by reference.
(b) Financial Statement Schedule.
Consolidated Schedule for the nine months ended May 31, 1997 and the
years ended August 31, 1996, 1995 and 1994
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.................. S-1
Report of Independent Auditors...................................... S-2
II. Valuation and Qualifying Accounts............................... S-3
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) The Company and the Guarantor hereby undertake:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
provided, however, that the undertakings set forth in paragraphs (a)(l)(i)
and (a)(l)(ii) above do not apply if the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Guarantor pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, the Company and
the Guarantor have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in that Act and is, therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
or the Guarantor of expenses incurred or paid by a director, officer or
controlling person of the Company or the Guarantor in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company or the Guarantor, as the case may be, will, unless in the opinion of
their respective counsel the matter has been
II-2
<PAGE> 106
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(c) Neither the Company nor the Guarantor has entered into any arrangement
or understanding with any person to distribute the securities to be received in
the Exchange Offer and to the best of the Company's and the Guarantor's
information and belief, each person participating in the Exchange Offer is
acquiring the securities in its ordinary course of business and has no
arrangement or understanding with any person to participate in the distribution
of the securities to be received in the Exchange Offer. In this regard, the
Company and the Guarantor will make each person participating in the Exchange
Offer aware (through this Prospectus or otherwise) that if the Exchange Offer is
being registered for the purpose of secondary resales, any securityholder using
the exchange offer to participate in a distribution of the securities to be
acquired in the registered exchange offer (1) could not rely on the staff
position enunciated in Exxon Capital Holdings Corporation (available May 13,
1988) or similar letters and (2) must comply with registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction. The Company and the Guarantor acknowledge that such a
secondary resale transaction should be covered by an effective registration
statement containing the selling securityholder information required by Item 507
of Regulation S-K.
(d) The Company and the Guarantor hereby undertake to respond to requests
for information that are incorporated by reference into this Prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
II-3
<PAGE> 107
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the town of Liberty Corner, State of
New Jersey, on September 10, 1997.
FEDDERS NORTH AMERICA, INC.
By /s/ ROBERT L. LAURENT, JR.
--------------------------------------
Robert L. Laurent, Jr.
Executive Vice President --
Finance and Administration
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities shown on September 10, 1997.
<TABLE>
<C> <S> <C>
SALVATORE GIORDANO Chairman of the Board
- -------------------------------------
Salvatore Giordano
SAL GIORDANO, JR. President and Chief Executive
- ------------------------------------- Officer and a Director
Sal Giordano, Jr. (Principal Executive Officer)
JOSEPH GIORDANO Director
- -------------------------------------
Joseph Giordano
C. A. KEEN Director
- -------------------------------------
C. A. Keen
HOWARD S. MODLIN Director
- -------------------------------------
Howard S. Modlin
CLARENCE RUSSEL MOLL Director
- -------------------------------------
Clarence Russel Moll
WILLIAM J. BRENNAN Director
- -------------------------------------
William J. Brennan
S. A. MUSCARNERA Director
- -------------------------------------
S. A. Muscarnera
ANTHONY PULEO Director
- -------------------------------------
Anthony Puleo
ROBERT L. LAURENT, JR. Executive Vice President --
- ------------------------------------- Finance and Administration
Robert L. Laurent, Jr. (Principal Financial and
Accounting Officer)
</TABLE>
By/s/ ROBERT N. EDWARDS
--------------------------
Robert N. Edwards
Attorney-in-fact
II-4
<PAGE> 108
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the town of Liberty Corner, State of
New Jersey, on September 10, 1997.
FEDDERS CORPORATION
By /s/ ROBERT L. LAURENT, JR.
--------------------------------------
Robert L. Laurent, Jr.
Executive Vice President --
Finance and Administration
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities shown on September 10, 1997.
<TABLE>
<C> <S> <C>
SALVATORE GIORDANO Chairman of the Board
- -------------------------------------
Salvatore Giordano
SAL GIORDANO, JR. Vice Chairman, President and
- ------------------------------------- Chief Executive Officer and a
Sal Giordano, Jr. Director (Principal Executive
Officer)
JOSEPH GIORDANO Director
- -------------------------------------
Joseph Giordano
C. A. KEEN Director
- -------------------------------------
C. A. Keen
HOWARD S. MODLIN Director
- -------------------------------------
Howard S. Modlin
CLARENCE RUSSEL MOLL Director
- -------------------------------------
Clarence Russel Moll
WILLIAM J. BRENNAN Director
- -------------------------------------
William J. Brennan
S. A. MUSCARNERA Director
- -------------------------------------
S. A. Muscarnera
ANTHONY PULEO Director
- -------------------------------------
Anthony Puleo
ROBERT L. LAURENT, JR. Executive Vice President --
- ------------------------------------- Finance and Administration
Robert L. Laurent, Jr. (Principal Financial and
Accounting Officer)
</TABLE>
By/s/ ROBERT N. EDWARDS
--------------------------
Robert N. Edwards
Attorney-in-fact
II-5
<PAGE> 109
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders and Directors
Fedders Corporation
The audits referred to in our report dated September 30, 1996, relating to
the consolidated financial statements of Fedders Corporation, which is contained
in the Prospectus constituting part of this Registration Statement, included the
audits of the financial statement schedule listed in Item 21(b). This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based upon our audits.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
/s/ BDO SEIDMAN, LLP
Woodbridge, New Jersey
September 30, 1996
S-1
<PAGE> 110
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of Fedders Corporation
We have audited the consolidated statements of operations, cash flows and
stockholders' equity of Fedders Corporation for the year ended August 31, 1994
and have issued our report thereon dated October 6, 1994 (included elsewhere in
this Registration Statement). Our audit also included the financial statement
schedule for the year ended August 31, 1994 listed in Item 21(b) of this
Registration Statement. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
MetroPark, New Jersey
October 6, 1994
S-2
<PAGE> 111
FEDDERS CORPORATION
VALUATION & QUALIFYING ACCOUNTS AND RESERVES
SCHEDULE II
FOR THE NINE MONTHS ENDED MAY 31, 1997
FOR THE YEARS ENDED AUGUST 31, 1996, 1995 AND 1994
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE ADDITIONS BALANCE
AT BEGINNING CHARGED TO AT END
OF PERIOD EXPENSES DEDUCTIONS OTHER OF PERIOD
------------ ---------- ---------- ----- ---------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Nine months ended: May 31, 1997.............. $1,952 $ 276 $ 95 $ -- $ 2,133
====== ===== ====== ===== ======
Year Ended: August 31, 1996.................. $ 872 $ 580 $ -- $ 500(1) $ 1,952
====== ===== ====== ===== ======
August 31, 1995................. $ 744 $ 286 $ 158 $ -- $ 872
====== ===== ====== ===== ======
August 31, 1994................. $1,078 $ 666 $1,000 $ -- $ 744
====== ===== ====== ===== ======
</TABLE>
- ---------------
(1) Includes $500 related to joint venture (see note 12 of the Notes to the
Consolidated Financial Statements).
S-3
<PAGE> 112
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------ -------------------------------------------------------------------------------
<S> <C>
1 Purchase Agreement dated August 11, 1997 by and between the Company, the
Guarantor, Donaldson, Lufkin & Jenrette Securities Corporation and Goldman,
Sachs & Co.
3.1(a) Certificate of Incorporation of the Company, as amended through July 23, 1996.
3.1(b)(i) Restated Certificate of Incorporation of the Guarantor (incorporated by
reference to Exhibit 3.1 to the Guarantor's Annual Report on Form 10-K for 1984
(File No. 1-8831)).
3.1(b)(ii) Amendment to Restated Certificate of Incorporation of the Guarantor
(incorporated by reference to Exhibit 4a to the Guarantor's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1985 (File No. 1-8831)).
3.1(b)(iii) Correction of Restated Certificate of Incorporation of the Guarantor
(incorporated by reference to Exhibit 4b to the Guarantor's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1985 (File No. 1-8831)).
3.1(b)(iv) Amendment to Certificate of Incorporation of the Guarantor (incorporated by
reference to Exhibit (3)(i) to the Guarantor's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1987 (File No. 1-8831)).
3.1(b)(v) Amendment to Certificate of Incorporation of the Guarantor (incorporated by
reference to Exhibit (3)(ii) to the Guarantor's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1987 (File No. 1-8831)).
3.1(b)(vi) Amendment to Certificate of Incorporation of the Guarantor (incorporated by
reference to Exhibit (3)(vi) to the Guarantor's Annual Report on Form 10-K for
1992 (File No. 1-8831)).
3.1(b)(vii) Amendments to Certificate of Incorporation of the Guarantor (incorporated by
reference to Exhibit (3)(vii) to the Guarantor's Annual Report on Form 10-K for
1996 (File No. 1-8831)).
3.2(a) By-Laws of the Company.
3.2(b) By-Laws of the Guarantor, amended through January 16, 1998 (incorporated by
reference to Exhibit (3)(vii) to the Guarantor's Annual Report on Form 10-K for
1987 (File No. 1-8831)).
4.1 Indenture, dated as of August 18, 1997, by and among the Company, the Guarantor
and the Trustee.
4.2 Registration Rights Agreement dated as of August 18, 1997, by and among the
Company, the Guarantor, Donaldson, Lufkin & Jenrette Securities Corporation and
Goldman, Sachs & Co.
5 Opinion of Cummings & Lockwood.
10(i) Stock Option Plan II (incorporated by reference to Exhibit 10.4 to the
Guarantor's Annual Report on Form 10-K for 1984 (File No. 1-8831)).
10(ii) Stock Option Plan III (incorporated by reference to Exhibit 10(iv) to the
Guarantor's Annual Report on Form 10-K for 1985 (File No. 1-8831)).
10(iii) Stock Option Plan IV (incorporated by reference to Exhibit 10(iv) to the
Guarantor's Annual Report on Form 10-K for 1987 (File No. 1-8831)).
10(iv) Stock Option Plan V (incorporated by reference to Exhibit 10(v) to the
Guarantor's Annual Report on Form 10-K for 1988 (File No. 1-8831)).
10(v) Stock Option Plan VI (incorporated by reference to Exhibit 10(vi) to the
Guarantor's Annual Report on Form 10-K for 1989 (File No. 1-8831)).
</TABLE>
<PAGE> 113
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------ -------------------------------------------------------------------------------
<S> <C>
10(vi) Stock Option Plan VII (incorporated by reference to Exhibit 10(vi) to the
Guarantor's Annual Report on Form 10-K for 1990 (File No. 1-8831)).
10(vii) Stock Option Plan VIII (incorporated by reference to Annex F to the Guarantor's
Proxy Statement -- Prospectus dated May 10, 1996 (File No. 1-8831)).
10(viii) Employment Contract between the Guarantor and Salvatore Giordano dated March
23, 1993 (incorporated by reference to Exhibit 10(viii) to the Guarantor's
Annual Report on Form 10-K for 1993 (File No. 1-8831)).
10(ix) Joint Venture Contract between Ningbo General Air Conditioner Factory and
Fedders Investment Corporation for the establishment of Fedders Xinle Co., Ltd.
dated July 31, 1995 (incorporated by reference to Exhibit 10(viii) to the
Guarantor's Annual Report on Form 10-K for 1996 (File No. 1-8831)).
11 Statement re: Computation of Per Share Earnings.
12 Computation of Ratio of Earnings to Fixed Charges.
21(a) Subsidiaries of the Company.
21(b) Subsidiaries of the Guarantor.
23(a) Consent of BDO Seidman, LLP.
23(b) Consent of Ernst & Young LLP.
23(c) Consent of Cummings & Lockwood (included as part of Exhibit 5).
24 Power of Attorney.
25 Statement of Eligibility on Form T-1 of the Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Exchange Agency Agreement between the Company and the Trustee.
</TABLE>
<PAGE> 1
Exhibit 1
================================================================================
FEDDERS NORTH AMERICA, INC.
FEDDERS CORPORATION
as Guarantor
$100,000,000
9 3/8% Senior Subordinated Notes due 2007
Purchase Agreement
August 11, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
================================================================================
<PAGE> 2
$100,000,000
9 3/8% Senior Subordinated Notes due 2007
of Fedders North America, Inc.
PURCHASE AGREEMENT
August 11, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10005
Dear Sirs:
Fedders North America, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to Donaldson, Lufkin & Jenrette
Securities Corporation and Goldman, Sachs & Co. (each, an "Initial Purchaser"
and, collectively, the "Initial Purchasers") an aggregate of $100,000,000 in
principal amount of its 9 3/8% Senior Subordinated Notes due 2007 (the "Series A
Notes"), subject to the terms and conditions set forth herein. The Series A
Notes are to be issued pursuant to the provisions of an indenture (the
"Indenture"), to be dated as of the Closing Date (as defined below), among the
Company, the Guarantor (as defined below) and State Street Bank and Trust
Company, as trustee (the "Trustee"). The Series A Notes and the Exchange Notes
(as defined below) issuable in exchange therefor are collectively referred to
herein as the "Notes." The Notes will be guaranteed (the "Guarantee") by Fedders
Corporation ("Fedders Corporation" or the "Guarantor"). Capitalized terms used
but not defined herein shall have the meanings given to such terms in the
Indenture.
1. OFFERING MEMORANDUM. The Series A Notes will be offered and
sold to the Initial Purchasers pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"Act"). The Company and
<PAGE> 3
the Guarantor have prepared a preliminary offering memorandum, dated July 29,
1997 (the "Preliminary Offering Memorandum"), and a final offering memorandum,
dated August 12, 1997 (the "Offering Memorandum"), relating to the Series A
Notes and the Guarantee.
Upon original issuance thereof, and until such time as the
same is no longer required pursuant to the Indenture, the Series A Notes (and
all securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE
HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR
(B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY
OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144 UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION
D UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE
TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN
BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN
EFFEC-
2
<PAGE> 4
TIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS
GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers agree,
severally and not jointly, to purchase from the Company, the principal amounts
of Series A Notes set forth opposite the name of such Initial Purchaser on
Schedule A hereto at a purchase price equal to 97% of the principal amount
thereof (the "Purchase Price").
3. TERMS OF OFFERING. The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers and sales (the "Exempt
Resales") of the Notes purchased hereunder on the terms set forth in the
Offering Memorandum, as amended or supplemented, solely to (i) persons whom the
Initial Purchasers reasonably believe to be "qualified institutional buyers" as
defined in Rule 144A under the Act ("QIBs") and (ii) to persons permitted to
purchase the Series A Notes in offshore transactions in reliance upon Regulation
S under the Act (each, a "Regulation S Purchaser") (such persons specified in
clauses (i) and (ii) being referred to herein as the "Eligible Purchasers"). The
Initial Purchasers will offer the Series A Notes to Eligible Purchasers
initially at a price equal to 99.52% of the principal amount thereof. Such price
may be changed at any time without notice.
Holders (including subsequent transferees) of the Series A
Notes will have the registration rights set forth in the registration rights
agreement (the "Registration Rights Agreement"), to be dated as of the Closing
Date, in substantially the form of Exhibit A hereto, for so long as such Series
A Notes constitute "Transfer Restricted Securities" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company and the Guarantor will agree to file with the Securities and
Exchange Commission (the "Commission") under the circumstances set forth
therein, (i) a registration statement under the Act (the "Exchange Offer
Registration Statement") relating to securities of the Company substantially
similar to the Notes (the "Exchange Notes"), to be offered in exchange for the
Series A Notes (such offer to exchange being referred to as the "Exchange
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<PAGE> 5
Offer") and the Guarantee thereof and (ii) a shelf registration statement
pursuant to Rule 415 under the Act (the "Shelf Registration Statement" and,
together with the Exchange Offer Registration Statement, the "Registration
Statements") relating to the resale by certain holders of the Series A Notes and
to use its best efforts to cause such Registration Statements to be declared and
remain effective and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer. This Agreement, the Indenture,
the Notes, the Guarantee and the Registration Rights Agreement are hereinafter
sometimes referred to collectively as the "Operative Documents."
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for, the
Series A Notes shall be made at the offices of Cahill Gordon & Reindel at 80
Pine Street, New York, New York 10005, or such other location as may be mutually
acceptable. Such delivery and payment shall be made at 9:00 a.m. New York City
time, on August 18, 1997 or at such other time as shall be agreed upon by the
Initial Purchasers and the Company. The time and date of such delivery and the
payment are herein called the "Closing Date."
(b) One or more of the Series A Notes in definitive global
form, registered in the name of Cede & Co., as nominee of the Depository Trust
Company ("DTC"), having an aggregate principal amount corresponding to the
aggregate principal amount of the Series A Notes sold to QIBs and Regulation S
Purchasers (collectively, the "Global Note"), shall be delivered by the Company
to the Initial Purchasers (or as the Initial Purchasers direct) in each case
with any transfer taxes thereon duly paid by the Company against payment by the
Initial Purchasers of the Purchase Price therefor by wire transfer in same day
funds to the order of the Company. The Global Note shall be made available to
the Initial Purchasers for inspection not later than 9:30 a.m., New York City
time, on the business day immediately preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY AND THE GUARANTOR. Each of the
Company and the Guarantor hereby jointly and severally agrees with the Initial
Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, to confirm such advice in writing,
(i) of the issuance by any state securities commission of any stop
order suspending the qualification or exemption from qualification of
any Series A Notes for offering or sale in any jurisdiction designated
by the Initial Purchasers pursuant to Section 5(e) hereof, or the
initiation of any proceeding by any state securities commission or any
other federal or state regulatory authority for such purpose and (ii)
of the happening of any event during the period referred to in Section
5(c) below that makes any statement of a material fact made in the
Preliminary Offering Memorandum or the Offering Memorandum untrue or
that requires any additions to or changes in the Preliminary Offering
4
<PAGE> 6
Memorandum or the Offering Memorandum in order to make the statements
therein not misleading. The Company shall use its best efforts to
prevent the issuance of any stop order or order suspending the
qualification or exemption of any Series A Notes under any state
securities or Blue Sky laws and, if at any time any state securities
commission or other federal or state regulatory authority shall issue
an order suspending the qualification or exemption of any Series A
Notes under any state securities or Blue Sky laws, the Company shall
use its best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and
any amendments or supplements thereto, as the Initial Purchasers may
reasonably request. Subject to the Initial Purchasers' compliance with
their representations and warranties and agreements set forth in
Section 7 hereof, the Company consents to the use of the Preliminary
Offering Memorandum and the Offering Memorandum, and any amendments and
supplements thereto required pursuant hereto, by the Initial Purchasers
in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for the
Initial Purchasers an Offering Memorandum is required by law to be
delivered in connection with Exempt Resales by the Initial Purchasers
and in connection with market-making activities of the Initial
Purchasers for so long as any Series A Notes are outstanding, (i) not
to make any amendment or supplement to the Offering Memorandum of which
the Initial Purchasers shall not previously have been advised or to
which the Initial Purchasers shall reasonably object after being so
advised and (ii) to prepare promptly upon the Initial Purchasers'
reasonable request, any amendment or supplement to the Offering
Memorandum which may be necessary or advisable in connection with such
Exempt Resales or such market-making activities.
(d) If, during the period referred to in Section 5(c) above,
any event shall occur or condition shall exist as a result of which, in
the opinion of counsel to the Initial Purchasers, it becomes necessary
to amend or supplement the Offering Memorandum in order to make the
statements therein, in the light of the circumstances when such
Offering Memorandum is delivered to an Eligible Purchaser, not
misleading, or if, in the opinion of counsel to the Initial Purchasers,
it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare an appropriate
amendment or supplement to such Offering Memorandum so that the
statements therein, as so amended or supplemented, will not, in the
light of the circumstances when it is so delivered, be misleading, or
so that such Offering Memorandum will comply with applicable law, and
to furnish to the Initial Purchasers and such other persons as the
Initial Purchasers may designate such number of copies thereof as the
Initial Purchasers may reasonably request.
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<PAGE> 7
(e) Prior to the sale of all Series A Notes pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial
Purchasers and counsel to the Initial Purchasers in connection with the
registration or qualification of the Series A Notes for offer and sale
to the Initial Purchasers and pursuant to Exempt Resales under the
securities or Blue Sky laws of such jurisdictions as the Initial
Purchasers may request and to continue such qualification in effect so
long as required for Exempt Resales and to file such consents to
service of process or other documents as may be necessary in order to
effect such registration or qualification; provided, however, that
neither the Company nor the Guarantor shall be required in connection
therewith to register or qualify as a foreign corporation in any
jurisdiction in which it is not now so qualified or to take any action
that would subject it to general service of process or taxation other
than as to matters and transactions relating to the Preliminary
Offering Memorandum, the Offering Memorandum or Exempt Resales, in any
jurisdiction in which it is not now so subject.
(f) So long as the Notes are outstanding, (i) to mail and make
generally available as soon as practicable after the end of each fiscal
year to the record holders of the Notes a financial report of the
Guarantor and its subsidiaries on a consolidated basis (and, to the
extent the Company becomes subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), a
similar financial report of the Company), all such financial reports to
include a consolidated balance sheet, a consolidated statement of
operations, a consolidated statement of cash flows and a consolidated
statement of shareholders' equity as of the end of and for such fiscal
year, together with comparable information as of the end of and for the
preceding year, certified by the Guarantor's independent public
accountants (and, to the extent the Company becomes subject to Section
13 or 15(d) of the Exchange Act, by the Company's independent public
accountants) and (ii) to mail and make generally available as soon as
practicable after the end of each quarterly period (except for the last
quarterly period of each fiscal year) to such holders, a consolidated
balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows of the Guarantor and its
subsidiaries (and, to the extent the Company becomes subject to Section
13 or 15(d) of the Exchange Act, similar financial reports of the
Company), as of the end of and for such period, and for the period from
the beginning of such year to the close of such quarterly period,
together with comparable information for the corresponding periods of
the preceding year.
(g) So long as the Notes are outstanding, to furnish to the
Initial Purchasers as soon as available copies of all reports or other
communications furnished by the Guarantor (and, to the extent the
Company becomes subject to Section 13 or 15(d) of the Exchange Act, by
the Company) to security holders generally or furnished to or filed
with the Commission or any national securities exchange on which any
class of securities of the Guarantor (and, to the extent applicable,
the Company)
6
<PAGE> 8
is listed and such other publicly available information concerning the
Guarantor and/or its subsidiaries as the Initial Purchasers may
reasonably request.
(h) So long as any of the Series A Notes remain outstanding
and, to the extent the Company becomes subject to Section 13 or 15(d)
of the Exchange Act, during any period in which the Company or the
Guarantor are not subject to Section 13 or 15(d) of the Exchange Act,
to make available to any holder of Series A Notes in connection with
any sale thereof and any prospective purchaser of such Series A Notes
from such holder, the information ("Rule 144A Information") required by
Rule 144A(d)(4) under the Act.
(i) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of the
obligations of the Company and the Guarantor under this Agreement,
including: (i) the fees, disbursements and expenses of counsel to the
Company and the Guarantor and accountants of the Company and the
Guarantor in connection with the sale and delivery of the Series A
Notes to the Initial Purchasers and pursuant to Exempt Resales, and all
other fees or expenses in connection with the preparation, printing,
filing and distribution of the Preliminary Offering Memorandum, the
Offering Memorandum and all amendments and supplements to any of the
foregoing (including financial statements) specified in Section 5(b)
and 5(c) prior to or during the period specified in Section 5(c),
including the mailing and delivering of copies thereof to the Initial
Purchasers and persons designated by them in the quantities specified
herein, (ii) all costs and expenses related to the transfer and
delivery of the Series A Notes to the Initial Purchasers and pursuant
to Exempt Resales, including any transfer or other taxes payable
thereon, (iii) all costs of printing or producing this Agreement, the
other Operative Documents, the Preliminary Offering Memorandum and the
Offering Memorandum in connection with the offering, purchase, sale or
delivery of the Series A Notes, (iv) all expenses in connection with
the registration or qualification of the Series A Notes and the
Guarantee for offer and sale under the securities or Blue Sky laws of
the several states and all costs of printing or producing any
preliminary and supplemental Blue Sky memoranda in connection therewith
(including the filing fees and fees and disbursements of counsel for
the Initial Purchasers in connection with such registration or
qualification and memoranda relating thereto) in an estimated amount of
$5,000, (v) the cost of printing certificates representing the Series A
Notes and the Guarantee, (vi) all expenses and listing fees in
connection with the application for quotation of the Series A Notes in
the National Association of Securities Dealers, Inc. ("NASD")
Automated Quotation System - PORTAL ("PORTAL"), (vii) the fees and
expenses of the Trustee and the Trustee's counsel in connection
with the Indenture, the Notes and the Guarantee, (viii) the costs and
charges of any transfer agent, registrar and/or depositary (including
DTC), (ix) any fees charged by rating agencies for the rating of the
Notes, (x) all costs and expenses of the Exchange Offer and any
7
<PAGE> 9
Registration Statement, as set forth in the Registration Rights
Agreement, and (xi) and all other costs and expenses incident to the
performance of the obligations of the Company and the Guarantor
hereunder for which provision is not otherwise made in this Section.
(j) To use its best efforts to effect the inclusion of the
Series A Notes in PORTAL and to maintain the listing of the Series A
Notes on PORTAL for so long as the Series A Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry" transfer of
the Notes, and to comply with all of its agreements set forth in the
representation letters of the Company and the Guarantor to DTC relating
to the approval of the Notes by DTC for "book-entry" transfer.
(l) During the period beginning on the date hereof and
continuing to and including the Closing Date, not to offer, sell,
contract to sell or otherwise transfer or dispose of any debt
securities of the Company or the Guarantor or any warrants, rights or
options to purchase or otherwise acquire debt securities of the Company
or the Guarantor substantially similar to the Notes and the Guarantee,
without the prior written consent of the Initial Purchasers.
(m) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Series A Notes to the
Initial Purchasers or pursuant to Exempt Resales in a manner that would
require the registration of any such sale of the Series A Notes under
the Act.
(n) Not to claim voluntarily, and to resist actively any
attempts to claim, the benefit of any usury laws against the holders of
any Notes.
(o) To cause the Exchange Offer to be made in the appropriate
form to permit Exchange Notes and the Guarantee thereof by the
Guarantor registered pursuant to the Act to be offered in exchange for
the Series A Notes and the Guarantee and to comply with all applicable
federal and state securities laws in connection with the Exchange
Offer.
(p) To use the proceeds from the sale of the Notes in the
manner specified in the Offering Memorandum under the caption "Use of
Proceeds."
(q) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(r) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by
it prior to the Closing Date
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<PAGE> 10
and to satisfy all conditions precedent to the delivery of the Series A
Notes and the Guarantee.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY
AND THE GUARANTOR. As of the date hereof, each of the Company and the Guarantor
jointly and severally represents and warrants to, and agrees with, the Initial
Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering
Memorandum do not, and any supplement or amendment to them will not,
contain any 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 the light of the circumstances under which they
were made, not misleading, except that the representations and
warranties contained in this paragraph (a) shall not apply to
statements in or omissions from the Preliminary Offering Memorandum or
the Offering Memorandum (or any supplement or amendment thereto) based
upon information relating to the Initial Purchasers furnished to the
Company in writing by the Initial Purchasers expressly for use therein
(the "Furnished Information"). No stop order preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued. As of the date
of this Agreement, the Furnished Information is comprised of the
following portions of the Offering Memorandum: (i) the paragraph
concerning overallotment and stabilization on page (iii), and (ii) the
text of the third, fourth, sixth and last paragraphs under the caption
"Plan of Distribution;"
(b) Each of the Guarantor and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business as described in
the Preliminary Offering Memorandum and the Offering Memorandum and to
own, lease and operate its properties, and each is duly qualified and
is in good standing as a foreign corporation authorized to do business
in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification, except
where the failure to be so qualified would not have a material adverse
effect on the business, financial condition or results of operations of
the Guarantor and its subsidiaries, taken as a whole (a "Material
Adverse Effect");
(c) The entities listed on Schedule B hereto are the only
subsidiaries, direct or indirect, of the Guarantor. Except as described
in the Preliminary Offering Memorandum and Offering Memorandum, all of
the outstanding shares of capital stock of each of the Guarantor's
subsidiaries are owned by the Guarantor, directly or indirectly through
one or more subsidiaries, free and clear of any security interest,
claim, lien, encumbrance or adverse interest of any nature (each, a
"Lien");
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<PAGE> 11
(d) This Agreement has been duly authorized, executed and
delivered by the Company and the Guarantor, and is a valid and binding
agreement of the Company and the Guarantor, enforceable against the
Company and the Guarantor in accordance with its terms except as (i)
the enforceability hereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability;
(e) The Indenture has been duly authorized by the Company and
the Guarantor and, on the Closing Date, will have been validly executed
and delivered by the Company and the Guarantor. When the Indenture has
been duly executed and delivered by the Company and the Guarantor, the
Indenture will be a valid and binding agreement of the Company and the
Guarantor, enforceable against the Company and the Guarantor in
accordance with its terms except as (i) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability. On the Closing Date, the Indenture
will conform in all material respects to the requirements of the Trust
Indenture Act of 1939, as amended (the "TIA" or "Trust Indenture Act"),
and the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder;
(f) The Series A Notes have been duly authorized and, on the
Closing Date, will have been validly executed and delivered by the
Company. When the Series A Notes have been issued, executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with
the terms of this Agreement, the Notes will be entitled to the benefits
of the Indenture and will be valid and binding obligations of the
Company, enforceable in accordance with their terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability. On the Closing Date,
the Series A Notes will conform as to legal matters to the description
thereof contained in the Offering Memorandum;
(g) On the Closing Date, the Exchange Notes will have been
duly authorized by the Company. When the Exchange Notes are issued,
executed and authenticated in accordance with the terms of the Exchange
Offer and the Indenture, the Exchange Notes will be entitled to the
benefits of the Indenture and will be the valid and binding obligations
of the Company, enforceable against the Company in accordance with
their terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and
10
<PAGE> 12
(ii) rights of acceleration and the availability of equitable remedies
may be limited by equitable principles of general applicability;
(h) The Guarantee to be endorsed on the Series A Notes by the
Guarantor has been duly authorized by the Guarantor and, on the Closing
Date, will have been duly executed and delivered by the Guarantor. When
the Series A Notes have been issued, executed and authenticated in
accordance with the Indenture and delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement, the
Guarantee of the Guarantor endorsed thereon will be entitled to the
benefits of the Indenture and will be the valid and binding obligation
of the Guarantor, enforceable against the Guarantor in accordance with
its terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability. On the Closing Date, the Guarantee to be endorsed on the
Series A Notes will conform as to legal matters to the description
thereof contained in the Offering Memorandum;
(i) The Guarantee to be endorsed on the Exchange Notes by the
Guarantor has been duly authorized by the Guarantor and, when issued,
will have been duly executed and delivered by the Guarantor. When the
Exchange Notes have been issued, executed and authenticated in
accordance with the terms of the Exchange Offer and the Indenture, the
Guarantee of the Guarantor endorsed thereon will be entitled to the
benefits of the Indenture and will be the valid and binding obligation
of the Guarantor, enforceable against the Guarantor in accordance with
its terms, except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability. When the Exchange Notes are issued, authenticated and
delivered, the Guarantee to be endorsed on the Exchange Notes will
conform as to legal matters to the description thereof in the Offering
Memorandum;
(j) The Registration Rights Agreement has been duly authorized
by the Company and the Guarantor and, on the Closing Date, will have
been duly executed and delivered by the Company and the Guarantor. When
the Registration Rights Agreement has been duly executed and delivered,
the Registration Rights Agreement will be a valid and binding agreement
of the Company and the Guarantor, enforceable against the Company and
the Guarantor in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability. On the Closing Date,
the Registration Rights Agreement will conform as to legal matters to
the description thereof in the Offering Memorandum;
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<PAGE> 13
(k) Neither the Guarantor nor any of its subsidiaries is in
violation of its respective charter or by-laws or in default in the
performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Guarantor and its
subsidiaries, taken as a whole, to which the Guarantor or any of its
subsidiaries is a party or by which the Guarantor or any of its
subsidiaries or their respective property is bound;
(l) The execution, delivery and performance of this Agreement
and the other Operative Documents by the Company and the Guarantor,
compliance by the Company and the Guarantor with all provisions hereof
and thereof and the consummation of the transactions contemplated
hereby and thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as may be required under the
securities or Blue Sky laws of the various states or under the Act),
(ii) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the
Guarantor or any of its subsidiaries or any indenture, loan agreement,
mortgage, lease or other agreement or instrument that is material to
the Guarantor and its subsidiaries, taken as a whole, to which the
Guarantor or any of its subsidiaries is a party or by which the
Guarantor or any of its subsidiaries or their respective property is
bound, (iii) violate or conflict with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental
body or agency having jurisdiction over the Guarantor, any of its
subsidiaries or their respective property, (iv) result in the
imposition or creation of (or the obligation to create or impose) a
Lien under, any agreement or instrument to which the Guarantor or any
of its subsidiaries is a party or by which the Guarantor or any of its
subsidiaries or their respective property is bound, or (v) result in
the termination or revocation of any Authorization (as defined below)
of the Guarantor or any of its subsidiaries or result in any other
impairment of the rights of the holder of any such Authorization which
could reasonably be expected, singly or in the aggregate, to have a
Material Adverse Effect;
(m) There are no legal or governmental proceedings pending or,
to the knowledge of the Guarantor, threatened to which the Guarantor or
any of its subsidiaries is or could be a party or to which any of their
respective property is or could be subject, which if decided adversely
to the Guarantor or any of its subsidiaries, could reasonably be
expected, singly or in the aggregate, to have a Material Adverse
Effect;
(n) Neither the Guarantor nor any of its subsidiaries has
violated any foreign, federal, state or local law or regulation or the
common law relating to the protection of human health and safety, the
environment or hazardous or toxic substances, constituents, or wastes,
crude oil, pollutants or contaminants
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<PAGE> 14
("Environmental Laws") or any provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or the rules and
regulations promulgated thereunder, except for such violations which,
singly or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect;
(o) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
facilities or compliance with Environmental Laws or any Authorization,
any related constraints on operating activities and any potential
liabilities to third parties) which could reasonably be expected,
singly or in the aggregate, to have a Material Adverse Effect;
(p) Each of the Guarantor and its subsidiaries has such
permits, licenses, consents, exemptions, franchises, authorizations and
other approvals (each, an "Authorization") of, and has made all filings
with and notices to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other tribunals,
including without limitation, under any applicable Environmental Laws,
as are necessary to own, lease, license and operate its respective
properties and to conduct its business, except where the failure to
have any such Authorization or to make any such filing or notice could
not reasonably be expected, singly or in the aggregate, to have a
Material Adverse Effect. Each such Authorization is valid and in full
force and effect and each of the Guarantor and its subsidiaries is in
material compliance with all the terms and conditions thereof and with
the rules and regulations of the authorities and governing bodies
having jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse of
time or both, would allow for revocation, suspension or termination of
any such Authorization or results or, after notice or lapse of time or
both, would result in any other impairment of the rights of the holder
of any such Authorization; and such Authorizations contain no
restrictions that are burdensome to the Guarantor or any of its
subsidiaries; except where such failure to be valid and in full force
and effect or to be in compliance, the occurrence of any such event or
the presence of any such restriction could not reasonably be expected,
singly or in the aggregate, to have a Material Adverse Effect;
(q) BDO Seidman, LLP, who has certified certain financial
statements and supporting schedules included in or incorporated by
reference into the Preliminary Offering Memorandum and the Offering
Memorandum, are independent public accountants with respect to the
Company and the Guarantor, as required by the Act and the Exchange Act.
The historical financial statements, together with related schedules
and notes, set forth in or incorporated by reference into the
Preliminary Offering Memorandum and the Offering Memorandum comply as
to form in all
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<PAGE> 15
material respects with the applicable requirements under the Act and
the Exchange Act;
(r) The historical financial statements, together with related
schedules and notes forming part of the Offering Memorandum (and any
amendment or supplement thereto), present fairly the consolidated
financial position, results of operations and changes in financial
position of the Guarantor and its subsidiaries on the basis stated in
the Offering Memorandum at the respective dates or for the respective
periods to which they apply; such statements and related schedules and
notes have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and
statistical information and data set forth in or incorporated by
reference into the Offering Memorandum (and any amendment or supplement
thereto) are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements of the
Guarantor and the books and records of the Company and the Guarantor;
(s) The pro forma financial statements included in the
Preliminary Offering Memorandum and the Offering Memorandum have been
prepared on a basis consistent with the historical financial statements
of the Guarantor and its subsidiaries and give effect to assumptions
used in the preparation thereof on a reasonable basis and in good faith
and present fairly the historical and proposed transactions
contemplated by the Preliminary Offering Memorandum and the Offering
Memorandum; and such pro forma financial statements comply as to form
in all material respects with the requirements applicable to pro forma
financial statements under the Act and the Exchange Act. The other pro
forma financial and statistical information and data included in the
Offering Memorandum are, in all material respects, accurately presented
and prepared on a basis consistent with the pro forma financial
statements;
(t) To the best knowledge of the Company and the Guarantor,
neither the Company, the Guarantor nor any subsidiary, nor any
director, officer or employee of the Company or the Guarantor has,
directly or indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful expenses
relating to political activity, made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds, violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended, or
made any unlawful bribe, rebate, payoff, influence payment, kickback,
or other unlawful payment;
(u) The Guarantor and its subsidiaries have good and
marketable title in fee simple to all real property and good title to
all personal property owned by them which is material to the business
of the Guarantor and its subsidiaries, taken as a
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<PAGE> 16
whole, in each case free and clear of all Liens and defects, except
such as are described in the Offering Memorandum or such as do not
materially affect the value of such property, taken as a whole, and do
not interfere with the use made and proposed to be made of such
property, taken as a whole, by the Guarantor and its subsidiaries; and
any material real property and buildings held under lease by the
Guarantor and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do
not interfere with the use made of such property and buildings by the
Guarantor and its subsidiaries, in each case except as described in the
Offering Memorandum;
(v) The Guarantor and its subsidiaries own or possess, or can
acquire on reasonable terms, all patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names
("Intellectual Property") currently employed by them in connection with
the business now operated by them except where the failure to own or
possess or otherwise be able to acquire such Intellectual Property
could not reasonably be expected, singly or in the aggregate, to have a
Material Adverse Effect; and neither the Guarantor nor any of its
subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to any of such Intellectual
Property which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could reasonably be expected
to have a Material Adverse Effect;
(w) Except as disclosed in the Offering Memorandum, no
relationship, direct or indirect, exists between or among the Guarantor
or any of its subsidiaries on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Guarantor or any
of its subsidiaries or the Guarantor on the other hand, which would be
required by the Act to be described in the Offering Memorandum if the
Offering Memorandum were a prospectus included in a registration
statement on Form S-1 filed with the Commission;
(x) There is no (i) significant unfair labor practice
complaint, grievance or arbitration proceeding pending or threatened
against the Guarantor or any of its subsidiaries before the National
Labor Relations Board or any state or local labor relations board, (ii)
strike, labor dispute, slowdown or stoppage pending or, to the
knowledge of the Guarantor, threatened against the Guarantor or any of
its subsidiaries or (iii) union representation question existing with
respect to the employees of the Guarantor or any of its subsidiaries,
except in the case of clauses (i), (ii) and (iii) for such actions
which, singly or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect. To the best knowledge of the Company
and the Guarantor, no collective bargaining organizing activities are
taking place with respect to the Guarantor or any of its subsidiaries;
15
<PAGE> 17
(y) Each of the Guarantor and its subsidiaries maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only
in accordance with management's general or specific authorization; and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences;
(z) All material tax returns required to be filed by the
Guarantor and each of its subsidiaries in any jurisdiction have been
filed, other than those filings being contested in good faith, and all
material taxes, including withholding taxes, penalties and interest,
assessments, fees and other charges due pursuant to such returns or
pursuant to any assessment received by the Guarantor or any of its
subsidiaries, have been paid, other than those being contested in good
faith and for which reasonable reserves have been provided;
(aa) All indebtedness of the Company and the Guarantor that
will be repaid with the proceeds of the issuance and sale of the Series
A Notes was incurred, and the indebtedness represented by the Series A
Notes is being incurred, for proper purposes and in good faith and each
of the Company and the Guarantor was, at the time of the incurrence of
such indebtedness that will be repaid with the proceeds of the issuance
and sale of the Series A Notes, and will be on the Closing Date (after
giving effect to the application of the proceeds from the issuance of
the Series A Notes) solvent, and had at the time of the incurrence of
such indebtedness that will be repaid with the proceeds of the issuance
and sale of the Series A Notes and will have on the Closing Date (after
giving effect to the application of the proceeds from the issuance of
the Series A Notes) sufficient capital for carrying on its respective
business and was, at the time of the incurrence of such indebtedness
that will be repaid with the proceeds of the issuance and sale of the
Series A Notes, and will be on the Closing Date (after giving effect to
the application of the proceeds from the issuance of the Notes) able to
pay its respective debts as they mature;
(bb) Neither the Company nor the Guarantor is and, after
giving effect to the offering and sale of the Notes and the application
of the net proceeds thereof as described in the Offering Memorandum,
neither will be an "investment company," as such term is defined in the
Investment Company Act of 1940, as amended;
(cc) There are no contracts, agreements or understandings
between the Company or the Guarantor and any person granting such
person the right to require the Company or the Guarantor to include any
securities of the Company or the
16
<PAGE> 18
Guarantor with the Notes and Guarantee registered pursuant to the
Registration Rights Agreement;
(dd) Neither the Guarantor nor any of its subsidiaries nor any
agent thereof acting on their behalf has taken, and none of them will
take, any action that might cause this Agreement or the issuance or
sale of the Series A Notes to violate Regulation G (12 C.F.R. Part
207), Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part
221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of
the Federal Reserve System;
(ee) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the
Offering Memorandum (exclusive of information upon which any amendments
or supplements subsequent to the date of this Agreement is based), (i)
there has not occurred any material adverse change or any development
involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or
operations of the Guarantor and its subsidiaries, taken as a whole,
(ii) there has not been any material adverse change or any development
involving a prospective material adverse change in the capital stock or
in the long-term debt of the Guarantor or any of its subsidiaries and
(iii) neither the Guarantor nor any of its subsidiaries has incurred
any material liability or obligation, direct or contingent;
(ff) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the information
specified in, and meeting the requirements of, Rule 144A(d)(4) under
the Act;
(gg) Neither the Series A Notes nor the Guarantee, when issued
and delivered pursuant to this Agreement, will be of the same class
(within the meaning of Rule 144A under the Act) as any security of the
Company or the Guarantor that is listed on a national securities
exchange registered under Section 6 of the Exchange Act or that is
quoted in a United States automated inter-dealer quotation system;
(hh) No form of general solicitation or general advertising
(as defined in Regulation D under the Act) was used by the Company, the
Guarantor or any of their respective representatives (other than the
Initial Purchasers, as to whom the Company and the Guarantor make no
representation) in connection with the offer and sale of the Series A
Notes contemplated hereby, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine,
or similar medium or broadcast over television or radio, or any seminar
or meeting whose attendees have been invited by any general
solicitation or general advertising. No securities of the same class as
the Series A Notes have been issued and sold by the Company within the
six-month period immediately prior to the date hereof;
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<PAGE> 19
(ii) Prior to the effectiveness of any Registration Statement,
the Indenture is not required to be qualified under the TIA;
(jj) None of the Company, the Guarantor or any of their
respective affiliates or any person acting on its or their behalf
(other than the Initial Purchasers, as to whom the Company and the
Guarantor make no representation) has engaged or will engage in any
directed selling efforts within the meaning of Regulation S under the
Act ("Regulation S") with respect to the Notes or the Guarantee;
(kk) The sale of the Series A Notes pursuant to Regulation S
is not part of a plan or scheme to evade the registration provisions of
the Act;
(ll) The Company, the Guarantor and their respective
affiliates and all persons acting on their behalf (other than the
Initial Purchasers, as to whom the Company and the Guarantor make no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the
offering of the Series A Notes outside the United States;
(mm) No registration under the Act of the Series A Notes or
the Guarantee is required for the sale of the Series A Notes and the
Guarantee to the Initial Purchasers as contemplated hereby assuming the
accuracy of the Initial Purchasers' representations and warranties and
agreements set forth in Section 7 hereof;
(nn) No "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2)
under the Act, (i) has imposed (or has informed the Company or the
Guarantor that it is considering imposing) any condition (financial or
otherwise) on the Company's or the Guarantor's retaining any rating
assigned to the Company, the Guarantor or any securities of the Company
or the Guarantor or (ii) has indicated to the Company or the Guarantor
that it is considering (a) the downgrading, suspension or withdrawal
of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (b) any
change in the outlook for any rating of the Company or the Guarantor;
and
(oo) The repurchase by the Guarantor of its common stock,
class A stock and convertible preferred stock, in an aggregate amount
not to exceed $50.0 million, and the redemption of the Guarantor's 8.5%
Convertible Subordinated Debentures due 2012 have each been duly and
validly authorized by the Guarantor.
The Company and the Guarantor acknowledge that the Initial
Purchasers and, for purposes of the opinions to be delivered to the Initial
Purchasers pursuant to Section 9 hereof, counsel to the Company and the
Guarantor and counsel to the Initial Purchasers will
18
<PAGE> 20
rely upon the accuracy and truth of the foregoing representations and hereby
consent to such reliance.
7. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each of
the Initial Purchasers, severally and not jointly, represents and warrants to
the Company and the Guarantor, and agrees that:
(a) Such Initial Purchaser is either a QIB or an institutional
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7)
under the Act (an "Accredited Institution"), in either case, with such
knowledge and experience in financial and business matters as is
necessary in order to evaluate the merits and risks of an investment in
the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring the Series A
Notes with a view to any distribution thereof or with any present
intention of offering or selling any of the Series A Notes in a
transaction that would violate the Act or the securities laws of any
state of the United States or any other applicable jurisdiction and (B)
will be reoffering and reselling the Series A Notes only to (x) QIBs in
compliance with the exemption from the registration requirements of the
Act provided by Rule 144A or (y) in offshore transactions in compliance
with Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general
solicitation or general advertising (within the meaning of Regulation D
under the Act) has been or will be used by such Initial Purchaser or
any of its representatives in connection with the offer and sale of the
Series A Notes pursuant hereto, including, but not limited to,
articles, notices or other communications published in any newspaper,
magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with
Exempt Resales, such Initial Purchaser will solicit offers to buy the
Series A Notes only from, and will offer to sell and sell the Series A
Notes only to (A) Eligible Purchasers that such Initial Purchaser
reasonably believes are QIBs and (B) Regulation S Purchasers that, in
each case, agree that (x) the Series A Notes purchased by them may be
resold, pledged or otherwise transferred within the time period
referred to under Rule 144(k) under the Act, as in effect on the date
of the transfer of such Series A Notes, (taking into account the
provisions of Rule 144(d) under the Act, if applicable) only (I) to the
Company or any of its subsidiaries, (II) to a person whom the seller
reasonably believes is a QIB purchasing for its own account or for the
account of a QIB in a transaction meeting the requirements of Rule 144A
under the Act, (III) in an offshore transaction (as defined in Rule 902
under the Act) meeting the requirements of Rule 904 of the Act, (IV) in
a transaction meeting the requirements of Rule 144
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<PAGE> 21
under the Act, (V) to an Accredited Institution that, prior to such
transfer, furnishes the Trustee a signed letter containing certain
representations and agreements relating to the registration of transfer
of such Series A Notes and, if such transfer is in respect of an
aggregate principal amount of Series A Notes less than $250,000, an
opinion of counsel acceptable to the Company that such transfer is in
compliance with the Act, (VI) in accordance with another exemption from
the registration requirements of the Act (and based upon an opinion of
counsel acceptable to the Company) or (VII) pursuant to an effective
registration statement and, in each case, in accordance with the
applicable securities laws of any state of the United States or any
other applicable jurisdiction and (y) they will deliver to each person
to whom such Series A Notes or an interest therein is transferred a
notice substantially to the effect of the foregoing.
(e) Neither of such Initial Purchasers nor any of such Initial
Purchaser's affiliates or any persons acting on such Initial
Purchaser's behalf has engaged or will engage in any directed selling
efforts within the meaning of Regulation S with respect to the Series A
Notes or the Guarantee.
(f) The Series A Notes offered and sold by such Initial
Purchaser in reliance on Regulation S have been and will be offered and
sold only in offshore transactions (as defined in Rule 902 under the
Act).
(g) The sale of the Series A Notes offered and sold by such
Initial Purchaser in reliance on Regulation S is not part of a plan or
scheme to evade the registration provisions of the Act.
(h) Such Initial Purchaser agrees that it has offered the
Series A Notes and will offer and sell the Series A Notes (i) as part
of its distribution at any time and (ii) otherwise until 40 days after
the later of the commencement of the offering of the Series A Notes and
the Closing Date, only in accordance with Rule 903 of Regulation S or
another exemption from the registration requirements of the Act. Such
Initial Purchaser agrees that, during such 40-day restricted period, it
will not cause any advertisement with respect to the Series A Notes
(including any "tombstone" advertisement) to be published in any
newspaper or periodical or posted in any public place and will not
issue any circular relating to the Series A Notes, except such
advertisements as permitted by and which include the statements
required by Regulation S.
(i) Such Initial Purchaser agrees that it has not offered or
sold and will not offer or sell the Series A Notes in reliance on
Regulation S (i) as part of its distribution at any time and (ii)
otherwise until 40 days after the later of the commencement of the
offering of the Series A Notes and the Closing Date, to a U.S.
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<PAGE> 22
person (as defined in Rule 902 under the Act) or for the account or
benefit of a U.S. person (other than a distributor (as defined in Rule
902 under the Act)).
(j) Such Initial Purchaser agrees that, at or prior to
confirmation of a sale of Series A Notes by it to any distributor,
dealer or person receiving a selling concession, fee or other
remuneration during the 40-day restricted period referred to in Rule
903(c)(3) under the Act, it will send to such distributor, dealer or
person receiving a selling concession, fee or other remuneration a
confirmation or notice to substantially the following effect:
The Series A Notes covered hereby have not been
registered under the U.S. Securities Act of 1933, as amended
(the "Securities Act"), and may not be offered and sold within
the United States or to, or for the account or benefit of,
U.S. persons (i) as part of your distribution at any time or
(ii) otherwise until 40 days after the later of the
commencement of the offering and the closing date, except in
either case in accordance with Regulation S under the
Securities Act (or Rule 144A or to accredited institutions in
transactions that are exempt from the registration
requirements of the Securities Act), and in connection with
any subsequent sale by you of the Notes covered hereby in
reliance on Regulation S during the period referred to above
to any distributor, dealer or person receiving a selling
concession, fee or other remuneration, you must deliver a
notice substantially to the foregoing effect. Terms used above
have the meanings assigned to them in Regulation S.
(k) Such Initial Purchaser agrees that the Notes offered and
sold in reliance on Regulation S will be represented upon issuance by a
global security that may not be exchanged for definitive securities
until the expiration of the 40-day restricted period referred to in
Rule 903(c)(3) under the Act and only upon certification of beneficial
ownership of such Series A Notes by non-U.S. persons or U.S. persons
who purchased such Series A Notes in transactions that were exempt from
the registration requirements of the Act.
(l) Such Initial Purchaser further represents and agrees that
(i) it has not offered or sold and will not offer or sell any Series A
Notes to persons in the United Kingdom prior to the expiration of the
period of six months from the issue date of the Series A Notes, 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 business 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 re-
21
<PAGE> 23
spect to anything done by it in relation to the Series A Notes in, from
or otherwise involving the United Kingdom and (iii) it has only issued
or passed on and will only issue or pass on in the United Kingdom any
document received by it in connection with the issuance of the Series A
Notes to a person who is of a kind described in Article 11(3) of the
Financial Services Act of 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom the document may otherwise lawfully
be issued or passed on.
(m) Such Initial Purchaser agrees that it will not offer, sell
or deliver any of the Series A Notes in any jurisdiction outside the
United States except under circumstances that will result in compliance
with the applicable laws thereof, and that it will take at its own
expense whatever action is required to permit its resale of the Series
A Notes in such jurisdictions. Such Initial Purchaser understands that
no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required
for such purpose.
(n) Such Initial Purchaser acknowledges that the Company and
the Guarantor and, for purposes of the opinions to be delivered to each
Initial Purchaser pursuant to Section 9 hereof, counsel to the Company
and the Guarantor and counsel to the Initial Purchasers will rely upon
the accuracy and truth of the foregoing representations and such
Initial Purchaser hereby consents to such reliance.
8. INDEMNIFICATION.
(a) The Company and the Guarantor agree, jointly and
severally, to indemnify and hold harmless the Initial Purchasers, their
directors, officers and each person, if any, who controls either of the Initial
Purchasers within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages, liabilities
and judgments (including, without limitation, any legal or other expenses
incurred by the Initial Purchasers, their directors, officers or control persons
in connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (or any amendment or
supplement thereto), the Preliminary Offering Memorandum or any Rule 144A
Information provided by the Company or the Guarantor to any holder or
prospective purchaser of Series A Notes pursuant to Section 5(h) or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon the Furnished Information.
(b) The Initial Purchasers agree to indemnify and hold
harmless the Company and the Guarantor, and their respective directors and
officers and each person, if
22
<PAGE> 24
any, who controls (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) the Company or the Guarantor, to the same extent as the
foregoing indemnity from the Company and the Guarantor to the Initial Purchasers
but only with reference to the Furnished Information.
(c) In case any action shall be commenced involving any person
in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b)
(the "indemnified party"), the indemnified party shall promptly notify the
person against whom such indemnity may be sought (the "indemnifying party") in
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), the Initial Purchasers shall not
be required to assume the defense of such action pursuant to this Section 8(c),
but may employ separate counsel and participate in the defense thereof, but the
fees and expenses of such counsel, except as provided below, shall be at the
expense of the Initial Purchasers). Any indemnified party shall have the right
to employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the indemnified party unless (i) the employment of such counsel shall have been
specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
employ counsel reasonably satisfactory to the indemnified party or (iii) the
named parties to any such action (including any impleaded parties) include both
the indemnified party and the indemnifying party, and the indemnified party
shall have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified parties
and all such fees and expenses shall be reimbursed as they are incurred. Such
firm shall be designated in writing by Donaldson, Lufkin & Jenrette Securities
Corporation, in the case of the parties indemnified pursuant to Section 8(a),
and by the Company and the Guarantor, in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall indemnify and hold
harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with the indemnifying party's written consent or (ii) effected without
the indemnifying party's written consent if the settlement is entered into more
than twenty business days after the indemnifying party shall have received
notice setting forth the terms of such proposed settlement and a request from
the indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior
23
<PAGE> 25
to the date of such settlement, the indemnifying party shall have failed to
comply with such reimbursement request. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement or
compromise of, or consent to the entry of judgment with respect to, any pending
or threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 8 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages, liabilities or judgments
referred to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities and
judgments (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Guarantor, on the one hand, and the
Initial Purchasers, on the other hand, from the offering of the Series A Notes
or (ii) if the allocation provided by clause 8(d)(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 8(d)(i) above but also the relative
fault of the Company and the Guarantor, on the one hand, and the Initial
Purchasers, on the other hand, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or judgments, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Guarantor, on the one hand, and the Initial
Purchasers, on the other hand, shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Series A Notes (before deducting
expenses) received by the Company, and the total discounts and commissions
received by the Initial Purchasers bear to the total price to investors of the
Series A Notes, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company and the Guarantor, on the
one hand, and the Initial Purchasers, on the other hand, 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 Guarantor, on the one
hand, or the Initial Purchasers, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company, the Guarantor, and the Initial Purchasers agree
that it would not be just and equitable if contribution pursuant to this Section
8(d) were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or
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<PAGE> 26
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or judgments referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses incurred by such indemnified party in connection with
investigating or defending any matter, including any action that could have
given rise to such losses, claims, damages, liabilities or judgments.
Notwithstanding the provisions of this Section 8, the Initial Purchasers shall
not be required to contribute any amount in excess of the amount by which the
total price (less the Initial Purchasers' discount shown on the cover page of
the Offering Memorandum) of the Series A Notes purchased by it were sold to
investors in Exempt Resales exceeds the amount of any damages which the Initial
Purchasers 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 Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Series A Notes purchased by each of the Initial Purchasers
hereunder and are not joint.
(e) The remedies provided for in this Section 8 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
9. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The
obligations of the Initial Purchasers to purchase the Series A Notes under this
Agreement are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and
the Guarantor contained in this Agreement shall be true and correct in
all material respects on the Closing Date with the same force and
effect as if made on and as of the Closing Date.
(b) On or after the date hereof (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any
notice have been given of any potential or intended downgrading,
suspension or withdrawal of, or of any review (or of any potential or
intended review) for a possible change that does not indicate the
direction of the possible change in any rating of the Company or the
Guarantor, or any securities of the Company or the Guarantor
(including, without limitation, the placing of any of the foregoing
ratings on credit watch with negative or developing implications or
under review with an uncertain direction) by any "nationally recognized
statistical rating organization" as such term is defined for purposes
of Rule 436(g)(2) under the Act, (ii) there shall not have occurred any
change, nor shall any notice have been given of any potential or
intended change, in the outlook for any rating of the Company or the
Guarantor or any securities of the Company or the Guarantor by any such
rating organization and (iii) no such rating
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<PAGE> 27
organization shall have given notice that it has assigned (or is
considering assigning) a lower rating to the Notes than that on which
the Notes were marketed.
(c) The Initial Purchasers shall have received on the Closing
Date a certificate dated the Closing Date, signed by the President and
the Chief Financial Officer of the Company and the Guarantor,
confirming the matters set forth in Sections 9(a), 9(b) and 9(d).
(d) Since the respective dates as of which information is
given in the Offering Memorandum other than as set forth in the
Offering Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), (i) there shall not have
occurred any change or any development involving a prospective change
in the condition, financial or otherwise, or the earnings, business,
management or operations of the Guarantor and its subsidiaries, taken
as a whole, (ii) there shall not have been any change or any
development involving a prospective change in the capital stock or in
the long-term debt of the Guarantor or any of its subsidiaries and
(iii) neither the Guarantor nor any of its subsidiaries shall have
incurred any liability or obligation, direct or contingent, the effect
of which, in any such case described in clause 9(d)(i), 9(d)(ii) or
9(d)(iii), in the judgment of the Initial Purchasers, is material and
adverse and, in the judgment of the Initial Purchasers, makes it
impracticable to market the Series A Notes on the terms and in the
manner contemplated in the Offering Memorandum.
(e) The Initial Purchasers shall have received on the Closing
Date an opinion (satisfactory to the Initial Purchasers and counsel for
the Initial Purchasers), dated the Closing Date, of Cummings and
Lockwood, counsel for the Company and the Guarantor, to the effect
that:
(i) each of the Guarantor, the Company and the
Company's domestic subsidiaries has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business as
described in the Offering Memorandum and to own, lease and
operate its properties as described in the Offering
Memorandum;
(ii) all the outstanding shares of capital stock of
the Company are owned by the Guarantor;
(iii) the Series A Notes have been duly authorized
and, when executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by
the Initial Purchasers in accordance with the terms of this
Agreement, and assuming due authentication by the Trustee will
be entitled to the benefits of the Indenture and will be valid
and binding obli-
26
<PAGE> 28
gations of the Company, enforceable in accordance with their
terms except as (x) the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (y) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability;
(iv) the Guarantee has been duly authorized and, when
the Series A Notes are executed and authenticated in
accordance with the provisions of the Indenture and delivered
to and paid for by the Initial Purchasers in accordance with
the terms of this Agreement, the Guarantee endorsed thereon
will be entitled to the benefits of the Indenture and will be
the valid and binding obligation of the Guarantor, enforceable
in accordance with its terms except as (x) the enforceability
thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (y) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(v) the Indenture has been duly authorized, executed
and delivered by the Company and the Guarantor and is a valid
and binding agreement of the Company and the Guarantor,
enforceable against the Company and the Guarantor in
accordance with its terms except as (x) the enforceability
thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (y) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
(vi) the Indenture complies as to form in all
material respects with the requirements of the TIA, and the
rules and regulations of the Commission applicable to an
indenture which is qualified thereunder. It is not necessary
in connection with the offer, sale and delivery of the Series
A Notes to the Initial Purchasers in the manner contemplated
by this Agreement or in connection with the Exempt Resales to
qualify the Indenture under the TIA;
(vii) this Agreement has been duly authorized,
executed and delivered by the Company and the Guarantor and is
a valid and binding agreement of the Company and the
Guarantor, enforceable against the Company and the Guarantor
in accordance with its terms except as (x) the enforceability
thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (y) rights of
acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability;
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<PAGE> 29
(viii) the Registration Rights Agreement has been
duly authorized, executed and delivered by the Company and the
Guarantor and is a valid and binding agreement of the Company
and the Guarantor, enforceable against the Company and the
Guarantor in accordance with its terms, except as (x) the
enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights
generally and (y) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles
of general applicability;
(ix) the Exchange Notes have been duly authorized
and, when executed and authenticated in accordance with the
provisions of the Indenture and delivered in exchange for
Series A Notes in accordance with the Indenture and the
Exchange Offer, will be entitled to the benefits of the
Indenture and will be valid and binding obligations of the
Company, enforceable in accordance with their terms except as
(x) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights
generally and (y) rights of acceleration and the availability
of equitable remedies may be limited by equitable principles
of general applicability;
(x) when the Exchange Notes are executed and
authenticated in accordance with the provisions of the
Indenture and delivered in exchange for Series A Notes in
accordance with the Indenture and the Exchange Offer, the
Guarantee endorsed thereon will be entitled to the benefits of
the Indenture and will be the valid and binding obligations of
the Guarantor, enforceable in accordance with its terms except
as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (y) rights of acceleration and the
availability of equitable remedies may be limited by equitable
principles of general applicability;
(xi) the statements under the captions "Description
of Notes" and "Plan of Distribution" (excluding the Furnished
Information) in the Offering Memorandum, insofar as such
statements constitute a summary of the legal matters,
documents or proceedings referred to therein, fairly present
in all material respects such legal matters, documents and
proceedings;
(xii) neither the Guarantor, the Company nor any of
the Company's domestic subsidiaries is in violation of its
respective charter or by-laws and, to such counsel's
knowledge, neither the Guarantor nor any of its subsidiaries
is in material default in the performance of any obligation,
agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or
instrument that has been filed as an exhibit to the
Guarantor's Annual Report on Form 10-K for the fiscal year
ended August 31, 1996 and, as of the date of such counsel's
opinion, that would be
28
<PAGE> 30
required to be filed as an exhibit to the Guarantor's Annual
Report on Form 10-K for the fiscal year ended August 31, 1997;
(xiii) the execution, delivery and performance of
this Agreement and the other Operative Documents by the
Company and the Guarantor, compliance by the Company and the
Guarantor with all provisions hereof and thereof and the
consummation of the transactions contemplated hereby and
thereby will not (i) require any consent, approval,
authorization or other order of, or qualification with, any
court or governmental body or agency (except such as may be
required under the securities or Blue Sky laws of the various
states or under federal securities laws), (ii) conflict with
or constitute a breach of any of the terms or provisions of,
or a default under, the charter or by-laws of the Guarantor,
the Company or any of the Company's domestic subsidiaries,
(iii) conflict with or constitute a breach of any of the terms
of provisions of, or a default under, any indenture, loan
agreement, mortgage, lease or other agreement or instrument
that has been filed as an exhibit to the Guarantor's Annual
Report on Form 10-K for the fiscal year ended August 31, 1996
and, as of the date of such counsel's opinion, that would be
required to be filed as an exhibit to the Guarantor's Annual
Report on Form 10-K for the fiscal year ended August 31, 1997,
(iv) violate or conflict with any applicable law or any rule,
regulation, or, to such counsel's knowledge, judgment, order
or decree of any court or any governmental body or agency
having jurisdiction over the Guarantor, any of its
subsidiaries or their respective property, (v) result in the
imposition or creation of (or the obligation to create or
impose) a Lien under, any agreement or instrument which has
been filed as an exhibit to the Guarantor's Annual Report on
Form 10-K for the fiscal year ended August 31, 1996 and, as of
the date of such counsel's opinion, that would be required to
be filed as an exhibit to the Guarantor's Annual Report on
Form 10-K for the fiscal year ended August 31, 1997, or (vi)
result in the termination or revocation of any material
Authorization of the Guarantor or any of its subsidiaries or
result in any other impairment of the rights of the holder of
any such material Authorization;
(xiv) except as otherwise described in the Offering
Memorandum, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the
Guarantor or any of its subsidiaries is a party or to which
any of their respective property is or could be subject, which
could reasonably be expected to result, singly or in the
aggregate, in a Material Adverse Effect;
(xv) neither the Company nor the Guarantor is and,
after giving effect to the offering and sale of the Series A
Notes and the application of the net proceeds thereof as
described in the Offering Memorandum, neither will
29
<PAGE> 31
be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended;
(xvi) neither the Guarantor nor any of its
subsidiaries nor any agent thereof acting on their behalf has
taken, and none of them will take, any action that might cause
this Agreement or the issuance or sale of the Series A Notes
to violate Regulation G (12 C.F.R. Part 207), Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or
Regulation X (12 C.F.R. Part 224) of the Board of Governors of
the Federal Reserve System;
(xvii) no registration under the Act of the Series A
Notes is required for the sale of the Series A Notes to the
Initial Purchasers as contemplated by this Agreement or for
the Exempt Resales assuming that (i) each Initial Purchaser is
a QIB or an Accredited Institution, (ii) the accuracy of, and
compliance with, the Initial Purchasers' representations and
agreements contained in Section 7 of this Agreement and (iii)
the accuracy of the representations of the Company and the
Guarantor set forth in Sections 6(gg), (hh), (ii), (kk), (ll)
and (mm) of this Agreement;
(xviii) such counsel has no reason to believe that,
as of the date of the Offering Memorandum or as of the Closing
Date, the Offering Memorandum, as amended or supplemented, if
applicable (except for the financial statements and other
financial data included therein and the Furnished Information,
as to which such counsel need not express any belief) contains
any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading; and
(xix) since the respective dates as of which
information is given in the Offering Memorandum other than as
set forth in the Offering Memorandum (exclusive of any
amendments or supplements thereto subsequent to the date of
this Agreement) to the knowledge of such counsel, (i) there
has not occurred any material adverse change in the condition,
financial or otherwise, or the earnings, business, management
or operations of the Guarantor and its subsidiaries, taken as
a whole, (ii) there has not been any material adverse change
in the capital stock or in the long-term debt of the
Guarantor, the Company or any of the Company's domestic
subsidiaries and (iii) neither the Guarantor, the Company nor
any of the Company's domestic subsidiaries has incurred any
material liability or obligation, direct or contingent.
The opinion of Cummings and Lockwood described in Section 9(e)
above shall be rendered to the Initial Purchasers at the request of the
Company and the Guarantor and shall so state therein. In giving such
opinion with respect to the
30
<PAGE> 32
matters covered by Section 9(e)(xix), Cummings and Lockwood may state
that their opinion and belief are based upon their participation in the
preparation of the Offering Memorandum and any amendments or
supplements thereto and review and discussion of the contents thereof,
but are without independent check or verification except as specified.
(f) The Initial Purchasers shall have received on the Closing
Date an opinion (satisfactory to the Initial Purchasers and counsel for
the Initial Purchasers), dated the Closing Date, of Robert N. Edwards,
in his capacity as General Counsel for the Company and the Guarantor,
to the effect that:
(i) each of the Guarantor, the Company and the
Company's domestic subsidiaries is duly qualified and is in
good standing as a foreign corporation authorized to do
business in each jurisdiction in which the nature of its
business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified
could not reasonably be expected to have a Material Adverse
Effect;
(ii) neither the Guarantor nor any of its
subsidiaries has violated any Environmental Law or any
provisions of ERISA, or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the
aggregate, could not reasonably be expected, singly or in the
aggregate, to have a Material Adverse Effect;
(iii) each of the Guarantor and its subsidiaries has
such Authorizations of, and has made all filings with and
notices to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other
tribunals, including without limitation, under any applicable
Environmental Laws, as are necessary to own, lease, license
and operate its respective properties and to conduct its
business, except where the failure to have any such
Authorization or to make any such filing or notice could not
reasonably be expected, singly or in the aggregate, to have a
Material Adverse Effect. Each such Authorization is valid and
in full force and effect and each of the Guarantor and its
subsidiaries is in material compliance with all the terms and
conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with
respect thereto; and no event has occurred (including the
receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would
allow for, revocation, suspension or termination of any such
Authorization or results or, after notice or lapse of time or
both, would result in any other impairment of the rights of
the holder of any such Authorization; and such Authorizations
contain no restrictions that are burdensome to the Guarantor
or any of its subsidiaries; except where such failure to be
valid and in
31
<PAGE> 33
full force and effect or to be in compliance, the occurrence
of any such event or the presence of any such restriction
could not reasonably be expected, singly or in the aggregate,
to have a Material Adverse Effect;
(iv) after due inquiry, to the best knowledge of
counsel, based upon written representation of the Company's
employees, neither the Company, the Guarantor nor any
subsidiary, nor any director, officer or employee of the
Company or the Guarantor has, directly or indirectly, used any
corporate funds for unlawful contributions, gifts,
entertainment, or other unlawful expenses relating to
political activity, made any unlawful payment to foreign or
domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds,
violated any provision of the Foreign Corrupt Practices Act of
1977, as amended;
(v) the Guarantor and its subsidiaries have good and
marketable title in fee simple to all real property and good
and marketable title to all personal property owned by them
which is material to the business of the Guarantor and its
subsidiaries taken as a whole, in each case free and clear of
all Liens and defects, except such as are described in the
Offering Memorandum or such as do not materially affect the
value of such property taken as a whole and do not materially
interfere with the use made and proposed to be made of such
property taken as a whole by the Guarantor and its
subsidiaries; and any material real property and buildings
held under lease by the Guarantor and its subsidiaries are
held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere
with the use made of such property and buildings by the
Guarantor and its subsidiaries, in each case except as
described in the Offering Memorandum;
(vi) the Guarantor and its subsidiaries own or
possess, or can acquire on reasonable terms, all Intellectual
Property currently employed by them in connection with the
business now operated by them except where the failure to own
or possess or otherwise be able to acquire such Intellectual
Property could not reasonably be expected, singly or in the
aggregate, to have a Material Adverse Effect; and neither the
Guarantor nor any of its subsidiaries has received any notice
of infringement of or conflict with asserted rights of others
with respect to any of such Intellectual Property which,
singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could reasonably be expected
singly or in the aggregate, to have a Material Adverse Effect;
(vii) except as disclosed in the Offering Memorandum,
no relationship, direct or indirect, exists between or among
the Guarantor or any of its
32
<PAGE> 34
subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Guarantor or any
of its subsidiaries on the other hand, which would be required
by the Act to be described in the Offering Memorandum if the
Offering Memorandum were a prospectus included in a
registration statement on Form S-1 filed with the Commission;
(viii) there is no (i) significant unfair labor
practice complaint, grievance or arbitration proceeding
pending or threatened against the Guarantor or any of its
subsidiaries before the National Labor Relations Board or any
state or local labor relations board, (ii) strike, labor
dispute, slowdown or stoppage pending or, to the knowledge of
the Guarantor, threatened against the Guarantor or any of its
subsidiaries or (iii) union representation question existing
with respect to the employees of the Guarantor or any of its
subsidiaries, except in the case of clauses (i), (ii) and
(iii) for such actions which, singly or in the aggregate,
could not reasonably be expected to have a Material Adverse
Effect. To the best of such counsel's knowledge after due
inquiry, no collective bargaining organizing activities are
taking place with respect to the Guarantor or any of its
subsidiaries;
(ix) all material tax returns required to be filed by
the Guarantor and each of its subsidiaries in any jurisdiction
have been filed, other than those filings being contested in
good faith, and all material taxes, including withholding
taxes, penalties and interest, assessments, fees and other
charges due pursuant to such returns or pursuant to any
assessment received by the Guarantor or any of its
subsidiaries, have been paid, other than those being contested
in good faith and for which reasonable reserves have been
provided;
(x) all indebtedness of the Company and the Guarantor
that will be repaid with the proceeds of the issuance and sale
of the Series A Notes was incurred, and the indebtedness
represented by the Series A Notes is being incurred, for
proper purposes and in good faith and each of the Company and
the Guarantor was, at the time of the incurrence of such
indebtedness that will be repaid with the proceeds of the
issuance and sale of the Series A Notes, and will be on the
Closing Date (after giving effect to the application of the
proceeds from the issuance of the Series A Notes) solvent, and
had at the time of the incurrence of such indebtedness that
will be repaid with the proceeds of the issuance and sale of
the Series A Notes and will have on the Closing Date (after
giving effect to the application of the proceeds from the
issuance of the Series A Notes) sufficient capital for
carrying on its respective business and was, at the time of
the incurrence of such indebtedness that will be repaid with
the proceeds of the issuance and sale of the Series A Notes,
and will be on the Closing Date (after giving effect to the
application
33
<PAGE> 35
of the proceeds from the issuance of the Notes) able to pay
its respective debts as they mature;
(xi) to the best of such counsel's knowledge after
due inquiry, there are no contracts, agreements or
understandings between the Company or the Guarantor and any
person granting such person the right to require the Company
or the Guarantor to include any securities of the Company or
the Guarantor with the Notes and Guarantee registered pursuant
to the Registration Rights Agreement; and
(xii) such counsel has no reason to believe that, as
of the date of the Offering Memorandum or as of the Closing
Date, the Offering Memorandum, as amended or supplemented, if
applicable (except for the financial statements and other
financial data included therein, as to which such counsel need
not express any belief) contains any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(g) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, of Cahill Gordon & Reindel,
counsel for the Initial Purchasers, in form and substance reasonably
satisfactory to the Initial Purchasers.
(h) The Initial Purchasers shall have received, at the time
this Agreement is executed and at the Closing Date, letters dated the
date hereof or the Closing Date, as the case may be, in form and
substance satisfactory to the Initial Purchasers from BDO Seidman LLP,
independent public accountant, containing the information and
statements of the type ordinarily included in accountants' "comfort
letters" to the Initial Purchasers with respect to the financial
statements and certain financial information contained in the Offering
Memorandum.
(i) The Series A Notes shall have been approved by the NASD
for trading and duly listed in PORTAL.
(j) The Initial Purchasers shall have received a counterpart,
conformed as executed, of the Indenture which shall have been entered
into by the Company, the Guarantor and the Trustee.
(k) The Company and the Guarantor shall have executed the
Registration Rights Agreement and the Initial Purchasers shall have
received an original copy thereof, duly executed by the Company and the
Guarantor.
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<PAGE> 36
(l) The Company shall not have failed at or prior to the
Closing Date to perform or comply with any of the agreements herein
contained and required to be performed or complied with by the Company
at or prior to the Closing Date.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time prior to the
Closing Date by the Initial Purchasers by written notice to the Company and the
Guarantor if any of the following has occurred: (i) any outbreak or escalation
of hostilities or other national or international calamity or crisis or change
in economic conditions or in the financial markets of the United States or
elsewhere that, in the Initial Purchasers' judgment, is material and adverse
and, in the Initial Purchasers' judgment, makes it impracticable to market the
Series A Notes on the terms and in the manner contemplated in the Offering
Memorandum, (ii) the suspension or material limitation of trading in securities
or other instruments on the New York Stock Exchange, the American Stock
Exchange, the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange, the Chicago Board of Trade or the NASDAQ National Market or limitation
on prices for securities or other instruments on any such exchange or the NASDAQ
National Market, (iii) the suspension of trading of any securities of the
Guarantor on any exchange or in the over-the-counter market, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects, or will materially and adversely
affect, the business, prospects, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole, (v) the declaration of a
banking moratorium by either federal or New York State authorities or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary or fiscal affairs which in your opinion has a material
adverse effect on the financial markets in the United States.
If on the Closing Date either or both of the Initial
Purchasers shall fail or refuse to purchase the Series A Notes which it or they
have agreed to purchase hereunder on such date and the aggregate principal
amount of the Series A Notes which such defaulting Initial Purchaser or Initial
Purchasers, as the case may be, agreed but failed or refused to purchase is not
more than one-tenth of the aggregate principal amount of the Series A Notes to
be purchased on such date by both Initial Purchasers, each non-defaulting
Initial Purchaser shall be obligated, in the proportion which the principal
amount of the Series A Notes set forth opposite its name in Schedule A bears to
the aggregate principal amount of the Series A Notes which the non-defaulting
Initial Purchaser has agreed to purchase, or in such other proportion as the
Initial Purchasers may specify, to purchase the Series A Notes which such
defaulting Initial Purchaser agreed but failed or refused to purchase on such
date; provided that in no event shall the aggregate principal amount of the
Series A Notes which any Initial Purchaser has agreed to purchase pursuant to
Section 2 hereof be in-
35
<PAGE> 37
creased pursuant to this Section 10 by an amount in excess of one-ninth of such
principal amount of the Series A Notes without the written consent of such
Initial Purchaser. If on the Closing Date either or both of the Initial
Purchasers shall fail or refuse to purchase the Series A Notes and the aggregate
principal amount of the Series A Notes with respect to which such default occurs
is more than one-tenth of the aggregate principal amount of the Series A Notes
to be purchased by both Initial Purchasers and arrangements satisfactory to the
Initial Purchasers and the Company for purchase of such Series A Notes are not
made within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Initial Purchaser, the Company or
the Guarantor. In any such case which does not result in termination of this
Agreement, either the Initial Purchasers, the Company or the Guarantor shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Offering
Memorandum or any other documents or arrangements may be effected. Any action
taken under this paragraph shall not relieve any defaulting Initial Purchaser
from liability in respect of any default of any such Initial Purchaser under
this Agreement.
11. MISCELLANEOUS. Notices given pursuant to any provision of
this Agreement shall be addressed as follows: (i) if to the Company or the
Guarantor, to Fedders Corporation, 505 Martinsville Road, P.O. Box 813, Liberty
Corner, New Jersey 07938, Attention: Robert N. Edwards, Esq. and (ii) if to the
Initial Purchasers, Donaldson, Lufkin & Jenrette Securities Corporation, 277
Park Avenue, New York, New York 10172, Attention: Syndicate Department, or in
any case to such other address as the person to be notified may have requested
in writing.
The respective indemnities, contribution agreements,
representations, warranties and other statements of the Company, the Guarantor
and the Initial Purchasers set forth in or made pursuant to this Agreement shall
remain operative and in full force and effect, and will survive delivery of and
payment for the Series A Notes, regardless of (i) any investigation, or
statement as to the results thereof, made by or on behalf of the Initial
Purchasers, the officers or directors of the Initial Purchasers, any person
controlling the Initial Purchasers, the Company, the Guarantor, the officers or
directors of the Company or the Guarantor, or any person controlling the Company
or the Guarantor, (ii) acceptance of the Series A Notes and payment for them
hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or
on behalf of the Company as provided herein (other than as a result of any
termination of this Agreement pursuant to Section 10), the Company and the
Guarantor, jointly and severally, agree to reimburse the Initial Purchasers for
all out-of-pocket expenses (including the fees and disbursements of counsel)
reasonably incurred by them. Notwithstanding any termination of this Agreement,
each of the Company and the Guarantor, jointly and severally, shall be liable
for all expenses which it has agreed to pay pursuant to Section 5(i) hereof. The
Company and the Guarantor also agree, jointly and severally, to reimburse the
Initial Purchasers and its officers, directors and each person, if any, who
controls such Initial Purchasers
36
<PAGE> 38
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
for any and all fees and expenses (including without limitation the fees and
expenses of counsel) incurred by them in connection with enforcing their rights
under this Agreement (including without limitation its rights under this Section
8).
Except as otherwise provided, this Agreement has been and is
made solely for the benefit of and shall be binding upon the Company, the
Guarantor, the Initial Purchasers, the Initial Purchasers' directors and
officers, any controlling persons referred to herein, the directors of the
Company and the Guarantor and their respective successors and assigns, all as
and to the extent provided in this Agreement, and no other person shall acquire
or have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Series A Notes from the
Initial Purchasers merely because of such purchase.
This Agreement shall be governed and construed in accordance
with the laws of the State of New York.
This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
37
<PAGE> 39
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Guarantor and the Initial Purchasers.
Very truly yours,
FEDDERS NORTH AMERICA, INC.
By: /s/ Robert L. Laurent, Jr.
-------------------------------
Name: Robert L. Laurent, Jr.
Title: Executive Vice President
FEDDERS CORPORATION,
as Guarantor
By: /s/ Robert L. Laurent, Jr.
-------------------------------
Name: Robert L. Laurent, Jr.
Title: Executive Vice President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Daniel J. Mackell
-------------------------------
Name: Daniel J. Mackell
Title: Vice President
GOLDMAN, SACHS & CO.
By: Goldman Sachs & Co.
-------------------------------
(Goldman Sachs & Co.)
S-1
<PAGE> 40
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount
Initial Purchaser of Notes
----------------- ----------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation................................. $ 60,000,000
Goldman, Sachs & Co.................................................................. $ 40,000,000
------------
Total $100,000,000
============
</TABLE>
<PAGE> 41
SCHEDULE B
SUBSIDIARIES
Fedders North America, Inc.
Emerson Quiet Kool Corporation
Fedders de Mexico S.A. de CV
Fedders, Inc.
Columbia Specialties, Inc
Fedders International, Inc.
Fedders Asia PTE, Ltd.
Fedders Exporting, Inc.
Fedders Investment Corporation
Fedders Xinle Co. Ltd.
NYCOR North America, Inc.
Rotorex Company, Inc.
Melcor Corporation
Melcor International Sales, Inc.
Melcor International Sales Corp.
Rotorex International, Inc.
Rotorex Technologies, Inc.
<PAGE> 42
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE> 1
Exhibit 3.1(a)
CERTIFICATE OF INCORPORATION
OF
C-A-T CORPORATION
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
sets amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the
"corporation") is
C-A-T CORPORATION
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 229 South State
Street, City of Dover, County of Kent; and the name of the registered agent of
the corporation in the State of Delaware at such address is The Prentice-Hall
Corporation System, Inc.
THIRD: The nature of the business and of the purposes to be conducted
and promoted by the corporation, which shall be in addition to the authority of
the corporation to conduct any lawful business, to promote any lawful purpose,
and to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware, is as
follows:
To purchase, receive, take by grant, gift, devise, bequest or
otherwise, lease, or otherwise acquire, own, hold, improve, employ, use
and otherwise deal in and with real or personal property, or any
interest therein, wherever situated, and to sell, convey, lease,
exchange, transfer or otherwise dispose of, or mortgage or pledge, all
or any of its property and assets, or any interest therein, wherever
situated.
<PAGE> 2
2
To engage generally in the real estate business as principal,
agent, broker, and in any lawful capacity, and generally to take,
lease, purchase, or otherwise acquire, and to own, use, hold, sell,
convey, exchange, lease, mortgage, work, clear, improve, develop,
divide, and otherwise handle, manage, operate, deal in and dispose of
real estate, real property, lands, multiple-dwelling structures,
houses, buildings and other works and any interest or right therein; to
take, lease, purchase or otherwise acquire, and to own, use, hold,
sell, convey, exchange, hire, lease, pledge, mortgage, and otherwise
handle, and deal in and dispose of, as principal, agent, broker, and in
any lawful capacity, such personal property, chattels, chattels real,
rights, easements, privileges, choses in action, notes, bonds,
mortgages, and securities as may lawfully be acquired, held, or
disposed of; and to acquire, purchase, sell, assign, transfer, dispose
of, and generally deal in and with, as principal, agent, broker, and in
any lawful capacity, mortgages and other interests in real, personal,
and mixed properties; to carry on a general construction, contracting,
building, and realty management business as principal, agent,
representative, contractor, subcontractor, and in any other lawful
capacity.
To carry on a general mercantile, industrial, investing, and
trading business in all its branches; to devise, invent, manufacture,
fabricate, assemble, install, service, maintain, alter, buy, sell,
import, export, license as licensor or licensee, lease as lessor or
lessee, distribute, job, enter into, negotiate, execute, acquire, and
assign contracts in respect of, acquire, receive, grant, and assign
licensing arrangements, options, franchises, and other rights in
respect of, and generally deal in and with, at wholesale and retail, as
principal, and as sales, business, special, or general agent,
representative, broker, factor, merchant, distributor, jobber, advisor,
and in any other lawful capacity, goods, wares, merchandise,
commodities, and unimproved, improved, finished, processed, and other
real, personal, and mixed property of any and all kinds, together with
the components, resultants, and by-products thereof.
<PAGE> 3
3
To apply for, register, obtain, purchase, lease, take licenses
in respect of or otherwise acquire, and to hold, own, use, operate,
develop, enjoy, turn to account, grant licenses and immunities in
respect of, manufacture under and to introduce, sell, assign, mortgage,
pledge or otherwise dispose of, and, in any manner deal with and
contract with reference to:
(a) inventions, devices, formulas, processes and any
improvements and modifications thereof;
(b) letters patent, patent rights, patented
processes, copyrights, designs, and similar rights,
trade-marks, trade names, trade symbols and other indications
of origin and ownership granted by or recognized under the
laws of the United States of America, the District of
Columbia, any state or subdivision thereof, and any
commonwealth, territory, possession, dependency, colony,
possession, agency or instrumentality of the United States of
America and of any foreign country, and all rights connected
therewith or appertaining thereunto;
(c) franchises, licenses, grants and concessions.
To guarantee, purchase, take, receive, subscribe for, and
otherwise acquire, own, hold, use, and otherwise employ, sell, lease,
exchange, transfer, and otherwise dispose of, mortgage, lend, pledge,
and otherwise deal in and with, securities (which term, for the purpose
of this Article THIRD, includes, without limitation of the generality
thereof, any shares of stock, bonds, debentures, notes, mortgages,
other obligations, and any certificates, receipts or other instruments
representing rights to receive, purchase or subscribe for the same, or
representing any other rights or interests therein or in any property
or assets) of any persons, domestic and foreign firms, associations,
and corporations, and by any government or agency or instrumentality
<PAGE> 4
4
thereof; to make payment therefor in any lawful manner; and, while
owner of any such securities, to exercise any and all rights, powers
and privileges in respect thereof, including the right to vote.
To make, enter into, perform and carry out contracts of every
kind and description with any person, firm, association, corporation or
government or agency or instrumentality thereof.
To acquire by purchase, exchange or otherwise, all, or any
part of, or any interest in, the properties, assets, business and good
will of any one or more persons, firms, associations or corporations
heretofore or hereafter engaged in any business for which a corporation
may now or hereafter be organized under the laws of the State of
Delaware; to pay for the same in cash, property or its own or other
securities; to hold, operate, reorganize, liquidate, sell or in any
manner dispose of the whole or any part thereof; and in connection
therewith, to assume or guarantee performance of any liabilities,
obligations or contracts of such persons, firms, associations or
corporations, and to conduct the whole or any part of any business thus
acquired.
To lend money in furtherance of its corporate purposes and to
invest and reinvest its funds from time to time to such extent, to such
persons, firms, associations, corporations, governments or agencies or
instrumentalities thereof, and on such terms and on such security, if
any, as the Board of Directors of the corporation may determine.
To make contracts of guaranty and suretyship of all kinds and
endorse or guarantee the payment of principal, interest or dividends
upon, and to guarantee the performance of sinking fund or other
obligations of, any securities, and to guarantee in any way permitted
by law the performance of any of the contracts or other undertakings in
which the corporation may otherwise be or become interested, of any
persons, firm, association, corporation, government or agency or
instrumentality thereof, or of any other combination, organization or
entity whatsoever.
<PAGE> 5
5
To borrow money without limit as to amount and at such rates
of interest as it may determine; from time to time to issue and sell
its own securities, including its shares of stock, notes, bonds,
debentures, and other obligations, in such amounts, on such terms and
conditions, for such purposes and for such prices, now or hereafter
permitted by the laws of the State of Delaware and by this certificate
of incorporation, as the Board of Directors of the corporation may
determine; and to secure any of its obligations by mortgage, pledge or
other encumbrance of all or any of its property, franchise and income.
To be a promoter or manager of other corporations of any type
or kind; and to participate with others in any corporation,
partnership, limited partnership, joint venture, or other association
of any kind, or in any transaction, undertaking or arrangement which
the corporation would have power to conduct by itself, whether or not
such participation involves sharing or delegation of control with or to
others.
To draw, make, accept, endorse, discount, execute, and issue
promissory notes, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or transferable instruments and
evidence of indebtedness whether secured by mortgage or otherwise, as
well as to secure the same by mortgage or otherwise, so far as may be
permitted by the laws of the State of Delaware.
To purchase, receive, take, reacquire or otherwise acquire,
own and hold, sell, lend, exchange, reissue, transfer or otherwise
dispose of, pledge, use, cancel, and otherwise deal in and with its own
shares and its other securities from time to time to such an extent and
in such manner and upon such terms as the Board of Directors of the
corporation shall determine; provided that the corporation shall not
use its funds or property for the purchase of its own shares of capital
stock when its capital is impaired or when such use would cause any
impairment of its capital, except to the extent permitted by law.
<PAGE> 6
6
To organize, as an incorporator, or cause to be organized
under the laws of the State of Delaware, or of any other State of the
United States of America, or of the District of Columbia, or of any
commonwealth, territory, dependency, colony, possession, agency, or
instrumentality of the United States of America, or of any foreign
country, a corporation or corporations for the purpose of conducting
and promoting any business or purpose for which corporations may be
organized, and to dissolve, wind up, liquidate, merge or consolidate
any such corporation or corporations or to cause the same to be
dissolved, wound up, liquidated, merged or consolidated.
To conduct its business, promote its purposes, and carry on
its operations in any and all of its branches and maintain offices both
within and without the State of Delaware, in any and all States of the
United States of America, in the District of Columbia, and in any or
all commonwealths, territories, dependencies, colonies, possessions,
agencies, or instrumentalities of the United States of America and of
foreign governments.
To promote and exercise all or any part of the foregoing
purposes and powers in any and all parts of the world, and to conduct
its business in all or any of its branches as principal, agent, broker,
factor, contractor, and in any other lawful capacity either alone or
through or in conjunction with any corporations, associations,
partnerships, firms, trustees, syndicates, individuals, organizations,
and other entities in any part of the world, and, in conducting its
business and promoting any of its purposes, to maintain offices,
branches and agencies in any part of the world, to make and perform any
contracts and to do any acts and things, and to carry on any business,
and to exercise any powers and privileges suitable, convenient, or
proper for the conduct, promotion, and attainment of any of the
business and purposes herein specified or which at any time may be
incidental thereto or may appear conducive to or expedient for the
accomplishment of any of such business and purposes and which might be
engaged in or carried on by a corporation incorporated or organized
under the
<PAGE> 7
7
General Corporation Law of the State of Delaware, and to have and
exercise all of the powers conferred by the laws of the State of
Delaware upon corporations incorporated or organized under the General
Corporation Law of the State of Delaware.
The foregoing provisions of this Article THIRD shall be construed both
as purposes and powers and each as an independent purpose and power. The
foregoing enumeration of specific purposes and powers shall not be held to limit
or restrict in any manner the purposes and powers of the corporation, and the
purposes and powers herein specified shall, except when otherwise provided in
this Article THIRD, be in no wise limited or restricted by reference to, or
inference from, the terms of any provision of this or any other Article of this
certificate of incorporation; provided, that the corporation shall not conduct
any business, promote any purpose, or exercise any power or privilege within or
without the State of Delaware which, under the laws thereof, the corporation may
not lawfully conduct, promote, or exercise.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is One Thousand (1,000), all of which are without par
value. All such shares are of one class and are Common Stock.
No holder of any of the shares of the stock of the corporation, whether
now or hereafter authorized and issued, shall be entitled as of right to
purchase or subscribe for (1) any unissued stock of any class, or (2) any
additional shares of any class to be issued by reason of any increase of the
authorized capital stock of the corporation of any class, or (3) bonds,
certificates of indebtedness, debentures or other securities convertible into
stock of the corporation, or carrying any right to purchase stock of any class,
but any such unissued stock or such additional authorized issue of any stock or
of other securities convertible into stock, or carrying any right to purchase
stock, may be issued and disposed of pursuant to resolution of the Board of
Directors to such persons, firms, corporations or associations and upon such
terms as may be deemed advisable by the Board of Directors in the exercise of
its discretion.
FIFTH: The name and the mailing address of the incorporator are as
follows:
NAME MAILING ADDRESS
R. G. Dickerson 229 South State Street, Dover, Delaware
<PAGE> 8
8
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of Directors.
The number of directors which shall constitute the whole Board of
Directors shall be fixed by, or in the manner provided in, the By-Laws.
The phrase "whole Board" and the phrase "total number of directors"
shall be deemed to have the same meaning, to wit, the total number of
directors which the corporation would have if there were no vacancies.
No election of directors need be by written ballot.
<PAGE> 9
9
2. After the original or other By-Laws of the corporation have
been adopted, amended, or repealed, as the case may be, in accordance
with the provisions of Section 109 of the General Corporation Law of
the State of Delaware, and, after the corporation has received any
payment for any of its stock, the power to adopt, amend, or repeal the
By-Laws of the corporation may be exercised by the Board of Directors
of the corporation; provided, however, that any provision for the
classification of directors of the corporation for staggered terms
pursuant to the provisions of subsection (d) of Section 141 of the
General Corporation Law of the State of Delaware shall be set forth in
an initial By-Law or in a By-Law adopted by the stockholders entitled
to vote of the corporation unless provisions for such classification
shall be set forth in this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue only
one class of stock, each outstanding share shall entitle the holder
thereof to notice of, and the right to vote at, any meeting of
stockholders. Whenever the corporation shall be authorized to issue
more than one class of stock, no outstanding share of any class of
stock which is denied voting power under the provisions of the
certificate of incorporation shall entitle the holder thereof to the
right to vote, at any meeting of stockholders except as the provisions
of paragraph (c)(2) of section 242 of the General Corporation Law of
the State of Delaware shall otherwise require; provided, that no share
of any such class which is otherwise denied voting power shall entitle
the holder thereof to vote upon the increase or decrease in the number
of authorized shares of said class.
NINTH: The corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, vote of
<PAGE> 10
10
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall 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.
TENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article TENTH.
Signed on January 26, 1976.
/s/ R. G. Dickerson
--------------------------------------------
R.G. Dickerson
Incorporator
<PAGE> 11
CERTIFICATE OF AMENDMENT OF CERTIFICATE
OF INCORPORATION BEFORE PAYMENT OF
ANY PART OF THE CAPITAL
OF
C-A-T CORPORATION
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation")
is
C-A-T CORPORATION
2. The corporation has not received any payment for any of its stock.
3. The certificate of incorporation of the corporation is hereby
amended by striking out Article FIRST thereof and by substituting in lieu of
said Article the following new Article:
"FIRST: The name of the corporation (hereinafter called the
"corporation") is
WORLDWIDE C-A-T CORPORATION"
4. The amendment of the certificate of incorporation of the corporation
herein certified was duly adopted, pursuant to the provisions of Section 241 of
the General Corporation Law of the State of Delaware, by the sole incorporator,
no directors having been named in the certificate of incorporation and no
directors having been elected.
Signed on January 26, 1976.
/s/ R. G. Dickerson
-----------------------------------
R.G. Dickerson, Sole Incorporator
<PAGE> 12
CERTIFICATE OF AMENDMENT OF CERTIFICATE
OF INCORPORATION BEFORE PAYMENT OF
ANY PART OF THE CAPITAL
OF
WORLDWIDE C-A-T CORPORATION
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation")
is
WORLDWIDE C-A-T CORPORATION
2. The corporation has not received any payment for any of its stock.
3. The certificate of incorporation of the corporation is hereby
amended by striking out Article FIRST thereof and by substituting in lieu of
said Article the following new Article:
"FIRST: The name of the corporation (hereinafter called the
"corporation") is
AIRTEMP CORPORATION"
4. The amendment of the certificate of incorporation of the corporation
was duly adopted, pursuant to the provisions of Section 241 of the General
Corporation Law of the State of Delaware, by at least a majority of the
directors who have been elected and qualified.
Signed on March 3, 1976.
/s/ Aaron S. Gertz
-----------------------------------
Aaron S. Gertz, Sole Director
<PAGE> 13
CERTIFICATE OF OWNERSHIP AND MERGER
OF
AIRTEMP OF NASHVILLE, INC.
(a Tennessee corporation)
INTO
AIRTEMP CORPORATION
(a Delaware corporation)
It is hereby certified that:
1. Airtemp Corporation (hereinafter sometimes referred to as the
"Corporation") is a business corporation of the State of Delaware.
2. The Corporation is the owner of all of the outstanding shares of the
stock of Airtemp of Nashville, Inc., which is a business corporation of the
State of Tennessee.
3. The laws of the jurisdiction of organization of Airtemp of
Nashville, Inc. permit the merger of a business corporation of that jurisdiction
with a business corporation of another jurisdiction.
4. The Corporation hereby merges Airtemp of Nashville, Inc. into the
Corporation.
5. The following is a copy of the resolutions adopted on October 25,
1977 by the Board of Directors of the Corporation to merge the said Airtemp of
Nashville, Inc. into the Corporation.
RESOLVED that Airtemp of Nashville, Inc. be merged into this
Corporation, and that all of the estate, property, rights, privileges,
powers and franchises
<PAGE> 14
2
of Airtemp of Nashville, Inc. be vested in and held and enjoyed by this
Corporation as fully and entirely and without change or diminution as
the same were before held and enjoyed by Airtemp of Nashville, Inc. in
its name.
RESOLVED that this Corporation shall assume all of the obligations of
Airtemp of Nashville, Inc.
RESOLVED that this Corporation shall cause to be executed and filed
and/or recorded the documents prescribed by the laws of the State of
Delaware by the laws of the State of Tennessee, and by the laws of any
other appropriate jurisdiction and will cause to be performed all
necessary acts within the jurisdiction of organization of Airtemp of
Nashville, Inc. and of this Corporation and in any other appropriate
jurisdiction.
RESOLVED that the effective date of the Certificate of Ownership and
Merger setting forth a copy of these resolutions shall be October 31,
1977 and that insofar as the General Corporation Law of the State of
Delaware shall govern the same, said date shall be the effective merger
date.
Executed on October 26, 1977.
Airtemp Corporation
/s/ S. Giordano, Jr.
--------------------------------------------
President
Attest:
/s/ A. Granoinetti-Luska
- -----------------------------------------------------
Asst. Secretary
<PAGE> 15
3
STATE OF NEW JERSEY )
) ss.:
COUNTY OF MIDDLESEX )
Salvatore Giordano, Jr., being duly sworn, deposes and says that he is
one of the persons who signed the foregoing certificate of merger on behalf of
the corporation named therein as the surviving corporation; that he signed said
certificate in the capacity set opposite or beneath his signature thereon; that
he has read the foregoing certificate and knows that the contents thereof; and
that the statements contained therein are true to his own knowledge.
/s/ S. Giordano, Jr.
-----------------------------------
Salvatore Giordano, Jr., President
Subscribed and sworn to before me on October 26, 1977.
/s/ Antoinette Granoinetti-Luska
- ------------------------------------
<PAGE> 16
CERTIFICATE OF OWNERSHIP AND MERGER
OF
AIRTEMP PUERTO RICO, INC.
(a Delaware corporation)
INTO
AIRTEMP CORPORATION
(a Delaware corporation)
It is hereby certified that:
1. Airtemp Corporation (hereinafter sometimes referred to as the
"Corporation") is a business corporation of the State of Delaware.
2. The Corporation is the owner of all of the outstanding shares of the
stock of Airtemp Puerto Rico, Inc., which is also a business corporation of the
State of Delaware.
3. On October 25, 1977, the Board of Directors of the Corporation
adopted the following resolutions to merge Airtemp Puerto Rico, Inc. into the
Corporation:
RESOLVED that Airtemp Puerto Rico, Inc. be merged into this
Corporation, and that all of the estate, property, rights,
privileges, powers and franchises of Airtemp Puerto Rico, Inc.
be vested in and held and enjoyed by this Corporation as fully
and entirely and without change or diminution as the same were
before held and enjoyed by Airtemp Puerto Rico, Inc. in its
name.
RESOLVED that this Corporation shall assume all of the
obligations of Airtemp Puerto Rico, Inc.
RESOLVED that this Corporation shall cause to be executed and
filed and/or recorded the documents prescribed by the laws of
any other appropriate
<PAGE> 17
2
jurisdiction and will cause to be performed all necessary acts
within the State of Delaware and within any other appropriate
jurisdiction.
RESOLVED that the effective date of the Certificate of
Ownership and Merger setting forth a copy of these
resolutions, and the date upon which the merger therein
provided for, shall become effective shall be October 31,
1977.
Executed on October 26, 1977.
Airtemp Corporation
/s/ S. Giordano, Jr.
-----------------------------------
President
Attest:
/s/ A. Granoinetti-Luska
- ----------------------------------------------
Asst. Secretary
<PAGE> 18
3
STATE OF NEW JERSEY )
) ss.:
COUNTY OF MIDDLESEX )
Salvatore Giordano, Jr., being duly sworn, deposes and says that he is
one of the persons who signed the foregoing certificate of merger on behalf of
the corporation named therein as the surviving corporation; that he signed said
certificate in the capacity set opposite or beneath his signature thereon; that
he has read the foregoing certificate and knows the contents thereof; and that
the statements contained therein are true to his own knowledge.
/s/ S. Giordano, Jr.
-----------------------------------
President
Subscribed and sworn to before me on October 26, 1977.
/s/ Antoinette Granoinetti-Luska
- ----------------------------------------
<PAGE> 19
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
of
AIRTEMP CORPORATION
It is hereby certified that:
1. The name of the corporation [hereinafter called the "corporation"]
is AIRTEMP CORPORATION.
2. The certificate of incorporation of the corporation is hereby
amended by striking out Article First thereof and by substituting in lieu of
said Article the following new Article First: "The name of the corporation is
Fedders Air Conditioning USA, Inc. (hereinafter called the "Corporation").
3. The amendment of the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
Signed and attested to at Peapack, New Jersey on May 23, 1985.
/s/ Salvatore Giordano
--------------------------------------------
Salvatore Giordano, Chairman of the Board
Attest:
/s/ Howard S. Modlin, Sec'y
- -----------------------------------------------------
Howard S. Modlin Secretary
<PAGE> 20
CERTIFICATE OF OWNERSHIP AND MERGER
OF
CareCo, Inc. (a Delaware corporation)
INTO
Fedders North America, Inc. (a Delaware corporation)
It is hereby certified that:
1. Fedders North America, Inc. (hereinafter sometimes referred to as
the "Corporation") is a business corporation of the State of Delaware.
2. The Corporation is the owner of all of the outstanding shares of the
stock of CareCo, Inc., which is also a business corporation of the State of
Delaware.
3. On July 9, 1996, the Board of Directors of the Corporation adopted
the following resolutions to merge CareCo, Inc. into the Corporation:
RESOLVED that CareCo, Inc. be and is hereby merged into
Fedders North America, Inc. pursuant to IRC Sec. 368(a)(1)(A).
RESOLVED that the proper officers of this Corporation be, and
they hereby are, authorized and directed to take all such
steps and execute and deliver all such documents and other
instruments as may be necessary or appropriate to carry out
the foregoing resolution.
Executed on July 9, 1996. Fedders North America, Inc.
/s/ S.M. Muscarnera
-----------------------------------
Its Secretary
S.M. Muscarnera
<PAGE> 21
CERTIFICATE OF OWNERSHIP AND MERGER
OF
RTXX Corporation (a Delaware corporation)
INTO
Fedders North America, Inc. (a Delaware corporation)
It is hereby certified that:
1. Fedders North America, Inc. [hereinafter sometimes referred to as
the "Corporation"] is a business corporation of the State of Delaware.
2. The Corporation is the owner of all of the outstanding shares of the
stock of RTXX Corporation, which is also a business corporation of the State of
Delaware.
3. On July 9, 1996, the Board of Directors of the Corporation adopted
the following resolutions to merge RTXX Corporation into the Corporation:
RESOLVED that RTXX Corporation be and is hereby merged into
Fedders North America, Inc. pursuant to IRC Sec. 368(a)(1)(A).
RESOLVED that the proper officers of this Corporation be, and
they hereby are, authorized and directed to take all such
steps and execute and deliver all such documents and other
instruments as may be necessary or appropriate to carry out
the foregoing resolution.
Executed on July 9, 1996. Fedders North America, Inc.
/s/ S.M. Muscarnera
-----------------------------------
Its Secretary
S. M. Muscarnera
<PAGE> 1
Exhibit 3.2(a)
BY-LAWS
OF
FEDDERS NORTH AMERICA, INC.
(A Delaware Corporation)
ARTICLE I.
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the Board of Directors,
if any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
corporation certifying the number of shares owned by him in the corporation. Any
and all signatures on any such certificate may be facsimiles. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any
<PAGE> 2
2
claim that may be made against it on account of the alleged loss, theft, or
destruction of any such certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be
required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered or bearer form which
shall entitle the holder to receive a certificate for a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon, and to participate in any of the assets of the corporation in
the event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the conditions that they shall become void if not exchanged
for certificates representing full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to he holders of
scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
3. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. 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 entitled to receive payment of any dividend or other
distribution or 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 directors may fix, in advance, a record date, which
shall not be more than sixty days nor less then ten days before the date of
<PAGE> 3
3
such meeting, nor more than sixty days prior to any other action. If no record
date is fixed, 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; 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 of Directors is necessary, shall be the day on which the
first written consent is expressed; and the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at any
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
5. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such right
notwithstanding that the certificate of incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the certificate of incorporation.
6. STOCKHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation,
<PAGE> 4
4
and each successive annual meeting shall be held on a date within thirteen
months after the date of the preceding annual meeting. A special meeting shall
be held on the date and at the time fixed by the directors.
- PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Delaware, as the directors may, from time
to time fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
- CALL. Annual meetings and special meetings may be called by the
directors or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date, and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of any annual
meeting shall state that the meeting is called for the election of directors and
for the transaction of other business which may properly come before the
meeting, and shall, (if any other action which could be taken at a special
meeting is to be taken at such annual meeting) state the purpose or purposes.
The notice of a special meeting shall in all instances state the purpose or
purposes for which the meeting is called. The notice of any meeting shall also
include, or be accompanied by, any additional statements, information, or
documents prescribed by the General Corporation Law. Except as otherwise
provided by the General Corporation Law, a copy of the notice of any meeting
shall be given, personally or by mail, not less than ten days nor more than
sixty days before the date of the meeting, unless the lapse of the prescribed
period of time shall have been waived, and directed to each stockholder at his
record address or at such other address which he may have furnished by request
in writing to the Secretary of the corporation. Notice by mail shall be deemed
to be given when deposited, with postage thereon prepaid, in the United States
mail. If a meeting is adjourned to another time, not more than thirty days
hence, and/or to another place, and if an announcement of the adjourned time
and/or place is made at the meeting, it shall not be necessary to give notice of
the adjourned meeting unless the directors, after adjournment, fix a new record
date for the adjourned meeting. Notice need not be given to any stockholder who
submits a written waiver of notice signed by him before or after the time stated
therein. Attendance of a stockholder at a meeting of
<PAGE> 5
5
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends the 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.
- STOCKHOLDER LIST. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders, 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 or other municipality or community 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. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided
over by one of the following officers in the order of seniority and if present
and acting - the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, the President, a Vice-President, or, if none of the foregoing is in
office and present and acting, by a chairman to be chosen by the stockholders.
The Secretary of the corporation, or in his absence, an Assistant Secretary,
shall act as secretary of every meeting, but if neither the Secretary nor an
Assistant Secretary is present the Chairman of the meeting shall appoint a
secretary of the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another person
or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or
<PAGE> 6
6
by his attorney-in-fact. No proxy shall be voted or acted upon after three years
from its date unless such proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and, if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his 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 his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock 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 stockholders. On request of the person presiding at
the meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question or matter determined by him or them and execute a
certificate of any fact found by him or them.
- QUORUM. The holders of a majority of the outstanding shares of stock
shall constitute a quorum at a meeting of stockholders for the transaction of
any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each share of stock shall entitle the holder thereof to one
vote. In the election of directors, a plurality of the votes cast shall elect.
Any other action shall be authorized by majority of the votes cast except where
the General Corporation Law prescribes a different percentage of votes and/or a
different exercise of voting power, and except as may be other-
<PAGE> 7
7
wise prescribed by the provisions of the certificate of incorporation and these
By-Laws. In the election of directors, and for any other action, voting need not
be by ballot.
7. STOCKHOLDER ACTION WITHOUT MEETING. Any action required by the
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of 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 where 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 II.
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATION AND NUMBER. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The
initial Board of Directors shall consist of one person. Thereafter the number of
directors constituting the whole board shall be at least one. Subject to the
foregoing limitation and except for the first Board of Directors, such number
may be fixed from time to time by action of the stockholders or of the
directors, or, if the number is not fixed, the number shall be three. The number
of directors may be increased or decreased by action of the stockholders or of
the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the members
thereof shall have been named in the certificate of incorporation, shall be
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual
<PAGE> 8
8
meeting of stockholders, and directors who are elected in the interim to fill
vacancies and newly created directorships, shall hold office until the next
annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. In the interim between
annual meetings of stockholders or of special meetings of stockholders called
for the election of directors and/or for the removal of one or more directors
and for the filling of any vacancy in that connection, newly created
directorships and any vacancy in the Board of Directors, including vacancies
resulting from the removal of directors for cause or without cause, may be
filled by the vote of a majority of the remaining directors then in office,
although less than a quorum, or by the sole remaining director.
4. MEETING.
- TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the
State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman of the Board, if any, the Vice-Chairman of the Board,
if any, of the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required
for regular meetings for which the time and place have been fixed. Written,
oral, or any other mode of notice of the time and place shall be given for
special meetings in sufficient time for the convenient assembly of the directors
thereat. Notice need not be given to any director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
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 need be specified in any
written waiver of notice.
<PAGE> 9
9
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A majority
of the directors present, whether or not a quorum is present, may adjourn a
meeting to another time and place. Except as herein otherwise provided, and
except as otherwise provided by the General Corporation Law, the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board. The quorum and voting provisions herein stated
shall not be construed as conflicting with any provisions of the General
Corporation Law and these By-Laws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any 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.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the
General Corporation Law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
6. COMMITTEES. Whenever its number consists of three or more, the Board
of Directors may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of two 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 any member of any such committee or committees, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of
<PAGE> 10
10
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board, shall have and may exercise the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation with the exception of any authority the delegation of
which is prohibited by Section 141 of the General Corporation Law, and may
authorize the seal of the corporation to be affixed to all papers which may
require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at any
meeting of the Board of Directors or 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.
ARTICLE III.
OFFICERS
The officers of the corporation shall consist of a President, a
Secretary, a Treasurer, and, if deemed necessary, expedient, or desirable by the
Board of Directors, a Chairman of the Board, a Vice-Chairman of the Board, an
Executive Vice-President, one or more other Vice-Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
with such titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board of
Directors choosing him, no officer other than the Chairman or Vice-Chairman of
the Board, if any, need be a director. Any number of offices may be held by the
same person, as the directors may determine, except that no person may hold the
offices of President and Secretary simultaneously.
Unless otherwise provided in the resolution choosing him, each officer
shall be chosen for a term which shall continue until the meeting of the Board
of Directors following the next annual meeting of stockholders and until his
successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform
such duties in the management and operation of the corporation as shall be
prescribed in the resolutions of the Board of Directors designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings of
all meetings
<PAGE> 11
11
and actions in writing of stockholders, directors, and committees of directors,
and shall exercise such additional authority and perform such additional duties
as the Board shall assign to him. Any officer may be removed, with or without
cause, by the Board of Directors. Any vacancy in any office may be filled by the
Board of Directors.
ARTICLE IV.
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
ARTICLE V.
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject
to change, by the Board of Directors.
ARTICLE VI.
CONTROL OVER BY-LAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter or repeal
these By-Laws and to adopt new By-Laws may be exercised by the Board of
Directors or by the stockholders.
(SEAL)
<PAGE> 1
Exhibit 4.1
================================================================================
INDENTURE
DATED AS OF AUGUST 18, 1997
BETWEEN
FEDDERS NORTH AMERICA, INC., AS ISSUER,
AND
FEDDERS CORPORATION, AS GUARANTOR,
AND
STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE
-------------------
$100,000,000
9 3/8% SENIOR SUBORDINATED SECURITIES DUE 2007
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
Section 310(a)(1)............................................ 7.10
(a)(2)............................................ 7.10
(a)(3)............................................ N.A.
(a)(4)............................................ N.A.
(a)(5)............................................ 7.08, 7.10.
(b)............................................... 7.08; 7.10; 13.02
(c)............................................... N.A.
Section 311(a)............................................... 7.11
(b)............................................... 7.11
(c)............................................... N.A.
Section 312(a)............................................... 2.05
(b)............................................... 13.03
(c)............................................... 13.03
Section 313(a)............................................... 7.06
(b)(1)............................................ 7.06
(b)(2)............................................ 7.06
(c)............................................... 7.06; 13.02
(d)............................................... 7.06
Section 314(a)............................................... 4.11; 4.12; 13.02
(b)............................................... N.A.
(c)(1)............................................ 13.04
(c)(2)............................................ 13.04
(c)(3)............................................ N.A.
(d)............................................... N.A.
(e)............................................... 13.05
(f)............................................... N.A.
Section 315(a)............................................... 7.01(b)
(b)............................................... 7.05; 13.02
(c)............................................... 7.01(a)
(d)............................................... 7.01(c)
(e)............................................... 6.11
Section 316 (a)(last sentence)................................ 2.09
(a)(1)(A)......................................... 6.05
(a)(1)(B)......................................... 6.04
(a)(2)............................................ N.A.
(b)............................................... 6.07
(c)............................................... 10.04
Section 317(a)(1)............................................ 6.08
(a)(2)............................................ 6.09
(b)............................................... 2.04
Section 318(a)............................................... 13.01
- ----------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.....................................................1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act..............15
SECTION 1.03. Rules of Construction..........................................15
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating................................................16
SECTION 2.02. Execution and Authentication...................................18
SECTION 2.03. Registrar and Paying Agent.....................................19
SECTION 2.04. Paying Agent to Hold Assets in Trust...........................19
SECTION 2.05. Securityholder Lists...........................................19
SECTION 2.06. Transfer and Exchange..........................................20
SECTION 2.07. Replacement Securities.........................................25
SECTION 2.08. Outstanding Securities.........................................25
SECTION 2.09. Treasury Securities............................................25
SECTION 2.10. Temporary Securities...........................................26
SECTION 2.11. Cancellation...................................................26
SECTION 2.12. Defaulted Interest.............................................26
SECTION 2.13. CUSIP Number...................................................26
SECTION 2.14. Deposit of Moneys..............................................26
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.............................................27
SECTION 3.02. Selection of Securities to Be Redeemed.........................27
SECTION 3.03. Notice of Redemption...........................................27
SECTION 3.04. Effect of Notice of Redemption.................................28
SECTION 3.05. Deposit of Redemption Price....................................28
SECTION 3.06. Securities Redeemed in Part....................................28
-i-
<PAGE> 4
Page
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities..........................................29
SECTION 4.02. Maintenance of Office or Agency................................29
SECTION 4.03. Transactions with Affiliates...................................29
SECTION 4.04. Limitation on Incurrence of Indebtedness.......................30
SECTION 4.05. Limitation on Certain Asset Sales..............................31
SECTION 4.06. Limitation on Restricted Payments..............................33
SECTION 4.07. Corporate Existence............................................35
SECTION 4.08. Payment of Taxes and Other Claims..............................36
SECTION 4.09. Notice of Defaults.............................................36
SECTION 4.10. Maintenance of Properties and Insurance........................36
SECTION 4.11. Compliance Certificate.........................................37
SECTION 4.12. Provision of Financial Information.............................37
SECTION 4.13. Waiver of Stay, Extension or Usury Laws........................37
SECTION 4.14. Change of Control..............................................37
SECTION 4.15. Limitation on Senior Subordinated Indebtedness.................39
SECTION 4.16. Limitations on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries......................................39
SECTION 4.17. Designation of Restricted and Non-Restricted Subsidiaries......40
SECTION 4.18. Limitation on Liens............................................40
SECTION 4.19. Limitation on Sale and Leaseback Transactions..................41
SECTION 4.20. Limitation on Guarantees of Company Indebtedness by Restricted
Subsidiaries.................................................41
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidation and Sale of Assets......................42
SECTION 5.02. Successor Corporation Substituted..............................42
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default..............................................42
SECTION 6.02. Acceleration...................................................44
SECTION 6.03. Other Remedies.................................................44
SECTION 6.04. Waiver of Past Default.........................................44
SECTION 6.05. Control by Majority............................................45
SECTION 6.06. Limitation on Suits............................................45
SECTION 6.07. Rights of Holders to Receive Payment...........................46
SECTION 6.08. Collection Suit by Trustee.....................................46
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Page
SECTION 6.09. Trustee May File Proofs of Claim...............................46
SECTION 6.10. Priorities.....................................................46
SECTION 6.11. Undertaking for Costs..........................................47
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee..............................................47
SECTION 7.02. Rights of Trustee..............................................48
SECTION 7.03. Individual Rights of Trustee...................................49
SECTION 7.04. Trustee's Disclaimer...........................................49
SECTION 7.05. Notice of Defaults.............................................49
SECTION 7.06. Reports by Trustee to Holders..................................50
SECTION 7.07. Compensation and Indemnity.....................................50
SECTION 7.08. Replacement of Trustee.........................................51
SECTION 7.09. Successor Trustee by Merger, etc...............................52
SECTION 7.10. Eligibility; Disqualification..................................52
SECTION 7.11. Preferential Collection of Claims Against Company..............52
ARTICLE EIGHT
SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior Indebtedness.................52
SECTION 8.02. No Payment on Securities in Certain Circumstances..............53
SECTION 8.03. Payment Over of Proceeds upon Dissolution, etc.................54
SECTION 8.04. Subrogation....................................................55
SECTION 8.05. Obligations of Company Unconditional...........................55
SECTION 8.06. Notice to Trustee..............................................56
SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating Agent.56
SECTION 8.08. Trustee's Relation to Senior Indebtedness......................56
SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness....................57
SECTION 8.10. Securityholders Authorize Trustee to Effectuate
Subordination of Securities..................................57
SECTION 8.11. This Article Not to Prevent Events of Default..................57
SECTION 8.12. Trustee's Compensation Not Prejudiced..........................57
SECTION 8.13. No Waiver of Subordination Provisions..........................57
SECTION 8.14. Subordination Provisions Not Applicable to Collateral Held
in Trust for Securityholders; Payments May Be Paid Prior
to Dissolution...............................................58
SECTION 8.15. Acceleration of Securities.....................................58
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ARTICLE NINE
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 9.01. Discharge of Indenture.........................................58
SECTION 9.02. Legal Defeasance...............................................59
SECTION 9.03. Covenant Defeasance............................................59
SECTION 9.04. Conditions to Defeasance or Covenant Defeasance................59
SECTION 9.05. Deposited Money and U.S Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions................61
SECTION 9.06. Reinstatement..................................................61
SECTION 9.07. Moneys Held by Paying Agent....................................62
SECTION 9.08. Moneys Held by Trustee.........................................62
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.....................................62
SECTION 10.02. With Consent of Holders........................................63
SECTION 10.03. Compliance with Trust Indenture Act............................64
SECTION 10.04. Revocation and Effect of Consents..............................64
SECTION 10.05. Notation on or Exchange of Securities..........................64
SECTION 10.06. Trustee to Sign Amendments, etc................................65
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee........................................65
SECTION 11.02. Severability...................................................66
SECTION 11.03. Limitation of Guarantor's Liability............................66
SECTION 11.04. Subordination of Subrogation and Other Rights..................66
SECTION 11.05. Delivery of Guarantee..........................................66
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated to Guarantor
Senior Indebtedness..........................................66
SECTION 12.02. No Payment on Guarantee in Certain Circumstances...............67
SECTION 12.03. Payment Over of Proceeds upon Dissolution, etc.................68
SECTION 12.04. Subrogation....................................................69
SECTION 12.05. Obligations of Guarantor Unconditional.........................69
SECTION 12.06. Notice to Trustee..............................................70
SECTION 12.07. Reliance on Judicial Order or Certificate of Liquidating Agent.70
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Page
SECTION 12.08. Trustee's Relation to Guarantor Senior Indebtedness............71
SECTION 12.09. Subordination Rights Not Impaired by Acts or Omissions
of the Guarantor or Holders of Guarantor Senior Indebtedness.71
SECTION 12.10. Securityholders Authorize Trustee to Effectuate
Subordination of Guarantee...................................71
SECTION 12.11. This Article Not to Prevent Events of Default..................71
SECTION 12.12. Trustee's Compensation Not Prejudiced..........................72
SECTION 12.13. No Waiver of Guarantee Subordination Provisions................72
SECTION 12.14. Payments May Be Paid Prior to Dissolution......................72
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls...................................72
SECTION 13.02. Notices........................................................73
SECTION 13.03. Communications by Holders with Other Holders...................74
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.............74
SECTION 13.05. Statements Required in Certificate or Opinion..................74
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar......................75
SECTION 13.07. Governing Law..................................................75
SECTION 13.08. No Recourse Against Others.....................................75
SECTION 13.09. Successors.....................................................75
SECTION 13.10. Counterpart Originals..........................................75
SECTION 13.11. Severability...................................................75
SECTION 13.12. No Adverse Interpretation of Other Agreements..................75
SECTION 13.13. Legal Holidays.................................................75
SIGNATURES...................................................................S-1
EXHIBIT A Form of Series A Security..........................................A-1
EXHIBIT B Form of Series B Security..........................................B-1
EXHIBIT C Form of Legend for Global Securities...............................C-1
EXHIBIT D Form of Transfer Certificate.......................................D-1
EXHIBIT E Form of certification to be given by the holders of beneficial
interest in a temporary Regulation S global security to Euroclear
or Cedel
EXHIBIT F Form of certification to be given by Euroclear operator or Cedel Bank,
Societe Anonyme
EXHIBIT G Form of certification to be given by transferee of beneficial
interest in a temporary Regulation S global security
EXHIBIT H Form of certification for transfer or exchange of restricted global
security to temporary Regulation S global security
EXHIBIT I Form of certification for transfer or exchange of restricted global
security to permanent Regulation S global security
EXHIBIT J Form of certification for transfer or exchange of temporary
Regulation S global security or permanent Regulation S global security
to restricted global security
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EXHIBIT K-1 Form of certification for transfer or exchange of non-global
restricted security to restricted global security
EXHIBIT K-2 Form of certification for transfer or exchange of non-global
restricted security to permanent Regulation S global security or
temporary Regulation S global security
EXHIBIT L-1 Form of certification for transfer or exchange of non-global
permanent Regulation S security to restricted global security
EXHIBIT L-2 Form of certification for transfer or exchange of non-global
permanent Regulation S security to permanent Regulation S global
security
- -----------------
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a part
of the Indenture.
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<PAGE> 9
INDENTURE dated as of August 18, 1997, between FEDDERS NORTH AMERICA,
INC., a Delaware corporation (the "Company"), FEDDERS CORPORATION, a Delaware
corporation (the "Guarantor") and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Acceleration Notice" see Section 6.02.
"Affiliate" means any of the following: (i) any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, (ii) any spouse, immediate family member or other
relative who has the same principal residence as any Person described in clause
(i) above, (iii) any trust in which any such Persons described in clause (i) or
(ii) above has a beneficial interest, and (iv) any corporation or other
organization of which any such Persons described above collectively owns 10% or
more of the equity of such entity.
"Affiliate Transaction" see Section 4.03.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" see Section 2.06(g).
"Asset Sale" means the sale, lease, conveyance or other disposition by
the Company or a Restricted Subsidiary of assets or property whether owned on
the date of original issuance of the Securities or thereafter acquired, in a
single transaction or in a series of related transactions; provided that Asset
Sales will not include such sales, leases, conveyances or dispositions in
connection with (i) the surrender or waiver of contract rights or the
settlement, release or surrender of contract, tort or other claims of any kind,
(ii) the sale of inventory in the ordinary course of business, (iii) a
sale-leaseback of assets within one year following the acquisition of such
assets, (iv) the grant of any license of patents, trademarks, registration
therefor and other similar intellectual property, (v) a transfer of assets by
the Company or a Restricted Subsidiary to the Company or a Restricted
Subsidiary, (vi) the designation of a Restricted Subsidiary as a Non-Restricted
Subsidiary pursuant to Section 4.17, (vii) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company as
permitted under Section 5.01, (viii) the sale or disposition of obsolete
equipment or other obsolete assets, (ix) Restricted Payments permitted by
Section 4.06 or (x) the exchange of assets for other non-cash assets that (a)
are useful in the business of the Company and its Restricted Subsidiaries and
(b) have a fair market value at least equal to the fair market value of the
assets being exchanged (as deter-
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mined in good faith by the Board of Directors or the board of directors of the
Restricted Subsidiary which owns such assets).
"Asset Sale Disposition Date" see Section 4.05.
"Asset Sale Offer " see Section 4.05.
"Asset Sale Purchase Date" see Section 4.05.
"Asset Sale Trigger Date" see Section 4.05.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" see Section 6.01.
"Board of Directors" means the Company's board of directors or any
authorized committee of such board of directors.
"Book-Entry Security" means a Security represented by a Global Security
and registered in the name of the nominee of the Depository.
"Business Day" means a day (other than a Saturday or Sunday) on which
the Depository and banks in New York, and banks in the city in which the
Corporate Trust Office of the Trustee is located, are open for business.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock, including any
Preferred Stock.
"Cash Flow" means, for any given period and Person, the sum of, without
duplication, Consolidated Net Income, plus (a) any provision for taxes based on
income or profits to the extent such income or profits were included in
computing Consolidated Net Income, plus (b) Consolidated Interest Expense, to
the extent deducted in computing Consolidated Net Income, plus (c) the
amortization of all intangible assets, to the extent such amortization was
deducted in computing Consolidated Net Income (including, but not limited to,
inventory write-ups, goodwill, debt and financing costs), plus (d) all
depreciation and all other non-cash charges (including, without limitation,
those charges relating to purchase accounting adjustments and LIFO adjustments),
to the extent deducted in computing Consolidated Net Income, plus (e) any
interest income, to the extent such income was not included in computing
Consolidated Net Income, plus (f) all dividend payments on Preferred Stock
(whether or not paid in cash) to the extent deducted in computing Consolidated
Net Income; provided, however, that, if any such calculation includes any period
during which an acquisition or sale of a Person or the incurrence or repayment
of Indebtedness occurred, then such calculation for such period shall be made on
a Pro Forma Basis.
"Cash Flow Coverage Ratio" means, for any given period and Person, the
ratio of: (i) Cash Flow, divided by (ii) the sum of Consolidated Interest
Expense (except dividends paid or payable in additional
<PAGE> 11
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shares of Capital Stock (other than Disqualified Stock)) in each case, without
duplication; provided, however, that if any such calculation includes any period
during which an acquisition or sale of a Person or the incurrence or repayment
of Indebtedness occurred, then such calculation for such period shall be made on
a Pro Forma Basis.
"CEDEL" means Cedel Bank, Societe Anonyme (or any successor securities
clearing agency).
"Certificated Securities" see Section 2.01.
"Change of Control" means the occurrence of any of the following: (i)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), excluding the Existing Stockholders, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that 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 50% of the total Voting Stock of the Company or of the
Guarantor; or (ii) the Company or the Guarantor consolidates with, or merges
with or into, another person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any person, or
any person consolidates with, or merges with or into, the Company or the
Guarantor, in any such event pursuant to a transaction in which the outstanding
Voting Stock of the Company or of the Guarantor is converted into or exchanged
for cash, securities or other property, other than any such transaction where
(A) the outstanding Voting Stock of the Company or of the Guarantor is converted
into or exchanged for (1) Voting Stock (other than Disqualified Stock) of the
surviving or transferee corporation or (2) cash, securities and other property
in an amount which could be paid by the Company as a Restricted Payment under
the Indenture and (B) immediately after such transaction no "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act),
excluding the Existing Stockholders, is the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have "beneficial ownership" of all securities that 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 50% of the total
Voting Stock of the surviving or transferee corporation; or (iii) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board of Directors or the board of directors of the Guarantor
(together with any new directors whose election by such Board of Directors or
the board of directors of the Guarantor whose nomination for election by the
stockholders of the Company was approved by a vote of a majority of the
directors then still in office who are entitled to vote to elect such new
director and were either directors at the beginning of such period or persons
whose election as directors or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors or the board of directors of the Guarantor then in office.
"Change of Control Offer" see Section 4.14.
"Change of Control Purchase Date" see Section 4.14.
"Change of Control Trigger Date" see Section 4.14.
"Commission" means the Securities and Exchange Commission.
<PAGE> 12
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"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President, a Vice President or its Treasurer, and by
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"Consolidated Interest Expense" means, for any given period and Person,
the aggregate of (i) the interest expense in respect of all Indebtedness of such
Person and its Restricted Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP (including amortization of original issue
discount on any such Indebtedness, all non-cash interest payments, the interest
portion of any deferred payment obligation and the interest component of capital
lease obligations, but excluding amortization of deferred financing fees if such
amortization would otherwise be included in interest expense) and (ii) the
product of (a) all cash dividend payments (and non-cash dividend payments in the
case of a Person that is a Restricted Subsidiary) on any series of Preferred
Stock of such Person and its Restricted Subsidiaries payable to a party other
than the Company or a wholly owned Subsidiary, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, on a consolidated basis and in accordance with GAAP;
provided, however, that for the purpose of the Cash Flow Coverage Ratio,
Consolidated Interest Expense shall be calculated on a Pro Forma Basis.
"Consolidated Net Income" means, for any given period and Person, the
aggregate of the Net Income of such Person and its Restricted Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that: (i) the Net Income of any Person acquired in a pooling
of interests transaction for any period prior to the date of such acquisition
shall be excluded, (ii) the Net Income (but not loss) of any Person that is not
a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person, (iii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Restricted Subsidiary of
that Net Income is not at the date of determination permitted without any prior
governmental approval (which has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, (iv) the cumulative effect of a
change in accounting principles shall be excluded, (v) income or loss
attributable to discontinued operations shall be excluded and (vi) all other
extraordinary, unusual or nonrecurring gains or losses shall be excluded;
provided, however, that for purposes of determining the Cash Flow Coverage
Ratio, Consolidated Net Income shall be calculated on a Pro Forma Basis.
"Consolidated Net Worth" means, with respect to any Person at any date,
the sum of (i) the consolidated stockholders' equity of such Person less the
amount of such stockholders' equity attributable to Disqualified Stock of such
Person and its Subsidiaries (Restricted Subsidiaries, in the case of the
Company), as determined on a consolidated basis in accordance with GAAP
consistently applied and (ii) the amount of any Preferred Stock of such Person
not included in the stockholders' equity of such Person in accordance with GAAP,
which Preferred Stock does not constitute Disqualified Stock.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 13.02 or such other address as the Trustee may give
notice to the Company.
<PAGE> 13
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"Covenant Defeasance Option" see Section 9.02.
"Credit Agreement" means collectively, the Accounts Financing Agreement
[Security Agreement] between Columbia Specialties, Inc., and Congress Financial
Corporation dated December 23, 1992 and the Accounts Financing Agreement
[Security Agreement] by and among Fedders North America, Inc., Emerson Quiet
Kool Corporation and Congress Financial Corporation dated December 23, 1992,
together with all loan documents and instruments thereunder (including, without
limitation, any guarantee agreements, covenant supplements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including, without limitation, increasing
the amount of available borrowings thereunder, and all Obligations with respect
thereto, in each case, to the extent permitted by Section 4.04 or adding
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Custodian" see Section 6.01.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"defeasance trust" see Section 9.04.
"Depository" means, with respect to the Securities issued in the form
of one or more Global Securities, The Depository Trust Company or another Person
designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"Depository Securities Certification" see Section 2.01.
"Designated Guarantor Senior Indebtedness" means (i) the guarantee by
the Guarantor of any Indebtedness outstanding under the Credit Agreement and
(ii) any other Guarantor Senior Indebtedness of the Guarantor the principal
amount of which is $20,000,000 or more.
"Designated Senior Indebtedness" means (i) any Indebtedness outstanding
under the Credit Agreement and (ii) any other Senior Indebtedness permitted
under the Indenture the principal amount of which is $20,000,000 or more and
that has been designated by the Company as Senior Indebtedness.
"Disposition" see Section 5.01.
"Disqualified Stock" with respect to any Person means any Capital Stock
or Equity Interests that 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, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part on, or prior to, the maturity date of the Securities, or any
Capital Stock or Equity Interests in any Restricted Subsidiary of such Person.
"Equity Interests" means Capital Stock or partnership interests or
warrants, options or other rights to acquire Capital Stock or partnership
interests (but excluding (i) any debt security that is convertible
<PAGE> 14
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into, or exchangeable for, Capital Stock or partnership interests, and (ii) any
other Indebtedness or Obligation).
"Equity Offering" means a public or private offering by the Company or
the Guarantor for cash of Capital Stock or other Equity Interests and all
warrants, options or other rights to acquire Capital Stock, other than an
offering of Disqualified Stock.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Euroclear" means the Euroclear Clearance System (or any successor
securities clearing agency).
"Event of Default" see Section 6.01.
"Excess Proceeds" see Section 4.05.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the Commission thereunder.
"Existing Stockholders" means the officers and directors of each of the
Company and the Guarantor on the date of issuance of the Securities and their
respective Affiliates and family members and trusts for the benefit of any of
the foregoing.
"Final Maturity Date" means August 15, 2007.
"GAAP" means generally accepted accounting principles, consistently
applied, as in effect in the United States from time to time. All financial and
accounting determinations and calculations under the Indenture will be made in
accordance with GAAP.
"Global Security" means a security evidencing all or a portion of the
Securities issued to the Depository or its nominee in accordance with Section
2.01 and bearing the legend set forth in Exhibit C hereto.
"Guarantee" means the guarantee of the Obligations of the Company with
respect to the Securities by the Guarantor pursuant to the terms of Article 11
hereof.
"Guaranteed Obligations" see Section 11.01.
"Guarantor" means Fedders Corporation, the sole stockholder of the
Company.
"Guarantor Blockage Period" see Section 12.02(a).
"Guarantor Payment Blockage Notice" see Section 12.02(a).
"Guarantor Senior Indebtedness" means, with respect to the Guarantor,
the Guarantor's guarantee of the Company's obligations under the Credit
Agreement and any other Indebtedness of the Guarantor (other than as otherwise
provided in this definition), whether outstanding on the date of the Indenture
or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebt-
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edness shall not be senior in right of payment to the Guarantee. Notwithstanding
the foregoing, "Guarantor Senior Indebtedness" will not include (i) Indebtedness
evidenced by the Guarantee; (ii) Indebtedness of the Guarantor that is
subordinate or junior in right of payment to any other Indebtedness of the
Guarantor; (iii) Indebtedness of the Guarantor which, when incurred and without
respect to any other election under Section 1111(b) of the Bankruptcy Law, is
without recourse to the Guarantor; (iv) Indebtedness which is represented by
Disqualified Stock of the Guarantor; (v) any liability for foreign, federal,
state, local or other taxes owed or owing by the Guarantor; (vi) Indebtedness of
the Guarantor to a Subsidiary or any other Affiliate of the Guarantor or any of
such Affiliate's subsidiaries; (vii) that portion of any Indebtedness which,
when incurred, is issued in violation of the Indenture; and (viii) trade
payables owed or owing by the Guarantor.
"Hedging Obligations" means, with respect to any Person, the
Obligations of such Persons under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements, (ii) foreign exchange
contracts, currency swap agreements or similar agreements, and (iii) other
agreements or arrangements designed to protect such Person against fluctuations,
or otherwise to establish financial hedges in respect of, exchange rates,
currency rates or interest rates.
"Holder," "holder of Securities," "Securityholders" or other similar
terms mean the registered holder of any Security.
"Indebtedness" means, with respect to any Person, (i) any indebtedness,
whether or not contingent, in respect of borrowed money or evidenced by bonds,
notes, debentures or similar instruments or letters of credit (or reimbursement
agreements in respect thereof) or representing the deferred and unpaid balance
of the purchase price of any property (including pursuant to capital leases),
except any such balance that constitutes an accrued expense or a trade payable,
and any Hedging Obligations, if and to the extent such indebtedness (other than
a Hedging Obligation) would appear as a liability upon a balance sheet of such
Person prepared on a consolidated basis in accordance with GAAP, and also
includes, to the extent not otherwise included, the guarantee of items that
would be included within this definition; (ii) Disqualified Stock of such
Person; or (iii) Preferred Stock issued by a Restricted Subsidiary of such
Person.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities
Corporation and Goldman, Sachs & Co.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" means each semiannual interest payment date on
February 15 and August 15 of each year, commencing February 15, 1998.
"Interest Record Date" for the interest payable on any Interest Payment
Date (except a date for payment of defaulted interest) means the February 1 or
August 1 (whether or not a Business Day), as the case may be, immediately
preceding such Interest Payment Date.
"Investment" means any capital contribution to, or other debt or equity
investment in, any Person. For the purposes of Section 4.06, the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by the Company or any of its Restricted Subsidiaries,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with re-
<PAGE> 16
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spect to such Investment, reduced by the payment of dividends or distributions
in connection with such Investment or any other amounts received by the Company
or any Restricted Subsidiary in respect of such Investment to the extent not
included in Consolidated Net Income.
"issue" means create, issue, assume, guarantee, incur or otherwise
become directly or indirectly liable for any Indebtedness or Capital Stock, as
applicable; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be issued
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
For this definition, the terms "issuing," "issuer," "issuance" and "issued" have
meanings correlative to the foregoing.
"Issue Date" means the original issue date of the Securities, August
18, 1997.
"Legal Defeasance Option" see Section 9.02.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell and any filing of or
agreement to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Liquidated Damages" has the meaning provided in the Registration
Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP, excluding, however, any gain
or loss, together with any related provision for taxes, realized in connection
with any Asset Sale (including, without limitation, dispositions pursuant to
sale and leaseback transactions).
"Net Proceeds" means, with respect to any Asset Sale, the aggregate
amount of cash proceeds (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, and including
any amounts received as disbursements or withdrawals from any escrow or similar
account established in connection with any such Asset Sale, but, in either such
case, only as and when so received) received by the Company or any of its
Restricted Subsidiaries in respect of such Asset Sale, net of: (i) the cash
expenses of such Asset Sale (including, without limitation, the payment of
principal of, and premium, if any, and interest on, Indebtedness required to be
paid as a result of such Asset Sale (other than the Securities) and legal,
accounting, management and advisory and investment banking fees and sales
commissions), (ii) taxes paid or payable as a result thereof, (iii) any portion
of cash proceeds that the Company determines in good faith should be reserved
for post-closing adjustments, it being understood and agreed that on the day
that all such post-closing adjustments have been determined, the amount (if any)
by which the reserved amount in respect of such Asset Sale exceeds the actual
post-closing adjustments payable by the Company or any of its Restricted
Subsidiaries shall constitute Net Proceeds on such date.
"New York Presenting Agent" see Section 4.02.
"Non-Global Permanent Regulation S Security" see Section 2.06.
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"Non-Restricted Subsidiary" means any Subsidiary of the Company other
than a Restricted Subsidiary.
"Non-U.S. Person" means a Person who is not a U.S. Person, as defined
in Regulation S.
"Obligations" means, with respect to any Indebtedness, all principal,
interest, premiums, penalties, fees, indemnities, expenses (including legal fees
and expenses), reimbursement obligations and other liabilities payable to the
holder of such Indebtedness under the documentation governing such Indebtedness,
and other claims of such holder arising in respect of such Indebtedness.
"Officer" means the Chairman, the Vice Chairman, the President, any
Vice President, the Chief Financial Officer, or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or Assistant Secretary of the Company
complying with Sections 13.04 and 13.05.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Other Company Indebtedness Guarantee" see Section 4.20.
"Other Permitted Indebtedness" means (i) Indebtedness of the Company
and its Restricted Subsidiaries existing as of the date of original issuance of
the Series A Securities and all related Obligations as in effect on such date;
(ii) Indebtedness of the Company and its Restricted Subsidiaries in respect of
bankers acceptances and letters of credit (including, without limitation,
letters of credit in respect of workers' compensation claims) issued in the
ordinary course of business, or other Indebtedness in respect of
reimbursement-type obligations regarding workers' compensation claims; (iii)
Refinancing Indebtedness; provided that: (A) the principal amount of such
Refinancing Indebtedness shall not exceed the outstanding principal amount of
Indebtedness (including unused commitments) extended, refinanced, renewed,
replaced, substituted or refunded plus any amounts incurred to pay premiums,
fees and expenses in connection therewith, and (B) the Refinancing Indebtedness
shall have a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being extended,
refinanced, renewed, replaced, substituted or refunded; (iv) intercompany
Indebtedness of and among the Company and its wholly owned Restricted
Subsidiaries (excluding guarantees by Restricted Subsidiaries of Indebtedness of
the Company not issued in compliance with Section 4.20); (v) Indebtedness of any
Non-Restricted Subsidiary created after the Issue Date; provided that such
Indebtedness is nonrecourse to the Company and its Restricted Subsidiaries and
the Company and its Restricted Subsidiaries have no Obligations with respect to
such Indebtedness; (vi) Indebtedness of the Company and its Restricted
Subsidiaries under Hedging Obligations; (vii) Indebtedness of the Company and
its Restricted Subsidiaries 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, which will not be, and will not be
deemed to be, inadvertent) drawn against insufficient funds in the ordinary
course of business; (viii) guarantees by a Restricted Subsidiary of Indebtedness
of the Company if the Indebtedness so guaranteed is permitted under the
Indenture and the Securities are guaranteed by such Restricted Subsidiary to the
extent required by Section 4.20; (ix) Indebtedness of the Company and its
Restricted Subsidiaries in connection with performance, surety, statutory,
appeal or similar bonds in the ordinary course of business; and (x) intercompany
Indebtedness of the Company to the Guarantor; provided such Indebtedness does
not bear interest.
"Owner Securities Certification" see Section 2.01.
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"Paying Agent" see Section 2.03.
"Payment Blockage Notice" see Section 8.02(a).
"Payment Blockage Period" see Section 8.02(a).
"Permanent Regulation S Global Security" see Section 2.01.
"Permitted Liens" means with respect to the Company and its Restricted
Subsidiaries, (i) Liens for taxes, assessments, governmental charges or claims
which are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor; (ii) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens arising
in the ordinary course of business and with respect to amounts not yet
delinquent or being contested in good faith by appropriate proceedings, if a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor; (iii) Liens incurred on
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (iv)
Liens incurred on deposits made to secure the performance of tenders, bids,
leases, statutory obligations, surety and appeal bonds, government contracts,
performance and return of money bonds and other obligations of a like nature
incurred in the ordinary course of business (exclusive of obligations for the
payment of borrowed money); (v) easements, rights-of-way, zoning or other
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances not interfering in any material respect with the business of the
Company or any of its Restricted Subsidiaries incurred in the ordinary course of
business; (vi) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods; (vii) judgment and attachment Liens not giving rise to an
Event of Default; (viii) leases or subleases granted to others not interfering
in any material respect with the business of the Company or any of its
Restricted Subsidiaries; (ix) Liens securing Indebtedness under Hedging
Obligations; (x) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements; (xi) Liens
arising out of consignment or similar arrangements for the sale of goods entered
into by the Company or its Restricted Subsidiaries in the ordinary course of
business; (xii) Liens arising from filing Uniform Commercial Code financing
statements regarding leases; (xiii) Liens existing on the date of original
issuance of the Securities and any extensions, refinancings, renewals,
replacements, substitutions or refundings thereof; (xiv) any Lien granted to the
Trustee and any substantially equivalent Lien granted to any trustee or similar
institution under any indenture for Senior Indebtedness permitted by the terms
of the Indenture; (xv) Liens securing Senior Indebtedness or Indebtedness of a
Restricted Subsidiary if such Indebtedness is incurred pursuant to the Credit
Agreement or is permitted to be incurred pursuant to paragraph (a) of Section
4.04; (xvi) Liens securing Indebtedness of the Company and its Restricted
Subsidiaries in connection with capital leases, sale and leaseback transactions,
purchase money obligations, capital expenditures or similar financing
transactions, which Indebtedness is permitted under Section 4.04 or 4.19; (xvii)
Liens on property existing at the time of acquisition thereof by the Company or
a Restricted Subsidiary of the Company; provided that such Liens were in
existence prior to the contemplation of such acquisition; and (xviii) additional
Liens at any one time outstanding in respect of properties or assets where
aggregate fair market value does not exceed $2,000,000 (the fair market value to
be determined on the date such Lien is granted on such properties or assets).
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
<PAGE> 19
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"Preferred Stock" of any Person means Capital Stock of such Person of
any class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
"principal" of a debt security means the principal of the security,
plus, when appropriate, the premium, if any, on the security.
"Private Placement Legend" means the legend initially set forth on the
Securities in the form set forth on Exhibit A hereto.
"Pro Forma Basis" means, for purposes of determining Consolidated Net
Income in connection with the Cash Flow Coverage Ratio (including in connection
with Sections 4.06, 4.17 and 5.01, the incurrence of Indebtedness pursuant to
paragraph (a) of Section 4.04 and Consolidated Net Worth for purposes of Section
5.01), giving pro forma effect to (x) any acquisition or sale of a Person,
business or asset, related incurrence, repayment or refinancing of Indebtedness
or other related transactions, including any Restructuring Charges which would
otherwise be accounted for as an adjustment permitted by Regulation S-X under
the Securities Act or on a pro forma basis under GAAP, or (y) any incurrence,
repayment or refinancing of any Indebtedness and the application of the proceeds
therefrom, in each case, as if such acquisition or sale and related
transactions, restructurings, consolidations, cost savings, reductions,
incurrence, repayment or refinancing were realized on the first day of the
relevant period permitted by Regulation S-X under the Securities Act or on a pro
forma basis under GAAP. Furthermore, in calculating the Cash Flow Coverage
Ratio, (1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the determination date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on the determination date;
(2) if interest on any Indebtedness actually incurred on the determination date
may optionally be determined at an interest rate based upon a factor of a prime
or similar rate, a eurocurrency interbank offered rate, or other rates, then the
interest rate in effect on the determination date will be deemed to have been in
effect during the relevant period; and (3) notwithstanding clause (1) above,
interest on Indebtedness determined on a fluctuating basis, to the extent such
interest is covered by agreements relating to interest rate swaps or similar
interest rate protection Hedging Obligations, shall be deemed to accrue at the
rate per annum resulting after giving effect to the operation of such
agreements.
"Purchase Agreement" means the Purchase Agreement dated August 11, 1997
between the Company, the Guarantor and the Initial Purchasers.
"Qualified Institutional Buyer" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"redemption price," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
as set forth in the form of Security annexed hereto as Exhibit A.
"Refinancing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries issued or given in exchange for, or the proceeds of
which are used to, extend, refinance, renew, replace,
<PAGE> 20
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substitute for or refund the Securities or Indebtedness contemplated by clause
(i) of the definition of Other Permitted Indebtedness or any Indebtedness issued
to so extend, refinance, renew, replace, substitute for or refund such
Indebtedness.
"Registered Exchange Offer" means the offer to exchange the Series B
Securities for all of the outstanding Series A Securities in accordance with the
Registration Rights Agreement.
"Register" see Section 2.03.
"Registrar" see Section 2.03.
"Registration" means the registration of the Registered Exchange Offer
by the Company and the Guarantor or other registration of the Securities under
the Securities Act pursuant to and in accordance with the terms of the
Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of August 18, 1997 between the Company, the Guarantor and the Initial
Purchasers.
"Registration Statement" means the registration statement(s) as defined
and described in the Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act.
"Restricted Global Security" see Section 2.01.
"Restricted Investment" means any Investment in any Person; provided
that Restricted Investments will not include: (i) Investments in marketable
securities and other negotiable instruments permitted by the Indenture; (ii)
Investments in the Company; (iii) Investments in any Restricted Subsidiary or in
a Person that becomes a Restricted Subsidiary as a result of such investment
(provided that any Investment in a Restricted Subsidiary or in a Person that
becomes a Restricted Subsidiary is made for fair market value (as determined by
the Board of Directors in good faith)); or (iv) Investments which exist on the
Issue Date. The amount of any Restricted Investment shall be the amount of cash
and the fair market value at the time of transfer of all other property (as
determined by the Board of Directors in good faith) initially invested or paid
for such Restricted Investment, plus all additions thereto, without any
adjustments for increases or decreases in value of or write-ups, write-downs or
write-offs with respect to, such Restricted Investment.
"Restricted Payments" see Section 4.06.
"Restricted Period" see Section 2.01.
"Restricted Security" has the meaning set forth in Rule 144(a)(3) under
the Securities Act; provided, that the Trustee shall be entitled to request and
conclusively rely upon an Opinion of Counsel with respect to whether any
Security is a Restricted Security
"Restricted Subsidiary" means: (i) any Subsidiary of the Company
existing on the Issue Date, and (ii) any other Subsidiary of the Company formed,
acquired or existing after the Issue Date that is designated as a "Restricted
Subsidiary" by the Company pursuant to a resolution approved by a majority of
the Board of Directors; provided, however, that the term Restricted Subsidiary
shall not include any Subsidiary of
<PAGE> 21
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the Company that has been redesignated by the Company pursuant to a resolution
approved by a majority of the Board of Directors as a Non-Restricted Subsidiary
in accordance with Section 4.17 unless such Subsidiary shall have subsequently
been redesignated a Restricted Subsidiary in accordance with clause (ii) of this
definition.
"Restructuring Charges" means any charges or expenses in respect of
restructuring or consolidating any business, operations or facilities, any
compensation or headcount reduction, or any other cost savings, of any Persons
or businesses either alone or together with the Company or any Restricted
Subsidiary, as permitted by GAAP or Regulation S-X under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities" means, collectively, the Series A Securities and the
Series B Securities, which should be treated as a single class of securities, as
amended or supplemented from time to time in accordance with the terms of this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the Commission thereunder.
"Senior Indebtedness" means the principal of, premium, if any, and
interest (including any interest accruing subsequent to the filing of a petition
of bankruptcy at the rate provided for in the documentation with respect
thereto, whether or not such interest is an allowed claim under applicable law)
on any Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Securities. Without limiting the
generality of the foregoing, "Senior Indebtedness" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, all monetary obligations (including guarantees thereof) of every nature of
the Company under the Credit Agreement, including, without limitation,
obligations to pay principal and interest, reimbursement obligations under
letters of credit, fees, expenses and indemnities and the guarantee of any
obligations owing by any Subsidiary under the Credit Agreement. "Senior
Indebtedness" shall not include (i) any Indebtedness of the Company to a
Subsidiary of the Company, (ii) Indebtedness to, or guaranteed on behalf of, any
shareholder, director, officer or employee of either the Company or any
Subsidiary of the Company (including, without limitation, amounts owed for
compensation), (iii) Indebtedness to trade creditors and other amounts incurred
in connection with obtaining goods, materials or services, (iv) Indebtedness
represented by Disqualified Stock, (v) any liability for federal, state, local
or other taxes owed or owing by the Company, (vi) that portion of any
Indebtedness incurred in violation of the Indenture provisions set forth in
Section 4.04 and (vii) any Indebtedness which is, by its express terms,
subordinated in right of payment to any other Indebtedness of the Company.
"Series A Securities" means the 9 3/8% Senior Subordinated Notes due
2007 of the Company issued pursuant to this Indenture and sold pursuant to the
Purchase Agreement.
"Series B Securities" means the 9 3/8% Senior Subordinated Notes due
2007 of the Company to be issued in exchange for the Series A Securities
pursuant to the Registered Exchange Offer and the Registration Rights Agreement.
<PAGE> 22
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"Services Agreement" means the Services Agreement dated as of July 31,
1997 between the Company and the Guarantor.
"Significant Subsidiary" means any Restricted Subsidiary of the Company
that would be a "significant subsidiary" as defined in clause (2) of the
definition of such term in Rule 1-02 of Regulation S-X under the Securities Act
and the Exchange Act.
"Subsidiary" of any Person means any entity of which the Equity
Interests entitled to cast at least a majority of the votes that may be cast by
all Equity Interests having ordinary voting power for the election of directors
or other governing body of such entity are owned by such Person (regardless of
whether such Equity Interests are owned directly by such Person or through one
or more Subsidiaries).
"Temporary Regulation S Global Security" see Section 2.01.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb), as amended, as in effect on the date of this
Indenture, except as provided in Section 10.03.
"Transferred Securities Certification" see Section 2.06(g).
"Trust Officer" means any officer within the corporate trust department
(or any successor group) of the Trustee including any vice president, assistant
vice president, assistant secretary or any other officer or assistant officer of
the Trustee customarily performing functions similar to those performed by the
persons who at that time shall be such officers, and also means, with respect to
a particular corporate trust matter, any other officer to whom such trust matter
is referred because of his knowledge of and familiarity with the particular
subject.
"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 such successor.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of New York.
"U.S. Government Obligations" means direct non-callable obligations of
the United States of America for the payment of which the full faith and credit
of the United States is pledged.
"U.S. Person" means a "U.S. person" as defined in Rule 902 under the
Securities Act.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect the board of directors.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the then
outstanding principal amount of such Indebtedness into (ii) the sum of the
product(s) obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
<PAGE> 23
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SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule and
not otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. 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 generally accepted accounting principles
in effect from time to time, and any other reference in this Indenture to
"generally accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision.
<PAGE> 24
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ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Securities and the Trustee's certificate of authentication with
respect thereto shall be substantially in the form of Exhibit A or Exhibit B
hereto, as the case may be. The Securities may have notations, legends or
endorsements (including notations relating to the Guarantee) required by law,
stock exchange rule or usage. The Company and the Trustee shall approve the form
of the Securities and any notation, legend or endorsement (including notations
relating to the Guarantee) on them. Each Security shall be dated the date of its
authentication, shall bear interest from the applicable date which shall be
payable on each Interest Payment Date as long as such Security is outstanding
and shall be payable on the Final Maturity Date.
The terms and provisions contained in the Securities shall constitute,
and are hereby expressly made, a part of this Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
Securities offered and sold in their initial distribution to Qualified
Institutional Buyers in reliance on Rule 144A or in offshore transactions in
reliance on Regulation S may, unless the applicable Holder requests Securities
in the form of physical, certificated Securities in registered form
("Certificated Securities"), which shall be substantially in the form of Exhibit
A, be initially issued in the form of Global Securities in fully registered form
without interest coupons, substantially in the form of Exhibit A, with such
applicable legends as are provided for in Exhibit A and Exhibit C.
Securities offered and sold in their initial distribution to Qualified
Institutional Buyers in reliance on Rule 144A shall be issued in the form of one
or more Global Securities (collectively, and together with their successor
securities, the "Restricted Global Security") which shall be registered in the
name of the Depository or its nominee and deposited with the Trustee, as
custodian for the Depository, duly executed by the Company and authenticated by
the Trustee as hereinafter provided, for credit by the Depository to the
respective accounts of beneficial owners of the Securities represented thereby
(or such other accounts as they may direct). The aggregate principal amount of
the Restricted Global Security may be increased or decreased from time to time
by adjustments made on the records of the Trustee, as custodian for the
Depository, in connection with a corresponding decrease or increase in the
aggregate principal amount of the Temporary Regulation S Global Security or the
Permanent Regulation S Global Security, as hereinafter provided in Section 2.06.
Securities offered and sold in reliance on Regulation S shall initially
be in the form of temporary Global Securities which shall be registered in the
name of the Depository or its nominee and deposited with the Trustee, as
custodian for the Depository, duly executed by the Company and authenticated by
the Trustee as hereinafter provided, for credit by the Depository to the
respective accounts of the beneficial owners of the Securities represented
thereby (or such other accounts as they may direct), provided that upon such
deposit all such Securities shall be credited to or through accounts maintained
at the Depository by or on behalf of Euroclear or CEDEL. Until such time as the
Restricted Period (as defined below) shall have expired, such temporary Global
Securities, together with their successor securities which are Global Securities
other than the Restricted Global Security, shall be referred to herein as a
"Temporary Regulation S Global Security." After such time as the Restricted
Period shall have expired and the certifications referred to below in the next
<PAGE> 25
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succeeding paragraph shall have been provided, interests in such Temporary
Regulation S Global Securities shall be exchanged (as initiated by the
beneficial owners of interests therein) for interests in like Global Securities,
referred to herein collectively as the "Permanent Regulation S Global Security,"
or for interests in like Certificated Securities, referred to herein
collectively as the "Non-Global Permanent Regulation S Security," each
substantially in the form of Security set forth in Exhibit A, with such
applicable legends as are provided for in Exhibit A or Exhibit C. Such Permanent
Regulation S Global Securities shall be registered in the name of the Depository
or its nominee and deposited with the Trustee, as custodian for the Depository,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided, for credit to the respective accounts of the beneficial owners of the
Securities represented thereby (or such other accounts as they may direct). The
aggregate principal amount of the Temporary Regulation S Global Security or the
Permanent Regulation S Global Security may be increased or decreased from time
to time by adjustments made on the records of the Trustee, as custodian for the
Depository, as hereinafter provided. As used herein, the term "Restricted
Period" means the period of 40 days commencing on the day after the latest of
(a) the day on which the Securities are first offered to persons other than
distributors (as defined in Regulation S) in reliance on Regulation S and (b)
the date of this Indenture; provided that promptly after the occurrence of the
date described in clause (a), the Company shall give written notice thereof to
the Trustee, identifying therein the day on which the Restricted Period expires.
Interests in a Temporary Regulation S Global Security may be exchanged
for interests in a Permanent Regulation S Global Security only after (a) the
expiration of the Restricted Period, (b) delivery by a beneficial owner of an
interest therein to Euroclear or CEDEL of a written certification (an "Owner
Securities Certification") substantially in the form of Exhibit E hereto, and
(c) upon delivery by Euroclear or CEDEL to the Trustee of a written
certification (a "Depository Securities Certification") substantially in the
form attached hereto as Exhibit F. Upon receipt by the Trustee of the Depository
Securities Certification and the notification from the Depository described in
clause (iv) of the next succeeding paragraph, the Trustee will exchange the
portion of the Temporary Regulation S Global Security covered by such
certification for interests in a Permanent Regulation S Global Security. The
delivery by such Holder of a beneficial interest in such Temporary Regulation S
Global Security of such certification shall constitute an irrevocable
instruction by such holder to Euroclear or CEDEL, as the case may be, to
exchange such Holder's beneficial interest in the Temporary Regulation S Global
Security for a beneficial interest in the Permanent Regulation S Global Security
upon the expiration of the Restricted Period in accordance with the next
succeeding paragraph.
Upon:
(i) the expiration of the Restricted Period;
(ii) receipt by Euroclear or CEDEL, as the case may be, of Owner
Securities Certifications described in the preceding paragraph;
(iii) receipt by the Depository of:
(1) written instructions given in accordance with the
Applicable Procedures from an Agent Member directing the Depository to
credit or cause to be credited to a specified Agent Member's account a
beneficial interest in a Permanent Regulation S Global Security in a
principal amount equal to that of the beneficial interest in a
corresponding Temporary Regulation S Global Security for which the
necessary certifications have been delivered; and
<PAGE> 26
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(2) a written order given in accordance with the Applicable
Procedures containing information regarding the account of the Agent
Member, and the Euroclear or CEDEL account for which such Agent
Member's account is held, to be credited with, and the account of the
Agent Member to be debited for, such beneficial interest; and
(iv) receipt by the Trustee of notification from the Depository in
accordance with the Applicable Procedures requesting the exchange of a
principal amount of the Temporary Regulation S Global Security identified
therein for the same amount of the Permanent Regulation S Global Security
and from Euroclear or CEDEL, as the case may be, of Depository Securities
Certifications,
the Trustee, as Registrar, shall, or shall instruct the Depository to, reduce
the principal amount of such Temporary Regulation S Global Security, and to
increase the principal amount of such Permanent Regulation S Global Security, by
the principal amount of the beneficial interest in such Temporary Regulation S
Global Security to be so transferred, and the Depository shall credit or cause
to be credited to the account of the person specified in such instructions a
beneficial interest in such Permanent Regulation S Global Security having a
principal amount equal to the amount by which the principal amount of such
Temporary Regulation S Global Security was reduced upon such transfer.
SECTION 2.02. Execution and Authentication.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless. Each
execution of a Security by the Company shall be accompanied by the execution of
a Guarantee by the Guarantor (and by any Restricted Subsidiary that guarantees
Indebtedness of the Company pursuant to Section 4.20).
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.
The Trustee shall authenticate (i) Series A Securities for original
issue in the aggregate principal amount not to exceed $100,000,000 and (ii)
Series B Securities from time to time only in exchange for a like principal
amount of Series A Securities, in each case upon a written order of the Company
in the form of an Officers' Certificate. The Officers' Certificate shall specify
the amount of Securities to be authenticated, the series of Securities and the
date on which the Securities are to be authenticated. The aggregate principal
amount of Securities outstanding at any time may not exceed $100,000,000, except
as provided in Section 2.07. Upon receipt of a written order of the Company in
the form of an Officers' Certificate, the Trustee shall authenticate Securities
in substitution for Securities originally issued to reflect any name change of
the Company.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
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Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where (a) Securities may
be presented or surrendered for registration of transfer or for exchange
("Registrar"), (b) Securities may be presented or surrendered for payment
("Paying Agent") and (c) notices and demands in respect of the Securities and
this Indenture may be served. The Registrar shall keep a register (the
"Register") of the Securities and of their transfer and exchange. The Company,
upon notice to the Trustee, may appoint one or more co-Registrars and one or
more additional Paying Agents. The term "Paying Agent" includes any additional
Paying Agent. Except as provided herein, the Company, or any Subsidiary may act
as Paying Agent, Registrar or co-Registrar.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
The Company initially appoints the Trustee as Registrar and Paying
Agent until such time as the Trustee has resigned or a successor has been
appointed.
SECTION 2.04. Paying Agent to Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of or premium, if any, or interest or Liquidated Damages, if any, on
the Securities, and shall notify the Trustee of any Default by the Company in
making any such payment. The Company at any time may require a Paying Agent to
distribute all assets held by it to the Trustee and account for any assets
disbursed and the Trustee may at any time during the continuance of any payment
Default, upon written request to a Paying Agent, require such Paying Agent to
distribute all assets held by it to the Trustee and to account for any assets
distributed. Upon distribution to the Trustee of all assets that shall have been
delivered by the Company to the Paying Agent (if other than the Company), the
Paying Agent shall have no further liability for such assets. If the Company,
any Subsidiary or any of their respective Affiliates acts as Paying Agent, it
shall, on or before each due date of the principal of or interest on the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or premium, if any, or, interest
or Liquidated Damages, if any, so becoming due until such sums shall be paid to
such Persons or otherwise disposed of as herein provided and will promptly
notify the Trustee of its action or failure so to act.
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
Holders. If the Trustee is not the Registrar, the Company
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shall furnish to the Trustee before each Interest Record Date and at such other
times as the Trustee may request in writing a list as of such date and in such
form as the Trustee may reasonably require of the names and addresses of
Holders, which list may be conclusively relied upon by the Trustee.
SECTION 2.06 Transfer and Exchange.
(a) Beneficial interests in a Global Security may, subject to the
restrictions on the transferability of the Securities set forth herein and upon
delivery of a certificate in the form of Exhibit D, be exchanged for
Certificated Securities upon request but only upon at least 20 days' prior
written notice given to the Trustee by or on behalf of the Depository (in
accordance with the Depository's customary procedures) and will bear the
applicable legends set forth in Exhibit A. The Company shall duly execute and
deliver to the Trustee upon request Certificated Securities for such purpose (or
from time to time shall provide to the Trustee an inventory of duly executed
Certificated Securities for such purpose).
(b) If any Global Security is to be exchanged for other Securities or
cancelled in whole, it shall be surrendered by or on behalf of the Depository or
its nominee to the Trustee, as Registrar, for exchange or cancellation as
provided in this Article Two. If any Global Security is to be exchanged for
other Securities or cancelled in part, or if another Security is to be exchanged
in whole or in part for a beneficial interest in any Global Security, such
Global Security shall be so surrendered for exchange or cancellation as provided
in this Article Two or, if the Trustee is acting as custodian for the Depository
or its nominee (or is party to a similar arrangement) with respect to such
Global Security, the principal amount thereof shall be reduced or increased by
an amount equal to the portion thereof to be so exchanged or cancelled, or the
principal amount of such other Security to be so exchanged for a beneficial
interest therein, as the case may be, in each case by means of an appropriate
adjustment made on the records of the Trustee, whereupon the Trustee, in
accordance with the Applicable Procedures, shall instruct the Depository or its
authorized representatives to make a corresponding adjustment to its records
(including by crediting or debiting any Agent Member's account as necessary to
reflect any transfer or exchange of a beneficial interest). Upon any such
surrender or adjustment of a Global Security, the Company shall execute and the
Trustee shall, subject to this Article Two, authenticate and deliver any
Securities issuable in exchange for such Global Security (or any portion
thereof) to or upon the order of, and registered in such names as may be
directed by, the Depository or its authorized representative. Upon the request
of the Trustee in connection with the occurrence of any of the events specified
in the preceding paragraph or in paragraph (r) below, the Company shall promptly
make available to the Trustee a reasonable supply of Securities that are not in
the form of Global Securities. The Trustee shall be entitled to rely upon any
order, direction or request of the Depository or its authorized representative
which is given or made pursuant to this Article Two if such order, direction or
request is given or made in accordance with the Applicable Procedures.
(c) Subject to the provisions in the legends required by this
Indenture, the registered Holder may grant proxies and otherwise authorize any
Person, including Agent Members and Persons who may hold interests in Agent
Members, to take any action that such Holder is entitled to take under this
Indenture.
(d) Neither Agent Members nor any other Person on whose behalf Agent
Members may act shall have any rights under this Indenture with respect to any
Global Security held on their behalf by the Depository or under the 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. 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 governing the
<PAGE> 29
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exercise of the rights of a Holder of any Security. With respect to any Global
Security deposited with the Trustee as custodian for the Depository for credit
to their respective accounts (or to such other accounts as they may direct) at
Euroclear or CEDEL, the provisions of the "Operating Procedures of the Euroclear
System" and the "Terms and Conditions Governing Use of Euroclear," and the
"Management Regulations" and "Instructions to Participants" of CEDEL,
respectively, shall be applicable to such Global Security.
(e) Upon presentation for transfer or exchange of any Security at the
office of the Trustee, as Registrar, or at the office of the New York Presenting
Agent located in The City of New York, accompanied by a written instrument of
transfer or exchange in the form approved by the Company (it being understood
that, until notice to the contrary is given to holders of Securities, the
Company shall be deemed to have approved the form of instrument of transfer or
exchange, if any, printed on any Security), executed by the registered Holder,
in person or by such Holder's attorney thereunto duly authorized in writing, and
upon compliance with this Section 2.06, such Security shall be transferred upon
the Register, and a new Security shall be authenticated and issued in the name
of the transferee. Notwithstanding any provision to the contrary herein or in
the Securities, transfers of a Global Security, in whole or in part, and
transfers of interests therein of the kind described in this Section 2.06, shall
only be made in accordance with this Section 2.06. Transfers and exchanges
subject to this Section 2.06 shall also be subject to the other provisions of
this Indenture that are not inconsistent with this Section 2.06.
(f) General. A Global Security may not be transferred, in whole or in
part, to any Person other than the Depository or a nominee thereof, and no such
transfer to any such other Person may be registered; provided, however, that
this paragraph (f) shall not prohibit any transfer of a Security that is issued
in exchange for a Global Security but is not itself a Global Security. No
transfer of a Security to any Person shall be effective under this Indenture or
the Securities unless and until such Security has been registered in the name of
such Person. Nothing in this paragraph (f) shall prohibit or render ineffective
any transfer of a beneficial interest in a Global Security effected in
accordance with the other provisions of this Section 2.06.
(g) Temporary Regulation S Global Security. If the holder of a
beneficial interest in a Temporary Regulation S Global Security wishes at any
time to transfer such interest to a Person who wishes to take delivery thereof
in the form of a beneficial interest in such Temporary Regulation S Global
Security, such transfer may be effected, subject to the rules and procedures of
the Depository, Euroclear and CEDEL, in each case to the extent applicable and
as in effect from time to time (the "Applicable Procedures"), only in accordance
with this paragraph (g). In order to effect such a transfer, the transferring
beneficial owner of an interest in a Temporary Regulation S Global Security
shall deliver to Euroclear or CEDEL, as the case may be, an Owner Securities
Certification, and the transferee of such beneficial interest in the Temporary
Regulation S Global Security shall deliver to Euroclear or CEDEL, as the case
may be, a written certification (a "Transferee Securities Certification")
substantially in the form of Exhibit G hereto.
(h) Restricted Global Security to Temporary Regulation S Global
Security. If the holder of a beneficial interest in the Restricted Global
Security wishes at any time to transfer such interest to a Person who wishes to
take delivery thereof in the form of a beneficial interest in the Temporary
Regulation S Global Security, such transfer may be effected, subject to the
Applicable Procedures, only in accordance with the provisions of this paragraph
(h) and paragraph (n) below. Upon receipt by the Trustee, as Registrar, of (A)
written instructions given by or on behalf of the Depository in accordance with
the Applicable Procedures directing the Trustee to credit or cause to be
credited to a specified Agent Member's account a beneficial interest in the
Temporary Regulation S Global Security in a specified principal amount and to
cause to be debited from another specified Agent Member's account a beneficial
interest in the Restricted Global Security in an equal principal amount and (B)
a certificate in substantially the form set forth in Exhibit H signed by or on
behalf of
<PAGE> 30
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the holder of such beneficial interest in the Restricted Global Security, the
Trustee, as Registrar, shall, subject to paragraph (n) below, reduce the
principal amount of the Restricted Global Security, and increase the principal
amount of the Temporary Regulation S Global Security by such specified principal
amount.
(i) Restricted Global Security to Permanent Regulation S Global
Security. If the holder of a beneficial interest in the Restricted Global
Security wishes at any time after the expiration of the Restricted Period to
transfer such interest to a Person who wishes to take delivery thereof in the
form of a beneficial interest in the Permanent Regulation S Global Security,
such transfer may be effected, subject to the Applicable Procedures, only in
accordance with this paragraph (i). Upon receipt by the Trustee, as Registrar,
after the expiration of the Restricted Period of (A) written instructions given
by or on behalf of the Depository in accordance with the Applicable Procedures
directing the Trustee to credit or cause to be credited to a specified Agent
Member's account a beneficial interest in the Permanent Regulation S Global
Security in a specified principal amount and to cause to be debited from another
specified Agent Member's account a beneficial interest in the Restricted Global
Security in an equal principal amount and (B) a certificate in substantially the
form set forth in Exhibit I signed by or on behalf of the holder of such
beneficial interest in the Restricted Global Security, the Trustee, as
Registrar, shall reduce the principal amount of a Restricted Global Security and
increase the principal amount of the Permanent Regulation S Global Security by
such specified principal amount. Beneficial interests in the Restricted Global
Security may not be transferred to the Permanent Regulation S Global Security
prior to expiration of the Restricted Period.
(j) Temporary Regulation S Global Security or Permanent Regulation S
Global Security to Restricted Global Security. If the holder of a beneficial
interest in the Temporary Regulation S Global Security or the Permanent
Regulation S Global Security at any time wishes to transfer such interest to a
Person who wishes to take delivery thereof in the form of a beneficial interest
in the Restricted Global Security, such transfer may be effected, subject to the
Applicable Procedures, only in accordance with this paragraph (j) and paragraph
(n) below; provided that with respect to any transfer of a beneficial interest
in a Temporary Regulation S Global Security, the transferor and Euroclear or
CEDEL, as the case may be, must have previously delivered an Owner Securities
Certification (to Euroclear or CEDEL, as the case may be) and a Depository
Securities Certification (to the Depository, which shall deliver such Depository
Securities Certification to the Trustee) respectively, with respect to such
beneficial interest. Upon receipt by the Trustee, as Registrar, of (A) written
instructions given by or on behalf of the Depository in accordance with the
Applicable Procedures directing the Trustee to credit or cause to be credited to
a specified Agent Member's account a beneficial interest in the Restricted
Global Security in a specified principal amount and to cause to be debited from
another specified Agent Member's account a beneficial interest in the Temporary
Regulation S Global Security or the Permanent Regulation S Global Security, as
the case may be, in an equal principal amount and (B) a certificate in
substantially the form set forth in Exhibit J signed by or on behalf of the
holder of such beneficial interest in the Temporary Regulation S Global Security
or the Permanent Regulation S Global Security, as the case may be, the Trustee,
as Registrar, shall, subject to paragraph (n) below, reduce the principal amount
of such Temporary Regulation S Global Security or Permanent Regulation S Global
Security, as the case may be, and increase the principal amount of the
Restricted Global Security by such specified principal amount.
(k) Non-Global Restricted Security to Global Security. If the holder of
a Restricted Security (other than a Global Security) wishes at any time to
transfer all or any portion of such Security to a Person who wishes to take
delivery thereof in the form of a beneficial interest in the Restricted Global
Security, the Temporary Regulation S Global Security or the Permanent Regulation
S Global Security, such transfer may be effected, subject to the Applicable
Procedures, only in accordance with this paragraph (k) and paragraph (n) below.
Upon receipt by the Trustee, as Registrar, of (A) such Restricted Security and
written instructions given by or on behalf of such Holder as provided in this
Section 2.06 directing the Trustee to credit or cause to
<PAGE> 31
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be credited to a specified Agent Member's account a beneficial interest in the
Restricted Global Security, the Temporary Regulation S Global Security or the
Permanent Regulation S Global Security, as the case may be, in a specified
principal amount equal to the principal amount of the Restricted Security (or
portion thereof) to be so transferred, and (B) an appropriately completed
certificate substantially in the form set forth in Exhibit K-1 hereto, if the
specified account is to be credited with a beneficial interest in the Restricted
Global Security, or Exhibit K-2 hereto, if the specified account is to be
credited with a beneficial interest in the Temporary Regulation S Global
Security or the Permanent Regulation S Global Security, signed by or on behalf
of such Holder, then the Trustee, as Registrar, shall, subject to paragraph (n)
below, cancel such Restricted Security (and issue a new Restricted Security in
respect of any untransferred portion thereof) as provided in this Section 2.06
and increase the principal amount of the Restricted Global Security, Temporary
Regulation S Global Security or Permanent Regulation S Global Security, as the
case may be, by the specified principal amount.
(l) Non-Global Permanent Regulation S Security to Restricted Global
Security or Permanent Regulation S Global Security. If the Holder of a
Non-Global Permanent Regulation S Security wishes at any time to transfer all or
any portion of such Security to a Person who wishes to take delivery thereof in
the form of a beneficial interest in the Restricted Global Security or the
Permanent Regulation S Global Security, as the case may be, such transfer may be
effected only in accordance with this paragraph (l) and subject to the
Applicable Procedures. Upon receipt by the Trustee, as Registrar, of (A) such
Non-Global Permanent Regulation S Security and instructions given by or on
behalf of such Holder as provided in this Section 2.06 directing the Trustee to
credit or cause to be credited to a specified Agent Member's account a
beneficial interest in the Restricted Global Security or the Permanent
Regulation S Global Security, as the case may be, in a principal amount equal to
the principal amount of the Non-Global Permanent Regulation S Security (or
portion thereof) to be so transferred, and (B)(i) with respect to a transfer
which is to be delivered in the form of a beneficial interest in the Restricted
Global Security, a certificate in substantially the form set forth in Exhibit
L-1, signed by or on behalf of such Holder, and (ii) with respect to a transfer
which is to be delivered in the form of a beneficial interest in the Permanent
Regulation S Global Security, a certificate in substantially the form set forth
in Exhibit L-2, signed by or on behalf of such Holder, then the Trustee, as
Registrar, shall, subject to paragraph (n) below, cancel such Non-Global
Permanent Regulation S Security (and issue a new Non-Global Permanent Regulation
S Security in respect of any untransferred portion thereof) as provided in this
Section 2.06 and increase the principal amount of the Restricted Global Security
or the Permanent Regulation S Global Security, as the case may be, by the
specified principal amount.
(m) Other Exchanges. Securities that are not Global Securities may be
exchanged (on transfer or otherwise) for Securities that are not Global
Securities or for beneficial interests in a Global Security (if any is then
outstanding) only in accordance with such procedures, which shall be
substantially consistent with the provisions of paragraphs (f) through (l) above
(including the certification requirements intended to insure that transfers of
beneficial interests in a Global Security comply with Rule 144A under the
Securities Act, Rule 144 under the Securities Act or Regulation S, as the case
may be) and any Applicable Procedures, as may be from time to time adopted by
the Company and the Trustee. The Trustee shall be entitled to request and
receive, from time to time, instructions as to such procedures adopted or
approved by the Company.
(n) Interests in Temporary Regulation S Global Security to be Held
Through Euroclear or CEDEL. Until the expiration of the Restricted Period,
beneficial interests in any Temporary Regulation S Global Security may be held
only in or through accounts maintained at the Depository by Euroclear or CEDEL
(or by Agent Members acting for the account thereof).
(o) When Certificated Securities are presented to the Registrar or a
co-Registrar with a request to register the transfer of such Certificated
Securities or to exchange such Certificated Securities for an
<PAGE> 32
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equal principal amount of Certificated Securities of other authorized
denominations, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its requirements for such transaction are met;
provided, however, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Certificated Securities at the Registrar's or
co-Registrar's request. 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 or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchanges or transfers pursuant to Sections 2.02, 2.10, 3.06, 4.05,
4.14 or 10.05). The Registrar or co-Registrar shall not be required to register
the transfer of or exchange of any Security (i) during a period between (a) the
date the Trustee receives notice of a redemption from the Company and the date
the Securities to be redeemed are selected by the Trustee or (b) an Interest
Record Date and the next succeeding Interest Payment Date or (ii) selected for
redemption in whole or in part pursuant to Article Three hereof, except the
unredeemed portion of any Security being redeemed in part, or tendered pursuant
to an offer therefor.
(p) If a Series A Security is a Restricted Security and a Certificated
Security, then as provided in this Indenture and subject to the limitations
herein set forth, the Holder, provided it is a Qualified Institutional Buyer,
may exchange such Security for a Book-Entry Security by instructing the Trustee
(by completing the Transferee Certificate in the form of Exhibit D hereto) to
arrange for such Series A Note to be represented by a beneficial interest in a
Global Security in accordance with the customary procedures of the Depository.
(q) Upon any exchange provided for in Section 2.06(a), the Company
shall execute and the Trustee shall authenticate and deliver to the person
specified by the Depository a new Certificated Security registered in such names
and in such authorized denominations as the Depository, pursuant to the
instructions of the beneficial owner of the Securities requesting the exchange,
shall instruct the Trustee. Thereupon, the beneficial ownership of such Global
Security shown on the records maintained by the Depository or its nominee shall
be reduced by the amounts so exchanged and an appropriate endorsement shall be
made by or on behalf of the Trustee on the Global Security. Any such exchange
shall be effected through the Depository in accordance with the procedures of
the Depository therefor.
(r) Notwithstanding the foregoing, no Global Security shall be
registered for transfer or exchange, or authenticated and delivered in the name
of a person other than the Depository for such Global Security or its nominee
until (i) the Depository notifies the Company that it is unwilling or unable to
continue as Depository for such Global Security or if at any time the Depository
ceases to be a clearing agency registered under the Exchange Act, and a
successor depository is not appointed by the Company within 30 days, (ii) the
Company executes and delivers to the Trustee a Company Order that all such
Global Securities shall be exchangeable or (iii) there shall have occurred and
be continuing an Event of Default. Upon the occurrence in respect of any Global
Security representing the Series A Securities of any one or more of the
conditions specified in clause (i), (ii) or (iii) of the preceding sentence,
such Global Security may be registered for transfer or exchange for Series A
Notes registered in the names of, authenticated and delivered to, such persons
as the Trustee or the Depository, as the case may be, shall direct.
(s) Except as provided above, any Security authenticated and delivered
upon registration of transfer of, or in exchange for, or in lieu of, any Global
Security shall also be a Global Security and bear the legend specified in
Exhibit C.
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(t) Neither the Trustee, the Registrar or any Paying Agent shall have
any responsibility or liability for the accuracy of the books and records of, or
for any actions or omissions of, the Depository, Euroclear, CEDEL or any Agent
Member.
(u) Notwithstanding anything contained herein to the contrary, neither
the Trustee nor the Registrar shall be responsible for ascertaining whether any
transfer complies with the registration provisions of or exemptions from the
Securities Act, applicable state securities laws, ERISA, the Code or the
Investment Company Act; provided, however, that if a certificate is specifically
required by the express terms of this Section 2.06 to be delivered to a Trustee
by a purchaser or transferee of a Note, the Trustee shall be under a duty to
receive and examine the same to determine whether it conforms on its face to the
requirements of this Indenture and shall promptly notify the party delivering
the same if such certificate does not conform.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee 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 Company's and the Trustee's requirements for replacement of
Securities are met. Such Holder must provide an indemnity bond or other
indemnity, sufficient in the judgment of both the Company and the Trustee, to
protect the Company, the Trustee and any Agent from any loss which any of them
may suffer if a Security is replaced and evidence to their satisfaction of the
apparent loss, destruction or theft of such Security. The Company may charge
such Holder for its reasonable out-of-pocket expenses in replacing a Security,
including reasonable fees and expenses of counsel.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those canceled by it, those delivered
to it for cancellation and those described in this Section 2.08 as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If on a Redemption Date or the Final Maturity Date the Paying Agent
holds money sufficient to pay all of the principal and interest due on the
Securities payable on that date, then on and after that date such Securities
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Securities.
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, the Guarantor or any of their respective Affiliates shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities that a Trust Officer of the Trustee actually knows are so owned shall
be disregarded.
<PAGE> 34
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The Trustee may require an Officers' Certificate listing Securities
owned by the Company, the Guarantor or, to the knowledge of the Officers signing
such Officers' Certificate, their respective Affiliates.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate upon receipt of a Company Order pursuant to Section 2.02 definitive
Securities in exchange for temporary Securities.
SECTION 2.11. 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 transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel all Securities surrendered for transfer, exchange,
payment or cancellation and deliver to the Company such canceled Securities for
disposal. Subject to Section 2.07, the Company may not issue new Securities to
replace Securities that it has paid or delivered to the Trustee for
cancellation. If the Company or the Guarantor shall acquire any of the
Securities, such acquisition shall not operate as a redemption or satisfaction
of the Indebtedness represented by such Securities unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of principal of or interest on the
Securities, it shall pay interest on overdue principal and on overdue
installments of interest (without regard to any applicable grace periods) from
time to time on demand at the rate per annum borne by the Securities, to the
extent lawful.
SECTION 2.13. CUSIP Number.
The Company in issuing the Securities will use a "CUSIP" number, and
the Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Securities and that reliance may be placed only
on the other identification numbers printed on the Securities. The Company shall
promptly notify the Trustee of any changes in CUSIP numbers.
SECTION 2.14. Deposit of Moneys.
Prior to 10:00 a.m. New York City time on each Interest Payment Date,
Redemption Date and the Final Maturity Date, the Company shall deposit with the
Paying Agent in immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date, Redemption Date or Final
Maturity Date, as the case may be, in a timely manner which permits the Paying
Agent to remit payment to the Holders on such Interest Payment Date, Redemption
Date or Final Maturity Date, as the case may be.
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ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company wants to redeem Securities pursuant to paragraph 6 or 7
of the Securities at the applicable redemption price set forth therein, it shall
notify the Trustee in writing of the Redemption Date and the principal amount of
Securities to be redeemed. The Company shall give such notice to the Trustee at
least 45 days before the Redemption Date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
stating that such redemption will comply with the conditions contained herein.
SECTION 3.02. Selection of Securities to Be Redeemed.
If less than all of the Securities are to be redeemed pursuant to
paragraph 6 of the Securities, the Trustee shall select the Securities to be
redeemed in compliance with the requirements of the national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by any other method as the Trustee shall deem fair and appropriate. Selection
of the Securities to be redeemed pursuant to paragraph 7 of the Securities shall
be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis
as is practicable (subject to the procedures of the Depository) based on the
aggregate principal amount of Securities held by each Holder. The Trustee shall
make the selection from the Securities then outstanding, subject to redemption
and not previously called for redemption.
The Trustee may select for redemption pursuant to paragraph 6 or 7 of
the Securities portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
SECTION 3.03. Notice of Redemption.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first-class mail to each Holder
at such Holder's registered address whose Securities are to be redeemed.
Each notice of redemption shall identify the Securities to be redeemed
(including, but subject to the provisions of Section 2.13, the CUSIP number
thereon) and shall state:
(i) the Redemption Date;
(ii) the redemption price;
(iii) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
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(iv) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(v) that, unless the Company defaults in making the redemption payment,
interest on Securities called for redemption ceases to accrue on and after
the Redemption Date and the only remaining right of the Holders is to
receive payment of the redemption price upon surrender to the Paying Agent;
and
(vi) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof will
be issued.
At the Company's request, the Trustee shall give the notice of
redemption on behalf of the Company, in the Company's name and at the Company's
expense.
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date and at the redemption price
specified in such notice. Upon surrender to the Paying Agent, such Securities
shall be paid at the redemption price, plus accrued interest thereon, if any, to
the Redemption Date, but interest installments whose maturity is on or prior to
such Redemption Date shall be payable to the Holders of record at the close of
business on the relevant Interest Record Date.
SECTION 3.05. Deposit of Redemption Price.
At least one Business Day before the Redemption Date, the Company shall
deposit with the Paying Agent (or if the Company is its own Paying Agent, shall,
on or before the Redemption Date, segregate and hold in trust) money sufficient
to pay the redemption price of and accrued interest and Liquidated Damages, if
any, on all Securities to be redeemed on that date other than Securities or
portions thereof called for redemption on that date which have been delivered by
the Company to the Trustee for cancellation.
If any Security surrendered for redemption in the manner provided in
the Securities shall not be so paid on the Redemption Date due to the failure of
the Company to deposit with the Paying Agent money sufficient to pay the
redemption price thereof, the principal and accrued and unpaid interest, if any,
thereon shall, until paid or duly provided for, bear interest as provided in
Sections 2.12 and 4.01 with respect to any payment default.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal amount to
the unredeemed portion of the Security surrendered.
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ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and premium, if any, and
interest and Liquidated Damages, if any, on the Securities in the manner
provided in the Securities and the Registration Rights Agreement. An installment
of principal, premium, interest or Liquidated Damages shall be considered paid
on the date due if the Trustee or Paying Agent (other than the Company, a
Subsidiary or an Affiliate of the Company) holds on that date money designated
for and sufficient to pay the installment in full and is not prohibited from
paying such money to the Holders of the Securities pursuant to the terms of this
Indenture. The Trustee shall not be responsible for knowing the amount of
Liquidated Damages due unless the Trustee shall have been notified by the
Company thereof.
The Company shall pay interest on overdue principal at the same rate
per annum borne by the Securities. The Company shall pay interest on overdue
installments of interest at the same rate per annum borne by the Securities, to
the extent lawful, as provided in Section 2.12.
SECTION 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency (which may be an office of the Trustee, Registrar or
co-registrar) where Securities may be surrendered for payment or for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be presented
(the "New York Presenting Agent"). The Company may also from time to time
designate one or more other offices or agencies where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in the Borough of Manhattan, The City of New York for such
purposes. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 13.02 hereof. The Company hereby initially
designates State Street Bank and Trust Company, N.A., at its address at 61
Broadway, 15th Floor, New York, New York 10006, as its office or agency in The
Borough of Manhattan, The City of New York, for such purposes.
SECTION 4.03. Transactions with Affiliates.
(a) The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, make any loan, advance, guarantee or
capital contribution to, or for the benefit of, or sell, lease, transfer or
dispose of any properties or assets to, or for the benefit of, or purchase or
lease any property or assets from, or enter into or amend any contract,
agreement or understanding with, or for the benefit of, an Affiliate (each such
transaction or series of related transactions that are part of a common plan are
referred to as an "Affiliate Transaction"), except in good faith and on terms
that are no less favorable to the Company or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable transaction on an arm's
length basis from an unrelated person.
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(b) The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any Affiliate Transaction involving aggregate payments
or other transfers by the Company and its Restricted Subsidiaries in excess of
$3,500,000 (including cash and non-cash payments and benefits valued at their
fair market value by the Board of Directors in good faith) unless the Company
delivers to the Trustee:
(i) a resolution of the Board of Directors stating that the Board of
Directors (including a majority of the disinterested directors, if any) has,
in good faith, determined that such Affiliate Transaction complies with the
provisions of the Indenture, and
(ii) (A) with respect to any Affiliate Transaction involving the
incurrence of Indebtedness, a written opinion of a nationally recognized
investment banking or accounting firm experienced in the review of similar
types of transactions, (B) with respect to any Affiliate Transaction
involving the transfer of real property, fixed assets or equipment, either
directly or by a transfer of 50% or more of the Capital Stock of a
Restricted Subsidiary which holds any such real property, fixed assets or
equipment, a written appraisal from a nationally recognized appraiser,
experienced in the review of similar types of transactions or (C) with
respect to any Affiliate Transaction not otherwise described in (A) and (B)
above, a written certification from a nationally recognized professional or
firm experienced in evaluating similar types of transactions, in each case,
stating that the terms of such transaction are fair to the Company or such
Restricted Subsidiary, as the case may be, from a financial point of view.
(c) Notwithstanding paragraphs (a) and (b) of this Section 4.03, this
Section 4.03 shall not apply to: (i) transactions between the Company and any
wholly owned Restricted Subsidiary or between wholly owned Restricted
Subsidiaries; (ii) transactions permitted by Section 4.06; (iii) compensation
paid to officers, employees or consultants of the Company or any subsidiary as
determined in good faith by the Board of Directors or executives; or (iv)
transactions between the Company and the Guarantor or between the Company and a
Subsidiary of the Guarantor in the ordinary course of business on terms
substantially consistent with past practice.
SECTION 4.04. Limitation on Incurrence of Indebtedness.
(a) The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, issue any Indebtedness (other than the
Indebtedness represented by the Securities) unless the Company's Cash Flow
Coverage Ratio for its four full fiscal quarters next preceding the date such
additional Indebtedness is issued would have been at least 2.0 to 1 on or prior
to August 31, 1999 and at least 2.25 to 1 thereafter determined on a Pro Forma
Basis (including, for this purpose, any other Indebtedness incurred since the
end of the applicable four-quarter period) as if such additional Indebtedness
and any other Indebtedness issued since the end of such four-quarter period had
been issued at the beginning of such four-quarter period.
(b) The foregoing limitations will not apply to the issuance of:
(i) Indebtedness of the Company and/or its Restricted Subsidiaries
under the Credit Agreement as measured on such date of issuance in an
aggregate principal amount outstanding on any such date of issuance not
exceeding the greater of (x) the sum of (A) 75% of the book value of the
accounts receivable of the Company and its Restricted Subsidiaries on a
consolidated basis and (B) 60% of the book value of the inventory of the
Company and its Restricted Subsidiaries on a consolidated basis or (y)
$50,000,000;
<PAGE> 39
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(ii) Indebtedness of the Company and its Restricted Subsidiaries in
connection with capital leases, purchase money obligations, capital
expenditures or similar financing transactions relating to their properties,
assets and rights up to $10,000,000 in aggregate principal amount;
(iii) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount of up to $10,000,000; and
(iv) Other Permitted Indebtedness.
(c) Notwithstanding paragraphs (a) and (b) of this Section 4.04, no
Restricted Subsidiary shall under any circumstances issue a guarantee of any
Indebtedness of the Company except for guarantees issued by Restricted
Subsidiaries pursuant to Section 4.20; provided, however, that the foregoing
will not limit or restrict guarantees issued by Restricted Subsidiaries in
respect of Indebtedness of other Restricted Subsidiaries.
SECTION 4.05. Limitation on Certain Asset Sales.
(a) The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, consummate an Asset Sale (including the
sale of any of the Capital Stock of any Restricted Subsidiary) providing for Net
Proceeds in excess of $5,000,000 unless the Net Proceeds from such Asset Sale
are applied (in any manner otherwise permitted by this Indenture) to one or more
of the following purposes in such combination as the Company shall elect: (i) an
investment in another asset or business in the same line of business as, or a
line of business similar to that of, the line of business of the Company and its
Restricted Subsidiaries at the time of the Asset Sale; provided that such
investment occurs on or prior to the 365th day following the date of such Asset
Sale (the "Asset Sale Disposition Date"), (ii) to reimburse the Company or its
Subsidiaries for expenditures made, and costs incurred, to repair, rebuild,
replace or restore property lost, damaged or taken to the extent that the Net
Proceeds consist of insurance proceeds received on account of such loss, damage
or taking, (iii) the purchase, redemption or other prepayment or repayment of
outstanding Senior Indebtedness or Indebtedness of the Company's Restricted
Subsidiaries on or prior to the 365th day following the Asset Sale Disposition
Date or (iv) an Asset Sale Offer expiring on or prior to the Asset Sale Purchase
Date. The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, consummate an Asset Sale unless at least
70% of the consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash, cash equivalents or marketable securities;
provided that, solely for purposes of calculating such 70% of the consideration,
the amount of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet or in the notes thereto, excluding
contingent liabilities and trade payables) of the Company or any Restricted
Subsidiary (other than liabilities that are by their terms subordinated to the
Securities) that are assumed by the transferee of any such assets and (y) any
notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are promptly, but in no event more than 30
days after receipt, converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received), shall be deemed to be cash and cash
equivalents for purposes of this provision. Any Net Proceeds from any Asset Sale
that are not applied or invested as provided in the first sentence of this
paragraph shall constitute "Excess Proceeds."
(b) When the aggregate amount of Excess Proceeds exceeds $6,500,000
(such date being an "Asset Sale Trigger Date"), the Company shall make an Offer
(an "Asset Sale Offer") to all holders of Securities to purchase the maximum
principal amount of the Securities then outstanding that may be purchased out of
Excess Proceeds, at an offer price in cash in an amount equal to 100% of
principal amount thereof plus any accrued and unpaid interest to the date (the
"Asset Sale Purchase Date") the Securities tendered are purchased
<PAGE> 40
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and paid for in accordance with this Section 4.05. Within 30 days following any
Asset Sale Trigger Date, the Company shall mail a notice to each holder of
Securities at such holder's registered address stating:
(i) that an Asset Sale Offer is being made pursuant to an Asset Sale
Trigger Date, the length of time the Asset Sale Offer shall remain open and
the maximum principal amount of Securities that will be accepted for payment
pursuant to such Asset Sale Offer;
(ii) the purchase price, the amount of accrued and unpaid interest as
of the Asset Sale Purchase Date and the Asset Sale Purchase Date (which
shall be no earlier than 30 days and no later than 60 days from the date
such notice is mailed);
(iii) that any Security or portion thereof not tendered or accepted for
payment will continue to accrue interest;
(iv) that any Security accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest on and after the Asset Sale Purchase
Date;
(v) that Holders electing to have a Security purchased pursuant to the
Asset Sale Offer will be required to surrender the Security, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Security
completed, to a Paying Agent at the address specified in the notice at least
three Business Days before the Asset Sale Purchase Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day before the Asset Sale Purchase Date, a facsimile transmission
or letter setting forth the name of the Holder, the principal amount of the
Security the Holder delivered for purchase and a statement that such Holder
is withdrawing his election to have the Security purchased;
(vii) that, if the aggregate principal amount of Securities surrendered
by Holders exceeds the Excess Proceeds, the Trustee shall select the
Securities to be purchased on a pro rata basis, by lot or by any other
method that the Trustee considers fair and appropriate and, if the
Securities are listed on any securities exchange, by a method that complies
with the requirements of such exchange; provided that, if less than all of a
holder's Securities are to be redeemed or accepted for payment, only
principal amounts of $1,000 or integral multiples thereof may be selected
for redemption or accepted for payment;
(viii) that Holders whose Securities were purchased only in part will
be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; and
(ix) a brief description of the circumstances and relevant facts
regarding such Asset Sale.
On the Asset Sale Purchase Date, the Company will, to the extent
required by this Indenture and the Asset Sale Offer, (1) accept for payment the
maximum principal amount of Securities or portions thereof tendered pursuant to
the Asset Sale Offer that can be purchased out of Excess Proceeds, (2) deposit
with the Paying Agent the aggregate purchase price of all Securities or portions
thereof accepted for payment and any accrued and unpaid interest on such
Securities as of the Asset Sale Purchase Date, and (3) deliver or cause to be
delivered to the Trustee all Securities tendered pursuant to the Asset Sale
Offer. The Paying
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Agent shall promptly mail to each holder of Securities or portions thereof
accepted for payment an amount equal to the purchase price for such Securities
plus any accrued and unpaid interest thereon, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book-entry) to such holder
of Securities accepted for payment in part a new Security equal in principal
amount to any unpurchased portion of the Securities and any Security not
accepted for payment in whole or in part shall be promptly returned to the
holder thereof. The Company will publicly announce the results of the Asset Sale
Offer on or as soon as practicable after the Asset Sale Purchase Date.
The Company will comply with any tender offer rules under the Exchange
Act which may then be applicable, including Rule 14e-1, in connection with an
Asset Sale offer. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Indenture, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Indenture by virtue thereof.
Notwithstanding the foregoing, to the extent that any or all of the Net
Proceeds of an Asset Sale are prohibited or delayed by applicable local law from
being repatriated to the United States, the portion of such Net Proceeds so
affected will not be required to be applied as described in this Section 4.05,
but may be retained for so long, but only for so long, as the applicable local
law prohibits repatriation to the United States.
To the extent that any Excess Proceeds remain after completion of an
Asset Sale Offer, the Company may use such remaining amount for general
corporate purposes. Upon completion of an Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
SECTION 4.06. Limitation on Restricted Payments.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, (i) declare or pay any dividend or make
any distribution on account of the Company's or such Restricted Subsidiary's
Capital Stock or other Equity Interests (other than dividends or distributions
payable in Capital Stock or other Equity Interests (other than Disqualified
Stock) of the Company and dividends or distributions payable by a Restricted
Subsidiary to a Restricted Subsidiary or to the Company); (ii) purchase, redeem
or otherwise acquire or retire for value any Capital Stock or other Equity
Interests of the Company or any of its Restricted Subsidiaries; (iii) make any
principal payment on, purchase, defease, redeem, prepay, decrease or otherwise
acquire or retire for value, prior to any scheduled final maturity, scheduled
repayment or scheduled sinking fund payment, any Indebtedness of the Company
that is subordinate or junior in right of payment to the Notes; or (iv) make any
Restricted Investment (all such dividends, distributions, purchases,
redemptions, acquisitions, retirements, prepayments and Restricted Investments
being collectively referred to as "Restricted Payments"), if, at the time of
such Restricted Payment:
(a) a Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof; or
(b) immediately after such Restricted Payment and after giving pro
forma effect thereto, the Company shall not be able to issue $1.00 of
additional Indebtedness pursuant to paragraph (a) of Section 4.04; or
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after the date of original issuance of the
Securities, without duplication, exceeds the sum of
<PAGE> 42
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(1) 50% of the aggregate Consolidated Net Income (including, for this
purpose, gains or losses from Asset Sales) of the Company (or, in case such
aggregate is a loss, 100% of such loss) for the period (taken as one
accounting period) from the beginning of the fiscal quarter commencing March
1, 1997 and ended as of the Company's most recently ended fiscal quarter at
the time of such Restricted Payment; plus (2) 100% of the aggregate net cash
proceeds and the fair market value of any property or securities (as
determined by the Board of Directors in good faith) received by the Company
from the issue or sale of Capital Stock or other Equity Interests of the
Company subsequent to the date of original issuance of the Securities (other
than (x) Capital Stock or other Equity Interests issued or sold to a
Restricted Subsidiary and (y) the issuance or sale of Disqualified Stock);
plus (3) the amount by which the principal amount of and any accrued
interest on either (A) Indebtedness of the Company or (B) any Indebtedness
of any Restricted Subsidiary is reduced on the Company's consolidated
balance sheet upon the conversion or exchange other than by a Restricted
Subsidiary subsequent to the date of original issuance of the Securities of
any Indebtedness of the Company or any Restricted Subsidiary (not held by
the Company or any Restricted Subsidiary) for Capital Stock or other Equity
Interests (other than Disqualified Stock) of the Company (less the amount of
any cash, or the fair market value of any other property or securities (as
determined by the Board of Directors in good faith), distributed by the
Company or any Restricted Subsidiary (to Persons other than the Company or
any other Restricted Subsidiary) upon such conversion or exchange); plus (4)
if any Non-Restricted Subsidiary is redesignated as a Restricted Subsidiary,
the value of the Restricted Payment that would result if such Subsidiary
were redesignated as a Non-Restricted Subsidiary at such time, as determined
in accordance with Section 4.17(b); provided, however, that for purposes of
this clause (4), the value of any redesignated Non-Restricted Subsidiary
shall be reduced by the amount that any such redesignation replenishes or
increases the amount of Restricted Investments permitted to be made pursuant
to paragraph (ii) of the next sentence.
Notwithstanding the foregoing, paragraphs (b) and (c) shall not
prohibit as Restricted Payments:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration, such payment would
comply with all covenants of this Indenture (including, but not limited to,
this Section 4.06); provided that payments made pursuant to this paragraph
shall count as a Restricted Payment for purposes of the calculation in
paragraph (c) of this Section 4.06;
(ii) the payment by the Company of a dividend to the Guarantor on the
date of issuance of the Securities from the proceeds received from the
issuance of the Securities not to exceed $72 million in cash; provided that
payments made pursuant to this paragraph (ii) shall not count as a
Restricted Payment for purposes of the calculation in paragraph (c) of this
Section 4.06;
(iii) any payment by the Company of a dividend to the Guarantor on the
date of issuance of the Securities or prior to the Issue Date in an amount
equal to the intercompany receivable on such date from the Guarantor;
provided that payments made pursuant to this paragraph (iii) shall not count
as a Restricted Payment for purposes of the calculation in paragraph (c) of
this Section 4.06;
(iv) the redemption, repurchase, retirement or other acquisition of any
Capital Stock or other Equity Interests of the Company or any Restricted
Subsidiary in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Company) of other Capital
Stock or other Equity Interests of the Company (other than any Disqualified
Stock) or the re-
<PAGE> 43
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demption, repurchase, retirement or other acquisition of any Capital
Stock or other Equity Interests of any Restricted Subsidiary in exchange
for, or out of the proceeds of, the substantially concurrent sale (other
than to the Company or a Subsidiary of the Company) of other Capital Stock
or other Equity Interests of such Restricted Subsidiary; provided that, in
each case, any net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition, and any Net Income resulting
therefrom, shall be excluded from paragraph (c) of this Section 4.06;
(v) Restricted Investments made or received in connection with the
sale, transfer or disposition of any business, properties or assets of the
Company or any Restricted Subsidiary; provided that, if such sale, transfer
or disposition constitutes an Asset Sale, the Company complies with the
provisions of the Section 4.05, and such Restricted Investments shall not
count as a Restricted Payment for purposes of the calculation in paragraph
(c) of this Section 4.06;
(vi) the payment of a dividend to the Guarantor in order to allow the
Guarantor to pay its regular quarterly dividend in respect of the
Guarantor's Convertible Preferred Stock, Common Stock, Class A Stock and
Class B Stock; provided that payments made pursuant to this paragraph (vi)
shall count as a Restricted Payment for purposes of the calculation in
paragraph (c) of this Section 4.06;
(vii) cash dividends or loans from the Company to the Guarantor
pursuant to the Services Agreement but in no event exceeding 4% of the
revenues of the Company and its Restricted Subsidiaries for the immediately
preceding four fiscal quarters; provided, that payments made pursuant to
this paragraph (vii) shall not count as a Restricted Payment for purposes of
the calculation paragraph (c) of this Section 4.06;
(viii) payments to the Guarantor in an amount equal to the amount of
income tax that the Company would have paid had it filed consolidated tax
returns on a separate company basis in any given tax year; provided that
payments made pursuant to this paragraph (viii) shall not count as a
Restricted Payment for purposes of the calculation in paragraph (c) of this
Section 4.06; and
(ix) $3,000,000; provided that payments made pursuant to this paragraph
(ix) shall count as a Restricted Payment for purposes of the calculation in
paragraph (c) of this Section 4.06.
SECTION 4.07. Corporate Existence.
Subject to Article Five, the Company and the Guarantor shall do or
shall cause to be done all things necessary to preserve and keep in full force
and effect their respective corporate existence and the corporate, partnership
or other existence of each Restricted Subsidiary in accordance with the
respective organizational documents of each of them (as the same may be amended
from time to time) and the rights (charter and statutory) and material
franchises of the Company, the Guarantor and the Restricted Subsidiaries;
provided, however, that the Company and the Guarantor shall not be required to
preserve any such right or franchise, or the corporate existence of any
Restricted Subsidiary, if the Board of Directors or the board of directors of
the Guarantor shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company, the Guarantor and the
Restricted Subsidiaries, taken as a whole, and that the loss thereof is not, and
will not be, adverse in any material respect to the Holders.
<PAGE> 44
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SECTION 4.08. Payment of Taxes and Other Claims.
The Company and the Guarantor shall pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, (1) all material
taxes, assessments and governmental charges levied or imposed upon the Company,
the Guarantor or any Restricted Subsidiary or upon the income, profits or
property of the Company, the Guarantor or any Restricted Subsidiary and (2) all
lawful claims for labor, materials and supplies which, in each case, if unpaid,
might by law become a material liability, or Lien upon the property, of the
Company, the Guarantor or any Restricted Subsidiary; provided, however, that
neither the Company nor the Guarantor shall be required to pay or discharge or
cause to be paid or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which appropriate provision has been made.
SECTION 4.09. Notice of Defaults.
(a) In the event that any Indebtedness of the Company, the Guarantor or
any of their Subsidiaries is declared due and payable before its maturity
because of the occurrence of any default (or any event which, with notice or
lapse of time, or both, would constitute such a default) under such
Indebtedness, the Company or the Guarantor shall promptly give written notice to
the Trustee of such declaration, the status of such default or event and what
action the Company or the Guarantor is taking or proposes to take with respect
thereto.
(b) Upon becoming aware of any Default or Event of Default, the Company
or the Guarantor shall promptly deliver an Officers' Certificate to the Trustee
specifying the Default or Event of Default.
SECTION 4.10. Maintenance of Properties and Insurance.
(a) The Company and the Guarantor shall cause all material properties
owned by or leased to either of them or any Restricted Subsidiary and used or
useful in the conduct of their business or the business of any Restricted
Subsidiary to be maintained and kept in normal condition, repair and working
order and supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company or the Guarantor may be necessary, so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in this
Section 4.10 shall prevent the Company, the Guarantor or any Restricted
Subsidiary from discontinuing the use, operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Board of Directors or of the board of directors of the
Guarantor or Restricted Subsidiary concerned, or of an officer (or other agent
employed by the Company, the Guarantor or any Restricted Subsidiary) of the
Company, the Guarantor or such Restricted Subsidiary having managerial
responsibility for any such property, desirable in the conduct of the business
of the Company, the Guarantor or any Restricted Subsidiary, and if such
discontinuance or disposal is not adverse in any material respect to the
Holders.
(b) The Company and the Guarantor shall maintain, and shall cause the
Restricted Subsidiaries to maintain, insurance with responsible carriers against
such risks and in such amounts, and with such deductibles, retentions,
self-insured amounts and co-insurance provisions, as are customarily carried by
similar businesses of similar size, including property and casualty loss, and
workers' compensation insurance.
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SECTION 4.11. Compliance Certificate.
The Company shall deliver to the Trustee within 90 days after the close
of each fiscal year a certificate signed by the principal executive officer,
principal financial officer or principal accounting officer stating that a
review of the activities of the Company has been made under the supervision of
the signing officers with a view to determining whether a Default or Event of
Default has occurred and whether or not the signers know of any Default or Event
of Default by the Company that occurred during such fiscal year. If they do know
of such a Default or Event of Default, the certificate shall describe all such
Defaults or Events of Default, their status and the action the Company is taking
or proposes to take with respect thereto.
SECTION 4.12. Provision of Financial Information.
For so long as the Securities are outstanding, whether or not the
Guarantor or any successor thereto is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Guarantor shall submit for filing
with the Commission the annual reports, quarterly reports and other documents
relating to the Guarantor and its Subsidiaries that the Guarantor would have
been required to file with the Commission pursuant to Section 13 or 15(d) if the
Guarantor were subject to such reporting requirements. The Guarantor will also
provide to all holders of Securities and file with the Trustee copies of such
annual reports, quarterly reports and other documents required to be furnished
to stockholders generally under the Exchange Act.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of the Trustee of any information contained
therein or determinable from information contained therein, including the
Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 4.13. Waiver of Stay, Extension or Usury Laws.
The Company and the Guarantor covenants (to the extent that they may
lawfully do so) that they shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law, which would prohibit or forgive the
Company or such Guarantor from paying all or any portion of the principal of
and/or interest, if any, on the Securities as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
performance of this Indenture; and (to the extent that they may lawfully do so)
each of the Company and the Guarantor hereby expressly waives all benefit or
advantage of any such law, and covenants that it 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.
SECTION 4.14. Change of Control.
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Trigger Date"), the Company shall notify
the Holders of the Securities of such occurrence in the manner prescribed by
this Indenture and shall, within 30 days after the Change of Control Trigger
Date, make an offer (the "Change of Control Offer") to purchase all Securities
then outstanding at a purchase price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date (the "Change of Control Purchase Date") the
Securities tendered are purchased and paid for in accordance with this Section
4.14. The Company shall furnish to the Trustee, at least 14 days before notice
of a Change of Control Offer is mailed to all holders of Securities, notice that
the
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Change of Control Offer is being made. Within 30 days following any Change of
Control Trigger Date, the Company shall mail a notice to each Holder of
Securities at such Holder's registered address stating:
(i) that a Change of Control Offer is being made pursuant to a Change
of Control Trigger Date, the length of time the Change of Control Offer
shall remain open and that all Securities tendered for payment will be
accepted for payment, and otherwise subject to the terms and conditions set
forth therein;
(ii) the purchase price, the amount of accrued and unpaid interest as
of the Change of Control Purchase Date, and the Change of Control Purchase
Date (which shall be no earlier than 30 days and no later than 60 days from
the date such notice is mailed);
(iii) that any Security not tendered will continue to accrue interest;
(iv) that any Security accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest on and after the Change of
Control Purchase Date;
(v) that Holders accepting the Change of Control Offer will be required
to surrender the Securities to the Paying Agent specified in the notice
prior to the close of business on the third Business Day preceding the
Change of Control Purchase Date;
(vi) that Holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Purchase Date, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Securities delivered for purchase and a statement that such
Holder is withdrawing his election to have such Securities purchased;
(vii) that Holders whose Securities are being purchased only in part
will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered;
(viii) any other procedures that a Holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
(ix) the name and address of the Paying Agent.
On the Change of Control Purchase Date, the Company will, to the extent
required by this Indenture and the Change of Control Offer, (1) accept for
payment all Securities or portions thereof (subject to the requirement that any
portion of a Security tendered must be tendered in any integral multiple $1,000
principal amount) tendered pursuant to the Change of Control Offer; (2) deposit
with the Paying Agent the aggregate purchase price of all Securities or portions
thereof accepted for payment and any accrued and unpaid interest and Liquidated
Damages, if any, on such Securities as of the Change of Control Purchase Date,
and (3) deliver or cause to be delivered to the Trustee all Securities tendered
pursuant to the Change of Control Offer. The Paying Agent shall promptly mail to
each holder of Securities or portions thereof accepted for payment an amount
equal to the purchase price for such Securities plus any accrued and unpaid
interest and Liquidated Damages, if any, thereon, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book-entry) to such holder
of Securities accepted for payment in part a new Security equal in principal
amount to any unpurchased portion of the Securities and any Security not
accepted for payment in
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whole or in part shall be promptly returned to the holder thereof. The Company
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Purchase Date.
The Company will comply with any tender offer rules under the Exchange
Act which may then be applicable, including Rule 14e-1, in connection with a
Change of Control Offer. To the extent that the provisions of any securities
laws or regulations conflict with provisions of this Indenture, the Company
shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under this Indenture by virtue
thereof.
SECTION 4.15. Limitation on Senior Subordinated Indebtedness.
The Company shall not, directly or indirectly, incur any Indebtedness
that by its terms would expressly rank senior in right of payment to the
Securities and expressly rank subordinate in right of payment to any Senior
Indebtedness.
SECTION 4.16. Limitations on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective, any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on
its Capital Stock or any other interest or participation in, or measured by, its
profits, owned by the Company or any Restricted Subsidiary, or pay any
Indebtedness owed to, the Company or any Restricted Subsidiary, (b) make loans
or advances to the Company, or (c) transfer any of its properties or assets to
the Company, except for such encumbrances or restrictions existing under or by
reason of:
(i) applicable law;
(ii) Indebtedness permitted (A) under paragraph (a) of Section 4.04,
(B) under clauses (i) or (iii) of paragraph (b) of Section 4.04 or clauses
(i), (v), (vi) or (viii) of the definition of Other Permitted Indebtedness,
or (C) by agreements and transactions permitted under Section 4.06;
(iii) customary provisions restricting subletting or assignment of any
lease or license of the Company or any Restricted Subsidiary;
(iv) any instrument governing Indebtedness or any other encumbrance or
restriction of a Person acquired by the Company or any Restricted Subsidiary
at the time of such acquisition, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired;
(v) the Credit Agreement;
(vi) any Refinancing Indebtedness permitted under Section 4.04 or
clauses (i), (v) or (viii) of the definition of Other Permitted
Indebtedness; provided that the encumbrances and restrictions created in
connection with such Refinancing Indebtedness are no more restrictive in any
material respect with regard to the interests of the Holders of Securities
than the encumbrances and restrictions in the refinanced Indebtedness; or
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(vii) the terms of purchase money obligations, but only to the extent
such purchase money obligations restrict or prohibit the transfer of the
property so acquired.
Nothing contained in this Section 4.16 shall prevent the Company from
entering into any agreement or instrument providing for the incurrence of
Permitted Liens or restricting the sale or other disposition of property or
assets of the Company or any of its Restricted Subsidiaries that are subject to
Permitted Liens.
SECTION 4.17. Designation of Restricted and Non-Restricted Subsidiaries.
(a) As of the date of this Indenture, all Subsidiaries of the Company
shall be Restricted Subsidiaries. Subject to the exceptions described below,
from and after the Issue Date, the Company may designate any existing or newly
formed or acquired Subsidiary as a Non-Restricted Subsidiary; provided that
either (i) the Subsidiary to be so designated has total assets of $1,000,000 or
less or (ii) immediately before and after giving effect to such designation: (I)
the Company could incur $1.00 of additional Indebtedness pursuant to paragraph
(a) of Section 4.04 determined on a Pro Forma Basis; (II) no Default or Event of
Default shall have occurred and be continuing; (III) all Investments made by the
Company or by a Restricted Subsidiary of the Company in such Restricted
Subsidiary which is being designated a Non-Restricted Subsidiary prior to or on
the date such Restricted Subsidiary is being designated a Non-Restricted
Subsidiary shall have been permitted pursuant to Section 4.06 as if all of such
Restricted Payments had been made on the day such Restricted Subsidiary is
designated a Non-Restricted Subsidiary (to the extent not previously included as
a Restricted Payment) in the amount of the greater of (A) the fair market value
(as determined by the Board of Directors in good faith) of the Equity Interests
of such Subsidiary held by the Company and its Restricted Subsidiaries on such
date or (B) the amount of the Investments determined in accordance with GAAP
made by the Company and any of its Restricted Subsidiaries in such Restricted
Subsidiary; and (IV) all transactions between the Subsidiary to be so designated
and its Affiliates remaining in effect are permitted pursuant to Section 4.03.
(b) The Company may redesignate any Non-Restricted Subsidiary as a
Restricted Subsidiary. The Company may not, and may not permit any Restricted
Subsidiary to, take any action or enter into any transaction or series of
transactions that would result in a Person becoming a Restricted Subsidiary
(whether through an acquisition, the redesignation of a Non-Restricted
Subsidiary or otherwise, but not including through the creation of a new
Restricted Subsidiary) unless, immediately before and after giving effect to
such action, transaction or series of transactions, (i) the Company could incur
at least $1.00 of additional Indebtedness pursuant to paragraph (a) of Section
4.04 on a Pro Forma Basis and (ii) no Default or Event of Default shall have
occurred and be continuing.
(c) The designation of a Subsidiary as a Restricted Subsidiary or the
removal of such designation shall be made by a resolution adopted by a majority
of the Board of Directors stating that the Board of Directors has made such
designation in accordance with this Indenture, and the Company shall deliver to
the Trustee such resolution together with an Officers' Certificate certifying
that the designation complies with this Indenture. Such designation will be
effective as of the date specified in the applicable resolution which may not be
before the date the applicable Officers' Certificate is delivered to the
Trustee.
SECTION 4.18. Limitation on Liens.
The Company shall not, and shall not cause or permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien (other than Permitted Liens) upon any property or asset now owned or
hereafter acquired by them, or any income or profits therefrom, or assign or
convey
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any right to receive income therefrom; provided, however, that in addition to
creating Permitted Liens on its properties or assets, the Company and any of its
Restricted Subsidiaries may create any Lien upon any of their properties or
assets (including, but not limited to, any Capital Stock of its Subsidiaries) if
the Notes are equally and ratably secured.
SECTION 4.19. Limitation on Sale and Leaseback Transactions.
The Company shall not, and shall not cause or permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company may enter into a sale and leaseback transaction if (i)
the Company could have incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
the Company's Cash Flow Coverage Ratio test set forth in paragraph (a) of
Section 4.04, (ii) the net cash proceeds of such sale and leaseback transaction
are at least equal to the fair market value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale and leaseback
transaction and (iii) the transfer of assets in such sale and leaseback
transaction is permitted by, and the proceeds of such transaction are applied in
compliance with, Section 4.05.
SECTION 4.20. Limitation on Guarantees of Company Indebtedness by Restricted
Subsidiaries.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to guarantee any Indebtedness of the Company other than the
Securities (the "Other Company Indebtedness") unless (A) such Restricted
Subsidiary contemporaneously executes and delivers a supplemental indenture to
this Indenture providing for a guarantee of payment of the Securities then
outstanding by such Restricted Subsidiary to the same extent as the guarantee of
payment (the "Other Company Indebtedness Guarantee") of the Other Company
Indebtedness (including waiver of subrogation, if any) and (B) if the Other
Company Indebtedness guaranteed by such Restricted Subsidiary is Senior
Indebtedness, the guarantee for the Securities shall be subordinated in right of
payment with the Other Company Indebtedness Guarantee; provided, however, that
the provisions of this Section 4.20 do not apply to guarantees by any Restricted
Subsidiary of the Company's Indebtedness under the Credit Agreement as in effect
on the Issue Date.
Each guarantee of the Securities created by a Restricted Subsidiary
pursuant to the provisions described in the foregoing paragraph shall be in form
and substance satisfactory to the Trustee and shall provide, among other things,
that it will be automatically and unconditionally released and discharged upon
(i) any sale, exchange or transfer permitted by this Indenture of (a) all of the
Company's Capital Stock in such Restricted Subsidiary or (b) the sale of all or
substantially all of the assets of the Restricted Subsidiary and upon the
application of the Net Proceeds from such sale in accordance with the
requirements of Section 4.05 or (ii) the release or discharge of the Other
Company Indebtedness Guarantee that resulted in the creation of such guarantee
of the Securities.
<PAGE> 50
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ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Consolidation and Sale of Assets.
(a) Each of the Company and the Guarantor shall not consolidate or
merge with or into, or sell, lease, convey or otherwise dispose of all or
substantially all of its assets to, any Person (any such consolidation, merger
or sale being a "Disposition") unless: (i) the successor corporation of such
Disposition or the corporation to which such Disposition shall have been made is
a corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia; (ii) the successor corporation of
such Disposition or the corporation to which such Disposition shall have been
made expressly assumes the Obligations of the Company or the Guarantor, as the
case may be, pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee, under this Indenture and the Securities; (iii)
immediately after such Disposition, no Default or Event of Default shall exist;
and (iv) the corporation formed by or surviving any such Disposition, or the
corporation to which such Disposition shall have been made, shall (I) have
Consolidated Net Worth (immediately after the Disposition but prior to giving
any pro forma effect to purchase accounting adjustments resulting from the
Disposition) equal to or greater than the Consolidated Net Worth of the Company
or the Guarantor, as the case may be, immediately preceding the Disposition, and
(II) be permitted immediately after the Disposition by the terms of the
Indenture to issue at least $1.00 of additional Indebtedness pursuant to
paragraph (a) of Section 4.04 determined on a Pro Forma Basis. The limitations
in this Indenture on the Company's ability to make a Disposition described in
this paragraph (a) do not restrict the Company's ability to sell less than all
or substantially all of its assets, such sales being governed by Section 4.05.
(b) Prior to the consummation of any proposed Disposition, the Company
shall deliver to the Trustee an Officers' Certificate to the foregoing effect
and an Opinion of Counsel stating that the proposed Disposition and such
supplemental indenture comply with this Indenture.
SECTION 5.02. Successor Corporation Substituted.
(a) In the event of any Disposition of the Company or the Guarantor in
accordance with Section 5.01, the successor corporation formed by such
consolidation or into which the Company or the Guarantor is merged or to which
such Disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company or the Guarantor under this
Indenture with the same effect as if such successor corporation had been named
as the Company or the Guarantor herein, and thereafter the predecessor
corporation shall be relieved of all Obligations and covenants under this
Indenture and the Securities.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
Each of the following shall be an "Event of Default" for purposes of
this Indenture:
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(i) a default for 30 days in payment of interest or Liquidated Damages,
if any, on the Securities;
(ii) a default in payment when due of principal or premium, if any,
with respect to the Securities;
(iii) failure by the Company to comply with the provisions of Section
4.04, 4.06, 4.14 or 5.01;
(iv) the failure of the Company to comply with any of its other
agreements or covenants in, or provisions of, this Indenture or the
Securities, which failure is not cured within thirty days after notice and
demand for cure sent to the Company by the Trustee or Holders of at least
25% of principal amount of the Securities then outstanding;
(v) a default by the Company, the Guarantor or any Restricted
Subsidiary under any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any Restricted Subsidiary (or the payment
of which is guaranteed by the Company or any Restricted Subsidiary), whether
such Indebtedness or guarantee now exists or shall be created hereafter, if
(I) either (A) such default results from the failure to pay principal of or
interest on any such Indebtedness (after giving effect to any extensions
thereof) or (B) as a result of such default the maturity of such
Indebtedness has been accelerated prior to its expressed maturity, and (II)
the principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness in default for failure to pay
principal or interest thereon, or, because of the acceleration of the
maturity thereof, aggregates in excess of $2,500,000;
(vi) a failure by the Company or any Restricted Subsidiary to pay final
judgments (not covered by insurance) aggregating in excess of $2,500,000
which judgments a court of competent jurisdiction does not rescind, annul or
stay within 45 days after their entry;
(vii) the Company, the Guarantor or any Significant Subsidiary pursuant
to or within the meaning of any Bankruptcy Law: (I) commences a voluntary
case, (II) consents to the entry of an order for relief against it in an
involuntary case, (III) consents to the appointment of a Custodian of it or
for all or substantially all of its property, (IV) makes a general
assignment for the benefit of its creditors, or (V) generally is not paying
its debts as they become due; and
(viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that: (I) is for relief against the Company, the
Guarantor or any Significant Subsidiary in an involuntary case, (II)
appoints a Custodian of the Company, the Guarantor or any Significant
Subsidiary or for all or substantially all of the property of the Company,
the Guarantor or any Significant Subsidiary, or (III) orders the liquidation
of the Company, the Guarantor or any Significant Subsidiary, and the order
or decree remains unstayed and in effect for 60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
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In the case of any Event of Default pursuant to paragraph (i) or (ii)
above occurring by reason of any willful action (or inactions) taken (or not
taken) by or on behalf of the Company with the intention of avoiding payment of
the premium that the Company would have to pay pursuant to a redemption of
Securities as described under Article Three, an equivalent premium shall also
become and be immediately, due and payable to the extent permitted by law.
SECTION 6.02. Acceleration.
If an Event of Default with respect to the Securities occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the outstanding Securities may declare the unpaid principal of and
accrued interest and Liquidated Damages, if any, to the date of acceleration on
all outstanding Securities to be due and payable immediately by notice in
writing to the Company (and to the Trustee if given by the Holders) specifying
the respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice") and, upon any such declaration, such principal amount and
accrued interest and Liquidated Damages, if any, notwithstanding anything
contained in this Indenture or the Securities to the contrary, shall become
immediately due and payable.
A Default or Event of Default under paragraph (vii) or (viii) will
result in the Securities automatically becoming due and payable without further
action or notice.
After a declaration of acceleration, but before a judgment or decree of
the money due in respect of the Securities has been obtained, the Holders of not
less than a majority in aggregate principal amount of the Securities then
outstanding by written notice to the Trustee may rescind an acceleration and its
consequences if all existing Events of Default (other than the nonpayment of
principal of and interest and Liquidated Damages, if any, on the Securities
which has become due solely by virtue of such acceleration) have been cured or
waived and if the rescission would not conflict with any judgment or decree. 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 by proceeding at law or in equity to collect the payment of
principal of or interest and Liquidated Damages, if any, 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
maturing 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 to the
extent permitted by law.
SECTION 6.04. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 10.02, prior to the declaration of
acceleration of the Securities, the Holders of not less than a majority in
aggregate principal amount of the outstanding Securities by written notice to
the Trustee may waive an existing Default or Event of Default and its
consequences, except a continuing Default in the payment of principal of or
premium, if any, or interest or Liquidated Damages, if any, on any Security or a
Default in respect of any term or provision of this Indenture that may not be
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amended or modified without the consent of each Holder affected as provided in
Section 10.02 (and except for any failure to pay any amount owing to the
Trustee, or waiver of any covenant or other provision for the personal
protection of the Trustee, without the Trustee's consent). The Company shall
deliver to the Trustee an Officers' Certificate stating that the requisite
percentage of Holders have consented to such waiver and attaching copies of such
consents. In case of any such waiver, the Company, the Trustee and the Holders
shall be restored to their former positions and rights hereunder and under the
Securities, respectively. This paragraph of this Section 6.04 shall be in lieu
of Section 316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA is
hereby expressly excluded from this Indenture and the Securities, as permitted
by the TIA.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred for every
purpose of this Indenture and the Securities, but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereon.
SECTION 6.05. Control by Majority.
Subject to Section 2.09, the Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it. However, the Trustee may refuse to follow
any direction that conflicts with law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of another Securityholder, or
that may involve the Trustee in personal liability; provided, however, that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction. In the event the Trustee takes any action or
follows any direction pursuant to this Indenture, the Trustee shall be entitled
to indemnification satisfactory to it in its sole discretion against any loss or
expense caused by taking such action or following such direction. This Section
6.05 shall be in lieu of Section 316(a)(1)(A) of the TIA, and such Section
316(a)(1)(A) of the TIA is hereby expressly excluded from this Indenture and the
Securities, as permitted by the TIA.
SECTION 6.06. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this
Indenture or the Securities unless:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of the
outstanding Securities make a written request to the Trustee to pursue a
remedy;
(iii) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability or
expense;
(iv) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(v) during such 60-day period the Holders of a majority in principal
amount of the outstanding Securities do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request.
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A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
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 or interest or Liquidated Damages, if
any, on a Security, on or after the respective due dates expressed in the
Security, 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
the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or premium, if any, or
interest or Liquidated Damages, if any, specified in Section 6.01(i) or (ii)
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company or the Guarantor or any other
obligor on the Securities for the whole amount of principal and premium, if any,
and accrued interest remaining unpaid, and Liquidated Damages, if any, together
with interest overdue on principal and to the extent that payment of such
interest is lawful, interest on overdue installments of interest, in each case
at the rate per annum borne by the Securities and such further amount as shall
be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
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
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Securityholders
allowed in any judicial proceedings relative to the Company or the Guarantor (or
any other obligor upon the Securities), any of their respective creditors or any
of their respective property and shall be entitled and empowered to collect and
receive any monies or other property payable or deliverable on any such claims
and to distribute the same, and any Custodian in any such judicial proceedings
is hereby authorized by each Securityholder to make such payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Securityholders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 7.07. Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Securityholder
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to this Article
Six, subject to the provisions of Articles Eight and Twelve, it shall pay out
the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to Holders for amounts due and unpaid on the Securities for
principal, premium, if any, or Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind,
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according to the amounts due and payable on the Securities for principal and
interest, respectively; and
Third: to the Company or, to the extent the Trustee collects any amount
from the Guarantor, to the Guarantor.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Securityholders pursuant to this
Section 6.10.
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 and expenses, 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 6.11 shall not apply to a suit by the Trustee, a suit by
a Holder or group of Holders of more than 10% in aggregate principal amount of
the outstanding Securities, or to any suit instituted by any Holder for the
enforcement or the payment of the principal of or interest or premium or
Liquidated Damages, if any, on any Securities on or after the respective due
dates expressed in the Security.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If a Default has occurred and is continuing, the Trustee shall
exercise such of 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 his own affairs.
(b) Except during the continuance of a Default:
(1) The Trustee shall not be liable except for the performance of such
duties as are specifically set forth herein; 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 conforming to
the requirements of this Indenture; however, in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall examine such
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
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(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(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) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive from such Holders an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. Rights of Trustee.
Subject to Section 7.01:
(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, which shall conform to
the provisions of Section 13.05. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.
(c) The Trustee may act through attorneys and agents of its selection
and shall not be responsible for the misconduct or negligence of any agent
or attorney (other than an agent who is an employee of the Trustee)
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 reasonably believes to be authorized or within
its rights or powers.
(e) The Trustee may consult with counsel and the advice or opinion of
such counsel as to matters of law shall be full and complete authorization
and protection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice or
opinion of such counsel.
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(f) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any request
or direction of the Guarantor mentioned herein shall be sufficiently
evidenced if signed by an officer of the Guarantor.
(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Securityholders pursuant to this Indenture, unless such
Securityholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, security, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company
or the Guarantor, personally or by agent or attorney.
(i) The Trustee shall not be deemed to have notice of any Event of
Default unless a Trust Officer of the Trustee has actual knowledge thereof
or unless the Trustee shall have received written notice thereof at the
Corporate Trust Office of the Trustee, and such notice references the
Securities and this Indenture.
(j) Permissive rights or powers available to the Trustee hereunder
shall not be assumed to be mandatory duties or obligations.
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, subject to
Section 7.10 hereof. Any Agent may do the same with like rights. However, the
Trustee is subject to 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 or the Guarantor in
this Indenture or any document issued in connection with the sale of Securities
or any statement in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.05. Notice of Defaults.
The Company shall deliver to the Trustee annually a statement regarding
compliance with this Indenture and, upon an Officer of the Company becoming
aware of any Default or Event of Default, a statement specifying such Default or
Event of Default. If a Default or an Event of Default occurs and is continuing
and the Trustee knows of such Default or Event of Default, the Trustee shall
mail to each Securityholder notice of the Default or Event of Default within 90
days after the occurrence thereof. Except in the case
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of a Default or an Event of Default in payment of principal of or premium, if
any, or interest or Liquidated Damages, if any, on any Security or a Default or
Event of Default in complying with Section 5.01 hereof, 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 interest of Securityholders.
This Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA
and such proviso to Section 315(b) of the TIA is hereby expressly excluded from
this Indenture and the Securities, as permitted by the TIA.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after each May 15
beginning with the May 15 following the date of this Indenture, the Trustee
shall mail to each Securityholder a report dated as of such May 15 that complies
with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b),
(c) and (d).
A copy of each such report at the time of its mailing to
Securityholders shall be filed with the Commission and each stock exchange, if
any, on which the Securities are listed.
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or of any delisting thereof.
SECTION 7.07. Compensation and Indemnity.
The Company and the Guarantor jointly and severally shall pay to the
Trustee from time to time such compensation as the Company and the Trustee shall
from time to time agree in writing 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 and the Guarantor shall reimburse the Trustee upon request
for all reasonable disbursements, expenses and advances (including fees,
disbursements and expenses of its agents and counsel) incurred or made by it in
addition to the compensation for its services except any such disbursements,
expenses and advances as may be attributable to the Trustee's negligence or bad
faith. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents, accountants, experts and counsel and any
taxes or other expenses incurred by a trust created pursuant to Section 9.01
hereof.
The Company and the Guarantor jointly and severally shall indemnify the
Trustee for, and hold it harmless against any and all loss, damage, claims,
liability or expense, including taxes (other than franchise taxes imposed on the
Trustee and taxes based upon, measured by or determined by the income of the
Trustee), arising out of or in connection with the acceptance or administration
of the trust or trusts hereunder, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent that
such loss, damage, claim, liability or expense is due to its own negligence or
bad faith. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. However, the failure by the
Trustee to so notify the Company shall not relieve the Company or the Guarantor
of their respective obligations hereunder. The Company and the Guarantor shall
defend the claim and the Trustee shall cooperate in the defense (and may employ
its own counsel) at the Company's and the Guarantor's expense; provided,
however, that the Company's and the Guarantor's reimbursement obligation with
respect to counsel employed by the Trustee will be limited to the reasonable
fees and expenses of such counsel.
The Company and the Guarantor need not pay for any settlement made
without their written consent, which consent shall not be unreasonably withheld.
The Company and the Guarantor need not reim-
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burse any expense or indemnify against any loss or liability incurred by the
Trustee as a result of the violation of this Indenture by the Trustee.
To secure the Company's and the Guarantor's payment obligations in this
Section 7.07, the Trustee shall have a Lien prior to the Securities against all
money or property held or collected by the Trustee, in its capacity as Trustee,
except money or property held in trust to pay principal of or premium, if any,
or interest or Liquidated Damages, if any, on particular Securities or the
purchase price or redemption price of any Securities to be purchased pursuant to
an Asset Sale Offer or Change of Control Offer or redeemed.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(vii) or (viii) occurs, the expenses (including
the reasonable fees and expenses of its agents and counsel) and the compensation
for the services shall be preferred over the status of the Holders in a
proceeding under any Bankruptcy Law and are intended to constitute expenses of
administration under any Bankruptcy Law. The Company's and the Guarantor's
obligations under this Section 7.07 and any claim arising hereunder shall
survive the resignation or removal of any Trustee, the discharge of the
Company's and the Guarantor's obligations pursuant to Article Nine and any
rejection or termination under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee and the Company in
writing and may appoint a successor Trustee with the Company's consent. The
Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent under any
Bankruptcy Law;
(3) a custodian or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed 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. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the out-
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standing Securities may petition, at the expense of the Company, 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 replacement of the Trustee pursuant to this Section
7.08, the Company's and the Guarantor's obligations under Section 7.07 shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another corporation
or banking corporation, the resulting, surviving or transferee corporation or
banking corporation without any further act shall be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be eligible to
act as Trustee under TIA Sections 310(a)(1) and 310(a)(2). The Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition. If the Trustee has or
shall acquire any "conflicting interest" within the meaning of TIA Section
310(b), the Trustee and the Company shall comply with the provisions of 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 outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 7.10, the Trustee
shall resign immediately in the manner and with the effect hereinbefore
specified in this Article Seven.
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
therein.
ARTICLE EIGHT
SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior Indebtedness.
The Company and the Guarantor covenant and agree, and the Trustee and
each Holder of the Securities by his acceptance thereof likewise covenant and
agree, that all Securities shall be issued subject to the provisions of this
Article Eight; and each person holding any Security, whether upon original issue
or upon transfer, assignment or exchange thereof, accepts and agrees that all
payments of the principal of and interest and Liquidated Damages, if any, on the
Securities by the Company or the Guarantor shall, to the extent and in the
manner set forth in this Article Eight, be subordinated and junior in right of
payment to the prior payment
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in full in cash of all amounts payable under Senior Indebtedness, whether
outstanding on the date of the Indenture or thereafter incurred.
SECTION 8.02. No Payment on Securities in Certain Circumstances.
(a) No direct or indirect payment by or on behalf of the Company of
principal of or interest and Liquidated Damages, if any, on the Securities,
whether pursuant to the terms of the Securities, upon acceleration, pursuant to
an Asset Sale Offer or Change of Control Offer or otherwise, shall be made to
the Holders of Securities and instead shall be made to the Holders of Senior
Indebtedness (except that Holders of Securities may receive payments made from
the defeasance trust described under Section 9.04) if (i) a default in the
payment of the principal of or premium, if any, or interest on Senior
Indebtedness occurs and is continuing beyond any applicable period of grace or
(ii) any other default occurs and is continuing with respect to Designated
Senior Indebtedness that permits holders of the Designated Senior Indebtedness
as to which such default relates to accelerate its maturity and the Trustee
receives a written notice (with a copy to the Company) of such other default (a
"Payment Blockage Notice") from the Company or the holders of any Designated
Senior Indebtedness until all Obligations with respect to Senior Indebtedness
are paid in full; payments on the Securities shall be resumed (a) in the case of
a payment default, upon the date on which such default is cured or waived and
(b) in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received by the Trustee (such period being
referred to herein as the "Payment Brokerage Period"), unless the maturity of
any Designated Senior Indebtedness has been accelerated (and written notice of
such acceleration has been received by the Trustee). No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice (it being understood that any subsequent action, or any breach of any
covenant for a period commencing after the date of receipt by the Trustee of
such Payment Blockage Notice, that, in either case, would give rise to such a
default pursuant to any provisions under which a default previously existed or
was continuing shall constitute a new default for this purpose).
Notwithstanding anything herein or in the Securities to the contrary,
(x) in no event shall a Payment Blockage Period extend beyond 179 days from the
date the Payment Blockage Notice in respect thereof was given, (y) there shall
be a period of at least 181 consecutive days in each 360-day period when no
Payment Blockage Period is in effect and (z) not more than one Payment Blockage
Period may be commenced with respect to the Securities during any period of 360
consecutive days. No event of default that existed or was continuing on the date
of commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period (to the extent the
holder of Designated Senior Indebtedness, or trustee or agent, giving notice
commencing such Payment Blockage Period had knowledge of such existing or
continuing event of default) may be, or be made, the basis for the commencement
of any other Payment Blockage Period by the holder or holders of such Designated
Senior Indebtedness or the trustee or agent acting on behalf of the holders of
such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such event of default has been cured or waived for a
period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee or any Holder when such payment is prohibited by
Section 8.02(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Designated Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Designated Senior Indebtedness
may have been issued, as their respective interests may appear, but only to the
extent that, upon notice from the Trustee to the holders of Designated Senior
Indebtedness that such prohibited
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payment has been made, the holders of the Designated Senior Indebtedness (or
their representative or representatives or a trustee) notify the Trustee in
writing of the amounts then due and owing on the Designated Senior Indebtedness,
if any, and only the amounts specified in such notice to the Trustee shall be
paid to the holders of Designated Senior Indebtedness.
SECTION 8.03. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities, upon
any dissolution or winding-up or liquidation or reorganization of the Company,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other similar proceedings, an assignment for the benefit of creditors or any
marshaling of the Company's assets, the holders of Senior Indebtedness shall be
entitled to receive payment in full in cash of all Obligations due in respect of
such Senior Indebtedness (including interest after the commencement of any
proceeding at the rate specified in the applicable Senior Indebtedness) before
the Holders of the Securities or the Trustee on behalf of such Holders shall be
entitled to receive any payment by the Company of the principal of or interest
or Liquidated Damages, if any, on the Securities, or any payment by the Company
to acquire any of the Securities for cash, property or securities, or any
distribution with respect to the Securities of any cash, property or securities.
Before any payment may be made by, or on behalf of, the Company of the principal
of or interest or Liquidated Damages, if any, on the Securities upon any such
dissolution or winding-up or liquidation or reorganization, any payment or
distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities, to which the Holders of the Securities
or the Trustee on their behalf would be entitled, but for the subordination
provisions of this Indenture, shall be made by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, directly to the holders of the Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders) or their representatives or to the trustee or
trustees or agent or agents under any agreement or indenture pursuant to which
any of such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all such Senior
Indebtedness in full in cash after giving effect to any prior or concurrent
payment, distribution or provision therefor to or for the holders of such Senior
Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Company of any kind or character, whether in cash, property
or securities, shall be received by the Trustee or any Holder of Securities at a
time when such payment or distribution is prohibited by Section 8.03(a) and
before all obligations in respect of Senior Indebtedness are paid in full in
cash, or payment provided for, such payment or distribution shall be received
and held in trust for the benefit of, and shall be paid over or delivered to,
the holders of Senior Indebtedness (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders) or their
respective representatives, or to the trustee or trustees or agent or agents
under any indenture pursuant to which any of such Senior Indebtedness may have
been issued, as their respective interests may appear, for application to the
payment of Senior Indebtedness remaining unpaid until all such Senior
Indebtedness has been paid in full in cash after giving effect to any prior or
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
with or into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided in Article Five shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the pur-
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poses of this Section 8.03 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions stated
in Article Five.
SECTION 8.04. Subrogation.
Upon the payment in full in cash of all Senior Indebtedness, or
provision for payment, the Holders of the Securities shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company made on such Senior
Indebtedness until the principal of and interest and Liquidated Damages, if any,
on the Securities shall be paid in full in cash; and, for the purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of the
Securities or the Trustee on their behalf would be entitled except for the
provisions of this Article Eight, and no payment over pursuant to the provisions
of this Article Eight to the holders of Senior Indebtedness by Holders of the
Securities or the Trustee on their behalf shall, as between the Company, its
creditors other than holders of Senior Indebtedness, and the Holders of the
Securities, be deemed to be a payment by the Company to or on account of the
Senior Indebtedness. It is understood that the provisions of this Article Eight
are and are intended solely for the purpose of defining the relative rights of
the Holders of the Securities, on the one hand, and the holders of the Senior
Indebtedness, on the other hand.
If any payment or distribution to which the Holders of the Securities
would otherwise have been entitled but for the provisions of this Article Eight
shall have been applied, pursuant to the provisions of this Article Eight, to
the payment of all amounts payable under Senior Indebtedness, then and in such
case, the Holders of the Securities shall be entitled to receive from the
holders of such Senior Indebtedness any payments or distributions received by
such holders of Senior Indebtedness in excess of the amount required to make
payment in full, or provision for payment, of such Senior Indebtedness.
SECTION 8.05. Obligations of Company Unconditional.
Nothing contained in this Article Eight or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as between the Company and
the Holders of the Securities, the obligation of the Company, which is absolute
and unconditional, to pay to the Holders of the Securities the principal of and
interest and Liquidated Damages, if any, on the Securities as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the Holders of the Securities and
creditors of the Company other than the holders of the Senior Indebtedness, nor
shall anything herein or therein prevent the Holder of any Security or the
Trustee on their behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article Eight of the holders of the Senior Indebtedness in respect of
cash, property or securities of the Company received upon the exercise of any
such remedy.
Without limiting the generality of the foregoing, nothing contained in
this Article Eight shall restrict the right of the Trustee or the Holders of
Securities to take any action to declare the Securities to be due and payable
prior to their stated maturity pursuant to Section 6.01 or to pursue any rights
or remedies hereunder; provided, however, that all Senior Indebtedness then due
and payable shall first be paid in full before the Holders of the Securities or
the Trustee are entitled to receive any direct or indirect payment from the
Company of principal of or interest or Liquidated Damages, if any, on the
Securities.
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SECTION 8.06. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities pursuant to the provisions of this Article
Eight. The Trustee shall not be charged with knowledge of the existence of any
event of default with respect to any Senior Indebtedness or of any other facts
which would prohibit the making of any payment to or by the Trustee unless and
until the Trustee shall have received notice in writing at its Corporate Trust
Office to that effect signed by an Officer of the Company, or by a holder of
Senior Indebtedness or trustee or agent therefor; and prior to the receipt of
any such written notice, the Trustee shall, subject to Article Seven, be
entitled to assume that no such facts exist; provided that if the Trustee shall
not have received the notice provided for in this Section 8.06 at least two
Business Days prior to the date upon which by the terms of this Indenture any
moneys shall become payable for any purpose (including, without limitation, the
payment of the principal of or interest or Liquidated Damages, if any, on any
Security), then, regardless of anything herein to the contrary, the Trustee
shall have full power and authority to receive any moneys from the Company and
to apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such prior date. Nothing contained in this Section 8.06 shall limit the right of
the holders of Senior Indebtedness to recover payments as contemplated by
Section 8.03. The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of any
Senior Indebtedness (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that any
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 Eight, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article Eight, 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.
SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities referred to in
this Article Eight, the Trustee and the Holders of the Securities shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, delivered to the Trustee or to the Holders of the
Securities for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of the 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 Eight.
SECTION 8.08. Trustee's Relation to Senior Indebtedness.
The Trustee and any Paying Agent shall be entitled to all the rights
set forth in this Article Eight with respect to any Senior Indebtedness which
may at any time be held by it in its individual or any other capacity to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall deprive the Trustee or any Paying Agent of any of its rights as
such holder.
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With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Eight, and no implied covenants or
obligations with respect to the 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 (except as provided in
Section 8.03(b)). The Trustee shall not be liable to any such holders if the
Trustee shall in good faith mistakenly pay over or distribute to Holders of
Securities or to the Company or to any other person cash, property or securities
to which any holders of Senior Indebtedness shall be entitled by virtue of this
Article Eight or otherwise.
SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness.
No right of any present or future holders of any Senior Indebtedness to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
The provisions of this Article Eight are intended to be for the benefit of, and
shall be enforceable directly by, the holders of Senior Indebtedness.
SECTION 8.10. Securityholders Authorize Trustee to Effectuate Subordination of
Securities.
Each Holder of Securities by his acceptance of such Securities
authorizes and expressly directs the Trustee on its or his behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article Eight, and appoints the Trustee its or his
attorney-in-fact for such purposes, including, in the event of any dissolution,
winding-up, liquidation or reorganization of the Company (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of the Company, the filing of a claim for
the unpaid balance of its or his Securities in the form required in those
proceedings.
SECTION 8.11. This Article Not to Prevent Events of Default.
The failure to make a payment on account of principal of or interest or
Liquidated Damages, if any, on the Securities by reason of any provision of this
Article Eight shall not be construed as preventing the occurrence of an Event of
Default specified in clause (i) or (ii) of Section 6.01.
SECTION 8.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article Eight shall apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
SECTION 8.13. No Waiver of Subordination Provisions.
Without in any way limiting the generality of Section 8.09, the holders
of Senior Indebtedness may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article Eight or the obligations
hereunder of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (a) change the manner,
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place or terms of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding or secured; (b) sell, exchange, release
or otherwise deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (c) release any Person liable in any manner for the
collection of Senior Indebtedness; and (d) exercise or refrain from exercising
any rights against the Company and any other Person.
SECTION 8.14. Subordination Provisions Not Applicable to Collateral Held in
Trust for Securityholders; Payments May Be Paid Prior
to Dissolution.
All money and United States Government Obligations deposited in trust
with the Trustee pursuant to and in accordance with Article Nine shall be for
the sole benefit of the Holders and shall not be subject to this Article Eight.
Nothing contained in this Article Eight or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in Section
8.02, from making payments of principal of and interest and Liquidated Damages,
if any, on the Securities, or from depositing with the Trustee any moneys for
such payments or from effecting a termination of the Company's and the
Guarantor's obligations under the Securities and this Indenture as provided in
Article Nine, or (ii) the application by the Trustee of any moneys deposited
with it for the purpose of making such payments of principal of and interest and
Liquidated Damages, if any, on the Securities, to the Holders entitled thereto
unless at least two Business Days prior to the date upon which such payment
becomes due and payable, the Trustee shall have received the written notice
provided for in Section 8.02(b) or in Section 8.06. The Company shall give
prompt written notice to the Trustee of any dissolution, winding-up, liquidation
or reorganization of the Company.
SECTION 8.15. Acceleration of Securities.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of the Senior Indebtedness of
the acceleration.
ARTICLE NINE
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 9.01. Discharge of Indenture.
The Company and the Guarantor may terminate their Obligations under the
Securities, the Guarantee and this Indenture, except the obligations referred to
in the last paragraph of this Section 9.01, if there shall have been cancelled
by the Trustee or delivered to the Trustee for cancellation all Securities
theretofore authenticated and delivered (other than any Securities that are
asserted to have been destroyed, lost or stolen and that shall have been
replaced as provided in Section 2.07) and the Company has paid all sums payable
by it hereunder or deposited all required sums with the Trustee.
After such delivery the Trustee upon request shall acknowledge in
writing the discharge of the Company's and the Guarantor's Obligations under the
Securities, the Guarantee and this Indenture except for those surviving
obligations specified below.
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Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company and the Guarantor in Sections 7.07, 9.05 and 9.06
hereof shall survive.
SECTION 9.02. Legal Defeasance.
The Company may at its option, by resolution of the Board of Directors,
be discharged from its Obligations with respect to the Securities and the
Guarantor discharged from its Obligations under the Guarantee on the date the
conditions set forth in Section 9.04 below are satisfied (hereinafter, the
"Legal Defeasance Option"). For this purpose, exercise of such Legal Defeasance
Option means that the Company shall be deemed to have paid and discharged the
entire indebtedness represented by the Securities and to have satisfied all its
other Obligations under such Securities and this Indenture insofar as such
Securities are concerned (and the Trustee, at the expense of the Company, shall,
subject to Section 9.06 hereof, execute proper instruments acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of Holders of outstanding Securities to
receive solely from the trust funds described in Section 9.04 hereof and as more
fully set forth in such Section, payments in respect of the principal of and
premium, if any, and interest and Liquidated Damages, if any, on such Securities
when such payments are due, (B) the Company's obligations with respect to such
Securities under Sections 2.03, 2.04 and 2.07, (C) the rights, powers, trusts,
duties, and immunities of the Trustee hereunder (including claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof) and (D) this
Article Nine. Subject to compliance with this Article Nine, the Company may
exercise its Legal Defeasance Option under this Section 9.02 with respect to the
Securities notwithstanding the prior exercise of its option under Section 9.03
below with respect to the Securities. 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.
SECTION 9.03. Covenant Defeasance.
At the option of the Company, pursuant to a resolution of the Board of
Directors, the Company and the Guarantor shall be released from their respective
Obligations under Sections 4.03 through 4.06 and Sections 4.14 through 4.20,
clauses (iii) and (iv) of paragraph (a) of Section 5.01, and paragraphs (c),
(d), (e) and (f) of Section 6.01, with respect to the outstanding Securities on
and after the date the conditions set forth in Section 9.04 hereof are satisfied
(hereinafter, "Covenant Defeasance Option"). For this purpose, exercise of such
Covenant Defeasance Option means that the Company and the Guarantor may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section or portion thereof, whether
directly or indirectly by reason of any reference elsewhere herein to any such
specified Section or portion thereof or by reason of any reference in any such
specified Section or portion thereof to any other provision herein or in any
other document, but the remainder of this Indenture and the Securities shall be
unaffected thereby. If the Company exercises the Covenant Defeasance Option,
payment of the Securities shall not be accelerated because of an Event of
Default specified in paragraphs (c), (d), (e) or (f) of Section 6.01 or because
of the Company's failure to comply with clauses (iii) and (iv) under paragraph
(a) of Section 5.01.
SECTION 9.04. Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to application of Section 9.02 or
Section 9.03 hereof to the outstanding Securities:
(1) the Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 who shall agree to comply with
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the provisions of this Article Nine applicable to it) as funds in trust
(the "defeasance trust") for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the benefit
of the Holders of the Securities, (A) money in an amount, or (B) U.S.
Government Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide, not
later than the due date of any payment, money in an amount, or (C) a
combination thereof, sufficient, in the opinion of a nationally-recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall be
applied by the Trustee (or other qualifying trustee) to pay and discharge,
the principal of and premium, if any, and accrued interest and Liquidated
Damages, if any, on the outstanding Securities on the Final Maturity Date of
such principal of or premium, if any, or interest, and Liquidated Damages,
if any, or on dates for payment and redemption of such principal and
premium, if any, and interest and Liquidated Damages, if any, selected in
accordance with the terms of this Indenture and of the Securities;
(2) no Event of Default or Default with respect to the Securities shall
have occurred and be continuing on the date of such deposit, or shall have
occurred and be continuing at any time during the period ending on the 91st
day after the date of such deposit or, if longer, ending on the day
following the expiration of the longest preference period under any
Bankruptcy Law applicable to the Company in respect of such deposit (it
being understood that this condition shall not be deemed satisfied until the
expiration of such period);
(3) such Legal Defeasance Option or Covenant Defeasance Option shall
not cause the Trustee to have a conflicting interest for purposes of the TIA
with respect to any securities of the Company;
(4) such Legal Defeasance Option or Covenant Defeasance Option shall
not result in a breach or violation of, or constitute default under any
other agreement, including without limitation the Credit Agreement, or
instrument to which the Company is a party or by which it is bound;
(5) the Company shall have delivered to the Trustee an Opinion of
Counsel stating that, as a result of such Legal Defeasance Option or
Covenant Defeasance Option, neither the trust nor the Trustee will be
required to register as an investment company under the Investment Company
Act of 1940, as amended;
(6) in the case of an election under Section 9.02 above, 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 to the effect that or (ii) there has been a change
in any applicable federal income tax law with the effect that, and such
opinion shall confirm that, the Holders of the outstanding Securities or
Persons in their positions will not recognize income, gain or loss for
federal income tax purposes solely as a result of such deposit in the
defeasance trust or the exercise of the Legal Defeasance Option and will be
subject to federal income tax on the same amount, in the same manner and at
the same times as would have been the case if such deposit in the defeasance
trust or the exercise of the Legal Defeasance Option had not occurred;
(7) in the case of an election under Section 9.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that
the Holders of the outstanding Securities or Persons in their positions will
not recognize income, gain or loss for federal income tax purposes solely as
a result of such deposit in the defeasance trust or the exercise of the
Covenant Defeasance
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Option and will be subject to federal income tax on the same amount, in
the same manner and at the same times as would have been the case if such
deposit in the defeasance trust or the exercise of the Covenant Defeasance
Option had not occurred;
(8) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Legal Defeasance Option under
Section 9.02 or the Covenant Defeasance Option under Section 9.03 (as the
case may be) have been complied with;
(9) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit under clause (1) was not made by the
Company with the intent of defeating, hindering, delaying or defrauding any
creditors of the Company or others; and
(10) the Company shall have paid or duly provided for payment under
terms mutually satisfactory to the Company and the Trustee all amounts then
due to the Trustee pursuant to Section 7.07 hereof.
SECTION 9.05. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 9.04 hereof in respect
of the outstanding Securities shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any Paying Agent as the Trustee may
determine, to the Holders of such Securities, of all sums due and to become due
thereon in respect of principal, premium, if any, accrued interest and
Liquidated Damages, if any, but such money need not be segregated from other
funds except to the extent required by law.
The Company and the Guarantor shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the U.S.
Government Obligations deposited pursuant to Section 9.04 hereof or the
principal, premium, if any, and interest received in respect thereof other than
any such tax, fee or other charge which by law is for the account of the Holders
of the outstanding Securities.
Anything in this Article Nine to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 9.04 which, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance Option or
Covenant Defeasance Option.
SECTION 9.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.01, 9.02 or 9.03 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 and the Guarantor's Obligations under this Indenture,
the Securities and the Guarantee shall be revived and reinstated as though no
deposit had occurred pursuant to this Article Nine until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in
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accordance with Section 9.01; provided, however, that if the Company or the
Guarantor has made any payment of principal of, premium, if any, accrued
interest or Liquidated Damages, if any, on any Securities because of the
reinstatement of their Obligations, the Company or the Guarantor, as the case
may be, 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.
SECTION 9.07. Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this Indenture,
all moneys then held by any Paying Agent under the provisions of this Indenture
shall, upon demand of the Company, be paid to the Trustee, or if sufficient
moneys have been deposited pursuant to Section 9.01 hereof, to the Company (or,
if such moneys had been deposited by the Guarantor, to such Guarantor), and
thereupon such Paying Agent shall be released from all further liability with
respect to such moneys.
SECTION 9.08. Moneys Held by Trustee.
Any moneys deposited with the Trustee or any Paying Agent or then held
by the Company or the Guarantor in trust for the payment of the principal of, or
premium, if any, interest or Liquidated Damages, if any, on any Security that
are not applied but remain unclaimed by the Holder of such Security for two
years after the date upon which the principal of, or premium, if any, interest
or Liquidated Damages, if any, on such Security shall have respectively become
due and payable shall be repaid to the Company (or, if appropriate, the
Guarantor) upon Company Request, or if such moneys are then held by the Company
or the Guarantor in trust, such moneys shall be released from such trust; and
the Holder of such Security entitled to receive such payment shall thereafter,
as an unsecured general creditor, look only to the Company and the Guarantor for
the payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money shall thereupon cease; provided, however, that the
Trustee or any such Paying Agent, before being required to make any such
repayment, may, at the expense of the Company and the Guarantor, either mail to
each Securityholder affected, at the address shown in the Register, or cause to
be published once a week for two successive weeks, in a newspaper published in
the English language, customarily published each Business Day and of general
circulation in The City of New York, New York, a notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such mailing or publication, any unclaimed balance of
such moneys then remaining will be repaid to the Company or the Guarantor. After
payment to the Company or the Guarantor or the release of any money held in
trust by the Company or the Guarantor, as the case may be, Securityholders
entitled to the money must look only to the Company and the Guarantor for
payment as general creditors unless applicable abandoned property law designates
another Person.
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
The Company and the Guarantor, when authorized by a resolution of the
Board of Directors and the board of directors of the Guarantor, and the Trustee
may amend or supplement this Indenture or the Securities without notice to or
consent of any Securityholder:
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(i) to cure any ambiguity, defect or inconsistency; provided, however,
that such amendment or supplement does not adversely affect the rights of
any Holder;
(ii) to provide for uncertificated Securities in addition to or in
place of Certificated Securities;
(iii) to provide for the assumption by a successor Person of the
obligations of the Company to the Holders of Securities under the
Securities, this Indenture and the Registration Rights Agreement in
connection with any transaction complying with Article Five of this
Indenture;
(iv) to provide for a guarantee of payment of the Securities by any
Restricted Subsidiary pursuant to Section 4.20;
(v) to comply with any requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA; or
(vi) to make any change that does not materially adversely affect the
legal rights of any Holder under this Indenture;
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 10.01.
SECTION 10.02. With Consent of Holders.
Subject to Section 6.07, the Company and the Guarantor, when authorized
by a resolution of the Boards of Directors and the board of directors of the
Guarantor, and the Trustee may amend or supplement this Indenture or the
Securities with the written consent of the Holders of at least a majority in
principal amount of the outstanding Securities. Subject to Section 6.07, the
Holders of a majority in principal amount of the outstanding Securities may
waive compliance by the Company or the Guarantor with any provision of this
Indenture or the Securities. However, without the consent of each Securityholder
affected, an amendment, supplement or waiver, including a waiver pursuant to
Section 6.04, may not:
(i) reduce the principal amount of any Securities whose Holders must
consent to an amendment to this Indenture or a waiver under this Indenture;
(ii) reduce the rate on or change the interest payment time on any
Security or alter the redemption provisions with respect thereto (other than
the provisions relating to Section 4.05 and 4.14) or the price at which the
Company is required to offer to purchase the Securities;
(iii) reduce the principal of or change the fixed maturity of any
Security;
(iv) change currency of payment of the principal of or interest on any
Security;
(v) modify any provisions of Section 6.01 or 6.04 (other than to add
sections of this Indenture or the Securities subject thereto) or 6.07; and
(vi) waive any default in the payment of the principal of, premium, if
any, or unpaid interest on, and Liquidated Damages, if any, with respect to
the Securities.
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An amendment under this Section 10.02 may not make any change under
Article Eight, Article Nine, Article Eleven or Article Twelve hereof that
adversely affects in any material respect the rights of any holder of Senior
Indebtedness then outstanding unless the holders of such Senior Indebtedness (or
any representative thereof authorized to give a consent) shall have consented to
such change.
It shall not be necessary for the consent of the Holders under this
Section 10.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 10.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 10.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 10.04. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of that
Security or portion of that Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security. Subject to the following paragraph, any such Holder or subsequent
Holder may revoke the consent as to such Holder's Security or portion of such
Security by notice to the Trustee or the Company received before the date on
which the Trustee receives an Officers' Certificate certifying that the Holders
of the requisite principal amount of Securities have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders of Securities entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last sentence of the immediately preceding paragraph, those
persons who were Holders of Securities at such record date (or their duly
designated proxies), and only those persons, shall be entitled to consent to
such amendment, supplement or waiver or to revoke any consent previously given,
whether or not such Persons continue to be Holders of such Securities after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(i) through (vi) of Section 10.02. In that case the amendment, supplement or
waiver shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
SECTION 10.05. 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
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the Security about 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 issue a
new Security shall not affect the validity and effect of such amendment,
supplement or waiver.
SECTION 10.06. Trustee to Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Ten is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver constitutes the legal, valid and binding obligation of the Company and
the Guarantor, enforceable in accordance with its terms (subject to customary
exceptions). The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive an indemnity
reasonably satisfactory to it.
ARTICLE ELEVEN
GUARANTEE
SECTION 11.01. Unconditional Guarantee.
The Guarantor hereby irrevocably and unconditionally guarantees to each
Holder of a Security authenticated by the Trustee and to the Trustee and its
successors and assigns that: the principal of and premium, if any, interest or
Liquidated Damages, if any, on the Securities will be promptly paid in full when
due, subject to any applicable grace period, whether on the Final Maturity Date,
by acceleration, call for redemption, upon a Change of Control Offer, upon an
Asset Sale Offer or otherwise, and interest on the overdue principal and
interest on any overdue interest on the Securities and expenses, indemnification
or otherwise, and all other obligations of the Company (all such obligations
guaranteed by the Guarantor being called herein the "Guaranteed Obligations"),
to the Holders or the Trustee hereunder or under the Securities will be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
subject, however, to the limitations set forth in Section 11.03. The Guarantor
hereby agrees that its obligations hereunder shall be unconditional and
continuing, irrespective of the validity, regularity or enforceability of the
Securities or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Securities with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of the Guarantor and shall (a) remain in
full force and effect until payment in full of all the Guaranteed Obligations,
(b) be binding upon the Guarantor and its successors, transferees and assigns
and (c) inure to the benefit of and be enforceable by the Trustee, the Holders
of the Securities and their successors, transferees and assigns. The Guarantor
hereby waives diligence, presentment, demand of payment, filing of claims with a
court in the event of insolvency or bankruptcy of the Company, any right to
require a proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that the Guarantee will not be discharged except by
complete performance of the Guaranteed Obligations, and this Guarantee. If any
Holder or the Trustee is required by any court or otherwise to return to the
Company, the Guarantor, or any Custodian, trustee, liquidator or other similar
official acting in relation to the Company or the Guarantor, any amount paid by
the Company or the Guarantor to the Trustee or such Holder, the Guarantee, to
the extent
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theretofore discharged, shall be reinstated in full force and effect. The
Guarantor further agrees that, as between the Guarantor, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
Guaranteed Obligations hereby may be accelerated as provided in Article Six for
the purpose of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Guaranteed
Obligations, and (y) in the event of any acceleration of the Guaranteed
obligations as provided in Article Six, such Guaranteed Obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantor for
the purpose of this Guarantee.
SECTION 11.02. Severability.
In case any provision of this Guarantee shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.03. Limitation of Guarantor's Liability.
The Guarantor and, by its acceptance of a Security issued hereunder,
each Holder and the Trustee hereby confirm that it is the intention of all such
parties that the guarantee by the Guarantor pursuant to its Guarantee not
constitute a fraudulent transfer or conveyance for purposes of any Bankruptcy
Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act
or any similar U.S. federal or state or other applicable law. To effectuate the
foregoing intention, the Holders and the Guarantor hereby irrevocably agree that
the obligations of the Guarantor under the Guarantee shall be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of the Guarantor, result in the obligations of the Guarantor under
the Guarantee not constituting such fraudulent transfer or conveyance.
SECTION 11.04. Subordination of Subrogation and Other Rights.
The Guarantor hereby agrees that any claim against the Company that
arises from the payment, performance or enforcement of the Guarantor's
obligations under the Guarantee or this Indenture, including, without
limitation, any right of subrogation, shall be subject and subordinate to, and
no payment with respect to any such claim of the Guarantor shall be made before,
the payment in full in cash of all outstanding Securities in accordance with the
provisions provided therefor in this Indenture.
SECTION 11.05. Delivery of Guarantee.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
Section 11.01 on behalf of the Guarantor.
ARTICLE TWELVE
SUBORDINATION OF GUARANTEE
SECTION 12.01. Guarantee Obligations Subordinated to Guarantor Senior
Indebtedness.
The Guarantor covenants and agrees, and the Trustee and each Holder of
the Securities by its or his acceptance thereof likewise covenants and agrees,
that the Guarantee shall be issued subject to the provisions of this Article
Twelve; and each person holding any Security, whether upon original issue or
upon trans-
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fer, assignment or exchange thereof, accepts and agrees that all payments of the
principal of and premium, if any, interest and Liquidated Damages, if any, on
the Securities pursuant to the Guarantee made by or on behalf of the Guarantor
shall, to the extent and in the manner set forth in this Article Twelve, be
subordinated and junior in right of payment to the prior payment in full in cash
of all amounts payable under Guarantor Senior Indebtedness of the Guarantor.
SECTION 12.02. No Payment on Guarantee in Certain Circumstances.
(a) No direct or indirect payment by or on behalf of the Guarantor of
principal of or premium, if any, or interest or Liquidated Damages, if any, on
the Securities, whether pursuant to the Guaranteed Obligations, whether pursuant
to the terms of the Securities, upon acceleration, pursuant to an Asset Sale
Offer or Change of Control Offer or otherwise, shall be made to the holders of
Securities and instead shall be made to the holders of Guarantor Senior
Indebtedness (except that holders of Securities may receive payments made from
the defeasance trust described under Section 9.04) if (i) a default in the
payment of the principal of or premium, if any, or interest on Guarantor Senior
Indebtedness occurs and is continuing beyond any applicable period of grace or
(ii) any other default occurs and is continuing with respect to Designated
Guarantor Senior Indebtedness that permits holders of the Designated Guarantor
Senior Indebtedness as to which such default relates to accelerate its maturity
and the Trustee receives a written notice (with a copy to the Guarantor) of such
other default (a "Guarantor Payment Blockage Notice") from the Guarantor or the
holders of any Designated Guarantor Senior Indebtedness until all Obligations
with respect to such Designated Guarantor Senior Indebtedness are paid in full;
payments on the Securities shall be resumed (a) in the case of a payment
default, upon the date on which such default is cured or waived and (b) in case
of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived or 179 days after the date on which the applicable
Guarantor Payment Blockage Notice is received by the Trustee (such period being
referred to herein as the "Guarantor Payment Blockage Period"), unless the
maturity of any Designated Guarantor Senior Indebtedness has been accelerated
(and written notice of such acceleration has been received by the Trustee). No
nonpayment default that existed or was continuing on the date of delivery of any
Guarantor Payment Blockage Notice to the Trustee shall be, or be made, the basis
for a subsequent Guarantor Payment Blockage Notice (it being understood that any
subsequent action, or any breach of any covenant for a period commencing after
the date of receipt by the Trustee of such Guarantor Payment Blockage Notice,
that, in either case, would give rise to such a default pursuant to any
provisions under which a default previously existed or was continuing shall
constitute a new default for this purpose).
Notwithstanding anything herein or in the Securities to the contrary,
(x) in no event shall a Guarantor Payment Blockage Period extend beyond 179 days
from the date the Guarantor Payment Blockage Notice in respect thereof was
given, (y) there shall be a period of at least 181 consecutive days in each
360-day period when no Guarantor Payment Blockage Period is in effect and (z)
not more than one Guarantor Payment Blockage Period may be commenced with
respect to the Guarantor during any period of 360 consecutive days. No event of
default that existed or was continuing on the date of commencement of any other
Guarantor Payment Blockage Period with respect to the Designated Guarantor
Senior Indebtedness initiating such Guarantor Payment Blockage Period (to the
extent the holder of Designated Guarantor Senior Indebtedness, or trustee or
agent, giving notice commencing such Guarantor Payment Blockage Period had
knowledge of such existing or continuing event of default) may be, or be made,
the basis for the commencement of any other Guarantor Payment Blockage Period by
the holder or holders of such Designated Guarantor Senior Indebtedness or the
trustee or agent acting on behalf of such Designated Guarantor Senior
Indebtedness, whether or not within a period of 360 consecutive days, unless
such event of default has been cured or waived for a period of not less than 90
consecutive days.
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(b) In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee or any Holder when such payment is prohibited by
Section 12.02(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of such Designated Guarantor
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Designated Guarantor
Senior Indebtedness may have been issued, as their respective interests may
appear, but only to the extent that, upon notice from the Trustee to the holders
of such Designated Guarantor Senior Indebtedness that such prohibited payment
has been made, the holders of such Designated Guarantor Senior Indebtedness (or
their representative or representatives or a trustee) notify the Trustee in
writing of the amounts then due and owing on such Designated Guarantor Senior
Indebtedness, if any, and only the amounts specified in such notice to the
Trustee shall be paid to the holders of such Designated Guarantor Senior
Indebtedness.
SECTION 12.03. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities of the
Guarantor of any kind or character, whether in cash, property or securities,
upon any dissolution or winding-up or liquidation or reorganization of the
Guarantor, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other similar proceedings, the holders of Guarantor Senior
Indebtedness shall be entitled to receive payment in full in cash of all
Obligations due in respect of such Guarantor Senior Indebtedness before the
Holders of the Securities or the Trustee on behalf of such Holders shall be
entitled to receive any payment by the Guarantor of the principal of or premium,
if any, and interest or Liquidated Damages, if any, on the Securities pursuant
to the Guarantee, or any payment to acquire any of the Securities for cash,
property or securities, or any distribution with respect to the Securities of
any cash, property or securities. Before any payment may be made by, or on
behalf of, the Guarantor of the principal of or premium, if any, and interest or
Liquidated Damages, if any, on the Securities upon any such dissolution or
winding-up or liquidation or reorganization, any payment or distribution of
assets or securities of the Guarantor of any kind or character, whether in cash,
property or securities, to which the Holders of the Securities or the Trustee on
their behalf would be entitled, but for the subordination provisions of this
Indenture, shall be made by the Guarantor or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, directly to the holders of the Guarantor Senior Indebtedness (pro
rata to such holders on the basis of the respective amounts of Guarantor Senior
Indebtedness held by such holders) or their representatives or to the trustee or
trustees or agent or agents under any agreement or indenture pursuant to which
any Guarantor Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all the Guarantor Senior
Indebtedness in full in cash after giving effect to any prior or concurrent
payment, distribution or provision therefor to or for the holders of Guarantor
Senior Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Guarantor of any kind or character, whether in cash,
property or securities, shall be received by the Trustee or any Holder of
Securities at a time when such payment or distribution is prohibited by Section
12.03(a) and before all Obligations in respect of the Guarantor Senior
Indebtedness are paid in full in cash, or payment provided for, such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid over or delivered to, the holders of the Guarantor Senior Indebtedness
(pro rata to such holders on the basis of the respective amounts of Guarantor
Senior Indebtedness held by such holders) or their respective representatives,
or to the trustee or trustees or agent or agents under any indenture pursuant to
which any of Guarantor Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of the Guarantor
Senior Indebtedness remaining unpaid until all Guarantor Senior Indebtedness has
been paid in full in cash after giving effect to any prior or concurrent
payment, distribution or provision therefor to or for the holders of Guarantor
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Senior Indebtedness; provided that the Trustee shall be entitled to receive from
the holders of Guarantor Senior Indebtedness written notice of the amounts owing
on the Guarantor Senior Indebtedness.
The consolidation of the Guarantor with, or the merger of the Guarantor
with or into, another corporation or the liquidation or dissolution of the
Guarantor following the conveyance or transfer of its property as an entirety,
or substantially as an entirety, to another corporation upon the terms and
conditions provided in Article Five shall not be deemed a dissolution,
winding-up, liquidation or reorganization for the purposes of this Section 12.03
if such other corporation shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions stated in Article Five.
SECTION 12.04. Subrogation.
Upon the payment in full in cash of all Guarantor Senior Indebtedness
of the Guarantor, or provision for payment, the Holders of the Securities shall
be subrogated to the rights of the holders of Guarantor Senior Indebtedness to
receive payments or distributions of cash, property or securities of the
Guarantor made on Guarantor Senior Indebtedness until the principal of and
premium, if any, and interest and Liquidated Damages, if any, on the Securities
shall be paid in full in cash; and, for the purposes of such subrogation, no
payments or distributions to the holders of Guarantor Senior Indebtedness of any
cash, property or securities to which the Holders of the Securities or the
Trustee on their behalf would be entitled except for the provisions of this
Article Twelve, and no payment over pursuant to the provisions of this Article
Twelve to the holders of the Guarantor Senior Indebtedness by Holders of the
Securities or the Trustee on their behalf shall, as between the Guarantor, its
creditors other than holders of the Guarantor Senior Indebtedness, and the
Holders of the Securities, be deemed to be a payment by the Guarantor to or on
account of the Guarantor Senior Indebtedness. It is understood that the
provisions of this Article Twelve are and are intended solely for the purpose of
defining the relative rights of the Holders of the Securities, on the one hand,
and the holders of Guarantor Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders of the Securities
would otherwise have been entitled but for the provisions of this Article Twelve
shall have been applied, pursuant to the provisions of this Article Twelve, to
the payment of all amounts payable under Guarantor Senior Indebtedness, then and
in such case, the Holders of the Securities shall be entitled to receive from
the holders of such Guarantor Senior Indebtedness any payments or distributions
received by such holders of Guarantor Senior Indebtedness in excess of the
amount required to make payment in full, or provision for payment, of such
Guarantor Senior Indebtedness.
SECTION 12.05. Obligations of Guarantor Unconditional.
Nothing contained in this Article Twelve or elsewhere in this Indenture
or in the Securities or the Guarantee is intended to or shall impair, as between
the Guarantor and the Holders of the Securities, the obligation of the
Guarantor, which is absolute and unconditional, to pay to the Holders of the
Securities the principal of and premium, if any, or interest and Liquidated
Damages, if any, on the Securities as and when the same shall become due and
payable in accordance with the terms of the Guarantee, or is intended to or
shall affect the relative rights of the Holders of the Securities and creditors
of the Guarantor other than the holders of Guarantor Senior Indebtedness, nor
shall anything herein or therein prevent the Holder of any Security or the
Trustee on their behalf from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article Twelve of the holders of Guarantor Senior Indebtedness in
respect of cash, property or securities of the Guarantor received upon the
exercise of any such remedy.
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Without limiting the generality of the foregoing, nothing contained in
this Article Twelve shall restrict the right of the Trustee or the Holders of
Securities to take any action to declare the Securities to be due and payable
prior to their stated maturity pursuant to Section 6.01 or to pursue any rights
or remedies hereunder; provided, however, that all Guarantor Senior Indebtedness
of the Guarantor then due and payable shall first be paid in full before the
Holders of the Securities or the Trustee are entitled to receive any direct or
indirect payment from such Guarantor of principal of or premium, if any, or
interest or Liquidated Damages, if any, on the Securities pursuant to such
Guarantor's Guarantee.
SECTION 12.06. Notice to Trustee.
The Company and the Guarantor shall give prompt written notice to the
Trustee of any fact known to the Company or the Guarantor which would prohibit
the making of any payment to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article Twelve. The Trustee shall not be
charged with knowledge of the existence of any event of default with respect to
any Guarantor Senior Indebtedness or of any other facts which would prohibit the
making of any payment to or by the Trustee unless and until the Trustee shall
have received notice in writing at its Corporate Trust Office to that effect
signed by an Officer of the Company or the Guarantor, or by a holder of
Guarantor Senior Indebtedness or trustee or agent therefor; and prior to the
receipt of any such written notice, the Trustee shall, subject to Article Seven,
be entitled to assume that no such facts exist; provided that if the Trustee
shall not have received the notice provided for in this Section 12.06 at least
two Business Days prior to the date upon which by the terms of this Indenture
any moneys shall become payable for any purpose (including, without limitation,
the payment of the principal of or premium, if any, or interest or Liquidated
Damages, if any, on any Security), then, regardless of anything herein to the
contrary, the Trustee shall have full power and authority to receive any moneys
from the Guarantor and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may be
received by it on or after such prior date. Nothing contained in this Section
12.06 shall limit the right of the holders of Guarantor Senior Indebtedness to
recover payments as contemplated by Section 12.03. The Trustee shall be entitled
to rely on the delivery to it of a written notice by a Person representing
himself or itself to be a holder of any Guarantor Senior Indebtedness (or a
trustee on behalf of, or other representative of, such holder) to establish that
such notice has been given by a holder of Guarantor Senior Indebtedness or a
trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Guarantor Senior Indebtedness to participate in any payment or distribution
pursuant to this Article Twelve, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Guarantor Senior Indebtedness held by such Person, the extent to which such
Person is entitled to participate in such payment or distribution and any other
facts pertinent to the rights of such Person under this Article Twelve, 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.
SECTION 12.07. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities of the
Guarantor referred to in this Article Twelve, the Trustee and the Holders of the
Securities shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which bankruptcy, dissolution, winding-up,
liquidation or reorganization proceedings are pending, or upon a certificate of
the receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
of the Securities for the purpose of ascertaining the Persons entitled to
participate in such distribution, the
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holders of Guarantor Senior Indebtedness and other Indebtedness of the
Guarantor, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Twelve.
SECTION 12.08. Trustee's Relation to Guarantor Senior Indebtedness.
The Trustee and any Paying Agent shall be entitled to all the rights
set forth in this Article Twelve with respect to any Guarantor Senior
Indebtedness which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Guarantor Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee or any
Paying Agent of any of its rights as such holder.
With respect to the holders of Guarantor Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article Twelve, and no implied
covenants or obligations with respect to the holders of Guarantor 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 Guarantor Senior
Indebtedness (except as provided in Section 12.03(b)). The Trustee shall not be
liable to any such holders if the Trustee shall in good faith mistakenly pay
over or distribute to Holders of Securities or to the Company or to any other
person cash, property or securities to which any holders of Guarantor Senior
Indebtedness shall be entitled by virtue of this Article Twelve or otherwise.
SECTION 12.09. Subordination Rights Not Impaired by Acts or Omissions of the
Guarantor or Holders of Guarantor Senior Indebtedness.
No right of any present or future holders of any Guarantor Senior
Indebtedness to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Guarantor or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by the Guarantor with the terms of this
Indenture, regardless of any knowledge thereof which any such holder may have or
otherwise be charged with. The provisions of this Article Twelve are intended to
be for the benefit of, and shall be enforceable directly by, the holders of
Guarantor Senior Indebtedness.
SECTION 12.10. Securityholders Authorize Trustee to Effectuate Subordination of
Guarantee.
Each Holder of Securities by its or his acceptance of such Securities
authorizes and expressly directs the Trustee on its or his behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article Twelve, and appoints the Trustee its or his
attorney-in-fact for such purposes, including, in the event of any dissolution,
winding-up, liquidation or reorganization of the Guarantor (whether in
bankruptcy, insolvency, receivership, reorganization or similar proceedings or
upon an assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of such Guarantor, the filing of a claim
for the unpaid balance of its or his Securities in the form required in those
proceedings.
SECTION 12.11. This Article Not to Prevent Events of Default.
The failure to make a payment on account of principal of or premium, if
any, or interest or Liquidated Damages, if any, on the Securities by reason of
any provision of this Article Twelve shall not be construed as preventing the
occurrence of an Event of Default specified in clauses (i) or (ii) of Section
6.01.
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SECTION 12.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article Twelve shall apply to amounts due to
the Trustee pursuant to other sections in this Indenture.
SECTION 12.13. No Waiver of Guarantee Subordination Provisions.
Without in any way limiting the generality of Section 12.09,
the holders of Guarantor Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
Twelve or the obligations hereunder of the Holders of the Securities to the
holders of Guarantor Senior Indebtedness, do any one or more of the following:
(a) change the manner, place or terms of payment or extend the time of payment
of, or renew or alter, Guarantor Senior Indebtedness or any instrument
evidencing the same or any agreement under which Guarantor Senior Indebtedness
is outstanding or secured; (b) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Guarantor Senior
Indebtedness; (c) release any Person liable in any manner for the collection of
Guarantor Senior Indebtedness; and (d) exercise or refrain from exercising any
rights against the Guarantor and any other Person.
SECTION 12.14. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article Twelve or elsewhere in this
Indenture shall prevent (i) the Guarantor, except under the conditions described
in Section 12.02, from making payments of principal of and premium, if any, and
interest and Liquidated Damages, if any, on the Securities, or from depositing
with the Trustee any moneys for such payments, or (ii) the application by the
Trustee of any moneys deposited with it for the purpose of making such payments
of principal of and premium, if any, and interest and Liquidated Damages, if
any, on the Securities, to the Holders entitled thereto unless at least two
Business Days prior to the date upon which such payment becomes due and payable,
the Trustee shall have received the written notice provided for in Section
12.02(b) or in Section 12.06. The Guarantor shall give prompt written notice to
the Trustee of any dissolution, winding-up, liquidation or reorganization of the
Guarantor.
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that
are required to be a part of this Indenture, and shall, to the extent
applicable, be governed by such provisions. If any provision of this Indenture
modifies any TIA provision that may be so modified, such TIA provision shall be
deemed to apply to this Indenture as so modified. If any provision of this
Indenture excludes any TIA provision that may be so excluded, such TIA provision
shall be excluded from this Indenture.
The provisions of TIA Sections 310 through 317 that
impose duties on any Person (including the provisions automatically deemed
included unless expressly excluded by this Indenture) are a part of and govern
this Indenture, whether or not physically contained herein.
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SECTION 13.02. Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in person, by facsimile and confirmed by overnight
courier, or mailed by first-class mail addressed as follows:
if to the Company or to the Guarantor:
Fedders Corporation
Westgate Corporate Center
505 Martinsville Road
P.O. Box 813
Liberty Corner, New Jersey 07938
Attention: Robert N. Edwards
Vice President and General Counsel
Facsimile: (908) 604-9317
Telephone: (908) 604-8686
with a copy to:
Cummings & Lockwood
Four Stamford Plaza
P.O. Box 120
Stamford, Connecticut 06904
Attention: Paul G. Hughes
Facsimile: (203) 351-4534
Telephone: (203) 327-1700
if to the Trustee:
State Street Bank and Trust Company
2 International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Facsimile: (617) 664-5374
Telephone: (617) 664-5553
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed, first-class, postage
prepaid, to a Holder including any notice delivered in connection with TIA
Section 310(b), TIA Section 313(c), TIA Section 314(a) and TIA Section 315(b),
shall be mailed to it or him at its or his address as set forth in the Register
and shall be sufficiently given to it or him if
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so mailed within the time prescribed. To the extent required by the TIA, any
notice or communication shall also be mailed to any Person described in TIA
Section 313(c).
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. Except for a notice to the Trustee, which is deemed given only
when received, if a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communications 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 any other Person
shall have the protection of TIA Section 312(c).
SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company or the
Guarantor to the Trustee to take or refrain from taking any action under this
Indenture, the Company or the Guarantor shall furnish to the Trustee at the
request of the Trustee:
(1) an Officers' Certificate in form and substance
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance satisfactory
to the Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
Each Officers' Certificate or Opinion of Counsel with respect
to compliance with a condition or covenant provided for in this Indenture shall
include:
(1) a statement that the Person 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 Person, 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
person, such condition or covenant has been complied with; provided,
however, that with respect to matters of fact an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
<PAGE> 83
-75-
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a
meeting of Securityholders. The Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 13.07. Governing Law.
The laws of the State of New York shall govern this Indenture,
the Securities and the Guarantee without regard to principles of conflicts of
law.
SECTION 13.08. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the
Company or the Guarantor shall not have any liability for any Obligations of the
Company or the Guarantor under the Securities, the Guarantee or this Indenture
or for any claim based on, in respect of or by reason of such Obligations or
their creation. Each Securityholder by accepting a Security waives and releases
all such liability and such waiver and release is part of the consideration for
issuance of the Securities.
SECTION 13.09. Successors.
All agreements of the Company in this Indenture and the
Securities shall bind its successor. All agreements of the Guarantor in this
Indenture and the Guarantee shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 13.10. Counterpart 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.
SECTION 13.11. Severability.
In case any provision in this Indenture, in the Securities or
in the Guarantee shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and a Holder shall have no claim therefor against
any party hereto.
SECTION 13.12. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company, the Guarantor or a Subsidiary. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.13. Legal Holidays.
If a payment date is a not a Business Day at a place of
payment, payment may be made at that place on the next succeeding Business Day,
and no interest shall accrue for the intervening period.
[Signature Pages Follow]
<PAGE> 84
S-1
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
FEDDERS NORTH AMERICA, INC.
By: /s/Robert L. Laurent, Jr.
-------------------------------------
Name: Robert L. Laurent, Jr.
Title: Executive Vice President
FEDDERS CORPORATION,
as Guarantor
By: /s/Robert L. Laurent, Jr.
-------------------------------------
Name: Robert L. Laurent, Jr.
Title: Executive Vice President
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: /s/Jill Olson
-------------------------------------
Name: Jill Olson
Title: Assistant Vice President
<PAGE> 85
EXHIBIT A
---------
[FORM OF SERIES A SECURITY]
[LEGEND FOR RESTRICTED SECURITY]
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL
NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY OF
ITS SUBSIDIARIES, (B) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) OF REGULATION D UNDER THE SECURITIES ACT) THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE
OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE
PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (F)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY)
OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING.
[LEGEND FOR TEMPORARY REGULATION S GLOBAL SECURITY]
THIS SECURITY IS A TEMPORARY REGULATION S GLOBAL SECURITY
WITHIN THE MEANING OF THE INDENTURE REFERRED TO HEREINAFTER. EXCEPT IN THE
CIRCUMSTANCES DESCRIBED IN SECTION 2.06 OF THE INDENTURE, INTERESTS IN THIS
TEMPORARY REGULATION S GLOBAL SECURITY MAY NOT BE OFFERED OR SOLD TO A U.S.
PERSON OR FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON PRIOR TO THE
A-1
<PAGE> 86
EXPIRATION OF THE RESTRICTED PERIOD (AS DEFINED IN THE INDENTURE), AND NO
TRANSFER OR EXCHANGE OF AN INTEREST IN THIS TEMPORARY REGULATION S GLOBAL
SECURITY MAY BE MADE FOR AN INTEREST IN A RESTRICTED GLOBAL SECURITY OR IN A
PERMANENT REGULATION S GLOBAL SECURITY UNTIL AFTER THE LATER OF THE DATE OF
EXPIRATION OF THE RESTRICTED PERIOD AND THE DATE ON WHICH THE OWNER SECURITIES
CERTIFICATION AND THE DEPOSITORY SECURITIES CERTIFICATION RELATING TO SUCH
INTEREST HAVE BEEN PROVIDED IN ACCORDANCE WITH THE TERMS OF THE INDENTURE, TO
THE EFFECT THAT THE BENEFICIAL OWNER OR OWNERS OF SUCH INTEREST ARE NOT U.S.
PERSONS.
[LEGEND FOR PERMANENT REGULATION S GLOBAL SECURITY OR NON-GLOBAL REGULATION S
SECURITY]
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD, OR DELIVERED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, ANY U.S. PERSON, UNLESS THE SECURITIES ARE REGISTERED UNDER THE
SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF IS
AVAILABLE.
A-2
<PAGE> 87
FEDDERS NORTH AMERICA, INC.
9 3/8% Senior Subordinated Note
due August 15, 2007, Series A
CUSIP No.:
No. [ ] $[ ]
FEDDERS NORTH AMERICA, INC., a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to [ ] or registered assigns, the principal sum of
[ ] Dollars, on August 15, 2007.
Interest Payment Dates: February 15 and August 15, commencing
on February 15, 1998.
Interest Record Dates: February 1 and August 1.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officer.
FEDDERS NORTH AMERICA, INC.
By:
---------------------------------
Name:
Title:
Attest:
---------------------------------
Name:
Title:
A-3
<PAGE> 88
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 9 3/8% Senior Subordinated Notes due 2007,
Series A, described in the within-mentioned Indenture.
Dated:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
----------------------------------
Authorized Signatory
A-4
<PAGE> 89
(REVERSE OF SECURITY)
FEDDERS NORTH AMERICA, INC.
9 3/8% Senior Subordinated Note
due August 15, 2007, Series A
1. Interest.
FEDDERS NORTH AMERICA, INC., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. Cash 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 August 18, 1997. The Company will pay interest semi-annually in
arrears on each Interest Payment Date, commencing February 15, 1998. 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 from time
to time on demand at the rate borne by the Securities and on overdue
installments of interest (without regard to any applicable grace periods) to the
extent lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except
defaulted interest) to the Persons who are the registered Holders at the close
of business on the Interest Record Date immediately preceding the Interest
Payment Date even if the Securities are canceled on registration of transfer or
registration of exchange after such Interest Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal and premium, if any, and interest and Liquidated Damages, if any,
in money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and premium, if any, and interest and Liquidated Damages, if
any, by wire transfer of Federal funds (provided that the Paying Agent shall
have received wire instructions on or prior to the relevant Interest Record
Date), or interest by check payable in such U.S. Legal Tender. The Company may
deliver any such interest payment to the Paying Agent or to a Holder at the
Holder's registered address.
3. Paying Agent and Registrar.
Initially, State Street Bank and Trust Company (the "Trustee")
will act as Paying Agent and Registrar. The Company may change any Paying Agent
or Registrar without notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as Registrar.
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture, dated as
of August 18, 1997 (the "Indenture"), among the Company, Fedders Corporation, a
Delaware corporation and the sole stockholder of the Company (the "Guarantor"),
and the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. 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) (the "TIA"),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstand-
A-5
<PAGE> 90
ing anything to the contrary herein, the Securities are subject to all such
terms, and holders of Securities are referred to the Indenture and the TIA for a
statement of them. The Securities are general obligations of the Company limited
in aggregate principal amount to $100,000,000.
5. Registration Rights.
Pursuant to the Registration Rights Agreement, dated as of
August 18, 1997 (the "Registration Rights Agreement"), among the Company, the
Guarantor and the Initial Purchasers of the Series A Securities, the Company and
the Guarantor will be obligated to consummate an exchange offer pursuant to
which the Holder of this Security shall have the right to exchange this Security
for 9 3/8% Senior Subordinated Notes due 2007, Series B, of the Company (the
"Series B Securities"), which have been registered under the Securities Act, in
like principal amount and having identical terms as the Series A Securities. The
Holders of Series A Securities shall be entitled to receive certain additional
payments in the event such exchange offer is not consummated and upon certain
other conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement. The Series A Securities and the Series B
Securities are together referred to herein as the "Securities."
6. Optional Redemption.
The Securities will be redeemable at the option of the
Company, in whole or in part, at any time or from time to time, on or after
August 15, 2002 at the redemption prices (expressed as a percentage of principal
amount) set forth below, plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the Redemption Date if redeemed during the twelve-month
period commencing on August 15 of the years set forth below:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2002 104.688%
2003 103.125%
2004 101.563%
2005 and thereafter 100.000%
</TABLE>
7. Optional Redemption upon Certain Equity Issuances.
At any time, or from time to time, prior to August 15, 2000,
the Company may redeem up to 30% of the originally issued principal amount of
Securities at a redemption price equal to 109.375% of the principal amount of
the Securities so redeemed, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the Redemption Date, with the net proceeds of one or
more Equity Offerings; provided, however, that at least 70% of the originally
issued principal amount of Securities remains outstanding immediately after
giving effect to any such redemption and provided, further, that such redemption
will occur within 60 days of the date of the Closing of such Equity Offering.
8. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at its registered address. The Trustee may
select for redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal
A-6
<PAGE> 91
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Security. On and after the
Redemption Date, interest will cease to accrue on Securities or portions thereof
called for redemption so long as the Company has deposited with the Paying Agent
for the Securities funds in satisfaction of the redemption price pursuant to the
Indenture.
9. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will
be required to offer to purchase all outstanding Securities at a purchase price
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the Change of Control
Purchase Date.
10. Limitation on Disposition of Assets.
The Company is, subject to certain conditions, obligated to
make an offer to purchase Securities at a purchase price equal to 100% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the Asset Sale Purchase Date.
11. Subordination.
The Indebtedness evidenced by the Securities is, to the extent
and in the manner provided in the Indenture, subordinated and subject in right
payment to the prior payment in full in cash of all Senior Indebtedness as
defined in the Indenture, and this Security is issued subject to such
provisions. Each Holder of this Security, by accepting the same, (a) agrees to
and shall be bound by such provisions, (b) authorizes and directs the Trustee,
on behalf of such Holder, to take such action as may be necessary or appropriate
to effectuate the subordination as provided in the Indenture and (c) appoints
the Trustee attorney-in-fact of such Holder for such purpose.
12. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer or exchange of Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer or
exchange of any Securities or portions thereof selected for redemption, except
the unredeemed portion of any security being redeemed in part.
13. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
14. Unclaimed Funds.
If funds for the payment of principal or premium, if any, or
interest or Liquidated Damages, if any, remain unclaimed for two years, the
Trustee and the Paying Agent will repay the funds to the Company at its written
request. After that, all liability of the Trustee and such Paying Agent with
respect to such funds shall cease.
15. Legal Defeasance and Covenant Defeasance.
A-7
<PAGE> 92
The Company and the Guarantor may be discharged from their
obligations under the Indenture, the Securities and the Guarantee except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantee, in each case upon satisfaction of certain conditions specified in the
Indenture.
16. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture, the Securities
and the Guarantee may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without notice
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture, the Securities and the Guarantee to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of Certificated Securities or comply with any
requirements of the Commission in connection with the qualification of the
Indenture under the TIA, or make any other change that does not materially
adversely affect the rights of any Holder of a Security.
17. Restrictive Covenants.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and the Restricted Subsidiaries to make
Restricted Payments, to incur Indebtedness, to create Liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets or to engage in transactions with Affiliates. The limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
18. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guarantee except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantee unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
19. Trustee Dealings with Company.
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 the Company, its Subsidiaries or their respective Affiliates as if it
were not the Trustee.
20. No Recourse Against Others.
No stockholder, director, officer or employee of the Company
shall have any liability for any Obligation 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. Each Holder of a Security by accepting a
Security waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Securities.
A-8
<PAGE> 93
21. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
22. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
23. 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 as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
24. Governing Law.
The laws of the State of New York shall govern the Indenture,
this Security and the Guarantee without regard to principles of conflicts of
laws.
A-9
<PAGE> 94
[FORM OF NOTATION ON SECURITY RELATING TO GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
Fedders Corporation (the "Guarantor") has unconditionally and
irrevocably guaranteed on a senior subordinated basis (such guarantee being
referred to herein as the "Guarantee") (i) the due and punctual payment of the
principal of and interest or premium or Liquidated Damages, if any, on the
Securities, whether on the Final Maturity Date, by acceleration, call for
redemption, upon a Change of Control Offer, upon an Asset Sale Offer or
otherwise, the due and punctual payment of interest on the overdue principal and
interest, if any, on the Securities and expenses, indemnification or otherwise,
and the due and punctual performance of all other obligations of the Company to
the Holders or the Trustee all in accordance with the terms set forth in Article
Eleven and Article Twelve of the Indenture and (ii) in case of any extension of
time of payment or renewal of any Securities or any of such other obligations,
that the same will be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of the Guarantor to the Holders and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth and
are expressly subordinated and subject in right of payment to the prior payment
in full of all Guarantor Senior Indebtedness of the Guarantor, to the extent and
in the manner provided, in Article Eleven and Article Twelve of the Indenture,
and reference is hereby made to such Indenture for the precise terms of the
Guarantee therein made.
No director, officer, employee or stockholder, as such, of the
Guarantor shall have any liability under the Guarantee by reason of such
person's status as director, officer, employee or stockholder. Each holder of a
Security by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Guarantee Indebtedness.
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
FEDDERS CORPORATION
By:
-------------------------------
Name:
Title:
A-10
<PAGE> 95
ASSIGNMENT FORM
I or we assign and transfer this Security to
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- -------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint
--------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
----------------- -----------------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
-----------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
A-11
<PAGE> 96
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.05 or Section 4.14 of the Indenture, check the
appropriate box:
Section 4.05 [ ]
Section 4.14 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.05 or Section 4.14 of the
Indenture, state the amount: $
------------
Dated: Your Signature:
------------ -----------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
-----------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
A-12
<PAGE> 97
EXHIBIT B
---------
(FORM OF SERIES B SECURITY)
FEDDERS NORTH AMERICA, INC.
9 3/8% Senior Subordinated Note
due August 15, 2007, Series B
CUSIP No.:
No. [ ] $[ ]
FEDDERS NORTH AMERICA, INC., a Delaware corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to [ ] or registered assigns, the principal sum of
[ ] Dollars, on August 15, 2007.
Interest Payment Dates: February 15 and August 15, commencing
on February 15, 1998.
Interest Record Dates: February 1 and August 1.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officer.
FEDDERS NORTH AMERICA, INC.
By:
-------------------------------------
Name:
Title:
Attest:
-------------------------
Name:
Title:
B-1
<PAGE> 98
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 9 3/8% Senior Subordinated Notes due 2007,
Series B, described in the within-mentioned Indenture.
Dated:
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By:
-----------------------------------
Authorized Signatory
B-2
<PAGE> 99
(REVERSE OF SECURITY)
FEDDERS NORTH AMERICA, INC.
9 3/8% Senior Subordinated Note
due August 15, 2007, Series B
1. Interest.
FEDDERS NORTH AMERICA, INC., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate per annum shown above. Cash 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 August 18, 1997. The Company will pay interest semi-annually in
arrears on each Interest Payment Date, commencing February 15, 1998. 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 from time
to time on demand at the rate borne by the Securities and on overdue
installments of interest (without regard to any applicable grace periods) to the
extent lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the close
of business on the Interest Record Date immediately preceding the Interest
Payment Date even if the Securities are canceled on registration of transfer or
registration of exchange after such Interest Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal and premium, if any, and interest and Liquidated Damages, if any,
in money of the United States that at the time of payment is legal tender for
payment of public and private debts ("U.S. Legal Tender"). However, the Company
may pay principal and premium, if any, and interest and Liquidated Damages, if
any, by wire transfer of Federal funds (provided that the Paying Agent shall
have received wire instructions on or prior to the relevant Interest Record
Date), or interest by check payable in such U.S. Legal Tender. The Company may
deliver any such interest payment to the Paying Agent or to a Holder at the
Holder's registered address.
3. Paying Agent and Registrar.
Initially, State Street Bank and Trust Company (the "Trustee")
will act as Paying Agent and Registrar. The Company may change any Paying Agent
or Registrar without notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as Registrar.
4. Indenture and Guarantees.
The Company issued the Securities under an Indenture, dated as
of August 18, 1997 (the "Indenture"), among the Company, Fedders Corporation, a
Delaware corporation and the sole stockholder of the Company (the "Guarantor"),
and the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. 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) (the "TIA"),
as in effect on the date of the Indenture until such time as the Indenture is
qualified under the TIA, and thereafter as in effect on the date on which the
Indenture is qualified under the TIA. Notwithstand-
B-3
<PAGE> 100
ing anything to the contrary herein, the Securities are subject to all such
terms, and Holders of Securities are referred to the Indenture and the TIA for a
statement of them. The Securities are general obligations of the Company limited
in aggregate principal amount to $100,000,000.
5. Exchange Offer.
The Series B Securities were issued pursuant to an exchange
offer pursuant to which 9 3/8% Senior Subordinated Notes due 2007, Series A, of
the Company (the "Series A Securities"), in like principal amount and having
substantially identical terms as the Series B Securities, were exchanged for the
Series B Securities. The Series A Securities and the Series B Securities are
together referred to herein as the "Securities."
6. Optional Redemption.
The Securities will be redeemable at the option of the
Company, in whole or in part, at any time or from time to time, on or after
August 15, 2002 at the redemption prices (expressed as a percentage of principal
amount) set forth below, plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the Redemption Date if redeemed during the twelve-month
period commencing on August 15 of the years set forth below:
<TABLE>
<CAPTION>
Year Percentage
- ---- ----------
<S> <C>
2002 104.688%
2003 103.125%
2004 101.563%
2005 and thereafter........ 100.000%
</TABLE>
7. Optional Redemption upon Certain Equity Issuances.
At any time, or from time to time, prior to August 15, 2000,
the Company may redeem up to 30% of the originally issued principal amount of
Securities at a redemption price equal to 109.375% of the principal amount of
the Securities so redeemed, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net proceeds of one or
more Equity Offerings; provided, however, that at least 70% of the originally
issued principal amount of Securities remains outstanding immediately after
giving effect to any such redemption and provided, further, that such redemption
will occur within 60 days of the date of the Closing of such Equity Offering.
8. Notice of Redemption.
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at its registered address. The Trustee may
select for redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption so long as the Company has deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture.
B-4
<PAGE> 101
9. Change of Control Offer.
Upon the occurrence of a Change of Control, the Company will
be required to offer to purchase all outstanding Securities at a purchase price
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the Change of Control
Purchase Date.
10. Limitation on Disposition of Assets.
The Company is, subject to certain conditions, obligated to
make an offer to purchase Securities at a purchase price equal to 100% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the Asset Sale Purchase Date.
11. Subordination.
The Indebtedness evidenced by the Securities is, to the extent
and in the manner provided in the Indenture, subordinated and subject in right
of payment to the prior payment in full in cash of all Senior Indebtedness as
defined in the Indenture, and this Security is issued subject to such
provisions. Each Holder of this Security, by accepting the same, (a) agrees to
and shall be bound by such provisions, (b) authorizes and directs the Trustee,
on behalf of such Holder, to take such action as may be necessary or appropriate
to effectuate the subordination as provided in the Indenture and (c) appoints
the Trustee attorney-in-fact of such Holder for such purpose.
12. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer or exchange of Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer or
exchange of any Securities or portions thereof selected for redemption, except
the unredeemed portion of any security being redeemed in part.
13. Persons Deemed Owners.
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
14. Unclaimed Funds.
If funds for the payment of principal or premium, if any, or
interest or Liquidated Damages, if any, remain unclaimed for two years, the
Trustee and the Paying Agent will repay the funds to the Company at its written
request. After that, all liability of the Trustee and such Paying Agent with
respect to such funds shall cease.
15. Legal Defeasance and Covenant Defeasance.
The Company and the Guarantor may be discharged from their
obligations under the Indenture, the Securities and the Guarantee except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantee, in each case upon satisfaction of certain conditions specified in the
Indenture.
B-5
<PAGE> 102
16. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture, the Securities
and the Guarantee may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without notice
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture, the Securities and the Guarantee to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of Certificated Securities or comply with any
requirements of the Commission in connection with the qualification of the
Indenture under the TIA, or make any other change that does not materially
adversely affect the rights of any Holder of a Security.
17. Restrictive Covenants.
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and the Restricted Subsidiaries to make
Restricted Payments, to incur Indebtedness, to create Liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets or to engage in transactions with Affiliates. The limitations are subject
to a number of important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such limitations.
18. Defaults and Remedies.
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guarantee except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantee unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
19. Trustee Dealings with Company.
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 the Company, its Subsidiaries or their respective Affiliates as if it
were not the Trustee.
20. No Recourse Against Others.
No stockholder, director, officer or employee of the Company
shall have any liability for any Obligation 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. Each Holder of a Security by accepting a
Security waives and releases all such liability. The waiver and release are part
of the consideration for the issuance of the Securities.
21. Authentication.
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
B-6
<PAGE> 103
22. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
23. 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 as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
24. Governing Law.
The laws of the State of New York shall govern the Indenture,
this Security and the Guarantee without regard to principles of conflicts of
laws.
B-7
<PAGE> 104
[FORM OF NOTATION ON SECURITY RELATING TO GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
Fedders Corporation (the "Guarantor") has unconditionally and
irrevocably guaranteed on a senior subordinated basis (such guarantee being
referred to herein as the "Guarantee") (i) the due and punctual payment of the
principal of and interest or premium or Liquidated Damages, if any, on the
Securities, whether on the Final Maturity Date, by acceleration, call for
redemption, upon a Change of Control Offer, upon an Asset Sale Offer or
otherwise, the due and punctual payment of interest on the overdue principal and
interest, if any, on the Securities and expenses, indemnification or otherwise,
and the due and punctual performance of all other obligations of the Company to
the Holders or the Trustee all in accordance with the terms set forth in Article
Eleven and Article Twelve of the Indenture and (ii) in case of any extension of
time of payment or renewal of any Securities or any of such other obligations,
that the same will be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of the Guarantor to the Holders and to the
Trustee pursuant to the Guarantee and the Indenture are expressly set forth and
are expressly subordinated and subject in right of payment to the prior payment
in full of all Guarantor Senior Indebtedness of the Guarantor, to the extent and
in the manner provided, in Article Eleven and Article Twelve of the Indenture,
and reference is hereby made to such Indenture for the precise terms of the
Guarantee therein made.
No director, officer, employee or stockholder, as such, of the
Guarantor shall have any liability under the Guarantee by reason of such
person's status as director, officer, employee or stockholder. Each holder of a
Security by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the
Guarantee Indebtedness.
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Securities upon which the
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
FEDDERS CORPORATION
By:
----------------------------------
Name:
Title:
B-8
<PAGE> 105
ASSIGNMENT FORM
I or we assign and transfer this Security to
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- -------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint
--------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
--------------- ----------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
-----------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
B-9
<PAGE> 106
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.05 or Section 4.14 of the Indenture, check the
appropriate box:
Section 4.05 [ ]
Section 4.14 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.05 or Section 4.14 of the
Indenture, state the amount: $
-------------
Dated: Your Signature:
--------------- ----------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
-----------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
B-10
<PAGE> 107
EXHIBIT C
---------
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends required in
the case of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY
BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN 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.
C-1
<PAGE> 108
EXHIBIT D
---------
Form of Certificate To Be
Delivered in Connection with
Transfers to Institutional Accredited Investors
---------------, ----
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Re: Fedders North America, Inc. (the "Company")
Indenture (the "Indenture") relating to 9 3/8% Senior
Subordinated Notes due 2007, Series A, or 9 3/8% Senior
Subordinated Notes due 2007, Series B
Ladies and Gentlemen:
In connection with our proposed purchase of 9 3/8% Senior
Subordinated Notes due 2007, Series A, or 9 3/8% Senior Subordinated Notes due
2007, Series B (the "Securities"), of the Company, we confirm that:
1. We have received such information as we deem necessary in
order to make our investment decision.
2. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions set forth
in the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Securities except in
compliance with, such restrictions and conditions and the Securities
Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities
have not been registered under the Securities Act, and that the
Securities may not be offered or sold within the United States or to,
or for the account or benefit of, U.S. persons except as permitted in
the following sentence. We agree, on our own behalf and on behalf of
any accounts for which we are acting as hereinafter stated, that if we
should sell any Securities, we will do so only (A) to the Company or
any subsidiary thereof, (B) inside the United States in accordance with
Rule 144A under the Securities Act to a "qualified institutional buyer"
(as defined therein), (C) inside the United States to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
the Trustee a signed letter substantially in the form hereof, (D)
outside the United States in accordance with Regulation S under the
Securities Act, (E) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available), or (F)
pursuant to an effective registration statement under the Securities
Act, and we further agree to provide to any person purchasing
Securities from us a notice advising such purchaser that resales of the
Securities are restricted as stated herein.
4. We understand that, on any proposed resale of Securities,
we will be required to furnish to the Trustee and the Company such
certification, legal opinions and other information as the Trustee and
the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that
the Securities purchased by us will bear a legend to the foregoing
effect.
D-1
<PAGE> 109
5. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Securities, and we and any accounts for which we are
acting are each able to bear the economic risk of our or their
investment, as the case may be.
6. We are acquiring the Securities purchased by us for our
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
--------------------------------------
[Authorized Signatory]
D-2
<PAGE> 110
EXHIBIT E
---------
[FORM OF CERTIFICATION TO BE GIVEN BY HOLDERS OF
BENEFICIAL INTEREST IN A TEMPORARY
REGULATION S GLOBAL SECURITY
TO EUROCLEAR OR CEDEL]
OWNER SECURITIES CERTIFICATION
FEDDERS NORTH AMERICA, INC.
9 3/8% Senior Subordinated Notes due 2007
CUSIP No. U 31334AA0
Reference is hereby made to the Indenture, dated as of August
18, 1997 (the "Indenture"), by and among Fedders North America, Inc., as Issuer,
Fedders Corporation, as Guarantor, and State Street Bank and Trust Company, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in this Indenture.
This is to certify that, as of the date hereof, $ of the
above-captioned Securities (the "Securities") are beneficially owned by non-U.S.
person(s). As used in this paragraph, the term "U.S. person" has the meaning
given to it by Regulation S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by tested telex on or
prior to the date on which you intend to submit your certification relating to
the Securities held by you for our account in accordance with your operating
procedures if any applicable statement herein is not correct on such date, and
in the absence of any such notification it may be assumed that this
certification applies as of such date.
We understand that this certificate is required in connection
with certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceedings.
This certificate and the statements contained herein are made for your benefit
and the benefit of the Issuer, the Guarantor and the Initial Purchasers.
Dated:
-----------, -----
By:
----------------------------------------
As, or as agent for, the beneficial
owner(s) of the Securities to which this
certificate relates.
E-1
<PAGE> 111
EXHIBIT F
---------
[FORM OF CERTIFICATION TO BE GIVEN
BY THE EUROCLEAR OPERATOR OR
CEDEL BANK, SOCIETE ANONYME]
DEPOSITORY SECURITIES CERTIFICATION
FEDDERS NORTH AMERICA, INC.
9 3/8% Senior Subordinated Notes due 2007
CUSIP No. U 31334AA0
Reference is hereby made to the Indenture, dated as of August
18, 1997 (the "Indenture"), by and among Fedders North America, Inc., as Issuer,
Fedders Corporation, as Guarantor, and State Street Bank and Trust Company, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in this Indenture.
This is to certify that, with respect to U.S.$
principal amount of the above-captioned Securities (the "Securities"), except as
set forth below, we have received in writing, by tested telex or by electronic
transmission, from member organizations appearing in our records as persons
being entitled to a portion of the principal amount of the Securities (our
"Member Organizations"), certifications with respect to such portion,
substantially to the effect set forth in this Indenture.(1)
We further certify (i) that we are not making available
herewith for exchange (or, if relevant, exercise of any rights or collection of
any interest) any portion of the Temporary Regulation S Global Security excepted
in such certifications and (ii) that as of the date hereof we have not received
any notification from any of our Member Organizations to the effect that the
statements made by such Member Organizations with respect to any portion of the
part submitted herewith for exchange (or, if relevant, exercise of any rights or
collection of any interest) are no longer true and cannot be relied upon as of
the date hereof.
- ------------------------
(1) Unless Morgan Guaranty Trust Company of New York, London Branch is
otherwise informed by the Agent, the long form certificate set out in
the Operating Procedures will be deemed to meet the requirements of
this sentence.
F-1
<PAGE> 112
We understand that this certification is required in
connection with certain securities laws of the United States. In connection
therewith, if administrative or legal proceedings are commenced or threatened in
connection with which this certification is or would be relevant, we irrevocably
authorize you to produce this certification to any interested party in such
proceedings. This certificate and the statements contained herein are made for
your benefit and the benefit of the Issuer, the Guarantor and the Initial
Purchasers.
Dated:
---------,------
Yours faithfully,
[MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as operator of the Euroclear System]
or
[CEDEL BANK, SOCIETE ANONYME]
By:
----------------------------------------
F-2
<PAGE> 113
EXHIBIT G
---------
[FORM OF CERTIFICATION TO BE GIVEN BY
TRANSFEREE OF BENEFICIAL INTEREST IN A
TEMPORARY REGULATION S GLOBAL SECURITY]
TRANSFEREE SECURITIES CERTIFICATION
FEDDERS NORTH AMERICA, INC.
9 3/8% Senior Subordinated Notes due 2007
CUSIP No. U 31334AA0
Reference is hereby made to the Indenture, dated as of August
18, 1997 (the "Indenture"), by and among Fedders North America, Inc., as Issuer,
Fedders Corporation, as Guarantor, and State Street Bank and Trust Company, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in this Indenture.
For purposes of acquiring a beneficial interest in the
Temporary Regulation S Global Security, the undersigned certifies that it is not
a U.S. Person as defined by Regulation S under the Securities Act of 1933, as
amended.
We undertake to advise you promptly by tested telex on or
prior to the date on which you intend to submit your certification relating to
the Securities held by you in which we intend to acquire a beneficial interest
in accordance with your operating procedures if any applicable statement herein
is not correct on such date, and in the absence of any such notification it may
be assumed that this certification applies as of such date.
We understand that this certificate is required in connection
with certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuer, the Guarantor and the Initial Purchasers.
Dated:
----------------,-----
By:
--------------------------------------------
As, or as agent for, the beneficial acquiror
of the Securities to which this certificate
relates.
G-1
<PAGE> 114
EXHIBIT H
---------
FORM OF CERTIFICATION FOR TRANSFER OR
EXCHANGE OF RESTRICTED GLOBAL SECURITY
TO TEMPORARY REGULATION S GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Re: Fedders North America, Inc.
9 3/8% Senior Subordinated Notes
due 2007 (the "Securities")
Reference is hereby made to the Indenture, dated as of August
18, 1997 (the "Indenture"), by and among Fedders North America, Inc., as Issuer,
Fedders Corporation, as Guarantor, and State Street Bank and Trust Company, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in this Indenture.
This letter relates to U.S. $ aggregate principal
amount of Securities which are held in the form of the Restricted Global
Security (CUSIP No. 313139AA5) with the Depository in the name of [insert name
of transferor] (the "Transferor"). The Transferor has requested a transfer of
such beneficial interest in the Securities to a Person who will take delivery
thereof in the form of an equal aggregate principal amount of Securities
evidenced by the Temporary Regulation S Global Security (CUSIP No. U31334AA0) to
be held with the Depository in the name of [Euroclear] [Cedel Bank, societe
anonyme].
In connection with such request and in respect of such
Securities, the Transferor does hereby certify that such transfer has been
effected in accordance with the transfer restrictions set forth in the
Securities and pursuant to and in accordance with Regulation S under the
Securities Act of 1933, as amended (the "Securities Act"), and accordingly the
Transferor does hereby certify that:
(1) the offer of the Securities was not made to a person in
the United States;
[(2) at the time the buy order was originated, the transferee
was outside the United States or the Transferor and any person acting
on its behalf reasonably believed that the transferee was outside the
United States;]
[(2) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither the
Transferor nor any person acting on our behalf knows that the
transaction was pre-arranged with a buyer in the United States;](2)
- ---------------------
(2) Insert one of these two provisions, which come from the definition of
"offshore transaction" in Regulation S.
H-1
<PAGE> 115
(3) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) upon completion of the transaction, the beneficial
interest being transferred as described above is to be held with the
Depository in the name of [Euroclear] [Cedel Bank, societe anonyme].
We understand that this certificate is required in connection
with certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuer, the Guarantor and the Initial Purchasers.
[Insert Name of Transferor]
By:
--------------------------------------
Name:
Title:
Dated:
---------------------------
cc: Fedders North America, Inc.
H-2
<PAGE> 116
EXHIBIT I
---------
FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF
RESTRICTED GLOBAL SECURITY TO
PERMANENT REGULATION S GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Re: Fedders North America, Inc.
9 3/8% Senior Subordinated Notes
due 2007 (the "Securities")
Reference is hereby made to the Indenture, dated as of August
18, 1997 (the "Indenture"), by and among Fedders North America, Inc., as Issuer,
Fedders Corporation, as Guarantor, and State Street Bank and Trust Company, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in this Indenture.
This letter relates to U.S.$ aggregate principal
amount of Securities which are held in the form of the Restricted Global
Security (CUSIP No. 313139AA5) with the Depository in the name of [insert name
of transferor] (the "Transferor"). The Transferor has requested a transfer of
such beneficial interest in the Securities to a Person who will take delivery
thereof in the form of an equal aggregate principal amount of Securities
evidenced by the Permanent Regulation S Global Security (CUSIP No. U31334AA0).
In connection with such request, and in respect of such
Securities, the Transferor does hereby certify that such transfer has been
effected in accordance with the transfer restrictions set forth in the
Securities and,
(1) with respect to transfers made in reliance on Regulation S
under the Securities Act of 1933, as amended (the "Securities Act"), the
Transferor does hereby certify that:
(A) the offer of the Securities was not made to a person in
the United States;
[(B) (at the time the buy order was originated, the transferee
was outside the United States or the Transferor and any person acting
on its behalf reasonably believed that the transferee was outside the
United States;]
[(B) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither the
Transferor nor any person acting on our behalf knows that the
transaction was pre-arranged with a buyer in the United States;](3)
- --------------------
(3) Insert one of these two provisions, which come from the definition of
"offshore transactions" in Regulation S.
I-1
<PAGE> 117
(C) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable; and
(D) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(2) with respect to transfers made in reliance on Rule 144
under the Securities Act, the Transferor does hereby certify that the Securities
are being transferred in a transaction permitted by Rule 144 under the
Securities Act.
We understand that this certificate is required in connection
with certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuer, the Guarantor and the Initial Purchasers.
[Insert Name of Transferor]
By:
--------------------------------------
Name:
Title:
Dated:
---------------------------
cc: Fedders North America, Inc.
I-2
<PAGE> 118
EXHIBIT J
---------
FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF
TEMPORARY REGULATION S GLOBAL SECURITY
OR PERMANENT REGULATION S GLOBAL SECURITY TO
RESTRICTED GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Re: Fedders North America, Inc.
9 3/8% Senior Subordinated Notes
due 2007 (the "Securities")
Reference is hereby made to the Indenture, dated as of August
18, 1997 (the "Indenture"), by and among Fedders North America, Inc., as Issuer,
Fedders Corporation, as Guarantor, and State Street Bank and Trust Company, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in this Indenture.
This letter relates to U.S.$ principal amount of
Securities which are evidenced by an aggregate [Temporary Regulation S Global
Security (CUSIP No. U31334AA0)] [Permanent Regulation S Global Security (CUSIP
No. U31334AA0)] and held with the Depository through [Euroclear] [Cedel] (Common
Code ) in the name of [insert name of transferor] (the "Transferor").
The Transferor has requested a transfer of such beneficial interest in
Securities to a person that will take delivery thereof in the form of an equal
principal amount of Securities evidenced by a Restricted Global Security of the
same series and of like tenor as the Securities (CUSIP No. 313139AA5).
In connection with such request and in respect of such
Securities, the Transferor does hereby certify that such transfer is being
effected pursuant to and in accordance with Rule 144A under the Securities Act
and, accordingly, the Transferor does hereby further certify that the Securities
are being transferred to a person that the Transferor reasonably believes is
purchasing the Securities for its own account, or for one or more accounts with
respect to which such person exercises sole investment discretion, and such
person and each such account is a "qualified institutional buyer" within the
meaning of Rule 144A, in each case in a transaction meeting the requirements of
Rule 144A and in accordance with any applicable securities laws of any state of
the United States.
J-1
<PAGE> 119
This certificate and the statements contained herein are made
for your benefit and the benefit of the Issuer, the Guarantor and the Initial
Purchasers.
[Insert Name of Transferor]
By:
--------------------------------------
Name:
Title:
Dated:
---------------------------
cc: Fedders North America, Inc.
J-2
<PAGE> 120
EXHIBIT K-1
-----------
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL RESTRICTED SECURITY TO
RESTRICTED GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Re: Fedders North America, Inc.
9 3/8% Senior Subordinated Notes
due 2007 (the "Securities")
Reference is hereby made to the Indenture, dated as of August
18, 1997 (the "Indenture"), by and among Fedders North America, Inc., as Issuer,
Fedders Corporation, as Guarantor, and State Street Bank and Trust Company, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in this Indenture.
This letter relates to $ principal amount of
Restricted Securities held in definitive form (CUSIP No. ) by [insert
name of transferor] (the "Transferor"). The Transferor has requested an exchange
or transfer of such Securities.
In connection with such request and in respect of such
Securities, the Transferor does hereby certify that (i) such Securities are
owned by the Transferor and are being exchanged without transfer or (ii) such
transfer has been effected pursuant to and in accordance with Rule 144A or Rule
144 under the United States Securities Act of 1933, as amended (the "Securities
Act") and accordingly the Transferor does hereby further certify that:
(1) if the transfer has been effected pursuant to
Rule 144A:
(A) the Securities are being transferred to a person
that the Transferor reasonably believes is purchasing the
Securities for its own account, or for one or more accounts
with respect to which such Person exercises sole investment
discretion;
(B) such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A; and
(C) the Securities have been transferred in a
transaction meeting the requirements of Rule 144A and in
accordance with any applicable securities laws of any state of
the United States; or
(2) if the transfer has been effected pursuant to
Rule 144:
(A) more than two years has elapsed since the date of
the closing of the initial placement of the Securities
pursuant to the Purchase Agreement; and
K-1-1
<PAGE> 121
(B) the Securities have been transferred in a
transaction permitted by Rule 144 and made in accordance with
any applicable securities laws of any state of the United
States.
We understand that this certificate is required in connection
with certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuer, the Guarantor and the Initial Purchasers.
Dated:
---------------'------
[Insert Name of Transferor]
By:
--------------------------------------
Name:
Title:
cc: Fedders North America, Inc.
K-1-2
<PAGE> 122
EXHIBIT K-2
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL RESTRICTED SECURITY TO
PERMANENT REGULATION S GLOBAL SECURITY
OR TEMPORARY REGULATION S GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Re: Fedders North America, Inc.
9 3/8% Senior Subordinated Notes
due 2007 (the "Securities")
Reference is hereby made to the Indenture, dated as of August
18, 1997 (the "Indenture"), by and among Fedders North America, Inc., as Issuer,
Fedders Corporation, as Guarantor, and State Street Bank and Trust Company, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in this Indenture.
This letter relates to $ principal amount of
Restricted Securities held in definitive form (CUSIP No. ) by [insert
name of transferor] (the "Transferor"). The Transferor has requested an exchange
or transfer of such Securities.
In connection with such request and in respect of such
Securities, the Transferor does hereby certify that (i) such Securities are
owned by the Transferor and are being exchanged without transfer or (ii) such
transfer has been effected pursuant to and in accordance with (a) Rule 903 or
Rule 904 under the Securities Act of 1933, as amended (the "Securities Act"), or
(b) Rule 144 under the Securities Act, and accordingly the Transferor does
hereby further certify that:
(1) if the transfer has been effected pursuant to
Rule 903 or Rule 904:
(A) the offer of the Securities was not made to a person
in the United States;
(B) either;
(i) at the time the buy order was originated, the
transferee was outside the United States or the Transferor and
any person acting on its behalf reasonably believed that the
transferee was outside the United States, or
(ii) the transaction was executed in, on or through
the facilities of a designated offshore securities market and
neither the Transferor nor any person acting on its behalf
knows that the transaction was pre-arranged with a buyer in
the United States;
(C) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable;
K-2-1
<PAGE> 123
(D) the transaction is not part of a plan or scheme to evade
the registration requirements of the Act; and
(E) if such transfer is to occur during the Restricted Period,
upon completion of the transaction, the beneficial interest being
transferred as described above was held with the Depository through
[Euroclear] [CEDEL]; or
(2) if the transfer has been effected pursuant to Rule 144:
(A) more than two years has elapsed since the date of the
closing of the initial placement of the Securities pursuant to the
Purchase Agreement; and
(B) the Securities have been transferred in a transaction
permitted by Rule 144 and made in accordance with any applicable
securities laws of any state of the United States.
We understand that this certificate is required in connection
with certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuer, the Guarantor and the Initial Purchasers.
Dated:
---------------'------
[Insert Name of Transferor]
By:
--------------------------------------
Name:
Title:
cc: Fedders North America, Inc.
K-2-2
<PAGE> 124
EXHIBIT L-1
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL PERMANENT REGULATION S
SECURITY TO RESTRICTED GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Re: Fedders North America, Inc.
9 3/8% Senior Subordinated Notes
due 2007 (the "Securities")
Reference is hereby made to the Indenture, dated as of August
18, 1997 (the "Indenture"), by and among Fedders North America, Inc., as Issuer,
Fedders Corporation, as Guarantor, and State Street Bank and Trust Company, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in this Indenture.
This letter relates to $ principal amount of
Restricted Securities held in definitive form (CUSIP No. ) by [insert
name of transferor] (the "Transferor"). The Transferor has requested an exchange
or transfer of such Securities.
In connection with such request and in respect of such
Securities, the Transferor does hereby certify that (i) such Securities are
owned by the Transferor and are being exchanged without transfer or (ii) such
transfer has been effected pursuant to and in accordance with Rule 144A under
the Securities Act, and accordingly the Transferor does hereby further certify
that the Securities are being transferred to a person that the Transferor
reasonably believes is purchasing the Securities for its own account, or for one
or more accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified institutional
buyer" within the meaning of Rule 144A, in each case in a transaction meeting
the requirements of Rule 144A and in accordance with any applicable securities
laws of any state of the United States.
L-1-1
<PAGE> 125
We understand that this certificate is required in connection
with certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuer, the Guarantor and the Initial Purchasers.
Dated:
---------------'------
[Insert Name of Transferor]
By:
--------------------------------------
Name:
Title:
cc: Fedders North America, Inc.
L-1-2
<PAGE> 126
EXHIBIT L-2
FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL PERMANENT REGULATION S
SECURITY TO PERMANENT REGULATION S GLOBAL SECURITY
State Street Bank and Trust Company,
as Trustee
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department
Re: Fedders North America, Inc.
9 3/8% Senior Subordinated Notes
due 2007 (the "Securities")
Reference is hereby made to the Indenture, dated as of August
18, 1997 (the "Indenture"), by and among Fedders North America, Inc., as Issuer,
Fedders Corporation, as Guarantor, and State Street Bank and Trust Company, as
Trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in this Indenture.
This letter relates to $ principal amount of
Restricted Securities held in definitive form (CUSIP No. ) by [insert
name of transferor] (the "Transferor"). The Transferor has requested an exchange
or transfer of such Securities.
In connection with such request and in respect of such
Securities, the Transferor does hereby certify that (i) such Securities are
owned by the Transferor and are being exchanged without transfer or (ii) such
transfer has been effected pursuant to and in accordance with (a) Rule 903 or
Rule 904 under the Securities Act of 1933, as amended (the "Securities Act"), or
(b) Rule 144 under the Securities Act, and accordingly the Transferor does
hereby further certify that:
(1) if the transfer has been effected pursuant to Rule 903 or
Rule 904:
(A) the offer of the Securities was not made to a
person in the United States;
(B) either;
(i) at the time the buy order was
originated, the transferee was outside the United
States or the Transferor and any person acting on its
behalf reasonably believed that the transferee was
outside the United States, or
(ii) the transaction was executed in, on or
through the facilities of a designated offshore
securities market and neither the Transferor nor any
person acting on its behalf knows that the
transaction was pre-arranged with a buyer in the
United States;
(C) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904 (b) of
Regulation S, as applicable;
L-2-1
<PAGE> 127
(D) the transaction is not part of a plan or scheme
to evade the registration requirements of the Act; and
(E) if such transfer is to occur during the
Restricted Period, upon completion of the transaction, the
beneficial interest being transferred as described above was
held with the Depository through [Euroclear] [CEDEL]; or
(2) if the transfer has been effected pursuant to Rule 144:
(A) more than two years has elapsed since the date of
the closing of the initial placement of the Securities
pursuant to the Purchase Agreement; and
(B) the Securities have been transferred in a
transaction permitted by Rule 144 and made in accordance with
any applicable securities laws of any state of the United
States.
We understand that this certificate is required in connection
with certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceeding. This
certificate and the statements contained herein are made for your benefit and
the benefit of the Issuer, Guarantor and the Initial Purchasers.
Dated:
---------------'------
[Insert Name of Transferor]
By:
--------------------------------------
Name:
Title:
cc: Fedders North America, Inc.
L-2-2
<PAGE> 1
Exhibit 4.2
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of August 18, 1997
by and among
FEDDERS NORTH AMERICA, INC.
FEDDERS CORPORATION
as Guarantor
and
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made
and entered into as of August 18, 1997, by and among Fedders North America,
Inc., a Delaware corporation (the "Company"), Fedders Corporation, a Delaware
corporation (the "Guarantor"), and Donaldson, Lufkin and Jenrette Securities
Corporation and Goldman, Sachs & Co. (each an "Initial Purchaser" and,
collectively, the "Initial Purchasers"), each of whom has agreed to purchase the
Company's 9 3/8% Senior Subordinated Notes due 2007 (the "Series A Notes")
pursuant to the Purchase Agreement (as defined below):
This Agreement is made pursuant to the Purchase Agreement,
dated August 11, 1997 (the "Purchase Agreement"), by and among the Company, the
Guarantor and the Initial Purchasers. In order to induce the Initial Purchasers
to purchase the Series A Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 3 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Advice: As defined in Section 6(d) hereof.
Business Day: Any day except a Saturday, Sunday or other day
in the City of New York, or in the city of the corporate trust office of the
Trustee, on which banks are authorized to close.
Broker-Dealer: Any broker or dealer registered under the
Exchange Act.
Broker-Dealer Transfer Restricted Securities: Exchange Notes
that are acquired by a Broker-Dealer in the Exchange Offer in exchange for
Series A Notes that such Broker-Dealer acquired for its own account as a result
of market making activities or other trading activities (other than Series A
Notes acquired directly from the Company or any of its affiliates).
Certificated Securities: As defined in the Indenture.
Closing Date: The date hereof.
1
<PAGE> 3
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (b) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar of Exchange Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes tendered by Holders thereof
pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Series A Notes, each
Interest Payment Date.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Notes: The Company's 9 3/8% Senior Subordinated Notes
due 2007 to be issued pursuant to the Indenture (i) in the Exchange Offer or
(ii) upon the request of any Holder of Series A Notes covered by a Shelf
Registration Statement, in exchange for such Series A Notes.
Exchange Offer: The registration by the Company under the Act
of the Exchange Notes pursuant to the Exchange Offer Registration Statement
pursuant to which the Company shall offer the Holders of all outstanding
Transfer Restricted Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities for Exchange Notes in an aggregate principal
amount equal to the aggregate principal amount of the Transfer Restricted
Securities tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration
Statement relating to the Exchange Offer.
Exempt Resales: The transactions in which the Initial
Purchasers propose to sell the Series A Notes (i) to certain "qualified
institutional buyers," as such term is defined in Rule 144A under the Act and
(ii) to persons permitted to purchase the Series A Notes in offshore
transactions in reliance on Regulation S under the Act.
Global Securities: As defined in the Indenture.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
2
<PAGE> 4
Indenture: The Indenture, dated the Closing Date, among the
Company, the Guarantor and State Street Bank and Trust Company, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture is
amended or supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the
Notes.
Liquidated Damages: As defined in Section 5 hereof.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Exchange Notes.
Person: An individual, partnership, corporation, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration
Statement at the time such Registration Statement is declared effective, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date, each
Person who is a Holder of Notes on the record date with respect to the Interest
Payment Date on which such Damages Payment Date shall occur.
Registrar: As defined in the Indenture.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the
Company and the Guarantor relating to (a) an offering of Exchange Notes pursuant
to an Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i) which
is filed pursuant to the provisions of this Agreement and (ii) including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds
Broker-Dealer Transfer Restricted Securities.
Shelf Registration Statement: As defined in Section 4 hereof.
3
<PAGE> 5
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest
to occur of (a) the date on which such Note is exchanged in the Exchange Offer
and entitled to be resold to the public by the Holder thereof without complying
with the prospectus delivery requirements of the Act, (b) the date on which such
Note has been disposed of in accordance with a Shelf Registration Statement, (c)
the date on which such Note is disposed of by a Broker-Dealer pursuant to the
"Plan of Distribution" contemplated by the Exchange Offer Registration Statement
(including delivery of the Prospectus contained therein) or (d) the date on
which such Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted
Securities (each, a "Holder") whenever such Person owns Transfer Restricted
Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by
applicable federal law or applicable interpretation of the staff of the
Commission (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company and the Guarantor shall (i) cause to be filed with
the Commission as soon as practicable after the Closing Date, but in no event
later than 45 days after the Closing Date, the Exchange Offer Registration
Statement, (ii) use its best efforts to cause such Exchange Offer Registration
Statement to become effective at the earliest practicable time, but in no event
later than 120 days after the Closing Date, (iii) in connection with the
foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause such Exchange Offer
Registration Statement to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the Exchange Notes to be
made under the state Blue Sky or securities laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and use
its best efforts to Consummate the Exchange Offer. The Exchange Offer shall
4
<PAGE> 6
be on the appropriate form permitting registration of the Exchange Notes to be
offered in exchange for the Series A Notes that are Transfer Restricted
Securities and to permit sales of Broker-Dealer Transfer Restricted Securities
by Restricted Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company and the Guarantor shall use their respective
best efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 20 Business Days. The Company and the Guarantor shall
cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Notes shall be included in the
Exchange Offer Registration Statement. The Company and the Guarantor shall use
their respective best efforts to cause the Exchange Offer to be Consummated on
the earliest practicable date after the Exchange Offer Registration Statement
has become effective, but in no event later than 30 Business Days thereafter.
(c) The Company shall include a "Plan of Distribution" section
in the Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Restricted Broker-Dealer who holds Series A Notes that
are Transfer Restricted Securities and that were acquired for the account of
such Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Series A Notes (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company)
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of each Exchange Note received by such Broker-Dealer in the Exchange Offer,
which prospectus delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer Registration
Statement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers that the Commission may require in order
to permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer, except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
The Company and the Guarantor shall use their respective best
efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(c) below to the extent necessary to en-
5
<PAGE> 7
sure that it is available for sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, and to ensure that such Registration
Statement conforms with the requirements of this Agreement, the Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of one year from the date on which the Exchange Offer is
Consummated.
The Company and the Guarantor shall promptly provide
sufficient copies of the latest version of such Prospectus to such Restricted
Broker-Dealers promptly upon request at any time during such one-year period in
order to facilitate such sales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company and the Guarantor
are not required to file an Exchange Offer Registration Statement with respect
to the Exchange Notes or not permitted to Consummate the Exchange Offer because
the Exchange Offer is not permitted by applicable law or the applicable
interpretations of the staff of the Commission (after the procedures set forth
in Section 6(a)(i) below have been complied with) or (ii) if any Holder of
Transfer Restricted Securities shall notify the Company within 10 Business Days
following the Consummation of the Exchange Offer that (A) such Holder was
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) such Holder may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder or (C) such Holder is a Broker-Dealer
and holds Series A Notes acquired directly from the Company or one of its
affiliates, then the Company and the Guarantor shall (x) cause to be filed on or
prior to 45 days after the date on which the Company determines that it is not
required to file the Exchange Offer Registration Statement or not permitted to
consummate the Exchange Offer pursuant to clause (i) above or 45 days after the
date on which the Company receives the notice specified in clause (ii) above a
shelf registration statement pursuant to Rule 415 under the Act (which may be an
amendment to the Exchange Offer Registration Statement (in either event, the
"Shelf Registration Statement")), relating to all Transfer Restricted Securities
the Holders of which shall have provided the information required pursuant to
Section 4(b) hereof, and shall (y) use their respective best efforts to cause
such Shelf Registration Statement to become effective on or prior to 120 days
after the date on which the Company becomes obligated to file such Shelf
Registration Statement. If, after the Company has filed an Exchange Offer
Registration Statement which satisfies the requirements of Section 3(a) above,
the Company is required to file and make effective a Shelf Registration
Statement solely because the Exchange Offer shall not be permitted under
applicable federal law, then the filing of the Exchange Offer Registra-
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<PAGE> 8
tion Statement shall be deemed to satisfy the requirements of clause (x) above.
Such an event shall have no effect on the requirements of clause (y) above. The
Company and the Guarantor shall use their respective best efforts to keep the
Shelf Registration Statement discussed in this Section 4(a) continuously
effective, supplemented and amended as required by and subject to the provisions
of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a), and to ensure that it conforms
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of at
least two years (as extended pursuant to Section 6(c)(i)) following the date on
which such Shelf Registration Statement first becomes effective under the Act.
(b) Provision by Holders of Certain Information in Connection
with the Shelf Registration Statement. No older of Transfer Restricted
Securities may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 20 days after receipt of a request
therefor, such information specified in item 507 of Regulation S-K under the Act
for use in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. No Holder of Transfer Restricted
Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof
unless and until such Holder shall have provided all such information. Each
Holder as to which any Shelf Registration Statement is being effected agrees to
furnish promptly to the Company all information required to be disclosed in
order to make the information previously furnished to the Company by such Holder
not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement
is not filed with the Commission on or prior to the date specified for such
filing in this Agreement, (ii) any such Registration Statement has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement, (iii) the Exchange Offer has not been
Consummated within 30 Business Days after the Exchange Offer Registration
Statement is first declared effective by the Commission or (iv) any Registration
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded promptly by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective immediately (each such event referred to in clauses (i) through (iv),
a "Registration Default"), then the Company and the Guarantor hereby jointly and
severally agree to pay liquidated damages (the "Liquidated Damages") to each
Holder of Transfer
7
<PAGE> 9
Restricted Securities with respect to the first 90-day period immediately
following the occurrence of such Registration Default, in an amount equal to
$.05 per week per $1,000 principal amount of Transfer Restricted Securities held
by such Holder for each week or portion thereof that the Registration Default
continues. The amount of the Liquidated Damages shall increase by an additional
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of Liquidated Damages of $.40 per week
per $1,000 principal amount of Transfer Restricted Securities. Notwithstanding
anything to the contrary set forth herein, (1) upon filing of the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange
Offer Registration Statement (and/or, if applicable, the Shelf Registration
Statement), in the case of (ii) above, (3) upon Consummation of the Exchange
Offer, in the case of (iii) above, or (4) upon the filing of a post-effective
amendment to the Registration Statement or an additional Registration Statement
that causes the Exchange Offer Registration Statement (and/or, if applicable,
the Shelf Registration Statement) to again be declared effective or made usable
in the case of (iv) above, the Liquidated Damages payable with respect to the
Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or
(iv), as applicable, shall cease.
All accrued Liquidated Damages shall be paid to Holders of
Transfer Restricted Securities that are in the form of Global Securities by wire
transfer of immediately available funds or by federal funds check and to Holders
of Transfer Restricted Securities that are in the form of Certificated
Securities by wire transfer to the account specified by them or by mailing
checks to their registered addresses on each Damages Payment Date. All
obligations of the Company and the Guarantor set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such security
shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with
the Exchange Offer, the Company and the Guarantor shall comply with all
applicable provisions of Section 6(c) below, shall use their respective best
efforts to effect such exchange and to permit the sale of Broker-Dealer Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof, and shall comply with all of the following
provisions:
(i) If, following the date hereof there has been published a
change in Commission policy with respect to exchange offers such as the
8
<PAGE> 10
Exchange Offer, such that in the reasonable opinion of counsel to the
Company there is a substantial question as to whether the Exchange
Offer is permitted by applicable federal law, the Company and the
Guarantor hereby agree to seek a no-action letter or other favorable
decision from the Commission allowing the Company and the Guarantor to
Consummate an Exchange Offer for the Series A Notes. The Company and
the Guarantor hereby agree to pursue the issuance of such a decision to
the Commission staff level but shall not be required to take
commercially unreasonable action to effect a change of Commission
policy. In connection with the foregoing, the Company and the Guarantor
hereby agree to take all such other actions as are requested by the
Commission or otherwise required in connection with the issuance of
such decision, including without limitation (A) participating in
telephonic conferences with the Commission, (B) delivering to the
Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded
that such an Exchange Offer should be permitted and (C) diligently
pursuing a resolution (which need not be favorable) by the Commission
staff of such submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Guarantor (which may be contained
in the letter of transmittal contemplated by the Exchange Offer
Registration Statement) to the effect that (A) it is not an affiliate
of the Company, (B) it is not engaged in, and does not intend to engage
in, and has no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes to be issued in
the Exchange Offer and (C) it is acquiring the Exchange Notes in its
ordinary course of business. In addition, each Holder shall acknowledge
and agree that any Broker-Dealer and any such Holder using the Exchange
Offer to participate in a distribution of the securities to be acquired
in the Exchange Offer (1) could not under Commission policy as in
effect on the date of this Agreement rely on the position of the
Commission enunciated in Morgan Stanley and Co., Inc., (available June
5, 1991) and Exxon Capital Holdings Corporation (available May 13,
1988), as interpreted in the Commission's letter to Shearman & Sterling
dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i)
above), and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary
9
<PAGE> 11
resale transaction and that such a secondary resale transaction must be
covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable,
of Regulation S-K if the resales are of Exchange Notes obtained by such
Holder in exchange for Series A Notes acquired by such Holder directly
from the Company or an affiliate thereof.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company and the Guarantor shall provide a
supplemental letter to the Commission (A) stating that the Company and
the Guarantor are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) and, if applicable, any no-action letter
obtained pursuant to clause (i) above, (B) including a representation
that neither the Company nor the Guarantor has entered into any
arrangement or understanding with any Person to distribute the Exchange
Notes to be received in the Exchange Offer and that, to the best of the
Company's and the Guarantor's information and belief, each Holder
participating in the Exchange Offer is acquiring the Exchange Notes in
its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Exchange
Notes received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantor shall comply with all the
provisions of Section 6(c) below and shall use their respective best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 4(b) hereof), and pursuant thereto the Company and the
Guarantor will prepare and file with the Commission a Registration Statement
relating to the registration on any appropriate form under the Act, which form
shall be available for the sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration
Statement required by this Agreement to permit the sale or resale of Transfer
Restricted Securities (including, without limitation, any Exchange Offer
Registration Statement, to the extent that the same are required to be available
to permit sales of Broker-Dealer
10
<PAGE> 12
Transfer Restricted Securities by Restricted Broker-Dealers), the Company and
the Guarantor shall:
(i) use their respective best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement (including the Prospectus
contained therein) (A) to contain a material misstatement or omission
or (B) not to be effective and usable for resale of Transfer Restricted
Securities during the period required by this Agreement, the Company
and the Guarantor shall file promptly an appropriate amendment to such
Registration Statement, (1) in the case of clause (A), correcting any
such misstatement or omission, and (2) in the case of clauses (A) and
(B), use their respective best efforts to cause such amendment to be
declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, or such shorter
period as will terminate when all Transfer Restricted Securities
covered by such Registration Statement have been sold; cause the
Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the Act,
and to comply fully with Rules 424, 430A and 462, as applicable, under
the Act in a timely manner; and comply with the provisions of the Act
with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise the managing underwriter(s), if any, and selling
Holders promptly and, if requested by such Persons, confirm such advice
in writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements
to the Prospectus or for additional information relating thereto, (C)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registra-
11
<PAGE> 13
tion Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement in order
to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification
or exemption from qualification of the Transfer Restricted Securities
under state Blue Sky or securities laws, the Company and the Guarantor
shall use their respective best efforts to obtain the withdrawal or
lifting of such order at the earliest practicable time;
(iv) furnish to the Initial Purchasers, each selling Holder
named in any Registration Statement or Prospectus and each of the
underwriter(s) in connection with such sale, if any, before filing with
the Commission, copies of any Registration Statement or any Prospectus
included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment
of such Holders and underwriter(s) in connection with such sale, if
any, for a period of at least five Business Days, and the Company will
not file any such Registration Statement or Prospectus or any amendment
or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) to which the
selling Holders of the Transfer Restricted Securities covered by such
Registration Statement or the underwriter(s) in connection with such
sale, if any, shall reasonably object within five Business Days after
the receipt thereof. A selling Holder or managing underwriter, if any,
shall be deemed to have reasonably objected to such filing if such
Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement
or omission or fails to comply with the applicable requirements of the
Act;
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<PAGE> 14
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s) in connection with such sale, if any, make the Company's
and the Guarantor's representatives available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such
selling Holders or underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any managing underwriter participating in any
disposition pursuant to such Registration Statement and any attorney or
accountant retained by such selling Holders or any of such
underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and the Guarantor and cause the
Company's and the Guarantor's officers, directors and employees to
supply all information reasonably requested by any such Holder,
underwriter, attorney or accountant in connection with such
Registration Statement or any post-effective amendment thereto
subsequent to the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the managing
underwriter(s) in connection with such sale, if any, promptly include
in any Registration Statement or Prospectus, pursuant to a supplement
or post-effective amendment if necessary, such information as such
selling Holders and underwriter(s), if any, may reasonably request to
have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to such underwriter(s), the
purchase price being paid therefor and any other terms of the offering
of the Transfer Restricted Securities to be sold in such offering; and
make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement or
post-effective amendment;
(viii) furnish to each selling Holder and each of the managing
underwriter(s) in connection with such sale, if any, without charge, at
least one copy of the Registration Statement, as first filed with the
Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
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<PAGE> 15
(ix) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
and the Guarantor hereby consent to the use (in accordance with law) of
the Prospectus and any amendment or supplement thereto by each of the
selling Holders and each of the underwriter(s), if any, in connection
with the offering and the sale of the Transfer Restricted Securities
covered by the Prospectus or any amendment or supplement thereto;
(x) enter into such agreements (including an underwriting
agreement) and make such representations and warranties and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to any Registration Statement contemplated by this Agreement
as may be reasonably requested by any Holder of Transfer Restricted
Securities or underwriter in connection with any sale or resale
pursuant to any Registration Statement contemplated by this Agreement,
and in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an Underwritten
Registration, the Company and the Guarantor shall:
(A) furnish (or in the case of paragraphs (2) and
(3), use its best efforts to furnish) to each selling Holder
and each underwriter, if any, upon the effectiveness of the
Shelf Registration Statement and to each Restricted
Broker-Dealer upon Consummation of the Exchange Offer:
(1) a certificate, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, signed on behalf of the Company and
the Guarantor by (x) the President and (y) a
principal financial or accounting officer of the
Company and the Guarantor, confirming, as of the date
thereof, the matters set forth in paragraphs (a), (b)
and (d) of Section 9 of the Purchase Agreement and
such other similar matters as the Holders, managing
underwriter(s) and/or Restricted Broker Dealers may
reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, of counsel for the Company and the
Guarantor covering matters similar to those set forth
in paragraphs (e) and (f) of Section 9 of the
Purchase Agreement and such other matter
14
<PAGE> 16
as the Holders, managing underwriter(s) and/or
Restricted Broker Dealers may reasonably request, and
in any event including a statement to the effect that
such counsel has participated in conferences with
officers and other representatives of the Company and
the Guarantor, representatives of the independent
public accountants for the Company and the Guarantor
and have considered the matters required to be stated
therein and the statements contained therein,
although such counsel has not independently verified
the accuracy, completeness or fairness of such
statements; and that such counsel advises that, on
the basis of the foregoing (relying as to materiality
to a large extent upon facts provided to such counsel
by officers and other representatives of the Company
and the Guarantor and without independent check or
verifications), no facts came to such counsel's
attention that caused such counsel to believe that
the applicable Registration Statement, at the time
such Registration Statement or any post-effective
amendment thereto became effective and, in the case
of the Exchange Offer Registration Statement, as of
the date of Consummation of the Exchange Offer,
contained an untrue statement of a material fact or
omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading, or that the Prospectus
contained in such Registration Statement as of its
date and, in the case of the opinion dated the date
of Consummation of the Exchange Offer, as of the date
of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact
necessary in order to make the statements therein, in
the light of the circumstances under which they were
made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel
assumes no responsibility for, and has not
independently verified, the accuracy, completeness or
fairness of the financial statements, notes and
schedules and other financial data included in any
Registration Statement contemplated by this Agreement
or the related Prospectus; and
(3) a customary comfort letter, dated as of
the date of effectiveness of the Shelf Registration
Statement or the date of Consummation of the Exchange
Offer, as the case may be, from the Company's
independent accountants, in the customary form and
covering matters of the type customarily covered in
comfort letters to underwriters in connection with
primary underwritten offerings, and affirming the
matters set forth in the comfort letters delivered
pursuant
15
<PAGE> 17
to paragraph (h) of Section 9 of the Purchase
Agreement, without exception;
(B) set forth in full or incorporate by reference in
the underwriting agreement, if any, in connection with any
sale or resale pursuant to any Shelf Registration Statement
the indemnification provisions and procedures of Section 8
hereof with respect to all parties to be indemnified pursuant
to said Section; and
(C) deliver such other documents and certificates as
may be reasonably requested by the selling Holders, the
managing underwriter(s), if any, and Restricted Broker
Dealers, if any, to evidence compliance with clause (A) above
and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company and the Guarantor pursuant to this clause (x).
The above shall be done at each closing under such
underwriting or similar agreement, as and to the extent required
thereunder, and if at any time the representations and warranties of
the Company and the Guarantor contemplated in (A)(1) above cease to be
true and correct, the Company and the Guarantor shall so advise the
underwriter(s), if any, the selling Holders and each Restricted
Broker-Dealer promptly and if requested by such Persons, shall confirm
such advice in writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration
and qualification of the Transfer Restricted Securities under the state
Blue Sky or securities laws of such jurisdictions as the selling
Holders or managing underwriter(s), if any, may request and do any and
all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the applicable Registration Statement; provided, however,
that neither the Company nor any Guarantor shall be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any
jurisdiction where it is not now so subject;
(xii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this
Agreement, Exchange Notes having an aggregate principal amount equal to
16
<PAGE> 18
the aggregate principal amount of Series A Notes surrendered to the
Company by such Holder in exchange therefor or being sold by such
Holder; such Exchange Notes to be registered in the name of such Holder
or in the name of the purchaser(s) of such Notes, as the case may be;
in return, the Series A Notes held by such Holder shall be surrendered
to the Company for cancellation;
(xiii) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as
the Holders or the underwriter(s), if any, may request at least two
Business Days prior to such sale of Transfer Restricted Securities;
(xiv) use their respective best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriter(s), if any, to consummate
the disposition of such Transfer Restricted Securities, subject to the
proviso contained in clause (xi) above;
(xv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
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<PAGE> 19
(xvii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation
by any underwriter (including any "qualified independent underwriter")
that is required to be retained in accordance with the rules and
regulations of the NASD, and use their respective best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xviii) otherwise use their respective best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act);
(xix) cause the Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the Holders of Notes to effect such changes to the
Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to be
so qualified in a timely manner; and
(xx) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition
of a Transfer Restricted Security that, upon receipt of the notice referred to
in Section 6(c)(i) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof,
or until it is advised in writing by the Company that the use of the Prospectus
may be resumed, and has received copies of any
18
<PAGE> 20
additional or supplemental filings that are incorporated by reference in the
Prospectus (the "Advice"). If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of either such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 6(c)(i) or Section 6(c)(iii)(D) hereof
to and including the date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(xv) hereof or shall have received the
Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantor's
performance of or compliance with this Agreement will be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses (including
filings made by any Purchaser or Holder with the NASD (and, if applicable, the
fees and expenses of any "qualified independent underwriter") and its counsel
that may be required by the rules and regulations of the NASD); (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Exchange Notes to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company, the Guarantor and the Holders of
Transfer Restricted Securities (subject to the provisions of Section 7(b)
hereof); (v) all application and filing fees in connection with listing the
Exchange Notes on a national securities exchange or automated quotation system
pursuant to the requirements hereof; and (vi) all fees and disbursements of
independent certified public accountants of the Company and the Guarantor
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company will, in any event, bear its and the Guarantor's
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantor.
19
<PAGE> 21
(b) In connection with any Registration Statement required by
this Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantor
will reimburse the Holders of Transfer Restricted Securities being tendered in
the Exchange Offer and/or resold pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or registered pursuant to
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be chosen by the Holders
of a majority in principal amount of the Transfer Restricted Securities for
whose benefit such Registration Statement is being prepared. The Company and the
Guarantor shall not have any obligation to pay any underwriting fees, discounts
or commissions attributable to the sale of any Exchange Notes pursuant to this
Agreement.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantor, jointly and severally,
agree to indemnify and hold harmless (i) each Holder and (ii) each person, if
any, who controls (within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder"), to the
fullest extent lawful, from and against any and all losses, claims, damages,
liabilities, judgments, actions and expenses (including without limitation and
as incurred, reimbursement of all reasonable costs of investigating, preparing,
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Holder) directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto), or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses are caused by an untrue statement or omission
or alleged untrue statement or omission that is made in reliance upon and in
conformity with information relating to any of the Holders furnished in writing
to the Company by any of the Holders expressly for use therein.
In case any action or proceeding (including any governmental
or regulatory investigation or proceeding) shall be brought or asserted against
any of the Indemnified
20
<PAGE> 22
Holders with respect to which indemnity may be sought against the Company or the
Guarantor, such Indemnified Holder (or the Indemnified Holder controlled by such
controlling person) shall promptly notify the Company and the Guarantor in
writing. Such Indemnified Holder shall have the right to employ its own counsel
in any such action and the fees and expenses of such counsel shall be paid, as
incurred, by the Company and the Guarantor (regardless of whether it is
ultimately determined that an Indemnified Holder is not entitled to
indemnification hereunder). The Company and the Guarantor shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for such Indemnified Holders, which firm shall be
designated by the Holders. The Company and the Guarantor shall be liable for any
settlement of any such action or proceeding effected with the Company's prior
written consent, which consent shall not be withheld unreasonably, and the
Company and the Guarantor agree to indemnify and hold harmless each Indemnified
Holder from and against any loss, claim, damage, liability or expense by reason
of any settlement of any action effected with the written consent of the
Company. Neither the Company nor any Guarantor shall, without the prior written
consent of each Indemnified Holder, settle or compromise or consent to the entry
of judgment in or otherwise seek to terminate any pending or threatened action,
claim, litigation or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not any Indemnified Holder is a
party thereto), unless such settlement, compromise, consent or termination
includes an unconditional release of each Indemnified Holder from all liability
arising out of such action, claim, litigation or proceeding.
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless the Company and the
Guarantor, and their respective directors, officers, and any person controlling
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or the Guarantor, and the respective officers, directors, partners,
employees, representatives and agents of each such person, to the same extent as
the foregoing indemnity from the Company and the Guarantor to each of the
Indemnified Holders, but only with respect to claims and actions based on
information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement. In case any action or
proceeding shall be brought against the Company, the Guarantor or its directors
or officers or any such controlling person in respect of which indemnity may be
sought against a Holder of Transfer Restricted Securities, such Holder shall
have the rights and duties given the Company and the Guarantor, and the Company,
the Guarantor, such directors or officers or such controlling person shall have
the rights and duties given to each Holder by the preceding paragraph. In no
event shall any Holder be li-
21
<PAGE> 23
able or responsible for any amount in excess of the amount by which the total
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantor, on the one hand, and the Holders, on the other hand,
from their sale of Transfer Restricted Securities or if such allocation is not
permitted by applicable law, the relative fault of the Company and the
Guarantor, on the one hand, and of the Indemnified Holder, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company and the Guarantor,
on the one hand, and of the Indemnified Holder, on the other hand, 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 Guarantor
or by the Indemnified Holder and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in the second paragraph of Section 8(a),
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
The Company, the Guarantor and each Holder of Transfer
Restricted Securities agree that it would not be just and equitable if
contribution pursuant to this Section 8(c) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred
22
<PAGE> 24
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, no Holder or
its related Indemnified Holders shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the total received by
such Holder with respect to the sale of its Transfer Restricted Securities
pursuant to a Registration Statement exceeds the sum of (A) the amount paid by
such Holder for such Transfer Restricted Securities plus (B) the amount of any
damages which such Holder has 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 Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(c) are several in proportion to the respective
principal amount of Series A Notes held by each of the Holders hereunder and not
joint.
SECTION 9. RULE 144A
The Company and the Guarantor hereby agree with each Holder,
for so long as any Transfer Restricted Securities remain outstanding and, in the
event the Company subsequently becomes subject to Section 13 or 15(d) of the
Exchange Act, during any period in which the Company or the Guarantor is not
subject to Section 13 or 15(d) of the Exchange Act, to make available, upon
request of any Holder of Transfer Restricted Securities, to any Holder of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder, the information required by Rule 144A(d)(4) under the Act in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in customary underwriting
arrangements entered into in connection therewith and (b) completes and executes
all reasonable questionnaires, powers of attorney, and other documents required
under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
For any Underwritten Offering, the investment banker or
investment bankers and manager or managers for any Underwritten Offering that
will administer such offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer
23
<PAGE> 25
Restricted Securities included in such offering. Such investment bankers and
managers are referred to herein as the "underwriters."
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to
exercise all rights provided herein, in the Indenture, the Purchase Agreement or
granted by law, including recovery of Liquidated Damages (the payment of which
is the sole monetary remedy available to the Holders of Transfer Restricted
Series A Notes in the event that the Company does not comply with the deadlines
set forth in this Agreement with respect to the conduct of the Exchange Offer or
the registration of the Series A Notes for resale under a Shelf Registration
Statement) or other damages, will in addition be entitled to specific
performance of its rights under this Agreement. The Company and the Guarantor
agree that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by them of the provisions of this Agreement and
hereby agree to waive the defense in any action for specific performance that a
remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor the
Guarantor will, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor the Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantor's securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. Neither the Company nor
the Guarantor will take any action, or voluntarily permit any change to occur,
with respect to the Notes that would materially and adversely affect the ability
of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. This Agreement may not be amended,
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given unless (i) in the case of Section 5 hereof
and this Section 12(d)(i), the Company has obtained the written consent of
Holders of all outstanding Transfer Restricted Securities (except with respect
to a waiver or departure entered into by a Holder with the Company that is
binding only with respect to the Notes held by such Holder) and (ii) in the case
of all other provisions hereof, the Com-
24
<PAGE> 26
pany has obtained the written consent of Holders of a majority of the
outstanding principal amount of Transfer Restricted Securities. Notwithstanding
the foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose securities are being tendered
pursuant to the Exchange Offer and that does not affect directly or indirectly
the rights of other Holders whose securities are not being tendered pursuant to
such Exchange Offer may be given by the Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities subject to such Exchange
Offer.
(e) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex, telecopier, or
air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company or the Guarantor:
505 Martinsville Road
P.O. Box 813
Liberty Corner, New Jersey 07938
Facsimile No.: (908) 604-9317
Attention: Robert N. Edwards, Esq.
With a copy to:
Cummings & Lockwood
Four Stamford Plaza
P.O. Box 120
Stamford, Connecticut 06904
Facsimile No.: (203) 351-4594
Attention: Paul G. Hughes, Esq.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when receipt acknowledged, if telecopied; and on the next Business Day, if
timely delivered to an air courier guaranteeing overnight delivery.
25
<PAGE> 27
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities directly from such Holder.
(g) 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.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) 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 CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that 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.
(k) Entire Agreement. This Agreement is 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 herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
26
<PAGE> 28
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
FEDDERS NORTH AMERICA, INC.
By: /s/ Robert L. Laurent, Jr.
-------------------------------
Name: Robert L. Laurent, Jr.
Title: Executive Vice President
FEDDERS CORPORATION
By: /s/ Robert L. Laurent, Jr.
-------------------------------
Name: Robert L. Laurent, Jr.
Title: Executive Vice President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Daniel J. Mackell
-------------------------------
Name: Daniel J. Mackell
Title: Vice President
GOLDMAN, SACHS & CO.
By: Goldman Sachs & Co.
-------------------------------
Name:
Title:
S-1
<PAGE> 1
Exhibit 5
September 10, 1997
Fedders North America, Inc.
505 Martinsville Road
Liberty Corner, New Jersey 07938-0813
Fedders Corporation
505 Martinsville Road
Liberty Corner, New Jersey 07938-0813
Re: Registration Statement on Form S-4 (No. 333- )
Dear Sirs:
In connection with the Registration Statement on Form S-4 (the
"Registration Statement") filed by Fedders North America, Inc. (the "Company")
and Fedders Corporation (the "Guarantor") with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and
the rules and regulations thereunder (the "Rules"), we have been requested to
render our opinion as to the legality of the $100,000,000 aggregate principal
amount of the Company's 9-3/8% Senior Subordinated Notes due 2007 (the "Notes")
and the related guarantee by the Guarantor of the Company's obligations under
the Notes (the "Guarantees"), included in the Registration Statement.
In this regard, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of (i) the Registration Statement,
(ii) the Indenture, dated as of August 18, 1997, among the Company, the
Guarantor and State Street Bank and Trust Company, as Trustee (the "Indenture"),
pursuant to which the Notes and the Guarantees are to be issued, (iii) the
Certificate of Incorporation and By-laws of each of the Company and the
Guarantor, as amended to date in the form filed as exhibits to the Registration
Statement and (iv) records of certain corporate proceedings of each of the
Company and
<PAGE> 2
Fedders North America, Inc. -2- September 10, 1997
Fedders Corporation
the Guarantor in the form certified by the Secretary of the Company and the
Guarantor relating to, among other things, the issuance and sale of the Notes
pursuant to an offer to exchange up to $100,000,000 principal amount of Notes
for all outstanding 9-3/8% Senior Subordinated Notes of the Company due 2007
(the "Original Notes") as described in the Registration Statement. In addition,
we have made such other examinations of law and fact as we considered necessary
in order to form a basis for the opinion contained herein.
In our examination of the aforesaid documents, we have assumed, without
independent investigation, the genuineness of all signatures, the legal capacity
of all individuals who have executed any of the documents, the authenticity of
all documents submitted to us as originals, the conformity to the original
documents of all documents submitted to us as certified, photostatic, reproduced
or conformed copies and the authenticity of all such documents.
In rendering the opinion set forth below, we have assumed that the
Notes and the Guarantees will be issued as described in the Registration
Statement.
Based on the foregoing, we are of the opinion that, when the Notes and
the related Guarantees are issued, authenticated and delivered in accordance
with the terms of the Indenture, the Notes and the Guarantees will be legal,
valid and binding obligations of the Company and the Guarantor, respectively,
enforceable against them in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other laws relating to or affecting creditors'
rights generally and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
Our opinion expressed above is limited to the laws of the State of New
York and the General Corporation Law of the State of Delaware.
We hereby consent to the use of our name in the Registration Statement
and in the related prospectus as the same appears under the caption "Legal
Matters," and to the use of this opinion as an exhibit to the Registration
Statement. In giving this consent, we do not thereby admit that we come within
the category of persons whose consent is required by the Act or the Rules.
Very truly yours,
/s/ Cummings & Lockwood
<PAGE> 1
EXHIBIT 11
FEDDERS CORPORATION
COMPUTATION OF PER SHARE EARNINGS
For The Nine Months Ended May 31, 1997 and The
Years Ended August 31, 1996, 1995 and 1994
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months
Ended May 31, Years Ended
---------------- ----------------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average number of common and common
equivalent shares outstanding(1) 41,250 41,281 41,997 41,001 39,386
======= ======= ======= ======= =======
Net income $13,905 $24,143 $31,158 $29,504 $20,989
Preferred stock dividend 2,178 -- 151 -- --
------- ------- ------- ------- -------
Net income attributable to
common stockholders $11,727 24,143 31,007 29,504 20,989
======= ======= ======= ======= =======
Net income per common share $0.28 $0.58 $0.74 $0.72 $0.53
======= ======= ======= ======= =======
Fully diluted:
Average number of common and common
equivalent shares outstanding (1) 41,250 41,281 41,997 41,001 39,386
Additional average number of common
shares assuming the conversion of the
5% convertible subordinated
debentures due 1996(2) -- -- -- -- 388
Additional average number of class A
shares assuming the conversion of
preferred stock and conversion of
the 8.5% subordinated debentures(3) 10,045 -- 529 -- --
------- ------- ------- ------- -------
Average common and common equivalent
shares outstanding 51,295 41,281 42,526 41,001 39,774
======= ======= ======= ======= =======
Net income $13,905 $24,143 $31,158 $29,504 $20,989
Interest relating to the 5% convertible
subordinated debentures due 1996 net
of applicable taxes and tax credits -- -- -- -- 661
Interest related to the 8.5% convertible
subordinated debentures due 2012 net of
applicable taxes and tax credits 944 -- 63 -- --
------- ------- ------- ------- -------
Net income attributable to common
stockholders assuming full dilution $14,849 $24,143 $31,221 $29,504 $21,650
======= ======= ======= ======= =======
Net income per common share assuming full $0.29 $0.58 $0.73 $0.72 $0.54
dilution ======= ======= ======= ======= =======
Fully diluted income per share
excluding anti-dilutive effect of
conversion of debentures $0.29 $0.58 $0.73 $0.72 $0.53
======= ======= ======= ======= =======
</TABLE>
(1) Average number of common and common stock equivalents outstanding have been
restated to reflect Class A Stock dividend distributed in September 1994 and
June 1995.
(2) The 5% convertible subordinated debentures due in May 1996 were fully
redeemed by the Company.
(3) Average number of shares included in fully diluted calculation for fiscal
year 1996 are for the period August 13 through August 31, 1996.
<PAGE> 1
Exhibit 12
FEDDERS CORPORATION
Computation of Ratio of Earnings To Fixed Charges
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended
Years Ended August 31, May 31,
------------------------------------------------------------------------------------
Proforma
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) from continuing operations
before taxes, extraordinary items and
cumulative effect of accounting changes $(24,965) $(2,340) $19,803 $35,691 $50,266 $38,022 $21,069
Add:
Portion of rent representative of the
interest factor 1,162 1,261 1,186 694 675 1,356 974
Interest expense 15,573 4,247 4,325 2,713 2,362 5,788 3,909
------------------------------------------------------------------------------------
Income (loss) as adjusted (8,230) 3,168 25,314 39,098 53,303 45,166 25,952
====================================================================================
Fixed charges:
Interest expense 15,573 4,247 4,325 2,713 2,362 5,788 3,909
Portion of rent representative of the
interest factor 1,162 1,261 1,186 694 675 1,356 974
------------------------------------------------------------------------------------
Fixed charges $16,735 $5,508 $5,511 $3,407 $3,037 $7,144 $4,883
====================================================================================
Ratio of earnings to fixed charges -- -- 4.59 11.48 17.55 6.32 5.31
====================================================================================
Deficiency of earnings versus
fixed charges $24,965 $2,340 -- -- -- -- --
====================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 21(a)
SUBSIDIARIES OF THE COMPANY
Name of Subsidiary State or Other Jurisdiction
of Incorporation
Emerson Quiet Kool Corporation Delaware
Columbia Specialties, Inc. Delaware
Rotorex Company, Inc. Delaware
Fedders, Inc. Ontario
Fedders de Mexico S.A. de C.V. Mexico
<PAGE> 1
EXHIBIT 21(b)
SUBSIDIARIES OF THE GUARANTOR
Name of Subsidiary State or Other Jurisdiction of
Incorporation
Fedders North America, Inc. Delaware
* Emerson Quiet Kool Corporation Delaware
* Columbia Specialties, Inc. Delaware
* Rotorex Company, Inc. Delaware
* Fedders Inc. Ontario
* Fedders de Mexico S.A. Mexico
Fedders International, Inc. Delaware
**Fedders Asia PTE, Ltd. Singapore
Fedders Exporting, Inc. Barbados
Fedders Investment Corporation Delaware
***Fedders Xinle Co. Ltd China
NYCOR North America, Inc. Delaware
****Melcor Corporation New Jersey
Rotorex International, Inc. Delaware
Rotorex Technologies, Inc. Delaware
* Wholly owned subsidiaries of Fedders North America, Inc.
** Wholly owned subsidiary of Fedders International, Inc.
*** Majority owned subsidiary of Fedders Investment Corporation
**** Wholly owned subsidiary of NYCOR North America, Inc.
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Fedders Corporation
Liberty Corner, New Jersey
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated September 30, 1996, relating to the
consolidated financial statements of Fedders Corporation, which is contained in
that Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
Woodbridge, New Jersey
September 10, 1997
<PAGE> 1
Exhibit 23(b)
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated October 6, 1994 in the Registration Statement on Form
S-4 dated September 10, 1997 and related Prospectus of Fedders Corporation for
the registration of $100,000,000 9 3/8% Senior Subordinated Notes due 2007.
/s/ Ernst & Young LLP
MetroPark, New Jersey
September 10, 1997
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned officers and directors of Fedders North America,
Inc. (the "Company") and Fedders Corporation (the "Guarantor"), hereby severally
constitute Robert L. Laurent, Jr. and Robert N. Edwards, and each of them
singly, as our attorneys-in-fact with full power to them, and each of them
singly, to sign for us and in our names and in our capacities as directors
and/or officers of the Company and the Guarantor, the Registration Statement on
Form S-4 relating to the exchange of the Company's 9-3/8% Senior Subordinated
Notes due 2007 for the outstanding 9-3/8% Senior Subordinated Notes due 2007,
and any and all amendments thereto, which Registration Statement is being filed
pursuant to the Securities Act of 1933, as amended, and, in general, to do all
such things in our names and behalf and in our capacities as officers and
directors to enable the Company and the Guarantor to comply with the provisions
of the Securities Act of 1933, as amended, and all requirements of the
Securities and Exchange Commission, including the filing of such amendments,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys, and all that our said
attorneys may do or cause to be done by virtue hereof.
In witness whereof, the undersigned have hereunto set their hands and
seals this 10th day of September, 1997.
/s/ SALVATORE GIORDANO /s/ SALVATORE GIORDANO, JR.
- ---------------------------- ----------------------------
Salvatore Giordano Salvatore Giordano, Jr.
/s/ JOSEPH GIORDANO /s/ WILLIAM J. BRENNAN
- ---------------------------- ----------------------------
Joseph Giordano William J. Brennan
/s/ C. A. KEEN /s/ HOWARD S. MODLIN
- ---------------------------- ----------------------------
C. A. Keen Howard S. Modlin
/s/ CLARENCE RUSSEL MOLL /s/ S. A. MUSCARNERA
- ---------------------------- ----------------------------
Clarence Russel Moll S. A. Muscarnera
/s/ ANTHONY E. PULEO /s/ ROBERT L. LAURENT, JR.
- ---------------------------- ----------------------------
Anthony E. Puleo Robert L. Laurent, Jr.
<PAGE> 1
Exhibit 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
FEDDERS NORTH AMERICA, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 22-2103510
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
AND
FEDDERS CORPORATION
(Exact name of obligor as specified in its charter)
DELAWARE 22-2562390
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
WESTGATE CORPORATE CENTER
505 MARTINSVILLE ROAD
P.O. BOX 813
LIBERTY CORNER, NJ 07938
(Address of principal executive offices) (Zip Code)
9 3/8% SENIOR SUBORDINATED NOTES DUE 2007
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
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.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee
to commence business was necessary or issued is on file with
the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the
Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4
to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Eastern
Edison Company (File No. 33-37823) and is incorporated herein
by reference thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority is annexed hereto as
Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 3rd of September. 1997.
STATE STREET BANK AND TRUST COMPANY
By: /s/ RUTH SMITH
------------------------------
NAME RUTH SMITH
TITLE VICE PRESIDENT
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by Fedders
North America, Inc. and Fedders Corporation. of their 9.375% Senior Subordinated
Notes due 2007, we hereby consent that reports of examination by Federal, State,
Territorial or District authorities may be furnished by such authorities to the
Securities and Exchange Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ RUTH SMITH
------------------------------
NAME RUTH SMITH
TITLE VICE PRESIDENT
DATED: SEPTEMBER 3, 1997
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business June 30, 1997, published
in accordance with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act and in accordance with a
call made by the Commissioner of Banks under General Laws, Chapter 172, Section
22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................ 1,842,337
Interest-bearing balances ......................................... 8,771,397
Securities ................................................................. 10,596,119
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ............................... 5,953,036
Loans and lease financing receivables:
Loans and leases, net of unearned income ............5,769,090
Allowance for loan and lease losses ................. 74,031
Allocated transfer risk reserve ..................... 0
Loans and leases, net of unearned income and allowances ........... 5,695,059
Assets held in trading accounts ............................................ 916,608
Premises and fixed assets .................................................. 374,999
Other real estate owned .................................................... 755
Investments in unconsolidated subsidiaries ................................. 28,992
Customers' liability to this bank on acceptances outstanding ............... 99,209
Intangible assets .......................................................... 229,412
Other assets ............................................................... 1,589,526
-----------
Total assets ............................................................... 36,097,449
===========
LIABILITIES
Deposits:
In domestic offices ............................................... 11,082,135
Noninterest-bearing ........................ 8,932,019
Interest-bearing ........................... 2,150,116
In foreign offices and Edge subsidiary ............................ 13,811,677
Noninterest-bearing ........................ 112,281
Interest-bearing ...........................13,699,396
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices
of the bank and of its Edge subsidiary ............................ 6,785,263
Demand notes issued to the U.S. Treasury and Trading Liabilities ........... 755,676
Other borrowed money ....................................................... 716,013
Subordinated notes and debentures .......................................... 0
Bank's liability on acceptances executed and outstanding ................... 99,605
Other liabilities .......................................................... 841,566
Total liabilities .......................................................... 34,091,935
===========
EQUITY CAPITAL
Perpetual preferred stock and related
surplus .................................................................... 0
Common stock ............................................................... 29,931
Surplus .................................................................... 437,183
Undivided profits and capital reserves/Net unrealized holding gains (losses) 1,542,695
Cumulative foreign currency translation adjustments ........................ (4,295)
Total equity capital ....................................................... 2,005,514
-----------
Total liabilities and equity capital ....................................... 36,097,449
</TABLE>
4
<PAGE> 6
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE> 1
EXHIBIT 99.1
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON ____________,
1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF ORIGINAL NOTES MAY BE
WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE BUSINESS DAY PRIOR TO THE
EXPIRATION DATE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE(S) SURRENDERED
NAME, ADDRESS(ES) OF REGISTERED OWNER(S) (ATTACH ADDITIONAL SHEETS IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE PRINCIPAL AMOUNT PRINCIPAL AMOUNT
NO(S).* REPRESENTED BY TENDERED (IF LESS THAN
CERTIFICATE OR ALL)**
BOOK-ENTRY
<S> <C> <C> <C>
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
TOTAL
PRINCIPAL
AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any
tendering holder of Original Notes (as hereinafter defined) will be deemed to
have tendered the entire aggregate principal amount represented by the column
labeled "Principal Amount Represented by Certificate or Book-Entry." The minimum
permitted tender is $1,000 in principal amount of Original Notes. All tenders
must be integral multiples of $1,000.
LETTER OF TRANSMITTAL
To Surrender 9-3/8% Senior Subordinated Notes due 2007
of
FEDDERS NORTH AMERICA, INC.
and the related Guarantee
of
FEDDERS CORPORATION
Pursuant to the Exchange Offer dated September _, 1997.
THE EXCHANGE AGENT
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<CAPTION>
BY HAND DELIVERY: BY OVERNIGHT COURIER: BY MAIL:
<S> <C> <C>
State Street Bank and Trust Company State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department Corporate Trust Department
Two International Place Two International Place, 4th Floor P.O. Box 778
Fourth Floor, Corporate Trust Window Boston, Massachusetts 02110 Boston, Massachusetts 02110
Boston, Massachusetts 02110
</TABLE>
DO NOT SENT CERTIFICATES REPRESENTING ORIGINAL NOTES TO FEDDERS NORTH
AMERICA, INC OR FEDDERS CORPORATION.
FOR INFORMATION CALL: (617) [INSERT].
<PAGE> 2
-2-
This Letter of Transmittal should be used in connection with the
Exchange Offer (as hereinafter defined) made by Fedders North America, Inc. (the
"Company") and Fedders Corporation to exchange the 9% Senior Subordinated Notes
due 2007 of the Company and the related Guarantee of Fedders Corporation issued
on August 18, 1997 (the "Original Notes") for new 9-3/8% Senior Subordinated
Notes due 2007 of the Company and the related Guarantee of Fedders Corporation
(the "Notes").
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. IF CERTIFICATES FOR
THE ORIGINAL NOTES TO BE EXCHANGED ARE REGISTERED IN DIFFERENT NAMES, A SEPARATE
LETTER OF TRANSMITTAL MUST BE SUBMITTED FOR EACH DIFFERENT REGISTERED OWNER. SEE
INSTRUCTION 3.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NOTES FOR THEIR ORIGINAL
NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW)
THEIR ORIGINAL NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
PLEASE FILL IN ALL APPLICABLE BLANKS, FOLLOW ALL INSTRUCTIONS CAREFULLY
AND SIGN THIS LETTER OF TRANSMITTAL IN THE SPACE PROVIDED BELOW. THIS LETTER OF
TRANSMITTAL, TOGETHER WITH YOUR CERTIFICATES FOR ORIGINAL NOTES TO BE EXCHANGED,
CAN BE RETURNED TO STATE STREET BANK AND TRUST COMPANY (THE "EXCHANGE AGENT").
YOUR BROKER, DEALER, BANK OR TRUST COMPANY CAN ASSIST YOU IN COMPLETING THIS
FORM.
SPECIAL ISSUANCE AND
DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 2, 6 AND 12)
TO BE COMPLETED ONLY IF THE CERTIFICATE(S) FOR ORIGINAL NOTES IN A
PRINCIPAL AMOUNT NOT TENDERED OR NOTES TO WHICH THE UNDERSIGNED MAY BE ENTITLED
ARE TO BE ISSUED IN THE NAME OF SOMEONE OTHER THAN THE REGISTERED OWNER.
CERTIFICATES REPRESENTING ORIGINAL NOTES MUST BE PROPERLY ASSIGNED AND
SIGNATURES GUARANTEED.
ISSUE CERTIFICATES FOR NEW NOTES TO:
Name____________________________________________________________________________
(Please Print)
Address_________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
________________________________________________________________________________
(Tax Identification or Social Security No.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 2 AND 6)
TO BE COMPLETED ONLY IF THE CERTIFICATE(S) FOR ORIGINAL NOTES IN A
PRINCIPAL AMOUNT NOT TENDERED OR NOT PURCHASED, OR NOTES ISSUED IN EXCHANGE FOR
ORIGINAL NOTES ACCEPTED FOR EXCHANGE, ARE TO BE SENT TO SOMEONE OTHER THAN THE
REGISTERED OWNER, AT AN ADDRESS OTHER THAN SHOWN ABOVE.
MAIL CERTIFICATE(S) TO:
Name____________________________________________________________________________
(Please Print)
Address_________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
________________________________________________________________________________
(Tax Identification or Social Security No.)
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY THE DEPOSITORY
TRUST COMPANY ("DTC") TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
DTC Book-Entry Account No.: ________________________________________________
Transaction Code No.: ______________________________________________________
<PAGE> 3
-3-
- ____________________________________________________________________________
- ____________________________________________________________________________
Signature(s) of Registered Owner(s) (See Instruction 3.)
Must be signed by registered owner(s) exactly as name(s) appear(s) on
certificate(s) submitted herewith or by person(s) authorized to become
registered owner(s) by certificates and documents transmitted herewith. If
signature is by attorney, executor, administrator, trustee or guardian or others
acting in a fiduciary capacity, please set forth full title and see Instruction
3.
Dated:__________________________________________________________________________
Name(s):________________________________________________________________________
________________________________________________________________________
(Please Print)
Capacity:_______________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________
(Include Zip Code)
________________________________________________________________________
(Area Code and Telephone No.) (Tax Identification or Social Security No.)
- Signature(s) Guaranteed By:
(See Instruction 2.)________________________________________________________
Dated:_____________________________
<PAGE> 4
-4-
Ladies and Gentlemen:
The person(s) who have signed this Letter of Transmittal acknowledge(s)
receipt of the Prospectus dated September __, 1997 (the "Prospectus") of the
Company and Fedders Corporation and this Letter of Transmittal (the "Letter of
Transmittal"), which together constitute the offer by the Company and Fedders
Corporation (the "Exchange Offer") to exchange $1,000 principal amount of its
Notes, which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to the Registration Statement of which the
Prospectus is a part, for each $1,000 principal amount of the Original Notes, of
which $100,000,000 aggregate principal amount is outstanding, upon the terms and
conditions set forth in the Exchange Offer. Other capitalized terms used but not
defined herein have the meaning given to them in the Prospectus. The form and
terms of the Notes will be the same in all material respects as the form and
terms of the Original Notes, except that the Notes have been registered under
the Securities Act and, therefore, will not bear legends restricting their
transfer.
This Letter of Transmittal is to be used by Holders if: (i)
certificates representing Original Notes are to be physically delivered to the
Exchange Agent herewith by Holders; (ii) tender of Original Notes is to be made
by book-entry transfer to the Exchange Agent's account at DTC, pursuant to the
procedures set forth in the Prospectus under "The Exchange Offer -- Procedures
for Tendering Original Notes" by any financial institution that is a participant
in DTC and whose name appears on a security position listing as the owner of
Original Notes; or (iii) tender of Original Notes is to be made according to the
guaranteed delivery procedures set forth in the Prospectus under "The Exchange
Offer -- Guaranteed Delivery Procedures." DELIVERY OF DOCUMENTS TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The term "Holder" with respect to the Exchange Offer means any person:
(i) in whose name Original Notes are registered on the books of the Company or
any other person who has obtained a properly completed bond power from the
registered Holder; or (ii) whose Original Notes are held of record by DTC who
desires to deliver such Original Notes by book-entry transfer at DTC. The
undersigned has completed, executed and delivered this Letter of Transmittal to
indicate the action the undersigned desires to take with respect to the Exchange
Offer.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR ORIGINAL
NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY. PLEASE READ THIS
ENTIRE LETTER OF TRANSMITTAL CAREFULLY.
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company and Fedders Corporation the principal
amount of Original Notes indicated above. Subject to and effective upon the
acceptance for exchange of Original Notes tendered in accordance with this
Letter of Transmittal, the undersigned exchanges, sells, assigns and transfers
to, or upon the order of, the Company and Fedders Corporation all right, title
and interest in and to the Original Notes tendered hereby. The undersigned
hereby irrevocably constitutes and appoints the Exchange Agent its true and
lawful agent and attorney-in-fact (with full knowledge that the Exchange Agent
also acts as the agent of the Company and Fedders Corporation and as trustee
under the Indenture for the Original Notes and the Notes) with respect to the
tendered Original Notes with full power of substitution to cause the Original
Notes to be assigned, transferred and exchanged for the Notes, including taking
any actions on behalf of the undersigned reasonably consistent with the
foregoing. The power of attorney granted in this paragraph shall be deemed
irrevocable and coupled with an interest.
The undersigned represents and warrants that the undersigned has full
power and authority to submit the Original Notes evidenced by the enclosed
certificate(s) and to surrender without restriction such certificate(s) and that
the undersigned has good and unencumbered title to such Original Notes and the
certificate(s) evidencing such Original Notes. The undersigned will, upon
request, execute and deliver any additional documents deemed appropriate or
necessary by the Company, Fedders Corporation or the Exchange Agent in
connection with the surrender of such certificate(s). The surrender of the
Original Notes and the certificate(s) referred to above shall be irrevocable and
binding upon the successors, assigns, heirs, executors, administrators and legal
representatives of the undersigned and shall not be affected by and shall
survive the death, incapacity or dissolution of the undersigned.
For purposes of the Exchange Offer, the Company and Fedders Corporation
shall be deemed to have accepted validly tendered Original Notes when, as and if
the Company and Fedders Corporation have given oral or written notice thereof to
the Exchange Agent.
If any tendered Original Notes are not accepted for exchange pursuant
to the Exchange Offer for any reason, certificates for any such unaccepted
Original Notes will be returned (except as noted below with respect to tenders
through DTC), without expense, to the undersigned at the address shown below or
at a different address as may be indicated under "Special Delivery
Instructions," as promptly as practicable after the Expiration Date.
The undersigned understands that tenders of Original Notes pursuant to
the procedures described under the caption "The Exchange Offer -- Procedures for
Tendering Original Notes" in the Prospectus and in the instructions hereto will
constitute a binding agreement among the undersigned, the Company and Fedders
Corporation upon the terms and subject to the conditions of the Exchange Offer.
If the person submitting this Letter of Transmittal is a broker-dealer
who will receive Notes for its own account pursuant to the Exchange Offer, such
person acknowledges that it will deliver a prospectus in connection with any
resale of such Notes. By so acknowledging and by delivering a prospectus in
connection with a resale of such Notes, such broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
<PAGE> 5
-5-
The undersigned understands that surrender of the enclosed
certificate(s) is not made in acceptable form until receipt by the Exchange
Agent of such certificate(s) and of this Letter of Transmittal, or a photocopy
hereof, duly completed and signed, together with all accompanying evidences of
authority in form acceptable to the Exchange Agent. All questions as to
validity, form and eligibility of any surrender of certificate(s) representing
Original Notes will be determined by the Exchange Agent and any such
determination shall be final and binding.
IMPORTANT TAX INFORMATION
Under current federal income tax law, a Holder whose surrendered
Original Notes are accepted for exchange for Notes is required by law to provide
the Exchange Agent (as payer) with such Holder's correct taxpayer identification
number on Substitute Form W-9 below. If such Holder is an individual, the
taxpayer identification number is such Holder's social security number. If the
Exchange Agent is not provided with the correct taxpayer identification number,
the Holder may be subject to a $50 penalty imposed by the Internal Revenue
Service.
Certain Holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that Holder must submit a statement, signed under penalties of
perjury, attesting to the individual's exempt status. Such statements can be
obtained from the Exchange Agent. See the enclosed Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
If backup withholding applies, the Exchange Agent is required to
withhold 31% of any such payments made to the Holder. Backup withholding is not
an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding, the Holder is required to notify the
Exchange Agent of such Holder's correct taxpayer identification number by
completing the form below certifying that the taxpayer identification number
provided on Substitute Form W-9 is correct (or that such Holder is awaiting a
taxpayer identification number) and that (1) the Holder has not been notified by
the Internal Revenue Service that such Holder is subject to backup withholding
as a result of failure to report all interest or dividends or (2) the Internal
Revenue Service has notified such holder that such Holder is no longer subject
to backup withholding.
WHAT NUMBER TO GIVE THE EXCHANGE AGENT
The Holder is required to give the Exchange Agent the social security
number or employer identification number of the record owner of the Original
Notes represented by the enclosed certificate(s). If such certificates for
Original Notes are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidelines on which
identifying number to report.
(SEE INSTRUCTION 10.)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: State Street Bank and Trust Company
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PART I - PLEASE PROVIDE YOUR Social Security Number
SUBSTITUTE TIN IN THE BOX AT RIGHT AND OR Taxpayer Identification Number (TIN)
CERTIFY BY SIGNING AND
Form W-9 DATING BELOW (If awaiting TIN write "Applied For")
-----------------------------------------------------------------------------------------
Department of the Treasury PART II - For Payees exempt from backup withholding, see the enclosed Guidelines for
Internal Revenue Service Certification of Taxpayer Identification Number on Substitute Form W-9 and
Payer's Request for Taxpayer complete as instructed therein.
Identification Number (TIN)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
CERTIFICATION - Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding because (a) I am exempt from backup
withholding, (b) I have not been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding as a result of failure to
report all interest or dividends or (c) IRS has notified me that I am no
longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS - You must cross out item (2) above if you have
been notified by IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by IRS that you were subject to backup withholding you
received another notification from IRS that you were no longer subject to
backup withholding do not cross out item (2). (Also see instructions in the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9).
SIGNATURE: DATE:
<PAGE> 6
-6-
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
INSTRUCTIONS
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal or a photocopy hereof, properly completed and fully executed, must
be used in connection with the delivery and surrender of certificate(s)
representing Original Notes. A Letter of Transmittal and the certificate(s)
representing Original Notes must be received by the Exchange Agent, in
satisfactory form in order to make an effective surrender.
THE METHOD OF DELIVERY OF ALL DOCUMENTS IS AT THE OPTION AND RISK OF
THE HOLDER, BUT IT IS RECOMMENDED THAT DOCUMENTS BE DELIVERED EITHER PERSONALLY,
THROUGH YOUR BROKER OR BY REGISTERED MAIL PROPERLY INSURED WITH RETURN RECEIPT
REQUESTED.
2. GUARANTEE OF SIGNATURES. If the certificate(s) delivered herewith
are registered in the name of a person other than the signer of this Letter of
Transmittal, the certificate(s) must be endorsed or accompanied by bond powers
signed by the registered owner(s) with the signature on the endorsement of bond
powers guaranteed as described below. The certificate(s) need not be endorsed or
accompanied by any instrument of assignment or transfer other than this Letter
of Transmittal if registered in the name of the person(s) signing this Letter of
Transmittal.
If Special Issuance Instructions or Special Delivery Instructions are
given by this Letter of Transmittal, each signature appearing on this Letter of
Transmittal must be guaranteed in the space provided hereon by a member of an
approved Signature Guarantee Medallion Program.
3. SIGNATURES ON LETTER OF TRANSMITTAL AND ENDORSEMENTS. If this Letter
of Transmittal is signed by the registered holder(s) of the certificate(s)
surrendered, the signature(s) on this Letter of Transmittal must be exactly the
same as the name(s) appear(s) on the face of the certificate(s) surrendered,
without alteration or enlargement or any change whatsoever.
In case of endorsements or signatures by executors, administrators,
trustees, guardians, attorneys, corporations and the like, the certificate(s)
delivered must be accompanied by evidence satisfactory to the Exchange Agent of
authority of the person to make the endorsement, or to sign, together with all
supporting documents necessary to validate the delivery.
If certificate(s) are delivered by joint holders or owners, all such
persons must sign.
If certificate(s) are registered in different forms, it will be
necessary to fill in, sign and submit as many separate Letters of Transmittal or
photocopies thereof as there are different registrations of certificate(s).
4. TENDER BY HOLDER; PARTIAL TENDERS. Only a Holder of Original Notes
may tender such Original Notes in the Exchange Offer. Any beneficial holder of
Original Notes who is not the registered Holder and who wishes to tender should
arrange with the registered Holder to execute and deliver this Letter of
Transmittal on such holder's behalf or must, prior to completing and executing
this Letter of Transmittal and delivering such holder's Original Notes either
make appropriate arrangements to register ownership of the Original Notes in
such holder's name or obtain a properly completed bond power from the registered
Holder. Tenders of Original Notes will be accepted only in integral multiples of
$1,000. If less than the entire principal amount of any certificate(s)
representing Original Notes is tendered, the tendering Holder should fill in the
principal amount tendered in the "Principal Amount Tendered (if less than all)"
box in the table at the beginning of this Letter of Transmittal. The entire
principal amount of Original Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated. If the entire principal
amount of all Original Notes is not tendered, then Original Notes for the
principal amount of Original Notes not tendered and a certificate(s)
representing Notes issued in exchange for any Original Notes accepted will be
sent to the Holder at his or her registered address, unless a different address
is provided in the appropriate box on this Letter of Transmittal, promptly after
the Original Notes are accepted for exchange.
5. VALIDITY OF SURRENDER; IRREGULARITIES. All questions as to the
validity, form and eligibility of any surrender of certificate(s) representing
Original Notes hereunder will be determined by the Company and Fedders
Corporation (which may delegate their power in whole or in part to the Exchange
Agent), and such determination shall be final and binding. The Company and
Fedders Corporation reserve the right to waive any irregularities or defects in
the surrender of any certificate(s) representing Original Notes, and their
interpretation of the terms and conditions of the Exchange Offer (including
these instructions) with respect to such irregularities or defects shall be
final and binding. A surrender will not be effective until all irregularities
have been cured or waived.
6. SPECIAL DELIVERY INSTRUCTIONS. Indicate the name and address to
which certificate(s) representing Notes in exchange for Original Notes
represented by the certificate(s) surrendered herewith are to be sent if
different from the name and address of the person(s) singing this Letter of
Transmittal. Completion of the Special Delivery Instructions does not constitute
a change to the address of record. A separate request must be made for a change
of address.
7. ADDITIONAL COPIES. Additional copies of this Letter of Transmittal
may be obtained from the Exchange Agent at the address listed on the face hereof
or from the Company at Westgate Corporate Center, P.O. Box 813, 505 Martinsville
Road, Liberty Corner, New Jersey 07938.
<PAGE> 7
-7-
8. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate number(s) and the principal amount(s) of Original Notes should be
listed on a separate signed schedule attached hereto.
9. LETTER OF TRANSMITTAL REQUIRED; SURRENDER OF CERTIFICATE(S) FOR
ORIGINAL NOTES; LOST, STOLEN OR DESTROYED CERTIFICATES. You will not receive any
certificate(s) representing Notes in exchange for your Original Notes unless and
until this Letter of Transmittal or a photocopy hereof, duly completed and
signed, together with the certificate(s) representing such Original Notes and
any required accompanying evidences of authority in form satisfactory to the
Exchange Agent, have been received by the Exchange Agent. If your certificate(s)
representing Original Notes have been lost, stolen or destroyed, you should
contact the Exchange Agent at the address set forth above for further
instructions.
10. SUBSTITUTE FORM W-9. You are required to provide the Exchange Agent
with a correct Taxpayer Identification Number ("TIN") on Substitute Form W-9,
which is provided under "Important Tax Information" above and to indicate that
you are not subject to backup withholding. FAILURE TO PROVIDE THE INFORMATION ON
THE SUBSTITUTE FORM W-9 MAY SUBJECT YOU TO A PENALTY AND A 31% FEDERAL INCOME
TAX WITHHOLDING. If the certificate(s) are in more than one name or are not in
the name of the actual owner, consult the enclosed Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9 for additional
guidelines on which number to report.
11. QUESTIONS AND REQUESTS FOR ASSISTANCE. Questions and requests for
assistance should be directed to the Exchange Agent at its address set forth
above or by telephone at (800) [INSERT]. All questions with respect to this
Letter of Transmittal will be determined by the Exchange Agent, whose
determinations shall be conclusive and binding.
12. TRANSFER TAXES. If any certificate(s) representing Notes is to be
issued to any person(s) other than the registered Holder(s) of the surrendered
certificate(s), it shall be a condition of the issuance and delivery of such
certificate(s) that the amount of any transfer taxes (whether imposed on the
registered holder(s) or such person(s)) payable on account of the transfer (or
transfers) of the surrendered certificate(s) shall be delivered to the Exchange
Agent or satisfactory evidence of the payment of such taxes or non-applicability
thereof shall be submitted to the Exchange Agent before such certificate(s)
representing Notes will be issued.
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
9-3/8% SENIOR SUBORDINATED NOTES DUE 2007 OF
FEDDERS NORTH AMERICA, INC.
AND THE RELATED GUARANTEE OF
FEDDERS CORPORATION
PURSUANT TO THE EXCHANGE OFFER DATED SEPTEMBER __, 1997
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
STATE STREET BANK AND TRUST COMPANY
This Notice of Guaranteed Delivery, or one substantially in form
equivalent hereto, must be used to accept the Exchange Offer (as defined below)
if certificates for 9-3/8% Senior Subordinated Notes due 2007 issued on August
18, 1997 by Fedders North America, Inc. (the "Company") and the related
guarantee by Fedders Corporation (the "Original Notes") are not immediately
available or if the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach State
Street Bank and Trust Company, as exchange agent (the "Exchange Agent"), on or
prior to the Expiration Date (as defined in the Exchange Offer). This Notice of
Guaranteed Delivery may be delivered by hand or facsimile transmission, or mail
to the Exchange Agent. The method of delivery is at the option and risk of the
tendering holder of Original Notes.
<TABLE>
<CAPTION>
BY HAND DELIVERY BY OVERNIGHT COURIER: BY MAIL:
<S> <C> <C>
State Street Bank and Trust Company State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department Corporate Trust Department
Two International Place Two International Place, 4th Floor P.O. Box 778
Fourth Floor, Corporate Trust Window Boston, Massachusetts 02110 Boston, Massachusetts 02110
Boston, Massachusetts 02110
</TABLE>
By Facsimile for Eligible Institutions: (617) [INSERT]
For confirmation and/or information call: (617) [INSERT]
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to gaurantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instruction thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Exchange Agent and must deliver the Letter of Transmittal or an
Agent's message and certificate(s) for the Original Notes to the
<PAGE> 2
Exchange Agent within the time period shown herein. Failure to do so could
result in a financial loss to such Eligible Institution.
As described in the Prospectus dated September __, 1996 (the
"Prospectus") of the Company and Fedders Corporation and in Instruction 2 of the
related Letter of Transmittal (the Prospectus, together with the Letter of
Transmittal, the "Exchange Offer"), this form must be used to accept the
Company's offer to exchange the Original Notes for its 9-3/8% Senior
Subordinated Notes due 2007, which have been registered under the Securities At
of 1933, as amended and the related guarantee by Fedders Corporation(the
"Notes"), subject to the terms and conditions set forth in the Exchange Offer,
if time will not permit the Letter of Transmittal, certificates representing
such Original Notes and other required documents to reach the Exchange Agent, or
the procedures for book-entry transfer cannot be completed, at or prior to 5:00
P.M., New York City time, on the Expiration Date. This form must be delivered by
an Eligible Institution by registered or certified mail or hand delivery, or
transmitted, via facsimile, to the Depositary as set forth above. All
capitalized terms used herein but not defined herein shall have the meanings
ascribed to them in the Exchange Offer.
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company and Fedders
Corporation, upon the terms and subject to the conditions set forth in the
Exchange Offer (receipt of which is hereby acknowledged), the principal amount
of the Original Notes, specified below, pursuant to the guaranteed delivery
procedures set forth in Exchange Offer.
The undersigned understand(s) that tenders of Original Notes may be
withdrawn, by written notice of withdrawal received by the Exchange Agent at any
time at or prior to 5:00 P.M., New York City time, on the Expiration Date. In
the event of a termination of the Exchange Offer, the Original Notes tendered
pursuant to the Exchange Offer will be returned to the tendering holders
promptly (or, in the case of Original Notes tendered by book-entry transfer,
such Original Notes will be credited to the account maintained at The Depository
Trust Company ("DTC") from which such Original Notes were delivered). If the
Company and Fedders Corporation make a material change in the terms of the
Exchange Offer or the information concerning the Exchange Offer, the Company and
Fedders Corporation will disseminate additional materials relating to the
Exchange Offer and extend such Exchange Offer, to the extent required by law.
The undersigned understand(s) that payment by the Exchange Agent for
Original Notes tendered and accepted for exchange pursuant to the Exchange Offer
will be made only after timely receipt by the Exchange Agent of such Original
Notes (or Book-Entry Confirmation of the transfer of such Original Notes into
the Exchange Agent's account at DTC) and a Letter of Transmittal (or facsimile
thereof) with respect to such Original Notes properly completed and duly
executed with any required signature guarantees and any other documents required
by the Letter of Transmittal or a properly transmitted Agent's Message.
All authority conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and every obligation of the undersigned under
this Notice of Guaranteed Delivery shall be binding upon the heirs, executors,
administrators, trustees in bankruptcy, personal and legal representatives,
successors and assigns of the undersigned.
2
<PAGE> 3
PLEASE SIGN AND COMPLETE
<TABLE>
<S> <C>
Signature(s) of Registered Holder(s) Date:____________________________________________
or Authorized Signatory:__________________________
_________________________________________________
__________________________________________________
Address:_________________________________________
Name(s) of Registered Holder(s):__________________
_________________________________________________
__________________________________________________
Area Code and Telephone No.:_____________________
__________________________________________________
If Original Notes will be delivered by book-entry
transfer to DTC, check the box: [ ]
DTC Account No.:_________________________________
<CAPTION>
DESCRIPTION OF NOTES TENDERED
CERTIFICATE NO(S).* PRINCIPAL AMOUNT REPRESENTED BY PRINCIPAL AMOUNT TENDERED (IF LESS
CERTIFICATE OR BOOK-ENTRY THAN ALL)**
<S> <C> <C> <C> <C> <C> <C>
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
</TABLE>
* Need not be completed by holders tendering by book-entry transfer.
** Unless otherwise specified, it will be assumed that the entire aggregate
principal represented by the Original Notes described above is being tendered.
This Notice of Guaranteed Delivery must be signed by the Holder(s)
exactly as their name(s) appear on certificate(s) for Original Notes or, if
tendered by a participant in DTC, exactly as such participant's name appears on
a security position listing as the owner of Original Notes, or by person(s)
authorized to become Holder(s) by endorsements and documents transmitted with
this Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must provide the following
information:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):________________________________________________________________________
Capacity:_______________________________________________________________________
Address(es):____________________________________________________________________
DO NOT SEND ORIGINAL NOTES WITH THIS FORM. NOTES SHOULD BE SENT TO THE
EXCHANGE AGENT, TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL.
3
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a recognized member of the Medallion Signature
Guarantee Program or any other "eligible guarantor institution," as such term is
defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934,
as amended (each, an "Eligible Institution"), hereby (i) represents that the
above-named persons are deemed to own the Original Notes tendered hereby, (ii)
represents that such tender of Original Notes complies the Exchange Offer and
(iii) guarantees that the Original Notes tendered hereby are in proper form for
transfer (pursuant to the procedures set forth in the Exchange Offer), together
with a properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) with any required signature guarantee and any other
documents required by the Letter of Transmittal or a properly transmitted
Agent's Message, will be received by the Exchange Agent at one of its addresses
set forth above within two business days after the date of execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Exchange Agent and must deliver the Letter of Transmittal or
Agent's Message, and Original Notes to the Exchange Agent within the time period
shown herein. Failure to do so could result in a financial loss to such Eligible
Institution.
Name of Firm:___________________________________________________________________
Authorized Signature:___________________________________________________________
Title:__________________________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
(Zip Code)
Area Code and Telephone Number:_________________________________________________
Dated:_______________, 1996
4
<PAGE> 1
EXHIBIT 99.3
Form of Exchange Agency Agreement
September , 1997
State Street Bank and Trust Company
Corporate Trust Department
Two International Place - 4th Floor
Boston, Massachusetts 02110
Attention: Ms. Traci Hopkins
Assistant Secretary
Ladies and Gentlemen:
Fedders North America, Inc., a Delaware corporation (the "Company") is
offering to exchange, upon the terms and subject to the conditions set forth in
the Prospectus dated September ___, 1997 (the "Prospectus"), and the
accompanying Letter of Transmittal (the "Letter of Transmittal") (which together
constitute the "Exchange Offer") $1,000 principal amount of its 9-3/8% Senior
Subordinated Notes due 2007, which have been registered under the Secuirites Act
of 1933, as amended, pursuant to the Registration Statement of which the
Prospectus is a part (the "New Notes") for each of the Company's outstanding
9-3/8% Senior Subordinated Notes due 2007 (the "Old Notes") of which
$100,000,000 principal amount is outstanding. The Old Notes and the New Notes
are guaranteed (the "Guarantee") on a senior subordinated basis by Fedders
Corporation, a Delaware corporation (the "Guarantor"). References herein to the
New Notes and the Old Notes shall include the related Guarantees.
You are hereby appointed and authorized to act as agent (the "Exchange
Agent") to effectuate the exchange of Old Notes for New Notes, on the terms and
subject to the conditions of this agreement (the "Agreement"). In that
connection, the following documents have been delivered to you in sufficient
quantities to enable you to satisfy paragraph 9 below:
(i) the Exchange Offer;
(ii) the Letter of Transmittal accompanying the Exchange Offer, to be used
by the holders of Old Notes ("Old Noteholders") in tendering their Old Notes";
and
(iii) the Notice of Guaranteed Delivery to be used by Old Noteholders in
tendering their Old Notes when those securities are not immediately available or
time will not permit a Letter of Transmittal and the accompanying documents to
reach you prior to the expiration of the Offer.
The Offer will expire at the time and on the date specified in the Exchange
Offer (the "Expiration Date") or at any subsequent time and date to which the
Company may extend the Offer, in which case the term "Expiration Date" shall
mean the latest date to which the Exchange Offer is extended.
You are hereby requested, and you hereby agree, to act as follows:
1. You are to accept Old Notes which are accompanied by the appropriate
Letter of Transmittal or facsimile thereof, properly completed and duly executed
in accordance with the instructions thereon and any requisite collateral
documents and all other instruments and communications submitted to you in
<PAGE> 2
connection with the Offer and to hold the same upon the terms and conditions set
forth in this Agreement.
2. You are to examine the Letters of Transmittal, Old Notes and other
documents delivered or mailed to you by or for Old Noteholders to ascertain
whether (i) the Letters of Transmittal are properly completed and duly executed
in accordance with the instructions set forth therein, (ii) the other documents
are properly completed and duly executed, and (iii) the Old Notes have otherwise
been properly tendered. You need not pass on the legal sufficiency of any
signature or verify any signature guarantee. You are also to tabulate the number
of consents received in response to the consent solicitation of the holders of
Old Notes contained in the Exchange Offer.
3. In the event any Letter of Transmittal or other document has been
improperly executed or completed or any of the certificates are not in proper
form or have been improperly tendered or any book-entry delivery of Old Notes
has been improperly made, or if some other irregularity in connection with the
delivery of Old Notes by a holder thereof exists, you are authorized, upon
consultation with the Company or its counsel, to endeavor to take such action as
may be necessary to cause such irregularity to be corrected. You are authorized,
upon consultation with the Company or one of its representatives, to request
from any person tendering Old Notes such additional documents or undertakings as
you may deem appropriate. All questions as to the form of the related documents
and the validity, eligibility (including time of receipt) and acceptance of
tendered Old Notes will be determined by the Company, in its sole discretion,
whose determination will be final and binding. The Company reserves the absolute
right to reject any or all tenders of any particular Old Notes, which would, in
the opinion of the Company's counsel, be unlawful. The Company also reserves the
absolute right to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any Old Notes, and the Company's interpretation of
the terms and conditions of the Offer (including the Letter of Transmittal and
the instructions set forth therein) will be final. No tender of Old Notes will
be deemed to have been properly made until all defects and irregularities have
been cured or waived.
4. Tenders of Old Notes may be made only as set forth in the Exchange
Offer, and securities shall be considered properly tendered to you only when:
a. a properly completed and duly executed Letter of Transmittal, with
any required signature guarantees and any other required documents as set forth
in the Letter of Transmittal, are received by you at your address set forth in
the Exchange Offer, and Old Notes are received by you at such addresses; or a
properly completed and duly executed Notice of Guaranteed Delivery substantially
in the form provided by the Company, with an appropriate guarantee of signature
and delivery from an Eligible Institution, is received by you at or prior to the
Expiration Date. For the purposes of this Agreement, an "Eligible Institution"
shall mean a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., or a commercial bank or trust
company having an office or correspondent in the United States. The Notice of
Guaranteed Delivery may be delivered to you by hand or transmitted by telegram,
facsimile transmission or letter;
b. Old Notes (in respect of which there have been delivered to you
prior to the Expiration Date a properly completed and duly executed Notice of
Guaranteed Delivery) in proper form for transfer together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), and
any other required documents as set forth in the Letter of Transmittal, are
received by you within five trading days of The New York Stock Exchange, Inc.
after the date of execution of such Notice of Guaranteed Delivery; and
c. the adequacy of the items relating to Old Notes, the Letter of
<PAGE> 3
Transmittal therefor and any Notice of Guaranteed Delivery has been favorably
passed upon as above provided.
Notwithstanding the provisions of the preceding paragraph, Old Notes which
the Company shall approve as having been properly tendered shall be considered
to be properly tendered.
5. Holders of Old Notes may make book-entry delivery of their securities.
You will establish in your name or the name of your nominee an account with
respect to the Old Notes at Depository Trust Company ("DTC") for purpose of the
Offer to permit book-entry transfers of Old Notes. Except as otherwise provided
below, Old Notes, or any book-entry transfer into your account at DTC of Old
Notes tendered electronically, as well as a properly completed and duly executed
copy of the Letter of Transmittal, and any other documents required by the
Letter of Transmittal, must be received by you or, in the case of tenders of
book-entry transfer, confirmed to you by transfer to your account on or prior to
the Expiration Date.
6. a. A tendering Old Noteholder may withdraw tendered Old Notes in
accordance with the procedures set forth in the Exchange Offer, in which event,
except as may be otherwise specified in the Old Noteholder's notice of
withdrawal, all items in your possession which shall have been received from the
Noteholder with respect to those Old Notes shall be promptly returned to or upon
the order of the Noteholder and the Old Notes covered by those items shall no
longer be considered to be properly tendered.
b. A withdrawal may not be rescinded. Withdrawn Old Notes may,
however, be tendered at anytime on or prior to the Expiration Date.
7. You are to record and to hold all tenders received by you and to
promptly notify by telephone after the close of business on each business day,
the following person as to the total number of Old Notes tendered on such day
and the cumulative numbers with respect to the Old Notes received through the
time of such call:
Robert N. Edwards, Vice President and General Counsel of the Company.
Each daily report should be divided into the following categories: the number
and principal amount of Old Notes represented by (i) certificates, and (ii)
Notices of Guaranteed Delivery actually received by you through the time of the
report. The foregoing information should also be sent to Mr. Edwards in a daily
letter.
In addition, you will also provide, and cooperate in making available to Mr.
Edwards, such other information as he or the Company's counsel may reasonably
request upon oral request made from time to time. Your cooperation shall
include, without limitation, the granting by you to the Company, and such other
persons as it may reasonably request, of access to those persons on your staff
who are responsible for receiving tenders of Old Notes in order to insure that
immediately prior to the Expiration Date, the Company shall have received
information in sufficient detail to enable it to decide whether to extend the
Offer.
8. Letters of Transmittal, Notices of Guaranteed Delivery and telegrams,
facsimile transmissions and letters submitted in lieu thereof pursuant to the
Offer shall be stamped by you as to the date and time of receipt and shall be
retained in your possession until the Expiration Date. As promptly as
practicable after the Expiration Date, you will deliver those items, together
with all properly tendered Old Notes to the Company.
<PAGE> 4
9. You are to satisfy requests of brokers, dealers, commercial banks, trust
companies and other persons for copies of the documents and other materials
specified in items (i) through (iii) of the introduction to this Agreement. You
are not authorized to offer or to pay any concessions of commissions to any
brokers, banks or other persons or to engage or to utilize any persons to
solicit tenders.
10. You are to follow up and to act upon any amendments, modifications or
supplements to these instructions mutually satisfactory to you and the Company,
and upon any further information in connection with the terms of the Offer, any
of which may be given to you by the Company, including instructions with respect
to (i) any extension or other modification of the Offer, (ii) the amount or
manner of payment for any Old Notes exchanged, and (iii) the cancellation of the
Offer.
11. If under the conditions set forth in the Exchange Offer, the Company
becomes obligated to accept Old Notes tendered, it will, as promptly as
practicable thereafter, deposit with you certificates representing New Notes in
the amount determined according to the ratio prescribed in the Exchange Offer.
Unless otherwise indicated under any Special Issuance Instructions or any
Special Delivery Instructions set forth in any Letter of Transmittal, you shall
mail the certificates representing the New Notes and the certificates for any
Old Notes submitted but not tendered for exchange to the registered owner of the
securities at the address shown in the Letter of Transmittal. In the event that
either or both the Special Issuance Instructions and the Special Delivery
Instructions are completed, you shall mail all certificates representing New
Notes (or Old Notes to be returned, if any) to the person or persons so
indicated in the Letter of Transmittal. Certificates shall be post-marked by you
within a reasonable period of time after certificates have been provided to you.
12. No exchange shall be made as to any Old Notes until you physically
receive a certificate or certificates representing those Old Notes, a properly
completed and duly executed Letter of Transmittal and any other required
documents.
13. For performing your services hereunder, you shall be entitled to
receive from the Company a fee of [$5,000.00] and an additional fee of [$35.00]
per Letter of Transmittal processed. You shall also be reimbursed by the Company
for all reasonable expenses, including counsel fees, if any, and mailing costs
you may incur in connection with the performance of your duties.
14. As Exchange Agent hereunder you:
(a) shall not have duties or obligations other than those specifically
set forth or as may subsequently be agreed to by you and the Company;
(b) shall not be obligated to take any legal action hereunder which
might in your judgment involve any expense or liability unless you have been
furnished with reasonable indemnification;
(c) may rely on and shall be protected in acting upon any certificate,
instrument, opinion, notice, letter, telegram or other document or security
delivered to you and believed by you to be genuine and to have been signed by
the proper party or parties;
(d) may rely on and shall be protected in acting or refraining from
acting upon the written instructions of Mr. Edwards; and
(e) may consult counsel satisfactory to you (including counsel to the
<PAGE> 5
Company), and the opinion of such counsel shall be full and complete
authorization and protection with respect to any action taken, suffered, or
omitted by you hereunder in good faith and in accordance with the opinion of
such counsel.
(f) You shall be deemed to have notice of any fact, claim or demand
with respect hereto unless actually known by an officer charged with
responsibility for administering this Agreement or unless in writing received by
you and making specific reference to this Agreement.
(g) No provision of this Agreement shall require you to expend or risk
your own funds, or to take any legal or other action hereunder which might in
your judgment involve it in, or require it to incur in connection with the
performance of your duties hereunder, any expense or any financial liability
unless it shall be furnished with indemnification acceptable to it.
15. You undertake the duties and obligations imposed herein upon the
following additional terms and conditions:
(a) you shall perform your duties and obligations hereunder with due
care;
(b) you shall not be under any responsibility in respect of the
validity or sufficiency (not only as to genuineness, but also as to its due
execution, the genuineness of signatures appearing thereon and as to the truth
and accuracy of any information therein contained) of any Letter of Transmittal,
certificate for Old Notes, book-entry transfer of securities or Notice of
Guaranteed Delivery; and
(c) Neither you nor any of your directors, officers or employees shall
be liable to anyone for any error of judgment, or for any act done or step taken
or omitted to be taken by you or any of your directors, officers or employees,
or for any mistake of fact or law, or for anything which you or any of your
directors, officers or employees, may do or refrain from doing in connection
with or in the administration of this Agreement, unless and except to the extent
the same constitutes gross negligence or willful misconduct on your part.
16. You are not authorized to make any recommendation on behalf of the
Company as to whether a holder of Old Notes should or should not tender his, her
or its securities.
17. All certificates for New Notes and all certificates representing New
Notes shall be forwarded by (i) first-class mail [under a blanket surety bond]
protecting you, the Company and the Guarantor from loss or liability arising out
of the non-receipt or non-delivery of such certificates or (ii) registered mail,
insured separately for the replacement value of such certificates.
18. You are authorized to cooperate with and furnish information to any
organization (and its representatives) designated from time to time by the
Company, in any manner reasonably requested by any of them and acceptable to you
in connection with the Offer and tenders thereunder.
19. The Company covenants and agrees to reimburse indemnify and hold you
harmless against any costs, expenses (including reasonable expenses of your
legal counsel), losses or damages which, without negligence, misconduct or bad
faith on your part may be paid, incurred or suffered by you or to which you may
become subject by reason of or as a result of the administration of your duties
hereunder or by reason of or as a result of your compliance with the
instructions set forth herein or with any written or oral instructions
<PAGE> 6
delivered to you pursuant hereto, or liability resulting from your actions as
Exchange Agent pursuant hereto, including any claims against you by any holder
tendering Old Notes for exchange. The Company shall be entitled to participate
at its own expense in the defense, and if the Company so elects at any time
after receipt of such notice, the Company shall assume the defense of any suit
brought to enforce any such claim. In the event that the Company assumes the
defense of any such suit, the Company shall not be liable for the fees and
expenses of any additional counsel thereafter retained by you, unless in your
judgment, which must be reasonable, it is advisable for you to be represented by
separate counsel. In no case shall the Company be liable under this indemnity
with respect to any claim or action against you, unless the Company shall be
notified by you, by letter or by cable or by telecopy confirmed by letter, of
the written assertion of a claim against you or of any action commenced against
you, promptly after you shall have received any such written assertion of a
claim or shall have been served with a summons or other first legal process
giving information as to the nature and basis of an action, but failure so to
notify the Company shall not relieve the Company from any liability which it may
have otherwise than on account of this indemnity.
20. You hereby acknowledge receipt of the Exchange Offer and each of the
documents listed in items (i) through (iii) of the introduction to this
Agreement and further acknowledge that you have examined the same. Any
inconsistency between this Agreement on the one hand and the Exchange Offer and
related Letters of Transmittal, as they may from time to time be amended, on the
other, shall be resolved in favor of the latter, except with respect to the
duties, liabilities and indemnification of you as Exchange Agent.
21. All notices, statements and other communications hereunder shall be in
writing, signed by a duly authorized officer of the party sending such notices,
and shall be deemed given when delivered by hand or by certified mail, postage
prepaid, addressed as follows:
To the Company:
Fedders North America, Inc.
c/o Fedders Corporation
Westgate Corporate Center
505 Martinsville Road
P.O. Box 813
Liberty Corner, New Jersey 07938
Attention: Robert N. Edwards
Vice President and General Counsel
Facsimile: (908) 604-9317
Telephone: (908) 604-8686
to you:
State Street Bank and Trust Company
Corporate Trust Department
Two International Place
Boston, MA 02102-0778
Attention: Fedders North America, Inc. Exchange
Facsimile: (617) 664-5365
Telephone: (617) 664-5553
<PAGE> 7
or to such other address as either party may furnish hereunder by notice;
provided that notice of change of address shall be deemed given only when
received.
22. This agreement shall be construed and enforced in accordance with the
law of the State of New York applicable to agreements made and to be performed
in New York and shall inure to the benefit of, and the obligations created
hereby shall be binding upon, the successors and assigns of the parties hereto.
23. These instructions may be reasonably modified or supplemented by the
Company or by any officer thereof authorized to give notice, approval or waiver
on its behalf.
24. As used herein, "business day" shall mean any day other than a Saturday
or Sunday, or any other day on which you are authorized or required to be closed
for business.
Please acknowledge receipt of this letter and confirm the arrangements
herein provided by signing and returning the enclosed copy.
Very truly yours,
FEDDERS NORTH AMERICA, INC.
By:_________________________________
Name:
Title:
ACCEPTED AS OF
September , 1997
STATE STREET BANK AND TRUST COMPANY
As Exchange Agent
By:_________________________________________
