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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: February 28, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number: 1-8803
MATERIAL SCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-2673173
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 EAST PRATT BOULEVARD
ELK GROVE VILLAGE, ILLINOIS 60007
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 847-439-8270
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
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registered
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Common Stock, $.02 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[_]
The aggregate market value of the voting stock of the registrant held by
shareowners (not including any voting stock owned by directors or executive
officers of the registrant (such exclusion shall not be deemed an admission that
any such person is an affiliate of the registrant)) of the registrant was
approximately $163,689,876 at April 24, 1998 (based on the closing sale price on
the New York Stock Exchange on such date, as reported by The Wall Street Journal
Midwest Edition).
At April 24, 1998, the registrant had outstanding an aggregate of 15,406,106
shares of its Common Stock.
Documents Incorporated by Reference
Portions of the following documents are incorporated herein by reference into
the indicated part of this Form 10-K:
Part of Form 10-K
Document into which incorporated
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Registrant's 1998 annual report to shareowners Parts I, II, IV
Registrant's proxy statement for the Annual Part III
Meeting of Shareowners to be held on
June 18, 1998
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PART I
ITEM 1. BUSINESS
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Introduction
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Material Sciences Corporation (unless otherwise indicated by the context,
including its subsidiaries, "MSC" or the "Company") develops, manufactures, and
markets continuously processed, coated, and laminated materials. These materials
are divided into four product groups: coil coating; galvanizing; laminates and
composites; and specialty films. The Company's materials are used in motor
vehicles, building products, appliances, lighting products, office equipment,
furniture, packaging, and a wide range of other products. MSC develops
proprietary value-added materials and processes to meet specific customer and
market requirements and believes it has achieved product or technological
leadership in each of its four product groups. The Company does not fabricate
any of the materials it processes.
Customers generally benefit from the energy savings and environmental
advantages of MSC's manufacturing processes and products. In the laminates and
composites, specialty films, and hot-dipped galvanizing portion of its
galvanizing product group, the Company is primarily a manufacturer and marketer
of its own products. In the coil coating and electrogalvanizing portion of its
galvanizing product group, MSC generally acts as a "toll coater" by processing
its customers' metal for a fee, without taking ownership of the metal.
Headquartered near Chicago, the Company, through its MSC Pinole Point Steel
Inc. ("MSCPPS"), MSC Pre Finish Metals Inc. ("PFM"), MSC Walbridge Coatings Inc.
("MSCWC"), MSC Laminates and Composites Inc. ("MSCLC"), and MSC Specialty Films,
Inc. ("MSCSF") subsidiaries, operates nine manufacturing plants. MSCPPS operates
one coil coating and one galvanizing facility in Richmond, California (the coil
coating facility is marketed under PFM). PFM operates two facilities in Elk
Grove Village, Illinois, one facility in Morrisville, Pennsylvania, and one
facility in Middletown, Ohio. MSCWC, a subsidiary of PFM, operates a facility in
Walbridge, Ohio, on behalf of Walbridge Coatings, an Illinois Partnership
("Partnership"), formed among MSCWC, Inland Steel Industries, Inc. ("Inland"),
and Bethlehem Steel Corporation ("BSC"). MSCLC operates one facility in Elk
Grove Village, Illinois. MSCSF operates one facility in San Diego, California.
Additional information concerning certain transactions and events is
incorporated herein by reference to Management's Discussion and Analysis of
Financial Condition and Results of Operations in the Company's annual report,
which is incorporated herein by reference.
MSC, a Delaware corporation, was founded in 1971 and has been a publicly
traded company since 1984. The principal executive offices of the Company are
located at 2200 East Pratt Boulevard, Elk Grove Village, Illinois 60007, and its
telephone number at that address is (847) 439-8270.
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Coil Coating
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The Company believes that coil coating is the most environmentally safe and
energy-efficient method available for applying paint and other coatings to
metal. This continuous, roll-to-roll highly automated, high-speed process
applies coatings to wide coils of metal. In the process, sheet metal is unwound
from a coil, cleaned, chemically treated, coated, oven-cured, and rewound into
coils for shipment to manufacturers that fabricate the coated metal into
finished products that are sold into a variety of industrial and commercial
markets. The coatings are designed to produce both protective and decorative
finishes. Through techniques such as printing, embossing, and striping, special
finishing effects can also be created. The finished product (i.e. prepainted or
coil coated metal) is a versatile material capable of being drawn, formed, bent,
bolted, riveted, chemically bonded, and welded. The Company generally acts as a
"toll coater" by processing coils for steel mills, or their customers, without
taking ownership of the metal. The Company charges by weight or surface area
processed.
The Company's coil coated products are used by manufacturers in building
products, appliances, heating and air conditioning, fuel tanks, lighting, above-
ground swimming pools, and other products. The Company's strategy in its coil
coating business has been to produce high-volume, competitively coated products
at low cost, as well as to identify, develop, and produce specialty niche
products meeting specific customer requirements.
Coil coating technology reduces the environmental impact of painting and
reduces manufacturers' energy needs. In coil coating processes, over 95% of the
coating material is applied, in contrast with the significant waste from
"overspray" typical in post-fabrication painting. The energy required to cure
coil coated metal is substantially less than that required by other coating
methods. These savings are achieved because of high-speed material processing
and because 90% to 95% of the coatings' volatile organic compounds are recycled
back into the curing ovens and used as fuel.
Manufacturers that use prepainted materials can eliminate or significantly
reduce on-site post paint lines and the associated compliance with complex
environmental and other regulations. Prepainted materials facilitate the
adoption of just-in-time and continuous process manufacturing techniques that
can result in improvements to work in process inventory, plant utilization, and
productivity. Since prepainted metal is cleaned, treated, and painted while
flat, the result is a more uniform and higher quality finished part than can be
achieved by even the best post-fabrication painting operation. There are no
hidden areas where paint is difficult to reach and where corrosion can begin
after the product has been marketed. As a result, companies using prepainted
material generally benefit from lower manufacturing costs and improved product
quality. Use of prepainted metal may, however, require product design or
fabrication changes and more stringent handling procedures during manufacturing.
The coil coating process competes with other methods of producing coated sheet
metal, principally post-fabrication finishing methods such as spraying, dipping,
and brushing. The Company believes that coil coating accounts for approximately
10% of all the sheet metal now
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being coated. The Company expects that, although there can be no assurance in
this regard, the market penetration of coil coated metal will increase as a
result of more stringent environmental regulation and the energy efficiency,
quality, and cost advantages provided by prepainted metal as compared to post-
fabrication painting, particularly in high-volume manufacturing operations. The
Company estimates that there are approximately 85 companies operating coil
coating lines in North America. The Company believes it is one of the largest
coil coaters, with approximately 15% of the total tons processed in the United
States in calendar 1997. Competition in the coil coating industry is heavily
influenced by geography, due to the high costs involved in transporting sheet
metal coils. Within geographic areas, coil coaters compete on the basis of
quality, price, customer service, technical support, and product development
capability.
Galvanizing
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The galvanizing product group serves the market for corrosion-resistant steel
for motor vehicles and building and construction products. The Company reaches
these markets through MSCWC and the galvanizing line at MSCPPS.
MSCWC is a joint venture partnership which produces electrogalvanized and coil
coated steel. Electrogalvanized ("EG") steel is the primary corrosion-resistant
steel product used to manufacture automobile and light truck bodies. Significant
domestic demand for EG steel began in 1985, and the Company believes that it
will continue as automobile manufacturers respond to consumer demands for longer
warranty protection against rust and, to a lesser extent, due to increased
applications for EG steel in the appliance and other non-automotive markets.
MSC participates in the electrogalvanizing market through its 50% financial
interest in and role as operator of the Partnership. Through the Partnership,
MSC electrogalvanizes zinc and zinc-alloy coatings and applies organic coatings
onto sheet metal. There is a growing demand by the automotive industry for a
full complement of products such as zinc-nickel, zinc-nickel with a thin organic
coating, and other organic coated zinc-nickel products such as fuel tanks that
offer additional protection against corrosion. As a result, a shift from pure
zinc to differentiated materials has commenced. These newer materials are
particularly in demand by Japanese automakers in the United States-currently
among the end-use customers for the Partnership's services. The Partnership's
facility is the only facility in North America capable of meeting, in a single
pass through its line, the demand for this full complement of products.
Sales to the Partnership represented 20%, 21%, and 23% of MSC's net sales in
fiscal 1998, 1997, and 1996, respectively. MSC's net sales for
electrogalvanizing consists of various fees charged to the Partnership for
operating the facility. Such fees are the predominant financial return to MSC
from its participation in the Partnership. There are both fixed fees (for
selling, general and administrative expenses and a portion of the financing,
taxes, and insurance) and variable fees based on production volumes (for the
balance of the financing, operating expenses, and profit). The Company pays the
actual costs of operating the facility, so the overall profitability of its
participation in the Partnership depends on its skill and efficiency. The
operating expense portion of the variable fee is based on standard costs, which
may be adjusted to reflect matters beyond the Company's control, upon agreement
of the partners or informal
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arbitration. The fees charged to BSC and Inland by the Partnership for services
fund the standard operating costs of the Partnership (including the Company's
per ton profit allowance) and, at a defined contractual production volume, all
of the Partnership's financing costs. At lesser levels of production, the
Company is obligated to fund a portion (not to exceed 50%) of the Partnership's
financing costs.
BSC and Inland are two of the major suppliers of sheet steel to the United
States automobile industry. The orders for the Partnership's toll coating
services are primarily and independently generated by BSC and Inland for their
respective customers, although the Partnership may also accept orders from
outside parties to the extent of available capacity and production schedules.
Through fiscal 1998, third party sales have not been significant. The sales and
marketing responsibilities of the Partnership are currently split between BSC
and Inland at 76% and 24%, respectively.
The term of the Partnership ends on June 30, 1998. MSC and BSC have entered
into a letter of intent with Inland for BSC, MSC, or both to acquire Inland's
interest in the Partnership. In addition, Inland has agreed to enter into a
tolling agreement with the Partnership for electrogalvanizing services through
December 31, 2001. MSC and BSC intend to extend the existing terms of the
Partnership.
Competition in the production and sale of EG steel for the automotive industry
comes from other steel companies that, either directly or through joint
ventures, produce EG steel on eight manufacturing lines in the United States,
including Inland's other facility. Limited quantities of EG steel also are
imported from foreign steel suppliers. The Company believes the Partnership's
line is well positioned to serve the current and expected end-users of EG steel.
The Company is unable to determine the effect, if any, on the market resulting
from the existence of excess capacity, the entrance of additional capacity,
improved galvanizing technology, or the substitution of other materials.
On December 15, 1997, the Company purchased certain assets and assumed certain
liabilities of a West Coast hot-dipped galvanizing and coil coating business
("Colorstrip, Inc."). Consideration for the purchase was approximately $129
million which was financed through a new bank line of credit and long-term debt.
Located in the San Francisco Bay Area, the operation consists of a 300,000 ton
capacity hot-dipped galvanizing line and a coil coating line capable of
producing 150,000 tons of prepainted metal. The two facilities operate as
MSCPPS, a subsidiary of MSC, and serve the building and construction market
across the western United States.
Hot-dipped galvanizing ("HDG") is a continuous, high-speed roll-to-roll
process for depositing zinc on steel. HDG deposits zinc onto steel by immersing
the steel strip into a molten bath of zinc (hot-dipped) making it corrosion
resistant. Zinc in the presence of a corrosive environment will sacrifice itself
to protect the steel. As such, zinc gives the maximum sacrificial protection to
steel in the greatest number of applications. Galvanized steel may be used as is
or can be painted, resulting in enhanced corrosion protection and versatility.
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MSCPPS's products are primarily used by the building and construction market
where they are manufactured into such products as roofing, siding, doors, duct
works, lighting fixtures, and a wide variety of other structural components.
MSCPPS generally takes ownership of the metal it processes.
Coated steel continues to be a growing choice for various industrial and
commercial needs because of its economy, versatility, attractiveness, and long
life. The volatility and generally rising prices of lumber also has made coated
steel a growing alternative in the residential construction market, where
durability, strength, fire-resistance, easy maintenance, and environmental
soundness have all contributed to its growth.
Laminates and Composites
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Laminates and composites combine layers of steel or other metals with layers
of polymers or other materials to achieve specific properties, such as noise and
vibration reduction, thermal insulation, or high reflectivity in lighting among
others. These products consist of functionally engineered materials that are
designed to meet specific customer requirements. Products in this group largely
result from the Company's research and development efforts and the proprietary
equipment and processes designed and implemented by its engineering and
manufacturing organizations. The Company supplies its laminates and composites
to a variety of markets both in the United States and internationally. The
majority of these materials are used in the automotive, lighting, appliance, and
computer disk drive industries. The major products in this product group are
disc brake noise dampers, Polycore Composites(R), and Specular+(R).
The disc brake noise damper market developed as manufacturers moved to
asbestos-free brake linings. The increased brake noise these linings produce can
be virtually eliminated by the composite materials pioneered by the Company. The
Company believes its material is used in over 50% of the domestic disc brake
noise dampers manufactured for the original equipment market. The Company also
believes it is a significant supplier to the emerging domestic aftermarket.
Polycore Composites are multilayer composites consisting of various metals,
coatings, and other materials, typically consisting of metal outer skins
surrounding a thin viscoelastic core material. Polycore Composites are
engineered to meet a variety of needs. The Company believes it is a leader in
developing and manufacturing continuously processed coated materials that reduce
noise and create thermal barriers. The automotive industry is the largest market
for metal composites, which are being used to replace solid sheet metal parts,
including oil pans, valve covers, front engine covers, and heat shields.
Polycore Composites are also being evaluated for use in dash panels, floor pans,
and other internal components in order to help reduce road noise. Polycore
Composites are also found in a number of other products, including lawn mower
engines, air conditioners, computer disk drive covers, and appliances, and other
uses are under evaluation.
Specular+ is a silver-sputtered film laminated to metal and then fabricated
into energy-efficient fluorescent lighting fixtures by the Company's customers.
Because pure silver offers
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unsurpassed reflectivity and precise light control, lighting fixtures made from
Specular+ produce virtually the same amount of light with only half the bulbs of
a typical white painted fixture. The result is a significant reduction in the
cost of electricity for lighting. The high reflective lighting market has
experienced a general softness due to the lack of utility rebates to offset the
higher initial cost of these fixtures and the deregulation of electric
utilities.
The market for laminate and composite materials is competitive, both
domestically and internationally. There are competitors in each product market
served by the Company, some of which have greater resources than the Company.
The Company believes, however, that its technology, product development
capability, technical support, and customer service place it in a strong
competitive position in this market.
Specialty Films
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The Company uses continuous, roll-to-roll sputter-deposition technology to
metallize wide rolls of flexible substrates, generally consisting of thin
polymeric films. In the sputter-deposition process, a target material is
disintegrated inside a vacuum chamber by ion bombardment into its component
atoms or molecules, which are then redeposited onto the surface of the base
material to be coated. Such base material (commonly called the substrate or
flexible web) can be polymeric film, foil, fabric, or paper.
Sputter-deposition permits the use of a wide range of target materials, singly
or in combination (including metals, metal alloys, and metal oxides), some of
which cannot be applied in any other way. This flexibility allows formation of
composites of metals, dielectrics, and semiconductors. Sputter-coated, flexible
polymeric substrates may be designed to have specific properties, including
energy reflectance, transmission, absorption, and electrical conductance. After
the sputtering process, these materials are often further enhanced with other
coatings, adhesives, and films on a coating and laminating line, resulting in a
multilayer laminate.
The Company's specialty films sales consist principally of solar control and
safety window films for use in the automotive aftermarket and in the
retrofitting of buildings. The Company sells these products through its own in-
house distribution network and independent distributors. The Company believes
there are significant growth opportunities in the building market, since there
is currently low market penetration, and industrial, commercial, and residential
building owners are becoming more familiar with the benefits of solar control
and safety window films. Solar control window films can lower energy bills year-
round by reducing heat penetration in the summer and by retaining residual
warmth in the winter. They also reject ultraviolet light, thereby eliminating
the damage it causes. In commercial environments, window film generally improves
productivity by reducing glare and heat generation. Safety films, which are
sold to the retrofit market and also to window manufacturers, offer security by
making glass shatter resistant.
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This product group also manufactures a number of specialty industrial
products, including imaging films used in the photocopier and printing industry;
Insceptors(R), which brown and crisp foods cooked in a microwave oven; and films
used in transparent holograms for anti-counterfeit and tamper-evident products.
This group also produces the silver-sputtered, coated film used in Specular+,
although intercompany sales of such films are excluded from this group's sales.
During fiscal 1998, a subsidiary of the Company acquired designated assets of
a specialty films distribution business in Australia and the remaining 51%
interest of a joint venture in Singapore.
MSC believes that there are four major domestic companies producing
competitive specialty film materials in addition to the Company. Some of these
competitors have greater resources than the Company, including patented
technology. The Company competes on the basis of a number of factors, including
product performance and quality, completeness of product offering, new product
development capabilities, service, and price. The Company believes that it is
competitive in these areas.
International
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The Company believes that significant opportunities exist internationally,
particularly for the Company's disc brake noise damper products, Polycore
Composites, Specular+, and solar control and safety window film. As a percent of
net sales, direct export sales represented 10%, 11%, and 8% in fiscal 1998,
1997, and 1996, respectively.
The Company has certain distribution agreements and licensing and royalty
agreements with agents and companies in Europe, Latin America, and the Far East
that cover disc brake noise dampers, Polycore Composites, and lighting products.
These agreements provide the Company with opportunities for market expansion in
those geographic areas.
Approximately 39% of the specialty films' products are sold to international
markets directly or through domestic distributors. The Company believes that
international shipments will continue to grow with the expansion of its
distribution network through strategic acquisitions and as emerging markets
increasingly realize the energy saving and ultraviolet light blocking benefits
this product provides.
The Company is pursuing a variety of other business relationships, including
direct sales, distribution agreements, licensing, and other forms of partnering
to increase its international sales and expand its international presence.
Marketing and Sales
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The Company markets its hot-dipped galvanizing, laminates and composites, and
coil coating products, services, and technologies primarily through its in-house
sales organization and also through independent distributors, agents, and
licensees. The Company focuses its sales efforts on
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manufacturers, but also sells to steel mills and their intermediaries, metal
service centers, and metal brokers. BSC and Inland are currently the primary
marketing partners for EG steel. The Company sells its specialty films' products
primarily through its internal distribution network, as well as domestic and
international distributors. All of the Company's selling activities are
supported by technical service departments that aid the customer in the choice
of available materials and their use in the customer's manufacturing process.
The Company estimates that customers in the original equipment and aftermarket
segment of the transportation industry were the end-users for approximately 48%,
52%, and 53% of MSC's net sales in fiscal 1998, 1997, and 1996, respectively.
Due to concentration in the automobile industry, the Company believes that sales
to other individual automobile companies, including indirect sales, are
significant.
The Company is a party to a ten year tolling agreement in which MSC agrees to
provide AK Steel Corporation ("AKS") with coil coating and other ancillary
services from the Middletown, Ohio facility until June 2003. For calendar year
1997, MSC was required to provide AKS with 52% of the facility's capacity. The
balance of capacity is being marketed by the Company's sales force and shifting
production from other MSC plants that, at times, reach their capacity.
The Company's backlog of orders as of February 28, 1998, was approximately
$79.3 million, all of which is expected to be filled during the remainder of the
current fiscal year. The Company's backlog was approximately $48.5 million as of
February 28, 1997.
MSC is generally not dependent on any one source for raw materials or
purchased components essential to its business, and it is believed that such raw
materials and components will be available in adequate quantities to meet
anticipated production schedules.
MSC believes that its business, in the aggregate, is not seasonal. Certain of
its products, however, sell more heavily in some seasons than in others.
Environmental Matters
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The Company is subject to federal, state, and local environmental laws. As a
result of these laws, the Company has incurred, and will continue to incur in
the future, capital expenditures and operating costs and charges. The Company is
involved in two Superfund sites located in Gary and Kingsbury, Indiana. Although
the ultimate cost of the Company's share of necessary cleanup expenses is not
yet known, the Company believes that it is adequately reserved for environmental
matters given the information currently available. See Note 5 of the Notes to
the Consolidated Financial Statements entitled "Environmental and Legal
Matters," on pages 9 and 10 of the Company's annual report, which is
incorporated by reference herein. The Company cannot predict the impact of new
or changed laws or regulations.
The Company believes it operates its facilities and conducts its business, in
all material respects, in accordance with all environmental laws presently
applicable to its facilities. The Company spent approximately $2.2 million in
fiscal 1998, and has budgeted approximately $4.3
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million during fiscal 1999, for maintenance or installation of environmental
controls at the Elk Grove Village, Illinois; Walbridge, Ohio; Morrisville,
Pennsylvania; Middletown, Ohio; and San Diego and Richmond, California
facilities. See Item 3 "Legal Proceedings" below.
Research and Development
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Management estimates that it spent approximately $6.1 million in fiscal 1998
and $6.7 million in fiscal 1997 and 1996 for product and process development
activities.
While it considers its various patents, licenses, and trademarks to be
important, it does not believe that the loss of any individual patent, license,
or trademark would have a material adverse effect upon its business.
Employees
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At February 28, 1998, the Company had 1,269 full-time employees. Of these,
approximately 898 were engaged in manufacturing, 176 in marketing and sales, 136
in administrative and clerical positions, and 59 in process and product
development.
The employees at the San Diego, California; Walbridge, Ohio; and the MSCSF
distribution facilities are not represented by a union. Hourly manufacturing
employees at Elk Grove Village, Illinois; Morrisville, Pennsylvania; and
Middletown, Ohio are covered by separate union contracts expiring in February
2002, November 2000, and May 2002, respectively. Hourly manufacturing employees
at Richmond, California are covered by two separate union contracts expiring in
March 2000 and January 2003. The Company believes that its relations with its
employees are good.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of April 24, 1998, are as follows:
<TABLE>
<CAPTION>
Position and
Name Age Year First Elected
---- --- ------------------
<S> <C> <C>
Gerald G. Nadig 52 Chairman, President and Chief Executive
Officer, MSC since January 1998; previously
President and Chief Executive Officer, MSC
since January 1997; previously President and
Chief Operating Officer, MSC since July 1991.
Thomas E. Moore 52 Executive Vice President and Chief Operating
Officer, MSC since May 1997; previously
Executive Vice President and General
Manager, MSCWC since 1993.
James J. Waclawik, Sr. 39 Vice President, Chief Financial Officer and
Secretary, MSC since October 1996;
previously Vice President and Controller,
MSC since July 1991.
Frank D. Graziano 65 Senior Vice President, Technology, MSC since
July 1991.
Anton F. Vitzthum 63 Senior Vice President, Manufacturing, MSC
since March 1994; previously Senior Vice
President, Operations, PFM since 1990.
Frank J. Lazowski, Jr. 58 Vice President, Human Resources, MSC since
July 1991.
Robert J. Mataya 55 Vice President, Business Planning and
Development, MSC since July 1991.
David J. DeNeve 29 Controller, MSC since October 1996;
previously Accounting and Tax Manager, MSC
since November 1995; previously Financial
Analyst, MSC since June 1994.
</TABLE>
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<TABLE>
<CAPTION>
Position and
Name Age Year First Elected
---- --- ------------------
<S> <C> <C>
David A. Fletcher 44 President and Chief Operating Officer, MSCSF
since September 1993; previously Vice
President, Research and Development, MSCSF
since 1989.
Ronald L. Millar 47 Group Vice President and General Manager,
MSCLC since November 1995; previously Vice
President, PFM since 1991.
Douglas M. Rose 48 President, PFM since December 1997.
Edward A. Williams 39 Group Vice President and General Manager,
MSCWC since May 1997; previously Plant
Manager, MSCWC since 1993.
</TABLE>
Prior to joining the Company in 1994, Mr. DeNeve was on the audit staff of
Arthur Andersen LLP. Mr. Rose was Executive Vice President, Toyoda Machinery
USA, prior to joining the Company and was Senior Vice President, Toyoda
Machinery USA from 1991 until 1994. Mr. Williams was Director of Pin Mill
Products, National Steel Midwest Division, prior to joining the Company and was
Superintendent, Armco Steel Company from 1989 until 1993.
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ITEM 2. PROPERTIES
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The Company owns or leases facilities with an aggregate of approximately
1,703,000 square feet of space. The Company considers all of such facilities to
be in good operating condition. In addition to the principal physical properties
used by the Company in its manufacturing operations as summarized in the table
below, the Company leases numerous sales and administrative offices pursuant to
short-term leases.
<TABLE>
<CAPTION>
Approximate
Area in Lease Expiration
Location Square Feet (or Ownership)
-------- ----------- --------------
<S> <C> <C>
Elk Grove Village, Illinois 58,000 Owner
Plant No. 1
Elk Grove Village, Illinois 205,000 Owner
Plant No. 2
Elk Grove Village, Illinois 233,000 Owner
Plant No. 3
Morrisville, Pennsylvania 121,000 Owner
Middletown, Ohio 170,000 Owner
Richmond, California 276,000 Owner
Plant No. 1
Richmond, California 203,000 Owner
Plant No. 2
San Diego, California 73,000 February 2007
Walbridge, Ohio 311,000 June 2003(1)
</TABLE>
(1) The lease is renewable, at the Company's option, for additional periods
totaling 25 years. Since April 1, 1986, this facility has been subleased to the
Partnership and the sublease is scheduled to expire on June 30, 1998. MSC and
BSC intend to extend the existing terms of the Partnership along with the
sublease (see "Galvanizing").
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ITEM 3. LEGAL PROCEEDINGS
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See Note 5 of the Notes to Consolidated Financial Statements entitled
"Environmental and Legal Matters," on pages 9 and 10 of the Company's annual
report, which is incorporated by reference herein.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY OWNERS
- ------- --------------------------------------------------
There were no matters submitted to the Company's security owners during the
fourth quarter of fiscal 1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
- -------
RELATED SHAREOWNER MATTERS
--------------------------
The Company's common stock, $.02 par value, is listed on the New York Stock
Exchange under the symbol "MSC." The table below sets forth, by fiscal quarter,
the high and low sales prices of the Company's common stock during its past two
fiscal years.
<TABLE>
<CAPTION>
Fiscal Fiscal
Year Quarter High Low
---- ------- ---- ---
<S> <C> <C> <C>
1998 1st 17 1/2 13 1/2
2nd 16 1/8 14 1/4
3rd 16 15/16 13 7/8
4th 14 7/16 10 5/16
</TABLE>
<TABLE>
<CAPTION>
Fiscal Fiscal
Year Quarter High Low
---- ------- ---- ---
<S> <C> <C> <C>
1997 1st 16 7/8 14 1/2
2nd 17 1/4 15
3rd 18 15 1/8
4th 21 15 1/4
</TABLE>
There were 1,140 owners of record of the Company's common stock at the close
of business on April 24, 1998. MSC has not paid cash dividends other than a
nominal amount in lieu of fractional shares in connection with stock dividends.
Management currently anticipates that all earnings will be retained for
development of the Company's business. If business circumstances should change,
the Board of Directors may declare and instruct the Company to pay cash
dividends.
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Reference is made to the information found under the caption "Selected
Financial Data" on page 1 of the Company's annual report, which is incorporated
by reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- -------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Reference is made to the information found under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 1 through 4 of the Company's annual report, which is incorporated by
reference herein.
Certain statements in this Form 10-K and in future filings of the Company with
the SEC and in the Company's written and oral statements made by or with the
approval of an authorized officer of the Company contain, or will contain,
various "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including assumptions concerning MSC's operations, future results, and
prospects, and the Company intends that such forward-looking statements be
subject to the safe harbors created thereby. These forward-looking statements
are based on MSC's current expectations and are subject to risk and
uncertainties which could cause actual results or events to differ materially
from those set forth or implied. Examples of forward-looking statements
include, but are not limited to, statements regarding the Company's future
financial position and results of operations and cash flows (including future
capital expenditures and anticipated debt levels and strategies for growth),
plans, and objectives. Uncertainties and factors which could cause actual
results or events to differ materially from those set forth or implied include,
but are not limited to, (i) successful development and market introduction of
anticipated new products and technologies; (ii) competitive factors and
competitor's responses to MSC's initiatives; (iii) changes in the current and
future business environment; (iv) adverse changes in government laws and
regulations applicable to the Company; (v) continuation of the favorable
environment to make acquisitions, including regulatory requirements and market
values of candidates; (vi) the stability of governments and business conditions
inside and outside the United States which may affect successful penetration of
the Company's products; (vii) the health of the automobile and durable goods
industries; (viii) environmental risks associated with the manufacturing
operations of the Company; (ix) the loss of one or more significant customers of
the Company; (x) risks associated with the termination of the Partnership in
June 1998; and (xi) increases in the price of raw and other material inputs used
by the Company that cannot be passed on to its customers. The Company does not
undertake any obligation to update or revise any forward-looking statement made
by it or on its behalf, whether as the result of new information, future events,
or otherwise.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------- -------------------------------------------
(a) The Consolidated Statements of Income for the years ended February 28,
1998 and 1997 and February 29, 1996, Consolidated Statements of Changes in
Shareowners' Equity for the years ended February 28, 1998 and 1997, and February
29, 1996, Consolidated Balance Sheets as of February 28, 1998 and 1997,
Consolidated Statements of Cash Flows for the years ended
16
<PAGE>
February 28, 1998 and 1997 and February 29, 1996, Notes to Consolidated
Financial Statements and the Report of Independent Public Accountants, set forth
on pages 5 through 16 of the Company's annual report, are incorporated by
reference herein.
(b) The unaudited selected quarterly financial data is set forth in Note 13 of
the Notes to Consolidated Financial Statements under the caption "Selected
Quarterly Results of Operations (Unaudited)" on page 15 of the Company's annual
report, which is incorporated by reference herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------- --------------------------------------------------
Reference is made to the information found under the caption "Election of
Directors" on pages 2 through 5 of the Company's proxy statement for the 1998
annual meeting of shareowners ("proxy statement"), all of which is incorporated
by reference herein, for information on the directors of the Company. Reference
is made to the information under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" set forth on page 14 of the proxy statement, all of which
is incorporated herein by reference. Reference is made to Part I of this report
for information on the executive officers of the Company.
ITEM 11. EXECUTIVE COMPENSATION
- -------- ----------------------
Reference is made to the information under the captions "Compensation of
Executive Officers", "Compensation and Organization Committee Report", "MSC
Performance Graph", "Employment and Other Agreements", and "Employee and Other
Plans" on pages 7 through 14 of the proxy statement, all of which is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
- -------
HOLDERS AND MANAGEMENT
----------------------
Reference is made to the information under the captions "Security Ownership of
Management of the Company" and "Information with Respect to Certain Shareowners"
set forth on pages 5 and 6 of the proxy statement, all of which is incorporated
by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------- ----------------------------------------------
Reference is made to the information under the caption "Employment and Other
Agreements" set forth on page 13 of the proxy statement, all of which is
incorporated herein by reference.
17
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
- --------
REPORTS ON FORM 8-K
-------------------
(A) FINANCIAL STATEMENTS AND SCHEDULES OF THE COMPANY
I Financial Statements of the Company. Incorporated herein by reference
-----------------------------------
to pages 5 through 16 of the Company's annual report.
(i) Consolidated Statements of Income for the years ended
February 28 or 29, 1998, 1997, and 1996
(ii) Consolidated Statements of Changes in Shareowners' Equity
for the years ended February 28 or 29, 1998, 1997, and 1996
(iii) Consolidated Balance Sheets - February 28, 1998 and 1997
(iv) Consolidated Statements of Cash Flows for the years ended
February 28 or 29, 1998, 1997, and 1996
(v) Notes to Consolidated Financial Statements
(vi) Report of Independent Public Accountants
II Supplemental Schedules
----------------------
(i) Report of Independent Public Accountants with respect to
Supplemental Schedule to the Financial Statements
(ii) Schedule II - Reserve for Receivable Allowances
All other schedules have been omitted, since the required information is not
significant, is included in the financial statements or the notes thereto, or is
not applicable.
(B) REPORTS ON FORM 8-K
On December 30, 1997, the Company filed a Form 8-K regarding the acquisition
of Colorstrip, Inc. and other matters.
On February 27, 1998, the Company filed a Form 8-K/A regarding the audited
historical financial statements and proforma financial information for the
acquisition of Colorstrip, Inc.
18
<PAGE>
(C) EXHIBITS
Exhibit
Number Description of Exhibit
------ ----------------------
2(a) Parent Agreement dated as of October 15, 1984, by and
among Bethlehem Steel Corporation, Inland Steel
Company, Pre Finish Metals Incorporated and Material
Sciences Corporation.(1)
2(b) Partnership Agreement dated as of August 30, 1984, by
and among EGL Steel Inc., Inland Steel
Electrogalvanizing Corporation and Pre Finish Metals
(EG) Incorporated.(1)
2(c) Amendment No. 1 to the Partnership Agreement dated as
of August 30, 1984.(2)
2(d) Amendment No. 2 to the Partnership Agreement dated as
of August 30, 1984.(2)
2(e) Operating Agreement dated as of October 15, 1984, by
and between Pre Finish Metals (EG) Incorporated and
Walbridge Coatings, An Illinois Partnership.(1)
2(f) Coating Agreement dated as of October 15, 1984, by and
between Bethlehem Steel Corporation and Walbridge
Coatings, An Illinois Partnership.(1)
2(g) Coating Agreement dated as of October 15, 1984, by and
between Inland Steel Company and Walbridge Coatings,
An Illinois Partnership.(1)
2(h) Amendments to Definitive Agreements dated as of March
31, 1986, among EGL Steel Inc., Inland Steel
Electrogalvanizing Corporation, Pre Finish Metals (EG)
Incorporated, Bethlehem Steel Corporation, Inland
Steel Company, Pre Finish Metals Incorporated and
Material Sciences Corporation.(5)
2(i) Further Amendments to Definitive Agreements dated as
of July 24, 1986, among EGL Steel Inc., Inland Steel
Electrogalvanizing Corporation, Pre Finish Metals (EG)
Incorporated, Bethlehem Steel Corporation, Inland
Steel Company, Inland Steel Industries, Inc., Pre
Finish Metals Incorporated and Material Sciences
Corporation.(3)
19
<PAGE>
Exhibit
Number Description of Exhibit
------ ----------------------
2(j) Further Amendments to Definitive Agreements dated as
of April 23, 1992, among EGL Steel Inc., Inland Steel
Electrogalvanizing Corporation, Pre Finish Metals (EG)
Incorporated, Bethlehem Steel Corporation, Inland
Steel Company, Inland Steel Industries, Inc., Pre
Finish Metals Incorporated and Material Sciences
Corporation.(6)
2(k) Asset Purchase Agreement by and among Colorstrip,
Inc., the Registrant, and MSC Pinole Point Steel Inc.,
dated as of November 14, 1997.(12)
3(a) Registrant's Restated Certificate of
Incorporation.(11)
3(b) Certificate of Designation, Preferences and Rights of
Series B Junior Participating Preferred Stock.(7)
3(c) Registrant's By-laws, as amended.(5)
4(a) Credit Agreement, dated as of December 12, 1997, among
Registrant, Bank of America National Trust and Savings
Association, as Agent and Letter of Credit Issuing
Bank, and other financial institutions party
thereto.(12)
4(b) First Amendment dated as of April 30, 1998, among
Registrant, Bank of America National Trust and Savings
Association, as Agent and Letter of Credit Issuing
Bank, and other financial institutions party thereto.
4(c) Note Agreement dated as of February 15, 1997, by and
among the Registrant and the purchasers described on
Schedule I attached thereto.(10)
4(d) Note Agreement dated as of February 15, 1998, by and
among the Registrant and the purchasers described on
Schedule I attached thereto.
4(e) First Amendment to Note Agreement dated as of January
23, 1998 among the Registrant, Principal Mutual Life
Insurance Company, Great-West Life & Annuity Insurance
Company, The Great-West Life Assurance Company,
Nationwide Life Insurance Company, Nationwide Life and
Annuity Insurance Company, and West Coast Life
Insurance Company.
20
<PAGE>
Exhibit
Number Description of Exhibit
------ ----------------------
4(f) Second Amendment to Note Agreement dated as of
February 27, 1998 among the Registrant, Principal
Mutual Life Insurance Company, Great-West Life &
Annuity Insurance Company, The Great-West Life
Assurance Company, Nationwide Life Insurance Company,
Nationwide Life and Annuity Insurance Company, and
West Coast Life Insurance Company.
4(g) Option Agreement dated as of February 26, 1998,
between the Registrant and Stern Stewart & Co.
4(h) Rights Agreement dated as of June 20, 1996, between
Material Sciences Corporation and Chase Mellon
Shareholder Services, L.L.C. as Rights Agent.(7)
There are omitted certain instruments with respect to
long-term debt, the total amount of securities
authorized under each of which does not exceed 10% of
the total assets of the registrant and its
subsidiaries on a consolidated basis. A copy of each
such instrument will be furnished to the Commission
upon request.
10(a) Material Sciences Corporation Stock Purchase Plan. (1)
10(b) Material Sciences Corporation Supplemental Pension
Plan.(1)
10(c) Material Sciences Corporation Employee Stock Purchase
Plan.(5)
10(d) Material Sciences Corporation 1985 Stock Option Plan
for Key Employees.(5)
10(e) Material Sciences Corporation 1985 Stock Option Plan
for Directors.(5)
10(f) Material Sciences Corporation 1992 Omnibus Stock
Awards Plan for Key Employees.(8)
10(g) Employment Agreement effective February 27, 1991,
between Material Sciences Corporation and G. Robert
Evans.(5)
10(h) Material Sciences Corporation 1991 Stock Option Plan
for Directors.(5)
21
<PAGE>
Exhibit
Number Description of Exhibit
------ ----------------------
10(i) Material Sciences Corporation Directors Deferred
Compensation Plan.(5)
10(j) Material Sciences Corporation 1996 Stock Option Plan
for Non-Employee Directors.(9)
10(k) Deferred Compensation Plan of Material Sciences
Corporation and Certain Participating Subsidiaries.(5)
10(l) Lease and Agreement dated as of December 1, 1980,
between Line 6 Corp. and Pre Finish Metals
Incorporated, relating to Walbridge, Ohio facility.(1)
10(m) First Amendment to Lease and Agreement dated as of May
30, 1986, between Corporate Property Associates and
Corporate Property Associates 2 and Pre Finish Metals
Incorporated.(3)
10(n) Sublease dated as of May 30, 1986, between Pre Finish
Metals Incorporated and Walbridge Coatings, An
Illinois Partnership.(3)
10(o) Lease Guaranty dated as of May 30, 1986, from Material
Sciences Corporation to Corporate Property Associates
and Corporate Property Associates 2.(3)
10(p) Note Purchase Agreement dated as of May 30, 1986,
between Material Sciences Corporation and
Creditanstalt-Bankverein (New York Branch).(3)
10(q) Agreement dated as of May 30, 1986, between Material
Sciences Corporation and Corporate Property Associates
and Corporate Property Associates 2.(3)
10(r) Term Loan Agreement dated as of July 23, 1986, among
Walbridge Coatings, An Illinois Partnership,
Creditanstalt-Bankverein (New York Branch) and The
Toledo Trust Company, including the related guaranties
by Material Sciences Corporation and Pre Finish Metals
Incorporated.(3)
10(s) Amendment No. 1 to Term Loan Agreement dated as of
March 31, 1987, among Walbridge Coatings, An Illinois
Partnership, Creditanstalt-Bankverein (New York
Branch) and The Toledo Trust Company.(3)
22
<PAGE>
Exhibit
Number Description of Exhibit
------ ----------------------
10(t) Amended and Restated Credit Facility Agreement dated
as of July 23, 1986, between Walbridge Coatings, An
Illinois Partnership, and Creditanstalt-Bankverein,
including the related guaranties by Material Sciences
Corporation and Pre Finish Metals Incorporated.(3)
10(u) Amendment and Consent Agreement dated as of April 23,
1992, among Walbridge Coatings, An Illinois
Partnership, Bethlehem Steel Corporation, EGL Steel,
Inc., Inland Steel Industries, Inc., Inland Steel
Company, Inland Steel Electrogalvanizing Corporation,
Material Sciences Corporation, Pre Finish Metals
Incorporated, Pre Finish Metals (EG) Incorporated, and
Creditanstalt-Bankverein, amending the Term Loan
Agreement dated as of July 23, 1986, as amended on
March 31, 1987, and amending the Amended and Restated
Credit Facility Agreement dated as of July 23, 1986,
including the related guaranties by Material Sciences
Corporation and Pre Finish Metals Incorporated.(6)
10(v) Form of Standstill Agreement dated as of January 29,
1986, among Material Sciences Corporation, Richard L.
Burns and Joyce Burns.(5)
10(w) Form of Indemnification Agreement between Material
Sciences Corporation and each of its officers and
directors.(6)
10(x) Severance Benefits Agreement, dated October 22, 1996
between Material Sciences Corporation and James J.
Waclawik, Sr.(10)
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.(13)
23
<PAGE>
_______________
(1) Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (Registration No. 2-93414), which was declared effective
on November 27, 1984.
(2) Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-00828), which was filed on October
11, 1985.
(3) Incorporated by reference to the Registrant's Form 10-K Annual
Report for the Fiscal Year Ended February 28, 1989 (File No. 1-
8803).
(4) Incorporated by reference to the Registrant's Form 10-Q Quarterly
Report for the Quarter Ended August 31, 1994 (File No. 1-8803).
(5) Incorporated by reference to the Registrant's Form 10-K Annual
Report for the Fiscal Year Ended February 28, 1991 (File No. 1-
8803).
(6) Incorporated by reference to the Registrant's Form 10-K Annual
Report for the Fiscal Year Ended February 29, 1992 (File No. 1-
8803).
(7) Incorporated by reference to the Registrant's Form 8-A filed on June
25, 1996 (File No. 1-8803).
(8) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 333-15679) which was filed on November
6, 1996.
(9) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 333-15677) which was filed on November
6, 1996.
(10) Incorporated by reference to the Registrant's Form 10-K Annual
Report for the Fiscal Year Ended February 28, 1997 (File No. 1-
8803).
(11) Incorporated by reference to the Registrant's Form 10-Q Quarterly
Report for the Quarter Ended August 31, 1997 (File No. 1-8803).
(12) Incorporated by reference to the Registrant's Form 8-K filed on
December 30, 1997 (File No. 1-8803).
(13) Appears only in the electronic filing of this report with the
Securities and Exchange Commission.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MATERIAL SCIENCES CORPORATION
By: /s/ Gerald G. Nadig
--------------------------------------
Gerald G. Nadig
Chairman, President and Chief Executive Officer
Date: May 22, 1998
Pursuant to the requirements of the Securities Act of 1934, this Report has
been signed by the following persons in the capacities indicated on May 22,
1998.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Gerald G. Nadig Chairman, President and Chief Executive Officer and Director
- --------------------------------
Gerald G. Nadig (Principal Executive Officer)
/s/ James J. Waclawik, Sr. Vice President, Chief Financial Officer and Secretary
- --------------------------------
James J. Waclawik, Sr. (Principal Financial Officer)
/s/ David J. DeNeve Controller
- --------------------------------
David J. DeNeve (Principal Accounting Officer)
/s/ Jerome B. Cohen Director
- --------------------------------
Jerome B. Cohen
/s/ Roxanne J. Decyk Director
- --------------------------------
Roxanne J. Decyk
/s/ Eugene W. Emmerich Director
- --------------------------------
Eugene W. Emmerich
/s/ G. Robert Evans Director
- --------------------------------
G. Robert Evans
/s/ E. F. Heizer, Jr. Director
- --------------------------------
E. F. Heizer, Jr.
/s/ Irwin P. Pochter Director
- --------------------------------
Irwin P. Pochter
/s/ Howard B. Witt Director
- --------------------------------
Howard B. Witt
</TABLE>
25
<PAGE>
EXHIBIT INDEX
MATERIAL SCIENCES CORPORATION
ANNUAL REPORT ON FORM 10-K
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
- -------
REPORTS ON FORM 8-K
-------------------
(A) FINANCIAL STATEMENTS AND SCHEDULES OF THE COMPANY
I Financial Statements of the Company. Incorporated herein by
-----------------------------------
reference to pages 5 through 16 of the Company's annual report.
(i) Consolidated Statements of Income for the years ended
February 28 or 29, 1998, 1997, and 1996
(ii) Consolidated Statements of Changes in Shareowners' Equity
for the years ended February 28 or 29, 1998, 1997 and 1996
(iii) Consolidated Balance Sheets -February 28, 1998 and 1997
(iv) Consolidated Statements of Cash Flows for the years ended
February 28 or 29, 1998, 1997, and 1996
(v) Notes to Consolidated Financial Statements
(vi) Report of Independent Public Accountants
II Supplemental Schedules
----------------------
(i) Report of Independent Public Accountants with respect to
Supplemental Schedule to the Financial Statements
(ii) Schedule II - Reserve for Receivable
All other schedules have been omitted, since the required information is not
significant, is included in the financial statements or the notes thereto, or is
not applicable.
26
<PAGE>
MATERIAL SCIENCES CORPORATION
ANNUAL REPORT ON FORM 10-K
INDEX TO EXHIBITS
Exhibit
Number Description of Exhibit
------ ----------------------
2(a) Parent Agreement dated as of October 15, 1984, by and
among Bethlehem Steel Corporation, Inland Steel
Company, Pre Finish Metals Incorporated and Material
Sciences Corporation.(1)
2(b) Partnership Agreement dated as of August 30, 1984, by
and among EGL Steel Inc., Inland Steel
Electrogalvanizing Corporation and Pre Finish Metals
(EG) Incorporated.(1)
2(c) Amendment No. 1 to the Partnership Agreement dated as
of August 30, 1984.(2)
2(d) Amendment No. 2 to the Partnership Agreement dated as
of August 30, 1984.(2)
2(e) Operating Agreement dated as of October 15, 1984, by
and between Pre Finish Metals (EG) Incorporated and
Walbridge Coatings, An Illinois Partnership.(1)
2(f) Coating Agreement dated as of October 15, 1984, by and
between Bethlehem Steel Corporation and Walbridge
Coatings, An Illinois Partnership.(1)
2(g) Coating Agreement dated as of October 15, 1984, by and
between Inland Steel Company and Walbridge Coatings,
An Illinois Partnership.(1)
2(h) Amendments to Definitive Agreements dated as of March
31, 1986, among EGL Steel Inc., Inland Steel
Electrogalvanizing Corporation, Pre Finish Metals (EG)
Incorporated, Bethlehem Steel Corporation, Inland
Steel Company, Pre Finish Metals Incorporated and
Material Sciences Corporation.(5)
27
<PAGE>
Exhibit
Number Description of Exhibit
------ ----------------------
2(i) Further Amendments to Definitive Agreements dated as
of July 24, 1986, among EGL Steel Inc., Inland Steel
Electrogalvanizing Corporation, Pre Finish Metals (EG)
Incorporated, Bethlehem Steel Corporation, Inland
Steel Company, Inland Steel Industries, Inc., Pre
Finish Metals Incorporated and Material Sciences
Corporation.(3)
2(j) Further Amendments to Definitive Agreements dated as
of April 23, 1992, among EGL Steel Inc., Inland Steel
Electrogalvanizing Corporation, Pre Finish Metals (EG)
Incorporated, Bethlehem Steel Corporation, Inland
Steel Company, Inland Steel Industries, Inc., Pre
Finish Metals Incorporated and Material Sciences
Corporation.(6)
2(k) Asset Purchase Agreement by and among Colorstrip,
Inc., the Registrant, and MSC Pinole Point Steel Inc.,
dated as of November 14, 1997.(12)
3(a) Registrant's Restated Certificate of
Incorporation.(11)
3(b) Certificate of Designation, Preferences and Rights of
Series B Junior Participating Preferred Stock.(7)
3(c) Registrant's By-laws, as amended.(5)
4(a) Credit Agreement, dated as of December 12, 1997, among
Registrant, Bank of America National Trust and Savings
Association, as Agent and Letter of Credit Issuing
Bank, and other financial institutions party
thereto.(12)
4(b) First Amendment dated as of April 30, 1998, among
Registrant, Bank of America National Trust and Savings
Association, as Agent and Letter of Credit Issuing
Bank, and other financial institutions party thereto.
4(c) Note Agreement dated as of February 15, 1997, by and
among the Registrant and the purchasers described on
Schedule I attached thereto.(10)
4(d) Note Agreement dated as of February 15, 1998, by and
among the Registrant and the purchasers described on
Schedule I attached thereto.
28
<PAGE>
Exhibit
Number Description of Exhibit
------ ----------------------
4(e) First Amendment to Note Agreement dated as of January
23, 1998 among the Registrant, Principal Mutual Life
Insurance Company, Great-West Life & Annuity Insurance
Company, The Great-West Life Assurance Company,
Nationwide Life Insurance Company, Nationwide Life and
Annuity Insurance Company, and West Coast Life
Insurance Company.
4(f) Second Amendment to Note Agreement dated as of
February 27, 1998 among the Registrant, Principal
Mutual Life Insurance Company, Great-West Life &
Annuity Insurance Company, The Great-West Life
Assurance Company, Nationwide Life Insurance Company,
Nationwide Life and Annuity Insurance Company, and
West Coast Life Insurance Company.
4(g) Option Agreement dated as of February 26, 1998,
between the Registrant and Stern Stewart & Co.
4(h) Rights Agreement dated as of June 20, 1996, between
Material Sciences Corporation and Chase Mellon
Shareholder Services, L.L.C. as Rights Agent.(7)
There are omitted certain instruments with respect to
long-term debt, the total amount of securities
authorized under each of which does not exceed 10% of
the total assets of the registrant and its
subsidiaries on a consolidated basis. A copy of each
such instrument will be furnished to the Commission
upon request.
10(a) Material Sciences Corporation Stock Purchase Plan. (1)
10(b) Material Sciences Corporation Supplemental Pension
Plan.(1)
10(c) Material Sciences Corporation Employee Stock Purchase
Plan.(5)
10(d) Material Sciences Corporation 1985 Stock Option Plan
for Key Employees.(5)
10(e) Material Sciences Corporation 1985 Stock Option Plan
for Directors.(5)
29
<PAGE>
Exhibit
Number Description of Exhibit
------ ----------------------
10(f) Material Sciences Corporation 1992 Omnibus Stock Awards
Plan for Key Employees.(8)
10(g) Employment Agreement effective February 27, 1991, between
Material Sciences Corporation and G. Robert Evans.(5)
10(h) Material Sciences Corporation 1991 Stock Option Plan for
Directors.(5)
10(i) Material Sciences Corporation Directors Deferred
Compensation Plan.(5)
10(j) Material Sciences Corporation 1996 Stock Option Plan for
Non-Employee Directors.(9)
10(k) Deferred Compensation Plan of Material Sciences
Corporation and Certain Participating Subsidiaries.(5)
10(l) Lease and Agreement dated as of December 1, 1980, between
Line 6 Corp. and Pre Finish Metals Incorporated, relating
to Walbridge, Ohio facility.(1)
10(m) First Amendment to Lease and Agreement dated as of May
30, 1986, between Corporate Property Associates and
Corporate Property Associates 2 and Pre Finish Metals
Incorporated.(3)
10(n) Sublease dated as of May 30, 1986, between Pre Finish
Metals Incorporated and Walbridge Coatings, An Illinois
Partnership.(3)
10(o) Lease Guaranty dated as of May 30, 1986, from Material
Sciences Corporation to Corporate Property Associates and
Corporate Property Associates 2.(3)
10(p) Note Purchase Agreement dated as of May 30, 1986, between
Material Sciences Corporation and Creditanstalt-
Bankverein (New York Branch).(3)
10(q) Agreement dated as of May 30, 1986, between Material
Sciences Corporation and Corporate Property Associates
and Corporate Property Associates 2.(3)
30
<PAGE>
Exhibit
Number Description of Exhibit
------ ----------------------
10(r) Term Loan Agreement dated as of July 23, 1986, among
Walbridge Coatings, An Illinois Partnership,
Creditanstalt-Bankverein (New York Branch) and The Toledo
Trust Company, including the related guaranties by
Material Sciences Corporation and Pre Finish Metals
Incorporated.(3)
10(s) Amendment No. 1 to Term Loan Agreement dated as of March
31, 1987, among Walbridge Coatings, An Illinois
Partnership, Creditanstalt-Bankverein (New York Branch)
and The Toledo Trust Company.(3)
10(t) Amended and Restated Credit Facility Agreement dated as
of July 23, 1986, between Walbridge Coatings, An Illinois
Partnership, and Creditanstalt-Bankverein, including the
related guaranties by Material Sciences Corporation and
Pre Finish Metals Incorporated.(3)
10(u) Amendment and Consent Agreement dated as of April 23,
1992, among Walbridge Coatings, An Illinois Partnership,
Bethlehem Steel Corporation, EGL Steel, Inc., Inland
Steel Industries, Inc., Inland Steel Company, Inland
Steel Electrogalvanizing Corporation, Material Sciences
Corporation, Pre Finish Metals Incorporated, Pre Finish
Metals (EG) Incorporated, and Creditanstalt-Bankverein,
amending the Term Loan Agreement dated as of July 23,
1986, as amended on March 31, 1987, and amending the
Amended and Restated Credit Facility Agreement dated as
of July 23, 1986, including the related guaranties by
Material Sciences Corporation and Pre Finish Metals
Incorporated.(6)
10(v) Form of Standstill Agreement dated as of January 29,
1986, among Material Sciences Corporation, Richard L.
Burns and Joyce Burns.(5)
10(w) Form of Indemnification Agreement between Material
Sciences Corporation and each of its officers and
directors.(6)
10(x) Severance Benefits Agreement, dated October 22, 1996
between Material Sciences Corporation and James J.
Waclawik, Sr.(10)
31
<PAGE>
Exhibit
Number Description of Exhibit
------ ----------------------
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.(13)
_________________
(1) Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (Registration No. 2-93414), which was declared effective
on November 27, 1984.
(2) Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-00828), which was filed on October
11, 1985.
(3) Incorporated by reference to the Registrant's Form 10-K Annual
Report for the Fiscal Year Ended February 28, 1989 (File No. 1-
8803).
(4) Incorporated by reference to the Registrant's Form 10-Q Quarterly
Report for the Quarter Ended August 31, 1994 (File No. 1-8803).
(5) Incorporated by reference to the Registrant's Form 10-K Annual
Report for the Fiscal Year Ended February 28, 1991 (File No. 1-
8803).
(6) Incorporated by reference to the Registrant's Form 10-K Annual
Report for the Fiscal Year Ended February 29, 1992 (File No. 1-
8803).
(7) Incorporated by reference to the Registrant's Form 8-A filed on June
25, 1996 (File No. 1-8803).
(8) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 333-15679) which was filed on November
6, 1996.
(9) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 333-15677) which was filed on November
6, 1996.
(10) Incorporated by reference to the Registrant's Form 10-K Annual
Report for the Fiscal Year Ended February 28, 1997 (File No. 1-
8803).
32
<PAGE>
(11) Incorporated by reference to the Registrant's Form 10-Q Quarterly
Report for the Quarter Ended August 31, 1997 (File No. 1-8803).
(12) Incorporated by reference to the Registrant's Form 8-K filed on
December 30, 1997 (File No. 1-8803).
(13) Appears only in the electronic filing of this report with the
Securities and Exchange Commission.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-------------------------------------
33
<PAGE>
MATERIAL SCIENCES CORPORATION
Supplemental Schedules
34
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
WITH RESPECT TO SUPPLEMENTAL SCHEDULE
TO THE FINANCIAL STATEMENTS
To the Shareowners and Board of Directors of Material Sciences Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in the Material Sciences
Corporation 1998 Annual Report to Shareowners incorporated by reference in this
Form 10-K, and have issued our report thereon dated April 15, 1998. Our audits
were made for the purpose of forming an opinion on the basic consolidated
financial statements taken as a whole. The supplemental financial statement
schedule is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic consolidated financial statements. The supplemental
financial statement schedule has been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
/s/ ARTHUR ANDERSEN LLP
-------------------------
ARTHUR ANDERSEN LLP
Chicago, Illinois
April 15, 1998
35
<PAGE>
SCHEDULE II
MATERIAL SCIENCES CORPORATION AND SUBSIDIARIES
RESERVE FOR RECEIVABLE ALLOWANCES
(in thousands)
<TABLE>
<CAPTION>
Additions
---------------------------------------------------------------
Balance at Charged to Charged Reclassifications Deductions Balance at
beginning costs and to other and from end of
of year expense accounts Acquisitions reserve year
---------------- ------------- ------------ ----------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1996
- --------------------
Receivable Allowances $ 3,628 $ 6,612 $ - $ 1,934 ($ 7,767) $ 4,407
================ ============= ============ ================= ============== ==============
1997
- --------------------
Receivable Allowances $ 4,407 $ 4,132 $ - $ - ($ 6,268) $ 2,271
================ ============= ============ ================= ============== ==============
1998
- --------------------
Receivable Allowances $ 2,271 $ 11,980 $ - $ 1,354 ($ 10,820) $ 4,785
================ ============= ============ ================= ============== ==============
</TABLE>
The activity in the Receivable Allowances account includes the Company's bad
debt, claim, and scrap allowance.
36
<PAGE>
EXHIBIT 4(B)
FIRST AMENDMENT
TO
CREDIT AGREEMENT
THIS FIRST AMENDMENT (this "Amendment") dated as of April __, 1998 is
entered into by and among Material Sciences Corporation, a Delaware corporation
(the "Company"), the lenders who are party to the Credit Agreement referred to
below (the "Banks"), and Bank of America National Trust and Savings Association,
as letter of credit issuing bank and as Agent for the Banks (herein, in such
latter capacity, the "Agent").
W I T N E S E T H:
-----------------
WHEREAS, the Company, the Banks and the Agent are parties to a certain
Credit Agreement dated as of December 12, 1997 (the "Credit Agreement"; terms
used but not otherwise defined herein are used herein as defined in the Credit
Agreement);
WHEREAS, the Company desires to amend the Credit Agreement in certain
respects relating to Revolving Loan availability; and
WHEREAS, subject to the terms and conditions set forth herein the Agent and
the Banks are willing to amend the Credit Agreement in certain respects;
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound hereby, the Company, the Agent and the Banks hereby agree as
follows:
Section 1. Amendment.
In reliance on the Company's warranties set forth in Section 2 below, as of
---------
the date hereof the Credit Agreement is hereby amended as follows:
(a) The definition of "Combined Commitment" set forth in Section 1.1
of the Credit Agreement is amended to read in its entirety as follows:
""Combined Commitment" means $90,000,000 or such lesser amount to
-------------------
which it may be reduced pursuant to Section 2.5."
-----------
(b) Section 2.5 of the Credit Agreement is amended to read in its
entirety as follows:
<PAGE>
"2.5 Voluntary Termination or Reduction of Commitments. The
-------------------------------------------------
Company may, upon not less than five Business Days' prior notice to
the Agent, terminate the Combined Commitment, or permanently reduce
the Combined Commitment by an aggregate minimum amount of $5,000,000
or any multiple of $500,000 in excess thereof; unless, after giving
------
effect thereto and to any prepayments of Loans made on the effective
date thereof, (a) the Effective Amount of all Revolving Loans, and L/C
Obligations together would exceed the amount of the Combined
Commitment then in effect, or (b) the Effective Amount of all L/C
Obligations then outstanding would exceed the L/C Commitment. Once
reduced in accordance with this Section, the Combined Commitments may
not be increased. Any reduction of the Combined Commitment shall be
applied to each Bank according to its Pro Rata Share. If and to the
extent specified by the Company in the notice to the Agent, some or
all of the reduction in the Combined Commitment shall be applied to
reduce the L/C Commitment. All accrued Commitment Fees and letter of
credit fees to, but not including, the effective date of any reduction
or termination of Combined Commitment, shall be paid on the effective
date of such reduction or termination."
(c) Clause (a) of Section 8.5 of the Credit Agreement is amended to
read in its entirety as follows:
"(a)(i) Indebtedness incurred pursuant to this Agreement and the
other Loan Documents and (ii) other Indebtedness of the Company owed
to any Bank individually; provided, that in the case of Indebtedness
--------
permitted by the foregoing clause (ii) the aggregate principal amount
of all such Indebtedness shall in no event exceed $10,000,000 at any
time outstanding."
Section 2. Warranties.
To induce the Agent and the Banks to enter into this Amendment, the Company
warrants to the Agent and the Banks as of the date hereof that:
(a) The representations and warranties contained in Article VI of the
Credit Agreement and in the other Loan Documents are true and correct in
all material respects on and as of the date hereof (except to the extent
such representations and warranties expressly refer to an earlier date);
and
(b) No Default or Event of Default has occurred and is continuing.
Section 3. GENERAL.
(a) As hereby modified, the Credit Agreement shall remain in full
force and
-2-
<PAGE>
effect and is hereby ratified, approved and confirmed in all respects.
(b) The provisions of this Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that the Company may not assign or transfer any of its
rights or obligations under this Amendment without the prior written
consent of the Agent and each Bank.
(c) This Amendment may be executed in any number of counterparts and
by the different parties on separate counterparts, and each such
counterpart, when so executed, shall be deemed to be an original, but all
such counterparts shall together constitute one and the same Amendment.
-3-
<PAGE>
Delivered at Chicago, Illinois, as of the date and year first above written.
MATERIAL SCIENCES CORPORATION
By:_____________________________________
Title:__________________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:_____________________________________
Title:__________________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Issuing Bank
By:_____________________________________
Title:__________________________________
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Bank
By:_____________________________________
Title:__________________________________
THE NORTHERN TRUST COMPANY
By:_____________________________________
Title:__________________________________
-4-
<PAGE>
The undersigned hereby acknowledge the foregoing and reaffirm their
respective duties and obligations arising under the Loan Documents to which each
is a party.
MSC PRE FINISH METALS INC.
By:_____________________________________
Title:__________________________________
MSC PRE FINISH METALS (EGV) INC.
By:_____________________________________
Title:__________________________________
MSC PRE FINISH METALS (MV) INC.
By:_____________________________________
Title:__________________________________
MSC PRE FINISH METALS (MT) INC.
By:_____________________________________
Title:__________________________________
MSC LAMINATES AND COMPOSITES INC.
By:_____________________________________
Title:__________________________________
MSC LAMINATES AND COMPOSITES (EGV) INC.
By:_____________________________________
Title:__________________________________
MSC WALBRIDGE COATINGS INC.
By:_____________________________________
Title:__________________________________
MSC SPECIALTY FILMS INC.
By:_____________________________________
-5-
<PAGE>
Title:__________________________________
MSC PINOLE POINT STEEL INC.
By:_____________________________________
Title:__________________________________
SOLAR-GARD INTERNATIONAL, INC.
By:_____________________________________
Title:__________________________________
MSC PRE FINISH METALS (PP) INC.
By:_____________________________________
Title:__________________________________
-6-
<PAGE>
Exhibit 4(d)
================================================================================
================================================================================
MATERIAL SCIENCES CORPORATION
NOTE AGREEMENT
Dated as of February 15, 1998
$5,000,000 Principal Amount, dated as of February 15, 1998
6.49% Series A Senior Notes
Due May 31, 2003
$56,500,000 Principal Amount, dated as of February 15, 1998
6.80% Series B Senior Notes
Due May 31, 2010
================================================================================
PPN Series A: 576674 A# 2
PPN Series B: 576674 B* 5
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
(S)1. DESCRIPTION OF NOTES AND COMMITMENT..................................... 1
1.1. Description of Notes............................................. 1
--------------------
1.2. Commitment; Closing Date......................................... 1
------------------------
1.3. Guaranty......................................................... 2
--------
(S)2. PREPAYMENT OF NOTES..................................................... 2
2.1. Required Prepayments............................................. 2
--------------------
2.2. Optional Prepayments............................................. 3
--------------------
2.3. Notice of Prepayments............................................ 3
---------------------
2.4. Surrender of Notes on Prepayment or Exchange..................... 3
--------------------------------------------
2.5. Direct Payment and Deemed Date of Receipt........................ 4
-----------------------------------------
2.6. Allocation of Payments........................................... 4
----------------------
2.7. Payments Due on Saturdays, Sundays and Holidays.................. 4
-----------------------------------------------
(S)3. REPRESENTATIONS......................................................... 4
3.1. Representations of the Company................................... 4
------------------------------
3.2. Representations of the Purchaser................................. 11
--------------------------------
(S)4. CLOSING CONDITIONS...................................................... 13
4.1. Representations and Warranties................................... 13
------------------------------
4.2. Legal Opinions................................................... 13
--------------
4.3. Events of Default................................................ 13
-----------------
4.4. Payment of Fees and Expenses..................................... 13
----------------------------
4.5. Legality of Investment........................................... 13
----------------------
4.6. Subsidiary Guaranty.............................................. 14
-------------------
4.7. Private Placement Number......................................... 14
------------------------
4.8. Sale of All Notes................................................ 14
-----------------
4.9. Proceedings and Documents........................................ 14
-------------------------
(S)5. INTERPRETATION OF AGREEMENT............................................. 14
5.1. Certain Terms Defined............................................ 14
---------------------
5.2. Accounting Principles............................................ 23
---------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.3. Valuation Principles............................................. 24
--------------------
5.4. Direct or Indirect Actions....................................... 24
--------------------------
(S)6. AFFIRMATIVE COVENANTS................................................... 24
6.1. Corporate Existence.............................................. 24
-------------------
6.2. Insurance........................................................ 24
---------
6.3. Taxes, Claims for Labor and Materials............................ 24
-------------------------------------
6.4. Maintenance of Properties........................................ 25
-------------------------
6.5. Maintenance of Records........................................... 25
----------------------
6.6. Financial Information and Reports................................ 25
---------------------------------
6.7. Inspection of Properties and Records............................. 27
------------------------------------
6.8. ERISA............................................................ 28
-----
6.9. Compliance with Laws............................................. 28
--------------------
6.10. Acquisition of Notes............................................. 29
--------------------
6.11. Additional Subsidiary Guarantors................................. 29
--------------------------------
6.12. Private Placement Number......................................... 29
------------------------
(S)7. NEGATIVE COVENANTS...................................................... 29
7.1. Consolidated Adjusted Net Worth.................................. 29
-------------------------------
7.2. Consolidated Senior Debt......................................... 29
------------------------
7.3. Total Indebtedness............................................... 30
------------------
7.4. Subsidiary Debt.................................................. 30
---------------
7.5. Fixed Charges Coverage Ratio..................................... 30
----------------------------
7.6. Liens............................................................ 30
-----
7.7. Merger or Consolidation.......................................... 31
-----------------------
7.8. Sale of Assets................................................... 32
--------------
7.9. Disposition of Stock of Restricted Subsidiaries.................. 32
-----------------------------------------------
7.10. Designation of Unrestricted Subsidiaries......................... 33
----------------------------------------
7.11. No Impairment of Subsidiaries.................................... 33
-----------------------------
7.12. Transactions with Affiliates..................................... 33
----------------------------
7.13. Nature of Business............................................... 33
------------------
(S)8. EVENTS OF DEFAULT AND REMEDIES THEREFOR................................. 34
8.1. Nature of Events.................................................. 34
----------------
8.2. Remedies on Default.............................................. 35
-------------------
8.3. Annulment of Acceleration of Notes............................... 36
----------------------------------
8.4. Other Remedies................................................... 36
--------------
8.5. Conduct No Waiver; Collection Expenses........................... 36
--------------------------------------
8.6. Remedies Cumulative.............................................. 37
-------------------
8.7. Notice of Default................................................ 37
-----------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
(S)9. AMENDMENTS, WAIVERS AND CONSENTS....................................... 37
9.1. Matters Subject to Modification.................................. 37
-------------------------------
9.2. Solicitation of Holders of Notes................................. 37
--------------------------------
9.3. Binding Effect................................................... 38
--------------
9.4. Notes held by Company, etc....................................... 38
--------------------------
(S)10. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT........ 38
10.1. Form of Notes.................................................... 38
-------------
10.2. Note Register.................................................... 39
-------------
10.3. Issuance of New Notes upon Exchange or Transfer.................. 39
-----------------------------------------------
10.4. Replacement of Notes............................................. 39
--------------------
(S)11. MISCELLANEOUS.......................................................... 39
11.1. Expenses......................................................... 39
--------
11.2. Notices.......................................................... 40
-------
11.3. Reproduction of Documents........................................ 40
-------------------------
11.4. Successors and Assigns........................................... 40
----------------------
11.5. Law Governing.................................................... 40
-------------
11.6. Headings......................................................... 41
--------
11.7. Counterparts..................................................... 41
------------
11.8. Reliance on and Survival of Provisions........................... 41
--------------------------------------
11.9. Integration and Severability..................................... 41
----------------------------
11.10.Confidential Information......................................... 41
------------------------
</TABLE>
SCHEDULE I
Annex I - Subsidiaries
Annex II - Indebtedness
Annex III - Restricted Investments
Annex IV - Liens
Exhibit A-1 - Form of Series A Senior Note
Exhibit A-2 - Form of Series B Senior Note
Exhibit B - Subsidiary Guaranty
Exhibit C - Form of Legal Opinion of Purchaser's Counsel
Exhibit D - Form of Legal Opinion of Company's Counsel
iii
<PAGE>
MATERIAL SCIENCES CORPORATION
NOTE AGREEMENT
Dated as of February 15, 1998
To Each of the Purchasers
Named in the Attached Schedule I
Ladies and Gentlemen:
MATERIAL SCIENCES CORPORATION, a Delaware corporation (the "Company"),
agrees with you as follows:
(S)1. DESCRIPTION OF NOTES AND COMMITMENT
1.1. Description of Notes. The Company has authorized the issuance and
--------------------
sale of (a) $5,000,000 aggregate principal amount of its Series A Senior Notes
to be dated February 27, 1998 (the "Series A Notes") and (b) $56,500,000
aggregate principal amount on its Series B Senior Notes to be dated February 27,
1998 (the "Series B Notes") (together, the Series A Notes and the Series B Notes
shall be referred to herein as "the Notes"). Each of the Notes shall bear
interest from its date of issuance (computed on the basis of a 360-day year
comprised of twelve 30-day months), payable semi-annually on May 31 and November
30 of each year, commencing May 31, 1998, and at maturity. The Series A Notes
shall bear interest at the rate of 6.49% per annum prior to maturity and shall
bear interest on any overdue principal (including any overdue optional
prepayment), and (to the extent legally enforceable) on any overdue Make-Whole
Amount and on any overdue installment of interest at the rate of 8.49% per
annum. The Series B Notes shall bear interest at the rate of 6.80% per annum
prior to maturity and shall bear interest on any overdue principal (including
any overdue optional or required prepayment), and (to the extent legally
enforceable) on any overdue Make-Whole Amount and on any overdue installment of
interest at the rate of 8.80% per annum. The Series A Notes shall be expressed
to mature on May 31, 2003 and the Series B Notes shall be expressed to mature on
May 31, 2010 and the Notes shall be substantially in the forms attached as
Exhibits A-1 and A-2. The term "Notes" as used herein shall include the
singular number as well as the plural. Any reference to you in this Agreement
shall in all instances be deemed to include any nominee of yours or any separate
account or other person on whose behalf you are purchasing Notes. You and the
other purchasers are sometimes referred to herein individually as a "Purchaser"
and collectively as the "Purchasers."
1
<PAGE>
1.2. Commitment; Closing Date. Subject to the terms and conditions
------------------------
hereof and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to issue and sell to you, and you agree to purchase
from the Company, Notes in the aggregate principal amount set forth opposite
your name in the attached Schedule I at a price of 100% of the principal amount
thereof.
Delivery of and payment for the Notes shall be made at the offices of
Gardner, Carton & Douglas, Quaker Tower, 321 North Clark Street, Suite 3400,
Chicago, Illinois 60610, at 9:00 a.m., Chicago time, on February 27, 1998 (the
"Closing Date") or such other times on such later dates as may be mutually
agreed upon by the Company and the Purchasers then purchasing the Notes. The
Notes shall be delivered to you in the form of one or more Notes in fully
registered form, issued in your name or in the name of your nominee. Delivery of
the Notes to you on the Closing Date shall be against payment of the purchase
price thereof in Federal funds or other funds in U.S. dollars immediately
available at Bank of America, Chicago, Illinois, ABA No. 071000039, for credit
to the account of Material Sciences Corporation, Account No. 79-36206. If on the
Closing Date the Company shall fail to tender the required Notes to any
Purchaser, such Purchaser shall be relieved of all remaining obligations under
this Agreement. Nothing in the preceding sentence shall relieve the Company of
any liability occasioned by such failure to deliver the Notes. The funding and
other obligations of the Purchasers under this Agreement shall be joint and not
several.
1.3. Guaranty. The Notes will be guaranteed by the Subsidiary Guarantors
--------
pursuant to the Subsidiary Guaranty. The Subsidiary Guaranty shall be released
upon the receipt by the Noteholders of evidence that guaranties from the
Subsidiary Guarantors to the Company's bank lenders have been released; such
evidence shall be accompanied by a written request by the Company that the
Subsidiary Guaranty be promptly returned to the Company upon delivery of such
evidence. Upon delivery of such evidence the Subsidiary Guaranty shall be
deemed terminated and shall cease to be in full force and effect. The original
Subsidiary Guaranty shall be promptly returned to the Company upon receipt of
such evidence.
(S)2. PREPAYMENT OF NOTES
2.1. Required Prepayments.
--------------------
2
<PAGE>
(a) There shall be no required prepayments with respect to the Series A
Notes.
(b) With respect to the Series B Notes, in addition to payment of all
outstanding principal of the Series B Notes at maturity and regardless of the
amount of such Series B Notes which may be outstanding from time to time, the
Company shall prepay and there shall become due and payable on May 31 in each
year, commencing May 31, 2002 and ending May 31, 2009,
3
<PAGE>
inclusive, $6,277,777 of the principal amount of the Series B Notes or such
lesser amount as would constitute payment in full on the Series B Notes, with
the remaining principal payable at maturity on May 31, 2010. Each such
prepayment shall be at a price of 100% of the principal amount prepaid, together
with interest accrued thereon to the date of prepayment. No premium (including
any Make-Whole Amount) shall be payable in connection with any required
prepayment.
2.2. Optional Prepayments. (a) Upon notice as provided in Section 2.3(a)
--------------------
and (b) or, in case of a prepayment made pursuant to Section 7.8, upon notice as
provided in Section 2.3(c), the Company may prepay the Notes, in whole or in
part, on any interest payment date, in an amount not less than $1,000,000, in
integral multiples of $100,000 in excess thereof or such lesser amount as shall
constitute payment in full of the Notes, at a price of 100% of the principal
amount to be prepaid, plus interest accrued thereon to the date of prepayment,
plus the Make-Whole Amount.
(b) Any optional prepayment of less than all of the Notes outstanding
pursuant to Section 2.2(a) shall be applied to reduce, on a pro rata basis, the
required prepayments and payment at maturity required by Section 2.1.
(c) Except as provided in Section 2.1, Section 7.8 or this Section 2.2,
the Notes shall not be prepayable in whole or in part.
2.3. Notice of Prepayments. (a) The Company shall give notice of any
---------------------
optional prepayment of the Notes pursuant to Section 2.2(a) to each holder of
the Notes not less than 30 nor more than 60 days before the date fixed for
prepayment, specifying (i) such date, (ii) the principal amount of the holder's
Notes to be prepaid on such date, (iii) the Determination Date for calculating
the Make-Whole Amount, (iv) a calculation of the estimated amount of the Make-
Whole Amount showing in detail the method of calculation, and (v) the accrued
interest applicable to the prepayment. Notice of prepayment having been so
given, the aggregate principal amount of the Notes specified in such notice,
together with accrued interest thereon and the actual Make-Whole Amount, shall
become due and payable on the prepayment date.
(b) The Company also shall give notice on the Determination Date to each
holder of the Notes to be prepaid pursuant to Section 2.2(a), by telecopy,
telegram or other same-day written communication, of the Make-Whole Amount
applicable to such prepayment and the details of the calculations used to
determine the amount of such Make-Whole Amount. Such
4
<PAGE>
calculations shall be subject to the concurrence of the holders of a majority in
aggregate principal amount of the Notes to be prepaid.
(c) In the event of a prepayment of Notes pursuant to Section 7.8, the
notice provided by the Company pursuant to paragraphs (a) and (b) of this
Section 2.3 shall also provide, in bold face type, that any Noteholder may,
within 15 days of receipt of notice of prepayment from the Company, direct the
Company in writing not to prepay its Notes. Failure by a Noteholder to
acknowledge such notice of prepayment shall constitute acceptance of the
Company's prepayment of the Notes. Nothing contained in this Section 2.3(c)
shall limit the Company's rights to optionally prepay the Notes pursuant to
Section 2.2 hereof. With respect to any specified sale of assets pursuant to
Section 7.8, if the Noteholders refuse prepayment of the Notes pursuant to this
paragraph (c), the Company shall be deemed to have satisfied its obligations
with respect to clauses (1) and (2) of Section 7.8.
2.4. Surrender of Notes on Prepayment or Exchange. Subject to Section
--------------------------------------------
2.5, upon any partial prepayment of a Note pursuant to this Section 2 or partial
exchange of a Note pursuant to Section 10.3, such Note may, at the option of the
holder thereof, (i) be surrendered to the Company pursuant to Section 10.3 in
exchange for a new Note or Notes equal to the principal amount remaining unpaid
on the surrendered Note, or (ii) be made available to the Company, at the
Company's principal office, for notation thereon of the portion of the principal
so prepaid or exchanged. In case the entire principal amount of any Note is
prepaid or exchanged, such Note shall be surrendered to the Company following
such prepayment for cancellation and shall not be reissued, and no Note shall be
issued in lieu of such Note.
2.5. Direct Payment and Deemed Date of Receipt. Notwithstanding any
-----------------------------------------
other provision contained in the Notes or this Agreement, the Company will pay
all sums becoming due on each Note held by you or any subsequent Institutional
Holder by wire transfer of immediately available funds to such account as you
have designated in Schedule I, or as you or such subsequent Institutional Holder
may otherwise designate by notice to the Company, in each case without
presentment and without notations being made thereon, except that any such Note
so paid or prepaid in full shall be surrendered to the Company for cancellation.
Any wire transfer shall identify such payment in the manner set forth in
Schedule I and shall identify the payment as principal, Make-Whole Amount, if
any, and/or interest. You and any subsequent Institutional Holder of a Note to
which this Section 2.5 applies agree that, before selling or otherwise
transferring any such Note, you or it will make a notation thereon of the
aggregate amount of all payments of principal theretofore made and of the date
to which interest has been
5
<PAGE>
paid and, upon written request of the Company, will provide a copy of such
notations to the Company. You will notify the Company if you sell or otherwise
transfer a Note. Any payment made pursuant to this Section 2.5 shall be deemed
received on the payment date only if received before 11:00 A.M., Chicago time.
Payments received after 11:00 A.M., Chicago time, shall be deemed received on
the next succeeding Business Day.
2.6. Allocation of Payments. In the case of a prepayment pursuant to
----------------------
Section 2.1 or 2.2(a), if less than the entire principal amount of all of the
Notes outstanding is to be paid, the Company will prorate the aggregate
principal amount to be prepaid among the outstanding Notes in proportion to the
unpaid principal amounts thereof.
2.7. Payments Due on Saturdays, Sundays and Holidays. If any interest
-----------------------------------------------
payment date on the Notes or the date fixed for any other payment of any Note or
exchange of any Note is not a Business Day, then such payment or exchange need
not be made on such date but may be made on the next succeeding Business Day;
provided that if such date is in connection with a payment or prepayment of
principal, interest shall be paid to such succeeding Business Day.
(S)3. REPRESENTATIONS
3.1. Representations of the Company. As an inducement to, and as part of
------------------------------
the consideration for, your purchase of the Notes pursuant to this Agreement,
the Company represents and warrants to each Purchaser as of the Closing Date as
follows:
(a) Corporate Organization and Authority. The Company is a solvent
------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties, to carry on its business as now
conducted and as presently proposed to be conducted, to enter into and perform
this Agreement and to issue and sell the Notes as contemplated in this
Agreement.
(b) Qualification to Do Business. The Company is duly qualified or
----------------------------
licensed and in good standing as a foreign corporation authorized to do business
in each jurisdiction where the nature of the business transacted by it or the
character of its properties owned or leased makes such qualification or
licensing necessary, except for jurisdictions where the failure to be so
licensed or qualified would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
6
<PAGE>
(c) Subsidiaries. The Company has no Subsidiaries except those listed in
------------
the attached ANNEX I, which correctly sets forth the jurisdiction of
incorporation and the percentage of the outstanding Voting Stock of each
Subsidiary which is owned, of record or beneficially, by the Company and/or one
or more Subsidiaries. Each Restricted Subsidiary is so designated on ANNEX I.
Each Subsidiary has been duly organized and is validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization and
is duly licensed or qualified and in good standing as a foreign corporation or
other organization in each other jurisdiction where the nature of the business
transacted by it or the character of its properties owned or leased makes such
qualification or licensing necessary, except for jurisdictions, individually or
in the aggregate, where the failure to be so licensed or qualified would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Each Subsidiary has all requisite corporate power and authority
to own and operate its properties and to carry on its business as now conducted
and as presently proposed to be conducted. The Company and each Subsidiary have
good and marketable title to all of the shares they purport to own of the
capital stock of each Subsidiary, free and clear in each case of any Lien,
except as otherwise disclosed in the attached ANNEX IV or in the Private
Placement Memorandum, and all such shares have been duly issued and are fully
paid and nonassessable.
(d) Financial Statements. The consolidated balance sheets of the Company
--------------------
and its Subsidiaries as of February 28 or 29, 1997, 1996 (as restated), 1995,
1994 and 1993, and the related consolidated statements of earnings,
shareholders' equity and cash flows for the years ended on such dates,
accompanied by the reports and unqualified opinions of Arthur Andersen LLP,
independent public accountants, copies of which have heretofore been delivered
to you, were prepared in conformity with GAAP consistently applied throughout
the periods involved (except as otherwise noted therein) and present fairly the
consolidated financial position of the Company and its Subsidiaries on such
dates and their consolidated results of operations and cash flows for the years
then ended.
The unaudited consolidated balance sheet of the Company and its
Subsidiaries as of November 30, 1997 and the unaudited consolidated statements
of earnings and the unaudited consolidated statements of cash flows for the nine
months ended November 30, 1997 and 1996, copies of which have heretofore been
delivered to you, were prepared in conformity with GAAP except for year end
adjustments consistently applied throughout the periods involved and present
fairly the consolidated financial position of the Company and its Subsidiaries
on such date and their consolidated results of operations and cash flows for the
periods ended on such dates.
(e) No Contingent Liabilities or Adverse Changes. Except as disclosed in
--------------------------------------------
the Private Placement Memorandum, neither the Company nor any of its
Subsidiaries has any contingent
7
<PAGE>
liabilities which, individually or in the aggregate, are material to the Company
and its Subsidiaries taken as a whole, other than as indicated in the most
recent audited financial statements described in Section 3.1(d), and, except as
set forth in such financial statements, since February 28, 1997 there have been
no adverse changes in the condition, financial or otherwise, of the Company and
its Subsidiaries, taken as a whole, except changes occurring in the ordinary
course of business, none of which, individually or in the aggregate, are
material.
(f) No Pending Litigation or Proceedings. Except as disclosed in the
------------------------------------
Private Placement Memorandum, there are no actions, suits or proceedings at law
or in equity or before or by any Federal, state, municipal or other governmental
or administrative instrumentality or other agency, domestic or foreign, pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary which would be reasonably expected to result in a Material Adverse
Effect.
(g) Compliance with Law. (i) Neither the Company nor any Subsidiary is:
-------------------
(x) in default with respect to any order, writ, injunction or decree of any
court to which it is a party; or (y) in default in any respect under any law,
rule, regulation, ordinance or order, relating to its or their respective
businesses which default would reasonably be expected to have a Material Adverse
Effect.
(ii) None of the Company, any Subsidiary, or any Affiliate of the
Company is an entity defined as a "designated national" within the meaning of
the Foreign Assets Control Regulations, 31 C.F.R. Chapter V, or is in material
violation of any Federal statute or Presidential Executive Order, or any rules
or regulations of any department, agency or administrative body promulgated
under any such statute or Order, concerning trade or other relations with any
foreign country or any citizen or national thereof or the ownership or operation
of any property.
(h) ERISA. (i) The Company and each ERISA Affiliate have operated and
-----
administered each Plan in compliance in all material respects with all
applicable laws. Neither the Company nor any ERISA Affiliate has incurred any
material liability pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans (as defined in
Section 3 of ERISA), and no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not be individually or in the aggregate
material.
8
<PAGE>
(ii) No single Plan is underfunded and the Plans in the aggregate
are not underfunded. The term "BENEFIT LIABILITIES" has the meaning specified in
section 4001 of ERISA and the terms "CURRENT VALUE" and "PRESENT VALUE" have the
meaning specified in section 3 of ERISA.
(iii) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are material.
(iv) Except as set forth in the Company's most recent audited
financial statements described in Section 3.1(d), the expected postretirement
benefit obligation (determined as of the last day of the Company's most recently
ended fiscal year in accordance with Financial Accounting Standards Board
Statement No. 106, without regard to liabilities attributable to continuation
coverage mandated by section 4980B of the Code) of the Company and its
Subsidiaries, is not material.
(v) The execution and delivery of this Agreement and the issuance
and sale of the Notes hereunder will not involve any transaction that is subject
to the prohibitions of section 406 of ERISA or in connection with which a tax
could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The
representation by the Company in the first sentence of this clause (v) is made
in reliance upon and subject to the accuracy of your representation in Section
3.2(b) as to the sources of the funds used to pay the purchase price of the
Notes to be purchased by you.
(i) Title to Properties. Except as disclosed on the most recent audited
-------------------
consolidated balance sheet described in Section 3.1(d), the Company and each
Subsidiary have (i) good and sufficient title in fee simple or its equivalent
under applicable law to all the real property owned by them and (ii) good and
sufficient title to all of the other property reflected in such balance sheet or
subsequently acquired by the Company or any Subsidiary (except as sold or
otherwise disposed of in the ordinary course of business), in each case free
from all Liens or defects in title except those permitted by Section 7.6.
9
<PAGE>
(j) Leases. The Company and each Subsidiary enjoy peaceful and undisturbed
------
possession under all leases under which the Company or such Subsidiary is a
lessee or is operating, except for leases the termination of which, individually
or in the aggregate, would not have a Material Adverse Effect.
(k) Franchises, Patents, Trademarks and Other Rights. The Company and each
------------------------------------------------
Subsidiary have all franchises, permits, licenses and other authority necessary
to carry on or used in their businesses as now being conducted, and none are in
default under any of such franchises, permits, licenses or other authority
except for franchises, permits, licenses or other authority, the lack or loss of
which, or default under, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect. The Company and each Subsidiary
own or possess or have the right to use all patents, trademarks, service marks,
trade names, copyrights, licenses and rights with respect to the foregoing
necessary for, or used by them in, the present conduct of their businesses.
(l) Authorization. This Agreement and the Notes have been duly authorized
-------------
by all necessary corporate action on the part of the Company and the Agreement
does, and the Notes when issued will, constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their terms, except
to the extent that enforcement of this Agreement and the Notes may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application relating to or affecting the enforcement of the rights of
creditors or by equitable principles, regardless of whether enforcement is
sought in equity or at law. The sale of the Notes, the execution and delivery
of the Agreement and compliance by the Company with all of the provisions of
this Agreement and the Notes (i) will not violate any provisions of any law,
rule, regulation or ordinance or any order, judgment, decree or ruling of any
court, arbitrator, governmental authority or agency applicable to the Company,
and (ii) will not result in any breach of any of the provisions of, constitute a
default under, or result in the creation of any Lien on any property of the
Company or any Subsidiary under the provisions of any charter document, by-law,
loan agreement or other material agreement or material instrument to which the
Company or any Subsidiary is a party or by which any of them or their property
are bound. The Subsidiary Guaranty has been duly authorized by all necessary
corporate action on the part of each Subsidiary Guarantor, and constitutes the
legal, valid and binding obligation of such Subsidiary Guarantor enforceable in
accordance with its terms, except to the extent that the enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws of general application relating to or affecting the enforcement of
the rights of creditors or by equitable principles, regardless of whether
enforcement is sought in equity or at law. The execution, delivery and
performance by each Subsidiary Guarantor of the Subsidiary Guaranty, (i) will
not violate any provisions of any law, rule, regulation or ordinance or any
order, judgment, decree or ruling of any court, arbitrator, governmental
authority or
10
<PAGE>
agency applicable to the Subsidiary Guarantor and will not result in any breach
of any of the provisions of, or constitute a default under, or result in the
creation of any Lien on any property of such Subsidiary Guarantor under the
provisions of, any charter document, by-law, loan, agreement or any other
material agreement or material instrument to which it is a party or by which it
or its property may be bound or affected.
(m) No Defaults. No event has occurred and no condition exists which, upon
-----------
the issuance of the Notes, would constitute a Default or an Event of Default
under this Agreement. Neither the Company nor any Subsidiary is in default
under any charter document, by-law, loan agreement or other material agreement
or material instrument to which it is a party or by which it or its property is
bound.
(n) Governmental Consent. None of (i) the nature of the Company or any of
--------------------
its Subsidiaries, their respective businesses or properties, (ii) any
relationship between the Company or any of its Subsidiaries and any other
Person, or (iii) any circumstances relative to the offer, issuance, sale or
delivery of the Notes or execution and delivery of this Agreement is such as to
require a consent, approval or authorization of, withholding of objection on the
part of, or filing of registration or qualification with, any governmental
authority on the part of the Company or any of its Subsidiaries in connection
with the execution and delivery of this Agreement, the Subsidiary Guaranty, or
the offer, issuance, sale or delivery of the Notes.
(o) Taxes. All tax returns required to be filed by the Company or any
-----
Subsidiary in any jurisdiction have been filed, and all taxes, assessments, fees
and other governmental charges upon the Company or any Subsidiary, or upon any
of their respective properties, income or franchises, which are due and payable,
have been paid timely or within appropriate extension periods or contested in
good faith by appropriate proceedings that stay the collection thereof by the
applicable governmental authority during the period of the contest and as to
which adequate reserves are maintained in accordance with generally accepted
accounting principles. The Federal income tax liability of the Company and its
Subsidiaries for all taxable years up to and including the taxable year ended
February 28, 1993 have been finally resolved and no material controversy in
respect of additional taxes due since such date is pending or, to the Company's
knowledge, threatened. The provisions for taxes on the books of the Company and
each Subsidiary are adequate for all open years and for the current fiscal
period.
11
<PAGE>
(p) Status under Certain Statutes. Neither the Company nor any Subsidiary
-----------------------------
is: (i) a "public utility company" or a "holding company," or an "affiliate" or
a "subsidiary company" of a "holding company," or an "affiliate" of such a
"subsidiary company," as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended, (ii) a "public utility" as defined in the
Federal Power Act, as amended, or (iii) an "investment company" or an
"affiliated person" thereof or an "affiliated person" of any such "affiliated
person," as such terms are defined in the Investment Company Act of 1940, as
amended.
(q) Private Offering. Neither the Company nor BancAmerica Robertson
----------------
Stephens, the only other Person authorized or employed by the Company as agent,
broker, dealer or otherwise in connection with the offering of the Notes or any
similar security of the Company, has offered any of the Notes or any similar
security of the Company for sale to, solicited offers to buy any thereof from,
or otherwise approached or negotiated with respect thereto with any prospective
purchaser, other than 55 institutional investors (excluding the Purchasers),
including the Purchasers, each of whom was offered all or a portion of the Notes
at private sale for investment. Neither the Company nor anyone acting on its
authorization will offer the Notes, or any part thereof or any similar security
for issuance or sale to, or solicit any offer to acquire any of the same from,
anyone so as to bring the issuance and sale of the Notes within the provisions
of Section 5 of the Securities Act.
(r) Effect of Other Instruments. Neither the Company nor any Subsidiary is
---------------------------
bound by any agreement or instrument or subject to any charter which in any way
restricts any Subsidiary's ability to pay dividends or make advances to the
Company
(s) Use of Proceeds. The Company will apply the net proceeds from the sale
---------------
of the Notes to refinance existing Indebtedness. None of the transactions
contemplated in this Agreement (including, without limitation thereof, the use
of the proceeds from the sale of the Notes) will violate or result in a
violation of Section 7 of the Exchange Act, or any regulations issued pursuant
thereto, including, without limitation, Regulations G, T and X of the Board of
Governors of the Federal Reserve System (12 C.F.R., Chapter II). None of the
proceeds from the sale of the Notes will be used to purchase or carry or
refinance any borrowing the proceeds of which were used to purchase or carry any
"margin stock" or "margin security" in violation of Regulations G, T or X.
(t) Condition of Property. All of the facilities of the Company and its
---------------------
Subsidiaries are in sound operating condition and repair, except for facilities
being repaired in the ordinary
12
<PAGE>
course of business or facilities which, individually or in the aggregate, are
not material to the Company and its Subsidiaries, taken as a whole.
(u) Books and Records. The Company and each Subsidiary (i) maintain books,
-----------------
records and accounts in reasonable detail which accurately and fairly reflect
their respective transactions and business affairs in all material respects, and
(ii) maintain a system of internal accounting controls sufficient to provide
reasonable assurances that transactions are executed in accordance with
management's general or specific authorization and to permit preparation of
financial statements in accordance with GAAP.
(v) Environmental Compliance. Except as disclosed in the Private Placement
------------------------
Memorandum, (i) the Company and each Subsidiary (including their operations and
the conditions at or in their Facilities) are in compliance with all
Environmental Laws except for violations which, individually or in the
aggregate, would reasonably be expected not to have a Material Adverse Effect;
(ii) the Company and each Subsidiary have obtained all permits under
Environmental Laws necessary to their respective operations, all such permits
are in full force and effect; and the Company and each Subsidiary are in
compliance with all material terms and conditions of such permits except for
such permits, individually or in the aggregate, the lack of which or
noncompliance with which would reasonably be expected not to have a Material
Adverse Effect; and (iii) neither the Company nor any of its Subsidiaries has
any material liability (contingent or otherwise) or knowledge of any
Environmental Claim against the Company, any Subsidiary or any of their
Facilities in connection with any Release of any Hazardous Material or the
existence of any Hazardous Material on, under or about any Facility that could
give rise to an Environmental Claim or proceedings that would reasonably be
expected to have a Material Adverse Effect.
(w) Indebtedness. ANNEX II sets forth a list of all outstanding
------------
Indebtedness of the Company and its Subsidiaries as of the date of January 31,
1998, since which date there has been no material change in the amounts,
interest rates, sinking funds, installment payments or maturities thereof.
Neither the Company nor any Subsidiary is in default, and no waiver of default
is currently in effect, in the payment of any principal or interest on any
Indebtedness of the Company or such Subsidiary and no event or condition exists
with respect to any Indebtedness of the Company or any Subsidiary that would
permit (or that with notice or the lapse of time, or both, would permit) one or
more Persons to cause such Indebtedness to become due and payable before its
stated maturity or before its regularly scheduled dates of payment. Except as
disclosed in ANNEX II, neither the Company nor any Subsidiary has agreed or
13
<PAGE>
consented to cause or permit in the future (upon the happening of a contingency
or otherwise) any of its property, whether now owned or hereafter acquired, to
be subject to a Lien not permitted by Section 7.6.
(x) Full Disclosure. None of the Private Placement Memorandum, the
---------------
financial statements referred to in Section 3.1(d), the Company's Annual Report
on Form 10-K for the year ended February 28, 1997, its Quarterly Report on Form
10-Q for the period ended November 30, 1997, its Annual Reports to Shareholders
for the years ended February 28 or 29, 1993, 1994, 1995, 1996 and 1997, this
Agreement, any other written statement or document furnished by or on behalf of
the Company to you in connection with the negotiation of the sale of the Notes
and the execution and delivery of the Agreement, taken together, contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements contained therein or herein not misleading in light of the
circumstances under which they were made. The financial projections contained in
the Private Placement Memorandum are forward-looking statements based on
estimates and assumptions that are inherently uncertain and, though considered
reasonable by the Company, are subject to significant business and economic and
competitive uncertainties and contingencies, all of which are difficult to
predict and many of which are beyond the control of the Company. There is no
fact known, or which with reasonable diligence would be known by any Responsible
Officer of the Company that the Company has not disclosed to you and that has a
Material Adverse Effect or, so far as the Company can now reasonably foresee,
will have, individually or in the aggregate, a Material Adverse Effect.
3.2. Representations of the Purchaser. (a) You represent, and in
--------------------------------
entering into this Agreement the Company understands, that you are acquiring the
Notes for your own account and not with a view to any distribution thereof, and
that you have no present intention of selling, negotiating or otherwise
disposing of the Notes, it being understood, however, that the disposition of
your property shall at all times be and remain within your control; subject,
however, to compliance with Federal securities laws. You acknowledge that the
Notes have not been registered under the Securities Act or any state securities
laws and you understand that the Notes must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available and all applicable state securities laws are complied
with. You have been advised that the Company does not contemplate registering,
and is not legally required to register, the Notes under the Securities Act or
any other securities laws.
(b) You further represent that, as of the date of this Agreement, at
least one of the following statements is an accurate representation as to each
source of funds (a "SOURCE") to be used by you to pay the purchase price of the
Notes to be purchased by you hereunder:
14
<PAGE>
(i) if you are an insurance company, the Source does not
include assets allocated to any separate account maintained by you in which
any employee benefit plan (or its related trust) has any interest, other
than a separate account that is maintained solely in connection with your
fixed contractual obligations under which the amounts payable, or credited,
to such plan and to any participant or beneficiary of such plan (including
any annuitant) are not affected in any manner by the investment performance
of the separate account;
(ii) the Source is either (i) an insurance company pooled
separate account, within the meaning of Prohibited Transaction Exemption
("PTE") 90-1 (issued January 29, 1990), or (ii) a bank collective
investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991)
and, except as you have disclosed to the Company in writing pursuant to
this paragraph (b), no employee benefit plan or group of plans maintained
by the same employer or employee organization beneficially owns more than
10% of all assets allocated to such pooled separate account or collective
investment fund;
(iii) the Source constitutes assets of an "INVESTMENT FUND"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the meaning of
Part V of the QPAM Exemption), no employee benefit plan's assets that are
included in such investment fund, when combined with the assets of all
other employee benefit plans established or maintained by the same employer
or by an affiliate (within the meaning of Section V(c)(1) of the QPAM
Exemption) of such employer or by the same employee organization and
managed by such QPAM, exceed 20% of the total client assets managed by such
QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM (applying the definition of "CONTROL" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity
-
of such QPAM and (ii) the names of all employee benefit plans whose assets
--
are included in such investment fund have been disclosed to the Company in
writing pursuant to this clause (iii);
(iv) the Source is a governmental plan;
(v) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit
plans, each of which has been identified to the Company in writing pursuant
to this paragraph (b)(v);
15
<PAGE>
(vi) the Source does not include assets of any employee benefit
plan, other than a plan exempt from the coverage of ERISA; or
(vii) if you are an insurance company and the Source includes
assets of your general account, such acquisition would be exempt under PTE
95-60 (issued July 12, 1995).
As used in this Section 3.2(b), the terms "EMPLOYEE BENEFIT PLAN," "GOVERNMENTAL
PLAN," "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
(c) You represent that you are an accredited investor within the
meaning of Regulation D under the Securities Act.
(d) You represent that you (i) have received the Private Placement
Memorandum, (ii) have had an opportunity to discuss the Company's business,
management and financial affairs with directors, officers and management of the
Company, (iii) have had the opportunity to review the Company's operations and
facilities and (iv) have also had the opportunity to ask questions of and
receive answers from, the Company and its management regarding the terms and
conditions of this investment.
(S)4. CLOSING CONDITIONS
Your respective obligations to purchase the Notes on the Closing Date shall
be subject to the performance by the Company of its agreements hereunder which
are to be performed at or prior to the time of delivery of the Notes, and to the
following conditions to be satisfied on or before the Closing Date:
4.1. Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in this Agreement, in the certificates
delivered pursuant to this Section 4 or otherwise made in connection herewith
shall be true and correct in all material respects on or as of the Closing Date
and the Company shall have delivered to the Purchasers on the Closing Date a
certificate to such effect, dated as of the Closing Date and executed by the
president, the chief financial officer or the chief accounting officer of the
Company.
4.2. Legal Opinions. Each Purchaser shall have received from Gardner,
--------------
Carton & Douglas, who is acting as your special counsel in this transaction, and
from Kirkland & Ellis, counsel to the Company, their opinions, dated as of the
Closing Date, in form and substance reasonably satisfactory to you and
substantially in the forms set forth or provided in the attached Exhibits C and
D, respectively.
16
<PAGE>
4.3. Events of Default. No event shall have occurred and be continuing as
-----------------
of the Closing Date which would constitute a Default or an Event of Default, and
the Company shall have delivered to you a certificate to such effect, dated as
of the Closing Date and executed by the president, the chief financial officer
or the chief accounting officer of the Company.
4.4. Payment of Fees and Expenses. The Company shall have paid all
----------------------------
reasonable and documented fees, expenses, costs and charges, including the
reasonable fees and expenses of Gardner, Carton & Douglas, your special counsel,
incurred by you through the Closing Date and incident to the proceedings in
connection with, and transactions contemplated by, this Agreement and the Notes.
4.5. Legality of Investment. Your acquisition of the Notes shall
----------------------
constitute a legal investment as of the Closing Date under the laws and
regulations of each jurisdiction to which you may be subject (without resort to
any "basket" or "leeway" provision which permits the making of an investment
without restrictions as to the character of the particular investment being
made), and such acquisition shall not subject you to any penalty or other
onerous condition in or pursuant to any such law or regulation. If requested by
you, you shall have received an Officer's Certificate certifying as to such
matters of fact as you may reasonably specify to enable you to determine such
purchase is permitted.
4.6. Subsidiary Guaranty. The Subsidiary Guarantors shall have executed
-------------------
and delivered the Subsidiary Guaranty.
4.7. Private Placement Number. A private placement number with respect to
------------------------
the Notes shall have been issued by S&P.
4.8. Sale of All Notes. Contemporaneously with the Closing, the Company
-----------------
shall sell to each Purchaser and each Purchaser shall purchase the Notes to be
purchased by them as specified in Schedule I.
4.9. Proceedings and Documents. All corporate proceedings taken in
-------------------------
connection with the transactions contemplated by this Agreement and all
documents necessary to the
17
<PAGE>
consummation of such transactions shall be reasonably satisfactory in form and
substance to you and your special counsel, and you and your special counsel
shall have received copies (executed or certified as may be appropriate) of all
legal documents or proceedings which you and they may reasonably request.
(S)5. INTERPRETATION OF AGREEMENT
5.1. Certain Terms Defined. The terms hereinafter set forth when used in
---------------------
this Agreement shall have the following meanings:
Affiliate - Any Person (other than a Restricted Subsidiary) (i) who is a
---------
director or executive officer of the Company or any Subsidiary, (ii) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (iii) which
beneficially owns or holds securities representing 10% or more of the combined
voting power of the Voting Stock of the Company or any Subsidiary, or (iv) of
which securities representing 10% or more of the combined voting power of its
Voting Stock (or in the case of a Person not a corporation, 10% or more of its
equity) is beneficially owned or held by the Company or any Subsidiary. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Agreement - As defined in Section 1.1.
---------
Business Day - Any day, other than Saturday, Sunday or a legal holiday or any
------------
other day on which banking institutions in Chicago, Illinois generally are
authorized by law to close.
Capitalized Lease - Any lease the obligation for Rentals with respect to
-----------------
which, in accordance with GAAP, would be required to be capitalized on a balance
sheet of the lessee or for which the amount of the asset and liability
thereunder, as if so capitalized, would be required to be disclosed in a note to
such balance sheet.
Capitalized Lease Obligation - Any amounts required to be capitalized under
----------------------------
any Capitalized Lease.
Capitalized Rentals - As of the date of any determination thereof, the amount
-------------------
at which the aggregate Rentals due and to become due under all Capitalized
Leases under which such Person is a lessee would be reflected as a liability on
a consolidated balanced sheet of such Person.
Closing Date - As defined in Section 1.2.
------------
18
<PAGE>
Code - The Internal Revenue Code of 1986, as amended.
----
Consolidated Adjusted Net Income - Without duplication, consolidated net
--------------------------------
income and net losses of the Company and its Restricted Subsidiaries, as defined
according to GAAP, after excluding the sum of (i) any net loss or any
undistributed net income of any Subsidiary in which the Company has an ownership
interest other than a Restricted Subsidiary; (ii) any net loss or any
undistributed net income of any Subsidiary prior to the date it became a
Restricted Subsidiary; (iii) any gain or net loss (net of any tax effect)
resulting from the sale of any capital assets other than in the ordinary course
of business; (iv) extraordinary gains or losses; (v) gains resulting from the
write-up of assets; (vi) any earnings of any Subsidiary unavailable for payment
to the Company; (vii) proceeds of any insurance policy (other than business
interruption and similar coverage); and (viii) reversal of any contingency
reserves (excluding reserves established in the normal course of business, such
as allowances for uncollectible accounts receivable and warranty reserves) not
created during any applicable period.
Consolidated Adjusted Net Income Available for Fixed Charges - With respect to
------------------------------------------------------------
the Company and its Restricted Subsidiaries, the sum of (i) Consolidated
Adjusted Net Income, (ii) income tax expense, as defined according to GAAP,
(iii) depreciation and amortization expense, as defined according to GAAP and
(iv) Fixed Charges.
Consolidated Adjusted Net Worth - Without duplication, the consolidated
-------------------------------
shareowners' equity of the Company and its Restricted Subsidiaries determined in
accordance with GAAP, less Restricted Investments in excess of 10% of
----
consolidated shareowners' equity as so determined.
Consolidated Adjusted Total Capitalization - Without duplication, on a
------------------------------------------
consolidated basis for the Company and its Restricted Subsidiaries (i) the sum
of (a) total shareowners' equity determined in accordance with GAAP (including
common stock, additional paid-in capital, retained earnings after deducting
treasury stock and cumulative foreign currency translation adjustments), (b)
Consolidated Senior Debt, and (c) Subordinated Debt, less (ii) Restricted
----
Investments in excess of 10% of consolidated shareholders' equity as so
determined.
Consolidated Senior Debt - All Indebtedness of the Company and its
------------------------
Subsidiaries on a consolidated basis other than Subordinated Debt.
Consolidated Total Assets - The total assets of the Company and its Restricted
-------------------------
Subsidiaries determined on a consolidated basis in accordance with GAAP.
19
<PAGE>
Default - Any event which, with the lapse of time or the giving of notice, or
- -------
both, would become an Event of Default.
Determination Date - One Business Day before the date fixed for a prepayment
------------------
pursuant to Section 2.2(a) or Section 7.8 or the date of declaration pursuant to
Section 8.2.
Environmental Claim - Any notice of violation, claim, demand, abatement order
-------------------
or other order by any Person for any damage, including personal injury
(including sickness, disease or death), tangible or intangible property damage,
contribution, indemnity, indirect or consequential damages, damage to the
environment, nuisance, pollution, contamination or other adverse effects on the
environment, or for fines, penalties or restrictions, resulting from or based
upon (i) the existence of a Release (whether sudden or non-sudden or accidental
or non-accidental) of, or exposure to, any Hazardous Material in, into or onto
the environment at, in, by, from or related to any Facility, (ii) the use,
handling, transportation, storage, treatment or disposal of Hazardous Materials
in connection with the operation of any Facility, or (iii) the violation, or
alleged violation, of any statute, rule, regulation, ordinance, order, permit,
license or authorization of or from any governmental authority, agency or court
relating to environmental matters pertaining to the Facilities.
Environmental Laws - All laws relating to pollution or protection of the
------------------
environment, including those relating to (i) fines, orders, injunctions,
penalties, damages, contribution, cost recovery compensation, losses or injuries
resulting from the Release or threatened Release of Hazardous Materials and to
the generation, use, storage, transportation, or disposal of Hazardous
Materials, in any manner applicable to the Company or any of its Subsidiaries or
any of their respective properties, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
(S) 9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C. (S) 1801
-- ---
et seq.), the Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et
- -- ---- --
seq.), the Federal Water Pollution Control Act (33 U.S.C. (S) 1251 et seq.), the
- --- -- ---
Clean Air Act (42 U.S.C. (S) 7401 et seq.), the Toxic Substances Control Act (15
-- ---
U.S.C. (S) 2601 et seq.), the Emergency Planning and Community Right-to-Know Act
-- ---
(42 U.S.C. (S) 11001 et seq.), and (ii) environmental protection, including the
-- ---
National Environmental Policy Act (42 U.S.C. (S) 4321 et seq.), and comparable
-- ---
state laws, each as amended or supplemented, and any similar or analogous local,
state and federal statutes and regulations promulgated pursuant thereto, each as
in effect as of any applicable Closing Date.
ERISA - The Employee Retirement Income Act of 1974, as amended from time to
-----
time and any successor statute.
ERISA Affiliate - The Company and (i) any corporation that is a member of a
---------------
controlled group of corporations within the meaning of Section 414(b) of the
Code of which the Company
20
<PAGE>
is a member, (ii) any trade or business (whether or not incorporated) which is a
member of a group of trades or businesses under common control within the
meaning of Section 414(c) of the Code of which the Company is a member, and
(iii) any member of an affiliated service group within the meaning of Section
414(m) or (o) of the Code of which the Company, any corporation described in
clause (i) above or any trade or business described in clause (ii) above is a
member.
Event of Default - As defined in Section 8.1.
----------------
Exchange Act - The Securities Exchange Act of 1934, as amended.
------------
Facility - Any and all real property (including all buildings, fixtures or
--------
other improvements located thereon) now or heretofore or hereafter owned,
leased, operated or used (under permit or otherwise) by the Company or any of
its Subsidiaries.
Fixed Charges - For any period means on a consolidated basis, without
-------------
duplication, the sum of (a) all Rentals payable under Long-Term Leases during
such period by the Company and its Restricted Subsidiaries, and (b) all Interest
Charges on all Indebtedness (including the interest component of Capitalized
Rentals) of the Company and its Restricted Subsidiaries.
GAAP - Generally accepted accounting principles in effect from time to time in
----
the United States.
Guaranties - All obligations (other than endorsements in the ordinary course
----------
of business of negotiable instruments for deposit or collection) of a Person
guaranteeing, or in effect guaranteeing, any Indebtedness, dividend or other
financial obligation of any other Person in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through an
agreement, contingent or otherwise, by such Person: (i) to purchase such
Indebtedness or obligation or any property or assets constituting security
therefor; (ii) to advance or supply funds (x) for the purchase or payment of
such Indebtedness or financial obligation, (y) to maintain working capital or
other balance sheet condition, or (z) otherwise to advance or make available
funds for the purchase or payment of such Indebtedness or financial obligation;
(iii) to lease property or to purchase securities or other property or services
primarily for the purpose of assuring the owner of such Indebtedness or
financial obligation against loss in respect thereof; or (iv) otherwise to
assure the owner of the Indebtedness or financial obligation against loss in
respect thereof. For the purposes of all computations made under this
Agreement, Guaranties in respect of any Indebtedness for borrowed money shall be
deemed to be Indebtedness equal to the principal amount of such Indebtedness but
only to the extent to which such Indebtedness has been guaranteed.
21
<PAGE>
Hazardous Materials - (i) Any chemical, material or substance defined as or
-------------------
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," or "toxic substances" or words of similar import under any Environmental
Laws; (ii) any oil, petroleum or petroleum derived substance, any drilling
fluid, produced water or other waste associated with the exploration,
development or production of crude oil, any flammable substance or explosive,
any radioactive material, any hazardous waste or substance, any toxic waste or
substance or any other material or pollutant that (x) poses a hazard to any
property of the Company or any of its Subsidiaries or to Persons on or about
such property or (y) causes such property to be in violation of any
Environmental Law; (iii) any friable asbestos, urea formaldehyde foam
insulation, electrical equipment which contains any oil or dielectric fluid with
levels of polychlorinated biphenyls in excess of fifty parts per million; and
(iv) any other chemical, material or substance, exposure to which is prohibited,
limited or regulated pursuant to Environmental Laws.
Indebtedness - Without duplication, on a consolidated basis for the Company
------------
and its Restricted Subsidiaries, (i) obligations for borrowed money, including,
without limitation, (a) bonds and notes and (b) obligations for borrowed money
which are non-recourse to the credit of such Person but which are secured by any
asset of such Person, (ii) obligations for deferred purchase price of any
property or service, except accounts payable arising in the ordinary course of
business, (iii) the face amount of all letters of credit issued and all drafts
thereunder, other than undrawn amounts under letters of credit used in the
ordinary course of business, (iv) Capitalized Lease Obligations, (v)
Indebtedness secured by Liens on property, and (vi) Guaranties.
Institutional Holder - Any bank, trust company, insurance company, pension
--------------------
fund, mutual fund or other similar financial institution, including, without
limiting the foregoing, any "qualified institutional buyer" within the meaning
of Rule 144A under the Securities Act, which is or becomes a holder of any Note.
Investment Grade - (a) For short-term Indebtedness, a rating of "A-2" or
----------------
better by S&P or "P-2" or better by Moody's, or (b) for long-term Indebtedness,
a rating of "BBB-" or better by S&P or "Baa3" or better by Moody's.
Interest Charges - Of any Person with respect to any Indebtedness thereof
----------------
(including, without limitation, Capitalized Rentals) for any period means all
interest charges and all amortization of debt discount and expense on any
particular Indebtedness (including, without limitation, payment-in-kind, zero
coupon and other like securities) for which such calculations are being made.
Investments - All investments made, in cash or by delivery of property,
-----------
directly or indirectly, by any Person, in any other Person, whether by
acquisition of shares of capital stock, indebtedness or other obligations or
securities or by loan, advance, capital contribution or
22
<PAGE>
otherwise; provided, however, that "Investments" shall not mean or include
investments in property to be used or consumed in the ordinary course of
business.
Lien - Any mortgage, pledge, security interest, encumbrance, lien or charge of
----
any kind, including any agreement to grant any of the foregoing, any conditional
sale or other title retention agreement, any lease in the nature thereof,
including a Capitalized Lease.
Long-Term Lease - Any lease of real or personal property (other than a
---------------
Capitalized Lease) having an original term, including any period for which the
lease may be renewed or extended at the option of the lessor, of more than three
years.
Make-Whole Amount - As of any Determination Date, to the extent that the
-----------------
Reinvestment Yield on such Determination Date is lower than the interest rate
payable on or in respect of the Notes, the excess of (a) the present value of
the principal and interest payments to be foregone by any prepayment (exclusive
of accrued interest on such Notes through the date of prepayment) on such Notes
(taking into account the manner of application of such prepayment required by
Section 2.2(b)), determined by discounting (semi-annually on the basis of a 360-
day year composed of twelve 30-day months), such payments at a rate that is
equal to the Reinvestment Yield, over (b) the aggregate principal amount of such
Notes then to be prepaid or paid. To the extent that the Reinvestment Yield on
any Determination Date is equal to or higher than the interest rate payable on
or in respect of such Notes, the Make-Whole Amount shall be zero.
Material Adverse Effect - A material adverse effect on (i) the business,
-----------------------
properties, operations or condition, financial or otherwise, of the Company and
its Restricted Subsidiaries, taken as a whole, (ii) the ability of the Company
to perform its obligations under this Agreement or the Notes, (iii) the ability
of any Subsidiary Guarantor to perform its obligations under the Subsidiary
Guaranty, or (iv) the validity or enforceability of this Agreement or the Notes.
Material Subsidiary - Any Restricted Subsidiary which either individually or
-------------------
in the aggregate (i) accounts for more than 5% of the consolidated assets of the
Company and its Restricted Subsidiaries, determined in accordance with GAAP or
(ii) accounts for more than 5% of the consolidated gross revenue of the Company
and its Restricted Subsidiaries, determined in accordance with GAAP.
Moody's - Moody's Investor Services, Inc.
-------
Multiemployer Plan - As defined in Section 3.1(h).
------------------
23
<PAGE>
1997 Senior Lenders - The holders of the Company's Series A and Series B Notes
-------------------
due May 31, 2007.
Noteholder - Any holder of a Note.
----------
Notes - As defined in Section 1.1.
-----
Partnership - Walbridge Coatings Partnership, a general partnership organized
-----------
under the laws of Illinois.
PBGC - The Pension Benefit Guaranty Corporation or any successor thereto.
----
Permitted Guaranties - (i) Guaranties of the Notes, (ii) Guaranties of the
--------------------
Company's Series A Notes and Series B Notes due May 31, 2007, (iii) Guaranties
in favor of the Company's bank lenders and (iv) Guaranties of other Indebtedness
with respect to which the Company is the primary obligor, provided that, with
respect to clauses (iii) and (iv), the requirements of Section 6.11 are met.
Person - Any individual, corporation, partnership, joint venture, association,
------
joint-stock company, trust, unincorporated organization or government, or any
governmental authority, agency or political subdivision.
Plan - Any employee pension benefit plan, as defined in Section 3(2) of ERISA,
----
that has been established by, or contributed to, or is maintained by the Company
or any ERISA Affiliate.
Private Placement Memorandum - The Private Placement Memorandum of the Company
----------------------------
dated January 1998 including all exhibits and attachments thereto.
Purchaser - As defined in Section 1.1.
---------
Qualified Public Offering - An underwritten public offering (or series of
-------------------------
offerings) of capital stock of the Company after the date hereof in which the
Company shall receive (or in the aggregate receive) net cash proceeds equaling
not less than $20,000,000, and after giving effect thereto (including the
application of proceeds therefrom) (i) the ratio of Consolidated Senior Debt to
Consolidated Adjusted Total Capitalization shall not exceed 55% and (ii) the
ratio of Total Indebtedness to Consolidated Adjusted Total Capitalization shall
not exceed 60%.
Reinvestment Yield - The sum of (i) 0.50% plus (ii) the per annum yield
------------------
reported, as of 10:00 A.M. (New York City time) on the Determination Date, on
the Cantor-Fitzgerald Brokerage Screen available on the Bloomberg and Knight
Ridder Information System (or, if not available,
24
<PAGE>
any other nationally recognized trading screen reporting on-line intraday
trading in United States government securities) for actively traded U.S.
Treasury securities having a final maturity equal to the Weighted Average Life
to Maturity of the Notes then being prepaid or paid as of the date of prepayment
or payment, rounded to the nearest month, or if such yields shall not be
reported as of such time or the yields reported as of such time are not
ascertainable in accordance with the preceding clause, then the arithmetic mean
of the yields published in the statistical release designated H.15(519) (or any
successor publication) of the Board of Governors of the Federal Reserve System
under the caption "U.S. Government Securities--Treasury Constant Maturities"
(the "statistical release") for the maturity corresponding to the remaining
Weighted Average Life to Maturity of the Notes as of the date of such prepayment
or payment rounded to the nearest month. For purposes of calculating the
Reinvestment Yield, the most recent weekly statistical release published prior
to the applicable Determination Date shall be used. In the event the statistical
release is not published, the arithmetic mean of such reasonably comparable
index as may be designated by the holders of at least 51% in aggregate principal
amount of the Notes, for the maturity corresponding to the remaining Weighted
Average Life to Maturity of the Notes as of the date of prepayment or payment,
as the case may be, rounded to the nearest month shall be used. If no maturity
exactly corresponding to such rounded Weighted Average Life to Maturity shall
appear therein, yields for the two most closely corresponding published
maturities (one of which occurs prior and the other subsequent to the Weighted
Average Life to Maturity) shall be calculated pursuant to the foregoing sentence
and the Reinvestment Yield shall be interpolated from such yields on a straight-
line basis (rounding, in each of such relevant periods, to the nearest month).
Release - Any release, spill, emission, leaking, pumping, pouring, emptying,
-------
dumping, injection, escaping, deposit, disposal, discharge, dispersal, leaching
or migration into the environment (including the abandonment or disposal of any
barrel, container or other closed receptacle containing any Hazardous Material),
or into or out of any Facility, including the movement of any released Hazardous
Material through the air, soil, surface water, groundwater or property.
Rentals - As of the date of any determination thereof, all fixed payments
-------
(including as such all payments which the lessee is obligated to make to the
lessor on termination of the lease or surrender of the property) payable by the
Company or a Restricted Subsidiary, as lessee or sublessee under a lease of real
or personal property, but shall be exclusive of any amounts required to be paid
by the Company or a Restricted Subsidiary (whether or not designated as rents or
additional rents) on account of maintenance, repairs, insurance, taxes and
similar charges. Fixed rents under any so-called "percentage leases" shall be
computed on the basis of the
25
<PAGE>
minimum rents, if any, required to be paid by the lessee, regardless of sales
volume or gross revenues.
Responsible Officer - (i) The chief executive officer, chief operating
-------------------
officer, chief financial officer and any senior vice president of the Company
and (ii) any officer of the Company with responsibility for the administration
of the relevant portion of this Agreement.
Restricted Investments - All Investments of the Company or any Restricted
----------------------
Subsidiary except:
(i) property of the Company or any Restricted Subsidiary to be used
in the ordinary course of business;
(ii) assets arising from the sale of goods and services in the
ordinary course of business;
(iii) loans or capital contributions to the Partnership in an
aggregate amount not to exceed $5,000,000 in any fiscal year;
(iv) Investments in, and advances to, Restricted Subsidiaries, or
Investments in any corporation, which after giving effect to such Investment,
becomes a Restricted Subsidiary (in each case whether by contributions to
capital, loans, advances, or guarantees);
(v) advances made in the ordinary course of business to officers
and employees (not to exceed, in the aggregate, $1,000,000), and to
subcontractors or suppliers;
(vi) shares of stock or other securities received in settlement for
claims arising in the ordinary course of business;
(vii) Investments in obligations issued by or fully guaranteed by the
United States of America or an agency thereof maturing within three years after
the date of issuance;
(viii) Investments in tax-exempt obligations maturing within one year
from the date of issuance, which are rated within one of the top two rating
classifications by at least one nationally recognized rating agency;
(ix) Investments in commercial paper, maturing within 270 days from
the date of issuance which is rated no lower than Investment Grade;
(x) participations in short-term notes maturing within 180 days
from the date of issuance issued by corporations or other entities which are
rated no lower than Investment Grade;
26
<PAGE>
(xi) certificates of deposit or banker's acceptances issued by a
bank or trust company organized under the laws of the United States or any state
thereof having capital, surplus and undivided profits aggregating at least
$100,000,000 and whose long-term debt is rated in one of the top two rating
classifications by at least one nationally recognized rating agency;
(xii) Investments in money market instrument programs which are
classified as current assets in accordance with GAAP; and
(xiii) other Investments existing as of the date of this Agreement and
listed in the attached ANNEX III, including the Guaranty dated January 31, 1997
of the Indebtedness of the Partnership by MSC Pre Finish Metals Inc. and the
Company.
Restricted Subsidiary - Any Subsidiary (i) of which at least a majority of the
---------------------
Voting Stock is owned by the Company and/or one or more Wholly-Owned Restricted
Subsidiaries, (ii) which is organized under the laws of the United States and
which maintains substantially all of its assets and conducts substantially all
of its business within the United States, Canada, Western Europe, or Mexico, and
(iii) which the Company then designates as a "Restricted Subsidiary" by notice
in writing given to the holders of the Notes, provided that the designation of a
Subsidiary as "Unrestricted" or "Restricted" shall not be changed more than
twice and shall be made pursuant to Section 7.10.
S&P - Standard & Poor's Rating Group.
---
Securities Act - The Securities Act of 1933, as amended.
--------------
Subordinated Debt - The sum of (a) the subordinated convertible notes dated
-----------------
September 7, 1995 issued by the Company in partial consideration for the
purchase of Solar Gard International, Inc., (b) the subordinated convertible
notes dated May 31, 1996 issued by the Company in partial consideration for the
purchase of Sun-Protective International Corporation, and (c) obligations of the
Company or its Restricted Subsidiaries outstanding at any time which are
subordinated in right of payment or security to all Consolidated Senior Debt.
Subsidiary - Any corporation of which at least a majority of the outstanding
----------
voting securities are owned or controlled by the Company.
Subsidiary Guarantors - MSC Pinole Point Steel Inc., MSC Pre Finish Metals
---------------------
Inc., MSC Pre Finish Metals (EGV) Inc., MSC Pre Finish Metals (MV) Inc., MSC Pre
Finish Metals (MT) Inc., MSC Pre Finish Metals (PP) Inc., MSC Laminates and
Composites Inc., MSC Laminates and
27
<PAGE>
Composites (EGV) Inc., MSC Walbridge Coatings Inc., MSC Specialty Films Inc.,
Solar-Gard International, Inc. and any other Person which hereafter executes and
delivers to the holders of the Notes pursuant to Section 6.11 hereof or
otherwise a counterpart signature page to the Subsidiary Guaranty.
Subsidiary Guaranty - The Subsidiary Guaranty in substantially the form of the
-------------------
attached Exhibit B, as amended from time to time.
Total Indebtedness - Total Indebtedness of the Company and its Restricted
------------------
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
Unrestricted Subsidiary - Any Subsidiary which is not then designated as a
-----------------------
Restricted Subsidiary, including any Subsidiary hereafter designated an
Unrestricted Subsidiary by the Company pursuant to Section 7.10.
Voting Stock - Capital stock of any class of a corporation having power under
------------
ordinary circumstances to vote for the election of members of the board of
directors of such corporation, or persons performing similar functions.
Weighted Average Life to Maturity - As applied to any prepayment of principal
---------------------------------
of the Notes, at any date, the number of years obtained by dividing (a) the then
outstanding principal amount of the Notes to be prepaid, into (b) the sum of the
products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity, or other required principal payment,
including payment at final maturity, foregone by virtue of such prepayment of
the Notes, by (ii) the number of years (calculated to the nearest 1/12th) which
would have elapsed between such date and the making of such payment.
Wholly-Owned - When applied to a Subsidiary or a Restricted Subsidiary, any
------------
Subsidiary or Restricted Subsidiary 100% of the Voting Stock of which is owned
by the Company and/or its Wholly-Owned Subsidiaries, other than directors'
qualifying shares.
Terms which are not defined in this Section and are defined in other Sections
of this Agreement shall have the meanings specified therein.
5.2. Accounting Principles. Where the character or amount of any asset or
---------------------
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP,
except where such principles are inconsistent with the requirements of this
Agreement.
28
<PAGE>
5.3. Valuation Principles. Except where indicated expressly to the
--------------------
contrary by the use of terms such as "fair value," "fair market value" or
"market value," each asset, each liability and each capital item of any Person,
and any quantity derivable by a computation involving any of such assets,
liabilities or capital items, shall be taken at the net book value thereof for
all purposes of this Agreement. "Net book value" with respect to any asset,
liability or capital item of any Person shall mean the amount at which the same
is recorded or, in accordance with GAAP should have been recorded, in the books
of account of such Person, as reduced by any reserves which have been or, in
accordance with GAAP should have been, set aside with respect thereto, but in
every case (whether or not permitted in accordance with GAAP) without giving
effect to any write-up, write-down or write-off (other than any write-down or
write-off the entire amount of which was charged to Consolidated Net Income or
to a reserve which was a charge to Consolidated Net Income) relating thereto
which was made after the date of this Agreement.
5.4. Direct or Indirect Actions. Where any provision in this Agreement
--------------------------
refers to action to be taken by any Person, or which such Person is prohibited
from taking, such provision shall be applicable whether the action in question
is taken directly or indirectly by such Person.
(S)6. AFFIRMATIVE COVENANTS
The Company agrees that, for so long as any amount remains unpaid on any Note:
6.1. Corporate Existence. The Company will maintain and preserve, and
-------------------
will cause each Restricted Subsidiary to maintain and preserve, its corporate
existence and right to carry on its business and maintain, preserve, renew and
extend all of its rights, powers, privileges and franchises necessary to the
proper conduct of its business; provided, however, that the foregoing shall not
prevent any transaction permitted by Section 7.7, Section 7.8 or Section 7.9 or
the termination of the corporate existence of any Restricted Subsidiary if, in
the opinion of the Board of Directors of the Company, such termination is in the
best interests of the Company, is not disadvantageous to holders of the Notes
and is not otherwise prohibited by this Agreement.
6.2. Insurance. The Company will, and will cause each Restricted
---------
Subsidiary to, maintain insurance coverage with financially sound and reputable
insurers in such forms and amounts, with such deductibles and against such risks
as are required by law or sound business practice and are customary for
corporations of the Company's size engaged in the same or similar
29
<PAGE>
businesses and owning and operating similar properties as the Company and its
Restricted Subsidiaries.
6.3. Taxes, Claims for Labor and Materials. The Company will pay and
-------------------------------------
discharge when due, and will cause each Subsidiary to pay and discharge when
due, all taxes, assessments and governmental charges or levies imposed upon it
or its property or assets, or upon properties leased by it (but only to the
extent required to do so by the applicable lease), prior to the date on which
penalties other than application of interest or revocation of discount attach
thereto, and all lawful claims which, if unpaid, could reasonably be expected to
become a Lien upon its property or assets, provided that neither the Company nor
any Subsidiary shall be required to pay any such tax, assessment, charge, levy
or claim, (i) the payment of which is being contested in good faith and by
proper proceedings that will stay the forfeiture or sale of any property and
with respect to which adequate reserves are maintained in accordance with GAAP
or (ii) the nonpayment of which in the aggregate would not reasonably be
expected to have a Material Adverse Effect.
6.4. Maintenance of Properties. The Company will maintain, preserve and
-------------------------
keep, and will cause each Restricted Subsidiary to maintain, preserve and keep,
its properties (whether owned in fee or a leasehold interest) essential to its
business in good repair and working order, ordinary wear and tear excepted, and
from time to time will make all necessary repairs, replacements, renewals,
improvements and additions excluding property which is obsolete or no longer
necessary for the operation of the Company and its Restricted Subsidiaries.
6.5. Maintenance of Records. The Company will keep, and will cause each
----------------------
Restricted Subsidiary to keep, at all times proper books of record and account
in which full, true and correct entries will be made of all dealings or
transactions of or in relation to the business and affairs of the Company or
such Restricted Subsidiary, in accordance with GAAP consistently applied
throughout the period involved (except for such changes as are disclosed in such
financial statements or in the notes thereto and concurred in by the Company's
independent certified public accountants), and the Company will, and will cause
each Restricted Subsidiary to, provide reasonable protection against loss or
damage to such books of record and account.
6.6. Financial Information and Reports. The Company will furnish to you
---------------------------------
and to any other Institutional Holder, in each case, then holding a Note, (in
duplicate if you or such other holder so request) the following:
30
30
<PAGE>
(a) As soon as available and in any event within 60 days after the end of
each of the first three quarterly accounting periods of each fiscal year of the
Company, a consolidated balance sheet of the Company and its Subsidiaries as of
the end of such period and consolidated statements of earnings and cash flows of
the Company and its Subsidiaries for the periods beginning on the first day of
such fiscal year and the first day of such quarterly accounting period (with
respect to earnings only) and ending on the date of such balance sheet, setting
forth in comparative form the corresponding consolidated figures for the
corresponding periods of the preceding fiscal year, all in reasonable detail,
prepared in accordance with GAAP consistently applied throughout the period
involved (except for changes disclosed in such financial statements or in the
notes thereto and concurred in by the Company's independent certified public
accountants) and certified by the chief financial officer or chief accounting
officer of the Company (i) outlining the basis of presentation, and (ii) stating
that the information presented in such statements presents fairly in all
material respects the financial condition of the Company and its Subsidiaries
and the results of operations for the period, subject to customary year-end
audit adjustments; provided that delivery within the time period specified above
of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance
with the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section 6.6(a);
(b) As soon as available and in any event within 90 days after the last
day of each fiscal year, a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year and the related consolidated
statements of operations, shareholders' equity and cash flows for such fiscal
year, in each case setting forth in comparative form figures for the preceding
fiscal year, all in reasonable detail, prepared in accordance with GAAP
consistently applied throughout the period involved (except for changes
disclosed in such financial statements or in the notes thereto and concurred in
by independent certified public accountants) and accompanied by a report
unqualified as to scope of audit and unqualified as to going concern as to the
consolidated balance sheet and the related consolidated statements of earnings,
shareholders' equity and cash flows by Arthur Andersen LLP, or any other firm of
independent public accountants of recognized national standing selected by the
Company, to the effect that such financial statements have been prepared in
conformity with GAAP and present fairly, in all material respects, the financial
position and results of operations and cash flows of the Company and its
Subsidiaries and that the examination of such financial statements by such
accounting firm has been made in accordance with generally accepted auditing
standards; provided that the delivery within the time period specified above of
the Company's Annual Report on Form 10-K for such fiscal year (together with the
Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3
under the Exchange Act) prepared in accordance with the requirements therefor
and filed with the Securities and Exchange Commission, together with the
accountant's
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report described in this Section 6.6(b), shall be deemed to satisfy the
requirements of this Section 6.6(b);
(c) In the event that one or more Unrestricted Subsidiaries shall own more
than 10% of the consolidated assets of the Company and its Subsidiaries or shall
account for more than 10% of the consolidated gross revenue of the Company and
its Subsidiaries, determined in accordance with GAAP, then the financial
statements and information delivered pursuant to (a) and (b) of this Section 6.6
shall be accompanied by unaudited financial statements for all Unrestricted
Subsidiaries of the Company taken as a group, together with consolidating
statements reflecting eliminations or adjustments required to reconcile such
group statements to the consolidated financial statements of the Company and its
Subsidiaries.
(d) Together with the financial statements delivered pursuant to
paragraphs (a) and (b) of this Section 6.6, a certificate of the chief financial
officer or chief accounting officer of the Company, (i) to the effect that such
officer has reexamined the terms and provisions of this Agreement and that no
Default or Event of Default is occurring or has occurred as of the date of such
certificate, during such periods and as of the end of such periods, or if such
officer is aware of any Default or Event of Default, such officer shall disclose
in such statement the nature thereof, its period of existence and what action,
if any, the Company has taken or proposes to take with respect thereto, and (ii)
stating whether the Company is in compliance with Sections 7.1 through 7.13 and
setting forth, in sufficient detail, the information and computations required
to establish whether or not the Company was in compliance with the requirements
of Sections 7.1 through 7.5 and, if applicable, Sections 7.6 through 7.10 for
the period covered by the financial reports then being furnished and as of the
end of such periods;
(e) Promptly after any Responsible Officer of the Company obtains
knowledge thereof, notice of any litigation or any governmental proceeding
pending against the Company or any Subsidiary which, individually or in the
aggregate, or which might reasonably be expected to result in a Material Adverse
Effect;
(f) As soon as available, copies of each financial statement, notice,
report and proxy statement which the Company shall furnish to its stockholders;
within 5 days after the effective date thereof, copies of each registration
statement (without exhibits, except as expressly requested and excluding
registration statements on Form S-8) and periodic report which the Company may
file with the Securities and Exchange Commission, and any similar or successor
agency of the Federal government administering the Securities Act, the Exchange
Act or the Trust Indenture Act of 1939, as amended; without duplication, within
15 days after filing, copies of each report
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(other than reports relating solely to the issuance of, or transactions by
others involving, its securities) relating to the Company or its securities
which the Company may file with any securities exchange on which any of the
Company's securities may be registered; copies of any orders in any material
proceedings to which the Company or any of its Subsidiaries is a party, issued
by any governmental agency, Federal or state, having jurisdiction over the
Company or any of its Subsidiaries; and, except at such times as the Company is
a reporting company under Section 13 or 15(d) of the Exchange Act or has
complied with the requirements for the exemption from registration under the
Exchange Act set forth in Rule 12g-3-2(b), such financial or other information
as any holder of the Notes or prospective purchaser of the Notes may reasonably
request;
(g) Promptly following any change in the composition of the Company's
Restricted Subsidiaries and annually following any change in the composition of
the Company's other Subsidiaries from that set forth in ANNEX I, as theretofore
updated pursuant to this paragraph, an updated list setting forth the
information specified in ANNEX I; and
(h) Such additional information as you or such other Institutional Holder
of the Notes may reasonably request concerning the Company and its Restricted
Subsidiaries.
6.7. Inspection of Properties and Records. The Company will allow, and
------------------------------------
will cause each Restricted Subsidiary to allow, any representative of you or any
other Institutional Holder, so long as you or such other Institutional Holder
holds any Note, to visit and inspect any of its properties, to examine its books
of record and account and to discuss its affairs, finances and accounts with its
officers and its present and former public accountants (and by this provision
the Company authorizes, at the time any Default or Event of Default has occurred
and is continuing, such accountants to discuss with you or such Institutional
Holder its affairs, finances and accounts all at such reasonable times, upon
reasonable notice and as often as you or such Institutional Holder may
reasonably request), and if, at the time thereof any Default or Event of Default
has occurred and is continuing, at the Company's expense. If no Default or
Event of Default has occurred or is continuing, then, upon the consent of the
Company, which consent shall not be unreasonably withheld, the Company shall
permit its present and former accountants to discuss with you or any
Institutional Holder its affairs, finances and accounts.
6.8. ERISA. (a) All assumptions and methods used to determine the
-----
actuarial valuation of employee benefits, both vested and unvested, under any
Plan subject to Title IV of
33
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ERISA, and each such Plan, whether now existing or adopted after the date
hereof, will comply in all material respects with ERISA.
(b) The Company will not at any time permit any Plan established,
maintained or contributed to by it or any ERISA Affiliate to:
(i) engage in any "PROHIBITED TRANSACTION" as such term is defined
in Section 4975 of the Code or in Section 406 of ERISA;
(ii) incur any "accumulated funding deficiency" as such term is
defined in Section 302 of ERISA, whether or not waived; or
(iii) be terminated under circumstances which are likely to result in
the imposition of a Lien on the property of the Company or any ERISA Affiliate
pursuant to Section 4068 of ERISA;
if the event or condition described in clauses (i), (ii) or (iii) above is
likely to subject the Company or an ERISA Affiliate to liabilities which,
individually or in the aggregate, might reasonably be expected to have a
Material Adverse Effect.
(c) Upon the request of you or any subsequent Institutional Holder, the
Company will furnish a copy of the annual report of each Plan (Form 5500)
required to be filed with the Internal Revenue Service.
(d) Within 5 days after obtaining knowledge thereof, the Company will
give you and any subsequent Institutional Holder written notice of (i) a
reportable event with respect to any Plan; (ii) the institution of any steps by
any of the Company, any ERISA Affiliate or the PBGC to terminate any Plan; (iii)
the institution of any steps by any of the Company or any ERISA Affiliate to
withdraw from any Plan; (iv) a prohibited transaction in connection with any
Plan; (v) any material increase in the contingent liability of the Company or
any Restricted Subsidiary with respect to any post-retirement welfare liability;
or (vi) the taking of any action by the Internal Revenue Service, the Department
of Labor or the PBGC with respect to any of the foregoing which, in any of the
events specified above, might reasonably be expected to result in a Material
Adverse Effect.
6.9. Compliance with Laws. (a) The Company will comply and will cause
--------------------
each Restricted Subsidiary to comply, in all material respects, with all laws,
rules and regulations, including Environmental Laws, applicable to its or their
respective businesses, other than laws, rules and regulations the failure to
comply with which or the sanctions and penalties resulting therefrom,
individually or in the aggregate, would not have a Material Adverse Effect;
provided,
34
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however, that the Company and its Restricted Subsidiaries shall not be required
to comply with laws, rules and regulations the validity or applicability of
which are being contested in good faith and by appropriate proceedings and as to
which the Company has established adequate reserves on its books in accordance
with GAAP.
(b) Promptly upon the occurrence thereof, the Company will give you and
each other Institutional Holder, so long as such Institutional Holder holds a
Note, notice of the institution of any proceedings against, or the receipt of
notice of potential liability or responsibility of, the Company or any
Subsidiary for violation, or the alleged violation, of any Environmental Law
which violation could reasonably be expected to result in a Material Adverse
Effect.
6.10. Acquisition of Notes. Neither the Company, any Subsidiary or any of
--------------------
them, directly or indirectly, will repurchase, redeem, prepay or otherwise
acquire, directly or indirectly, any Notes except upon the payment or prepayment
of the Notes pursuant to Section 2.1, Section 2.2(a) or Section 7.8.
6.11. Additional Subsidiary Guarantors. In the event that (a) any
--------------------------------
Subsidiary other than a Subsidiary Guarantor existing on the Closing Date shall
hereafter guaranty Indebtedness of the Company to bank lenders, the Company
agrees to cause such Subsidiary to guaranty the Notes concurrently therewith and
to the same extent and (b) any Subsidiary becomes a Material Subsidiary, the
Company agrees to cause such Material Subsidiary to execute and deliver a
counterpart signature page to the Subsidiary Guaranty.
6.12. Private Placement Number. The Company consents to the filing by
------------------------
your special counsel of copies of this Agreement with S&P to obtain a private
placement number.
(S)7. NEGATIVE COVENANTS
The Company agrees that, for so long as any amount remains unpaid on any Note:
7.1. Consolidated Adjusted Net Worth. The Company shall not permit at
-------------------------------
any time its Consolidated Adjusted Net Worth to be less than the sum of (i)
$105,000,000, (ii) the net cash proceeds of a Qualified Public Offering, and
(iii) until such time as the ratio of Total Indebtedness to Consolidated
Adjusted Total Capitalization is less than 45%, as measured on the last day of
any two consecutive fiscal quarters ending on or after February 28, 1998, 40% of
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Consolidated Adjusted Net Income for each semiannual period of the Company
commencing after August 31, 1997, as measured as of the last day of each such
fiscal semiannual period. If Consolidated Adjusted Net Income for any semiannual
fiscal period is a deficit, such deficit shall not reduce the amount of
Consolidated Adjusted Net Worth required to be maintained pursuant to this
covenant.
7.2. Consolidated Senior Debt. The Company shall not at any time permit
------------------------
the ratio of Consolidated Senior Debt to Consolidated Adjusted Total
Capitalization ("Senior Leverage Ratio") to exceed, as measured on the last day
of each fiscal quarter, (x) 60.0% for the period commencing on the Closing Date
through February 28, 1999, (y) 57.5% for the period from March 1, 1999 to
February 29, 2000, and (z) 55.0% thereafter, provided that, if at any time the
Company shall complete a Qualified Public Offering, thereafter the Senior
Leverage Ratio shall not exceed 55%, as measured on the last day of each fiscal
quarter.
7.3. Total Indebtedness. The Company shall not permit at any time the
------------------
ratio of Total Indebtedness to Consolidated Adjusted Total Capitalization
("Total Leverage Ratio") to exceed, as measured on the last day of each fiscal
quarter, (x) 65.0% for the period from the Closing Date through February 28,
1999, (y) 62.5% for the period from March 1, 1999 to February 29, 2000, and (z)
60.0% thereafter; provided that, if at any time the Company shall complete a
Qualified Public Offering, thereafter, the Total Leverage Ratio shall not exceed
60%, as measured on the last day of each fiscal quarter.
7.4. Subsidiary Debt. The Company shall not permit its Restricted
---------------
Subsidiaries to create, assume, guarantee or otherwise incur Indebtedness, other
than (i) Indebtedness owed to the Company or another Wholly-Owned Restricted
Subsidiary, (ii) Permitted Guaranties and (iii) additional Indebtedness,
provided that the aggregate amount (calculated without duplication) of
outstanding Indebtedness of Restricted Subsidiaries permitted under this clause
(iii), when added to the aggregate amount (calculated without duplication) of
outstanding Indebtedness permitted under Section 7.6(l)(i), does not exceed 15%
of Consolidated Adjusted Total Capitalization and provided further that any such
Indebtedness could be incurred pursuant to Sections 7.2 and 7.3 hereof.
7.5. Fixed Charges Coverage Ratio. Until such time that ratio of Total
----------------------------
Indebtedness to Consolidated Adjusted Total Capitalization is less than 45%, as
measured on the last day of each of any two consecutive fiscal quarters ending
on or after February 28, 1998, the Company shall maintain the ratio of
Consolidated Adjusted Net Income Available For Fixed Charges to
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Fixed Charges as measured on the last day of any fiscal year at not less than
2.00 to 1 for the period of the four consecutive fiscal quarters ending on such
date of determination.
7.6. Liens. The Company will not, and will not permit any Restricted
-----
Subsidiaries to, permit to exist, create, assume or incur, directly or
indirectly, any Lien on its properties or assets, whether now owned or hereafter
acquired, except:
(a) Liens for property taxes, assessments, or other governmental charges
not then due and delinquent or the validity of which is being contested in good
faith and as to which the Company has established adequate reserves on its
books,
(b) Liens arising in the ordinary course of business and not incurred in
connection with the borrowing of money, including Liens securing claims of
carriers, warehousemen, mechanics, materialmen, landlords and other similar
Liens that in the aggregate do not materially interfere with the conduct of
business of the Company and its Restricted Subsidiaries taken as a whole or
materially impair the value of the property or assets of the Company and its
Restricted Subsidiaries taken as a whole;
(c) Liens incidental to the normal conduct of the business of the Company
or any Restricted Subsidiary (not incurred for the borrowing of money),
including Liens in connection with workers' compensation, unemployment
insurance, and other governmental insurance or benefits;
(d) Liens resulting from judgments or court proceedings, provided the
execution of such Liens is effectively stayed, such Liens are being contested in
good faith by appropriate proceedings which have been in existence for less than
60 days which the Company is protesting in good faith, provided that the Company
has established adequate reserves for such matters on its books;
(e) minor survey exceptions, easements, encroachments, rights-of-way, and
zoning ordinances which customarily exist on real property and which do not
materially detract from the value of such property;
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(f) Liens securing Indebtedness of a Restricted Subsidiary to the Company
or another Restricted Subsidiary;
(g) existing Liens on property of the Company or any Restricted Subsidiary
described in the attached ANNEX IV;
(h) Liens securing the payment of the purchase price of assets provided
(i) any such Liens are created within 90 days after the acquisition of such
assets; (ii) at the time of acquisition of such assets, Indebtedness secured by
such Liens does not exceed the purchase price thereof; (iii) such Liens do not
extend to other property of the Company or any Restricted Subsidiary; and (iv)
Indebtedness secured by such Liens is permitted by Sections 7.2 and 7.3 hereof;
(i) Liens created pursuant to Capitalized Leases permitted by Section 7.2
and Section 7.3 hereof;
(j) leases or subleases granted to third parties which do not interfere in
any material respect with the business of the Company or its Restricted
Subsidiaries;
(k) subject to Section 7.8, any interest or title of a lessor or sublessor
under any lease entered into in the ordinary course of business; and
(l) Liens not permitted by paragraphs (a) through (k) above to secure
Indebtedness; provided that at the time of incurrence of such Indebtedness, (i)
the aggregate amount of Indebtedness secured by such Liens permitted by this
Section 7.6(l) plus (ii) the aggregate amount (calculated without duplication)
of outstanding Indebtedness of Restricted Subsidiaries permitted under clause
(iii) of Section 7.4 does not exceed 15% of Consolidated Adjusted Total
Capitalization and (iii) such Indebtedness could be incurred pursuant to
Sections 7.2 and 7.3 hereof.
7.7. Merger or Consolidation. The Company will not, and will not permit
-----------------------
any Restricted Subsidiary to, merge or consolidate with, or sell all or
substantially all of its assets to, any Person, except that:
38
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(a) The Company may merge into or consolidate with, or sell all or
substantially all of its assets to, any Person or permit any Person to merge
into it, provided that immediately after giving effect thereto,
(i) The Company is the successor corporation or, if the Company is
not the successor corporation, the successor corporation is a solvent
corporation organized under the laws of a state of the United States of America
or the District of Columbia and expressly assumes in writing the Company's
obligations under this Agreement and the Notes;
(ii) There shall exist no Default or Event of Default; and
(iii) The Company or such successor corporation could incur at least
$1.00 of Consolidated Senior Debt pursuant to Section 7.2; and
(b) Any Restricted Subsidiary may (i) merge into the Company or a Wholly-
Owned Restricted Subsidiary, and (ii) merge with any Unrestricted Subsidiary so
long as the Restricted Subsidiary shall remain the surviving Person; provided in
each instance set forth in clauses (i) and (ii) that immediately before and
after giving effect thereto there shall exist no Default or Event of Default.
7.8. Sale of Assets. The Company will not, and will not permit any
--------------
Restricted Subsidiary to, sell, lease, transfer or otherwise (including by way
of merger) dispose of (collectively a "Disposition") any assets, including
capital stock of Subsidiaries, in one or a series of transactions, other than in
the ordinary course of business, to any Person, except to the Company or a
Wholly-Owned Restricted Subsidiary, (i) if, in any fiscal year, after giving
effect to such Disposition, the aggregate net book value of assets subject to
Dispositions during such fiscal year would exceed 15% of Consolidated Total
Assets as of the end of the immediately preceding fiscal quarter or (ii) if a
Default or Event of Default exists or would exist. Notwithstanding the
foregoing, the Company may, or may permit a Restricted Subsidiary to, make a
Disposition and the assets subject to such Disposition shall not be subject to
or included in the foregoing limitation and computation contained in clause (i)
of the preceding sentence to the extent that (x) such assets are leased back by
the Company or such Restricted Subsidiary, as lessee, within 180 days following
the acquisition by the Company or such Restricted Subsidiary
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<PAGE>
or completion of construction of such assets or (y) the net proceeds from such
Disposition are (1) Reinvested in Productive assets of the Company or a
Restricted Subsidiary of at least equivalent value within 180 days of such
Disposition or (2) applied to the payment or prepayment of outstanding
Consolidated Senior Debt. Any prepayment of Notes pursuant to this Section 7.8
shall be in accordance with section 2.2.
7.9. Disposition of Stock of Restricted Subsidiaries. The Company will
-----------------------------------------------
not permit any Restricted Subsidiary to issue its capital stock, or any
warrants, rights or options to purchase, or securities convertible into or
exchangeable for, such capital stock, to any Person other than the Company or a
Wholly-Owned Restricted Subsidiary. The Company will not, and will not permit
any Restricted Subsidiary to, sell, transfer or otherwise dispose of (other than
to the Company or a Wholly-Owned Restricted Subsidiary) any capital stock
(including any warrants, rights or options to purchase, or securities
convertible into or exchangeable for, capital stock) or Indebtedness of any
Restricted Subsidiary, unless:
(a) simultaneously therewith all Investments in such Restricted Subsidiary
owned by the Company and every other Restricted Subsidiary are disposed of as an
entirety;
(b) such Restricted Subsidiary does not have any continuing Investment in
the Company or any other Subsidiary not being simultaneously disposed of; and
(c) such sale, transfer or other disposition is permitted by Section 7.8.
7.10. Designation of Unrestricted Subsidiaries. The Company will not
----------------------------------------
designate any Restricted Subsidiary as an Unrestricted Subsidiary if such
Subsidiary has been designated an Unrestricted Subsidiary more than once
previously and unless immediately before and after such designation:
(a) such Subsidiary does not own any Investment in the Company or any
Restricted Subsidiary;
(b) there exists no Default or Event of Default; and
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(c) the Company could incur at least $1.00 of additional Indebtedness.
7.11. No Impairment of Subsidiaries. The Company will not, and will not
-----------------------------
permit any Restricted Subsidiary to, enter into any agreement or amend the
charter or by-laws of such Restricted Subsidiary or take or omit to take any
action, the effect of which is to restrict the ability of any Restricted
Subsidiary to pay dividends or make distributions to the Company, or if the
Company is not its parent, to its parent.
7.12. Transactions with Affiliates. The Company will not, and will not
----------------------------
permit any Restricted Subsidiary to, enter into any transaction (including the
furnishing of goods or services) with an Affiliate (other than the Company),
except on terms and conditions no less favorable to the Company or such
Restricted Subsidiary than would be obtained in a comparable arm's-length
transaction with a Person not an Affiliate.
7.13. Nature of Business. The Company will not, and will not permit any
------------------
Restricted Subsidiary to, engage in any business if, as a result thereof, the
business then to be conducted by the Company and its Restricted Subsidiaries,
taken as a whole, would cease to be substantially the same or related to the
business described in the Private Placement Memorandum.
(S)8. EVENTS OF DEFAULT AND REMEDIES THEREFOR
8.1. Nature of Events. An "Event of Default" shall exist if any one or
----------------
more of the following occurs:
(a) Any default in the payment of interest when due on any of the Notes
and continuance of such default for a period of five Business Days;
(b) Any default in the payment of the principal or Make-Whole Amount of
any of the Notes at maturity, upon acceleration of maturity or at any date fixed
for prepayment;
(c) (i) Any default in the payment of the principal of, or interest or
premium on, any other Indebtedness of the Company and its Material Subsidiaries
aggregating in excess of $5,000,000 as and when due and payable (whether by
lapse of time, declaration, call for
41
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redemption or otherwise) and the continuation of such default beyond the period
of grace, if any, allowed with respect thereto, or (ii) default (other than a
payment default) under any loan agreements or other instruments of the Company
and its Restricted Subsidiaries under or pursuant to which such Indebtedness
aggregating in excess of $5,000,000 is issued, and the continuation of such
default beyond the period of grace, if any, allowed with respect thereto and the
sums due under clauses (i) or (ii) under such Indebtedness shall have been
accelerated and such acceleration shall not have been annulled.
(d) Any default in the observance or performance of Section 6.11, Sections
7.1 through 7.13 or Section 8.7;
(e) Any default in the observance or performance of any other covenant or
provision of this Agreement which is not remedied within 30 days after notice
thereof to the Company by any holder of a Note;
(f) Default under the Subsidiary Guaranty which continues beyond the
period of grace, if any, allowed with respect thereto;
(g) The Subsidiary Guaranty shall cease to be in full force and effect for
any reason whatsoever, including, without limitation, a determination by any
governmental body or court that the Subsidiary Guaranty is invalid, void or
unenforceable insofar as any Subsidiary Guarantor is concerned or any Subsidiary
Guarantor shall contest or deny in writing the validity or enforceability of any
of its obligations under the Subsidiary Guaranty;
(h) Any representation or warranty made by or on behalf of the Company or
any Subsidiary Guarantor in this Agreement, or made by or on behalf of the
Company or any Subsidiary Guarantor in any written statement or certificate
furnished by or on behalf of the Company in connection with the issuance and
sale of the Notes or furnished by or on behalf of the Company or any Subsidiary
Guarantor pursuant to this Agreement, proves incorrect in any material respect
as of the date of the issuance or making thereof;
(i) Any judgment, writ or warrant of attachment or any similar process in
an aggregate amount in excess of $5,000,000 shall be entered or filed against
the Company or any Material Subsidiary or against any property or assets of
either and remain unpaid, uninsured, unindemnified, unvacated, unbonded or
unstayed (through appeal or otherwise) for sixty (60) days
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or, if stayed pending appeal, are not discharged within sixty (60) days after
expiration of such stay;
(j) The Company or any Material Subsidiary shall
(i) generally not pay its debts as they become due or admit in
writing its inability to pay its debts generally as they become due;
(ii) file a petition in bankruptcy or for reorganization or for the
adoption of an arrangement under the Federal Bankruptcy Code, or any similar
applicable bankruptcy or insolvency law, as now or in the future amended (herein
collectively called "Bankruptcy Laws"); file an answer or other pleading
admitting or failing to deny the material allegations of such a petition; fail
to obtain the dismissal of such a petition within 60 days of its filing or be
subject to an order for relief or a decree approving such a petition; or file an
answer or other pleading seeking, consenting to or acquiescing in relief
provided for under the Bankruptcy Laws;
(iii) make an assignment of all or a substantial part of its property
for the benefit of its creditors;
(iv) seek or consent to or acquiesce in the appointment of a
receiver, liquidator, custodian or trustee of it or for all or a substantial
part of its property;
(v) be finally adjudicated bankrupt or insolvent;
(vi) be subject to the entry of a court order, which shall not be
vacated, set aside or stayed within 60 days of the date of entry, (A) appointing
a receiver, liquidator, custodian or trustee of it or for all or a substantial
part of its property, (B) for relief pursuant to an involuntary case brought
under, or effecting an arrangement in, bankruptcy, (C) for a reorganization
pursuant to the Bankruptcy Laws, or (D) for any other judicial modification or
alteration of the rights of creditors; or
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(vii) be subject to the assumption of custody or sequestration by a
court of competent jurisdiction of all or a substantial part of its property,
which custody or sequestration shall not be suspended or terminated within 60
days from its inception.
8.2. Remedies on Default. When any Event of Default described in
-------------------
paragraphs (c) through (i) of Section 8.1 has occurred and is continuing, the
holders of more than 33% in aggregate principal amount of the Notes then
outstanding may, by notice to the Company, declare the entire principal,
together with the Make-Whole Amount (to the extent permitted by law) and all
interest accrued on all Notes to be, and such Notes shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are expressly waived. Notwithstanding the
foregoing, (i) when any Event of Default described in paragraphs (a) or (b) of
Section 8.1 has occurred and is continuing, any holder may by notice to the
Company declare the entire principal, and all interest accrued on the Notes,
together with the Make-Whole Amount (to the extent permitted by law), then held
by such holder to be, and such Notes shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other notice of any kind,
all of which are expressly waived, and (ii) when any Event of Default described
in paragraph (j) of Section 8.1 has occurred, then the entire principal,
together with the Make-Whole Amount (to the extent permitted by law) and all
interest accrued on all outstanding Notes shall immediately become due and
payable without presentment, demand or notice of any kind. Upon the Notes or
any of them becoming due and payable as aforesaid, the Company will forthwith
pay to the holders of such Notes the entire principal of and interest accrued on
such Notes, plus the Make-Whole Amount which shall be calculated on the
Determination Date.
8.3. Annulment of Acceleration of Notes. The provisions of Section 8.2
----------------------------------
are subject to the condition that if the principal of, the Make-Whole Amount and
accrued interest on the Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraphs (a)
through (i), inclusive, of Section 8.1, the holder or holders of 66-2/3% in
aggregate principal amount of the Notes then outstanding may, by written
instrument filed with the Company, rescind and annul such declaration and the
consequences thereof, provided that (i) at the time such declaration is annulled
and rescinded no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement, (ii) all arrears of interest
upon all the Notes and all other sums payable under the Notes and under this
Agreement (except any principal, Make-Whole Amount or interest on the Notes
which has become due and payable solely by reason of such declaration under
Section 8.2) shall have been duly paid, and (iii) each and every Default or
Event of Default shall have been cured or waived; and provided further, that no
such rescission and annulment shall extend to or affect any subsequent Default
or Event of Default or impair any right consequent thereto.
44
<PAGE>
8.4. Other Remedies. If any Event of Default shall be continuing, any
--------------
holder of Notes may enforce its rights by suit in equity, by action at law, or
by any other appropriate proceedings, whether for the specific performance (to
the extent permitted by law) of any covenant or agreement contained in this
Agreement or in the Notes or in the Subsidiary Guaranty or in aid of the
exercise of any power granted in this Agreement or in the Subsidiary Guaranty,
and may enforce the payment of any Note held by such holder and any of its other
legal or equitable rights.
8.5. Conduct No Waiver; Collection Expenses. No course of dealing on the
--------------------------------------
part of any holder of Notes, nor any delay or failure on the part of any holder
of Notes to exercise any of its rights, shall operate as a waiver of such rights
or otherwise prejudice such holder's rights, powers and remedies. If the
Company fails to pay, when due, the principal of, the Make-Whole Amount, or the
interest on, any Note, or fails to comply with any other provision of this
Agreement, the Company will pay to each holder, to the extent permitted by law,
on demand, such further amounts as shall be sufficient to cover the cost and
expenses, including but not limited to reasonable attorneys' fees, incurred by
such holders of the Notes in collecting any sums due on the Notes or in
otherwise enforcing any of their rights incident to an Event of Default.
8.6. Remedies Cumulative. No right or remedy conferred upon or reserved
-------------------
to any holder of Notes under this Agreement or the Subsidiary Guaranty is
intended to be exclusive of any other right or remedy, and every right and
remedy shall be cumulative and in addition to every other right or remedy given
under this Agreement or the Subsidiary Guaranty or now or hereafter existing
under any applicable law. Every right and remedy given by this Agreement or by
applicable law to any holder of Notes may be exercised from time to time and as
often as may be deemed expedient by such holder, as the case may be.
8.7. Notice of Default. With respect to Defaults, Events of Default or
-----------------
claimed defaults, the Company will give the following notices:
(a) Within five days of a Responsible Officer of the Company becoming aware
of any Default or Event of Default, the Company promptly will furnish to each
holder of a Note written notice of the occurrence of a Default or an Event of
Default. Such notice shall specify the nature of such default, the period of
existence thereof and what action the Company has taken or is taking or proposes
to take with respect thereto.
45
<PAGE>
(b) If the holder of any Note or of any other evidence of Indebtedness of
the Company or any Subsidiary gives any notice or takes any other action with
respect to a claimed default, the Company will forthwith give written notice
thereof to each holder of the then outstanding Notes, describing the notice or
action and the nature of the claimed default.
(S)9. AMENDMENTS, WAIVERS AND CONSENTS
9.1. Matters Subject to Modification. Any term, covenant, agreement or
-------------------------------
condition of this Agreement may, with the consent of the Company, be amended, or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Company shall have obtained
the consent in writing of the holder or holders of a majority in aggregate
principal amount of outstanding Notes; provided, however, that, without the
written consent of the holder or holders of all of the Notes then outstanding,
no such waiver, modification, alteration or amendment shall be effective which
will (i) change any of the provisions, including definitions, relating to
payment (including any required prepayment) of the principal of, Make-Whole
Amount or the interest on any Note, (ii) change the amount of any payment or
prepayment of principal or Make-Whole Amount, or reduce the rate of interest
thereon, or (iii) change any of the provisions of Section 8.1, Section 8.2,
Section 8.3 or this Section 9.
9.2. Solicitation of Holders of Notes. Neither the Company nor any Person
--------------------------------
acting on the Company's behalf will solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the Notes or the Subsidiary Guaranty unless each holder of the
Notes (irrespective of the amount of Notes then owned by it) shall concurrently
be informed thereof by the Company and shall be afforded the opportunity of
considering the same and shall be supplied by the Company with sufficient
information to enable it to make an informed decision with respect thereto.
Executed or true and correct copies of any waiver or consent effected pursuant
to the provisions of this Section 9 shall be delivered by the Company to each
holder of outstanding Notes forthwith following the date on which the same shall
have been executed and delivered by the holder or holders of the requisite
percentage of outstanding Notes. The Company will not, directly or indirectly,
pay or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fees or otherwise, to any holder of the Notes as
consideration for or as an inducement to the entering into by any holder of the
Notes of any waiver or amendment of any of the terms and provisions of this
Agreement or the Subsidiary Guaranty, unless such remuneration is concurrently
paid, on the same terms, ratably to each holder of the then outstanding Notes.
Any consent made by a holder of Notes that has transferred or has agreed to
transfer its Notes to the Company, any Subsidiary, or any
46
<PAGE>
Affiliate thereof and has provided or has agreed to provide such written consent
as a condition to such transfer shall be void and of no force and effect except
solely as to such holder, and any amendments effected or waivers granted or to
be effected or granted that would not have been or would not be so effected or
granted but for such consent (and the consents of all other holders of Notes
that were acquired under the same or similar conditions) shall be void and of no
force and effect retroactive to the date such amendment or waiver initially took
or takes effect, except solely as to such holder.
9.3. Binding Effect. Any such amendment or waiver shall apply equally to
--------------
all the holders of the Notes and shall be binding upon them, upon each future
holder of any Note and upon the Company whether or not such Note shall have been
marked to indicate such amendment or waiver. No such amendment or waiver shall
extend to or affect any obligation not expressly amended or waived or impair any
right related thereto.
9.4. Notes held by Company, etc. Solely for the purpose of determining
---------------------------
whether the holders of the requisite percentage of the aggregate principal
amount of Notes then outstanding approved or consented to any amendment, waiver
or consent to be given under this Agreement or the Notes or the Subsidiary
Guaranty, or have directed the taking of any action provided herein or in the
Notes or in the Subsidiary Guaranty to be taken upon the direction of the
holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company, any
Subsidiaries or any Affiliates shall be deemed not to be outstanding.
(S)10. FORM OF NOTES, REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT
10.1. Form of Notes. Each Series A Note and Series B Note initially
-------------
delivered under this Agreement will be in the form of one fully registered Note
in the form attached as Exhibit A-1 and Exhibit A-2, respectively. The Notes
are issuable only in fully registered form and in denominations of at least
$250,000 (or the remaining outstanding balance thereof, if less than $250,000).
10.2. Note Register. The Company shall cause to be kept at its principal
-------------
office a register (the "Note Register") for the registration and transfer of the
Notes. The names and addresses of the holders of Notes, the transfer thereof
and the names and addresses of the
47
<PAGE>
transferees of the Notes shall be registered in the Note Register. The Company
may deem and treat the person in whose name a Note is so registered as the
holder and owner thereof for all purposes (subject to the provisions of Section
2.5) and shall not be affected by any notice to the contrary, until due
presentment of such Note for registration of transfer as provided in this
Section 10.
10.3. Issuance of New Notes upon Exchange or Transfer. Upon surrender for
-----------------------------------------------
exchange or registration of transfer of any Note at the office of the Company
designated for notices in accordance with Section 11.2, the Company shall
execute and deliver, at its expense, one or more new Notes of any authorized
denominations requested by the holder of the surrendered Note (subject to
Section 10.1), each dated the date to which interest has been paid on the Notes
so surrendered (or, if no interest has been paid, the date of such surrendered
Note), but in the same aggregate unpaid principal amount as such surrendered
Note, and registered in the name of such person or persons as shall be
designated in writing by such holder. Every Note surrendered for registration
of transfer shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the holder of such Note or by his attorney duly
authorized in writing. The Company may condition its issuance of any new Note
in connection with a transfer by any Person on compliance with Section 3.2, by
Institutional Holders on compliance with Section 2.4 and on the payment to the
Company of a sum sufficient to cover any stamp tax or other governmental charge
imposed in respect of such transfer.
10.4. Replacement of Notes. Upon receipt of evidence satisfactory to the
--------------------
Company of the loss, theft, mutilation or destruction of any Note, and in the
case of any such loss, theft or destruction upon delivery of a bond of indemnity
in such form and amount as shall be reasonably satisfactory to the Company or in
the event of such mutilation upon surrender and cancellation of the Note, the
Company, without charge to the holder thereof, will make and deliver a new Note
of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. If any
such lost, stolen or destroyed Note is owned by you or any other Institutional
Holder, then the affidavit of an authorized officer of such owner setting forth
the fact of such loss, theft or destruction and of its ownership of the Note at
the time of such loss, theft or destruction shall be accepted as satisfactory
evidence thereof, and no further indemnity shall be required as a condition to
the execution and delivery of a new Note, other than a written agreement of such
owner (in form reasonably satisfactory to the Company) to indemnify the Company.
(S)11. MISCELLANEOUS
48
<PAGE>
11.1. Expenses. Whether or not the purchase of Notes herein contemplated
--------
shall be consummated, the Company agrees to pay directly all reasonable and
documented expenses in
49
<PAGE>
connection with the preparation, execution and delivery of this Agreement and
the Subsidiary Guaranty and the transactions contemplated by this Agreement,
including, but not limited to, out-of-pocket expenses, recording and filing
fees, including the filing fees of S&P in connection with obtaining a private
placement number, recording fees and filing charges and fees and disbursements
of one special counsel for Purchaser, photocopying and printing costs and
charges for shipping the Notes, adequately insured, to you at your home office
or at such other address as you may designate, and all similar expenses
(including the fees and expenses of counsel, the reasonable allocated costs of
staff counsel and the fees and expenses of a financial advisor, but only in
connection with any work-out, renegotiation or restructuring in the case of a
financial advisor) relating to any amendments, waivers or consents in connection
with this Agreement or the Notes or the Subsidiary Guaranty, including, but not
limited to, any such amendments, waivers or consents resulting from any Default,
Event of Default, work-out, renegotiation or restructuring relating to the
performance by the Company or any Subsidiary Guarantor of their obligations
under this Agreement or the Notes. The Company also agrees that it will pay and
save you harmless against any and all liability with respect to stamp and other
documentary taxes, if any, which may be payable, or which may be determined to
be payable in connection with the execution and delivery of this Agreement or
the Notes (but not in connection with a transfer of any Notes), whether or not
any Notes are then outstanding. The obligations of the Company under this
Section 11.1 shall survive the retirement of the Notes.
11.2. Notices. Except as otherwise expressly provided herein, all
-------
communications provided for in this Agreement shall be in writing and delivered
or sent by registered or certified mail, return receipt requested, or by
overnight courier (i) if to you, to the address set forth below your name in
Schedule I, or to such other address as you may in writing designate, (ii) if to
any other holder of the Notes, to such address as the holder may designate in
writing to the Company, and (iii) if to the Company, to Material Sciences
Corporation, 2200 East Pratt Boulevard, Elk Grove Village, Illinois 60007,
Attention: Chief Financial Officer, or to such other address as the Company may
in writing designate.
11.3. Reproduction of Documents. This Agreement and all documents
-------------------------
relating hereto, including, without limitation, (i) consents, waivers and
modifications which may hereafter be executed, (ii) documents received by you at
the closing of the purchase of the Notes (except the Notes themselves), and
(iii) financial statements, certificates and other information previously or
hereafter furnished to you, may be reproduced by you by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process, and you may destroy any original document so reproduced. The Company
agrees and stipulates that any such reproduction which is legible shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and that any
enlargement, facsimile or further
50
<PAGE>
reproduction of such reproduction shall likewise be admissible in evidence;
provided that nothing herein contained shall preclude the Company from objecting
to the admission of any reproduction on the basis that such reproduction is not
accurate, has been altered or is otherwise incomplete or to the same extent that
the Company could contest the original.
11.4. Successors and Assigns. This Agreement will inure to the benefit of
----------------------
and be binding upon the parties hereto and their respective successors and
assigns.
11.5. Law Governing. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws (and not the law of conflicts) of the State of
Illinois.
11.6. Headings. The headings of the sections and subsections of this
--------
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
11.7. Counterparts. This Agreement may be executed simultaneously in one
------------
or more counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart or reproduction thereof permitted by Section
11.3.
11.8. Reliance on and Survival of Provisions. All written covenants,
--------------------------------------
representations and warranties made by the Company herein and in any
certificates delivered pursuant to this Agreement, whether or not in connection
with a closing, (i) shall be presumed to have been relied upon by you,
notwithstanding any investigation heretofore or hereafter made by you or on your
behalf and (ii) shall survive the delivery of this Agreement and the Notes.
11.9. Integration and Severability. This Agreement embodies the entire
----------------------------
agreement and understanding between you and the Company, and supersedes all
prior agreements and understandings relating to the subject matter hereof. In
case any one or more of the provisions contained in this Agreement or in any
Note, or application thereof, shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained in this Agreement and in any Note, and any other application thereof,
shall not in any way be affected or impaired thereby.
51
<PAGE>
11.10. Confidential Information. For the purposes of this Section 11.10,
------------------------
"CONFIDENTIAL INFORMATION" means information delivered to you by or on behalf of
the Company or any Subsidiary in connection with the transactions contemplated
by or otherwise pursuant to this Agreement that is proprietary in nature and
that was clearly marked or labeled or otherwise adequately identified when
received by you as being confidential information of the Company or such
Subsidiary, provided that such term does not include information that (a) was
-------- -
publicly known or otherwise known to you prior to the time of such disclosure,
(b) subsequently becomes publicly known through no act or omission by you or any
-
person acting on your behalf, (c) otherwise becomes known to you other than
-
through disclosure by the Company or any Subsidiary or (d) constitutes financial
-
statements delivered to you under Section 6.6(a) and (b) that are otherwise
publicly available. You will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by you in good faith to
protect confidential information of third parties delivered to you, provided
--------
that you may deliver or disclose Confidential Information to (i) your directors,
-
officers, employees, agents, accountants, attorneys and affiliates, (to the
extent such disclosure reasonably relates to the administration of the
investment represented by your Notes), (ii) your financial advisors and other
--
professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section 11.10,
(iii) any other holder of any Note, (iv) any Institutional Investor to which you
--- --
sell or offer to sell such Note or any part thereof or any participation therein
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 11.10), (v) any Person
-
from which you offer to purchase any security of the Company (if such Person has
agreed in writing prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 11.10), (vi) any federal or state
--
regulatory authority having jurisdiction over you, (vii) the National
---
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio, or (viii) any other Person to which such delivery or
----
disclosure may be necessary or appropriate (w) to effect compliance with any
-
law, rule, regulation or order applicable to you, (x) in response to any
-
subpoena or other legal process, (y) in connection with any litigation to which
-
you are a party or (z) if an Event of Default has occurred and is continuing, to
-
the extent you may reasonably determine such delivery and disclosure to be
necessary or appropriate in the enforcement or for the protection of the rights
and remedies under your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by and to be
entitled to the benefits of this Section 11.10 as though it were a party to this
Agreement. On reasonable request by the Company in connection with the delivery
to any holder of a Note of information required to be delivered to such holder
under this Agreement or requested by such holder (other than a holder that is a
party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 11.10.
52
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchasers have caused this Agreement
to be executed and delivered by their respective officer or officers thereunto
duly authorized.
MATERIAL SCIENCES CORPORATION
By: /s/ James J. Waclawik, Sr.
--------------------------
Title: Vice President, Chief Financial Officer
and Secretary
53
<PAGE>
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: /s/ Shabnam B. Miglani
-----------------------
Title: Counsel
By: /s/ JoEllen J. Watts
---------------------
Title: Counsel
GENERAL ELECTRIC CAPITAL ASSURANCE COMPANY
By: /s/ William D. Koski
---------------------
Title: Vice President
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
By: /s/ John H. Beers
------------------
Title: Vice President
MUTUAL OF OMAHA INSURANCE COMPANY
By: /s/ Edwin H. Garrison, Jr.
---------------------------
Title: First Vice President
UNITED OF OMAHA LIFE INSURANCE COMPANY
By: /s/ Edwin H. Garrison, Jr.
--------------------------
Title: First Vice President
54
<PAGE>
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By: /s/ Julie Bock
----------------
Title: Assistant Vice President
By: /s/ Ernie P. Friesen
----------------------
Title: Assistant Vice President Investments
FARM BUREAU LIFE INSURANCE COMPANY OF MICHIGAN
By: /s/ David D. Baker
---------------------
Title: Portfolio Department Manager
FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN
By: /s/ David D. Baker
--------------------
Title: Portfolio Department Manager
KNIGHTS OF COLUMBUS
By: /s/ Robert J. Lane
--------------------
Title: Assistant Supreme Secretary
BERKSHIRE LIFE INSURANCE COMPANY
By: /s/ Ellen I. Whittaker
------------------------
Title: Senior Investment Officer
NIPPON LIFE INSURANCE COMPANY OF AMERICA,
By Its Attorney-in-Fact, PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
55
<PAGE>
By: /s/ Shabnam B. Miglani
------------------------
Title: Counsel
By: /s/ David P. Ellingson
------------------------
Title: Vice President and Associate
General Counsel
56
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Principal Mutual Life Insurance Company Series A $3,500,000
711 High Street
Des Moines, IA 50392-0800
Attention: Investment Department - Secuirities
Fax: (515) 248-2490
Tel: (515) 248-3495
Address for all communications is as above,
except notices of payment and written confirmations
of wire or inter-bank transfers, which shall be addressed to:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
Attention: Investment Accounting - Secuirities
Fax: (515) 248-2643
Tel: (515) 247-0689
All payments are to be by bank wire transfer of
immediately available funds to:
Norwest Bank Iowa, N.A.
7th & Walnut Streets
Des Moines, IA 50309
ABA # 073000228
OBI PFGSE(S) B0061410 ()
For credit to Principal Mutual Life Insurance Company
1
SCHEDULE I
----------
<PAGE>
Account No. 014752
With the following accompanying information:
Name of Company: Material Sciences Corporation
Description of Security: $5,000,000 Series A Senior Notes due May 31, 2003
Issuance Date:
Security Number: 576674 A# 2
Bond Number: 1-B-61410
due Date and Application (as among principal, premium and interest)
of the payment being made:
Taxpayer ID # 42-0127290
2
SCHEDULE I
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Principal Mutual Life Insurance Company Series A $1,000,000
711 High Street
Des Moines, IA 50392-0800
Attention: Investment Department - Secuirities
Fax: (515) 248-2490
Tel: (515) 248-3495
Address for all communications is as above,
except notices of payment and written confirmations
of wire or inter-bank transfers, which shall be addressed to:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
Attention: Investment Accounting - Secuirities
Fax: (515) 248-2643
Tel: (515) 247-0689
All payments are to be by bank wire transfer of
immediately available funds to:
Norwest Bank Iowa, N.A.
7th & Walnut Streets
Des Moines, IA 50309
ABA # 073000228
OBI PFGSE(S) B0061410 ()
For credit to Principal Mutual Life Insurance Company
3
SCHEDULE I
<PAGE>
Account No. 032395
With the following accompanying information:
Name of Company: Material Sciences Corporation
Description of Security: $5,000,000 Series A Senior Notes due May 31, 2003
Issuance Date:
Security Number: 576674 A# 2
Bond Number: 16-B-61410
due Date and Application (as among principal, premium and interest)
of the payment being made:
Taxpayer ID # 42-0127290
4
SCHEDULE I
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Nippon Life Insurance Company Series A $500,000
of America
c/o Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0800
Attention: Investment Department - Secuirities
Fax: (515) 248-2490
Tel: (515) 248-3495
Address for all communications is as above,
except notices of payment and written confirmations
of wire or inter-bank transfers, which shall be addressed to:
Nippon Life Insurance Company of America
c/o Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
Attention: Investment Accounting - Secuirities
Fax: (515) 248-2643
Tel: (515) 247-0689
All payments are to be by bank wire transfer of
immediately available funds to:
Norwest Bank Iowa, N.A.
7th & Walnut Streets
Des Moines, IA 50309
ABA # 073000228
5
SCHEDULE I
<PAGE>
OBI PFGSE(S) B0061410 ()
For credit to Nippon Life Insurance Company of America
Account No. 7051775
With the following accompanying information:
Name of Company: Material Sciences Corporation
Description of Security: $5,000,000 Series A Senior Notes due May 31, 2003
Issuance Date:
Security Number: 576674 A# 2
Bond Number: 500-B-61410
due Date and Application (as among principal, premium and interest)
of the payment being made:
Taxpayer ID # 04-250-9896
6
SCHEDULE I
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Principal Mutual Life Insurance Company Series B $8,300,000
711 High Street
Des Moines, IA 50392-0800
Attention: Investment Department - Secuirities
Fax: (515) 248-2490
Tel: (515) 248-3495
Address for all communications is as above,
except notices of payment and written confirmations
of wire or inter-bank transfers, which shall be addressed to:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
Attention: Investment Accounting - Secuirities
Fax: (515) 248-2643
Tel: (515) 247-0689
All payments are to be by bank wire transfer of
immediately available funds to:
Norwest Bank Iowa, N.A.
7th & Walnut Streets
Des Moines, IA 50309
ABA # 073000228
OBI PFGSE(S) B0061409 ()
For credit to Principal Mutual Life Insurance Company
7
SCHEDULE I
<PAGE>
Account No. 014752
With the following accompanying information:
Name of Company: Material Sciences Corporation
Description of Security: $10,000,000 Series B Senior Notes due May 31, 2010
Issuance Date:
Security Number: 576674 B* 5
Bond Number: 1-B-61409
due Date and Application (as among principal, premium and interest)
of the payment being made:
Taxpayer ID # 42-012-7290
8
SCHEDULE I
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Principal Mutual Life Insurance Company Series B $1,700,000
711 High Street
Des Moines, IA 50392-0800
Attention: Investment Department - Secuirities
Fax: (515) 248-2490
Tel: (515) 248-3495
Address for all communications is as above,
except notices of payment and written confirmations
of wire or inter-bank transfers, which shall be addressed to:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
Attention: Investment Accounting - Secuirities
Fax: (515) 248-2643
Tel: (515) 247-0689
All payments are to be by bank wire transfer of
immediately available funds to:
Norwest Bank Iowa, N.A.
7th & Walnut Streets
Des Moines, IA 50309
ABA # 073000228
OBI PFGSE(S) B0061409 ()
For credit to Principal Mutual Life Insurance Company
9
SCHEDULE I
<PAGE>
Account No. 032395
With the following accompanying information:
Name of Company: Material Sciences Corporation
Description of Security: $10,000,000 Series B Senior Notes due May 31, 2010
Issuance Date:
Security Number: 576674 B* 5
Bond Number: 16-B-61409
due Date and Application (as among principal, premium and interest)
of the payment being made:
Taxpayer ID # 42-012-7290
10
SCHEDULE I
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
General Electric Capital Assurance Company Series B $10,000,000
THE NOTE SHOULD BE REGISTERED IN THE NOMINEE NAME OF: SALKELD & CO.
ADDRESS FOR ALL NOTICES IN RESPECT OF PAYMENT:
General Electric Capital Assurance Company
c/o GE Financial Assurance
Two Union Square, 601 Union Street
Seattle, WA 98101
Attn: Investment Accounting, 14th Floor
Telephone No.: (206) 516-2871
Fax No.: (206) 516-4740
ADDRESS FOR ALL OTHER COMMUNICATIONS:
General Electric Capital Assurance Company
c/o GE Financial Assurance
Two Union Square, 601 Union Street
Seattle, WA 98101
Attn: Investment Dept., Structured Finance
Telephone No.: (206) 516-4614
Fax No.: (206) 516-4998
PHYSICAL DELIVERY OF THE NOTE:
Bankers Trust Co.
16 Wall Street
4th Floor, Window 44
11
SCHEDULE I
<PAGE>
New York, NY 10005
Acct. #97833
Attn.: George Flores (212) 618-2207
12
SCHEDULE I
<PAGE>
PAYMENTS:
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds to:
Bankers Trust Company
16 Wall Street
New York, NY 10015
ABA #021001033
Attn: 99-911-145
Acct: #97833
Ref: Material Sciences Corporation, 6.80% Series B Notes due
May 31, 2010, PPN: #576674 B* 5, identify principal or interest
Taxpayer ID #91-6027719
13
SCHEDULE I
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Phoenix Home Life Mutual Insurance Company Series B $10,000,000
c/o Phoenix Duff & Phelps Corporation
56 Prospect Street
P.O. Box 150480
Hartford, CT 06115-0480
Attention: Private Placements Division
Telecopier Number: (860) 403-5451
Address for all communications is as above,
except notices of payment and written confirmations
of wire or inter-bank transfers, which shall be addressed to:
Phoenix Home Life Mutual Insurance Company
c/o Phoenix Duff & Phelps Corporation
56 Prospect Street, P.O. Box 150480
Hartford, CT 06115-0480
Attention: Private Placements Division
Telecopier Number: (860) 403-5451
All payments are to be by bank wire transfer of
immediately available funds to:
Chase Manhattan Bank, N.A.
New York, New York
ABA #021000021
Income Processing
Account #900 9000 200
14 14
SCHEDULE I
<PAGE>
For credit to:
Phoenix Home Life Account #: G07185
OBI = (Material Sciences Corporation), PPN = (Series B: 576674 B* 5),
RATE = (6.80%), DUE = (May 31, 2010), INCLUDE COMPANY
NAME, PRINCIPAL AND INTEREST BREAKDOWN AND
PREMIUM, IF ANY.
Taxpayer ID #: 06-0493340
15
SCHEDULE I
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Mutual of Omaha Insurance Company Series B $5,000,000
4-Investment Loan Administration
Mutual of Omaha Plaza
Omaha, NE 68175-1011
Address for all communications is as above,
except notices of payment of principal and interest,
corporate actions, reorganizations and written confirmations
of wire or inter-bank transfers, which shall be addressed to:
The Chase Manhattan Bank
4 New York Plaza - 13th Floor
New York, NY 10004
Attn: Income Processing - J. Pipperato
a/c: G07096
All payments are to be by bank wire transfer of
immediately available funds to:
Chase Manhattan Bank
ABA #021000021
Private Income Processing
For credit to:
Mutual of Omaha Insurance Company
Account #900-9000200
a/c: G07096
Cusip/PPN: Series B: 576674 B* 5
16
SCHEDULE I
<PAGE>
Interest Amount:
Principal Amount:
Address for delivery of bonds:
The Chase Manhattan Bank
North America Insurance - 6th Floor
Attn: Ann Marie Mazza
3 Chase Metrotech Center
Brooklyn, NY 11245
Taxpayer ID #: 47-0246511
17
SCHEDULE I
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
United of Omaha Life Insurance Company Series B $5,000,000
4-Investment Loan Administration
Mutual of Omaha Plaza
Omaha, NE 68175-1011
Address for all communications is as above,
except notices of payment of principal and interest,
corporate actions, reorganizations and written confirmations
of wire or inter-bank transfers, which shall be addressed to:
The Chase Manhattan Bank
4 New York Plaza - 13th Floor
New York, NY 10004
Attn: Income Processing - J. Pipperato
a/c: G07097
All payments are to be by bank wire transfer of
immediately available funds to:
Chase Manhattan Bank
ABA #021000021
Private Income Processing
For credit to:
United of Omaha Life Insurance Company
Account #900-9000200
a/c: G07097
Cusip/PPN: Series B: 576674 B* 5
18
SCHEDULE I
<PAGE>
Interest Amount:
Principal Amount:
Address for delivery of bonds:
The Chase Manhattan Bank
North America Insurance - 6th Floor
Attn: Ann Marie Mazza
3 Chase Metrotech Center
Brooklyn, NY 11245
Taxpayer ID #: 47-0322111
19
SCHEDULE I
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Great-West Life & Annuity Insurance Series B $3,500,000
Company
8515 East Orchard Road
3rd Floor, Tower 2
Englewood, CO 80111
Attention: Corporate Finance Investments
- -----------------------------------------
Address for all communications is as above,
except notices of payments of principal and
interest, which shall be addressed to:
Norwest Bank Minnesota, N.A.
733 Marquette Avenue
Investors Bldg., 5th Floor
Minneapolis, Minnesota 55479-0047
Telecopier: (612) 667-3331
Attention: Income Collections
- ------------------------------
All payments are to be by bank wire transfer of
immediately available funds to:
ABA #091-000-019 NW MPLS/TRUST CLEARING
ACCT # 08-40-245 ATTN: Acct # 12468800
Special Instructions: 1) security description (PPN # 576674 B* 5)
2) allocation of payment between principal and
interest, and
20
SCHEDULE I
<PAGE>
3) confirmation of principal balance
Physical delivery of securities to:
Norwest Bank Minnesota, N.A.
733 Marquette Avenue, 5th Floor
Minneapolis, Minnesota 55479-0047
Attention: Security Clearance
- ------------------------------
Taxpayer ID # 84-0467907
21
SCHEDULE I
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Farm Bureau Life Insurance Company Series B $3,000,000
of Michigan
7373 W. Saginaw
Lansing, Michigan 48917
Address for all communications is as as follows:
Farm Bureau Life Insurance Company of Michigan
Attn: Steven R. Harkness - Investment Division
P.O. Box 30400
Lansing, Michigan 48909
overnight address:
7373 W. Saginaw
Lansing, Michigan 48917
Phone: (517) 323-6670
Fax: (517) 323-6554
- - WITH COPIES TO -
Comerica Bank Great-West Life & Annuity
Trust Operations AND Insurance Company
P.O. Box 75000 3rd Floor, Tower 2
Detroit, MI 48275-3454 8515 East Orchard Road
Englewood, Colorado 80111
Attn: Corporate Finance Investments
22
SCHEDULE I
<PAGE>
All payments are to be by bank wire transfer of
immediately available funds to:
Comerica Bank
ABA 072000096
Credit Trust Operations
Fixed Income Unit
Acct. # 21585-98530
(Security Name) (Principal ________ Interest ________)
Physical delivery of securities to:
Comerica Bank
411 West Lafayette Street
Detroit, Michigan 48226
Attention: Daniel J. Molnar - MC3462
Taxpayer ID # 38-6056370
23
SCHEDULE I
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Farm Bureau Mutual Insurance Company Series B $2,000,000
of Michigan
7373 W. Saginaw
Lansing, Michigan 48917
Address for all communications is as as follows:
Farm Bureau Life Insurance Company of Michigan
Attn: Steven R. Harkness - Investment Division
P.O. Box 30400
Lansing, Michigan 48909
overnight address:
7373 W. Saginaw
Lansing, Michigan 48917
Phone: (517) 323-6670
Fax: (517) 323-6554
- - WITH COPIES TO -
Comerica Bank Great-West Life & Annuity
Trust Operations AND Insurance Company
P.O. Box 75000 3rd Floor, Tower 2
Detroit, MI 48275-3454 8515 East Orchard Road
Englewood, Colorado 80111
Attn: Corporate Finance Investments
24
SCHEDULE I
<PAGE>
All payments are to be by bank wire transfer of
immediately available funds to:
Comerica Bank
ABA 072000096
Credit Trust Operations
Fixed Income Unit
Acct. # 21585-98530
(Security Name) (Principal ________ Interest ________)
Physical delivery of securities to:
Comerica Bank
411 West Lafayette Street
Detroit, Michigan 48226
Attention: Daniel J. Molnar - MC3462
Taxpayer ID # 38-1316179
25
SCHEDULE I
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Knights of Columbus Series B $5,000,000
One Columbus Plaza
New Haven, Connecticut 06510-3326
Attention: Investment Department
Telecopier Number: (203) 772-0037
Address for all communications is as above,
except notices with respect to payments and written
confirmation of each such payment should be addressed to:
Knights of Columbus
P.O. Box 2016
New Haven, Connecticut 06521-2016
Attention: Accounting Department
All payments are to be by bank wire transfer of
Federal or other immediately available funds (identifying
each payment as "...") to:
Bank of New York (ABA #021-000-018)
One Wall Street
New York, New York 10286
for credit to: Knights of Columbus General Account
Account #8900300825
Taxpayer ID #: 06-0416470
26
SCHEDULE I
<PAGE>
SCHEDULE I
----------
Principal Amount of Notes to Be Purchased
-----------------------------------------
Name and Address of Purchaser Principal Amount of Notes
- ----------------------------- -------------------------
Berkshire Life Insurance Company Series B $3,000,000
Attention: Securities Department
700 South Street
Pittsfield, MA 01201
Fax Number: (413) 442-9763
Phone Number: (413) 499-4321
Address for all notices and confirmations of
payments and all other communications is as above.
All payments on account of the Notes in accordance with
the provisions thereof and of this Agreement shall be
transmitted by bank wire transfer of Federal or other
immediately available funds to:
Berkshire Life Insurance Company
Account Number 002-4-020877
The Chase Manhattan Bank, N.A.
ABA #021000021
with sufficient information (including issuer, PPN number, interest rate,
maturity and whether payment is of principal, premium or interest) to identify
the source and application of such funds.
Taxpayer ID #: 04-1083480
28
SCHEDULE I
<PAGE>
ANNEX I
Subsidiaries
ANNEX I
<PAGE>
ANNEX II
Indebtedness
ANNEX II
<PAGE>
ANNEX III
Restricted Investments
ANNEX III
<PAGE>
ANNEX IV
Liens
ANNEX IV
<PAGE>
EXHIBIT A-1
-----------
MATERIAL SCIENCES CORPORATION
6.49% SERIES A SENIOR NOTE
DUE MAY 31, 2003
No. AR-___ February 27, 1998
$__________
MATERIAL SCIENCES CORPORATION, a Delaware corporation (the "Company"), for
value received, promises to pay to __________________________ or registered
assigns, on May 31, 2003, the principal amount of $____________ and to pay
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the principal amount from time to time remaining unpaid hereon at the rate of
6.49% per annum from the date hereof until maturity, payable on May 31 and
November 30 in each year, commencing May 31, 1998, and at maturity, and to pay
interest on any overdue principal and (to the extent legally enforceable), on
any overdue Make-Whole Amount and on any overdue installment of interest at a
per annum rate of 8.49% until paid. Payments of the principal of, the Make-
Whole Amount, if any, and the interest on this Note shall be made in lawful
money of the United States of America at the principal office of the Company.
This Note is issued under and pursuant to the terms and provisions of the
Note Agreement, dated as of February 15, 1998, entered into by the Company with
the Purchasers named in Schedule I thereto (the "Note Agreement"), and this Note
and any holder hereof is entitled to all of the benefits provided for by such
Note Agreement and is bound by the terms provided for by such Note Agreement or
referred to therein. The provisions of the Note Agreement are incorporated in
this Note to the same extent as if set forth at length herein.
As provided in the Note Agreement, upon surrender of this Note for
registration of transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered
1
EXHIBIT A-1
<PAGE>
holder hereof or its attorney duly authorized in writing, a new Note for a like
unpaid principal amount will be issued to, and registered in the name of, the
transferee upon the payment of the taxes or other governmental charges, if any,
that may be imposed in connection therewith. The Company may treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
This Note may be declared due prior to its expressed maturity date and
voluntary prepayments may be made hereon all in the events, on the terms and in
the manner as provided in the Note Agreement. Such prepayments include certain
optional prepayments with a Make-Whole Amount (as defined in the Note
Agreement).
Should the indebtedness represented by this Note or any part thereof be
collected in any proceeding provided for in the Note Agreement or be placed in
the hands of attorneys for collection, the Company agrees to pay, in addition to
the principal, Make-Whole Amount, if any, and interest due and payable hereon,
all costs of collecting this Note, including reasonable attorneys' fees and
expenses.
This Note and the Note Agreement are governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Illinois.
MATERIAL SCIENCES CORPORATION
By:
Its:
2
EXHIBIT A-1
<PAGE>
GUARANTY ENDORSEMENT
Payment of principal, interest and Make-Whole Amount, if any, with respect
to this Note is guaranteed pursuant to the terms of the Subsidiary Guaranty
dated February 27, 1998 of the undersigned. Subject to the terms thereof, which
are incorporated herein by reference, the undersigned guarantees the prompt
payment when due of the principal, Make-Whole Amount, if any, and interest, on
this Note.
MSC Pinole Point Steel Inc. MSC Laminates and Composites Inc.
By: By:
Title: Title:
MSC Pre Finish Metals Inc. MSC Laminates and Composites (EGV) Inc.
By: By:
Title: Title:
MSC Pre Finish Metals (EGV) Inc. MSC Walbridge Coatings Inc.
By: By:
Title: Title:
MSC Pre Finish Metals (MV) Inc. MSC Specialty Films Inc.
By: By:
Title: Title:
3
EXHIBIT A-1
<PAGE>
MSC Pre Finish Metals (MT) Inc. Solar-Gard International, Inc.
By: By:
Title: Title:
MSC Pre Finish Metals (PP) Inc.
By:
Title:
4
EXHIBIT A-1
<PAGE>
EXHIBIT A-2
-----------
MATERIAL SCIENCES CORPORATION
6.80% SERIES B SENIOR NOTE
DUE MAY 31, 2010
No. BR-___ February 27, 1998
$__________
MATERIAL SCIENCES CORPORATION, a Delaware corporation (the "Company"), for
value received, promises to pay to __________________________ or registered
assigns, on May 31, 2010, the principal amount of $____________ and to pay
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the principal amount from time to time remaining unpaid hereon at the rate of
6.80% per annum from the date hereof until maturity, payable on May 31 and
November 30 in each year, commencing May 31, 1998, and at maturity, and to pay
interest on any overdue principal and (to the extent legally enforceable), on
any overdue Make-Whole Amount and on any overdue installment of interest at a
per annum rate of 8.80% until paid. Payments of the principal of, the Make-
Whole Amount, if any, and the interest on this Note shall be made in lawful
money of the United States of America at the principal office of the Company.
This Note is issued under and pursuant to the terms and provisions of the
Note Agreement, dated as of February 15, 1998, entered into by the Company with
the Purchasers named in Schedule I thereto (the "Note Agreement"), and this Note
and any holder hereof is entitled to all of the benefits provided for by such
Note Agreement and is bound by the terms provided for by such Note Agreement or
referred to therein. The provisions of the Note Agreement are incorporated in
this Note to the same extent as if set forth at length herein.
As provided in the Note Agreement, upon surrender of this Note for
registration of transfer, duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered
1
EXHIBIT A-2
<PAGE>
holder hereof or its attorney duly authorized in writing, a new Note for a like
unpaid principal amount will be issued to, and registered in the name of, the
transferee upon the payment of the taxes or other governmental charges, if any,
that may be imposed in connection therewith. The Company may treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
This Note may be declared due prior to its expressed maturity date and
voluntary prepayments may be made hereon all in the events, on the terms and in
the manner as provided in the Note Agreement. Such prepayments include certain
required prepayments on May 31 of each year commencing May 31, 2002 through May
31, 2009, inclusive, with the remaining principal payable on May 31 2010, and
certain optional prepayments with a Make-Whole Amount (as defined in the Note
Agreement).
Should the indebtedness represented by this Note or any part thereof be
collected in any proceeding provided for in the Note Agreement or be placed in
the hands of attorneys for collection, the Company agrees to pay, in addition to
the principal, Make-Whole Amount, if any, and interest due and payable hereon,
all costs of collecting this Note, including reasonable attorneys' fees and
expenses.
This Note and the Note Agreement are governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Illinois.
MATERIAL SCIENCES CORPORATION
By:
Its:
2
EXHIBIT A-2
<PAGE>
GUARANTY ENDORSEMENT
Payment of principal, interest and Make-Whole Amount, if any, with respect
to this Note is guaranteed pursuant to the terms of the Subsidiary Guaranty
dated February 27, 1998 of the undersigned. Subject to the terms thereof, which
are incorporated herein by reference, the undersigned guarantees the prompt
payment when due of the principal, Make-Whole Amount, if any, and interest, on
this Note.
MSC Pinole Point Steel Inc. MSC Laminates and Composites Inc.
By: By:
Title: Title:
MSC Pre Finish Metals Inc. MSC Laminates and Composites (EGV) Inc.
By: By:
Title: Title:
MSC Pre Finish Metals (EGV) Inc. MSC Walbridge Coatings Inc.
By: By:
Title: Title:
3
EXHIBIT A-2
<PAGE>
MSC Pre Finish Metals (MV) Inc. MSC Specialty Films Inc.
By: By:
Title: Title:
MSC Pre Finish Metals (MT) Inc. Solar-Gard International, Inc.
By: By:
Title: Title:
MSC Pre Finish Metals (PP) Inc.
By:
Title:
4
EXHIBIT A-2
<PAGE>
EXHIBIT B
---------
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY dated February 27, 1998 (the "Guaranty") is made,
jointly and severally, by __________________, _________________ and
____________, and those additional entities that hereafter become parties hereto
by executing counterpart signature pages hereof (each a "Guarantor" and
collectively the "Guarantors") in favor of (i) the Purchasers named in Schedule
I to the Note Agreement dated as of February 15, 1998 (as amended or modified
and in effect from time to time, referred to herein as the "Note Agreement")
between Material Sciences Corporation, a Delaware corporation (the "Company"),
and the Purchasers and (ii) each other holder of the Company's 6.49% Series A
Senior Notes due May 31, 2003 and 6.80% Series B Senior Notes due May 31, 2010
(the "Notes") from time to time (collectively, such holders are hereinafter
referred to as the "Holders"). All capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to such terms in the
Note Agreement.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, as an inducement to, and as part of the consideration for, their
purchase of the Notes, the Purchasers are to receive, in accordance with the
terms of the Note Agreement, a guarantee of the Company's obligations under the
Note Agreement and the Notes from each of the Guarantors, each of which is a
Subsidiary of the Company;
WHEREAS, certain of the proceeds of the Notes have been and will be
advanced to or for the benefit of the Guarantors, and thus, all unpaid principal
of and accrued and unpaid interest on the Notes and all other obligations of the
Company to the Holders now existing or hereafter arising under the Note
Agreement were and continue to be incurred for and have inured and will continue
to inure to the benefit of the Guarantors (which benefits are hereby
acknowledged); and
WHEREAS, in consideration of the benefits that inure to the Guarantors, the
Guarantors desire to guarantee the due and punctual payment of all Guaranteed
Debt (as hereinafter defined);
1
EXHIBIT B
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
the Guarantors, jointly and severally, covenant and agree as follows:
1. Guaranty. Each Guarantor, jointly and severally, irrevocably and
--------
unconditionally guarantees, subject to the limitations set forth in Section 7,
the full and prompt payment when due (whether at stated maturity, upon
acceleration or otherwise) of all unpaid principal of, accrued and unpaid
interest and Make-Whole Amount, if any, on the Notes, all accrued and unpaid
fees and all other obligations of the Company to the Holders now existing or
hereafter incurred under or arising out of or in connection with the Notes or
the Note Agreement, and the performance of the Notes and the Note Agreement (all
such principal, interest, Make-Whole Amount, fees, obligations and liabilities
being collectively referred to herein as the "Guaranteed Debt"), whether
according to the present terms of the Guaranteed Debt or any change or changes
in the terms, covenants and conditions of any of the Guaranteed Debt, now or at
any time hereafter made or granted, or any earlier or accelerated date or dates
for payment in the Guaranteed Debt. It is understood that this Guaranty is a
continuing guarantee of the payment of the indebtedness represented by the
Guaranteed Debt and shall remain in full force and effect until the indefeasible
payment in full of the Guaranteed Debt or, with respect to any Guarantor, or the
occurrence of a Release Event (as defined below). Each Guarantor agrees that
all references in this Guaranty to Guaranteed Debt of the Company shall include
any successor or assignee of the Company so long as this Guaranty remains in
effect. For purposes of this Guaranty, a "Release Event" shall mean the date on
which the evidence is delivered to a Holder that a Guarantor has been released
in full from its guaranty in favor of the Company's senior bank lenders.
2. Waiver. Each Guarantor waives notice of the acceptance of this
------
Guaranty and of the occurrence of any and all of the events described in Section
3. Each Guarantor further waives presentment, protest, notice, demand or action
on delinquency in respect of the Guaranteed Debt or any part thereof. Each
Guarantor agrees that the time or place of payment of the Guaranteed Debt may be
changed or extended, in whole or in part, to a time certain or otherwise, and
may be renewed or accelerated, in whole or in part; that the Company may be
granted indulgences generally; that any of the provisions of the Notes or the
Note Agreement may be modified, amended or waived; that any party liable for
the payment thereof may be granted indulgences or released; and that any other
party liable for the payment of the Guaranteed Debt or liable upon any security
therefor may be released, in whole or in part, at, before and/or after the
stated, extended or accelerated maturity of the Guaranteed Debt, all without
notice to or further assent
2
EXHIBIT B
<PAGE>
by any Guarantor, which shall remain bound thereon, notwithstanding any such
exchange, compromise, surrender, extension, renewal, acceleration, modification,
indulgence or release.
3. Certain Rights of Holders. The validity and enforceability of this
-------------------------
Guaranty against each Guarantor shall not be impaired or affected by any of the
following, whether occurring before or after receipt by the Holders of any
notice of termination of this Guaranty: (a) any extension, modification,
continuation or renewal of, or indulgence with respect to, or substitutions for,
the Guaranteed Debt or any part thereof or any agreement relating thereto (other
than any agreement between the Purchaser or any other Holder and one or more
Guarantors specifically modifying or amending the terms of this Guaranty in
accordance with Section 9) at any time; (b) any failure or omission to enforce
any right, power or remedy with respect to the Guaranteed Debt or any part
thereof or any agreement relating thereto; (c) any waiver of any right, power or
remedy or of any default with respect to the Guaranteed Debt or any part thereof
or any agreement relating thereto; (d) any release, surrender, compromise,
settlement, waiver, subordination or modification, with or without
consideration, of any other guaranties with respect to the Guaranteed Debt or
any part thereof, or any other obligation of any Person with respect to the
Guaranteed Debt or any part thereof; (e) the enforceability or validity of the
Guaranteed Debt or any part thereof or the genuineness, enforceability or
validity of any agreement relating thereto; (f) the application of payments
received from any source to the payment of indebtedness of the Company or any
Subsidiary other than the Guaranteed Debt, any part thereof or amounts which are
not covered by this Guaranty even though a Holder might lawfully have elected to
apply such payments to any part or all of the Guaranteed Debt or to amounts
which are not covered by this Guaranty; or (g) any other circumstances which
otherwise under the laws of any jurisdiction constitute a legal or equitable
discharge of a surety or a guarantor or a bar (in the nature of a moratorium or
otherwise) to the enforcement of the rights of a Holder against the Company, all
whether or not any Guarantor shall have had notice or knowledge of any act or
omission referred to in the foregoing clauses (a) through (g) of this paragraph.
Each Guarantor agrees that such Guarantor's obligation to make payment in
accordance with the terms of this Guaranty shall not be impaired, modified,
changed, released or limited in any manner whatsoever in the event any portion
of the Guaranteed Debt is invalid or unenforceable against the Company, or by
any impairment, modification, change, release or limitations of the liability of
the Company or its estate in bankruptcy resulting from the operation of any
present or future provision of the Federal Bankruptcy Code or other similar
federal or state statute, or from the decision of any court.
3
EXHIBIT B
<PAGE>
4. Absolute Guaranty. The obligations of each Guarantor under this
-----------------
Guaranty are joint and several and are absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, without limitation,
(i) any action or inaction by a Holder or any other circumstance contemplated in
Section 3; or (ii) the existence of any other guaranties of the Guaranteed Debt,
whether or not such other guaranties have been acted upon in any way.
5. Primary Liability of Guarantors. This Guaranty is a primary
-------------------------------
obligation of each Guarantor. Each Guarantor agrees that this Guaranty may be
enforced by the Holders, or any of them, and each Guarantor hereby waives the
right to require the Holders (or any of them) to proceed against the Company or
any other person (including a co-guarantor) or to require the Holders (or any of
them) to pursue any other remedy or enforce any other right. Each Guarantor
further agrees that nothing contained herein shall prevent the Holders, or any
of them, from suing on the Notes or the Note Agreement or from exercising any
other rights available to it under the Notes or the Note Agreement and the
exercise of any of the aforesaid rights and the completion of any foreclosure
proceedings shall not constitute a discharge of any of the Guarantor's
obligations hereunder until the indefeasible payment in full of the Guaranteed
Debt or, with respect to any Guarantor, the occurrence of a Release Event.
6. Continuing Guaranty, etc. This Guaranty shall continue in full force
-------------------------
and effect until the Guaranteed Debt is indefeasibly paid in full,
notwithstanding any extensions, modifications, renewals or indulgences with
respect to, or substitutions for, the Guaranteed Debt. Notwithstanding the
foregoing, this Guaranty shall continue to be effective, or be reinstated, as
the case may be, if at any time payment, or any part thereof, of any of the
Guaranteed Debt is rescinded or must otherwise be restored or returned by any
Holder upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Company, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Company or any substantial part of its property, or otherwise, all as though
such payments had not been made. No failure or delay on the part of any Holder
in exercising any right, power or privilege hereunder and no course of dealing
between any Guarantor or any Holder shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights, powers and remedies herein expressly
provided are cumulative and not exclusive of any rights, powers or remedies
which any Holder would otherwise have. No notice to or demand on any Guarantor
in any case shall entitle any Guarantor to any other or future notice or demand
in similar or other circumstances or constitute a waiver of the rights of any
4
EXHIBIT B
<PAGE>
Holder to act in any circumstances without notice or demand. Credit may be
granted or continued from time to time by the Holders to the Company without
notice to or authorization from any Guarantor regardless of the Company's
financial or other condition at the time of any such grant or continuation.
7. Maximum Liability of Guarantor. Anything herein or in any other
------------------------------
document, instrument or agreement executed and delivered in connection herewith
to the contrary notwithstanding, the maximum liability of a Guarantor hereunder
as at any date of determination thereof shall in no event exceed such
Guarantor's Maximum Guaranteed Amount (as defined below) as determined as of the
date of the execution and delivery of this Guaranty (unless a later date shall
be deemed by a court of competent jurisdiction to be applicable to the
determination of the solvency of such Guarantor for purposes of any applicable
federal or state fraudulent transfer, fraudulent conveyance or similar law
governing debtors and the enforceability of debtors' obligations ("Applicable
Insolvency Law"), in which event such other date shall apply), increased by any
increase (but not decreased by any subsequent decrease) in such Guarantor's
Maximum Guaranteed Amount, unless the inclusion of any such increase is contrary
to any Applicable Insolvency Law. For the purpose of this paragraph, "Maximum
Guaranteed Amount" shall mean the greater of (i) the aggregate amount of the
Guaranteed Debt the proceeds of which are used to make a Valuable Transfer (as
defined below) to such Guarantor and (ii) ninety-five percent (95%) of the
Adjusted Net Worth (as defined below) of such Guarantor, provided that in no
event shall the amount specified in this clause (ii) be an amount that would
result in such Guarantor having unreasonably small capital, as such term is used
in any Applicable Insolvency Law. For the purpose of this paragraph, "Valuable
Transfer" shall mean the amount of (i) all loans, advances or capital
contributions made to the Guarantor with proceeds of the Guaranteed Debt; (ii)
all debt securities or other obligations of the Guarantor acquired from the
Guarantor or retired by the Guarantor with proceeds of the Guaranteed Debt;
(iii) the fair market value of all property acquired with proceeds of the
Guaranteed Debt and transferred, absolutely and not as collateral, to the
Guarantor; (iv) all equity securities of the Guarantor acquired from the
Guarantor with proceeds of the Guaranteed Debt; and (v) the value of any
quantifiable economic benefits not included in clauses (i) through (iv), above,
but includable in accordance with Applicable Insolvency Law, accruing to the
Guarantor as a result of the Guaranteed Debt. For purposes of this paragraph,
"Adjusted Net Worth" shall mean the excess of (i) the amount of the "present
fair salable value" of the assets of the Guarantor as of the date of
determination, over (ii) the amount of all "liabilities of such Guarantor,
contingent or otherwise", as of the date of determination, as such quoted terms
are determined in accordance with Applicable Insolvency Law. In determining the
Adjusted Net Worth of the Guarantor for purposes of calculating the
5
EXHIBIT B
<PAGE>
Maximum Guaranteed Amount for the Guarantor, the liabilities of the Guarantor to
be used in such determination pursuant to clause (ii) of the preceding sentence
shall in any event include any amounts guaranteed by the Guarantor pursuant to
clause (i) of the definition of Maximum Guaranteed Amount.
8. Successors; Assigns. This Guaranty shall be binding upon each
-------------------
Guarantor and its respective successors and permitted assigns and shall inure to
the benefit of the Purchaser, each other Holder and their respective successors
and assigns so long as such successor and assign holds a Note. Each Guarantor
expressly waives notice of transfer or assignment of the Guaranteed Debt, or any
part thereof, or of the rights of any Holder hereunder. Failure to give notice
will not affect the liabilities of each Guarantor hereunder.
9. Amendment; Waiver. This Guaranty may be amended only by an instrument
-----------------
in writing executed jointly by the Guarantors and a majority in aggregate
principal amount of outstanding Notes.
10. Note Agreement. Each Guarantor acknowledges that an executed (or
--------------
conformed) copy of the Note Agreement has been made available to its principal
executive officers and such officers are familiar with the contents thereof.
11. Setoff. In addition to, and without limitation of, any rights of the
------
Holders under applicable law, any indebtedness from such Holders to any
Guarantor (including all account balances, whether provisional or final and
whether or not collected or available) may be offset, upon the occurrence and
continuance of a Default or Event of Default, and applied toward the payment of
the obligations owing to such Holders, whether or not the Guaranteed Debt, or
any part thereof, shall then be due.
12. Notices. All notices and other communications hereunder shall be made
-------
in the manner and with the effect provided in Section 11.2 of the Note
Agreement, if to any Holder, at the address for notices specified in the Note
Agreement, and, if to any Guarantor, to the address set forth below:
c/o Material Sciences Corporation
2200 East Pratt Boulevard
Elk Grove Village, IL 60007
Attention: Chief Financial Officer
6
EXHIBIT B
<PAGE>
13. Choice of Law. This Guaranty shall be construed in accordance with
-------------
the internal laws (and not the law of conflicts) of the State of Illinois.
14. Expenses; Indemnity. In addition to its Maximum Guaranteed Amount,
-------------------
each Guarantor agrees to reimburse (to the extent the Holder is not so
reimbursed by the Company or any other Guarantor) (i) each Holder for any costs
and out-of-pocket expenses (including reasonable attorneys' fees and reasonable
time charges of attorneys for such Holder, which attorneys may be employees of
such Holder) paid or incurred by such Holder in connection with any amendment
and modification of this Guaranty and (ii) each Holder for any costs and out-of-
pocket expenses (including attorneys' fees and time charges of attorneys for
such Holder, which attorneys may be employees of such Holder) paid or incurred
by such Holder in connection with the collection and enforcement of this
Guaranty. Each Guarantor further agrees to indemnify each Holder, and its
directors, officers and employees, against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all expenses of litigation or preparation therefor whether or not such Holder is
a party thereto) which it may pay or incur arising out of or relating to this
Guaranty, provided, however, that such Holder, and its directors, officers or
employees, shall not have a right to be indemnified or held harmless hereunder
for its own gross negligence or willful misconduct. The obligations of the
Guarantors under this Section 14 shall survive the termination of this Guaranty.
15. Submission to Jurisdiction. Each Guarantor hereby irrevocably submits
--------------------------
to the jurisdiction of the courts of the State of Illinois and of the courts of
the United States of America having jurisdiction in the State of Illinois for
the purpose of any legal action or proceeding in any such court with respect to,
or arising out of, this Guaranty, the Note Agreement or the Notes. The
Guarantors designate and appoint CT Corporation System, Chicago, Illinois as
their lawful agent in the State of Illinois upon which may be served and which
may accept and acknowledge, for and on behalf of each Guarantor all process in
any action, suit or proceedings that may be brought against any Guarantor in any
of the courts referred to in this Section 15 and agrees that such service of
process, or the acceptance or acknowledgment thereof by said agent, shall be
valid, effective and binding in every respect, provided, however, that if said
agency shall cease for any reason whatsoever, each Guarantor designates and
appoints, without power or revocation, the Secretary of State of the State of
Illinois to serve as its agent for service of process. If the Purchaser or any
other holder of any Note shall cause process to be served upon any Guarantor by
being served upon such agent, a copy of such process shall also be mailed to
such Guarantor
7
EXHIBIT B
<PAGE>
by United States registered mail, first class postage prepaid, at such
Guarantor's address set forth in Section 12.
16. Entire Agreement; Severability of Provisions. This Guaranty
--------------------------------------------
constitutes the entire agreement of the Guarantors with the Purchaser with
respect to the subject matter hereof and supersedes all prior agreements and
understandings relating to the subject matter hereof. Any provision in this
Guaranty that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of this Guaranty are declared to be
severable.
17. Captions. Captions are for reference only and in no way limit the
--------
terms of the Guaranty.
18. Counterparts. This Guaranty may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument. The failure
of any Guarantor to execute a counterpart hereof shall not affect or impair the
validity or enforceability of this Guaranty against any Guarantor executing this
Guaranty.
19. Severability of Provisions. Any provision in this Guaranty that is
--------------------------
held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as
to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of this Guaranty are declared to be severable.
8
EXHIBIT B
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed
and delivered as of the date first above written.
MSC Pinole Point Steel Inc.
MSC Pre Finish Metals Inc.
MSC Pre Finish Metals (EGV) Inc.
MSC Pre Finish Metals (MV) Inc.
MSC Pre Finish Metals (MT) Inc.
MSC Pre Finish Metals (PP) Inc.
MSC Laminates and Composites Inc.
MSC Laminates and Composites (EGV) Inc.
MSC Walbridge Coatings Inc.
MSC Specialty Films Inc.
Solar-Gard International, Inc.
By: /s/ James J. Waclawik, Sr.
---------------------------
Title: Vice President, Chief Financial Officer
and Secretary
Signing on behalf of each of the foregoing
Guarantors
9
EXHIBIT B
<PAGE>
EXHIBIT C
---------
LEGAL OPINIONS
The opinion of Gardner, Carton & Douglas, special counsel for the
Purchasers, shall be to the effect that:
1. The Company is a corporation organized and validly existing in good
standing under the laws of the State of Delaware, with all requisite corporate
power and authority to enter into the Agreement and to issue and sell the Notes.
2. The Agreement and the Notes have been duly authorized by proper
corporate action on the part of the Company, have been duly executed and
delivered by an authorized officer of the Company, and constitute the legal,
valid and binding agreements of the Company, enforceable in accordance with
their terms, except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of
general application relating to or affecting the enforcement of the rights of
creditors or by equitable principles, regardless of whether enforcement is
sought in a proceeding in equity or at law.
3. The Subsidiary Guaranty has been duly authorized by proper corporate
action on the part of each Subsidiary Guarantor, has been duly executed and
delivered by an authorized officer of each Subsidiary Guarantor, and constitutes
the legal, valid and binding obligation of each Subsidiary Guarantor,
enforceable in accordance with its terms, except to the extent the enforcement
of the Subsidiary Guaranty may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application relating to or
affecting the enforcement of the rights of creditors or by equitable principles,
regardless of whether enforcement is sought in a proceeding in equity or at law.
4. Based upon the representations set forth in the Agreement, the
offering, sale and delivery of the Notes and the issuance and delivery of the
Subsidiary Guaranty do not require the registration of the Notes or the
Subsidiary Guaranty under the Securities Act of 1933, as amended, nor the
qualification of an indenture under the Trust Indenture Act of 1939, as amended.
1
EXHIBIT C
<PAGE>
5. The issuance and sale of the Notes, the execution and delivery of the
Agreement and compliance with the terms and provisions of the Notes and the
Agreement will not conflict with or result in any breach of any of the
provisions of the Certificate of Incorporation or By-Laws of the Company.
6. The execution, delivery and performance of the Subsidiary Guaranty
will not violate any provisions of the Certificates of Incorporation or By-Laws
of the Subsidiary Guarantors.
7. No approval, consent or withholding of objection on the part of, or
filing, registration or qualification with, any governmental body, Federal or
state, is necessary in connection with the execution and delivery of the Note
Agreement or the Notes.
The opinion of Gardner, Carton & Douglas also shall state that the legal opinion
of Kirkland & Ellis, counsel for the Company, delivered to you pursuant to the
Agreement, is satisfactory in form and scope to Gardner, Carton & Douglas, and,
in its opinion, the Purchasers and it are justified in relying thereon and shall
cover such other matters relating to the sale of the Notes and the execution and
delivery of the Agreement as the Purchasers may reasonably request.
2
EXHIBIT C
<PAGE>
EXHIBIT 4(E)
FIRST AMENDMENT TO NOTE AGREEMENT
---------------------------------
Reference is hereby made to the Note Agreement dated as of February 15,
1997, as amended pursuant to a Waiver dated as of April 29, 1997 (together, the
"Original Agreement"), and as amended hereby (the "Agreement"), among Material
Sciences Corporation (the "Company"), Principal Mutual Life Insurance Company
("Principal"), Great-West Life & Annuity Insurance Company ("GWLA"), The Great-
West Life Assurance Company ("GWLAC"), Nationwide Life Insurance Company
("Nationwide"), Nationwide Life and Annuity Insurance Company ("NLAIC") and West
Coast Life Insurance Company (Principal, GWLA, GWLAC, Nationwide NLAIC and West
Coast Life together, the "Purchasers"). This First Amendment to the Original
Agreement is hereinafter referred to as the "First Amendment."
WHEREAS, the Company has requested that the Purchasers agree to certain
amendments to the Original Agreement; and
WHEREAS, the Purchasers have agreed to such amendments in consideration of
certain of the provisions set forth herein;
IT IS THEREFORE AGREED THAT:
1. Definitions.
-----------
(a) All defined terms used herein shall have the meanings assigned to such
terms in the Original Agreement except as noted herein.
(b) Section 5.1 of the Original Agreement shall be amended by adding
thereto the following definitions:
Amendment Request - That Amendment Request of the Company dated
December, 1997 and provided to the Purchasers.
Colorstrip Acquisition - The acquisition by the Company or a
Subsidiary of substantially all of the assets of Colorstrip, Inc., as
described in the Amendment Request.
Consolidated Adjusted Net Income - Without duplication, consolidated
net income and net losses of the Company and its Restricted Subsidiaries,
as defined according to GAAP, after excluding the sum of (i) any net loss
or any undistributed net income of any Subsidiary in which the Company has
an ownership interest other than a Restricted Subsidiary; (ii) any net loss
or any undistributed net income of any Subsidiary prior to the date it
became a Restricted Subsidiary; (iii) any gain or net loss (net of any tax
effect) resulting from the sale of any capital assets other than in the
ordinary course of business;
____________________________
/1/ Nationwide is the owner of the Notes that were originally to be issued to
West Coast.
<PAGE>
(iv) extraordinary gains or losses; (v) gains resulting from the
write-up of assets; (vi) any earnings of any Subsidiary unavailable
for payment to the Company; (vii) proceeds of any insurance policy
(other than business interruption and similar coverage); and (viii)
reversal of any contingency reserves (excluding reserves established
in the normal course of business, such as allowances for uncollectible
accounts receivable and warranty reserves) not created during any
applicable period.
Consolidated Adjusted Net Income Available for Fixed Charges -The
sum of (i) Consolidated Adjusted Net Income, (ii) income tax expense,
as defined according to GAAP, (iii) depreciation and amortization
expense, as defined according to GAAP and (iv) Fixed Charges.
Fixed Charges - The sum of (i) interest expense and (ii)
operating lease rental expense, both as defined according to GAAP.
Qualified Public Offering - An underwritten public offering (or
series of offerings) of capital stock of the Company in which the
Company shall receive (or in the aggregate receive) net cash proceeds
equaling not less than $20,000,000, and after giving effect thereto
(including the application of proceeds therefrom) (i) the ratio of
Consolidated Senior Debt to Consolidated Adjusted Total Capitalization
shall not exceed 55% and (ii) the ratio of Total Indebtedness to
Consolidated Adjusted Total Capitalization shall not exceed 60%.
2. Payment of Amendment Fee.
------------------------
Upon execution of this First Amendment, the Company shall pay to each
Noteholder an amendment fee equal to each Noteholder's pro rata share (based on
the unpaid principal amount of the Notes then outstanding) of an amount equal to
.25% multiplied by the aggregate principal amount of the Notes outstanding.
3. Amendments.
----------
(a) The Original Agreement is amended by deleting therefrom Section 7.1
and inserting in lieu thereof the following:
"SECTION 7.1 CONSOLIDATED ADJUSTED NET WORTH. The Company shall
-------------------------------
not permit at any time its Consolidated Adjusted Net Worth to be less than
the sum of (i) $105,000,000, (ii) the net cash proceeds of a Qualified
Public Offering, and (iii) until such time as the ratio of Total
Indebtedness to Consolidated Adjusted Total Capitalization is less than
45%, as measured on the last day of two consecutive fiscal quarters elapsed
since the closing date of the Colorstrip Acquisition, 40% of Consolidated
Adjusted Net Income for each semiannual period of the Company commencing
after August 31, 1997, as measured as of the last day of each such fiscal
semiannual period. If Consolidated
2
<PAGE>
Adjusted Net Income for any semiannual fiscal period is a deficit,
such deficit shall not reduce the amount of Consolidated Adjusted Net
Worth required to be maintained pursuant to this covenant."
(b) The Original Agreement is amended by deleting therefrom Section
7.2 and inserting in lieu thereof the following:
"SECTION 7.2 CONSOLIDATED SENIOR DEBT. The Company shall not at
------------------------
any time permit the ratio of Consolidated Senior Debt to Consolidated
Adjusted Total Capitalization ("Senior Leverage Ratio") to exceed, as
measured on the last day of each fiscal quarter, (x) 60.0% for the
period from the closing date of the Colorstrip Acquisition through
February 28, 1999, (y) 57.5% for the period from March 1, 1999 to
February 29, 2000, and (z) 55.0% thereafter, provided that, if at any
time the Company shall complete a Qualified Public Offering,
thereafter the Senior Leverage Ratio shall not exceed 55%, as measured
on the last day of each fiscal quarter."
(c) The Original Agreement is amended by deleting therefrom Section
7.3 and inserting in lieu thereof the following:
"SECTION 7.3 TOTAL INDEBTEDNESS. The Company shall not permit at
------------------
any time the ratio of Total Indebtedness to Consolidated Adjusted
Total Capitalization ("Total Leverage Ratio") to exceed, as measured
on the last day of each fiscal quarter, (x) 65.0% for the period from
the closing date of the Colorstrip Acquisition through February 28,
1999, (y) 62.5% for the period from March 1, 1999 to February 29,
2000, and (z) 60.0% thereafter; provided that, if at any time the
Company shall complete a Qualified Public Offering, thereafter, the
Total Leverage Ratio shall not exceed 60%, as measured on the last day
of each fiscal quarter."
(d) The Original Agreement is amended by adding thereto the following
new Section 7.12:
"SECTION 7.12 FIXED CHARGES COVERAGE. Until such time that ratio
----------------------
of Total Indebtedness to Consolidated Adjusted Total Capitalization is
less than 45%, as measured on the last day of two consecutive fiscal
quarters elapsed since the date of closing of the Colorstrip
Acquisition, the Company shall maintain the ratio of Consolidated
Adjusted Net Income Available For Fixed Charges to Fixed Charges as
measured on the last day of any fiscal year at not less than 2.00 to 1
for the period of the four consecutive fiscal quarters ending on such
date of determination."
4. Representations and Warranties.
------------------------------
(a) In order to induce the Purchasers to enter into this First Amendment,
the Company confirms that (i) except as otherwise set forth in the Schedules
attached hereto, each of the
-3-
<PAGE>
representations and warranties set forth in the Original Agreement is true and
correct in all material respects as of the date hereof, except that to the
extent any such representation or warranty is stated to relate solely to an
earlier date, the Company confirms that such representation or warranty was true
and correct in all material respects as of such earlier date and (ii) no Default
or Event of Default (which has not been cured pursuant to amendments made
hereunder) has occurred and is continuing.
(b) The Company represents and warrants that it has the requisite
corporate power and authority to enter into this First Amendment and to
otherwise carry out the transactions contemplated by this First Amendment.
(c) The Company represents and warrants that this First Amendment has
been duly authorized by all necessary corporate action on the part of the
Company and that this First Amendment has been executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that enforcement hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
relating to or affecting the enforcement of the rights of creditors or by
equitable principles regardless of whether enforcement is sought in equity or at
law.
(d) Neither the Amendment Request nor any other written statement or
document furnished by or on behalf of the Company in connection with this First
Amendment, taken together, contain any untrue statement of a material fact or
omit a material fact necessary to make the statements contained therein, in
light of the circumstances under which made, not misleading. The financial
projections contained in the Amendment Request are forward-looking statements
based on estimates and assumptions that are inherently uncertain and, though
considered reasonable by the Company, are subject to significant business and
economic and competitive uncertainties and contingencies, all of which are
difficult to predict and many of which are beyond the control of the Company.
Accordingly, there can be no assurances that the forecasted results will be
realized or that actual results will not be significantly higher or lower than
forecasted.
(e) The execution, delivery and performance by the Company of this
First Amendment will not violate any provision of any law, rule, regulation or
ordinance or any order, judgment, decree or ruling of any court, arbitrator,
governmental authority or agency applicable to the Company and will not result
in any breach of any of the provisions of, or constitute a default under, or
result in the creation of any Lien on any property of the Company under the
provisions
4
<PAGE>
of, any charter document, by-law, loan, agreement or any other material
agreement or material instrument to which it is a party or by which it or its
property may be bound or affected.
5. Counterparts.
------------
This First Amendment may be executed by the parties hereto
individually, or in any combination of the parties hereto in several
counterparts, all of which taken together shall constitute one and the same
First Amendment.
6. Conditions to Effectiveness.
---------------------------
The effectiveness of the Purchasers' agreement to this First Amendment
is subject to the satisfaction on or prior to the date hereof of each of the
following conditions:
(a) Delivery to the Purchasers of each of the following documents:
(i) copies of this First Amendment executed by the Company;
and
(ii) payment to each Purchaser of the Amendment fee
described in Section 2 hereof.
(b) payment of fees and expenses of counsel to the Purchaser.
7. Ratification and Acknowledgment.
-------------------------------
All of the representations, warranties, provisions, covenants, terms
and conditions of the Original Agreement not amended herein shall remain
unaltered and in full force and effect. The Original Agreement, as amended
hereby, is in all respects agreed to, ratified and confirmed by the Company. The
Company acknowledges and agrees that the amendments granted herein shall not be
construed as establishing a course of conduct on the part of the Purchasers upon
which the Company may rely at any time in the future.
8. Reference to and Effect on the Agreement.
----------------------------------------
Upon the effectiveness of this First Amendment, each reference in the
Original Agreement and in other documents describing or referencing the Original
Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like
import referring to the Original Agreement, shall mean and be a reference to the
Original Agreement, as amended hereby.
-5-
<PAGE>
Dated as of this _______ day of January, 1998.
MATERIAL SCIENCES CORPORATION
By:________________________________________
Its:
6
<PAGE>
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: _____________________________
Title:
By: _____________________________
Title:
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
By: _____________________________
Title:
By: _____________________________
Title:
THE GREAT-WEST LIFE ASSURANCE COMPANY
By: _____________________________
Title:
By: _____________________________
Title:
NATIONWIDE LIFE INSURANCE COMPANY
By: ______________________________
Title:
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
By: ______________________________
Title:
-7-
<PAGE>
EXHIBIT 4(F)
SECOND AMENDMENT TO NOTE AGREEMENT
----------------------------------
Reference is hereby made to the Note Agreement dated as of February 15,
1997, as amended pursuant to a Waiver dated as of April 29, 1997 and a First
Amendment to Note Agreement dated January 23, 1998 (together, the "Original
Agreement"), and as amended hereby (the "Agreement"), among Material Sciences
Corporation (the "Company"), Principal Mutual Life Insurance Company
("Principal"), Great-West Life & Annuity Insurance Company ("GWLA"), The Great-
West Life Assurance Company ("GWLAC"), Nationwide Life Insurance Company
("Nationwide"), Nationwide Life and Annuity Insurance Company ("NLAIC") and West
Coast Life Insurance Company (Principal, GWLA, GWLAC, Nationwide NLAIC and West
Coast Life together, the "Purchasers"). This Second Amendment to the Original
Agreement is hereinafter referred to as the "Second Amendment."
WHEREAS, the Company intends to issue $5,000,000 aggregate principal amount
Series A Senior Notes due May 31, 2003 and $56,600,000 aggregate principal
amount Series B Senior Notes, due May 31, 2010 (collectively, the "1998 Notes");
and
WHEREAS, in connection with the issuance of the 1998 Notes, the Company and
the Purchasers have negotiated certain covenants which they wish to incorporate
into the Original Agreement;
IT IS THEREFORE AGREED THAT:
1. Definitions.
-----------
(a) All defined terms used herein shall have the meanings assigned to such
terms in the Original Agreement except as noted herein.
(b) Section 5.1 of the Original Agreement shall be amended by adding
thereto the following definition:
Permitted Guaranties - (i) Guaranties of the Notes, (ii) Guaranties of the
Company's Series A and Series B Notes dated February 27, 1998, (iii) Guaranties
in favor of the Company's bank lenders and (iv) Guaranties of other Indebtedness
with respect to which the Company is the primary obligor, provided that, with
respect to clauses (iii) and (iv), the requirements of Section 6.11 are met.
2. Amendments.
----------
(a) The Original Agreement is amended by deleting therefrom paragraph
(l) of Section 7.4 and inserting in lieu thereof the following:
________________________
/1/ Nationwide is the owner of the Notes that were originally to be issued to
West Coast.
<PAGE>
"(l) Liens not permitted by paragraphs (a) through (k)
above to secure Indebtedness; provided that at the time of
incurrence of such Indebtedness, (i) the aggregate amount of
Indebtedness secured by such Liens permitted by this Section
7.4(l) plus (ii) the aggregate amount (calculated without
duplication) of outstanding Indebtedness of Restricted
Subsidiaries permitted under clause (iii) of Section 7.13
does not exceed 15% of Consolidated Adjusted Total
Capitalization and (iii) such Indebtedness could be incurred
pursuant to Sections 7.2 and 7.3 hereof."
(b) The Original Agreement is amended by adding thereto the
following new Section 7.13:
"SECTION 7.13 SUBSIDIARY INDEBTEDNESS. The Company shall not permit
-----------------------
its Restricted Subsidiaries to create, assume, guarantee or otherwise incur
Indebtedness, other than (i) Indebtedness owed to the Company or another
Wholly-Owned Restricted Subsidiary, (ii) Permitted Guaranties and (iii)
additional Indebtedness, provided that the aggregate amount (calculated
without duplication) of outstanding Indebtedness of Restricted Subsidiaries
permitted under this clause (iii), when added to the aggregate amount
(calculated without duplication) of outstanding Indebtedness permitted
under Section 7.4(l)(i), does not exceed 15% of Consolidated Adjusted Total
Capitalization and provided further that any such Indebtedness could be
incurred pursuant to Sections 7.2 and 7.3 hereof."
3. Representations and Warranties.
------------------------------
(a) The Company confirms that (i) except as otherwise set forth in the
Schedules attached hereto, each of the representations and warranties set forth
in the Original Agreement is true and correct in all material respects as of the
date hereof, except that to the extent any such representation or warranty is
stated to relate solely to an earlier date, the Company confirms that such
representation or warranty was true and correct in all material respects as of
such earlier date and (ii) no Default or Event of Default (which has not been
cured pursuant to amendments made hereunder) has occurred and is continuing.
(b) The Company represents and warrants that it has the requisite
corporate power and authority to enter into this Second Amendment and to
otherwise carry out the transactions contemplated by this Second Amendment.
2
<PAGE>
CONFORMED COPY
--------------
(c) The Company represents and warrants that this Second Amendment has
been duly authorized by all necessary corporate action on the part of the
Company and that this Second Amendment has been executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that enforcement hereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws of general application
relating to or affecting the enforcement of the rights of creditors or by
equitable principles regardless of whether enforcement is sought in equity or at
law.
(d) No written statement or document furnished by or on behalf of the
Company in connection with this Second Amendment contains any untrue statement
of a material fact or omits a material fact necessary to make the statements
contained therein, in light of the circumstances under which made, not
misleading.
(e) The execution, delivery and performance by the Company of this Second
Amendment will not violate any provision of any law, rule, regulation or
ordinance or any order, judgment, decree or ruling of any court, arbitrator,
governmental authority or agency applicable to the Company and will not result
in any breach of any of the provisions of, or constitute a default under, or
result in the creation of any Lien on any property of the Company under the
provisions of, any charter document, by-law, loan, agreement or any other
material agreement or material instrument to which it is a party or by which it
or its property may be bound or affected.
4. Counterparts.
------------
This Second Amendment may be executed by the parties hereto individually,
or in any combination of the parties hereto in several counterparts, all of
which taken together shall constitute one and the same Second Amendment.
5. Conditions to Effectiveness.
---------------------------
The effectiveness of the Purchasers' agreement to this Second Amendment is
subject to the satisfaction on or prior to the date hereof of each of the
following conditions:
(a) Delivery to the Purchasers copies of this Second Amendment executed by
the Company.
-3-
<PAGE>
(b) payment of fees and expenses of counsel to the Purchaser.
6. Ratification and Acknowledgment.
-------------------------------
All of the representations, warranties, provisions, covenants, terms and
conditions of the Original Agreement not amended herein shall remain unaltered
and in full force and effect. The Original Agreement, as amended hereby, is in
all respects agreed to, ratified and confirmed by the Company. The Company
acknowledges and agrees that the amendments granted herein shall not be
construed as establishing a course of conduct on the part of the Purchasers upon
which the Company may rely at any time in the future.
7. Reference to and Effect on the Agreement.
----------------------------------------
Upon the effectiveness of this Second Amendment, each reference in the
Original Agreement and in other documents describing or referencing the Original
Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like
import referring to the Original Agreement, shall mean and be a reference to the
Original Agreement, as amended hereby.
4
<PAGE>
CONFORMED COPY
--------------
Dated as of this _______ day of February, 1998.
MATERIAL SCIENCES CORPORATION
By: /s/ James J. Waclawik, Sr.
--------------------------
Title: Vice President, Chief Financial Officer and
Secretary
-5-
<PAGE>
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
BY: /S/ SHABNAM B. MIGLANI
-----------------------
TITLE: COUNSEL
BY: /S/ JOELLEN J. WATTS
-----------------------
TITLE: COUNSEL
GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY
BY: /S/ JULIE BOCK
----------------
TITLE: ASSISTANT VICE PRESIDENT
BY: /S/ ERNIE P. FRIESEN
----------------------
TITLE: ASSISTANT VICE PRESIDENT INVESTMENTS
THE GREAT-WEST LIFE ASSURANCE COMPANY
BY: /S/ W.J. SHARMAN
------------------
TITLE: DIRECTOR BOND INVESTMENTS
BY: /S/ P.G. MUNRO
----------------
TITLE: EXECUTIVE V.P. AND
CHIEF INVESTMENT OFFICER
NATIONWIDE LIFE INSURANCE COMPANY
BY: /S/ JAMES W. PRUDEN
---------------------
TITLE: VICE PRESIDENT MUNICIPAL SECURITIES
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
BY: /S/ JAMES W. PRUDEN
---------------------
TITLE: VICE PRESIDENT MUNICIPAL SECURITIES
6
<PAGE>
EXHIBIT 4(g)
OPTION AGREEMENT
THIS AGREEMENT, dated as of February 26, 1998, is entered into between
Material Sciences Corporation, a Delaware corporation (the "Company"), and Stern
-------
Stewart & Co., a partnership resident in New York (the "Partnership").
-----------
The Company, in consideration of consulting services provided by the
Partnership to the Company, pursuant to a letter agreement dated November 6,
1997 between the Partnership and the Company, wishes to grant a stock option for
the purchase of Common Stock of the Company, par value $.02 per share (the
"Common Stock"), to the Partnership, on the terms and conditions contained in
------------
this Agreement.
Accordingly, in consideration of the premises and the agreements set forth
herein, the parties hereto hereby agree as follows:
1. Grant of Option. The Company, effective as of the date of this
---------------
Agreement, pursuant to resolutions adopted by the Board of Directors of the
Company (the "Board"), hereby grants to the Partnership, the right and option
-----
(the "Option") to purchase all or any part of an aggregate of _______________
------
shares of Common Stock (the "Shares") at the price of $_________ per share (as
------
adjusted from time to time, the "Option Price"), on the terms and conditions set
------------
forth in this Agreement.
2. Vesting and Term of Option.
--------------------------
a. The Option may not be exercised, in whole or in part, prior to
February 28, 2000 (the "Initial Exercise Date"). The Option may be exercised,
---------------------
in whole or in part, at any time or from time to time, on or after the Initial
Exercise Date and on or before the close of business on February 26, 2003 (the
"Expiration Date").
---------------
b. Notwithstanding the vesting provision contained in Section 2(a)
above, but subject to the other terms and conditions set forth herein, the
Option may be exercised, in whole or in part, at any time or from time to time,
following the occurrence of a Change of Control (as hereinafter defined). In
addition, at any time following a Change of Control, the Partnership may, in
lieu of exercising the Option, elect to receive from the Company, within 5
business days after receipt of written notice of such election, $135,000 in
cash consideration for the cancellation of the Option (or such pro rata portion
of $135,000 if this election is made with respect to fewer than all of the
Shares underlying the Option).
c. For the purpose of this Agreement, a "Change of Control" shall
-----------------
mean:
i) the acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
------------ ------
(within the meaning of Rule 13d-3 promulgated under
<PAGE>
the Exchange Act) of 50% or more of either (A) the then outstanding shares of
Common Stock (the "Outstanding Company Common Stock") or (B) the combined voting
--------------------------------
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
--------------------------
Securities");
- ----------
ii) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
---------------
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of Person other than the Board;
iii) the Chief Executive Officer of the Company on the date
hereof is no longer the Chief Executive Officer of the Company;
iv) consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
--------------------
Business Combination, all or substantially all of the individuals and entities
who were the beneficial owners, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% in the
aggregate of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election or directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be; or
v) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
3. Method of Exercising Options
----------------------------
a. Subject to the terms and conditions of this Agreement, the Option
may be exercised by written notice of exercise delivered to the Secretary of the
Company pursuant to Section 7 hereof; provided, however, that no fractional
shares may be purchased hereunder at any time, and the Company shall not be
obligated to make any payment in lieu of fractional shares. The date of
delivery of such notice in accordance with the terms hereof shall be deemed to
be the exercise date of the Option. Such notice shall state the election to
exercise the Option, the number of Shares as to which the Option is being
exercised and the manner of payment and shall be signed
2
<PAGE>
by the Partnership. The notice shall be accompanied by payment in full of the
Option Price for all Shares designated in the notice.
b. Payment of the exercise price shall be made to the Company by
delivery of a check payable to the Company or cash in United States currency. In
the alternative, the Partnership may elect, in the written notice of exercise of
the Option, to pay the Option Price in Shares otherwise issuable upon the
exercise of the Option, in which case the number of Shares to be delivered to
the Partnership upon exercise of the Option shall be reduced by the number of
Shares having an aggregate Current Market Price (as hereinafter defined) equal
to the aggregate Option Price of the number of Shares as to which the Option is
being exercised. For the purposes of this paragraph, the "Current Market Price"
shall mean the average of the closing price per share of Common Stock on the
principal trading market for the Common Stock on the five business days
immediately preceding the date of exercise.
4. Adjustments. In the event of a reorganization, recapitalization,
-----------
stock split, stock dividend, combination of shares, merger, consolidation,
distribution of assets, or any other changes in the corporate structure or stock
of the Company, the Board shall make such adjustments as are appropriate in the
number and kind of shares covered by the Option and in the Option Price in order
to appropriately reflect such event.
5. Registration. The Company agrees to use reasonable best efforts such
------------
that, (i) not later than the Initial Exercise Date and (ii) promptly following
a Change of Control, the Shares then subject to the Option shall be registered
for resale on Form S-8 or such other appropriate form under the Securities Act
of 1933, as amended (the "Securities Act"), so as to permit the resale of such
--------------
Shares, without restriction, under the Securities Act by the Partnership;
provided that, other than upon a Change of Control, the Company shall not be
required to file a registration statement or take any other action pursuant to
this Section 5 prior to January 1, 2000; provided further that the Company shall
not be required to file a registration statement pursuant to this Section 5 if
Rule 144 or a successor rule under the Securities Act is available so as to
permit immediate resale of such Shares after the Initial Exercise Date or a
Change of Control, as applicable. The Partnership shall deliver to the Company
such information and take such actions as the Company may reasonably request for
the purposes of completing any action to be taken pursuant to this Section 5 or
as is necessary to comply with applicable rules of the Securities Act.
6. General.
-------
a. Neither the Partnership nor the Partnership's successors or
assigns shall have any of the rights and privileges of a stockholder of the
Company with respect to the Shares of Common Stock subject to the Option unless
and until certificates for such Shares shall have been issued upon exercise of
the Option.
b. The Option shall not be transferable by the Partnership.
3
<PAGE>
c. The Company shall at all times prior to the Expiration Date
reserve and keep available such number of authorized shares of Common Stock as
will be sufficient to satisfy the requirements of this Agreement.
d. This Agreement shall be governed by and construed under the
internal laws of the State of Illinois, without giving effect to the conflicts
of laws principles thereof.
e. The Partnership may not sell, transfer or dispose of any Shares
(except pursuant to an effective registration statement under the Securities
Act), without first delivering to the Company an opinion of counsel (reasonably
acceptable in form and substance to the Company), that neither registration nor
qualification under the Securities Act and applicable state securities laws is
required in connection with such transfer.
f. As a condition precedent to the exercise of this Option, the
Partnership shall, if requested by the Company, pay to the Company, in addition
to the Option Price, such amount of cash as the Company may be required, under
applicable federal, state or local law or regulations, to withhold and pay over
as income or other withholding taxes.
g. This Option is subject to the condition that if at any time the
Board or a committee thereof shall determine, in its discretion, that the
listing of the shares subject hereto on any securities exchange, or the
registration or qualification of such shares under any federal or state law, or
the consent or approval of any regulatory body, shall be necessary or desirable
as a condition of, or in connection with, the granting of this Option or the
purchase or delivery of shares hereunder, this Option may not be exercised, in
whole or in part, and the Shares hereunder may not be delivered, as the case may
be, unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board or a committee thereof. The Company agrees to use
reasonable best efforts to cause such listing, registration, qualification,
consent or approval to be effected in a timely manner.
7. Notices. All notices or other communications required or permitted to
-------
be given hereunder shall be in writing and shall be delivered by hand, or sent
by telecopy, or sent, postage prepaid, by United States registered, certified or
express mail, or reputable overnight courier service, and shall be deemed given,
if delivered by hand or sent by telecopy, when so delivered or so sent, or, if
sent by mail or by overnight courier service when received by the addressee, as
follows:
a. If to the Company:
Material Sciences Corporation
2200 East Pratt Blvd.
Elk Grove Village, IL 60007
Attention: Chief Financial Officer
4
<PAGE>
b. If to the Partnership:
Stern Stewart & Co., a partnership
1345 Avenue of the Americas
New York, New York 10105
Attention: Chief Financial Officer
Either party hereto may change the address or facsimile number to which notices
and other communications are to be delivered or sent by giving the other party
prior written notice in the manner set forth herein.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Company and the Partnership have executed this
Agreement as of the day and year first above written.
MATERIAL SCIENCES CORPORATION
By:____________________________
Its:___________________________
STERN STEWART & CO.
By:____________________________
Its:___________________________
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
State or
Jurisdiction of
Name of Subsidiary Incorporation
------------------ -------------
MSC Pre Finish Metals Inc. Illinois
MSC Pre Finish Metals (EGV) Inc. Delaware
MSC Pre Finish Metals (MV) Inc. Delaware
MSC Pre Finish Metals (MT) Inc. Delaware
MSC Walbridge Coatings Inc. Delaware
MSC Specialty Films, Inc. California
MSC Laminates and Composites Inc. Delaware
MSC Laminates and Composites (EGV) Inc. Delaware
Material Sciences Foreign Sales Corporation U. S. Virgin Islands
Solar-Gard International, Inc. Florida
Solar-Gard International (UK) Limited United Kingdom
Solar-Gard (Canada) Inc. Canada
MSC Specialty Films (Australasia) Pty. Limited Australia
Solar-Gard (SEA) Pte., Ltd. Singapore
MSC Pinole Point Steel Inc. Delaware
MSC Pre Finish Metals (PP) Inc. Delaware
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports dated April 15, 1998, included in or incorporated by
reference in this Form 10-K, into the Company's previously filed Registration
Statements on Form S-8 (No. 33-00067, 33-40610, 33-41310, 33-57648, 33-81064,
333-15679, and 333-15677).
/s/ ARTHUR ANDERSEN LLP
-------------------------
ARTHUR ANDERSEN LLP
Chicago, Illinois
May 26, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Consolidated Statements of Income and Consolidated Balance Sheets and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 3,625
<SECURITIES> 0
<RECEIVABLES> 53,536
<ALLOWANCES> 4,785
<INVENTORY> 60,892
<CURRENT-ASSETS> 125,848
<PP&E> 363,004
<DEPRECIATION> 106,405
<TOTAL-ASSETS> 418,074
<CURRENT-LIABILITIES> 65,518
<BONDS> 187,563
0
0
<COMMON> 327
<OTHER-SE> 140,591
<TOTAL-LIABILITY-AND-EQUITY> 418,074
<SALES> 320,163
<TOTAL-REVENUES> 320,163
<CGS> 251,567
<TOTAL-COSTS> 251,567
<OTHER-EXPENSES> 5,342
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,064
<INCOME-PRETAX> 10,503
<INCOME-TAX> 4,044
<INCOME-CONTINUING> 6,459
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,459
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
