<PAGE> 1
As filed with the Securities and Exchange Commission on December 23, 1997
Registration Statement No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PARK-OHIO INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
OHIO 5072 34-6520107
(State or other jurisdiction of (Primary Standard (I.R.S. employer
incorporation or organization) Industrial Code Number) identification number)
</TABLE>
23000 EUCLID AVENUE
CLEVELAND, OHIO 44117
(216) 692-7200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Ronald J. Cozean, Esq.
General Counsel and Secretary
Park-Ohio Industries, Inc.
23000 Euclid Avenue
Cleveland, Ohio 44117
(216) 692-7200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
David P. Porter, Esq.
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
(216) 586-3939
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement has become effective.
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If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of each class of Amount to be Proposed maximum offering Proposed maximum Amount of
securities to be registered registered price per unit(1) aggregate offering price(1) registration fee
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/4% Senior Subordinated Notes
due 2007......................... $150,000,000 100% $150,000,000 $44,250.00
</TABLE>
================================================================================
(1) Estimated Solely for the purpose of calculating the registration fee
pursuant to Rule 457(a).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 22, 1997
PROSPECTUS
PARK OHIO LOGO
$150,000,000
PARK-OHIO INDUSTRIES, INC.
9 1/4% SENIOR SUBORDINATED NOTES DUE 2007
OFFER TO EXCHANGE ITS 9 1/4% SENIOR SUBORDINATED NOTES DUE 2007, WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ANY AND ALL OF ITS
OUTSTANDING 9 1/4% SENIOR SUBORDINATED NOTES DUE 2007 ISSUED ON NOVEMBER 25,
1997.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998 [THE 21st BUSINESS DAY FOLLOWING THE COMMENCEMENT OF THE
EXCHANGE OFFER], UNLESS EXTENDED.
Park-Ohio Industries, Inc., an Ohio corporation (the "Company"), hereby
offers to exchange (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), up to $150,000,000 in aggregate
principal amount of the Company's new 9 1/4% Senior Subordinated Notes due 2007
(the "Exchange Notes"), for $150,000,000 in aggregate principal amount of the
Company's outstanding 9 1/4% Senior Subordinate Notes due 2007 (the "Original
Notes") originally issued on November 25, 1997. The Original Notes and the
Exchange Notes are sometimes collectively referred to herein as the "Notes."
The terms of the Exchange Notes are substantially identical in all respects
(including principal amount, interest rate and maturity) to the terms of the
Original Notes for which they may be exchanged pursuant to this Exchange Offer,
except that (i) the Exchange Notes will be freely transferable by holders
thereof (other than as provided herein) and issued free of any covenant
restricting transfer absent registration and (ii) holders of the Exchange Notes
will not be entitled to certain rights of holders of the Original Notes under
the Registration Rights Agreement (as defined herein), which rights will
terminate upon the consummation of the Exchange Offer. The Exchange Notes will
evidence the same debt as the Original Notes (which they replace) and will be
entitled to the benefits of an Indenture dated as of November 25, 1997 governing
the Original Notes and the Exchange Notes (the "Indenture"). For a complete
description of the terms of the Exchange Notes, see "Description of the Notes."
There will be no cash proceeds to the Company from the Exchange Offer.
Interest on the Notes will be payable in cash semiannually on each June 1
and December 1, commencing June 1, 1998. The Notes will be redeemable at the
option of the Company, in whole or in part, at any time on or after December 1,
2002, at the redemption prices set forth herein, plus accrued and unpaid
interest to the redemption date. In addition, the Company, at its option, may
redeem at any time and from time to time prior to December 1, 2000, in the
aggregate up to 35% of the original principal amount of the Notes at a
redemption price equal to 109.25% of the aggregate principal amount so redeemed,
plus accrued and unpaid interest to the redemption date, with the Net Proceeds
(as defined herein) of one or more Public Equity Offerings (as defined herein),
provided that at least 65% of the principal amount of the Notes originally
issued remains outstanding immediately after the occurrence of any such
redemption and that any such redemption occurs within 60 days following the
closing of any such Public Equity Offering. See "Description of the
Notes -- Optional Redemption."
Upon a Change of Control (as defined herein), each holder of the Notes will
be entitled to require the Company to purchase such holder's Notes at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest to the purchase date. See "Description of the Notes -- Change of
Control Offer." In addition, the Company will be obligated in certain instances
to make an offer to purchase the Notes at a purchase price in cash equal to 100%
of the principal amount thereof, plus accrued and unpaid interest to the
purchase date, with the Available Asset Sale Proceeds (as defined herein) of
certain asset sales. See "Description of the Notes -- Certain
Covenants -- Limitation on Certain Asset Sales."
The Notes will be general unsecured obligations of the Company and will
rank subordinate in right of payment to all existing and future Senior
Indebtedness (as defined herein) of the Company, including indebtedness under
the New Credit Facility (as defined herein). The Notes will rank pari passu with
any senior subordinated indebtedness and senior in right of payment to any
subordinated indebtedness of the Company. As of September 30, 1997, on a pro
forma basis,
(continued on next page)
SEE "RISK FACTORS" ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS OF THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is December , 1997.
<PAGE> 3
(continued from prior page)
after giving effect to the Refinancing (as defined herein), the Company would
have had $12.8 million aggregate principal amount of Senior Indebtedness
outstanding. A majority of the Company's assets are held through Subsidiaries
(as defined herein). The Notes will be effectively subordinated to the
obligations of such Subsidiaries. As of September 30, 1997, the Subsidiaries of
the Company had $78.5 million of liabilities outstanding, consisting primarily
of trade payables and accrued expenses. The Indenture will permit the Company
and its Subsidiaries to incur additional indebtedness, subject to certain
limitations.
The Original Notes were sold on November 25, 1997, in a transaction not
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in reliance upon an exemption provided in the Securities Act. Accordingly, the
Original Notes may not be offered, resold or otherwise pledged, hypothecated or
transferred in the United States unless registered under the Securities Act or
unless an exemption from the registration requirements of the Securities Act is
available. The Exchange Notes are being offered to satisfy the obligations of
the Company under the Registration Rights Agreement (as defined herein) relating
to the Original Notes. See "The Exchange Offer -- Purposes and Effects of the
Exchange Offer." Each holder receiving Exchange Notes, other than a
broker-dealer, will represent that the holder is not engaging in or intending to
engage in a distribution of such Exchange Notes. Exchange Notes issued pursuant
to the Exchange Offer in exchange for the Original Notes may be offered for
resale, resold or otherwise transferred by the holder thereof (other than any
holder that is an affiliate of the Company within the meaning of Rule 405 under
the Securities Act), without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holders' business and such holders
have no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. Each broker-dealer that receives Exchange
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by acknowledging and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. Despite this
acknowledgement, such broker-dealer may nonetheless be determined to be an
"underwriter" by the Securities and Exchange Commission (the "Commission"). See
"The Exchange Offer -- Purposes and Effects of the Exchange Offer" and "Plan of
Distribution." Broker-dealers may use this Prospectus, as amended or
supplemented, in connection with resales of the Exchange Notes received in
exchange for the Original Notes where such Original Notes were acquired by such
broker-dealer as a result of market-making activities or other such trading.
The Exchange Offer is not conditioned on any minimum aggregate principal
amount of Original Notes being tendered for exchange. The Company will accept
for exchange any and all validly tendered Original Notes not withdrawn prior to
5:00 P.M., New York City time, on , 1998 [the 21st business day
following the commencement of the Exchange Offer] unless extended (for a maximum
of an additional 20 business days) by the Company, in its sole discretion (the
"Expiration Date"). Tenders of Original Notes may be withdrawn at any time prior
to the Expiration Date. The Exchange Offer is subject to certain customary
conditions. See "The Exchange Offer -- Certain Conditions to the Exchange
Offer." Original Notes may be tendered only in integral multiples of $1,000. The
Company will pay all expenses incident to the Exchange Offer.
The Notes constitute securities for which there is no established trading
market. Any Original Notes not tendered and accepted in the Exchange Offer will
remain outstanding. The Company does not currently intend to list the Exchange
Notes on any securities exchange. To the extent that any Original Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Original Notes would be adversely affected. No assurances can be
given as to the liquidity of the trading market for either the Original Notes or
the Exchange Notes.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material may be obtained at
prescribed rates by writing the Commission, Public Reference Section, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission maintains a Web site,
located at http://www.sec.gov., that contains reports, proxy and information
statements and other information regarding registrants, including the Company,
that file electronically with the Commission. While any Notes remain
outstanding, the Company will make available, upon request, to any holder and
any prospective purchaser of the Notes the information required by Rule
144A(d)(4) under the Securities Act during any period in which the Company is
not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"). Any such request should be mailed to Park-Ohio Industries,
Inc., 23000 Euclid Avenue, Cleveland, Ohio 44117. Telephone requests may be
directed to the Corporate Secretary at (216)692-7200. In addition, such reports
and other information concerning the Company may be inspected at the offices of
the National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006-1506.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus
and shall be deemed to be a part hereof:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1996 (File No. 000-03134).
2. The Company's Quarterly Reports on Form 10-Q for the periods ended March
31, 1997, June 30, 1997 and September 30, 1997 (File No. 000-03134).
3. The Company's Current Report on Form 8-K filed on August 11, 1997 (File
No. 000-03134).
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the Offering shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from their respective
dates of filing. Any statement contained herein or in any document incorporated
or deemed to be incorporated shall be deemed to be modified or superseded for
all purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any subsequently filed document which also is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
RONALD J. COZEAN, GENERAL COUNSEL AND SECRETARY, PARK-OHIO INDUSTRIES, INC.,
23000 EUCLID AVENUE, CLEVELAND, OHIO 44117, (216) 692-7200. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY JANUARY , 1998
[FIVE BUSINESS DAYS BEFORE EXPIRATION OF THE EXCHANGE OFFER].
THE COMPANY HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON TO
WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, UPON WRITTEN OR ORAL REQUEST
OF SUCH PERSON, A COPY OF ANY AND ALL OF THE INFORMATION THAT HAS BEEN
INCORPORATED BY REFERENCE IN THIS PROSPECTUS (OTHER THAN EXHIBITS TO THE
INFORMATION THAT ARE INCORPORATED BY REFERENCE UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE INTO THE INFORMATION THAT THIS PROSPECTUS
INCORPORATES). PERSONS REQUESTING COPIES OF EXHIBITS TO SUCH DOCUMENTS THAT WERE
NOT SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS WILL BE CHARGED THE
COSTS OF REPRODUCTION AND MAILING.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the consolidated
financial statements and notes thereto appearing elsewhere in this Prospectus.
Except where the context otherwise requires, as used herein, the Company refers
to Park-Ohio Industries, Inc. and its Subsidiaries. Except as otherwise
indicated herein, each reference to "pro forma" means that the financial results
for the stated period, or other information, have been adjusted to reflect the
consummation of the 1997 Acquisitions (as defined herein under "-- Recent
Developments") and the Refinancing as if such transactions had occurred at the
beginning of such period.
THE COMPANY
The Company operates diversified manufacturing and logistics businesses
which serve a wide variety of industrial markets. The Company's manufactured
products segment ("Manufactured Products") designs and manufactures a broad
range of high quality products engineered for specific customer applications.
The principal customers of Manufactured Products are original equipment
manufacturers ("OEMs") and end-users in the automotive, railroad, truck and
aerospace industries. The Company's logistics segment ("Logistics") is a leading
national supplier of fasteners (e.g., nuts, bolts and screws) and other
industrial products to OEMs, other manufacturers and distributors. In connection
with the supply of such industrial products, Logistics provides a variety of
value-added, cost-effective procurement solutions. The principal customers of
Logistics are in the transportation, industrial, electrical and lawn and garden
equipment industries. The Company's diversified operations moderate the effect
on the Company of downturns affecting individual operating units and industries
served. Between 1992 and 1996, the Company has grown significantly, both
internally and through acquisitions. Over this period, the Company's net sales
increased at a 50.8% compound annual growth rate ("CAGR"), from $67.2 million to
$347.7 million, income (loss) from continuing operations increased from ($8.8)
million to $9.7 million, and EBITDA (as defined herein) increased from ($4.5)
million to $28.1 million. The Company generated pro forma net sales, pro forma
income from continuing operations and pro forma EBITDA (as defined herein) of
$379.5 million, $7.4 million and $32.4 million, respectively for the nine months
ended September 30, 1997.
Manufactured Products. Manufactured Products operates through five groups
which capitalize on the Company's expertise in efficiently converting raw
materials into high quality finished products. The five groups include: Aluminum
Casting, Forged and Machined Products, Capital Equipment, Metal Forming and
Industrial Rubber Products. The Aluminum Casting Group manufactures aluminum
permanent mold castings, primarily for the automotive industry. The Forged and
Machined Products Group designs and manufactures crankshafts, camshafts and
other high strength, high performance structural parts, primarily for aircraft
and locomotive manufacturers. The Capital Equipment Group custom engineers and
manufactures induction heating systems, forging presses and heat processing and
curing systems, primarily for the packaging and automotive industries. The Metal
Forming Group manufactures standard and specialty engineered fasteners and
related hardware, bearings, plumbing fixtures and certain consumer products. The
Industrial Rubber Products Group manufactures molded rubber products for use in
automobiles, fluid and gas lines, steel mills, and food processing and
communications equipment.
Logistics. Logistics is a leading national supplier of over 90,000 standard
and specialty fasteners and other industrial products pursuant to either supply
chain management agreements or traditional wholesale supply arrangements. Supply
chain management, which is Logistics' primary focus for future growth, involves
offering customers procurement solutions and comprehensive, on-site management
for most of their fastener and related hardware needs. Supply chain management
customers receive value-added services, such as part usage and cost analysis,
product redesign recommendations, supplier selection, quality assurance, bar
coding, product packaging and tracking, just-in-time delivery, electronic
billing services and ongoing technical support. Supply chain management services
are typically provided to customer's facilities pursuant to exclusive,
multi-year total fastening service ("TFS") contracts. TFS contracts enable
Logistics' customers to both reduce procurement costs and better focus on their
company's core manufacturing competencies by: (i) significantly reducing the
administrative and labor costs associated with fastener procurement by
outsourcing
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certain internal purchasing, quality control and inventory fulfillment
responsibilities; (ii) reducing the amount of working capital invested in
inventory; (iii) achieving purchasing efficiencies as a result of vendor
consolidation; and (iv) receiving technical expertise in the selection of
fasteners and other components for certain manufacturing processes. Sales
pursuant to TFS contracts have increased significantly in recent years and
represented over 60% of Logistics' pro forma net sales for the nine months ended
September 30, 1997. Logistics' remaining sales are generated through the
wholesale supply of fasteners and other industrial products to OEMs, other
manufacturers and distributors. Logistics supplies standard and specialty
engineered fasteners as well as other items such as valves, fittings, clamps and
rubber products. Logistics operates out of 34 branches located throughout the
United States and branches in Mexico, Canada, Puerto Rico and England, and has a
central distribution center located in Dayton, Ohio.
COMPETITIVE STRENGTHS
The Company's manufacturing and logistics businesses generally have the
following competitive strengths:
LONG-TERM RELATIONSHIPS WITH MARKET-LEADING CUSTOMERS. The Company has been
successful in forming and developing customer relationships, certain of which
have been in place for over 50 years, with some of the largest companies in
their respective industries. In many cases, the Company's businesses have
achieved sole-source supply positions as a result of their reputation for
manufacturing high quality products, superior customer service,
applications-engineering expertise and commitment to partnering with their
customers. Manufactured Products' principal customers include BF Goodrich,
Boeing, Chrysler, Cooper Industries, Delphi, Ford, General Dynamics, General
Motors, Moen and United Technologies. Logistics has multi-year, exclusive TFS
contracts with plants of OEMs such as General Electric, Mack Truck, Navistar and
Polaris.
LEADERSHIP IN SEVERAL NICHE BUSINESSES. Several of the Company's products
hold leading positions in their respective business lines. For example, as
sole-source supplier to Ford and Chrysler, the Company is the leading domestic
manufacturer of aluminum permanent mold pump housings and pinion carriers for
automobile and light truck transmissions. In addition, the Company is the
sole-source supplier of crankshafts and camshafts to General Motors' North
American locomotive manufacturing operations. Logistics is one of the leading
providers of fasteners in the United States as a result of its national
coverage, broad product line and ability to offer value-added services to its
customers.
DIVERSE CUSTOMER BASE. The Company's products are sold to more than 7,000
customers in a wide variety of industries. With the exception of Ford, no single
customer represented more than 4.4% of the Company's pro forma net sales for the
nine months ended September 30, 1997. Ford, which in the aggregate represented
7.7% of such sales, purchases the Company's products through 17 distinct
purchasing centers, each of which maintains an independent relationship with the
Company. The Company plans to continue to expand its customer base by
introducing new products in both of its segments and adding new branches and TFS
contract customers at Logistics.
SOPHISTICATED LOGISTICS INFRASTRUCTURE. Since 1995, the Company has spent
over $5 million upgrading Logistics' management information and communication
systems to more efficiently distribute in excess of 150,000 SKUs to its
customers. Logistics' electronic data interchange ("EDI") capabilities provide
an interactive order system to a majority of its TFS contract
customers. Logistics' customized systems enable it to provide customers with
just-in-time delivery of bar coded packages labeled for delivery to specific
points of use. Such systems also enhance fill rates by automatically searching
alternative branches for products that are unavailable at a particular location
and routing those products for shipment. In addition, Logistics' advanced
communication systems enhance its ability to efficiently manage its inventory
and automatically replenish TFS customers' stocks.
EXPERIENCED MANAGEMENT TEAM WITH SIGNIFICANT EQUITY OWNERSHIP. The
Company's senior operating team has an average of over 25 years of relevant
industry experience. Management also has significant experience in acquiring and
integrating businesses into the Company, and employs a disciplined approach to
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making such acquisitions. The Company's senior management team owns, in the
aggregate, approximately 33% of the fully diluted common stock of the Company.
BUSINESS STRATEGY
Management believes that the Company's growth in sales and profitability in
the future will result from the successful implementation of its business
strategy, the key elements of which include:
INCREASED INTERACTION BETWEEN MANUFACTURED PRODUCTS AND LOGISTICS. The
Company intends to continue to expand interaction between Manufactured Products
and Logistics by: (i) increasing the number of products supplied to Logistics by
Manufactured Products; (ii) cross-selling Logistics' services to Manufactured
Products' customers; and (iii) selectively acquiring companies that manufacture
Logistics' best-selling products. Management believes that these and other
initiatives will enable the Company to expand its product offerings and further
enhance Logistics' ability to control the entire supply chain management
process. In addition, the Company's expertise in manufacturing fasteners and
other industrial products enables Logistics to provide valuable technical advice
to its TFS customers, which reduces their production costs. Similarly,
Logistics' expertise in supply chain management can be transferred to
Manufactured Products' businesses to enhance the quality of customer service
currently provided by such businesses.
GROWTH THROUGH SELECTIVE ACQUISITIONS. The Company intends to continue to
make strategic acquisitions of complementary businesses to: (i) increase the
number of products made by Manufactured Products and sold by Logistics; (ii) add
customers and expand Logistics geographic coverage; (iii) take advantage of
consolidation in the logistics industry; and (iv) capitalize on management's
expertise in improving the operations of acquired companies.
Management has a proven track record of improving the financial results of
acquired companies, as evidenced by the material increases in sales, income from
continuing operations and EBITDA of the businesses acquired by the Company since
1992. Such improvements have been achieved through significant operating expense
reductions resulting from factors such as improved labor, supplier and customer
relations, increased purchasing power and more effective asset utilization and
management practices, as well as increased access to capital. Management
utilizes strict criteria to evaluate business acquisition possibilities,
including existing customer relationships, potential cost reductions, synergies
and return on investment parameters. The Company typically avoids auction
situations and exhibits discipline in declining specific transactions when the
price exceeds a level acceptable to the Company.
LEVERAGING EXISTING CUSTOMER RELATIONSHIPS. The Company seeks to enhance
customer relationships by, among other things: (i) providing high quality
products and services, as evidenced by the ISO 9000 and QS-9000 certifications
and numerous supplier awards obtained by certain of the Company's business
units; (ii) making capital investments in equipment and facilities pursuant to
new long-term supply arrangements such as the contract recently signed by
General Aluminum Mfg. Company ("GAMCO"), a part of the Aluminum Casting Group,
to produce cast aluminum transmission pump housings for Chrysler; (iii)
engineering new products in conjunction with customers to meet specific
application requirements; and (iv) obtaining additional TFS contracts for
existing customer facilities not currently served by Logistics.
STRENGTHENING OPERATING PERFORMANCE. The Company intends to make ongoing
capital investments in its Manufactured Products businesses to maintain the
historical growth in sales and EBITDA achieved by such units in recent years. In
addition, the Company intends to pursue enhanced operating efficiency through:
(i) increased purchasing power as a result of economies of scale, particularly
at Logistics; (ii) enhanced workforce productivity; (iii) increased sourcing of
Logistics' products off-shore; (iv) continued enhancement of management
information systems; (v) higher inventory turnover; and (vi) ongoing
re-engineering and total quality programs to improve process flow, reduce
re-work and improve cycle time.
DECENTRALIZED MANAGEMENT OF OPERATING UNITS. The Company's operating units
are managed on a decentralized basis by operating unit managers, while a
corporate management team provides strategic direction and support and
identifies and evaluates potential acquisition and divestiture opportunities.
Management believes that the Company's decentralized operating approach
eliminates many of the inefficien-
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<PAGE> 9
cies that can result from a highly centralized corporate structure, while
providing individual operating units with greater access to capital, strategic
direction and certain administrative functions. Operating unit managers are
vested with decision-making authority and are compensated based on the
profitability of their respective business units. As a result of the discrete
nature of the Company's operating units, the Company is able to buy and sell
such units on an opportunistic basis. Management believes that the Company's
decentralized management philosophy results in better customer service by
allowing each operating unit the flexibility and autonomy to implement policies
and make decisions based on first-hand assessments of individual customer
requirements.
RECENT DEVELOPMENTS
In furtherance of its business strategy, the Company completed five
acquisitions for cash in 1997 (collectively, the "1997 Acquisitions"). In
January 1997, the Company acquired the assets of Green Ball Bearing Company
("Green Bearing"), a manufacturer of wheel, hub and clutch bearings for the
automotive aftermarket, for $0.7 million. In February 1997, the Company acquired
the assets of Feco Engineered Systems Limited ("Feco"), which produces complete
oven systems that combine heat processing and curing technologies with material
handling and conveying methods, for approximately $3 million. In May 1997, the
Company acquired the assets of The Delo Screw Products Company ("Delo"), a
manufacturer of screw machine products, for $9.2 million. These three
Manufactured Products acquisitions were supplemented by two recent acquisitions
of logistics businesses. In July 1997, the Company acquired Arden Industrial
Products, Inc. ("Arden") for approximately $44 million. In October 1997, the
Company acquired the assets of Arcon Fastener Corporation ("Arcon") for $5.6
million.
THE REFINANCING
At the time the Original Notes were issued, the Company amended its
existing revolving credit facility (the "Existing Credit Facility") in order to
provide an unsecured revolving credit facility with a commitment of $50.0
million. The amended Existing Credit Facility is referred to herein as the New
Credit Facility. Obligations under the New Credit Facility are guaranteed by the
Company's Subsidiaries. See "Description of Other Indebtedness -- New Credit
Facility." The Company used the net proceeds from the offering of the Original
Notes and borrowings under the New Credit Facility to refinance the Existing
Credit Facility and placed funds in escrow which will be used to redeem its
$21.1 million aggregate principal amount of 7 1/4% Convertible Senior
Subordinated Debentures due 2004 (the "Convertible Senior Subordinated
Debentures"). As of September 30, 1997, there were outstanding borrowings under
the Existing Credit Facility of $129.8 million. The Company repaid the amounts
outstanding under the Existing Credit Facility and gave irrevocable notice with
respect to the redemption of the Convertible Senior Subordinated Debentures (the
"Redemption") at the time of the offering of the Original Notes. The Redemption
is expected to occur on December 24, 1997. Failure to complete the Redemption by
December 26, 1997 will constitute an Event of Default under the Indenture
governing the Notes. The offering of the Original Notes, the New Credit
Facility, the repayment of the Existing Credit Facility and the Redemption are
collectively referred to herein as the "Refinancing." See "Use of Proceeds" and
"Capitalization." Subsequent to the offering of the Original Notes, the Company
entered into the Demand Master Promissory Note, dated December 3, 1997 (the
"Promissory Note") with KeyBank, National Association, which replaced the Credit
Agreement, dated April 11, 1995, as amended. The Promissory Note constitutes the
New Credit Facility for purposes of the Indenture.
The Company's principal executive offices are located at 23000 Euclid
Avenue, Cleveland, Ohio 44117, and its telephone number is (216) 692-7200.
4
<PAGE> 10
THE EXCHANGE OFFER
Purpose of the Exchange Offer.... The Original Notes were sold in a
transaction exempt from the registration
requirements of the Securities Act by the
Company on November 25, 1997 to CIBC
Oppenheimer Securities Corp., Merrill Lynch
& Co. and Value Investing Partners, Inc.
(the "Initial Purchasers"). In connection
therewith, the Company executed and
delivered, for the benefit of the holders
of the Original Notes, the Registration
Rights Agreement dated November 25, 1997
(the "Registration Rights Agreement"),
which is incorporated by reference as an
exhibit to the Registration Statement of
which this Prospectus is a part, providing
for, among other things, the Exchange Offer
so that the Exchange Notes will be freely
transferable by the holders thereof without
registration or any prospectus delivery
requirements under the Securities Act,
except that a "dealer" or any of its
"affiliates" as such terms are defined
under the Securities Act, who exchanges
Original Notes held for its own account
will be required to deliver copies of this
Prospectus in connection with any resale of
the Exchange Notes issued in exchange for
such Original Notes. See "The Exchange
Offer -- Purposes and Effects of the
Exchange Offer" and "Plan of Distribution."
The Exchange Offer............... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each
$1,000 principal amount of Original Notes
that are properly tendered and accepted.
The Company will issue Exchange Notes on or
promptly after the Expiration Date. There
is $150,000,000 aggregate principal amount
of Original Notes outstanding. The Original
Notes and the Exchange Notes are
collectively referred to herein as the
"Notes." The terms of the Exchange Notes
are substantially identical in all respects
(including principal amount, interest rate
and maturity) to the terms of the Original
Notes for which they may be exchanged
pursuant to the Exchange Offer, except that
(i) the Exchange Notes are freely
transferable by holders thereof (other than
as provided herein), and are not subject to
any covenant restricting transfer absent
registration under the Securities Act and
(ii) holders of the Exchange Notes will not
be entitled to certain rights of holders of
the Original Notes under the Registration
Rights Agreement, which rights will
terminate upon the consummation of the
Exchange Offer. See "The Exchange Offer."
The Exchange Offer is not conditioned upon
any minimum aggregate principal amount of
Original Notes being tendered for exchange.
Based on an interpretation by the staff of
the Commission set forth in no-action
letters issued to third parties, the
Company believes that the Exchange Notes
issued pursuant to the Exchange Offer in
exchange for Original Notes may be offered
for resale, resold and otherwise
transferred by a holder thereof (other than
(i) a broker-dealer who purchases such
Exchange Notes directly from the Company to
resell
5
<PAGE> 11
pursuant to Rule 144A under the Securities
Act or any other available exemption under
the Securities Act or (ii) a person that is
an affiliate (as defined in Rule 405 under
the Securities Act) of the Company),
without compliance with the registration
and prospectus delivery provisions of the
Securities Act, provided that the holder is
acquiring the Exchange Notes in the
ordinary course of its business and is not
participating, and has no arrangement or
understanding with any person to
participate, in the distribution of the
Exchange Notes. The Company has not sought,
and does not currently intend to seek a
no-action letter. There can be no assurance
that the staff of the Securities and
Exchange Commission would make a similar
determination with respect to the Exchange
Offer. Each broker-dealer that receives the
Exchange Notes for its own account in
exchange for the Original Notes, where such
Notes were acquired by such broker-dealer
as a result of market-making activities or
other trading activities, must acknowledge
that it will deliver a prospectus in
connection with any resale of such Exchange
Notes.
Registration Rights Agreement.... The Original Notes were sold by the Company
on November 25, 1997 to the Initial
Purchasers pursuant to a Securities
Purchase Agreement dated as of November 19,
1997 by and between the Company and the
Initial Purchasers (the "Purchase
Agreement"). Pursuant to the Purchase
Agreement, the Company and the Initial
Purchasers entered into the Registration
Rights Agreement which grants the holders
of the Original Notes certain exchange and
registration rights. See "The Exchange
Offer -- Termination of Certain Rights."
This Exchange Offer is intended to satisfy
such rights, which terminate upon the
consummation of the Exchange Offer. The
holders of the Exchange Notes are not
entitled to any exchange of registration
rights with respect to the Exchange Notes.
Expiration Date.................. The Exchange Offer will expire at 5:00
p.m., New York City time, on ,
1998, [the 21st day after the commencement
of the Exchange Offer] unless the Exchange
Offer is extended (for a maximum of an
additional 20 business days) by the Company
in its reasonable discretion, in which case
the term "Expiration Date" shall mean the
latest date and time to which the Exchange
Offer is extended.
Accrued Interest on the Exchange
Notes and Original Notes....... Interest on the Exchange Notes will accrue
from November 25, 1997. Holders whose
Original Notes are accepted for exchange
will be deemed to have waived the right to
receive any interest accrued on the
Original Notes.
Conditions to the
Exchange Offer................. The Exchange Offer is subject to certain
customary conditions, which may be waived
by the Company. See "The Exchange
Offer -- Certain Conditions to the Exchange
Offer." The Exchange Offer is not
conditioned upon any mini-
6
<PAGE> 12
mum aggregate principal amount of Original
Notes being tendered for exchange. The
Company reserves the right to terminate or
amend the Exchange Offer at any time prior
to the Expiration Date upon the occurrence
of any such conditions.
Procedures for Tendering
Original Notes................. Each holder of Original Notes wishing to
accept the Exchange Offer must complete,
sign and date the Letter of Transmittal, or
a facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter
of Transmittal, or such facsimile, together
with the Original Notes and any other
required documentation to the exchange
agent (the "Exchange Agent") at the address
set forth herein. Original Notes may be
physically delivered, but physical delivery
is not required if a confirmation of a
book-entry of such Original Notes to the
Exchange Agent's account at The Depository
Trust Company ("DTC" or the "Depository")
is delivered in a timely fashion. By
executing the Letter of Transmittal, each
holder will represent to the Company that,
among other things, the Exchange Notes
acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of
business of the person receiving such
Exchange Notes, whether or not such person
is the holder, that neither the holder nor
any such other person is engaged in, or
intends to engage in, or has an arrangement
or understanding with any person to
participate in, the distribution of such
Exchange Notes and that neither the holder
nor any such other person is an
"affiliate," as defined under Rule 405 of
the Securities Act, of the Company. Each
broker or dealer that receives Exchange
Notes for its own account in exchange for
Original Notes, where such Original Notes
were acquired by such broker or dealer as a
result of market-making activities or other
trading activities, must acknowledge that
it will deliver a prospectus in connection
with any resale of such Exchange Notes. See
"The Exchange Offer -- Procedures for
Tendering" and "Plan of Distribution."
Special Procedures for
Beneficial Owners.............. Any beneficial owner whose Original Notes
are registered in the name of a broker,
dealer, commercial bank, trust company or
other nominee and who wishes to tender
should contact such registered holder
promptly and instruct such registered
holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to
tender on such owner's own behalf, such
owner must, prior to completing and
executing the Letter of Transmittal and
delivering his Original Notes, either make
appropriate arrangements to register
ownership of the Original Notes in such
owner's name or obtain a properly completed
bond power from the registered holder. The
transfer of registered ownership may take
considerable time. See "The Exchange
Offer -- Procedures for Tendering."
7
<PAGE> 13
Guaranteed Delivery Procedures... Holders of Original Notes who wish to
tender their Original Notes and whose
Original Notes are not immediately
available or who cannot deliver their
Original Notes, the Letter of Transmittal
or any other documents required by the
Letter of Transmittal to the Exchange Agent
prior to the Expiration Date, must tender
their Original Notes in accordance with the
guaranteed delivery procedures set forth in
the "Exchange Offer -- Guaranteed Delivery
Procedures."
Acceptance of the Original Notes
and Delivery of the Exchange
Notes.......................... Subject to the satisfaction or waiver of
the conditions to the Exchange Offer, the
Company will accept for exchange any and
all Original Notes which are properly
tendered in the Exchange Offer prior to the
Expiration Date. The Exchange Notes issued
pursuant to the Exchange Offer will be
delivered on the earliest practicable date
following the Expiration Date. See "The
Exchange Offer -- Terms of the Exchange
Offer."
Withdrawal Rights................ Tenders of Original Notes may be withdrawn
at any time prior to the Expiration Date.
See "The Exchange Offer -- Withdrawal of
Tenders."
Exchange Agent................... Norwest Bank Minnesota, National
Association is serving as the Exchange
Agent in connection with the Exchange
Offer. See "The Exchange Offer -- Exchange
Agent."
Effect on Holders of
the Original Notes............. As a result of the making of, and upon
acceptance for exchange of all validly
tendered Original Notes pursuant to the
terms of this Exchange Offer, the Company
will have fulfilled one of the covenants
contained in the Registration Rights
Agreement and, accordingly, there will be
no increase in the interest rate on the
Original Notes pursuant to the applicable
terms of the Registration Rights Agreement
due to the Exchange Offer. Holders of the
Original Notes who do not tender their
Original Notes will be entitled to all the
rights and limitations applicable thereto
under the Indenture between the Company and
Norwest Bank Minnesota, National
Association, as trustee (the "Trustee"),
relating to the Original Notes and the
Exchange Notes, except for any rights under
the Indenture or the Registration Rights
Agreement, which by their terms terminate
or cease to have further effectiveness as a
result of the making of, and the acceptance
for exchange of all validly tendered
Original Notes pursuant to, the Exchange
Offer. All untendered Original Notes will
continue to be subject to the restrictions
on transfer provided for in the Original
Notes and in the Indenture. To the extent
that Original Notes are tendered and
accepted in the Exchange Offer, the trading
market for untendered Original Notes could
be adversely affected.
Use of Proceeds.................. There will be no cash proceeds to the
Company from the exchange pursuant to the
Exchange Offer.
8
<PAGE> 14
THE NOTES
The Exchange Notes......... The Exchange Offer applies to $150,000,000
aggregate principal amount of the Original Notes.
The form and terms of the Exchange Notes are the
same as the form and terms of the Original Notes
except that (i) the exchange will have been
registered under the Securities Act and, therefore,
the Exchange Notes will not bear legends
restricting their transfer pursuant to the
Securities Act, and (ii) holders of the Exchange
Notes will not be entitled to certain rights of
holders of the Original Notes under the
Registration Rights Agreement, which rights will
terminate upon consummation of the Exchange Offer.
The Exchange Notes will evidence the same debt as
the Notes (which they replace) and will be issued
under, and be entitled to the benefits of, the
Indenture. See "Description of the Notes" for
further information and for definition of certain
capitalized terms used below.
Issuer..................... Park-Ohio Industries, Inc.
Maturity Date.............. December 1, 2007.
Interest Rate.............. The Notes will bear interest at a rate of 9 1/4%
per annum.
Interest Payment Dates..... Interest will accrue on the Exchange Notes from the
date of issuance of the Original Notes (the "Issue
Date") and will be payable in cash semiannually on
each June 1 and December 1, commencing June 1,
1998. Interest on the Notes will be paid on the
basis of a 360-day year and twelve 30-day months.
Ranking.................... The Notes will be general unsecured obligations of
the Company and will rank subordinate in right of
payment to all existing and future Senior
Indebtedness of the Company, including indebtedness
under the New Credit Facility. The Company may
incur additional Senior Indebtedness if it meets
certain financial ratio tests set forth in the
Indenture. Except for such financial ratio tests,
there are no restrictions on the Company's ability
to incur additional debt or total debt that ranks
senior to or pari passu with the Notes. The Notes
will rank pari passu with any senior subordinated
indebtedness and senior in right of payment to any
subordinated indebtedness of the Company. As of
September 30, 1997, on a pro forma basis, after
giving effect to the Refinancing, the Company would
have had $12.8 million aggregate principal amount
of Senior Indebtedness outstanding. A majority of
the Company's assets are held through Subsidiaries.
The Notes will be effectively subordinated to the
obligations of such Subsidiaries. As of September
30, 1997, the Subsidiaries of the Company had $78.5
million of liabilities outstanding, consisting
primarily of trade payable and accrued expenses,
and were guarantors of the Company's obligations
under the Existing Credit Facility. The Indenture
will permit the Company and its Subsidiaries to
incur additional indebtedness, subject to certain
limitations. The Subsidiaries are guarantors of the
obligations under the New Credit Facility. Due to
such guarantees granted under the New Credit
Facility, the lenders thereunder have a senior
claim to the assets of such Subsidiaries.
Optional Redemption........ The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or
after December 1, 2002, at the redemption prices
set forth herein, plus accrued and unpaid interest
to the redemption date. In addition, the Company,
at its option, may redeem at any
9
<PAGE> 15
time and from time to time prior to December 1,
2000, in the aggregate up to 35% of the original
principal amount of the Notes at a redemption price
equal to 109.25% of the aggregate principal amount
so redeemed, plus accrued and unpaid interest to
the redemption date, with the Net Proceeds of one
or more Public Equity Offerings, provided that at
least 65% of the principal amount of the Notes
originally issued remains outstanding immediately
after the occurrence of any such redemption and
that any such redemption occurs within 60 days
following the closing of any such Public Equity
Offering.
Change of Control.......... Upon a Change of Control, each holder of the Notes
will be entitled to require the Company to purchase
such holder's Notes at a purchase price equal to
101% of the principal amount thereof, plus accrued
and unpaid interest to the purchase date. See
"Description of the Notes -- Change of Control
Offer."
Asset Sale Proceeds........ The Company will be obligated in certain instances
to make an offer to purchase the Notes at a
purchase price in cash equal to 100% of the
principal amount thereof, plus accrued and unpaid
interest to the purchase date with the Available
Asset Sale Proceeds of certain asset sales. See
"Description of the Notes -- Certain
Covenants -- Limitation on Certain Asset Sales."
Certain Covenants.......... The Indenture will contain covenants for the
benefit of the holders of the Notes that, among
other things, restrict the ability of the Company
and its Subsidiaries to: (i) incur additional
Indebtedness (as defined herein); (ii) pay
dividends and make certain other distributions;
(iii) issue capital stock of Subsidiaries; (iv)
make certain investments; (v) repurchase stock;
(vi) create liens; (vii) enter into transactions
with affiliates; (viii) enter into sale and
lease-back transactions; (ix) create dividend or
other payment restrictions affecting Subsidiaries;
(x) merge or consolidate the Company or any
Subsidiaries; and (xi) transfer or sell assets.
These covenants are subject to a number of
important exceptions. See "Description of the
Notes -- Certain Covenants."
RISK FACTORS
Prospective investors in the Notes, should consider carefully the
information set forth under the caption "Risk Factors" and all other information
set forth in this Prospectus, before making an investment in the Notes.
10
<PAGE> 16
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The summary historical consolidated financial data set forth below for the
three years ended December 31, 1996 have been derived from the consolidated
financial statements of the Company, which have been audited by Ernst & Young
LLP, independent auditors. The summary historical consolidated financial data
for the nine-month periods ended September 30, 1996 and 1997 have been derived
from unaudited consolidated financial statements of the Company, which include
all adjustments (consisting of normal recurring accruals) that management
considers necessary for a fair presentation of the financial position and
results of operations for these periods. The data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements of the Company and notes
thereto, and other financial information included elsewhere herein. The data for
the periods presented are not necessarily comparable because of acquisitions
made throughout such periods. The unaudited pro forma consolidated financial
information for the year ended December 31, 1996 and the nine-month period ended
September 30, 1997 has been derived from the unaudited pro forma consolidated
financial data included elsewhere herein. The unaudited pro forma consolidated
financial information and the results of operations for the nine months ended
September 30, 1997 are not necessarily indicative of results that may be
expected for any annual or interim period or for the full year ending December
31, 1997.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------------------------- -----------------------------
NINE MONTHS ENDED NINE MONTHS
YEARS ENDED DECEMBER 31, SEPTEMBER 30, YEAR ENDED ENDED
------------------------------ ------------------------- DECEMBER 31, SEPTEMBER 30,
1994 1995 1996 1996 1997(A) 1996(B) 1997(B)
-------- -------- -------- ----------- ----------- ------------ --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT
DATA:
Net sales................... $129,216 $289,501 $347,679 $ 261,297 $ 311,916 $476,693 $379,530
Cost of products sold....... 104,225 240,871 289,400 217,293 262,060 378,503 308,503
-------- -------- -------- -------- -------- -------- --------
Gross profit.............. 24,991 48,630 58,279 44,004 49,856 98,190 71,027
Selling, general and
administrative expenses... 16,838 30,020 38,131 28,314 31,613 71,499 48,159
Operating income(c)......... 8,153 18,610 17,496 15,690 18,243 24,039 22,868
Interest expense............ 1,501 5,911 6,947 5,478 6,078 15,480(d) 11,609(d)
OTHER FINANCIAL DATA:
EBITDA(e)................... $ 11,366 $ 24,888 $ 28,146 $ 21,202 $ 25,614 38,264 32,433
Depreciation and
amortization.............. 3,213 6,278 7,998 5,512 7,371 11,573 9,565
Capital expenditures........ 11,749 13,632 15,590 8,600 9,244 17,673 10,440
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-------------------------------
ACTUAL PRO FORMA
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents............................................................. $ 3,786 $ 2,500
Working capital, as adjusted(f)....................................................... 135,303 138,049
Total assets.......................................................................... 388,782 401,003
Total debt............................................................................ 154,124 165,143
Shareholders' equity.................................................................. 128,015 126,623
</TABLE>
(see footnotes on following page)
11
<PAGE> 17
NOTES TO SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(a) Historical results for the nine months ended September 30, 1997 include the
results for the 1997 Acquisitions (excluding Arcon) from their respective
closing dates: (i) Green Bearing as of January 14, 1997; (ii) Feco as of
February 7, 1997; (iii) Delo as of May 27, 1997; and (iv) Arden as of July
25, 1997.
(b) Reflects the results of the 1997 Acquisitions, including Arcon, for the
periods prior to their respective closing dates and certain cost savings
that management believes would have been realized and amortization of
intangible assets that would have been incurred had the Company consummated
the 1997 Acquisitions as of the beginning of the periods presented. See
"Unaudited Pro Forma Consolidated Financial Data" for a detailed description
of the pro forma adjustments.
(c) Operating income is defined as net sales less cost of products sold,
selling, general and administrative expenses and a restructuring charge. In
1996, the Company incurred a restructuring charge of $2.7 million related to
the consolidation of three of the Company's consumer products manufacturing
facilities into one and the discontinuation of certain product lines.
(d) Reflects an interest rate of 9.25% on the Notes.
(e) EBITDA is defined as earnings from continuing operations before interest,
income taxes, depreciation, amortization, other income and non-recurring
items. Non-recurring items include a restructuring charge of $2.7 million in
the fourth quarter of 1996 related to the consolidation of three of the
Company's consumer products manufacturing facilities into one and the
discontinuation of certain product lines. EBITDA is not a measure of
performance under GAAP. While EBITDA should not be considered in isolation
or as a substitute for net income, cash flows from operating activities and
other income or cash flow statement data prepared in accordance with GAAP or
as a measure of profitability or liquidity, management understands that
EBITDA is customarily used as an indication of a company's ability to incur
and service debt. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion of other measures of
liquidity and operations that are covered by the audited financial
statements. EBITDA as defined herein may not be comparable to other
similarly titled measures of other companies.
(f) Working capital, as adjusted, is defined as total current assets excluding
cash and cash equivalents less total current liabilities excluding the
current portion of long-term debt.
12
<PAGE> 18
RISK FACTORS
Prospective purchasers of the Notes should consider carefully the following
factors, as well as other information set forth in this Prospectus, before
making an investment in the Notes.
HIGH LEVEL OF INDEBTEDNESS; POTENTIAL INABILITY TO SERVICE DEBT
The Company has, and after giving effect to the Refinancing will continue
to have, substantial leverage. At September 30, 1997, on a pro forma basis after
giving effect to the offering of the Original Notes, the Company would have had
$165.1 million of indebtedness, representing approximately 56.6% of the
Company's total capitalization. See "Capitalization." Furthermore, subject to
certain restrictions in the Indenture, the Company and its subsidiaries may
incur additional indebtedness from time to time to finance acquisitions, provide
for working capital or capital expenditures or for other purposes.
The level of the Company's indebtedness could have important consequences
to holders of the Notes, including, but not limited to, the following: (i) the
ability of the Company to obtain additional financing for acquisitions, working
capital, capital expenditures or other purposes, if necessary, may be impaired
or such financing may not be on terms favorable to the Company; (ii) the Company
will have significant cash requirements for debt service; (iii) financial and
other covenants and operating restrictions imposed by the terms of the Indenture
and by the Company's Senior Indebtedness will limit, among other things, its
ability to borrow additional funds or to dispose of assets; (iv) the Company may
be at a competitive disadvantage because it will be more highly leveraged than
some of its competitors; (v) a downturn in the Company's businesses will have a
more significant impact on its results of operations; and (vi) the Company will
have and may increase indebtedness senior to the Notes immediately following the
issuance of the Notes.
The Company currently expects that it will be able to service the principal
obligations on its indebtedness out of cash flow from operations. The ability of
the Company to satisfy its obligations will be primarily dependent upon the
future financial and operating performance of the Company's Subsidiaries and
upon the Company's ability to renew or refinance borrowings or to raise
additional equity capital. Each of these alternatives is dependent upon
financial, business and other general economic factors affecting the Company and
its Subsidiaries and the Company's businesses in particular, many of which are
beyond the control of the Company and its Subsidiaries. If the Company and its
Subsidiaries are unable to generate sufficient cash flow to meet their debt
service obligations, they will have to pursue one or more alternatives, such as
reducing or delaying capital expenditures, refinancing debt, selling assets or
raising equity capital. There can be no assurance that any such alternatives
could be accomplished on satisfactory terms or that such actions would yield
sufficient funds to retire the Notes and the indebtedness senior to the Notes.
While management believes that cash flow from operations will provide an
adequate source of long-term liquidity, a significant drop in operating cash
flow resulting from economic conditions, competition or other uncertainties
beyond the Company's control would increase the need for alternative sources of
liquidity. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
SUBORDINATION OF THE NOTES; NO GUARANTEES
The payment of principal, premium, if any, and interest on, and any other
amount owing in respect of, the Notes is subordinated to the prior payment in
full of all existing and future Senior Indebtedness of the Company, including
the New Credit Facility. As of September 30, 1997, on a pro forma basis, after
giving effect to the Refinancing, the Company would have had $12.8 million
aggregate principal amount of Senior Indebtedness outstanding and would have had
$38.1 million of undrawn commitments under the New Credit Facility. The
Indenture will limit, but not prohibit, the incurrence by the Company of
indebtedness which constitutes Senior Indebtedness. In the event of the
bankruptcy, liquidation, dissolution, reorganization or other winding up of the
Company or its Subsidiaries, the assets of the Company or such Subsidiaries will
be available to pay obligations on the Notes only after all Senior Indebtedness
has been paid in full in cash, and there may not be sufficient assets remaining
to pay amounts due on any or all of the Notes. In addition, under certain
circumstances, the Company and its Subsidiaries may not pay principal, premium,
if any, or interest
13
<PAGE> 19
on, or any other amounts owing in respect of, the Notes, or purchase, redeem or
otherwise retire the Notes, if a payment default or a non-payment default exists
with respect to certain Senior Indebtedness, and, in the case of a non-payment
default, a payment blockage notice has been received by the Trustee (as defined
herein). Because the assets of the Company are and will be primarily held by
operating Subsidiaries, the claims of holders of the Notes will be structurally
subordinated to all existing and future liabilities and obligations (whether or
not for borrowed money), including trade payables, accrued expenses and
litigation costs. As of September 30, 1997, the Subsidiaries of the Company had
$78.5 million of liabilities outstanding, consisting primarily of trade payables
and accrued expenses, and were guarantors of the Company's obligations under the
Existing Credit Facility. The Notes are being issued solely by the Company, and
none of the Company's Subsidiaries are or will be a guarantor under the Notes.
The Indenture expressly provides that no person or entity other than the Company
will have any liability for any obligations of the Company under the Notes or
such Indenture or any claim based on, in respect of or by reason of such
obligations, and that by accepting the Notes, each holder of the Notes waives
and releases such liability, which waiver and release are part of the
consideration for the Notes. The Subsidiaries are guarantors of the obligations
under the New Credit Facility. Due to such guarantees granted under the New
Credit Facility, the lenders thereunder have a senior claim to the assets of
such Subsidiaries. See "Description of the Notes -- Subordination."
HOLDING COMPANY STRUCTURE; RELIANCE ON SUBSIDIARIES
A majority of the Company's income is generated by, and a majority of its
assets are held by, its operating Subsidiaries. As a result, the Company will be
dependent on the earnings and cash flow of, and dividends and distributions or
advances from, its Subsidiaries to provide the funds necessary to meet its debt
service obligations, including the payment of principal of and interest on the
Notes. There can be no assurance that the Company's Subsidiaries will generate
sufficient cash flow to dividend, distribute or advance funds to the Company.
DEPENDENCE ON AUTOMOTIVE INDUSTRY; INDUSTRY CYCLICALITY
The Company's sales to the automotive industry accounted for approximately
30% of the Company's pro forma net sales during the nine months ended September
30, 1997. The automotive industry is highly cyclical, is dependent on consumer
spending and is subject to, among other things, general economic conditions and
the impact of international trade. The Company also sells products to customers
in other industries that experience cyclicality in demand for products, such as
the construction, industrial equipment, truck, electrical equipment, plumbing
and lawn and garden equipment industries. Although the automotive industry
accounts for less than one-third of the Company's sales, a downturn in the
domestic automotive industry would have a material adverse effect on the
Company's financial condition, liquidity and results of operations. While the
Company's largest customer, Ford, accounted for 7.7% of the Company's pro forma
net sales for the nine months ended September 30, 1997, certain individual
operating businesses of the Company have a larger concentration of sales to
particular automotive or other customers. Although the Company considers its
relations with its customers to be good, the loss of certain automotive or other
customers could have a material adverse effect on the financial condition,
liquidity and results of operations of certain of the Company's operating units.
See "Business."
RESTRICTIVE DEBT COVENANTS
The Indenture contains covenants that, among other things, limit the
ability of the Company and its Subsidiaries to incur additional indebtedness,
incur liens, pay dividends and make certain other restricted payments, make
investments, repurchase stock, consummate certain asset sales, enter into
certain transactions with affiliates, issue capital stock of Subsidiaries,
create dividend or other payment restrictions affecting subsidiaries,
consolidate or merge with any person or transfer or sell all or substantially
all of the assets of the Company. See "Description of the Notes -- Certain
Covenants."
Although the New Credit Facility does not currently contain restrictive
covenants, future amendments to or replacements of the New Credit Facility could
include covenants that limit the Company's ability to incur additional
indebtedness, prepay subordinated indebtedness, dispose of certain assets,
create liens, make capital
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<PAGE> 20
expenditures, make certain investments or acquisitions and otherwise restrict
corporate activities. Such amendment or replacement of the New Credit Facility
may also require the Company to comply with certain financial ratios and tests,
under which the Company would be required to achieve certain financial and
operating results. The ability of the Company to comply with such provisions may
be affected by events beyond its control. A breach of any of these covenants
would result in a default under such amendment or replacement of the New Credit
Facility. In the event of any such default, depending on the actions taken by
the lenders, the Company could be prohibited from making any payments on the
Notes. In addition, such lenders could elect to declare all amounts borrowed
under the New Credit Facility, as amended or replaced, together with accrued
interest thereon, to be due and payable, which would be an event of default
under the Indenture. As a result of the priority afforded the New Credit
Facility, there can be no assurance that the Company would have sufficient
assets to pay indebtedness then outstanding under the New Credit Facility, as
amended or replaced, and the Indenture. See "Description of Other
Indebtedness -- New Credit Facility."
POTENTIAL INABILITY TO EFFECT PURCHASE OF NOTES UPON A CHANGE OF CONTROL
In the event of a "Change of Control" of the Company, each holder of the
Notes will be entitled to require the Company to purchase such holder's Notes at
a purchase price equal to 101% of the principal amount thereof, plus any accrued
and unpaid interest, to the purchase date. A Change of Control under the
Indenture could result in a default under the New Credit Facility. The exercise
by the holders of the Notes of their right to require the Company to purchase
the Notes upon a Change of Control could also cause a default under other
indebtedness of the Company (including the New Credit Facility), even if the
Change of Control itself does not, because of the financial effect of such
purchase on the Company. The Company's ability to pay cash to the holders of the
Notes upon such a purchase may be limited by the Company's then existing
financial resources. There can be no assurance that in the event of a Change of
Control, the Company will have, or will have access to, sufficient funds or will
be contractually permitted under the terms of outstanding indebtedness to pay
the required purchase price for all Notes tendered by holders upon a Change of
Control. The obligations of the Company to offer to purchase the Notes are
subject to its obligations to repay amounts outstanding under the New Credit
Facility. Even if the Company can satisfy its obligations under the New Credit
Facility, there can be no assurance that it would be able to fund such purchase
of any Notes. See "Description of the Notes -- Change of Control Offer" and
"Description of Other Indebtedness -- New Credit Facility."
DEPENDENCE ON KEY MANAGEMENT
The success of the Company depends upon the efforts, abilities and
expertise of its executive officers and other senior managers, including Edward
F. Crawford, its Chairman, Chief Executive Officer and President, as well as the
president of each of the Company's operating units. The loss of the services of
such individuals and/or other key individuals could have a material adverse
effect on the Company's financial condition, liquidity and results of
operations. See "Management."
POTENTIAL INABILITY TO INTEGRATE THE 1997 ACQUISITIONS OR FUTURE ACQUISITIONS
The Company believes it will realize substantial benefits from the
successful integration of the 1997 Acquisitions. However, there can be no
assurance that the Company will be able to maintain or improve the operating
results of the 1997 Acquisitions or that the 1997 Acquisitions will be
successfully integrated into the operations of the Company. The Company
continually evaluates potential acquisitions and intends to actively pursue
acquisition opportunities, some of which could be material. Future acquisitions
may be financed by internally generated funds, bank borrowings, public offerings
or private placements of equity or debt securities, or a combination of the
foregoing. There can be no assurance that the Company will be able to make
acquisitions on terms favorable to the Company. If the Company completes any
such future acquisitions, it will encounter various associated risks, including
the possible inability to integrate an acquired business into the Company's
operations, increased goodwill amortization, diversion of management's attention
and unanticipated problems or liabilities, some or all of which could have a
material adverse effect on the Company's operations and financial performance.
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<PAGE> 21
DEPENDENCE ON THIRD-PARTY SUPPLIERS AND MANUFACTURERS
Manufactured Products purchases substantially all of its raw materials,
principally metals and certain component parts incorporated into its products,
and Logistics purchases substantially all of its fasteners, from third-party
suppliers and manufacturers. Management believes that there are numerous
available sources of supply for required raw materials and component parts
incorporated into the Company's products other than certain specialty fasteners.
While the Company currently maintains alternative sources for raw materials and
such component parts, the Company's businesses are subject to the risk of price
fluctuations and periodic delays in the delivery of certain specialty fasteners,
raw materials and component parts. Failure by certain suppliers to continue to
supply the Company with raw materials or such component parts on commercially
reasonable terms, or at all, would have a material adverse effect on the
Company. The Company has subcontracted production of some component parts
incorporated into its products to third-party manufacturers and receives a
majority of the products sold by Logistics from third-party manufacturers.
Accordingly, the Company is dependent on the ability of such manufacturers,
among other things, to meet stringent performance and quality specifications and
to conform to delivery schedules. Failure by such third-party manufacturers to
comply with these and other requirements could have a material adverse effect on
the Company's financial condition, liquidity and results of operations. See
"Business -- Raw Materials and Suppliers."
COMPETITION
The markets for the Company's manufactured products are highly competitive.
Certain of the Company's competitors are large companies that have greater
financial resources than the Company. Management believes that the principal
competitive factors in Manufactured Products are product quality and conformity
to customer specifications, design and engineering capabilities, product
development, timeliness of delivery and price. The rapidly evolving nature of
the markets in which the Company competes may attract new entrants as they
perceive opportunities, and the Company's competitors may foresee the course of
market development more accurately than the Company. In addition, the Company's
competitors may develop products that are superior to the Company's products or
may adapt more quickly than the Company to new technologies or evolving customer
requirements. Logistics competes with over 2,500 domestic full-line industrial
fastener distributors and other domestic distributors that offer fasteners in
addition to other products, as well as a number of fastener manufacturers, who,
in certain circumstances, may sell directly to OEMs. Recent trends by OEMs to
limit their number of outside vendors and moderate growth in the industrial
fastener industry have resulted in increased competition as many manufacturers
and distributors have reduced prices to compete more effectively. Management
expects competitive pressures in the Company's markets to remain strong. Such
pressures arise from existing competitors, other companies that may enter the
Company's existing or future markets and, in certain cases, the Company's
customers, which may decide to move production in-house of certain items sold by
the Company. There can be no assurance that the Company will be able to compete
successfully with its existing competitors or with new competitors. Failure to
compete successfully could have a material adverse effect on the Company's
financial condition, liquidity and results of operation. See "Business."
PRODUCT LIABILITY
The Company's businesses expose it to potential product liability risks
that are inherent in the design, manufacture and sale of its products and
products of third-party vendors that it uses or resells. While the Company
currently maintains what management believes to be suitable and adequate product
liability insurance, there can be no assurance that it will be able to maintain
such insurance on acceptable terms or that any such insurance will provide
adequate protection against potential liabilities. In the event of a claim
against the Company, a lack of sufficient insurance coverage could have a
material adverse effect on the Company's financial condition, liquidity and
results of operations. Moreover, even if the Company maintains adequate
insurance, any successful claim could have a material adverse effect on the
Company's financial condition, liquidity and results of operations. See
"Business -- Legal Matters."
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<PAGE> 22
ENVIRONMENTAL COMPLIANCE
The Company is subject to a variety of environmental laws including those
which regulate the use, handling, treatment, storage, discharge and disposal of
substances and hazardous wastes used or generated in the Company's manufacturing
processes. A failure by the Company to comply with present and future
environmental laws could subject it to future liabilities or the suspension of
production. Such environmental laws could also restrict the Company's ability to
expand its facilities or could require the Company to acquire costly equipment
or to incur other significant expenses in connection with its manufacturing
processes. Remediation is currently required at the Company's Kent, Ohio
facility. Management believes compliance with existing laws and the cost of such
remediation efforts will not have a material adverse impact on the Company's
financial condition, liquidity and results of operations. However, material
future expenditures may be necessary if compliance standards change or material
unknown conditions are discovered. See "Business -- Environmental Regulations."
GOVERNMENT REGULATION; FASTENER QUALITY ACT
The Fastener Quality Act of 1991 (the "Fastener Act") regulates the
manufacture, importation and distribution of certain high-grade industrial
fasteners in the United States. Implementation of the Fastener Act, which is
scheduled for May 1998, will require certain testing, certification and
recordkeeping requirements by the manufacturers, importers and distributors of
such fasteners. As a result, the Company and other fastener suppliers will be
required to maintain records and product tracking systems and may be required to
comply with requirements imposed during the implementation of the Fastener Act.
The Company has tracking and traceability systems, which, to date, have not
materially increased expenses. However, there can be no assurance that future
regulations will not result in materially increased costs for the Company.
DEPENDENCE ON INFORMATION SYSTEMS
The Company believes that its computer systems are an integral part of its
Manufactured Products and Logistics businesses and certain growth strategies are
contingent upon the Company's computer systems. The Company depends on its
information systems to process orders, manage inventory and accounts receivable
collections, purchase products, maintain cost-effective operations, route and
reroute orders and provide superior service to its customers. There can be no
assurance that a disruption in the operation of the Company's information
systems used by Logistics, including the failure of the supply chain management
software to function properly, or those used by Manufactured Products will not
occur. Any such disruption could have a material adverse effect on the Company's
financial condition, liquidity and results of operations.
LABOR RELATIONS
The Company is a party to nine collective bargaining agreements with
various labor unions, five of which will expire in 1998. In the aggregate, under
those agreements the Company currently employs approximately 720 full-time
employees. The Company's inability to negotiate acceptable contracts with these
unions could result in, among other things, strikes, work stoppages or other
slowdowns by the affected workers and increased operating costs as a result of
higher wages or benefits paid to union members. In the last six years, the
Company has experienced labor strikes at two operating units of Manufactured
Products. While the Company considers its current relations with its employees
to be good, if the unionized workers were to engage in a strike, work stoppage
or other slowdown, or other employees were to become unionized, the Company
could experience a significant disruption of its operations and higher ongoing
labor costs, which could have a material adverse effect on the Company's
business, financial condition and results of operations.
LACK OF PUBLIC MARKET FOR THE NOTES; RESTRICTIONS ON RESALE
There is no existing trading market for the Notes, and the Company does not
intend to list any Notes on any securities exchange; however, Notes will be
eligible for trading in the PORTAL Market of the National Association of
Securities Dealers, Inc. The Initial Purchasers have advised the Company that
they currently intend to make a market in the Notes. The Initial Purchasers are
not obligated to do so, however, and any market-making with respect to the Notes
may be discontinued at any time without notice. In addition, any market-making
activities in the Original Notes may be limited during the pending of the
Exchange Offering.
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<PAGE> 23
Therefore, there can be no assurance as to the liquidity of any trading market
for the Notes or that an active public market for the Notes will develop. See
"The Exchange Offer."
CONSEQUENCES OF FAILURE TO EXCHANGE ORIGINAL NOTES
The Original Notes were offered and sold pursuant to exemptions from the
Securities Act. Accordingly, holders of Original Notes who do not exchange their
Original Notes for Exchange Notes pursuant to the Exchange Offer will continue
to be subject to the restrictions on transfer of such Original Notes as set
forth in the legend thereon. In general, the Original Notes may not be offered
or sold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act or
applicable state securities laws. The Company does not currently expect that it
will register the Original Notes under the Securities Act. Based on
interpretations by the staff of the Commission issued in no-action letters to
third parties, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Original Notes may be offered for resale,
resold or otherwise transferred by the Holder thereof (other than any such
Holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act), provided that such Exchange Notes are acquired in the
ordinary course of such Holder's business and such Holder has no arrangement
with any person to participate in the distribution of such Exchange Notes. Such
no-action letters are not binding interpretations of the law. The Company has
not sought, and does not currently intend to seek a no-action letter. There can
be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer. Any Holder of Original Notes
who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes would not be acting consistently with such
interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Thus, any Exchange Notes acquired by
such Holder will not be freely transferable except in compliance with the
Securities Act. Each Restricted Holder that receives Exchange Notes for its own
account in exchange for the Original Notes, where such Original Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of Distribution."
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<PAGE> 24
THE EXCHANGE OFFER
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER
The Original Notes were sold by the Company on November 25, 1997 to the
Initial Purchasers pursuant to a Purchase Agreement dated as of November 19,
1997. As a condition to the sale of the Original Notes, the Company and the
Initial Purchasers entered into the Registration Rights Agreement on November
25, 1997. Pursuant to the Registration Rights Agreement, the Company agreed
that, unless the Exchange Offer is not permitted by applicable law or Commission
policy, it would (i) file with the Commission a Registration Statement under the
Securities Act with respect to the Exchange Notes within 45 days after the Issue
Date, (ii) use its best efforts to cause such Registration Statement to become
effective under the Securities Act within 130 days after the Issue Date and
(iii) upon effectiveness of the Registration Statement, commence the Exchange
Offer, keep the Exchange Offer open for at least 30 days (or a longer period if
required by law) and deliver to the Exchange Agent Exchange Notes in the same
aggregate principal amount as the Original Notes that were tendered by holders
thereof pursuant to the Exchange Offer. Under existing Commission
interpretations, the Exchange Notes would in general be freely transferable
after the Exchange Offer without further registration under the Securities Act;
provided, that in the case of broker-dealers, a prospectus meeting the
requirements of the Securities Act be delivered as required. The Company has
agreed to make available a prospectus meeting the requirements of the Securities
Act to any broker-dealer for use in connection with any resale of any such
Exchange Notes acquired as described below for such period of 180 days after the
Expiration Date. A broker-dealer that delivers such a prospectus to purchasers
in connection with such resales will be subject to certain of the civil
liability provisions under the Securities Act, and will be subject to the
Registration Rights Agreement (including certain indemnification rights and
obligations). A copy of the Registration Rights Agreements has been incorporated
by reference as an exhibit to the Registration Statement of which this
Prospectus is a part. The Registration Statement of which this Prospectus is a
part is intended to satisfy certain of the Company's obligations under the
Registration Rights Agreement and the Purchase Agreement.
The Company is generally not required to file any registration statement to
register any outstanding Original Notes. Holders of Original Notes who do not
tender their Original Notes or whose Original Notes are tendered but not
accepted will have to rely on exemptions to registration requirements under the
securities laws, including the Securities Act, if they wish to sell their
Original Notes.
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder (other than (i) a broker-dealer who
purchases such Exchange Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) any
such holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) who exchanges Original Notes for Exchange Notes in
the ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement with any person to participate, in the
distribution of the Exchange Notes, will be allowed to resell the Exchange Notes
to the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. The Company has not
sought, and does not currently intend to seek a no-action letter. There can be
no assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer. However, if any holder acquires the Exchange
Notes in the Exchange Offer for the purpose of distributing or participating in
the distribution of the Exchange Notes or is a broker-dealer, such holder cannot
rely on the position of the staff of the Commission enumerated in certain
no-action letters issued to third parties and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale transaction, unless an exemption from registration is otherwise
available. Each broker-dealer that receives Exchange Notes for its own account
in exchange for Original Notes, where such Original Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within
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<PAGE> 25
the meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with the resales of Exchange Notes received in exchange for Original Notes where
such Original Notes were acquired by such broker-dealer as a result of
market-making or other trading activities. Pursuant to the Registration Rights
Agreement, the Company has agreed to make this Prospectus, as it may be amended
or supplemented from time to time, available to broker-dealers for use in
connection with any resale for a period of 180 days after the Expiration Date.
See "Plan of Distribution."
REGISTRATION RIGHTS; ADDITIONAL INTEREST
In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect such an Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 180 days of the date of the
Registration Rights Agreement, the Company will, at its own expense, (a) as
promptly as practicable, file a shelf registration statement covering resales of
the Notes (the "Shelf Registration Statement"), (b) use its best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act, and (c) use its best efforts to keep effective the Shelf
Registration Statement until three years after its effective date. The Company
will, in the event of the Shelf Registration Statement, provide to each holder
of the Notes copies of the prospectus which is a part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement for the
Notes has become effective and take certain other actions as are required to
permit unrestricted resales of the Notes. A holder of the Notes that sells such
Notes pursuant to the Shelf Registration Statement generally would be required
to be named as a selling securityholder in the related prospectus and to deliver
a prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Act in connection with such sales, and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such a
holder (including certain indemnification rights and obligations).
Although the Company intends to file one of the registration statements
described above, there can be no assurance that such registration statement will
be filed or, if filed, that it will become effective. If the Company fails to
comply with the above provisions or if such registration statement fails to
become effective, then, as liquidated damages, additional interest shall become
payable in respect of the Notes as follows:
If (i) the Exchange Offer Registration Statement or Shelf Registration
Statement is not filed within 45 days after the Issue Date;
(ii) an Exchange Offer Registration Statement or Shelf Registration
Statement is not declared effective within 130 days after the Issue Date;
or
(iii) either (A) the Company has not exchanged the Exchange Notes for
all Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to 60 days after the date on which the Exchange Offer
Registration Statement was declared effective or (B) the Exchange Offer
Registration Statement ceases to be effective at any time prior to the time
that the Exchange Offer is consummated or (C) if applicable, the Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
second anniversary of its effective date;
(each such event referred to in clauses (i) through (iii) above is a
"Registration Default"), then the sole remedy available to holders of the Notes
will be the immediate assessment of additional interest ("Additional Interest")
as follows: the per annum interest rate on the Notes will increase by 50 basis
points; and the per annum interest rate will increase by an additional 25 basis
points for each subsequent 90-day period during which the Registration Default
remains uncured, up to a maximum additional interest rate of 200 basis points
per annum in excess of the interest rate on the cover of this Prospectus. All
Additional Interest will be payable to holders of the Notes in cash on each June
1 and December 1, commencing with the first such date occurring after any such
Additional Interest commences to accrue, until such Registration Default is
cured. After the date on which such Registration Default is cured, the interest
rate on the Notes will revert to the interest rate originally borne by the Notes
(as shown on the cover of this Prospectus).
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<PAGE> 26
Although all material terms of the Registration Rights Agreement have been
described herein, the summary herein of certain provisions of the Registration
Rights Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the
Registration Rights Agreement, which has been incorporated by reference as an
exhibit to the Registration Statement of which this Prospectus is a part, a copy
of which will be available upon request to the Company.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept any and
all Original Notes validly tendered and not withdrawn prior to the Expiration
Date. The Company will issue $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of outstanding Original Notes
surrendered pursuant to the Exchange Offer. Holders may tender some or all of
their Original Notes pursuant to the Exchange Offer; provided, however, that
Original Notes may be tendered only in integral multiples of $1,000. The
Exchange Offer is not conditioned upon any minimum aggregate principal amount of
Original Notes being tendered for exchange.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the Exchange Notes will be registered
under the Securities Act and, therefore, will not bear legends restricting their
transfer and (ii) holders of the Exchange Notes will not be entitled to the
certain rights of holders of Original Notes under the Registration Rights
Agreement, which rights will terminate upon the consummation of the Exchange
Offer. The Exchange Notes will evidence the same debt as the Original Notes
(which they replace) and will be issued under, and be entitled to the benefits
of, the Indenture, which also authorized the issuance of the Original Notes,
such that all outstanding Notes will be treated as a single class of debt
securities under the Indenture.
Interest on the Exchange Notes will accrue from the last interest payment
date on which interest was paid on the Original Notes surrendered in exchange
therefor or, if no interest has been paid, from November 25, 1997. Accordingly,
registered holders of Exchange Notes on the relevant record date for the first
interest payment date following the consummation of the Exchange Offer will
receive interest accruing from the last interest payment date on which interest
was paid or, if no interest has been paid on the Notes, from November 25, 1997.
Original Notes accepted for exchange will cease to accrue interest from and
after the date of the consummation of the Exchange Offer. Holders whose Original
Notes are accepted for exchange will not receive any payment in respect of
interest on such Original Notes otherwise payable on any interest payment date,
the record date for which occurs on or after consummation of the Exchange Offer.
As of the date of this Prospectus, $150,000,000 aggregate principal amount
of the Original Notes are outstanding and registered in the name of Cede & Co.,
as nominee for the Depository Trust Company ("DTC"). Only a registered holder of
the Original Notes (or such holder's legal representative or attorney-in-fact)
as reflected on the records of the Trustee under the Indenture may participate
in the Exchange Offer. There will be no fixed record date for determining
registered holders of the Original Notes entitled to participate in the Exchange
Offer.
Holders of the Original Notes do not have any appraisal or dissenters'
rights under the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder.
The Company shall be deemed to have accepted validly tendered Original
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders of Original Notes for the purposes of receiving the Exchange Notes from
the Company.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, or due to the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Original Notes will be
returned without expense to the tendering holders thereof (or in the case of
Original Notes tendered by book-entry transfer, such Original Notes will be
credited to the account of such holder maintained at the DTC), as promptly as
practicable after the expiration or termination of the Exchange Offer.
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<PAGE> 27
Holders who tender Original Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See " -- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; TERMINATION
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1998 [the 21st business day following the commencement of the
Exchange Offer] unless the Company, in its sole discretion, extends the Exchange
Offer (for a maximum of an additional 20 business days), in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended.
In order to extend the Exchange Offer the Company will notify the Exchange
Agent of any extension by oral (promptly confirmed in writing) or written notice
and will make a public announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date of the Exchange Offer. Without limiting the manner in which the Company may
choose to make a public announcement of any delay, extension, amendment or
termination of the Exchange Offer, the Company shall have no obligation to
publish, advertise or otherwise communicate any such public announcement, other
than by making a timely release to an appropriate news agency.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, (ii) to extend the Exchange Offer, (iii) if any
conditions set forth below under "-- Certain Conditions to the Exchange Offer"
shall not have been satisfied, to terminate the Exchange Offer by giving oral or
written notice of such delay, extension or termination to the Exchange Agent or
(iv) to amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders of
Original Notes, and the Company will extend the Exchange Offer for a period of
five to ten business days, depending upon the significance of the amendment and
the manner of disclosure to such registered holders, if the Exchange Offer would
otherwise expire during such five to ten business day period. The rights
reserved by the Company in this paragraph are in addition to the Company's
rights set forth below under the caption "-- Certain Conditions to the Exchange
Offer."
If the Company extends the period of time during which the Exchange Offer
is open, or if it is delayed in accepting for exchange of, or in issuing and
exchanging the Exchange Notes for, any Original Notes, or is unable to accept
for exchange of, or issue Exchange Notes for, any Original Notes pursuant to the
Exchange Offer for any reason, then, without prejudice to the Company's rights
under the Exchange Offer, the Exchange Agent may, on behalf of the Company,
retain all Original Notes tendered, and such Original Notes may not be withdrawn
except as otherwise provided below in "-- Withdrawal of Tenders." The adoption
by the Company of the right to delay acceptance for exchange of, or the issuance
and the exchange of the Exchange Notes, for any Original Notes is subject to
applicable law, including Rule 14e-1(c) under the Exchange Act, which requires
that the Company pay the consideration offered or return the Original Notes
deposited by or on behalf of the holders thereof promptly after the termination
or withdrawal of the Exchange Offer.
PROCEDURES FOR TENDERING
Only a registered holder of Original Notes may tender such Original Notes
in the Exchange Offer. To tender in the Exchange Offer, a holder must complete,
sign and date the Letter of Transmittal, or facsimile thereof, have the
signature thereon guaranteed if required by the Letter of Transmittal and mail
or otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent at the address set forth below under "-- Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of a book-entry transfer of such
Notes, if such procedure is available, into the Exchange Agent's account at DTC
pursuant to the procedure for book-entry transfer described below, must be
received by the
22
<PAGE> 28
Exchange Agent prior to the Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described below.
Any financial institution that is a participant in DTC's Book-Entry
Transfer Facility system may make book-entry delivery of the Original Notes by
causing DTC to transfer such Original Notes into the Exchange Agent's account in
accordance with DTC's procedure for such transfer. Although delivery of Original
Notes may be effected through book-entry transfer into the Exchange Agent's
account at DTC, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, must, in any
case, be transmitted to and received or confirmed by the Exchange Agent at its
addresses set forth under "-- Exchange Agent" below prior to 5:00 p.m., New York
City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE
WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute a binding agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE
EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES
SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner of the Original Notes whose Original Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owners's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Original Notes, either make appropriate
arrangements to register ownership of the Notes in such owner's name (to the
extent permitted by the Indenture) or obtain a properly completed assignment
from the registered holder. The transfer of registered ownership may take
considerable time.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Original Notes (which term includes any participants in
DTC whose name appears on a security position listing as the owner of the
Original Notes) or if delivery of the Exchange Notes is to be made to a person
other than the registered holder, such Original Notes must be endorsed or
accompanied by a properly completed bond power, in either case signed by such
registered holder as such registered holder's name appears on such Original
Notes with the signature on the Original Notes or the bond power guaranteed by
an Eligible Institution (as defined below).
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "-- Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution unless the Original Notes tendered pursuant thereto
are tendered (i) by a registered holder who has not completed the box entitled
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be made by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States, or another "Eligible Guarantor Institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (any of the foregoing,
an "Eligible Institution").
23
<PAGE> 29
If the Letter of Transmittal or any Original Notes or assignments are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may utilize DTC's Automated Tender Offer
Program to tender Original Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Original Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Original Notes not properly tendered or any Original Notes, the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Original Notes must be cured within such time as the Company shall determine.
Although the Company intends to request the Exchange Agent to notify holders of
defects or irregularities with respect to tenders of Original Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Original Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived.
While the Company has no present plan to acquire any Original Notes which
are not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Original Notes which are not tendered pursuant to the
Exchange Offer, the Company reserves the right in its sole discretion to
purchase or make offers for any Original Notes that remain outstanding
subsequent to the Expiration Date or, if any of the conditions set forth below
under "-- Certain Conditions to the Exchange Offer" shall not have been
satisfied, to terminate the Exchange Offer and, to the extent permitted by
applicable law, purchase Original Notes in the open market, in privately
negotiated transactions or otherwise. The terms of any such purchases or offers
could differ from the terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the Exchange Notes to be acquired by the holder of the Original
Notes in connection with the Exchange Offer are being acquired by the holder in
the ordinary course of business of the holder, (ii) the holder has no
arrangement or understanding with any person to participate in the distribution
of Exchange Notes, (iii) the holder acknowledges and agrees that any person who
is a broker-dealer registered under the Exchange Act or is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the staff of the Commission
set forth in certain no-action letters, (iv) the holder understands that a
secondary resale transaction described in clause (iii) above and any resales of
Exchange Notes obtained by such holder in exchange for Original Notes acquired
by such holder directly from the Company should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission, and (v) the holder is not an "affiliate," as defined in Rule 405 of
the Securities Act, of the Company. If the holder is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Original Notes that
were acquired as a result of market-making activities or other trading
activities, the holder is required to acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the holder
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
24
<PAGE> 30
RETURN OF NOTES
If any tendered Original Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Original Notes are
withdrawn or are submitted for a greater principal amount than the holders
desire to exchange, such unaccepted, withdrawn or non-exchanged Original Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Original Notes tendered by book-entry transfer into the Exchange Agent's
account at DTC pursuant to the book-entry transfer procedures described below,
such Original Notes will be credited to an account maintained with DTC) as
promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Original Notes at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus, and any financial institution
that is a participant in DTC's system may make book-entry delivery of Original
Notes by causing DTC to transfer such Original Notes into the Exchange Agent's
account at DTC in accordance with DTC's procedures for transfer. However,
although delivery of Original Notes may be effected through book-entry transfer
at DTC, the Letter of Transmittal or facsimile thereof, with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address set forth below
under "-- Exchange Agent" on or prior to the Expiration Date or pursuant to the
guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original
Notes are not immediately available or (ii) who cannot deliver their Original
Notes (or complete the procedures for book-entry transfer), the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Original Notes (if
available) and the principal amount of Original Notes tendered, stating
that the tender is being made thereby guaranteeing that, within five New
York Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or a facsimile thereof) together with the certificate(s)
representing the Original Notes in proper form for transfer (or a
confirmation of a book-entry transfer into the Exchange Agent's account at
DTC of Original Notes delivered electronically), and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Original
Notes in proper form for transfer (or a confirmation of a book-entry
transfer into the Exchange Agent's account at DTC of Original Notes
delivered electronically), and all other documents required by the Letter
of Transmittal are received by the Exchange Agent within five New York
Stock Exchange trading days after the Expiration Date.
Upon request to the exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
25
<PAGE> 31
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Original Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Original Notes to be withdrawn (the "Depositor"), (ii) identify the Original
Notes to be withdrawn (including the certificate number or numbers (if
applicable) and principal amount of such Original Notes), and (iii) be signed by
the holder in the same manner as the original signature on the Letter of
Transmittal by which such Original Notes were tendered (including any required
signature guarantees). All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company in
its sole discretion, whose determination shall be final and binding on all
parties. Any Original Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be issued
with respect thereto unless the Original Notes so withdrawn are validly
retendered. Properly withdrawn Notes may be retendered by following one of the
procedures described above under "-- Procedures for Tendering" at any time prior
to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Original Notes not theretofore accepted for exchange, and may terminate or amend
the Exchange Offer as provided herein before the acceptance of such Original
Notes, if any of the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the Exchange Offer which, in
the reasonable judgment of the Company, might impair the ability of the Company
to proceed with the Exchange Offer or have a material adverse effect on the
contemplated benefits of the Exchange Offer to the Company or there shall have
occurred any material adverse development in any existing action or proceeding
with respect to the Company or any of its subsidiaries; or
(b) there shall have been any material change, or development involving a
prospective change, in the business or financial affairs of the Company or any
of its subsidiaries which, in the reasonable judgment of the Company, could
reasonably be expected to materially impair the ability of the Company to
proceed with the Exchange Offer or materially impair the contemplated benefits
of the Exchange Offer to the Company; or
(c) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation which, in the judgment of the Company, could reasonably be
expected to materially impair the ability of the Company to proceed with the
Exchange Offer or materially impair the contemplated benefits of the Exchange
Offer to the Company; or
(d) any governmental approval which the Company shall, in its reasonable
discretion, deem necessary for the consummation of the Exchange Offer as
contemplated hereby shall not have been obtained.
If the Company determines in its reasonable discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Original
Notes and return all tendered Original Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Original Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Original Notes (see "-- Withdrawal of Tenders") or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Original Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders of the Original Notes, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the
26
<PAGE> 32
significance of the waiver and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business day period.
Holders may have certain rights and remedies against the Company under the
Registration Rights Agreement should the Company fail to consummate the Exchange
Offer, notwithstanding a failure of the conditions stated above. Such conditions
are not intended to modify those rights or remedies in any respect.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
condition or may be waived by the Company in whole or in part at any time and
from time to time in the Company's reasonable discretion. The failure by the
Company at any time to exercise the foregoing rights shall not be deemed a
waiver of any such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Original Notes eligible to participate in this
Exchange Offer will terminate upon consummation of the Exchange Offer except
with respect to the Company's continuing obligations (i) to indemnify the
holders (including any broker-dealers) and certain parties related to the
holders against certain liabilities (including liabilities under the Securities
Act), (ii) to provide, upon the request of any holder of a transfer-restricted
Original Note, the information required by Rule 144A(d)(4) under the Securities
Act in order to permit resales of such Original Notes pursuant to Rule 144A,
(iii) to use its best efforts to keep the Registration Statement effective to
the extent necessary to ensure that it is available for resales of transfer
restricted Notes by broker-dealers for a period of 180 days from the date on
which the Registration Statement is declared effective and (iv) to provide
copies of the latest version of the Prospectus to broker-dealers upon their
request for a period of 180 days from the date on which the Registration
Statement is declared effective. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
EXCHANGE AGENT
Norwest Bank Minnesota, National Association has been appointed as Exchange
Agent for the Exchange Offer. All questions and requests for assistance as well
as all correspondence in connection with the Exchange Offer and the Letter of
Transmittal should be addressed to the Exchange Agent, as follows:
By Registered or Certified Mail:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
P.O. Box 1517
Minneapolis, MN 55480-1517
By Hand:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
Northstar East, 12th Floor
608 2nd Avenue
Minneapolis, MN 55402
By Overnight Courier:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
Norwest Center
Sixth and Marquette
Minneapolis, MN 55479-0113
By Facsimile:
Norwest Bank Minnesota, National Association
Corporate Trust Operations
(612) 667-4927
Confirm by telephone:
(612) 667-9764
Requests for additional copies of this Prospectus, the Letter of
Transmittal or the Notice of Guaranteed Delivery should be directed to the
Exchange Agent.
27
<PAGE> 33
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager or other soliciting agent
in connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptance of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
The cash expenses to be incurred in connection with the offering of the
Original Notes and the Exchange Notes will be paid by the Company and are
estimated in the aggregate to be approximately $637,500. Such expenses include
fees and expenses of the Exchange Agent and Trustee, accounting and legal fees
and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Original Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes, or Original Notes for principal amounts not
tendered or acceptable for exchange, are to be delivered to, or are to be issued
in the name of, any person other than the registered holders of the Original
Notes tendered, or if tendered Original Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a transfer
tax is imposed for any reason other than the exchange of Original Notes pursuant
to the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder of Original
Notes.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Original Notes as reflected in the Company's accounting records on the date of
the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized. The expenses of the Exchange Offer will be amortized over the term
of the Exchange Notes.
CONSEQUENCE OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Original
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Original Notes which are not exchanged for the Exchange Notes pursuant
to the Exchange Offer will remain restricted securities. Accordingly, such
Original Notes may be resold only (i) to a person whom the seller reasonably
believes is a qualified institutional buyer (as defined in Rule 144A under the
Securities Act) in a transaction meeting the requirements of Rule 144A, (ii) in
a transaction meeting the requirements of Rule 144 under the Securities Act,
(iii) outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (v) to the Company
or (vi) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any state of the United States
or any other applicable jurisdiction.
28
<PAGE> 34
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange
Original Notes in like principal amount, the terms of which are substantially
identical to the Exchange Notes. All Original Notes surrendered in exchange for
Exchange Notes will be retired and cancelled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any increase in
the indebtedness of the Company.
The following table summarizes the sources and uses of funds in connection with
the Refinancing as of November 25, 1997 (dollars in thousands):
<TABLE>
<S> <C>
SOURCES OF FUNDS:
Original Notes.......................................... $150,000
New Credit Facility..................................... 16,184
--------
Total sources of funds.......................... $166,184
========
USES OF FUNDS:
Repayment of Existing Credit Facility(a)................ $138,413
Repayment of Convertible Senior Subordinated
Debentures(b)........................................ 23,196
Estimated fees and expenses............................. 4,575
--------
Total uses of funds............................. $166,184
========
</TABLE>
- ---------------
(a) The Existing Credit Facility bore interest at rate of 6.67% as of September
30, 1997. The amount shown above includes accrued interest of $0.7 million.
(b) The Convertible Senior Subordinated Debentures bear interest at a rate of
7.25% per annum and have a final maturity of June 15, 2004. The amount shown
above includes a redemption premium of $1.3 million and accrued interest of
$0.8 million. The Company mailed redemption notices to the holders of the
Convertible Senior Subordinated Debentures and the Convertible Senior
Subordinated Debentures will be redeemed on December 24, 1997. The indenture
governing the Convertible Senior Subordinated Debentures contains a covenant
prohibiting the issuance of the Notes. The issuance of the Notes will not
constitute an event of default under such indenture, as the Convertible
Senior Subordinated Debentures will be redeemed prior to the time an event
of default could occur thereunder. However, if there is a delay in the
redemption of the Convertible Senior Subordinated Debentures, the issuance
of the Notes may constitute an event of default under the indenture
governing the Convertible Senior Subordinated Debentures. In addition,
failure to redeem or retire the Convertible Senior Subordinated Debentures
by December 26, 1997 will constitute an Event of Default under the Indenture
governing the Notes.
29
<PAGE> 35
CAPITALIZATION
The following table sets forth the historical consolidated capitalization
of the Company and its Subsidiaries at September 30, 1997, and the pro forma
consolidated capitalization as adjusted to reflect the Refinancing and the
acquisition of Arcon. This table should be read in conjunction with the
information contained in "Use of Proceeds," "Unaudited Pro Forma Consolidated
Financial Data," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" as well as the Company's consolidated
financial statements and notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-------------------------------------------------------
COMPANY ARCON REFINANCING COMPANY
ACTUAL ACTUAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents...................... $ 3,786 $ (775) $ (511) $ 2,500
======== ======== ======== ========
Existing Credit Facility....................... $ 129,750 $ 4,810 $(134,560) $ --
New Credit Facility(a)......................... -- -- 11,894 11,894
Other debt(b).................................. 3,249 -- -- 3,249
Convertible Senior Subordinated Debentures..... 21,125 -- (21,125) --
Notes offered hereby........................... -- -- 150,000 150,000
-------- -------- -------- --------
Total debt................................... 154,124 4,810 6,209 165,143
Shareholders' equity........................... 128,015 -- (1,392) 126,623
-------- -------- -------- --------
Total capitalization......................... $ 282,139 $ 4,810 $ 4,817 $ 291,766
======== ======== ======== ========
</TABLE>
- ---------------
(a) The New Credit Facility is a $50.0 million senior unsecured revolving credit
facility. See "Description of Other Indebtedness -- New Credit Facility."
(b) Other debt is comprised primarily of state loans and capital leases. See
"Description of Other Indebtedness."
30
<PAGE> 36
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Consolidated Balance Sheet as of
September 30, 1997 and Unaudited Pro Forma Consolidated Income Statement Data
for the nine months ended September 30, 1997 and the year ended December 31,
1996 are based on the historical consolidated financial statements of the
Company. The Unaudited Pro Forma Consolidated Balance Sheet is adjusted to give
effect to the Refinancing and the acquisition of Arcon as if these events had
occurred on September 30, 1997. The Unaudited Pro Forma Consolidated Income
Statement Data are adjusted to give effect to the Refinancing and the 1997
Acquisitions as if these events occurred as of the beginning of the periods
presented. The Unaudited Pro Forma Consolidated Income Statement Data include
the historical operations of the 1997 Acquisitions prior to the dates the
Company made such acquisitions, using the purchase method of accounting. The pro
forma operating results are presented for informational purposes only and are
not necessarily indicative of the operating results that would have been
achieved had the 1997 Acquisitions actually occurred at the beginning of each
period presented, nor do they purport to indicate the results of future
operations.
The Unaudited Pro Forma Consolidated Financial Data are based on the
assumptions set forth in the notes to such statements and should be read in
conjunction with the consolidated financial statements and notes thereto of the
Company included elsewhere in this Prospectus.
31
<PAGE> 37
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ARCON
COMPANY ACQUISITION COMPANY REFINANCING COMPANY
ACTUAL ADJUSTMENTS(A) COMBINED ADJUSTMENTS PRO FORMA
-------- -------------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...... $ 3,786 $ (775) $ 3,011 $ (511)(b) $ 2,500
Accounts receivable, net....... 82,234 558 82,792 -- 82,792
Inventories.................... 111,720 4,694 116,414 -- 116,414
Deferred taxes................. 4,640 -- 4,640 -- 4,640
Other current assets........... 11,222 88 11,310 -- 11,310
-------- ------ -------- ------- --------
Total current assets.... 213,602 4,565 218,167 (511) 217,656
Property, plant and equipment.... 126,716 716 127,432 -- 127,432
Less accumulated depreciation.... (58,719) -- (58,719) -- (58,719)
-------- ------ -------- ------- --------
67,997 716 68,713 -- 68,713
Other assets:
Excess purchase price over net
assets acquired, net......... 68,705 3,000 71,705 -- 71,705
Deferred taxes................. 13,100 -- 13,100 853(c) 13,953
Other.......................... 25,378 -- 25,378 4,575(d) 28,976
-- -- -- (977)(c) --
-------- ------ -------- ------- --------
$388,782 $8,281 $397,063 $ 3,940 $401,003
======== ====== ======== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable......... $ 41,161 $2,061 $ 43,222 $ -- $ 43,222
Accrued expenses............... 31,602 1,410 33,012 (877)(e) 32,135
Current portion of long-term
liabilities.................. 1,750 -- 1,750 -- 1,750
Current portion of long-term
debt......................... 5,415 -- 5,415 (5,000)(f) 415
-------- ------ -------- ------- --------
Total current
liabilities........... 79,928 3,471 83,399 (5,877) 77,522
Long-term liabilities:
Long-term debt................. 148,709 4,810 153,519 11,209(g) 164,728
Other postretirement
benefits..................... 27,416 -- 27,416 -- 27,416
Other liabilities.............. 4,714 -- 4,714 -- 4,714
-------- ------ -------- ------- --------
180,839 4,810 185,649 11,209 196,858
Shareholders' equity:
Common stock................... 10,960 -- 10,960 -- 10,960
Additional paid-in capital..... 53,481 -- 53,481 -- 53,481
Retained earnings.............. 65,506 -- 65,506 (1,392)(c) 64,114
Treasury stock, at cost........ (1,932) -- (1,932) -- (1,932)
-------- ------ -------- ------- --------
128,015 -- 128,015 (1,392) 126,623
-------- ------ -------- ------- --------
$388,782 $8,281 $397,063 $ 3,940 $401,003
======== ====== ======== ======= ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet.
32
<PAGE> 38
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
(a) Reflects purchase accounting adjustments relating to the acquisition of Arcon as of
October 3, 1997.
(b) Reflects the portion of the Company's cash on hand used in connection with the
Refinancing. See "Use of Proceeds."
(c) Reflects the following adjustments related to the Refinancing:
Write-off of deferred financing costs -- existing indebtedness.............. $ (977)
Redemption premium -- Convertible Senior Subordinated Debentures............ (1,268)
Related income tax effect................................................... 853
-------
-
Total adjustment....................................................... $(1,392)
=======
(d) Reflects financing costs and expenses incurred in connection with the Refinancing.
(e) Reflects the accrued and unpaid interest on the Existing Credit Facility and Convertible
Senior Subordinated Debentures paid in connection with the Refinancing.
(f) Reflects the repayment of the portion of the Existing Credit Facility included in
current portion of long-term debt.
(g) Reflects the following adjustments to long-term debt resulting from the Refinancing:
Gross proceeds from the Original Notes....................................... $150,000
Borrowings under the New Credit Facility..................................... 11,894
Repayment of the Existing Credit Facility included in long-term debt......... (129,560)
Repayment of the Convertible Senior Subordinated Debentures.................. (21,125)
--------
Total adjustment........................................................ $ 11,209
========
</TABLE>
33
<PAGE> 39
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT DATA
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
------------------------- PRO FORMA
1997 ACQUISITION PRO FORMA REFINANCING AS
COMPANY(A) ACQUISITIONS(B) ADJUSTMENTS(C) COMPANY ADJUSTMENTS ADJUSTED
--------- ------------ ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Net sales.......................... $311,916 $67,614 $ -- $379,530 $ -- $379,530
Cost of products sold.............. 262,060 48,645 (2,202)(d) 308,503 -- 308,503
-------- ------- ------- -------- ------- --------
Gross profit..................... 49,856 18,969 2,202 71,027 -- 71,027
Selling, general and
administrative expenses.......... 31,613 17,679 (1,788)(e) 48,159 -- 48,159
-- -- 655(f) -- -- --
-------- ------- ------- -------- ------- --------
Operating income................. 18,243 1,290 3,335 22,868 -- 22,868
Other income....................... (320) -- -- (320) -- (320)
Interest expense................... 6,078 525 -- 6,603 5,006(g) 11,609
-------- ------- ------- -------- ------- --------
Income from continuing
operations before income
taxes......................... 12,485 765 3,335 16,585 (5,006) 11,579
Income taxes....................... 4,682 92 1,267(h) 6,041 (1,902)(h) 4,139
-------- ------- ------- -------- ------- --------
Income from continuing
operations.................... $ 7,803 $ 673 $ 2,068 $ 10,544 $(3,104) $ 7,440
======== ======= ======= ======== ======= ========
OTHER FINANCIAL DATA:
Operating income................... $ 18,243 $ 1,290 $ 3,335 $ 22,868 -- $ 22,868
Plus: Depreciation and
amortization..................... 7,371 1,539 655(f) 9,565 -- 9,565
-------- ------- ------- -------- ------- --------
EBITDA(i).......................... $ 25,614 $ 2,829 $ 3,990 $ 32,433 $ -- $ 32,433
======== ======= ======= ======== ======= ========
Capital expenditures............... $ 9,244 $ 1,196 $ -- $ 10,440 $ -- $ 10,440
Interest expense................... 6,078 525 -- 6,603 5,006 11,609
Ratio of earnings to fixed
charges(j)....................... 2.6x -- -- -- -- 1.9x
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Income Statement
Data.
34
<PAGE> 40
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT DATA
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(a) Historical results for the nine months ended September 30, 1997 include the
results for the 1997 Acquisitions (excluding Arcon) from their respective
closing dates: (i) Green Bearing as of January 14, 1997; (ii) Feco as of
February 7, 1997; (iii) Delo as of May 27, 1997; and (iv) Arden as of July
25, 1997.
(b) The following table reflects the historical operating results for the 1997
Acquisitions for the period from January 1, 1997 to the earlier of their
respective dates of acquisition by the Company or September 30, 1997:
<TABLE>
<CAPTION>
FECO
AND
GREEN
ARDEN ARCON DELO BEARING TOTAL
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Net sales.......................... $50,219 $10,719 $5,080 $1,596 $67,614
Cost of products sold.............. 36,592 7,294 3,597 1,162 48,645
------- ------- ------ ------ -------
Gross profit..................... 13,627 3,425 1,483 434 18,969
Selling, general and administrative
expenses......................... 13,392 3,393 586 308 17,679
------- ------- ------ ------ -------
Operating income................. 235 32 897 126 1,290
Interest expense................... -- 454 31 40 525
------- ------- ------ ------ -------
Income (loss) before income
taxes......................... 235 (422) 866 86 765
Income taxes....................... 92 -- -- -- 92
------- ------- ------ ------ -------
Net income (loss)................ $ 143 $ (422) $ 866 $ 86 $ 673
======= ======= ====== ====== =======
OTHER FINANCIAL DATA:
EBITDA............................. $ 1,288 $ 384 $1,016 $ 141 $ 2,829
Depreciation and amortization...... 1,053 352 119 15 1,539
Capital expenditures............... 304 553 336 3 1,196
</TABLE>
(c) Reflects adjustments for certain cost savings that management believes would
have been realized and amortization of intangible assets that would have
been incurred had the Company consummated the 1997 Acquisitions as of
January 1, 1997.
(d) Reflects the following cost saving adjustments to cost of products sold in
conjunction with the 1997 Acquisitions:
<TABLE>
<S> <C>
Elimination of operating personnel............................................. $(1,725)
Elimination of redundant branch facilities..................................... (477)
-------
Total adjustment..................................................... $(2,202)
=======
</TABLE>
(e) Reflects the following cost saving adjustments to selling, general and
administrative expenses in conjunction with the 1997 Acquisitions:
<TABLE>
<S> <C>
Elimination of corporate personnel............................................. $(1,331)
Elimination of redundant corporate facilities.................................. (457)
-------
Total adjustment..................................................... $(1,788)
=======
</TABLE>
(f) Reflects additional amortization of goodwill over 25 years as a result of
the 1997 Acquisitions.
35
<PAGE> 41
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT DATA -- CONTINUED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(g) Reflects the following adjustments to interest expense:
<TABLE>
<S> <C>
Interest expense -- Notes offered hereby(1).................................... $10,406
Interest expense -- New Credit Facility(2)..................................... 658
Interest expense -- other debt................................................. 160
Amortization of deferred financing costs....................................... 385
-------
Pro forma interest expense................................................... 11,609
Less: historical interest expense.............................................. (6,603)
-------
Total adjustment..................................................... $ 5,006
=======
</TABLE>
- ---------------
(1) Reflects an interest rate of 9.25%.
(2) Assumes an interest rate of 7.375%.
(h) Adjustment necessary to reflect income tax expense at the Company's
effective income tax rate of 38%.
(i) EBITDA is defined as earnings from continuing operations before interest,
income taxes, depreciation, amortization, other income and non-recurring
items. EBITDA is not a measure of performance under GAAP. While EBITDA
should not be considered in isolation or as a substitute for net income,
cash flows from operating activities and other income or cash flow statement
data prepared in accordance with GAAP or as a measure of profitability or
liquidity, management understands that EBITDA is customarily used as an
indication of a company's ability to incur and service debt. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of other measures of liquidity and operations
that are covered by the audited financial statements. EBITDA as defined
herein may not be comparable to other similarly titled measures of other
companies.
(j) Earnings are defined as income from continuing operations before income
taxes and fixed charges. Fixed charges are defined as interest expense and a
portion of rental expense representing the interest factor, which the
Company estimates to be one-third of rental expense, and amortization of
deferred financing costs.
36
<PAGE> 42
UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT DATA
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------
1997 ACQUISITION PRO FORMA REFINANCING PRO FORMA
COMPANY ACQUISITIONS(A) ADJUSTMENTS(B) COMPANY ADJUSTMENTS AS ADJUSTED
---------- --------------- -------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Net sales......................... $347,679 $ 129,014 $ -- $ 476,693 $ -- $ 476,693
Cost of products sold............. 289,400 93,356 (4,253)(c) 378,503 -- 378,503
-------- --------- -------- --------- ------- ---------
Gross profit.................... 58,279 35,658 4,253 98,190 -- 98,190
Selling, general and
administrative expenses......... 38,131 35,167 (2,926)(d) 71,499 -- 71,499
-- -- 1,127(e) -- -- --
Restructuring charge.............. 2,652 -- -- 2,652 -- 2,652
-------- --------- -------- --------- ------- ---------
Operating income................ 17,496 491 6,052 24,039 -- 24,039
Other income...................... (4,204) (109) -- (4,313) -- (4,313)
Interest expense.................. 6,947 914 -- 7,861 7,619(f) 15,480
-------- --------- -------- --------- ------- ---------
Income (loss) from continuing
operations before income
taxes........................ 14,753 (314) 6,052 20,491 (7,619) 12,872
Income taxes (benefit)............ 5,060 (370) 2,300(g) 6,990 (2,895)(g) 4,095
-------- --------- -------- --------- ------- ---------
Income from continuing
operations................... $ 9,693 $ 56 $ 3,752 $ 13,501 $(4,724) $ 8,777
======== ========= ======== ========= ======= =========
OTHER FINANCIAL DATA:
Operating income.................. $ 17,496 $ 491 $ 6,052 $ 24,039 $ -- $ 24,039
Plus: Depreciation and
amortization.................... 7,998 2,448 1,127(e) 11,573 -- 11,573
Restructuring charge.............. 2,652 -- -- 2,652 -- 2,652
-------- --------- -------- --------- ------- ---------
EBITDA(h)......................... $ 28,146 $ 2,939 $ 7,179 $ 38,264 $ -- $ 38,264
======== ========= ======== ========= ======= =========
Capital expenditures.............. $ 15,590 $ 2,083 $ -- $ 17,673 $ -- $ 17,673
Interest expense.................. 6,947 914 -- 7,861 7,619 15,480
Ratio of earnings to fixed
charges(i)...................... 2.7x -- -- -- -- 1.7x
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Income Statement
Data.
37
<PAGE> 43
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT DATA
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(a) The following table reflects the 1996 historical operating results for the
1997 Acquisitions:
<TABLE>
<CAPTION>
FECO AND
ARDEN ARCON DELO GREEN BEARING TOTAL
------- ------- ------- ------------- --------
<S> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Net sales.............................. $90,496 $16,728 $10,689 $11,101 $129,014
Cost of products sold.................. 65,475 12,134 7,701 8,046 93,356
------- ------- ------- ------- --------
Gross profit......................... 25,021 4,594 2,988 3,055 35,658
Selling, general and administrative
expenses............................. 25,956 4,497 1,157 3,557 35,167
------- ------- ------- ------- --------
Operating income (loss).............. (935) 97 1,831 (502) 491
Other (income) expense................. -- 229 (338) -- (109)
Interest (income) expense.............. -- 625 (139) 428 914
------- ------- ------- ------- --------
Income (loss) before income taxes.... (935) (757) 2,308 (930) (314)
Income taxes (benefit)................. (370) -- -- -- (370)
------- ------- ------- ------- --------
Net income (loss).................... $ (565) $ (757) $ 2,308 $ (930) $ 56
======= ======= ======= ======= ========
OTHER FINANCIAL DATA:
EBITDA................................. $ 842 $ 403 $ 2,074 $ (380) $ 2,939
Depreciation and amortization.......... 1,777 306 243 122 2,448
Capital expenditures................... 1,089 607 278 109 2,083
</TABLE>
(b) Reflects adjustments for certain cost savings that management believes would
have been realized and amortization of intangible assets that would have
been incurred had the Company consummated the 1997 Acquisitions as of
January 1, 1996.
(c) Reflects the following cost saving adjustments to cost of products sold in
conjunction with the 1997 Acquisitions:
<TABLE>
<S> <C>
Elimination of operating personnel............................................. $(3,542)
Elimination of redundant branch facilities..................................... (711)
-------
Total adjustment..................................................... $(4,253)
=======
</TABLE>
(d) Reflects the following cost saving adjustments to selling, general and
administrative expenses in conjunction with the 1997 Acquisitions:
<TABLE>
<S> <C>
Elimination of corporate personnel............................................. $(2,337)
Elimination of redundant corporate facilities.................................. (589)
-------
Total adjustment..................................................... $(2,926)
=======
</TABLE>
(e) Reflects additional amortization of goodwill over 25 years as a result of
the 1997 Acquisitions.
(f) Reflects the following adjustments to interest expense:
<TABLE>
<S> <C>
Interest expense -- Notes offered hereby(1).................................... $13,875
Interest expense -- New Credit Facility(2)..................................... 877
Interest expense -- other debt................................................. 215
Amortization of deferred financing costs....................................... 513
-------
Pro forma interest expense................................................... 15,480
Less: historical interest expense.............................................. (7,861)
-------
Total adjustment..................................................... $ 7,619
=======
</TABLE>
38
<PAGE> 44
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED INCOME STATEMENT DATA -- CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
- ---------------
(1) Reflects an interest rate of 9.25%.
(2) Assumes an interest rate of 7.375%.
(g) Adjustment necessary to reflect income tax expense at the Company's
effective income tax rate of 38%.
(h) EBITDA is defined as earnings from continuing operations before interest,
income taxes, depreciation, amortization, other income and non-recurring
items. Non-recurring items include a restructuring charge of $2.7 million in
the fourth quarter of 1996 related to the consolidation of three of the
Company's consumer products manufacturing facilities into one and the
discontinuation of certain product lines. EBITDA is not a measure of
performance under GAAP. While EBITDA should not be considered in isolation
or as a substitute for net income, cash flows from operating activities and
other income or cash flow statement data prepared in accordance with GAAP or
as a measure of profitability or liquidity, management understands that
EBITDA is customarily used as an indication of a company's ability to incur
and service debt. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion of other measures of
liquidity and operations that are covered by the audited financial
statements. EBITDA as defined herein may not be comparable to other
similarly titled measures of other companies.
(i) Earnings are defined as income from continuing operations before income
taxes and fixed charges. Fixed charges are defined as interest expense and
a portion of rental expense representing the interest factor, which the
Company estimates to be one-third of rental expense, and amortization of
deferred financing costs.
39
<PAGE> 45
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The selected historical consolidated financial data set forth below for the
five years ended December 31, 1996 have been derived from the consolidated
financial statements of the Company. The consolidated financial statements for
the five years ended December 31, 1996 have been audited by Ernst & Young LLP,
independent auditors. The selected historical consolidated financial data for
the nine-month periods ended September 30, 1996 and 1997 have been derived from
unaudited consolidated financial statements of the Company, which include all
adjustments (consisting of normal recurring accruals) that management considers
necessary for a fair presentation of the financial position and results of
operations for these periods. The data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the consolidated financial statements of the Company and notes
thereto, and other financial information included elsewhere herein. The data for
the periods presented are not necessarily comparable because of acquisitions
made throughout such periods. The results of operations for the nine months
ended September 30, 1997 are not necessarily indicative of results that may be
expected for any other interim period or for the full year ending December 31,
1997.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------- --------------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED STATEMENT OF OPERATIONS
DATA:
Net sales........................... $ 67,190 $ 94,472 $129,216 $289,501 $347,679 $ 261,297 $ 311,916
Cost of products sold............... 57,734 75,892 104,225 240,871 289,400 217,293 262,060
-------- -------- -------- -------- -------- -------- --------
Gross profit...................... 9,456 18,580 24,991 48,630 58,279 44,004 49,856
Selling, general and administrative
expenses.......................... 16,182 13,968 16,838 30,020 38,131 28,314 31,613
Restructuring charge................ -- -- -- -- 2,652 -- --
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)(a)........ (6,726) 4,612 8,153 18,610 17,496 15,690 18,243
Other (income) expense.............. 1,451 -- -- (214) (4,204)(b) (1,521) (320)
Interest expense.................... 504 683 1,501 5,911 6,947 5,478 6,078
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing
operations before income
taxes........................... (8,681) 3,929 6,652 12,913 14,753 11,733 12,485
Income taxes (benefit).............. 137 242 (1,826) (6,900) 5,060 4,488 4,682
-------- -------- -------- -------- -------- -------- --------
Income (loss) from continuing
operations...................... $ (8,818) $ 3,687 $ 8,478 $ 19,813 $ 9,693 $ 7,245 $ 7,803
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA(c)........................... $ (4,548) $ 7,239 $ 11,366 $ 24,888 $ 28,146 $ 21,202 $ 25,614
Capital expenditures................ 6,091 4,992 11,749 13,632 15,590 8,600 9,244
Ratio of earnings to fixed
charges(d)........................ -- 3.9x 3.8x 2.8x 2.7x 2.7x 2.6x
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------- --------------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents........... $ 114 $ 133 $ 2,172 $ 2,662 $ 4,659 $ 2,232 $ 3,786
Working capital, as adjusted(e)..... 13,319 20,560 27,677 98,110 100,247 108,089 135,303
Total assets........................ 67,681 93,541 128,396 301,747 282,910 272,628 388,782
Total debt.......................... 12,008 25,054 32,001 118,738 82,989 77,263 154,124
Shareholders' equity................ 8,795 17,933 46,715 95,954 115,698 114,897 128,015
</TABLE>
See accompanying Notes to Selected Historical Consolidated Financial Data.
40
<PAGE> 46
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(a) Operating income (loss) is defined as net sales less cost of products sold,
selling, general and administrative expenses and a restructuring charge. In
1996, the Company incurred a restructuring charge of $2.7 million related to
the consolidation of three of the Company's consumer products manufacturing
facilities into one and the discontinuation of certain product lines.
(b) In 1996, other income was comprised of (i) a gain of $2.7 million in
connection with the full settlement of subordinated notes receivable
resulting from the sale of two manufacturing facilities and (ii) a gain of
$1.5 million on the sale of certain securities by the Company in the third
quarter of 1996.
(c) EBITDA is defined as earnings from continuing operations before interest,
income taxes, depreciation, amortization, other income and non-recurring
items. Non-recurring items include a restructuring charge of $2.7 million in
the fourth quarter of 1996 related to the consolidation of three of the
Company's consumer products manufacturing facilities into one and the
discontinuation of certain product lines. EBITDA is not a measure of
performance under GAAP. While EBITDA should not be considered in isolation
or as a substitute for net income, cash flows from operating activities and
other income or cash flow statement data prepared in accordance with GAAP or
as a measure of profitability or liquidity, management understands that
EBITDA is customarily used as an indication of a company's ability to incur
and service debt. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion of other measures of
liquidity and operations that are covered by the audited financial
statements. EBITDA as defined herein may not be comparable to other
similarly titled measures of other companies.
(d) Earnings are defined as income from continuing operations before income
taxes and fixed charges. Fixed charges are defined as interest expense and a
portion of rental expense representing the interest factor, which the
Company estimates to be one-third of rental expense, and amortization of
deferred financing costs. For 1992, the Company's earnings were insufficient
to cover fixed charges by $8.7 million.
(e) Working capital, as adjusted, is defined as total current assets excluding
cash and cash equivalents less total current liabilities excluding current
portion of long-term debt.
41
<PAGE> 47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The consolidated financial statements of the Company include the accounts
of Park-Ohio Industries, Inc. and its subsidiaries after elimination of material
intercompany transactions and balances. The historical financial information of
the Company's continuing operations is not directly comparable on a nine-month
period to nine-month period basis due to the 1997 Acquisitions. The historical
financial information of the Company's continuing operations is not directly
comparable on a year-to-year basis due to (i) the 1997 Acquisitions and (ii) the
purchase by the Company in 1995 of RB&W Corporation ("RB&W"), The Ajax
Manufacturing Company ("Ajax"), Blue Falcon Forge, Inc. ("Blue Falcon"), Cicero
Flexible Products ("Cicero"), Geneva Rubber Company ("Geneva") and Advanced
Vehicles, Inc. ("Advanced Vehicles"). RB&W, Ajax, Blue Falcon, Cicero, Geneva
and Advanced Vehicles were acquired by the Company in accordance with its
strategy to acquire and improve the operations of underperforming and
complementary manufacturing companies. In addition, the acquisition of RB&W
provided the Company with an entry into the logistics business. The subsequent
acquisitions of Arden and Arcon expanded Logistics. In 1996, the Company sold
substantially all of the assets of Bennett Industries, Inc. ("Bennett"), a
manufacturer of plastic containers, in order to focus on its remaining
manufacturing and logistics businesses. Bennett generated net sales of $81.9
million in 1995. The operating results of Bennett have been classified as
discontinued operations. Except as otherwise indicated, the following discussion
relates to the Company on an historical basis without giving pro forma effect to
the acquisition of Arcon, which occurred on October 3, 1997.
OVERVIEW
The Company operates diversified manufacturing and logistics businesses
which serve a wide variety of industrial markets. Manufactured Products designs
and manufactures a broad range of high quality products engineered for specific
customer applications. The principal customers of Manufactured Products are OEMs
and end-users in the automotive, railroad, truck and aerospace industries.
Logistics is a leading national supplier of fasteners (e.g., nuts, bolts and
screws) and other industrial products to OEMs, other manufacturers and
distributors. In connection with the supply of such industrial products,
Logistics provides a variety of value-added, cost-effective procurement
solutions. The principal customers of Logistics are in the transportation,
industrial, electrical and lawn and garden equipment industries. The Company's
diversified operations moderate the effect on the Company of downturns affecting
individual operating units and industries served. Between 1992 and 1996, the
Company has grown significantly, both internally and through acquisitions. Over
this period, the Company's net sales increased at a 50.8% CAGR, from $67.2
million to $347.7 million, income (loss) from continuing operations increased
from ($8.8) million to $9.7 million, and EBITDA increased from ($4.5) million to
$28.1 million. The Company generated pro forma net sales, pro forma income from
continuing operations and pro forma EBITDA (as defined herein) of $379.5
million, $7.4 million and $32.4 million, respectively for the nine months ended
September 30, 1997.
Growth in the Company's net sales, income from continuing operations, and
EBITDA since 1992 has been primarily attributable to the Company's strategy of
making selective acquisitions in order to complement internal growth.
Historically, the Company has acquired underperforming businesses with potential
for: (i) significant cost reductions through improved labor, supplier and
customer relations and increased purchasing power and (ii) revenue enhancement
due to better asset utilization and management practices, as well as increased
access to capital. The Company's internal growth has been driven primarily by
the addition of Logistics customers under TFS contracts and by the leveraging of
existing customer relationships at Manufactured Products.
Between 1992 and September 30, 1997, the Company's continuing operations
incurred $39.4 million of capital expenditures, the majority of which was used
to expand and upgrade existing manufacturing facilities and enhance the
Company's management information systems. Management believes that the Company's
capital expenditures in 1998 will primarily fund planned maintenance, capacity
expansion and system upgrades. Management believes that annual maintenance
capital expenditures for its existing facilities will be approximately $3
million.
42
<PAGE> 48
RESTRUCTURING CHARGES AND OTHER INCOME
Restructuring Charges. During the fourth quarter of 1996, the Company
commenced the reorganization of its consumer products manufacturing operations
which resulted in the consolidation of three manufacturing facilities into one
and the discontinuation of certain product lines. As a result of these actions,
the Company recorded a non-cash charge of $2.7 million, primarily for the
writedown of certain property, equipment and inventory to their estimated
realizable value.
Other Income. In December 1996, the Company received a lump sum payment as
full settlement of subordinated notes receivable resulting from the sale of two
manufacturing facilities. The net proceeds of $2.7 million were recorded as
other income in the fourth quarter of 1996. In the third quarter of 1996, the
Company sold certain securities, which resulted in a gain of $1.5 million. Such
gains were recorded as other income in 1996. In 1995, other income was
attributable to gains on the sale of securities.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1997 versus Nine Months Ended September 30, 1996
On August 1, 1997, the Company acquired substantially all of the shares of
Arden for $44.0 million in cash. The transaction was accounted for as a
purchase. Arden is included in the Company's Logistics segment.
On July 31, 1996, the Company completed the sale for $50.8 million in cash
of substantially all of the assets of Bennett, a manufacturer of plastic
containers, which resulted in a pre-tax gain of $13.8 million recognized in the
third quarter of 1996. The results of operations and changes in cash flow of
Bennett for the nine months ended September 30, 1996 have been presented as
discontinued operations.
Net sales from continuing operations increased by $50.6 million, or 19.4%,
from $261.3 million for the nine months ended September 30, 1996 to $311.9
million for the nine months ended September 30, 1997. Approximately 51% of this
increase was attributable to internal growth and the remainder was a result of
the 1997 Acquisitions. Of the internal sales growth, approximately 67% was
primarily attributable to the addition of TFS customers and the remainder was
due to increased orders from Manufactured Products' customers. Approximately 49%
of the growth in net sales was due to the 1997 Acquisitions, a majority of which
was attributable to the acquisition of Arden.
Gross profit from continuing operations increased by $5.9 million, or
13.4%, from $44.0 million for the nine months ended September 30, 1996 to $49.9
million for the nine months ended September 30, 1997. Of this increase, 81.9%
was attributable to the 1997 Acquisitions and 18.1% was due to internal growth.
A majority of the increase attributable to the 1997 Acquisitions was related to
Arden. The Company's consolidated gross margin from continuing operations
decreased to 16.0% for the nine months ended September 30, 1997 from 16.8% for
the nine months ended September 30, 1996. This decrease in consolidated gross
margin was primarily due to a change in the Company's revenue mix and the timing
of certain large product shipments.
Selling, general and administrative expenses from continuing operations
increased by $3.3 million, or 11.7%, from $28.3 million for the nine months
ended September 30, 1996 to $31.6 million for the nine months ended September
30, 1997. Approximately 73% of such increase was related to the 1997
Acquisitions and the remainder was attributable to higher overhead costs to
support higher sales levels. Consolidated selling, general and administrative
expenses decreased as a percentage of net sales to 10.1% for the nine months
ended September 30, 1997 from 10.8% for the nine months ended September 30, 1996
due to economies of scale resulting from higher sales volume.
The Company had other income of $1.5 million for the nine months ended
September 30, 1996 as compared to $320,000 for the nine months ended September
30, 1997, primarily due to a gain on the sale of securities.
Interest expense from continuing operations increased by $0.6 million from
$5.5 million for the nine months ended September 30, 1996 to $6.1 million for
the nine months ended September 30, 1997. This increase was primarily due to the
reclassification of approximately $0.8 million of interest expense in 1996 to
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<PAGE> 49
discontinued operations as a result of the sale of Bennett. The Company's
average debt outstanding and cost of borrowings were approximately the same in
both periods.
1996 versus 1995
On July 31, 1996, the Company completed the sale for $50.8 million in cash
of substantially all of the assets of Bennett, which resulted in a pre-tax gain
of $13.8 million. The results of operations and changes in cash flow of Bennett
have been classified as discontinued operations in the Company's consolidated
statements of income and cash flow for 1996 and 1995. The assets and liabilities
of Bennett were classified in the Company's consolidated balance sheet as net
assets of discontinued operations at December 31, 1995.
Net sales from continuing operations increased by $58.2 million, or 20.1%,
from $289.5 million in 1995 to $347.7 million in 1996. Of this increase,
approximately $57.5 million was due to the inclusion of the results of
acquisitions made in 1995 in the Company's consolidated results for a full year
in 1996 as compared to a partial year in 1995.
Gross profit from continuing operations increased by $9.7 million, or
20.0%, from $48.6 million in 1995 to $58.3 million in 1996. Of this increase,
$8.6 million was due to the inclusion of the results of acquisitions made in
1995 in the Company's consolidated results for a full year in 1996 as compared
to a partial year in 1995. The remaining $1.1 million increase was attributable
to gross profit improvements primarily related to Logistics' higher sales
volumes and the addition of TFS customers. The Company's consolidated gross
margin was 16.8% in 1996 and 1995.
Selling, general and administrative expenses from continuing operations
increased $8.1 million, or 27.0%, from $30.0 million in 1995 to $38.1 million in
1996. This increase was primarily a result of the inclusion of the acquisitions
made in 1995 in the Company's consolidated results for a full year in 1996 as
compared to a partial year in 1995 and higher overhead costs to support higher
sales levels. Consolidated selling, general and administrative expenses
increased as a percentage of net sales to 11.0% in 1996 from 10.4% in 1995
primarily as a result of the acquisitions consummated in 1995.
During the fourth quarter of 1996, the Company commenced the reorganization
of its consumer products manufacturing operations which resulted in the
consolidation of three manufacturing facilities into one and the discontinuation
of certain product lines. As a result of these actions, the Company recorded a
non-cash charge of $2.7 million, primarily for the writedown of certain
property, equipment and inventory to their estimated realizable value.
The Company had other income of $4.2 million in 1996 as compared to
$214,000 in 1995. In 1996, other income was comprised of (i) a gain of $2.7
million from the lump sum payment as full settlement of subordinated notes
receivable, resulting from the Company's sale of two manufacturing facilities
and (ii) a gain of $1.5 million on the sale of securities. In 1995, other income
was comprised of a gain on the sale of securities.
Interest expense from continuing operations increased $1.0 million from
$5.9 million in 1995 to $6.9 million in 1996, primarily due to higher levels of
bank debt outstanding during 1996 as compared to 1995. The Company's average
debt outstanding increased from $92.4 million in 1995 to $103.2 million in 1996.
The increase in average borrowings was caused by the acquisition of RB&W on
March 31, 1995 and higher levels of bank debt to support increased sales and
production as well as capital expenditures.
During the fourth quarter of 1995, the Company determined that utilization
of its net operating loss carryforwards was assured and therefore recorded
deferred tax assets of $8.1 million. Consequently, as of January 1, 1996, the
Company's financial statements included a provision for Federal income taxes.
Federal income tax expense from continuing operations for 1995 was reduced by
$3.7 million due to the utilization of net operating loss carryforwards. During
1996, as a result of the gain on the sale of Bennett, all net operating loss
carryforwards for tax purposes relating to the Company were fully utilized. At
December 31, 1996, subsidiaries of the Company had net operating loss
carryforwards for tax purposes of approximately $15 million, subject to certain
limitations that expire between 2001 and 2007.
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<PAGE> 50
1995 versus 1994
On March 31, 1995, the Company paid $31.0 million in cash and 2.0 million
shares of Common Stock (valued at $23.2 million) for all of the shares of RB&W,
which had indebtedness of approximately $30 million at the time of the
acquisition. The transaction was accounted for as a purchase and, accordingly,
the operations of RB&W have been included in the consolidated financial
statements of the Company since March 31, 1995. The metal forming business of
RB&W is included in the Company's Manufactured Products segment and the supply
chain management business of RB&W comprised the Company's Logistics segment in
1995.
Net sales from continuing operations increased by $160.3 million, or
124.1%, from $129.2 million in 1994 to $289.5 million in 1995. Of this increase,
$139.2 million was due to the inclusion of RB&W in the Company's consolidated
results from the date of acquisition. Of the sales increase attributable to
RB&W, $108.5 million was generated by its logistics business and $30.7 million
was generated by its metal forming business. The remainder of the sales increase
was primarily due to acquisitions of manufacturing operations made in 1995.
Gross profit from continuing operations increased $23.6 million, or 94.4%,
from $25.0 million in 1994 to $48.6 million in 1995. Substantially all of this
increase was attributable to the inclusion of RB&W in the Company's consolidated
results from the date of acquisition. The Company's consolidated gross margin
decreased to 16.8% in 1995 from 19.3% in 1994. This decrease was primarily due
to the inclusion of RB&W in the Company's consolidated results in 1995 from the
date of acquisition. In addition, gross margin in the Company's consumer
products business declined as a result of both increased raw material costs that
could not be passed through to customers and product mix changes.
Selling, general and administrative expenses from continuing operations
increased $13.2 million, or 78.6%, from $16.8 million in 1994 to $30.0 million
in 1995. This increase was primarily due to the inclusion of RB&W in the
Company's consolidated results in 1995 from the date of acquisition. The
Company's consolidated selling, general and administrative expenses as a
percentage of net sales decreased to 10.4% in 1995 as compared to 13.0% in 1994,
primarily due to economies of scale resulting from higher sales volume.
Interest expense from continuing operations increased by $4.4 million from
$1.5 million in 1994 to $5.9 million in 1995 due to higher levels of bank debt
outstanding in 1995. Average debt outstanding increased from $27.8 million in
1994 to $92.4 million in 1995. This increase in average borrowings was caused
by: (i) the acquisition of RB&W and other companies in 1995; (ii) higher levels
of bank debt to support increased sales; and (iii) the Convertible Senior
Subordinated Debentures, issued in May 1994, being outstanding for the full year
in 1995 as compared to a partial year in 1994.
The income tax benefit of $6.9 million in 1995 primarily resulted from
recording an $8.1 million reduction in the valuation allowance on deferred tax
assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs are primarily for working capital and capital
expenditures. The Company's primary sources of liquidity have been funds
provided by operations, proceeds from financing activities and proceeds from the
sale of discontinued operations. On December 3, 1997, the Company executed a
$50.0 million Promissory Note which will be used for general corporate purposes.
The Promissory Note expires on the earlier of demand, or April 30, 1999. Amounts
borrowed under the Promissory Note may be requested by the Company at either (i)
the Lender's Base Rate less one percent or (ii) LIBOR plus 150 basis points. See
"Description of Other Indebtedness -- New Credit Facility."
The ratio of current assets (excluding cash and cash equivalents) to
current liabilities (excluding current portion of long-term debt) was 2.82 to 1
at September 30, 1997, as compared to 2.97 to 1 at December 31, 1996, 2.98 to 1
at December 31, 1995 and 2.35 to 1 at December 31, 1994. Working capital
(defined as current assets excluding cash and cash equivalents less current
liabilities excluding the current portion of long-term debt) increased by $35.1
million to $135.3 million as of September 30, 1997 from $100.2 million as of
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<PAGE> 51
December 31, 1996 primarily as a result of the inclusion of the current assets
and liabilities of Arden, which was acquired in the third quarter of 1997.
Working capital increased by $2.1 million from $98.1 million in 1995 to $100.2
million in 1996. Working capital increased by $70.4 million from $27.7 million
in 1994 to $98.1 million in 1995 primarily as a result of the acquisitions
consummated in 1995.
Management believes that cash provided by operating activities supplemented
as necessary from time to time by borrowings under the New Credit Facility will
be sufficient to finance its operations, service the interest payments on its
debt and fund capital expenditures in 1998. Management believes that the annual
maintenance capital expenditures for its existing facilities will be
approximately $3 million. Capital expenditures are anticipated to be
approximately $12 million in 1998, which will be used to fund planned
maintenance, capacity expansion and system upgrades.
The Company does not have principal payment obligations under any of its
outstanding indebtedness in excess of $1.0 million in any year prior to maturity
of the Notes, except with respect to the New Credit Facility, which will expire
on April 11, 2001. The ability of the Company to satisfy its obligations under
existing indebtedness will be primarily dependent upon the future financial and
operating performance of its operating units and upon the Company's ability to
renew or refinance borrowings or to raise additional equity capital as
necessary.
In November 1997, the Company issued $150.0 million of 9 1/4% Senior
Subordinated Notes due 2007. The net proceeds of the issuance were approximately
$146.1 million, which were used in part to repay the Existing Credit Facility.
The Company also commenced the Redemption to purchase all of its Convertible
Senior Subordinated Debentures, plus accrued interest thereon using a portion of
the net proceeds from the Original Notes together with borrowings under the New
Credit Facility.
During the nine months ended September 30, 1997, the Company generated
$15.9 million from continuing operations before changes in operating assets and
liabilities. After giving effect to the use of $24.6 million in the operating
accounts, the Company used $8.7 million for operating activities. During the
period, the Company invested $9.2 million in capital expenditures and $53.9
million for acquisitions and investments, including the acquisition of Arden for
$44.0 million. The Company also bought 210,279 shares of its common stock in the
open market for $2.8 million during the period. In addition, 350,000 shares of
common stock were issued under stock option agreements for which the Company
received $2.8 million from the option holders. The Company also purchased $1.1
million principal amount of its Convertible Senior Subordinated Debentures in
the open market. These activities were funded by a net increase in bank
borrowings of $72.0 million and a decrease in cash balances of $0.9 million.
During 1996, the Company generated $20.6 million from continuing operations
before changes in operating assets and liabilities. After giving effect to the
use of $15.0 million in the operating accounts and $2.0 million provided from
discontinued operations, the Company provided $7.7 million from operating
activities. During 1996, the Company invested $15.6 million in capital
expenditures and purchased 126,225 shares of its common stock for $1.8 million,
all of which were funded by internally generated cash flow and bank borrowings.
During 1995, the Company generated $18.0 million from continuing operations
before changes in operating assets and liabilities. After giving effect to
changes in the operating accounts of $27.7 million and $5.7 million provided by
discontinued operations, the Company used $4.0 million in operating activities.
This amount and capital expenditures of $13.6 million were funded by an increase
in bank borrowings. In addition, the Company borrowed $68.6 million under its
bank facility to fund acquisitions, primarily RB&W, with an aggregate cash
purchase price of $35.8 million and to repay $32.8 million of acquired debt
related to the acquisitions.
During 1994, the Company generated $9.7 million from operations before
changes in operating assets and liabilities. After giving effect to changes in
the operating accounts of $6.4 million and the $5.7 million provided by
discontinued operations, the Company generated $9.0 million from operating
activities. During 1994, the Company borrowed $11.4 million under its bank
facility and received gross proceeds of $22.2 million from the issuance of the
Convertible Senior Subordinated Debentures and $4.2 million of its Common Stock.
The combined proceeds were used to fund capital expenditures of $11.7 million,
make acquisitions with an
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<PAGE> 52
aggregate cash purchase price of $2.1 million, acquire other capital assets of
$2.9 million and repay $26.7 million of bank debt.
SEASONALITY; VARIABILITY OF OPERATING RESULTS
As a result of the significant growth in the Company's net sales, income
from continuing operations and EBITDA in recent years, seasonal fluctuations
have been substantially mitigated. The Company, however, performs scheduled
plant maintenance in the third quarter to coincide with customer plant shut
downs.
The timing of orders placed by the Company's customers has varied with,
among other factors, orders for customers' finished goods, customer production
schedules, competitive conditions and general economic conditions. The
variability of the level and timing of orders has, from time to time, resulted
in significant periodic and quarterly fluctuations in the operations of the
Company's business units. Such variability is particularly evident at the
businesses in the Capital Equipment Group, which typically ship a few large
systems per year. In addition, the Company experiences seasonality in the Kay
Home Products, Inc. ("Kay Home Products") operating unit of the Metal Forming
Group. Kay Home Products' goods are typically used by consumers in the spring
and summer and consequently its first two quarters of operating results are
typically the strongest.
FORWARD-LOOKING STATEMENTS
This Prospectus contains and incorporates by reference certain statements
that are "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. Those statements include,
among other things, discussions of the Company's business strategy and
expectations concerning the Company's future operations, margins, profitability,
liquidity and capital resources, as well as statements concerning potential
acquisitions of certain complementary businesses and achievement of cost savings
and other efficiencies in connection therewith. Certain statements in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations contain forward-looking statements, including without limitation,
discussion regarding the Company's anticipated levels of capital expenditures
and the sufficiency of cash flow from operations and certain borrowings to
finance operations, service interest payments on its debt and fund capital
expenditures. Investors in the Notes offered hereby are cautioned that reliance
on any forward-looking statement involves risks and uncertainties, and that
although the Company believes that the assumptions on which the forward-looking
statements contained herein are based are reasonable, any of those assumptions
could prove to be inaccurate, and as a result, the forward-looking statements
based on those assumptions also could be materially incorrect. The uncertainties
in this regard include, but are not limited to, those identified in "Risk
Factors." In light of these and other uncertainties, the inclusion of a
forward-looking statement herein should not be regarded as a representation by
the Company that the Company's plans and objectives will be achieved.
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<PAGE> 53
BUSINESS
THE COMPANY
The Company operates diversified manufacturing and logistics businesses
which serve a wide variety of industrial markets. Manufactured Products designs
and manufactures a broad range of high quality products engineered for specific
customer applications. The principal customers of Manufactured Products are OEMs
and end-users in the automotive, railroad, truck and aerospace industries.
Logistics is a leading national supplier of fasteners (e.g., nuts, bolts and
screws) and other industrial products to OEMs, other manufacturers and
distributors. In connection with the supply of such industrial products,
Logistics provides a variety of value-added, cost-effective procurement
solutions. The principal customers of Logistics are in the transportation,
industrial, electrical and lawn and garden equipment industries. The Company's
diversified operations moderate the effect on the Company of downturns affecting
individual operating units and industries served. Between 1992 and 1996, the
Company has grown significantly, both internally and through acquisitions. Over
this period, the Company's net sales increased at a 50.8% CAGR, from $67.2
million to $347.7 million, income (loss) from continuing operations increased
from ($18.8) million to $9.7 million, and EBITDA increased from ($4.5) million
to $28.1 million. The Company generated pro forma net sales, pro forma income
from continuing operations and pro forma EBITDA of $379.5 million, $7.4 million
and $32.4 million, respectively, for the nine months ended September 30, 1997.
COMPETITIVE STRENGTHS
The Company's manufacturing and logistics businesses generally have the
following competitive strengths:
LONG-TERM RELATIONSHIPS WITH MARKET-LEADING CUSTOMERS. The Company has been
successful in forming and developing customer relationships, certain of which
have been in place for over 50 years, with some of the largest companies in
their respective industries. In many cases, the Company's businesses have
achieved sole-source supply positions as a result of their reputation for
manufacturing high quality products, superior customer service,
applications-engineering expertise and commitment to partnering with their
customers. Manufactured Products' principal customers include BF Goodrich,
Boeing, Chrysler, Cooper Industries, Delphi, Ford, General Dynamics, General
Motors, Moen and United Technologies. Logistics has multi-year, exclusive TFS
contracts with plants of OEMs such as General Electric, Mack Truck, Navistar and
Polaris.
LEADERSHIP IN SEVERAL NICHE BUSINESSES. Several of the Company's products
hold leading positions in their respective business lines. For example, as
sole-source supplier to Ford and Chrysler, the Company is the leading domestic
manufacturer of aluminum permanent mold pump housings and pinion carriers for
automobile and light truck transmissions. In addition, the Company is the
sole-source supplier of crankshafts and camshafts to General Motors' North
American locomotive manufacturing operations. Logistics is one of the leading
providers of fasteners in the United States as a result of its national
coverage, broad product line and ability to offer value-added services to its
customers.
DIVERSE CUSTOMER BASE. The Company's products are sold to more than 7,000
customers in a wide variety of industries. With the exception of Ford, no single
customer represented more than 4.4% of the Company's pro forma net sales for the
nine months ended September 30, 1997. Ford, which in the aggregate represented
7.7% of such sales, purchases the Company's products through 17 distinct
purchasing centers, each of which maintains an independent relationship with the
Company. The Company plans to continue to expand its customer base by
introducing new products in both of its segments and adding new branches and TFS
contract customers at Logistics.
SOPHISTICATED LOGISTICS INFRASTRUCTURE. Since 1995, the Company has spent
over $5 million upgrading Logistics' management information and communication
systems to more efficiently distribute in excess of 150,000 SKUs to its
customers. Logistics' EDI capabilities provide an interactive order system to a
majority of its TFS contract customers. Logistics' customized systems enable it
to provide customers with just-in-time delivery of bar coded packages labeled
for delivery to specific points of use. Such systems also enhance fill rates by
automatically searching alternative branches for products that are unavailable
at a particular location
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<PAGE> 54
and routing those products for shipment. In addition, Logistics' advanced
communication systems enhance its ability to efficiently manage its inventory
and automatically replenish TFS customers' stocks.
EXPERIENCED MANAGEMENT TEAM WITH SIGNIFICANT EQUITY OWNERSHIP. The
Company's senior operating team has an average of over 25 years of relevant
industry experience. Management also has significant experience in acquiring and
integrating businesses into the Company, and employs a disciplined approach to
making such acquisitions. The Company's senior management team owns, in the
aggregate, approximately 33% of the fully diluted common stock of the Company
(the "Common Stock").
BUSINESS STRATEGY
Management believes that the Company's growth in sales and profitability in
the future will result from the successful implementation of its business
strategy, the key elements of which include:
INCREASED INTERACTION BETWEEN MANUFACTURED PRODUCTS AND LOGISTICS. The
Company intends to continue to expand interaction between Manufactured Products
and Logistics by: (i) increasing the number of products supplied to Logistics by
Manufactured Products; (ii) cross-selling Logistics' services to Manufactured
Products' customers; and (iii) selectively acquiring companies that manufacture
Logistics' best-selling products. Management believes that these and other
initiatives will enable the Company to expand its product offerings and further
enhance Logistics' ability to control the entire supply chain management
process. In addition, the Company's expertise in manufacturing fasteners and
other industrial products enables Logistics to provide valuable technical advice
to its TFS customers, which reduces their production costs. Similarly,
Logistics' expertise in supply chain management can be transferred to
Manufactured Products' businesses to enhance the quality of customer service
currently provided by such businesses.
GROWTH THROUGH SELECTIVE ACQUISITIONS. The Company intends to continue to
make strategic acquisitions of complementary businesses to: (i) increase the
number of products made by Manufactured Products and sold by Logistics; (ii) add
customers and expand Logistics geographic coverage; (iii) take advantage of
consolidation in the logistics industry; and (iv) capitalize on management's
expertise in improving the operations of acquired companies.
Management has a proven track record of improving the financial results of
acquired companies, as evidenced by the material increases in sales, income from
continuing operations and EBITDA of the businesses acquired by the Company since
1992. Such improvements have been achieved through significant operating
expense reductions resulting from factors such as improved labor, supplier and
customer relations, increased purchasing power and more effective asset
utilization and management practices, as well as increased access to capital.
Management utilizes strict criteria to evaluate business acquisition
possibilities, including existing customer relationships, potential cost
reductions, synergies and return on investment parameters. The Company typically
avoids auction situations and exhibits discipline in declining specific
transactions when the price exceeds a level acceptable to the Company.
LEVERAGING EXISTING CUSTOMER RELATIONSHIPS. The Company seeks to enhance
customer relationships by, among other things: (i) providing high quality
products and services, as evidenced by the ISO 9000 and QS-9000 certifications
and numerous supplier awards obtained by certain of the Company's business
units; (ii) making capital investments in equipment and facilities pursuant to
new long-term supply arrangements such as the contract recently signed by GAMCO
to produce cast aluminum transmission pump housings for Chrysler; (iii)
engineering new products in conjunction with customers to meet specific
application requirements; and (iv) obtaining additional TFS contracts for
existing customer facilities not currently served by Logistics.
STRENGTHENING OPERATING PERFORMANCE. The Company intends to make ongoing
capital investments in its Manufactured Products businesses to maintain the
historical growth in sales and EBITDA achieved by such units in recent years. In
addition, the Company intends to pursue enhanced operating efficiency through:
(i) increased purchasing power as a result of economies of scale, particularly
at Logistics; (ii) enhanced workforce productivity; (iii) increased sourcing of
Logistics' products off-shore; (iv) continued enhancement
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<PAGE> 55
of management information systems; (v) higher inventory turnover; and (vi)
ongoing re-engineering and total quality programs to improve process flow,
reduce re-work and improve cycle time.
DECENTRALIZED MANAGEMENT OF OPERATING UNITS. The Company's operating units
are managed on a decentralized basis by operating unit managers, while a
corporate management team provides strategic direction and support and
identifies and evaluates potential acquisition and divestiture opportunities.
Management believes that the Company's decentralized operating approach
eliminates many of the inefficiencies that can result from a highly centralized
corporate structure, while providing individual operating units with greater
access to capital, strategic direction and certain administrative functions.
Operating unit managers are vested with decision-making authority and are
compensated based on the profitability of their respective business units. As a
result of the discrete nature of the Company's operating units, the Company is
able to buy and sell such units on an opportunistic basis. Management believes
that the Company's decentralized management philosophy results in better
customer service by allowing each operating unit the flexibility and autonomy to
implement policies and make decisions based on first-hand assessments of
individual customer requirements.
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OPERATIONS
The Company conducts its business through two segments: Manufactured
Products and Logistics. Manufactured Products consists of five groups, certain
of which are comprised of multiple businesses. Each of the Company's operating
units has its own management team and maintains its own independent market
identity. The following chart highlights the Company's two business segments,
the key products they sell and the primary industries they serve:
<TABLE>
<CAPTION>
PRO FORMA SALES FOR
THE
NINE MONTHS ENDED
SEGMENT PRIMARY INDUSTRIES SERVED SELECTED PRODUCTS/SERVICES SEPTEMBER 30, 1997(a)
- ------------------------------- --------------------------- --------------------------- ---------------------
(MILLIONS)
<S> <C> <C> <C>
MANUFACTURED PRODUCTS
ALUMINUM CASTING GROUP: $ 28.0
GAMCO Automotive Transmission pump housings,
pinion carriers, clutch
retainers
FORGED AND MACHINED PRODUCTS GROUP: 36.7
Park Drop Forge Railroad, aerospace Crankshafts, camshafts,
aircraft landing gears
Ohio Crankshaft Railroad, power generation, Crankshafts, camshafts
shipbuilding
Cleveland City Forge Construction Specialized hardware
Blue Falcon Forge Railroad Center plates, couplings
CAPITAL EQUIPMENT GROUP: 38.9
Tocco Automotive, truck Induction heating systems
Ajax Automotive, truck Forging presses
Feco Food and beverage Heat processing and curing
packaging, automotive systems/conveyance systems
Advanced Vehicles Paper, aluminum, steel, Specialty lift trucks
flooring
METAL FORMING GROUP: 57.4
RB&W Manufacturing Automotive, truck, railroad Nuts
Delo Plumbing Fixtures
Green Bearing Automotive Bearings
Kay Home Products Consumer products retailers Barbecue grills, screen
houses, television tables
INDUSTRIAL RUBBER PRODUCTS GROUP: 14.0
Castle Fluid and gas, steel Valve seals, power and
conveyor rolls, slitter
rings
Cicero Automotive, food Wire harnesses, spark plug
processing, consumer boots and nipples, general
appliance sealing gaskets
Geneva Automotive, Primary wire harnesses,
telecommunications, transoceanic cable boots,
funeral, truck casket gaskets, shock and
vibration mounts
LOGISTICS 207.2
RB&W Logistics, Arden and Transportation, industrial, Standard and specialty
Arcon electrical and lawn and fasteners and other
garden equipment, HVAC industrial products,
value-added services
</TABLE>
- ---------------
(a) Gives pro forma effect to the 1997 Acquisitions. Pro Forma sales for the
nine months ended September 30, 1997 do not reflect $2.7 million of
intercompany eliminations. See "Unaudited Pro Forma Consolidated Financial
Data."
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<PAGE> 57
MANUFACTURED PRODUCTS
Manufactured Products operates through five groups which capitalize on the
Company's expertise in efficiently converting raw materials into high quality
finished products. The five groups include: Aluminum Casting, Forged and
Machined Products, Capital Equipment, Metal Forming and Industrial Rubber
Products. Manufactured Products generated pro forma net sales, pro forma income
from continuing operations before income taxes and pro forma EBITDA of $172.3
million, $10.1 million and $16.0 million, respectively, or 45.8%, 44.1% and
49.5%, respectively, of the Company's pro forma net sales, pro forma income from
continuing operations and pro forma EBITDA for the nine months ended September
30, 1997.
ALUMINUM CASTING GROUP. The Aluminum Casting Group operates through GAMCO
and its wholly owned subsidiary. The Aluminum Casting Group, which manufactures
aluminum permanent mold castings primarily for the automotive industry,
generated pro forma net sales of $28.0 million for the nine months ended
September 30, 1997, which represented 7.4% of the Company's pro forma net sales
for such period.
Products and Services. GAMCO manufactures aluminum permanent mold castings
used primarily in automobile transmissions and engines. GAMCO's aluminum
castings are manufactured by transferring molten aluminum from a melting furnace
to a steel mold in which the aluminum then solidifies into the final product.
GAMCO's principal automotive products include: transmission pump housings,
planetary pinion carriers, clutch retainers, rotor castings and bearing cups. In
addition, GAMCO manufactures products for non-automotive end users such as
surgical table components, light housings and electrical meter housings. GAMCO
also provides value-added services such as secondary casting, machining,
drilling, tapping and part assembly.
GAMCO's cast aluminum parts are critical components manufactured primarily
for automotive OEMs. Although these parts are lightweight, they possess high
durability and integrity characteristics even under extreme pressure and
temperature conditions. Demand by automotive OEMs for aluminum permanent mold
products has increased in recent years as OEMs have sought lighter alternatives
to heavier steel and iron components. Lighter aluminum cast components increase
an automobile's fuel efficiency without decreasing its structural integrity.
Management believes this replacement trend will continue as government standards
regarding fuel efficiency become increasingly stringent.
Markets and Customers. GAMCO sells its products primarily to customers
located in North America. The market for aluminum permanent mold castings is
comprised of two segments: automotive and non-automotive. Management estimates
that the domestic aluminum permanent mold casting market represented over $1
billion of annual sales in 1996.
A significant portion of GAMCO's sales are to automotive OEMs or suppliers
pursuant to sole-source supply relationships. GAMCO's relationship with Ford,
which is GAMCO's largest customer, has existed for approximately 30 years. GAMCO
is the sole-source supplier of transmission pump housings used in Ford's F-150
truck, Lincoln Town Car and Econoline Van models. GAMCO also serves as the
sole-source supplier to Chrysler for transmission clutch retainers used in the
Jeep Grand Cherokee sport utility vehicle, as well as planetary pinion carriers
used in vans and trucks and bearing cups used in rear end differentials. GAMCO's
relationship with Chrysler, which is currently its second largest customer, has
existed for over 30 years. GAMCO recently expanded its relationship with
Chrysler by significantly increasing its manufacturing capacity in order to
produce three cast aluminum transmission clutch retainer parts, pursuant to a
new sole-source supply contract, to be used in the Jeep Grand Cherokee, Dodge
Dakota and Dodge Ram models. Sanden Corporation, a tier-1 supplier of air
conditioning compressors, is another significant GAMCO automotive
customer. Non-automotive customers include American Sterilizer and Air-Shields,
both of which are in the healthcare industry and purchase surgical table
components and incubator structures, respectively. GAMCO also supplies
electrical lug connectors to Homac and marine castings to Volvo/Penta.
Competition. The domestic aluminum permanent mold industry is highly
competitive and consists of several large participants. The Company's principal
competition comes from several large domestic companies such as Amcast, CMI
International, Stahl and Teksid, each of which provides a broad array of
products manufactured from a variety of metals, including aluminum. GAMCO
competes principally on the basis of its ability to: (i) engineer and
manufacture high quality, semi-machined castings in large volumes; (ii) provide
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<PAGE> 58
timely delivery; and (iii) retain the manufacturing flexibility necessary to
quickly adjust to the needs of its customers. Although there are a number of
smaller domestic companies with aluminum permanent mold casting capabilities,
the automotive industry's stringent quality and service standards enable only
large suppliers with the requisite quality certifications to compete
effectively. As one of these suppliers, GAMCO has benefited in recent years as
automotive OEMs have consolidated their supplier base. GAMCO, a well-established
name in the aluminum permanent mold industry, has achieved QS-9000 and ISO 9002
certifications and has been awarded numerous supplier quality awards, including
Ford's Q1 and Chrysler's Pentastar.
FORGED AND MACHINED PRODUCTS GROUP. The Forged and Machined Products Group
consists of four operating units: Park Drop Forge, Ohio Crankshaft, Cleveland
City Forge and Blue Falcon Forge. The Forged and Machined Products Group designs
and manufactures crankshafts, camshafts and other high strength, high
performance structural parts primarily for aircraft and locomotive
manufacturers. The Forged and Machined Products Group generated pro forma net
sales of $36.7 million for the nine months ended September 30, 1997, which
represented 9.7% of the Company's pro forma net sales for such period.
Products and Services. The Forged and Machined Products Group produces,
machines and finishes closed-die metal forgings for customers in the railroad,
aerospace, power generation, shipbuilding, construction and off-road vehicle
industries. The forging process enables metal to be shaped while generally
retaining higher structural integrity than metal shaped through other
processes. Ohio Crankshaft, one of the largest independent designers and
machiners of crankshafts and camshafts in the United States, machines, induction
hardens and surface finishes crankshafts and camshafts used primarily in
locomotives, power generators and ships. Park Drop Forge manufactures closed-die
metal forgings of up to 6,000 pounds, including crankshafts, camshafts and
aircraft landing gears, primarily for customers in the railroad and aerospace
industries. Park Drop Forge is able to produce large forged products as a result
of its 50,000 pound hammer, one of only three of its kind in North America.
Cleveland City Forge manufactures and machines specialized hardware such as
turnbuckles and clevises for the construction industry. Its products are
manufactured according to customers' specific dimensional and/or strength
requirements. Blue Falcon Forge produces large forged products for the railroad
industry, such as center plates and couplings, both of which are used in the
undercarriage of rail cars.
Markets and Customers. The Forged and Machined Products Group's goods are
sold to a wide variety of domestic and international OEMs and other
manufacturers in the transportation, power generation and construction
industries. Ohio Crankshaft's major customers in the railroad industry include
General Motors, for which the Company is the sole-source supplier of locomotive
camshafts and crankshafts, and Precision National Plating. Park Drop Forge's
products are sold primarily to machining companies and subassemblers who finish
the products for sale to OEMs in the railroad and aerospace industries. Park
Drop Forge's primary customers include machinists such as Cooper Energy
Services, General Dynamics and Ohio Crankshaft, and aircraft subassemblers who
assemble components such as complete landing gear units for aircraft OEMs such
as Airbus, Boeing and McDonnell Douglas. Cleveland City Forge's primary
customers include construction companies such as Babcock & Wilcox and Butler
Industries. Blue Falcon Forge's primary customers include major rail car
manufacturers such as National Steel Car, Thrall and Trinity Industries.
Competition. The Forged and Machined Products Group competes domestically
and internationally with other small to medium-sized businesses. Ohio Crankshaft
competes domestically with companies such as National Forge and internationally
with Alfing Kessler on the basis of product quality and precision. Park Drop
Forge competes domestically and internationally on the basis of product quality
and precision with approximately 20 forging manufacturers that are capable of
producing large forged components such as Canton Drop Forge, Krop Forge, Schultz
Forge and Alfing Kessler. Blue Falcon Forge and Cleveland City Forge compete
domestically on the basis of product quality, price and delivery time with
numerous small and medium-sized forging companies.
CAPITAL EQUIPMENT GROUP. The Capital Equipment Group consists of four
operating units: Tocco, Ajax, Feco and Advanced Vehicles. The Capital Equipment
Group custom engineers and manufactures induction heating systems, forging
presses and heat processing and curing systems, primarily for the automotive and
packaging industries. The Capital Equipment Group generated pro forma net sales
of $38.9 million for the
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<PAGE> 59
nine months ended September 30, 1997, which represented 10.3% of the Company's
pro forma net sales for such period.
Products and Services. The Capital Equipment Group manufactures large
industrial equipment for a variety of industries including automotive, truck and
packaging. Tocco specializes in the engineering and construction of induction
heating systems primarily for the automotive and truck industries. Tocco's
induction heating systems are engineered and built to customer specifications
and are used primarily by OEMs for surface hardening. Ajax engineers,
manufactures and services mechanical forging presses ranging in size from 500 to
8,000 tons that are used worldwide in the automotive and truck manufacturing
industries. Feco produces complete oven systems that combine heat processing and
curing technologies with material handling and conveying methods. Feco's
principal products include industrial drying and curing ovens for automotive
components, metal can curing ovens, specialized conveyor and automation systems
for lightweight containers, and plastic and glass bottle coating and finishing
systems. Advanced Vehicles specializes in the design and production of specialty
lift trucks used by customers in the paper, aluminum, steel and flooring
industries.
Markets and Customers. The Capital Equipment Group's products are sold
domestically and internationally to a wide variety of heavy industrial
manufacturers in the automotive, truck and packaging industries. Tocco's
products are sold primarily to domestic manufacturers of automotive components
including Ford, GKN, GM and Torrington. Ajax sells its products worldwide
primarily to Chrysler, Delphi, Isuzu and Presrite. Feco's products are sold
primarily to manufacturers including Chrysler, Corning Glass, Crown Cork & Seal,
Ford, GM, PepsiCo and Reynolds Aluminum. Advanced Vehicles' products are sold
primarily to non-exclusive lift truck dealers and end users, including AK Steel,
Alcoa, Formica and John Deere.
Competition. The Capital Equipment Group competes domestically and
internationally with large equipment manufacturers on the basis of service
capability, ability to meet customer specifications, delivery performance and
engineering expertise. Tocco's domestic competitors include Inductotherm and
Ajax Magna-thermic, and its international competitors include Elva-FDF GmbH and
Ema GmbH. Ajax competes with four private companies worldwide who manufacture
mechanical forging presses: Erie Press Systems, National Machine Company,
Eumoco-Hasenclever and Sumitomo. Feco's primary domestic competitors include
Moco, and its international competitors include LTG and Oven Systems. Advanced
Vehicles' primary competition comes from manufacturers of standard lift trucks,
although it also competes against manufacturers of specialty lift trucks
including CWF-RICO and Elwell-Parker.
METAL FORMING GROUP. The Metal Forming Group consists of four operating
units: RB&W Manufacturing, Delo, Green Bearing and Kay Home Products. The Metal
Forming Group manufactures standard and specialty engineered fasteners and
related hardware, bearings, plumbing fixtures and certain consumer products. The
Metal Forming Group generated pro forma net sales of $57.4 million for the nine
months ended September 30, 1997, which represented 15.1% of the Company's pro
forma net sales for such period.
Products and Services. The Metal Forming Group engineers and manufactures
precision cold formed and cold extruded products, which are manufactured by
shaping cold raw materials, for the automotive, truck and railroad industries.
In addition, the Metal Forming Group screw-machines plumbing fixtures and
manufactures bearings and certain consumer products. RB&W Manufacturing produces
certain standard and specialty nuts to customer specifications, which are used
in large volumes by customers in the automobile, truck and railroad industries.
RB&W Manufacturing's products include lock nuts, spac nuts and wheel hardware,
which are principally used in applications where controlled tightening is
required due to high vibration. RB&W Manufacturing currently sells approximately
$4 million of product through Logistics. The Company intends to increase the
number of products supplied to Logistics by Manufactured Products, primarily
fasteners and rubber products. Delo screw-machines products for OEMs in the
plumbing industry and produces knobs and internal plumbing fixtures. Green
Bearing produces wheel, hub and clutch bearings, primarily for sale to the
automotive aftermarket. Kay Home Products, which manufactures products for sale
to consumers through various retail outlets, produces barbecue grills, screen
houses, television tray tables, plant stands and patio tables.
Markets and Customers. The Metal Forming Group's products are sold to a
diverse set of industrial and retail customers. RB&W sells its products to OEMs
and distributors in the automotive, truck and railroad
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<PAGE> 60
industries. Delo sells its products to OEMs, primarily in the plumbing industry.
Green Bearing sells its products to distributors in the automotive aftermarket.
Major customers of RB&W Manufacturing include Cooper Industries, Ford, GM,
Navistar and TRW. Delo's major customers include Moen and T&S Brass. Kay Home
Products sells its goods in North America through a network of mass merchandise
retailers, grocery chains, drug stores and hardware stores. Kay Home Products'
primary customers include Cotter, K-Mart, Lowes, Menards and Wal-Mart.
Competition. The Metal Forming Group's operating units compete against
other domestic and international, small to medium-sized manufacturers. Due to
the fragmented nature of the markets in which RB&W Manufacturing and Delo
compete and the substantial purchasing power of the large OEMs served, these
companies compete primarily on the basis of price, product quality, engineering
expertise and delivery reliability. Green Bearing competes primarily on the
basis of product quality and delivery reliability. Kay Home Products competes
primarily on the basis of price. RB&W Manufacturing's domestic competitors
include Captive Capacity, Decker, Federal Screw, Gripco, MacLean Fogg, Masco,
Pal Nut and its international competitors include San Shing. Delo and Green
Bearing compete domestically against numerous small, regional companies. Major
competitors of Kay Home Products include Precision, Sunbeam and Weber-Stevens.
INDUSTRIAL RUBBER PRODUCTS GROUP. The Industrial Rubber Products Group
consists of three operating units: Castle Rubber Company ("Castle"), Cicero and
Geneva. The Industrial Rubber Products Group manufactures molded rubber products
for use in automobiles, fluid and gas lines, steel mills, and food processing
and communications equipment. The Industrial Rubber Products Group generated pro
forma net sales of $14.0 million for the nine months ended September 30, 1997,
which represented 3.7% of the Company's pro forma net sales for such period.
Products and Services. The Industrial Rubber Products Group manufactures
injection and transfer molded products, lathe-cut goods, roll coverings and
various items requiring rubber to metal bonding for use in industrial
applications. Castle manufactures valve seals, power and conveyor rolls and
slitter rings. Cicero is a developer and manufacturer of injection molded
silicone rubber products for customers in the automotive, food processing and
consumer appliance industries, such as wire harnesses, spark plug boots and
nipples and general sealing gaskets. Geneva is a manufacturer of injection
molded rubber products for customers in the automotive, telecommunications,
funeral and heavy truck industries. Its products include primary wire harnesses,
transoceanic cable boots, casket gaskets and shock and vibration mounts.
Markets and Customers. The Industrial Rubber Products Group supplies the
fluid and gas, steel, food processing, consumer appliance, heavy truck,
telecommunications, funeral and aerospace industries, both domestically and
internationally. The Industrial Rubber Products Group's major customers include
AT&T, Cooper Industries, Delphi, Dresser, Mueller and Sunbeam.
Competition. The Industrial Rubber Products Group competes primarily on the
basis of price and product quality with other domestic small to medium-sized
manufacturers of rubber products. The Industrial Rubber Products Group's main
competitors include Geauga Carlisle, Goshen Rubber, Johnson Rubber, LCI,
National Rubber, Robin Industries and Western Rubber.
LOGISTICS
Logistics is a leading national supplier of over 90,000 standard and
specialty fasteners and other industrial products pursuant to either supply
chain management agreements or traditional wholesale supply arrangements.
Logistics operates out of 34 branches located throughout the United States, two
branches in Mexico and branches in Canada, Puerto Rico and England, and has a
central distribution center located in Dayton, Ohio. Logistics generated pro
forma net sales, pro forma income from continuing operations before income taxes
and pro forma EBITDA of $207.2 million, $12.8 million and $16.4 million,
respectively, or 54.2%, 55.9% and 50.5%, respectively, of the Company's pro
forma net sales, pro forma income from continuing operations and pro forma
EBITDA for the nine months ended September 30, 1997.
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Products and Services. Supply chain management, which is Logistics' primary
focus for future growth, involves offering customers procurement solutions and
comprehensive, on-site management for most of their fastener and related
hardware needs. Supply chain management customers receive value-added services,
such as part usage and cost analysis, product redesign recommendations, supplier
selection, quality assurance, bar coding, product packaging and tracking,
just-in-time delivery, electronic billing services and ongoing technical
support. Supply chain management services are typically provided to customers'
facilities pursuant to exclusive, multi-year TFS contracts. TFS contracts enable
Logistics' customers to both reduce procurement costs and better focus on their
company's core manufacturing competencies by: (i) significantly reducing the
administrative and labor costs associated with fastener procurement by
outsourcing certain internal purchasing, quality control and inventory
fulfillment responsibilities; (ii) reducing the amount of working capital
invested in inventory; (iii) achieving purchasing efficiencies as a result of
vendor consolidation; and (iv) receiving technical expertise in the selection of
fastener and other components for certain manufacturing processes. Management
believes that TFS contracts foster longer-lasting supply relationships with
customers, who increasingly rely on the Company for their fastener needs, as
compared to traditional buy/sell distribution customers. Sales pursuant to TFS
contracts have increased significantly in recent years and represented over 60%
of Logistics' pro forma net sales for the nine months ended September 30,
1997. Logistics' remaining sales are generated through the wholesale supply of
fasteners and other industrial products to OEMs, other manufacturers and
distributors pursuant to master or authorized distributor relationships.
Logistics supplies standard and specialty engineered fasteners such as
nuts, bolts, screws and washers. In addition to fasteners, Logistics supplies,
among other things, valves, fittings, clamps and rubber products, which
currently represent approximately 10% of Logistics' net sales. Logistics also
provides engineering and design services to its customers.
Applications-engineering specialists and the direct sales force work closely
with the engineering staff of OEM customers to recommend the appropriate
fasteners for a new product or to suggest alternative fasteners that reduce
overall production costs, streamline assembly or enhance the appearance or
performance of the end product.
Markets and Customers. In 1996, more than 95% of Logistics' net sales were
to domestic customers. The domestic industrial fastener market is estimated by
industry sources to have generated over $7 billion in annual sales in 1996 at
the wholesale level. Fasteners are used extensively by OEMs in a variety of
industries, and demand is generally related to the state of the economy and to
the overall level of manufacturing activity.
Logistics markets and sells fasteners and other industrial products to over
7,000 customers domestically and internationally. The principal markets served
by Logistics are transportation equipment, including manufacturers of heavy
trucks, recreational vehicles and automotive parts and accessories (Dana
Corporation, Eaton, E-Z-GO (Textron), Mack Truck, Navistar, Paccar, Polaris and
U-Haul), industrial equipment (Caterpillar and Ingersoll-Rand), electrical
equipment, including manufacturers of electrical controls, appliances and motors
(Amana, Emerson Electric, Federal Signal, Frigidaire, General Electric and
Maytag), lawn and garden equipment (American Yard Products, MTD, Murray Outdoor,
Snapper and Toro) and HVAC (Carrier and Thermo-King).
In recent years, OEMs have made it a priority to reduce their total cost of
purchasing and handling fasteners. Due to the low unit cost and the large number
of different fasteners used to manufacture or assemble a single product,
administrative and overhead costs comprise a substantial portion of an OEM's
fastener-related costs. As a result, management believes that the number of
industrial fastener suppliers are consolidating as OEMs rely on fewer suppliers
to achieve purchasing efficiencies. Larger suppliers such as the Company that
provide a wide array of value-added services and are reliable sources for
just-in-time delivery are best positioned to capitalize on these trends. In
addition, OEMs are increasingly relying on fastener suppliers to provide design
and applications engineering support, enabling more efficient use of internal
engineering resources. Management believes that these developments will allow
Logistics to increase the amount of low unit cost fastener and non-fastener
items supplied to OEMs.
Competition. The industrial fastener supply industry is highly competitive
and fragmented, with over 2,500 domestic full-line, industrial fastener
suppliers and other domestic suppliers that offer a limited number of fasteners
in addition to other industrial products. Management believes that substantially
all of Logistics'
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competitors operate on a regional basis and do not provide customers with the
wide array of value-added services offered by larger suppliers such as the
Company.
Management considers Bamal, C-Tech, Endries International, Flexalloy,
General Fasteners and Purchase Parts Group to be Logistics' principal domestic
competitors for national inventory management programs with OEM customers.
Logistics competes primarily on the basis of its value-added services, extensive
product selection and price.
SALES AND MARKETING
Each of the operating units within Manufactured Products markets and sells
its products through both internal sales personnel and independent sales
representatives. In some instances, the internal engineering staff assists in
the sales and marketing effort through joint design and applications-engineering
efforts with major customers. In addition, some Manufactured Products operating
units market certain of their products through various regional and national
trade shows.
Logistics markets its products and services in the United States, Mexico,
Canada and Europe, primarily through its direct sales force, which is assisted
by applications engineers who provide the technical expertise necessary to
assist the engineering staff of OEM customers in designing new products and
improving existing products. Logistics often obtains new customers as a result
of referrals from existing customers. In addition, management expects to
significantly grow Logistics' customer base as a result of the Company's
strategy to offer Logistics' services to customers of its Manufactured Products
businesses.
RAW MATERIALS AND SUPPLIERS
Manufactured Products purchases substantially all of its raw materials,
principally metals and certain component parts incorporated into its products,
and Logistics purchases substantially all of its fasteners, from third-party
suppliers and manufacturers. Management believes that raw materials and
component parts other than certain specialty fasteners are available from
alternative sources. Most raw materials required by Manufactured Products are
commodity products available from several domestic suppliers. Park Drop Forge
supplies approximately 75% of the closed-die steel forgings used in the
production of crankshafts and camshafts by Ohio Crankshaft. Logistics has
multiple sources of supply for standard products, but has limited supply sources
for certain specialty products. Approximately 10% of Logistics' fasteners are
purchased from suppliers in foreign countries, primarily Taiwan, Japan and
Korea. The Company is dependent upon the ability of such suppliers to meet
stringent quality and performance standards and to conform to delivery
schedules. In addition, operating units of Manufactured Products supply
approximately $4 million of products to Logistics. The Company intends to
increase the number of products supplied to Logistics by Manufactured Products,
primarily fasteners and rubber products.
EMPLOYEES
As of September 30, 1997, after giving effect to the Arcon acquisition, the
Company had a total of 2,536 employees, of whom 2,515 were employed by the
Company's operating units. Approximately 720 employees are subject to collective
bargaining agreements that expire between February 1998 and June 2001. The
Company believes that its collective bargaining agreements will be renegotiated
and extended in the ordinary course of business. The Company considers its
relations with its employees to be good. In the last six years, the Company has
experienced labor strikes at two operating units of Manufactured Products. The
following
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table provides information relating to the employees of the Company's operating
units as of September 30, 1997:
<TABLE>
<CAPTION>
OPERATING UNIT EMPLOYEES
------------------------------------------ ---------
<S> <C>
Aluminum Casting.......................... 320
Forged and Machined Products.............. 380
Capital Equipment......................... 308
Metal Forming............................. 397
Industrial Rubber Products................ 331
Logistics................................. 779
-----
Total operating unit
employees..................... 2,515
=====
</TABLE>
PROPERTIES
The following are the principal operating facilities of the Company's
Manufactured Products businesses, listed by operating unit, each of which also
has limited general office and administrative space:
<TABLE>
<CAPTION>
APPROXIMATE
OPERATING UNIT LOCATION SQUARE FOOTAGE OWNED/LEASED
- ---------------------------------- ---------------------------------- ------------------ ------------
<S> <C> <C> <C>
Aluminum Casting.................. Conneaut, Ohio (three locations) 211,500 Leased
Conneaut, Ohio 110,000 Owned
Hartsville, Tennessee 39,000 Leased
Forged and Machined Products...... Cuyahoga Heights, Ohio 427,000 Owned
Cleveland, Ohio 391,000 Owned
Berwick, Pennsylvania 180,000 Leased
Wellington, Ohio 50,000 Owned
Capital Equipment................. Cleveland, Ohio 167,000 Leased
Cleveland, Ohio 116,000 Owned
Boaz, Alabama 100,000 Leased
Madison Heights, Michigan 26,000 Leased
West Midland, England 11,500 Leased
Indianapolis, Indiana 10,000 Leased
Quatero, Mexico 10,000 Leased
Metal Forming..................... Antioch, Illinois 333,500 Owned
Kent, Ohio 225,000 Owned
Coraopolis, Pennsylvania 133,000 Owned
Cleveland, Ohio 72,000 Owned
Delaware, Ohio 44,500 Owned
Mississauga, Ontario 37,000 Leased
Mississauga, Ontario 19,500 Leased
Industrial Rubber Products........ East Butler, Pennsylvania 136,000 Owned
Geneva, Ohio 81,000 Leased
Cicero, Illinois 17,000 Owned
</TABLE>
Logistics leases 34 branch locations domestically in 20 states, and leases
two branches in Mexico and one in each of Canada, Puerto Rico and England. In
addition, Logistics leases its central distribution facility in Dayton, Ohio.
The Company leases its executive offices in Cleveland, Ohio.
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BACKLOG
Manufactured Products' backlog was as follows as of September 30, 1997
(dollars in millions):
<TABLE>
<CAPTION>
PERCENTAGE
OPERATING UNIT AMOUNT OF TOTAL
------------------------------------------------- ------ ----------
<S> <C> <C>
Aluminum Casting................................. $ 5.3 6.9%
Forged and Machined Products..................... 31.4 40.6
Capital Equipment................................ 21.5 27.8
Metal Forming.................................... 15.9 20.6
Industrial Rubber Products....................... 3.2 4.1
----- -----
Total.................................. $77.3 100.0%
===== =====
</TABLE>
Management believes that Manufactured Products' backlog as of any
particular date may not be indicative of sales for any future period. The
Company expects that approximately 60% of Manufactured Products' backlog as of
September 30, 1997 will be shipped by December 31, 1997. Management believes
that backlog is not a meaningful measure for the Company's Logistics operating
units, as a majority of Logistics' customers require just-in-time delivery of
fasteners and other industrial products.
RESEARCH AND DEVELOPMENT
Research and development activities are conducted separately by each
operating unit. The Company's operating units focus on engineering products to
meet specific customer application requirements. Teams representing different
functional areas within an operating unit work closely with customers early in
the product design process to ensure that products meet customer specifications
and are designed for ease of manufacturing. As a general matter, the Company's
operating units have not required substantial research and development
expenditures.
ENVIRONMENTAL REGULATIONS
The Company is subject to numerous federal, state and local laws and
regulations designed to protect public health and the environment
("Environmental Laws"), particularly with regard to discharges and emissions, as
well as handling, storage, treatment and disposal, of various substances and
wastes. Pursuant to certain Environmental Laws, owners or operators of
facilities may be liable for the costs of response or other corrective actions
for contamination identified at or emanating from current or former locations,
without regard to whether the owner or operator knew of, or was responsible for,
the presence of any such contamination, and for related damages to natural
resources. Additionally, persons who arrange for the disposal or treatment of
hazardous substances or materials may be liable for costs of response at sites
where they are located, whether or not the site is owned or operated by such
person.
The Company believes that it is currently in material compliance with
applicable Environmental Laws. In general, the Company has not experienced
difficulty in complying with Environmental Laws in the past, and compliance with
Environmental Laws has not had a material adverse effect on the Company's
financial condition, liquidity and results of operations. The Company's capital
expenditures on environmental control facilities were not material during the
past five years and such expenditures are not expected to be material to the
Company in the foreseeable future.
The Company has been identified as a potentially responsible party at
certain third-party sites under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, or comparable state laws
which provided for strict and, under certain circumstances, joint and several
liability. The Company is participating in the cost of certain clean-up efforts
at several of these sites. However, the Company's share of such costs has not
been material and based on available information, the Company does not expect
its exposure at any of these locations to have a material adverse effect on its
results of operations, liquidity or financial condition.
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At its facility in Kent, Ohio, the Company is conducting remediation of
groundwater impacted by operations and disposal activities. Contaminants known
to be present in the groundwater at the facility and to have migrated off-site
include oil and certain volatile organic compounds. In addition, the Company is
conducting soil and groundwater investigations in connection with a closure
under the Resource Conservation and Recovery Act of 1976, as amended, of
hazardous waste storage areas associated with former metal plating operations.
To date, the approximately $2 million cost associated with all of these efforts
at the Kent facility has been shared equally between the Company and the former
owner of the facility under a cost-sharing agreement. Allocation of
responsibilities for future costs is being negotiated. The availability of
third-party payments or insurance for environmental remediation activities is
subject to risks associated with the willingness and ability of the third party
to make payments. The Company does not believe that future costs to address the
currently identified environmental issues at its facilities will be material.
LEGAL MATTERS
The Company is subject to various pending and threatened lawsuits in which
claims for monetary damages are asserted in the ordinary course of business.
While any litigation involves an element of uncertainty, in the opinion of
management, liabilities, if any, arising from currently pending or threatened
litigation will not have a material adverse effect on the Company's financial
condition, liquidity and results of operations.
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MANAGEMENT
EXECUTIVE OFFICERS, SENIOR MANAGERS AND DIRECTORS
The following table sets forth certain information with respect to the
Company's executive officers, certain other senior managers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- ----------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS
Edward F. Crawford.................... 57 Chairman of the Board, Chief Executive Officer
and President
James S. Walker....................... 55 Vice President and Chief Financial Officer
Felix J. Tarorick..................... 55 Vice President of Operations, President of Metal
Forming Group
Ronald J. Cozean...................... 34 Secretary and General Counsel
Matthew V. Crawford................... 28 Assistant Secretary, Corporate Counsel and Director
Patrick W. Fogarty.................... 36 Director of Finance
SENIOR MANAGERS
Andrew A. Arena....................... 50 President of Logistics
Richard G. McLaughlin................. 55 President of Aluminum Casting Group
Sterling J. Parks..................... 55 President of Forged and Machined Products, Capital
Equipment and Industrial Rubber Products Groups
DIRECTORS
Lewis E. Hatch, Jr.................... 71 Director
Thomas E. McGinty..................... 68 Director
Lawrence O. Selhorst.................. 64 Director
James W. Wert......................... 51 Director
</TABLE>
Edward F. Crawford has been Chairman of the Board and Chief Executive
Officer of the Company since 1992. Mr. E. Crawford has also served as Chairman
of the Board, Chief Executive Officer and President of The Crawford Group, Inc.,
which operates a diversified group of manufacturing companies, since 1964. Mr.
E. Crawford served as a director of the Company from 1989 to 1991. Mr. E.
Crawford has over 30 years of entrepreneurial experience in buying, selling and
operating manufacturing companies. Mr. E. Crawford also serves as a director of
Continental Global Group, Inc., a manufacturer of conveyor equipment for use in
the coal mining industry.
James S. Walker has served as Vice President and Chief Financial Officer of
the Company since 1991. Mr. Walker has significant experience in evaluating
acquisitions and integrating acquired companies. Mr. Walker has been with the
Company for over 19 years and has served in several capacities, including
Corporate Controller and Assistant Treasurer.
Felix J. Tarorick became Vice President of Operations in 1996 and has been
President of the Metal Forming Group since 1995. From 1992 to 1995, Mr. Tarorick
served as President of Kay Home Products, Inc. Mr. Tarorick joined the Company
in 1992. Mr. Tarorick has over 30 years of relevant industry experience.
Ronald J. Cozean has served as Secretary and General Counsel since joining
the Company in 1994. Mr. Cozean was an associate at the law firm of Squires,
Sanders & Dempsey L.L.P. from 1991 to 1994.
Matthew V. Crawford has served as Assistant Secretary and Corporate Counsel
since joining the Company in February 1995 and has served as President of
Crawford Container Company since 1991. Mr. M. Crawford became a director of the
Company in August 1997. Prior to joining the Company, Mr. M. Crawford worked as
a Corporate Finance Analyst at McDonald & Co. Securities, Inc. Mr. E. Crawford
is the father of Mr. M. Crawford.
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<PAGE> 67
Patrick W. Fogarty has been Director of Finance since joining the Company
in 1995. Prior thereto, Mr. Fogarty held various positions, including Senior
Manager, at Ernst & Young LLP from 1983 to 1995.
Andrew A. Arena has served as President of Logistics since March 1995.
Prior thereto, he served the Company in various capacities, including Vice
President and General Manager of the Company's distribution division. Mr. Arena
joined the Company in 1971. Mr. Arena has over 25 years of relevant industry
experience.
Richard G. McLaughlin has served as President of the Aluminum Casting Group
since the acquisition of GAMCO by the Company in October 1993. Since 1985, he
has served in various capacities at GAMCO, including President from 1991 to
1995. Mr. McLaughlin has over 25 years of relevant industry experience.
Sterling J. Parks has been President of the Forged and Machined Products,
Capital Equipment and Industrial Rubber Products Groups since joining the
Company in October 1992. From 1979 to 1992, Mr. Parks operated a business
consulting firm. Mr. Parks has over 25 years of relevant industry experience.
Lewis E. Hatch, Jr. has been a director of the Company since 1992. Mr.
Hatch is retired and was the Chairman and Chief Operating Officer of Rusch
International, an international medical device company, from 1986 to 1992 and
has served as a director of Teleflex, Inc. since 1976.
Thomas E. McGinty has been a director of the Company since 1986, and served
as the Interim Chairman of the Board and Chief Executive Officer of the Company
from November 1991 to June 1992. Since 1983, Mr. McGinty has been the President
of a management consulting firm, Belvoir Consultants, Inc.
Lawrence O. Selhorst has been a director of the Company since 1995. Mr.
Selhorst is also the Chairman of the Board and Chief Executive Officer of
American Spring Wire Corp. (spring wire manufacturer) and a director of Lincoln
Electric Company. Mr. Selhorst served as Chairman of the Board of RB&W
Corporation from 1992 to 1995.
James W. Wert has been a director of the Company since 1992. Mr. Wert is
retired and served as Senior Executive Vice President, Chief Investment Officer
and Chief Financial Officer of KeyCorp (financial services company) from 1994 to
1996 and as Vice Chairman and Chief Financial Officer of Society Corporation
(financial services company) from 1990 to 1994. Mr. Wert also serves as a
director of Continental Global Group, Inc., a manufacturer of conveyor equipment
for use in the coal mining industry.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Executive Committee, an Audit
Committee, a Compensation and Stock Option Committee and an Outside Directors
Committee.
The Executive Committee has all powers and rights necessary to exercise the
full authority of the Board of Directors in the management of the business and
affairs of the Company when necessary in between meetings of the Board of
Directors. The members of the Executive Committee are Messrs. E. Crawford,
McGinty and Wert.
The Audit Committee is primarily concerned with the effectiveness of the
Company's accounting policies and practices, financial reporting and internal
controls. The Audit Committee is authorized to: (i) make recommendations to the
Board of Directors regarding the engagement of the Company's independent
accountants; (ii) review the plan, scope and results of the annual audit, the
independent auditors' letter of comments and management's response thereto, and
the scope of any non-audit services which may be performed by the independent
auditors; (iii) manage the Company's policies and procedures with respect to
internal accounting and financial controls; and (iv) review any changes in
accounting policy. The members of the Audit Committee are Messrs. Hatch, McGinty
and Selhorst.
The Compensation and Stock Option Committee is authorized and directed to:
(i) review and approve the compensation and benefits of the executive officers;
(ii) review and approve the annual salary plans; (iii) review management
organization and development; (iv) review and advise management regarding the
benefits, including bonuses, and other terms and conditions of employment of
other employees; and
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<PAGE> 68
(v) administer any stock option plans which may be adopted and the granting of
options under such plans. The members of the Compensation and Stock Option
Committee are Messrs. Hatch, Selhorst and Wert.
The Outside Directors Committee is authorized to review corporate
governance matters, including any potential conflict of interest that may arise
involving certain, if any, employee directors. The members of the Outside
Directors Committee are Messrs. Hatch, McGinty, Selhorst and Wert.
COMPENSATION OF THE BOARD OF DIRECTORS
The Company compensates non-employee directors for serving on the Board of
Directors and reimburses them for any expenses incurred as a result of Board of
Directors meetings. Non-employee directors receive compensation in the form of
option grants in accordance with the Company's 1996 Non-employee Director Stock
Option Plan approved by the shareholders of the Company at the 1996 Annual
Meeting. During 1996, Messrs. Hatch, McGinty, Selhorst and Wert each received a
non-statutory stock option to purchase 6,000 shares of Common Stock and $6,250
for the first quarter of 1996, prior to the approval of the Non-employee
Director Stock Option Plan. Commencing with the second quarter of 1996,
non-employee directors ceased receiving annual cash retainers for their service
to the Company.
EXECUTIVE COMPENSATION
The following table shows all the cash compensation paid or to be paid by
the Company or any of its subsidiaries, as well as certain other compensation
paid or accrued, during the years ended December 31, 1996, 1995 and 1994 to the
Chairman of the Board and Chief Executive Officer and the other highest paid
executive officers of the Company whose compensation was at least $100,000 for
the year ended December 31, 1996 (collectively, the "Named Executive Officers")
in all capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------
ANNUAL COMPENSATION SECURITIES
NAME AND --------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SAR(A) COMPENSATION(B)
- ------------------------------ ---- -------- -------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Edward F. Crawford 1996 $225,000 $ 2,000 500,000 $ 164
Chairman of the Board and 1995 225,000 -- -- 164
Chief Executive Officer 1994 225,000 -- -- 181
James S. Walker 1996 $140,000 $ 30,000 10,000 $ 3,164
Vice President and 1995 140,000 20,000 10,000 3,164
Chief Financial Officer 1994 140,000 10,000 5,000 3,181
Felix J. Tarorick(c) 1996 $150,000 $ 25,000 10,000 $ 3,164
Vice President of Operations
Ronald J. Cozean(c) 1996 $100,000 $ 25,000 7,000 $ 2,664
Secretary and 1995 90,000 20,000 10,000 1,464
General Counsel 1994 45,000 -- 20,000 91
John J. Murray(c) 1996 $250,000 $100,000 23,000 $ 4,725
President and Chief 1995 250,000 50,000 150,000 1,725
Operating Officer
</TABLE>
- ---------------
(a) Reflects the number of shares of Common Stock covered by stock options
granted during the years shown. No stock appreciation rights ("SARs") were
granted to the Named Executive Officers during the years shown.
(b) For the year ended December 31, 1996, all other compensation includes
contributions made by the Company under: (i) the Company's Supplemental
Defined Contribution Plan as follows: Mr. Walker $3,000, Mr. Tarorick $3,000
and Mr. Murray $3,000; (ii) the Individual Account Retirement Plan: Mr.
Cozean $2,500; and (iii) insurance premiums paid by the Company as follows:
Mr. E. Crawford $164, Mr. Walker $164, Mr. Tarorick $164, Mr. Cozean $164
and Mr. Murray $1,725.
(c) Mr. Tarorick became an executive officer of the Company in 1996. Mr. Cozean
joined the Company as Secretary and General Counsel of the Company on July
1, 1994. Mr. Murray resigned from the
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<PAGE> 69
Company on May 15, 1997 in order to pursue other business interests. Mr. Murray
joined the Company as President and Chief Operating Officer on January 1, 1995.
STOCK OPTION PLANS
The Company has in effect an Amended and Restated 1992 Stock Option Plan
(the "Plan") that permits the granting of "non-statutory stock options" and
"incentive stock options." The Plan is administered by the Compensation and
Stock Option Committee of the Board of Directors, which has authority to select
officers and key employees to be participants and to determine the type and
number of awards to be granted.
The number of shares currently available for grant under the Plan shall not
exceed 850,000, subject to certain adjustments. The option price for stock
options granted under the Plan is fixed by the Compensation and Stock Option
Committee, but in no event will it be less than the fair market value of the
Common Stock on the date of grant. The Plan provides that the fair market value
of the Common Stock shall be the Nasdaq closing price on the trading day
immediately preceding the date on which the option is granted. Options may be
granted under the Plan at any time on or prior to February 18, 2002.
At the 1996 Annual Meeting, the shareholders of the Company approved a one
time grant to Mr. E. Crawford of a non-statutory stock option to purchase
500,000 shares of Common Stock.
The following tables set forth information regarding grants of stock
options with respect to the Named Executive Officers during 1996.
OPTION/SAR GRANTS IN FISCAL 1996
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
SECURITIES % OF TOTAL APPRECIATION FOR OPTION
UNDERLYING OPTIONS/SARS EXERCISE OR TERM(c)
OPTIONS/SARS GRANTED TO BASE PRICE EXPIRATION ------------------------
NAME GRANTED(a) EMPLOYEES PER SHARE(b) DATE 5% 10%
- ------------------------- ------------ ----------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Edward F. Crawford....... 500,000 74.8% $ 13.625 2/22/11 $7,350,688 $21,643,312
James S. Walker.......... 10,000 1.5% 13.625 2/22/06 85,701 217,183
Felix J. Tarorick........ 10,000 1.5% 13.625 2/22/06 85,701 217,183
Ronald J. Cozean......... 7,000 1.0% 13.625 2/22/06 59,991 152,028
John J. Murray........... 23,000 3.4% 13.625 2/22/06 197,113 499,520
</TABLE>
- ---------------
(a) Options become exercisable to the extent of 33 1/3% of the subject shares
after one year from the date of grant, 66 2/3% after two years from the date
of grant, and 100% after three years from the date of grant, except Mr. E.
Crawford's, which vest over a five-year period in 20% increments.
(b) Represents the Nasdaq National Market closing price of the Common Stock on
the day prior to grant.
(c) The 5% and 10% assumed annual rates of appreciation are mandated by the
rules of the Commission and do not represent the Company's estimate or
projection of the future Common Stock price.
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<PAGE> 70
AGGREGATE OPTION/SAR EXERCISES DURING MOST RECENTLY COMPLETED FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
SHARES AGGREGATE FISCAL YEAR END FISCAL YEAR END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE(A)
- ----------------------------------------- ----------- --------- --------------- ---------------
<S> <C> <C> <C> <C>
Edward F. Crawford....................... None N/A 100,000/500,000 $775,000/0
James S. Walker.......................... None N/A 46,666/18,334 257,500/15,000
Felix J. Tarorick........................ None N/A 46,666/18,334 257,500/15,000
Ronald J. Cozean......................... None N/A 16,666/20,334 7,500/15,000
John J. Murray........................... None N/A 50,000/123,000 112,500/225,000
</TABLE>
- ---------------
(a) The "Value of Unexercised In-the-Money Options/SARs at December 31, 1996"
was calculated by determining the difference between the fair market value
of the underlying Common Stock at December 31, 1996 (the Nasdaq National
Market closing price of the Company's Common Stock on December 31, 1996 was
$12.875) and the exercise price of the option. An option is "In-the-Money"
when the fair market value of the underlying Common Stock exceeds the
exercise price of the option.
CERTAIN TRANSACTIONS
Mr. Wert, a director of the Company, was the Chief Investment Officer of
KeyCorp, the parent of KeyBank, National Association ("KeyBank"), until July 31,
1996. As of September 30, 1997, the Company was indebted to KeyBank and four
other banks in the amount of $129.8 million under a revolving credit facility
and term loan. KeyBank is also the trustee and investment advisor for the
Company's Individual Account Retirement Plan and for two defined benefit plans
covering certain hourly employees. The Company maintains checking accounts at
KeyBank, and KeyBank is the registrar and transfer agent for the Company's
Common Stock.
GAMCO, a wholly owned subsidiary of the Company, leases space in three
buildings in Conneaut, Ohio: (i) a 91,500 square-foot facility owned by a
company owned by Mr. M. Crawford, at a monthly rent of $26,833; (ii) an
additional 70,000 square-foot attached facility owned by Mr. E. Crawford, at a
monthly rate of $9,000; and (iii) a separate 50,000 square-foot facility owned
by Mrs. E. Crawford, at a monthly rent of $3,000. Ajax leases a facility in
Cleveland, Ohio at a monthly rent of $20,833. This facility is owned by a
corporation whose shareholders are Mr. E. Crawford and his son, Mr. M. Crawford.
The Company believes that the foregoing transactions are all on terms at
least as favorable to the Company as if negotiated on an arms-length basis with
unrelated third parties.
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<PAGE> 71
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock by: (i) each person (or group
of affiliated persons) known to the Company to be the beneficial owner of more
than five percent of the outstanding Common Stock; (ii) each director of the
Company; (iii) each Named Executive Officer individually; and (iv) all directors
and executive officers of the Company as a group. Unless otherwise indicated,
the information is as of October 1, 1997 and the nature of beneficial ownership
consists of sole voting and investment power.
<TABLE>
<CAPTION>
PERCENT
NAME OF SHARES OF OF
BENEFICIAL OWNER COMMON STOCK CLASS
-------------------------------------------------- ------------ -------
<S> <C> <C>
Edward F. Crawford................................ 2,807,000(a) 25.0%
Matthew V. Crawford............................... 310,655(b) 2.8%
Thomas E. McGinty................................. 123,700(c) 1.1%
Felix J. Tarorick................................. 82,500(d) *
James S. Walker................................... 55,600(e) *
James W. Wert..................................... 47,000(f) *
Lawrence O. Selhorst.............................. 43,701(g) *
Lewis E. Hatch, Jr. .............................. 32,060(h) *
Ronald J. Cozean.................................. 29,000(i) *
Pioneering Management Corporation................. 1,095,000(j) 9.8%
Kennedy Capital Management, Inc................... 703,228(k) 6.1%
Dimensional Fund Advisors, Inc.................... 658,161(l) 5.9%
Directors and executive officers as a group (10
persons)........................................ 3,545,883 31.1%
</TABLE>
- ---------------
* Less than one percent.
(a) The total includes 2,112,500 shares over which Mr. E. Crawford has sole
voting and investment power, 22,500 shares owned by L'Accent de Provence of
which Mr. E. Crawford is President and owner of 25% of its capital stock and
over which Mr. E. Crawford shares voting and investment power, 9,500 shares
owned by Mr. E. Crawford's wife as to which Mr. E. Crawford disclaims
beneficial ownership, 100,000 shares subject to stock options currently
exercisable, and 562,500 shares held by The Huntington Trust Company NA over
which Mr. E. Crawford has sole voting power. The address of Mr. E. Crawford
is the business address of the Company.
(b) Includes 5,000 shares of Common Stock issuable pursuant to currently
exercisable stock options.
(c) Includes 12,000 shares of Common Stock issuable pursuant to currently
exercisable stock options or options that will become exercisable within 60
days.
(d) Includes 30,000 shares of Common Stock issuable pursuant to currently
exercisable stock options.
(e) Includes 30,000 shares of Common Stock issuable pursuant to currently
exercisable stock options.
(f) Includes 12,000 shares of Common Stock issuable pursuant to currently
exercisable stock options or options that will become exercisable within 60
days.
(g) Includes 12,000 shares of Common Stock issuable pursuant to currently
exercisable stock options or options that will become exercisable within 60
days.
(h) Includes 2,165 shares owned by Mr. Hatch's wife as to which Mr. Hatch
disclaims beneficial ownership and 12,000 shares of Common Stock issuable
pursuant to currently exercisable stock options or options that will become
exercisable within 60 days.
(i) Includes 29,000 shares of Common Stock issuable pursuant to currently
exercisable stock options.
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<PAGE> 72
(j) Based on information set forth on Amendment No. 2 to Schedule 13G dated
January 20, 1997. Pioneering Management Corporation ("PMC"), a registered
investment advisor, reported sole voting power over the 1,095,000 shares
beneficially owned as of December 31, 1996, sole investment power over
10,000 shares, and shared investment power over 1,085,000 shares. The
address for PMC is 60 State Street, Boston, Massachusetts 02109.
(k) Based on information set forth on Schedule 13G dated February 10, 1997.
Included in the 703,228 shares beneficially owned as of December 31, 1996
are 415,528 shares which Kennedy Capital Management, Inc. ("Kennedy
Capital") reports it has the right to acquire. Kennedy Capital reported sole
voting and investment power over all the shares. The address of Kennedy
Capital is 10829 Olive Blvd., St. Louis, Missouri 63141.
(l) Based on information set forth on Schedule 13G dated February 5, 1997.
Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, reported beneficial ownership of 658,161 shares of Common Stock as
of December 31, 1996, all of which shares were held in portfolios of DFA
Investment Dimensions Group Inc., a registered open-end investment company,
or in series of the DFA Investment Trust Company, a Delaware business trust,
or the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, for all of which Dimensional
serves as investment manager. Dimensional reported sole voting and
investment power with respect to all of such shares, but disclaims
beneficial ownership of all such shares. The address for Dimensional is 1299
Ocean Avenue, 11th Floor, Santa Monica, California 90401.
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<PAGE> 73
DESCRIPTION OF OTHER INDEBTEDNESS
NEW CREDIT FACILITY
Subsequent to the offering of the Original Notes, the Company entered into
the Promissory Note with KeyBank, National Association, which replaced the
Credit Agreement, dated April 11, 1995, as amended. The Promissory Note
constitutes the New Credit Facility for purposes of the Indenture. The
Promissory Note expires at the earlier of demand, or April 30, 1999.
Advances pursuant to the Promissory Note will be used for general corporate
purposes. Advances may be, at the option of the Company, Prime Rate Advances or
LIBOR Advances. Prime Rate Advances bear interest at the Lender's Base Rate less
one percent, and LIBOR Advances bear interest at 150 basis points in excess of
the LIBOR Rate.
The Promissory Note contains customary representations, warranties and
events of default for facilities of this type.
INDUSTRIAL REVENUE BONDS
The Company is the guarantor of certain First Mortgage Industrial Bonds
(the "Bonds") which were issued in June 1975 in connection with a construction
project to expand the facilities of Tocco. The Bonds bear interest at a rate of
9 1/4% per annum and will mature in 2000. As of September 30, 1997, $1.2 million
aggregate principal amount of Bonds were outstanding.
STATE LOANS
The Company is a borrower pursuant to a State of Ohio Department of
Development loan, which was issued in April 1997 in connection with the
refurbishment of the Company's corporate headquarters. This loan bears interest
at a rate of 5% per annum and will mature in 2002. As of September 30, 1997,
$0.9 million aggregate principal amount was outstanding under this loan.
GAMCO is a borrower pursuant to a State of Ohio Department of Development
loan, which was issued in October 1993 in connection with the expansion of
GAMCO's facility and the purchase of certain equipment. This loan bears interest
at a rate of 3% per annum and will mature in 1998. As of September 30, 1997,
$0.6 million aggregate principal amount was outstanding under this loan.
OTHER INDEBTEDNESS
In addition, as of September 30, 1997, the Company had $0.5 million of
other indebtedness outstanding, which was comprised of certain capital leases.
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<PAGE> 74
DESCRIPTION OF THE NOTES
The Original Notes were, and the Exchange Notes will be, issued under an
Indenture, dated as of November 25, 1997 (the "Indenture") by and between the
Company and Norwest Bank Minnesota, N.A., as trustee (the "Trustee"). The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act") as in effect on the date of the Indenture. The Notes are
subject to all such terms, and holders of the Notes are referred to the
Indenture and the Trust Indenture Act for a statement of them. The following is
a summary of all material terms and provisions of the Notes. This summary does
not purport to be a complete description of the Notes and is subject to the
detailed provisions of, and qualified in its entirety by reference to, the Notes
and the Indenture (including the definitions contained therein). A copy of the
form of Indenture may be obtained from the Company by any holder or prospective
investor upon request. Definitions relating to certain capitalized terms are set
forth under "-- Certain Definitions". Capitalized terms that are used but not
otherwise defined herein have the meanings ascribed to them in the Indenture and
such definitions are incorporated herein by reference.
GENERAL
The Notes will be limited in aggregate principal amount to $150,000,000.
The Notes will be general unsecured obligations of the Company and will rank
subordinate in right of payment to any Senior Indebtedness of the Company, pari
passu with any senior subordinated indebtedness, and senior in right of payment
to any existing or future subordinated Indebtedness of the Company.
A majority of the operations of the Company are conducted through its
Subsidiaries and, therefore, the Company is dependent upon the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the Notes.
The Notes will be effectively subordinated to all Indebtedness and other
liabilities (including trade payables) of the Company's Subsidiaries. Any right
of the Company to receive assets of any of its Subsidiaries upon a Subsidiary's
liquidation or reorganization (and the consequent right of the holders of the
Notes to participate in those assets) will be effectively subordinated to the
claims of that Subsidiary's creditors.
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on December 1, 2007. The Notes will bear interest at
a rate of 9 1/4% per annum from the Issue Date until maturity. Interest is
payable semiannually in arrears on each June 1 and December 1 commencing June 1,
1998, to holders of record of the Notes at the close of business on the
immediately preceding May 15 and November 15, respectively. The interest rate on
the Notes is subject to increase, and such Additional Interest will be payable
on the payment dates set forth above, in certain circumstances, if the Notes (or
other securities substantially similar to the Notes) are not registered with the
Commission within the prescribed time periods. See "Exchange Offer; Registration
Rights."
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Company, in whole at any
time or in part from time to time on or after December 1, 2002, at the following
redemption prices (expressed as percentages of the principal amount thereof),
together, in each case, with accrued and unpaid interest, if any, to the
redemption date, if redeemed during the twelve-month period beginning on
December 1 of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---------------------------------- ----------
<S> <C>
2002.............................. 104.625%
2003.............................. 103.083%
2004.............................. 101.542%
2005 and thereafter............... 100.000%
</TABLE>
Notwithstanding the foregoing, the Company may redeem in the aggregate up
to 35% of the original principal amount of Notes at any time and from time to
time prior to December 1, 2000 at a redemption price
69
<PAGE> 75
equal to 109.25% of the aggregate principal amount so redeemed plus accrued and
unpaid interest, if any, to the redemption date with the Net Proceeds of one or
more Public Equity Offerings' provided that at least 65% of the principal amount
of Notes originally issued remains outstanding immediately after the occurrence
of any such redemption and that any such redemption occurs within 60 days
following the closing of any such Public Equity Offering.
In the event of a redemption of fewer than all of the Notes, the Trustee
shall select the Notes to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, or while such Notes are listed,
or if such Notes are not then listed on a national securities exchange, on a pro
rata basis, by lot or in such other manner as the Trustee shall deem fair and
equitable. The Notes will be redeemable in whole or in part upon not less than
30 nor more than 60 days' prior written notice, mailed by first class mail to a
holder's last address as it shall appear on the register maintained by the
Registrar of the Notes. On and after any redemption date, interest will cease to
accrue on the Notes or portions thereof called for redemption unless the Company
shall fail to redeem any such Note.
SUBORDINATION
The indebtedness represented by the Notes is, to the extent and in the
manner provided in the Indenture, subordinated in right of payment to the prior
indefeasible payment and satisfaction in full in cash of all existing and future
Senior Indebtedness of the Company. As of September 30, 1997, after giving pro
forma effect to the Refinancing, the principal amount of outstanding Senior
Indebtedness of the Company, on a consolidated basis, would have been $12.8
million.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, arrangement, reorganization, liquidation, dissolution or other
winding-up or other similar case or proceeding in connection therewith whether
or not involving insolvency or bankruptcy, relative to the Company or to its
creditors, as such, or to the Company's assets, whether voluntary or
involuntary, or any general assignment for the benefit of creditors or other
marshalling of assets or liabilities of the Company (except in connection with
the merger or consolidation of the Company or its liquidation or dissolution
following the transfer of all or substantially all of its assets, upon the terms
and conditions permitted under the circumstances described under "-- Merger,
Consolidation or Sale of Assets" below) (all of the foregoing referred to herein
individually as a "Bankruptcy Proceeding" and collectively as "Bankruptcy
Proceedings"), the holders of Senior Indebtedness of the Company will be
entitled to receive payment and satisfaction in full in cash of all amounts due
on or in respect of all Senior Indebtedness of the Company before the holders of
the Notes are entitled to receive or retain any payment or distribution of any
kind on account of the Notes. In the event that, notwithstanding the foregoing,
the Trustee or any holder of Notes receives any payment or distribution of
assets of the Company of any kind, whether in cash, property or securities,
including, without limitation, by way of set-off or otherwise, in respect of the
Notes before all Senior Indebtedness of the Company is paid and satisfied in
full in cash, then such payment or distribution will be held by the recipient in
trust for the benefit of holders of Senior Indebtedness and will be immediately
paid over or delivered to the holders of Senior Indebtedness or their
representative or representatives to the extent necessary to make payment in
full of all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the holders
of Senior Indebtedness. By reason of such subordination, in the event of any
such Bankruptcy Proceeding, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than other creditors of the Company,
including holders of the Notes.
Upon the occurrence of a Payment Default on Designated Senior Indebtedness,
no payment or distribution of any kind or character (including, without
limitation, cash, property and any payment or distribution which may be payable
or deliverable by reason of the payment of any other Indebtedness of the Company
being subordinated to the payment of the Notes by the Company) may be made by or
on behalf of the Company or any Subsidiary of the Company, including, without
limitation, by way of set-off or otherwise, for or on account of the Notes, or
for or on account of the purchase, redemption or other acquisition of any Notes,
and neither the Trustee nor any holder or owner of any Notes shall take or
receive from the Company or any Subsidiary of the Company, directly or
indirectly in any manner, payment in respect of all or any portion of Notes
commencing on the date of receipt by the Trustee of written notice from the
representative of
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the holders of Designated Senior Indebtedness (the "Representative") of the
occurrence of such Payment Default, and in any such event, such prohibition
shall continue until such Payment Default is cured, waived in writing or
otherwise ceases to exist. At such time as the prohibition set forth in the
preceding sentence shall no longer be in effect, subject to the provisions of
the following paragraph, the Company shall resume making any and all required
payments in respect of the Notes, including any missed payments.
Upon the occurrence of a Non-Payment Event of Default on Designated Senior
Indebtedness, no payment or distribution of any kind or character (including,
without limitation, cash, property and any payment or distribution which may be
payable or deliverable by reason of the payment of any other indebtedness of the
Company being subordinated to the payment of the Notes by the Company) may be
made by the Company or any Subsidiary of the Company, including, without
limitation, by way of set-off or otherwise, for or on account of the Notes, or
for or on account of the purchase, redemption or other acquisition of any Notes,
and neither the Trustee nor any holder or owner of any Notes shall take or
receive from the Company or any Subsidiary of the Company, directly or
indirectly in any manner, payment in respect of all or any portion of the Notes
for a period (a "Payment Blockage Period") commencing on the date of receipt by
the Trustee of written notice from the Representative of such Non-Payment Event
of Default unless and until (subject to any blockage of payments that may then
be in effect under the preceding paragraph) the earliest of (x) more than 179
days shall have elapsed since receipt of such written notice by the Trustee, (y)
such Non-Payment Event of Default shall have been cured or waived in writing or
otherwise shall have ceased to exist or such Designated Senior Indebtedness
shall have been paid in full or (z) such Payment Blockage Period shall have been
terminated by written notice to the Company or the Trustee from such
Representative, after which, in the case of clause (x), (y) or (z), the Company
shall resume making any and all required payments in respect of the Notes,
including any missed payments. Notwithstanding any other provision of the
Indenture, in no event shall a Payment Blockage Period commenced in accordance
with the provisions of the Indenture described in this paragraph extend beyond
179 days from the date of the receipt by the Trustee of the notice referred to
above (the "Initial Blockage Period"). Any number of additional Payment Blockage
Periods may be commenced during the Initial Blockage Period; provided, however,
that no such additional Payment Blockage Period shall extend beyond the Initial
Blockage Period. After the expiration of the Initial Blockage Period, no Payment
Blockage Period may be commenced until at least 180 consecutive days have
elapsed from the last day of the Initial Blockage Period. Notwithstanding any
other provision of the Indenture, no Non-Payment Event of Default with respect
to Designated Senior Indebtedness which existed or was continuing on the date of
the commencement of any Payment Blockage Period initiated by the Representative
shall be, or be made, the basis for the commencement of a second Payment
Blockage Period initiated by the Representative, whether or not within the
Initial Blockage Period, unless such Non-Payment Event of Default shall have
been cured or waived for a period of not less than 90 consecutive days.
If the Company fails to make any payment on the Notes when due or within
any applicable grace period, whether or not on account of payment blockage
provisions, such failure would constitute an Event of Default under the
Indenture and would enable the holders of the Notes to accelerate the maturity
thereof. See "-- Events of Default."
A holder of Notes by its acceptance of Notes agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on its behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee its
attorney-in-fact for such purpose.
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
Limitation on Additional Indebtedness
The Company will not, directly or indirectly, incur (as defined) any
Indebtedness (including Acquired Indebtedness); provided that if no Default or
Event of Default shall have occurred and be continuing at the time or as a
consequence of the incurrence of such Indebtedness, the Company may incur
Indebtedness (including Acquired Indebtedness) if after giving effect to the
incurrence of such Indebtedness and the receipt
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and application of the proceeds thereof, the Company's Consolidated Fixed Charge
Coverage Ratio is at least 2.25 to 1. In addition, none of the Subsidiaries of
the Company will, directly or indirectly, incur any Subsidiary Indebtedness;
provided that if no Default or Event of Default shall have occurred and be
continuing at the time or as a consequence of the incurrence of such Subsidiary
Indebtedness, any of the Company's Subsidiaries may incur Subsidiary
Indebtedness if, after giving effect to the incurrence of such Subsidiary
Indebtedness and the receipt and application of the proceeds thereof, such
Subsidiary's Consolidated Fixed Charge Coverage Ratio is at least 2.50 to 1.
Notwithstanding the foregoing, the Company and its Subsidiaries may incur
Permitted Indebtedness; provided that the Company will not incur any Permitted
Indebtedness that ranks junior in right of payment to the Notes that has a
maturity or mandatory sinking fund payment prior to the maturity of the Notes.
Limitation on Other Senior Subordinated Indebtedness
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, incur, contingently or otherwise, any Indebtedness that
is both (i) subordinated in right of payment to any Senior Indebtedness of the
Company or any of its Subsidiaries, as the case may be, and (ii) senior in right
of payment to the Notes. For purposes of this covenant, Indebtedness is deemed
to be senior in right of payment to the Notes, if it is not explicitly
subordinated in right of payment to Senior Indebtedness at least to the same
extent as the Notes are subordinated to such Senior Indebtedness.
Limitation on Restricted Payments
The Company will not make, and will not permit any of its Subsidiaries to,
directly or indirectly, make any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under "-- Limitation on Additional
Indebtedness" above; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) 50% of the Company's cumulative Consolidated
Net Income (or minus 100% of any cumulative deficit in Consolidated Net
Income during such period) plus (2) 100% of the aggregate Net Proceeds
received by the Company from the issue or sale after the Issue Date of
Capital Stock (other than Disqualified Capital Stock or Capital Stock of
the Company issued to any Subsidiary of the Company) of the Company or any
Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Capital Stock (other than Disqualified
Capital Stock) of the Company which has been so converted, exercised or
exchanged, as the case may be plus (3) without duplication of any amounts
included in clause (c)(2) above, 100% of the aggregate Net Proceeds
received by the Company of any equity contribution from a holder of the
Company's Capital Stock, plus (4) $5.0 million, excluding in the case of
clauses (c)(2) and (3), any Net Proceeds from a Public Equity Offering to
the extent used to redeem the Notes. For purposes of determining under this
clause (c) the amount expended for Restricted Payments, cash distributed
shall be valued at the face amount thereof and property other than cash
shall be valued at its fair market value.
The provisions of this covenant shall not prohibit (i) the payment of any
distribution within 60 days after the date of declaration thereof, if at such
date of declaration such payment would comply with the provisions of the
Indenture; (ii) the repurchase, redemption or other acquisition or retirement of
any shares of Capital Stock of the Company or Indebtedness subordinated to the
Notes by conversion into, or by or in exchange for, shares of Capital Stock of
the Company (other than Disqualified Capital Stock) or out of the Net Proceeds
of the substantially concurrent sale (other than to a Subsidiary of the Company)
of other shares of Capital Stock of the Company (other than Disqualified Capital
Stock); (iii) the redemption or retirement of Indebtedness of the Company
subordinated to the Notes in exchange for, by conversion into, or out of the Net
Proceeds of,
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a substantially concurrent sale or incurrence of Indebtedness of the Company
(other than any Indebtedness owed to a Subsidiary) that is contractually
subordinated in right of payment to the Notes to at least the same extent as the
Indebtedness being redeemed or retired; (iv) the retirement of any shares of
Disqualified Capital Stock of the Company by conversion into, or by exchange
for, shares of Disqualified Capital Stock of the Company, or out of the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Disqualified Capital Stock of the Company; (v) so
long as no Default or Event of Default shall have occurred and be continuing,
payments made with respect to extinguishment of fractional shares or odd-lot
shares not to exceed $250,000 in the aggregate; (vi) payments to a holding
company that, directly or indirectly, owns all of the outstanding Capital Stock
of the Company, in amounts sufficient to pay: (w) franchise taxes and other fees
required to maintain its corporate existence, (x) costs associated with
preparation of required documents for filing with the Securities and Exchange
Commission and with any exchange on which such company's securities are traded,
(y) federal, state, foreign and local taxes to the extent that such taxes are
attributable to the ownership of the Company and its Subsidiaries, and (z) other
operating or administrative costs of up to $200,000 per year; or (vii) so long
as no Default or Event of Default shall have occurred and be continuing,
payments, directly or indirectly, to employees to repurchase Capital Stock or
other securities of the Company or of a holding company that, directly or
indirectly, owns all of the outstanding Capital Stock of the Company upon the
death, disability or termination of employment of such employees, in amounts not
to exceed, in the aggregate, $1.5 million per year; provided that in calculating
the aggregate amount of Restricted Payments made subsequent to the Issue Date
for purposes of clause (c) of the immediately preceding paragraph, amounts
expended pursuant to clauses (i), (v) and (vii) shall be included in such
calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant described above were computed, which calculations may
be based upon the Company's latest available financial statements, and that no
Default or Event of Default has occurred and is continuing and no Default or
Event of Default will occur immediately after giving effect to any such
Restricted Payments.
Limitation on Liens
The Company will not, and will not permit any of its Subsidiaries to,
create, incur or otherwise cause or suffer to exist or become effective any
Liens of any kind (other than Permitted Liens) upon any property or asset of the
Company or any of its Subsidiaries or any shares of Capital Stock or
Indebtedness of any Subsidiary of the Company which owns property or assets, now
owned or hereafter acquired, unless (i) if such Lien secures Indebtedness which
is pari passu with the Notes, then the Notes are secured on an equal and ratable
basis with the obligations so secured until such time as such obligation is no
longer secured by a Lien or (ii) if such Lien secures Indebtedness which is
subordinated to the Notes, any such Lien shall be subordinated to the Lien
granted to the holders of the Notes to the same extent as such Indebtedness is
subordinated to the Notes.
Limitation on Transactions with Affiliates
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or series
of related transactions (including, without limitation, the sale, purchase,
exchange or lease of assets, property or services) with any Affiliate (each an
"Affiliate Transaction") or extend, renew, waive or otherwise modify the terms
of any Affiliate Transaction entered into prior to the Issue Date unless (i)
such Affiliate Transaction is between or among the Company and its Wholly Owned
Subsidiaries; or (ii) the terms of such Affiliate Transaction are fair and
reasonable to the Company or such Subsidiary, as the case may be, and the terms
of such Affiliate Transaction are at least as favorable as the terms which could
be obtained by the Company or such Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount or
having a fair market value in excess of $2.0 million which is not permitted
under clause (i) above, the Company must obtain a resolution of the Board of
Directors of the Company certifying that such Affiliate
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Transaction complies with clause (ii) above. In any Affiliate Transaction (or
any series of related Affiliate Transactions which are similar or part of a
common plan) involving an amount or having a fair market value in excess of
$10.0 million which is not permitted under clause (i) above, the Company must
obtain a favorable written opinion as to the fairness of such transaction or
transactions, as the case may be, from an Independent Financial Advisor.
The foregoing provisions will not apply to (i) any Restricted Payment that
is not prohibited by the provisions described under "-- Limitation on Restricted
Payments" above or (ii) reasonable fees and compensation paid to and indemnity
provided on behalf of, officers, directors or employees of the Company or any
Subsidiary of the Company as determined in good faith by the Company's Board of
Directors or senior management.
Limitation on Certain Asset Sales
The Company will not, and will not permit any of its Subsidiaries to,
consummate an Asset Sale unless (i) the Company or such applicable Subsidiary,
as the case may be, receives consideration at the time of such sale or other
disposition at least equal to the fair market value of the assets sold or
otherwise disposed of (as determined in good faith by the Board of Directors of
the Company, and evidenced by a board resolution); (ii) not less than 80% of the
consideration received by the Company or such applicable Subsidiary, as the case
may be, is in the form of cash or Cash Equivalents; and (iii) the Asset Sale
Proceeds received by the Company or such Subsidiary are applied (a) first, to
the extent the Company or any such Subsidiary, as the case may be, elects, or is
required, to prepay, repay or purchase indebtedness under any then existing
Senior Indebtedness of the Company or any such Subsidiary within 12 months
following the receipt of the Asset Sale Proceeds from any Asset Sale; provided
that any such repayment shall result in a permanent reduction of the commitments
thereunder in an amount equal to the principal amount so repaid; (b) second, to
the extent of the balance of Asset Sale Proceeds after application as described
above, to the extent the Company elects, to an investment in assets (including
Capital Stock or other securities purchased in connection with the acquisition
of Capital Stock or property of another Person) used or useful in businesses
similar or ancillary to the business of the Company or any such Subsidiary as
conducted on the Issue Date; provided that such investment occurs on or prior to
the 365th day following receipt of such Asset Sale Proceeds (the "Reinvestment
Date") and (c) third, if on the Reinvestment Date the Available Asset Sale
Proceeds exceed $10.0 million, the Company shall apply an amount equal to such
Available Asset Sale Proceeds to an offer to repurchase the Notes, at a purchase
price in cash equal to 100% of the principal amount thereof plus accrued and
unpaid interest, if any, to the purchase date (an "Excess Proceeds Offer"). If
an Excess Proceeds Offer is not fully subscribed, the Company may retain the
portion of the Available Asset Sale Proceeds not required to repurchase Notes.
If the Company is required to make an Excess Proceeds Offer, the Company
shall mail, within 30 days following the Reinvestment Date, a notice to the
holders stating, among other things: (1) that such holders have the right to
require the Company to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the purchase date; (2) the
purchase date, which shall be no earlier than 30 days and not later than 45 days
from the date such notice is mailed; (3) the instructions that each holder must
follow in order to have such Notes purchased; and (4) the calculations used in
determining the amount of Available Asset Sale Proceeds to be applied to the
purchase of such Notes.
In the event of the transfer of substantially all of the property and
assets of the Company and its Subsidiaries as an entirety to a Person in a
transaction permitted under "-- Merger, Consolidation or Sale of Assets" below,
the successor Person shall be deemed to have sold the properties and assets of
the Company and its Subsidiaries not so transferred for purposes of this
covenant, and shall comply with the provisions of this covenant with respect to
such deemed sale as if it were an Asset Sale.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and other securities laws and regulations thereunder to the extent
such laws and regulations are applicable in connection with the repurchase of
Notes pursuant to an Excess Proceeds Offer. To the extent that the provisions of
any
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securities laws or regulations conflict with the "Asset Sale" provisions of the
Indenture, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under the
"Asset Sale" provisions of the Indenture by virtue thereof.
Limitation on Preferred Stock of Subsidiaries
The Company will not permit any of its Subsidiaries to issue any Preferred
Stock (except Preferred Stock issued to the Company or a Wholly Owned Subsidiary
of the Company) or permit any Person (other than the Company or a Wholly Owned
Subsidiary of the Company) to hold any such Preferred Stock unless the Company
or such Subsidiary would be entitled to incur or assume Indebtedness under
"-- Limitation on Additional Indebtedness" above (other than Permitted
Indebtedness) in the aggregate principal amount equal to the aggregate
liquidation value of the Preferred Stock to be issued.
Limitation on Capital Stock of Subsidiaries
The Company will not (i) sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of a Subsidiary of the Company or (ii) permit any
of its Subsidiaries to issue any Capital Stock, other than to the Company or a
Wholly Owned Subsidiary of the Company. The foregoing restrictions shall not
apply to an Asset Sale made in compliance with " -- Limitation on Certain Asset
Sales" above or the issuance of Preferred Stock in compliance with
" -- Limitation on Preferred Stock of Subsidiaries" above.
Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary of the
Company to (a)(i) pay dividends or make any other distributions to the Company
or any Subsidiary of the Company (A) on its Capital Stock or (B) with respect to
any other interest or participation in, or measured by, its profits or (ii)
repay any Indebtedness or any other obligation owed to the Company or any
Subsidiary of the Company, (b) make loans or advances or capital contributions
to the Company or any of its Subsidiaries or (c) transfer any of its properties
or assets to the Company or any of its Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of: (i) encumbrances or
restrictions existing on the Issue Date to the extent and in the manner such
encumbrances and restrictions are in effect on the Issue Date; (ii) applicable
law; (iii) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person
(including any Subsidiary of the Person), so acquired; (iv) customary
non-assignment provisions in leases or other agreements entered in the ordinary
course of business and consistent with past practices; (v) Refinancing
Indebtedness; provided that such restrictions are no more restrictive than those
contained in the agreements governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; or (vi) customary
restrictions in security agreements or mortgages securing Indebtedness of the
Company or a Subsidiary to the extent such restrictions restrict the transfer of
the property subject to such security agreements and mortgages.
Limitation on Sale and Lease-Back Transactions
The Company will not, and will not permit any of its Subsidiaries to, enter
into any Sale and Lease-Back Transaction unless (i) the consideration received
in such Sale and Lease-Back Transaction is at least equal to the fair market
value of the property sold, as determined in good faith by the Board of
Directors of the Company and evidenced by a board resolution and (ii) the
Company could incur the Attributable Indebtedness in respect of such Sale and
Lease-Back Transaction in compliance with " -- Limitation on Additional
Indebtedness" above.
Payments for Consent
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of any Notes for or as an
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inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
agreed to be paid to all holders of the Notes which so consent, waive or agree
to amend in the time frame set forth in solicitation documents relating to such
consent, waiver or agreement.
CHANGE OF CONTROL OFFER
Upon the occurrence of a Change of Control, the Company shall be obligated
to make an offer to purchase (the "Change of Control Offer") each holder's
outstanding Notes at a purchase price (the "Change of Control Purchase Price")
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the Change of Control Payment Date (as defined) in accordance with
the procedures set forth below.
Within 20 days of the occurrence of a Change of Control, the Company shall
(i) cause a notice of the Change of Control Offer to be sent at least once to
the Dow Jones News Service or similar business news service in the United States
and (ii) send by first-class mail, postage prepaid, to the Trustee and to each
holder of the Notes, at the address appearing in the register maintained by the
Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 30 days nor later than 45 days from
the date such notice is mailed (the "Change of Control Payment Date"));
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Notes delivered for purchase, and a
statement that such holder is withdrawing his election to have such Notes
purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered;
(8) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Notes or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee Notes so accepted together with
an Officers' Certificate stating the Notes or portions thereof tendered to the
Company. The Paying Agent shall promptly mail to each holder of Notes so
accepted payment in an amount equal to the purchase price for such Notes, and
the Company shall execute and issue, and the Trustee shall promptly authenticate
and mail to such holder, a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered; provided that each such new Note shall be
issued in an original principal amount in denominations of $1,000 and integral
multiples thereof.
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The Indenture requires that if the New Credit Facility is in effect, or any
amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change of Control, prior to the mailing of the notice to holders
described in the second preceding paragraph, but in any event within 20 days
following any Change of Control, the Company covenants to (i) repay in full all
obligations and terminate all commitments under or in respect of the New Credit
Facility and all other Senior Indebtedness the terms of which require repayment
upon a Change of Control or offer to repay in full all obligations and terminate
all commitments under or in respect of the New Credit Facility and all such
Senior Indebtedness and repay the Indebtedness owed to each such lender who has
accepted such offer or (ii) obtain the requisite consents under the New Credit
Facility and all such other Senior Indebtedness to permit the repurchase of the
Notes as described above. The Company must first comply with the covenant
described in the preceding sentence before it shall be required to purchase
Notes in the event of a Change of Control; provided that the Company's failure
to comply with the covenant described in the preceding sentence constitutes an
Event of Default described in clause (iii) under "-- Events of Default" below if
not cured within 30 days after the notice required by such clause. As a result
of the foregoing, a holder of the Notes may not be able to compel the Company to
purchase the Notes unless the Company is able at the time to refinance all of
the obligations under or in respect of the New Credit Facility and all such
other Senior Indebtedness or obtain requisite consents under the New Credit
Facility and all such other Senior Indebtedness.
The Indenture will further provide that, (A) if the Company or any
Subsidiary thereof has issued any outstanding (i) indebtedness that is
subordinated in right of payment to the Notes or (ii) Preferred Stock, and the
Company or such Subsidiary is required to make a Change of Control Offer or to
make a distribution with respect to such subordinated indebtedness or Preferred
Stock in the event of a Change of Control, the Company shall not consummate any
such offer or distribution with respect to such subordinated indebtedness or
Preferred Stock until such time as the Company shall have paid the Change of
Control Purchase Price in full to the holders of Notes that have accepted the
Company's Change of Control Offer and shall otherwise have consummated the
Change of Control Offer made to holders of the Notes and (B) the Company will
not issue Indebtedness that is subordinated in right of payment to the Notes or
Preferred Stock with change of control provisions requiring the payment of such
Indebtedness or Preferred Stock prior to the payment of the Notes in the event
of a Change in Control under the Indenture.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company will not and will not permit any of its Subsidiaries to
consolidate with, merge with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of the assets of the Company
(as an entirety or substantially as an entirety in one transaction or a series
of related transactions), to any Person unless: (i) the Company or such
Subsidiary, as the case may be, shall be the continuing Person, or the Person
(if other than the Company or such Subsidiary) formed by such consolidation or
into which the Company or such Subsidiary, as the case may be, is merged or to
which the properties and assets of the Company or such Subsidiary, as the case
may be, are sold, assigned, transferred, leased, conveyed or otherwise disposed
of shall be a corporation organized and existing under the laws of the United
States or any State thereof or the District of Columbia and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all of the obligations of the Company or such
Subsidiary, as the case may be, under the Indenture, the Notes and the
obligations thereunder shall remain in full force and effect; (ii) immediately
before and immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; and (iii) immediately
after giving effect to such transaction on a pro forma basis the Company or such
Person could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under " -- Certain Covenants -- Limitation on Additional
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Indebtedness" above provided, however that this provision will not prevent the
Company from merging into an Affiliate of the Company for the sole purpose of
creating a holding company whose sole asset will be all of the outstanding
capital stock of the Company or shares of a shell corporation whose only assets
are all of the outstanding capital stock of the Company.
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of the
Company, the Capital Stock of which constitutes all or substantially all of the
properties and assets of the Company, shall be deemed to be the transfer of all
or substantially all of the properties and assets of the Company.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) default in payment of any principal of, or premium, if any, on the
Notes whether at maturity, upon redemption or otherwise (whether or not
such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) default for 30 days in payment of any interest on the Notes;
(iii) default by the Company or any Subsidiary in the observance or
performance of any other covenant in the Notes or the Indenture for 30 days
after written notice from the Trustee or the holders of not less than 25%
in aggregate principal amount of the Notes then outstanding (except in the
case of a default with respect to the "Change of Control" or "Merger,
Consolidation or Sale of Assets" covenants which shall constitute an Event
of Default with such notice requirement but without such passage of time
requirement);
(iv) failure to pay when due principal, interest or premium in an
aggregate amount of $5.0 million or more with respect to any Indebtedness
of the Company or any Subsidiary thereof, or the acceleration of any such
Indebtedness aggregating $3.0 million or more which default shall not be
cured, waived or postponed pursuant to an agreement with the holders of
such Indebtedness within 60 days after written notice as provided in the
Indenture, or such acceleration shall not be rescinded or annulled within
20 days after written notice as provided in the Indenture;
(v) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $5.0 million shall be rendered
against the Company or any Subsidiary thereof, and shall not be discharged
for any period of 60 consecutive days during which a stay of enforcement
shall not be in effect;
(vi) failure to redeem or otherwise retire the Convertible Senior
Subordinated Debentures by the end of the thirtieth day following the Issue
Date; provided that if such thirtieth day is not a Business Day (as defined
in the indenture relating to the Convertible Senior Subordinated
Debentures), such period shall extend to the end of the next Business Day;
and
(vii) certain events involving bankruptcy, insolvency or
reorganization of the Company or any Subsidiary thereof.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of principal or premium, if any,
or interest on the Notes) if the Trustee considers it to be in the best interest
of the holders of the Notes to do so.
The Indenture will provide that if an Event of Default (other than an Event
of Default resulting from certain events of bankruptcy, insolvency or
reorganization or a failure to redeem the Convertible Senior
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Subordinated Debentures) shall have occurred and be continuing, then the Trustee
or the holders of not less than 25% in aggregate principal amount of the Notes
then outstanding may declare to be immediately due and payable the entire
principal amount of all the Notes then outstanding plus accrued interest to the
date of acceleration and (i) such amounts shall become immediately due and
payable or (ii) if there are any amounts outstanding under the New Credit
Facility, such amounts shall become immediately due and payable upon the first
to occur of an acceleration under the New Credit Facility or five business days
after receipt by the Company and the representative under the New Credit
Facility of a notice of acceleration; provided, however, that after such
acceleration but before a judgment or decree based on acceleration is obtained
by the Trustee, the holders of a majority in aggregate principal amount of
outstanding Notes may, under certain circumstances, rescind and annul such
acceleration if (i) all Events of Default, other than nonpayment of principal,
premium, if any, or interest that has become due solely because of the
acceleration, have been cured or waived as provided in the Indenture; (ii) to
the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due otherwise
than by such declaration of acceleration, has been paid; and (iii) in the event
of the cure or waiver of an Event of Default of the type described in clause
(vii) of the above Events of Default, the Trustee shall have received an
officers' certificate and an opinion of counsel that such Event of Default has
been cured or waived. No such rescission shall affect any subsequent Default or
impair any right consequent thereto. In case an Event of Default resulting from
certain events of bankruptcy, insolvency or reorganization shall occur, the
principal, premium and interest amount with respect to all of the Notes shall be
due and payable immediately without any declaration or other act on the part of
the Trustee or the holders of the Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Indenture or the Notes and to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, subject to
certain limitations provided for in the Indenture and under the Trust Indenture
Act.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the holders of at least 25% in aggregate principal amount of
the outstanding Notes shall have made written request and offered reasonable
indemnity to the Trustee to institute such proceeding as Trustee, and unless the
Trustee shall not have received from the holders of a majority in aggregate
principal amount of the outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
Notwithstanding the foregoing, such limitations do not apply to a suit
instituted on such Note on or after the respective due dates expressed in such
Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may elect either (a) to defease and
be discharged from any and all of its obligations with respect to the Notes
(except for the obligations to register the transfer or exchange of such Notes,
to replace temporary or mutilated, destroyed, lost or stolen Notes, to maintain
an office or agency in respect of the Notes and to hold monies for payment in
trust) ("defeasance") or (b) to be released from its obligations with respect to
the Notes under certain covenants contained in the Indenture ("covenant
defeasance") upon the deposit with the Trustee (or other qualifying trustee), in
trust for such purpose, of money and/or non-callable U.S. government obligations
which through the payment of principal and interest in accordance with their
terms will provide money, in an amount sufficient to pay the principal of,
premium, if any, and interest on the Notes, on the scheduled due dates therefor
or on a selected date of redemption in accordance with the terms of the
Indenture. Such a trust may only be established if, among other things, (i) the
Company has delivered to the Trustee an opinion of counsel (as specified in the
Indenture) (A) to the effect that neither the trust nor the Trustee will be
required to register as an investment company under the Investment Company Act
of 1940, as amended, and (B) describing either a private ruling concerning the
Notes or a published ruling of the Internal Revenue Service, to the effect that
holders of the Notes or persons in their positions will not recognize income,
gain or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income tax on the same
amount and in the same manner and at the same times, as would have been the case
if such deposit, defeasance and
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discharge had not occurred; (ii) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or insofar as Events of
Default from bankruptcy, insolvency or reorganization events are concerned, at
any time in the period ending on the 91st day after the date of deposit; (iii)
such defeasance or covenant defeasance shall not result in a breach or violation
of, or constitute a default under the Indenture or any other material agreement
or instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any or its Subsidiaries is bound; (iv) the Company shall
have delivered to the Trustee an Officers' Certificate stating that the deposit
was not made by the Company with the intent of preferring the holders of the
Notes over any other creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding any other creditors of the Company or others;
(v) the Company shall have delivered to the Trustee an Officers' Certificate and
an opinion of counsel, each stating that all conditions precedent provided for
or relating to the defeasance or the covenant defeasance have been complied
with; (vi) the Company shall have delivered to the Trustee an opinion of counsel
to the effect that (A) the trust funds will not be subject to any rights of
holders of Senior Indebtedness, including, without limitation, those arising
under the Indenture and (B) after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; and (vii) certain other customary conditions precedent are satisfied.
MODIFICATION OF INDENTURE
From time to time, the Company and the Trustee may, without the consent of
holders of the Notes, amend or supplement the Indenture for certain specified
purposes, including providing for uncertificated Notes in addition to
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not, in the opinion of the Trustee, materially and
adversely affect the rights of any holder. The Indenture contains provisions
permitting the Company and the Trustee, with the consent of holders of at least
a majority in principal amount of the outstanding Notes, to modify or supplement
the Indenture, except that no such modification shall, without the consent of
each holder affected thereby, (i) reduce the amount of Notes whose holders must
consent to an amendment, supplement, or waiver to the Indenture; (ii) reduce the
rate of or change the time for payment of interest, including defaulted
interest, on any Note; (iii) reduce the principal of or premium on or change the
stated maturity of any Note or change the date on which any Notes may be subject
to redemption or repurchase or reduce the redemption or repurchase price
therefor; (iv) make any Note payable in money other than that stated in the Note
or change the place of payment from New York, New York; (v) waive a default on
the payment of the principal of, interest on, or redemption payment with respect
to any Note; (vi) make any change in provisions of the Indenture protecting the
right of each holder of Notes to receive payment of principal of and interest on
such Note on or after the due date thereof or to bring suit to enforce such
payment, or permitting holders of a majority in principal amount of Notes to
waive Defaults or Events of Default; (vii) amend, change or modify in any
material respect the obligation of the Company to make and consummate a Change
of Control Offer in the event of a Change of Control or make and consummate an
Asset Sale Offer with respect to any Asset Sale that has been consummated or
modify any of the provisions or definitions with respect thereto; or (viii)
modify or change any provision of the Indenture or the related definitions
affecting the subordination or ranking of the Notes in a manner which adversely
affects the holders of Notes.
REPORTS TO HOLDERS
So long as the Company is subject to the periodic reporting requirements of
the Exchange Act, it will continue to furnish the information required thereby
to the Commission and to the holders of the Notes. The Indenture provides that
even if the Company is entitled under the Exchange Act not to furnish such
information to the Commission or to the holders of the Notes, it will
nonetheless continue to furnish such information to the Commission and holders
of the Notes.
COMPLIANCE CERTIFICATE
The Company will deliver to the Trustee on or before 90 days after the end
of the Company's fiscal year and on or before 45 days after the end of each of
the first, second and third fiscal quarters in each year an
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Officers' Certificate stating whether or not the signers know of any Default or
Event of Default that has occurred. If they do, the certificate will describe
the Default or Event of Default, its status and the intended method of cure, if
any.
THE TRUSTEE
The Trustee under the Indenture will be the Registrar and Paying Agent with
regard to the Notes. The Indenture provides that, except during the continuance
of an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Indenture. During the existence of an Event of
Default, the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar under such Indenture may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
is not required to transfer or exchange any Note selected for redemption and,
further, is not required to transfer or exchange any Note for a period of 15
days before selection of the Notes to be redeemed.
The Notes will be issued in a transaction exempt from registration under
the Act and will be subject to the restrictions on transfer described in "Notice
to Investors."
The registered holder of a Note may be treated as the owner of it for all
purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Subsidiary or is merged into or consolidated with any
other Person or which is assumed in connection with the acquisition of assets
from such Person and, in each case, not incurred by such Person in connection
with, or in anticipation or contemplation of, such Person becoming a Subsidiary
or such merger, consolidation or acquisition.
"Affiliate" means, with respect to any specific Person, any other Person
that directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Asset Acquisition" means (a) an Investment by the Company or any
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or any Subsidiary of the Company, or
shall be merged with or into the Company or any Subsidiary of the Company or (b)
the acquisition by the Company or any Subsidiary of the Company of the assets of
any Person (other than a Subsidiary of the Company) which constitute all or
substantially all of the assets of such Person or comprise any division or line
of business of such Person or any other properties or assets of such Person or
any other properties or assets of such Person other than in the ordinary course
of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
assignment, transfer, lease or other disposition (including any Sale and
Lease-Back Transaction), other than to the Company or any of its Wholly Owned
Subsidiaries, in any single transaction or series of related transactions of (a)
any Capital Stock of or other equity interest in any Subsidiary of the Company
or (b) any other property or assets of the Company or
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of any Subsidiary thereof; provided that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or its
Subsidiaries receive aggregate consideration of less than $2.0 million; (ii) the
sale, lease, conveyance, disposition or other transfer of all or substantially
all of the assets of the Company as permitted under "-- Merger, Consolidation or
Sale of Assets;" (iii) a disposition of inventory in the ordinary course of
business; (iv) an exchange of property for other similar property structured on
a tax-free, like-kind basis; or (v) the issuance of shares of a wholly owned
Subsidiary of the Company solely to the shareholders of the Company in a
transaction pursuant to which the Company becomes a Wholly Owned direct or
indirect subsidiary of such Subsidiary.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Subsidiary of the Company from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Subsidiary of the Company as a result of such Asset Sale, (d) repayment
of Indebtedness that is required to be repaid in connection with such Asset Sale
and (e) deduction of appropriate amounts to be provided by the Company or a
Subsidiary of the Company as a reserve, in accordance with GAAP, against any
liabilities associated with the assets sold or disposed of in such Asset Sale
and retained by the Company or a Subsidiary after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such Asset Sale,
and (ii) promissory notes and other noncash consideration received by the
Company or any Subsidiary of the Company from such Asset Sale or other
disposition upon the liquidation or conversion of such notes or noncash
consideration into cash.
"Attributable Indebtedness" in respect of a Sale and Lease-Back Transaction
means, as at the time of determination, the greater of (i) the fair value of the
property subject to such arrangement and (ii) the present value (discounted at
the rate of 10%, compounded annually) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such Sale and
Lease-Back Transaction (including any period for which such lease has been
extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that have not been applied in
accordance with clauses (iii)(a) or (iii)(b) of "-- Certain
Covenants -- Limitations on Certain Asset Sales," and which have not yet been
the basis for an Excess Proceeds Offer in accordance with clause (iii)(c) of the
first paragraph of "-- Certain Covenants -- Limitation on Certain Asset Sales."
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, partnership interests or any other
participation, right or other interest in the nature of an equity interest in
such Person including, without limitation, Common Stock and Preferred Stock of
such Person, or any option, warrant or other security convertible into any of
the foregoing.
"Capitalized Lease Obligations" means with respect to any Person,
Indebtedness represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having a rating of at least A-1 from S&P or at least P-1 from Moody's; and (iv)
certificates of deposit or bankers' acceptances maturing
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within one year from the date of acquisition thereof issued by any bank
organized under the laws of the United States of America or any state thereof or
the District of Columbia or any U.S. branch of a foreign bank having at the date
of acquisition thereof combined capital and surplus of not less than $250.0
million.
A "Change of Control" of the Company will be deemed to have occurred at
such time as (i) any Person (including a Person's Affiliates and associates),
other than a Permitted Holder, becomes the beneficial owner (as defined under
Rule 13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of 50% or more of the total voting or economic power of the Company's
Common Stock; (ii) any Person (including a Person's Affiliates and associates),
other than a Permitted Holder, becomes the beneficial owner of more than 33 1/3%
of the total voting power of the Company's Common Stock and the Permitted
Holders beneficially own, in the aggregate, a lesser percentage of the total
voting power of the Common Stock of the Company than such other Person and do
not have the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the Company;
(iii) there shall be consummated any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which the Common Stock of the Company would be converted into cash, securities
or other property, other than (x) a merger or consolidation of the Company in
which the holders of the Common Stock of the Company outstanding immediately
prior to the consolidation or merger hold, directly or indirectly, at least a
majority of the Common Stock of the surviving corporation immediately after such
consolidation or merger or (y) a merger of the Company with an Affiliate of the
Company (or a shell corporation with no shareholders formed solely for the
purpose of creating a holding company) for the sole purpose of creating a
holding company whose sole asset, directly or indirectly, will be all of the
outstanding capital stock of the Company; or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Company has been approved by 66 2/3% of the directors then
still in office who either were directors at the beginning of such period or
whose election or recommendation for election was previously so approved) cease
to constitute a majority of the Board of Directors of the Company.
"Common Stock" of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of EBITDA of such Person during the four full fiscal quarters
(the "Four Quarter Period") ending on or prior to the date of the transaction
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio (the "Transaction Date") to Consolidated Fixed Charges of such Person for
the Four Quarter Period. In addition to and without limitation of the foregoing,
for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" shall be calculated after giving effect on a pro forma basis for the
period of such calculation to (i) the incurrence (and the application of the
proceeds thereof) or repayment of any Indebtedness of such Person or any of its
Subsidiaries giving rise to the need to make such calculation and any incurrence
(and the application of the proceeds thereof) or repayment of other
Indebtedness, other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence (and the application of the proceeds
thereof) or repayment, as the case may be, occurred on the first day of the Four
Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Subsidiaries (including any
Person who becomes a Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness and also including
any EBITDA (provided that such EBITDA shall be included only to the extent
includable pursuant to the definition of "Consolidated Net Income") attributable
to the assets which are the subject of the Asset Acquisition or Asset Sale
during the Four Quarter Period) occurring during the Four Quarter Period or at
any time subsequent to the last day of the Four Quarter Period and on or prior
to the Transaction Date, as if such Asset Sale or Asset Acquisition
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(including the incurrence, assumption or liability for any such Acquired
Indebtedness) occurred on the first day of the Four Quarter Period. If such
Person or any of its Subsidiaries directly or indirectly guarantees Indebtedness
of a third Person, the preceding sentence shall give effect to the incurrence of
such guaranteed Indebtedness as if such Person or any Subsidiary of such Person
had directly incurred or otherwise assumed such guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate per annum
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date; (2) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Four Quarter Period; and (3) notwithstanding clause
(1) above, interest on Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by one or more Interest Rate Agreements, shall
be deemed to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person, for any
period, the sum, without duplication, of (i) Consolidated Interest Expense, plus
(ii) the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Capital Stock
(other than Disqualified Capital Stock)) paid, accrued or scheduled to be paid
or accrued during such period times (y) a fraction, the numerator of which is
one and the denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person, expressed as a
decimal.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis
(including, but not limited to (i) Redeemable Dividends, whether paid or
accrued; (ii) imputed interest included in Capitalized Lease Obligations; (iii)
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing; (iv) the net costs
associated with Interest Rate Agreements and other hedging obligations; (v) the
interest portion of any deferred payment obligation; (vi) amortization of
discount or premium, if any; and (vii) all other non-cash interest expense
(other than interest amortized to cost of sales)) plus, without duplication, all
net capitalized interest for such period and all interest incurred or paid under
any guarantee of Indebtedness (including a guarantee of principal, interest or
any combination thereof) of any Person, plus the amount of all dividends or
distributions paid on Disqualified Capital Stock (other than dividends paid or
payable in shares of Capital Stock of the Company) minus amortization of
deferred financing costs and expenses.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (a) the Net Income of any Person (the "other Person") in
which the Person in question or any of its Subsidiaries has less than a 100%
interest (which interest does not cause the Net Income of such other Person to
be consolidated into the Net Income of the Person in question in accordance with
GAAP) shall be included only to the extent of the amount of dividends or
distributions paid to the Person in question or the Subsidiary; (b) the Net
Income of any Subsidiary of the Person in question that is subject to any
restriction or limitation on the payment of dividends or the making of other
distributions shall be excluded to the extent of such restriction or limitation;
(c)(i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (ii) any
net gain (but not loss) resulting from an Asset Sale by the Person in question
or any of its Subsidiaries other than in the ordinary course of business shall
be excluded; (d) extraordinary or unusual and non-recurring gains and losses
shall be excluded; (e) income or loss attributable to discontinued operations
(including, without limitation, operations disposed of during such period
whether or not such operations were classified as discontinued) shall be
excluded; and (f) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets, any
earnings of the successor corporation prior to such consolidation, merger or
transfer of assets shall be excluded.
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"Designated Senior Indebtedness," means (a) any Senior Indebtedness under
the New Credit Facility and (b) any other Senior Indebtedness which at the time
of determination exceeds $25.0 million in aggregate principal amount (or
accreted value in the case of Indebtedness issued at a discount) outstanding or
available under a committed facility, which is specifically designated in the
instrument evidencing such Senior Indebtedness as "Designated Senior
Indebtedness" by such Person and as to which the Trustee has been given written
notice of such designation.
"Disqualified Capital Stock" means any Capital Stock of a Person or a
Subsidiary thereof which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable at the option of the
holder), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Notes, for cash or securities constituting Indebtedness.
Without limitation of the foregoing, Disqualified Capital Stock shall be deemed
to include any Preferred Stock of a Person or a Subsidiary of such Person, with
respect to either of which, under the terms of such Preferred Stock, by
agreement or otherwise, such Person or Subsidiary is obligated to pay current
dividends or distributions in cash during the period prior to the maturity date
of the Notes; provided, however, that Preferred Stock of a Person or any
Subsidiary thereof that is issued with the benefit of provisions requiring a
change of control offer to be made for such Preferred Stock in the event of a
change of control of such Person or Subsidiary which provisions have
substantially the same effect as the provisions of the Indenture described under
"Change of Control," shall not be deemed to be Disqualified Capital Stock solely
by virtue of such provisions.
"EBITDA" means, with respect to any Person and its Subsidiaries, for any
period, an amount equal to (a) the sum of (i) Consolidated Net Income for such
period, plus (ii) the provision for taxes for such period based on income or
profits to the extent such income or profits were included in computing
Consolidated Net Income and any provision for taxes utilized in computing net
loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such
period (but only including Redeemable Dividends in the calculation of such
Consolidated Interest Expense to the extent that such Redeemable Dividends have
not been excluded in the calculation of Consolidated Net Income), plus (iv)
depreciation for such period on a consolidated basis, plus (v) amortization of
intangibles for such period on a consolidated basis, plus (vi) any other
non-cash items reducing Consolidated Net Income for such period, minus (b) all
non-cash items increasing Consolidated Net Income for such period, all for such
Person and its Subsidiaries determined on a consolidated basis in accordance
with GAAP; and provided, however, that, for purposes of calculating EBITDA
during any fiscal quarter, cash income from a particular Investment of such
Person shall be included only (x) if cash income has been received by such
Person with respect to such Investment during each of the previous four fiscal
quarters, or (y) if the cash income derived from such Investment is attributable
to Cash Equivalents.
"Exchange Act" means the Securities Exchange Act of 1934, as amended and
the rules and regulations of the Commission promulgated thereunder.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of the Company acting reasonably
and in good faith and shall be evidenced by a resolution of the Board of
Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time, except that with respect to
changes in generally accepted accounting principles that become effective
following the Issue Date with respect to non-cash items, such changes shall not
be given effect if the Company and its lenders under the New Credit Facility
agree not to give effect to such changes for the purpose of evaluating the
Company and its Subsidiaries' financial condition or performance under the New
Credit Facility.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such
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Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred," "incurrable," and "incurring"
shall have meanings correlative to the foregoing); provided that a change in
GAAP that results in an obligation of such Person that exists at such time
becoming Indebtedness shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the ordinary
course of business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and shall also include, to the extent not otherwise included (i) any
Capitalized Lease Obligations of such Person; (ii) obligations secured by a lien
to which the property or assets owned or held by such Person is subject, whether
or not the obligation or obligations secured thereby shall have been assumed;
(iii) guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor); (iv) all obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction; (v) Disqualified Capital Stock of such Person or any Subsidiary
thereof; and (vi) obligations of any such Person under any currency agreement or
any Interest Rate Agreement applicable to any of the foregoing (if and to the
extent such currency agreement or Interest Rate Agreement obligations would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP). The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation; provided that
(i) the amount outstanding at any time of any Indebtedness issued with original
issue discount is the principal amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP, (ii) Indebtedness shall not include
any liability for federal, state, local or other taxes and (iii) Indebtedness
shall not include interest on, and any and all other fees, expense reimbursement
obligations and other amounts due pursuant to any Indebtedness.
"Independent Financial Advisor" means an investment banking firm of
national reputation in the United States (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
"Investments" means, with respect of any Person, directly or indirectly,
any advance, account receivable (other than an account receivable arising in the
ordinary course of business of such Person), loan or capital contribution to (by
means of transfers of property to others, payments for property or services for
the account or use of others or otherwise), the purchase of any Capital Stock,
bonds, notes, debentures, partnership or joint venture interests or other
securities of, the acquisition, by purchase or otherwise, of all or
substantially all of the business or assets or stock or other evidence of
beneficial ownership of, any Person or the making of any investment in any
Person. Investments shall exclude (i) extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices of such Person and
(ii) the repurchase of securities of any Person by such Person. For the purposes
of the "Limitation on Restricted Payments" covenant, the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by the Company or any of its Subsidiaries, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment, reduced by the payment of dividends
or distributions in connection with such Investment or any other amounts
received in respect of such Investment; provided that no such payment of
dividends or distributions or receipt of any such other amounts shall reduce
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the amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If the
Company or any Subsidiary of the Company sells or otherwise disposes of any
Common Stock of any direct or indirect Subsidiary of the Company such that,
after giving effect to any such sale or disposition, the Company no longer owns,
directly or indirectly, greater than 50% of the outstanding Common Stock of such
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such Subsidiary not sold or disposed of.
"Issue Date" means the date the Notes are first issued by the Company and
authenticated by the Trustee under the Indenture.
"Lien" means, with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Net Income" means, with respect to any Person, for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means in the case of any sale of Capital Stock by or equity
contribution to any Person, the aggregate net cash proceeds received by such
Person, after payment of expenses, commissions and the like incurred in
connection therewith.
"New Credit Facility" means the Credit Agreement dated as of April 11,
1995, between the Company, the lenders party thereto in their capacities as
lenders thereunder and KeyBank, National Association, as agent, together with
the related documents thereto (including, without limitation, any guarantee
agreements and, to the extent entered into, any security documents), in each
case as such agreements have been and may be amended (including any amendment
and restatement thereof), supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by the
"Limitation on Additional Indebtedness" covenant) or adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any Designated Senior Indebtedness.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President and
the Chief Financial Officer, Treasurer or any Corporate Controller of such
Person that shall comply with applicable provisions of the Indenture.
"Payment Default" means any default, whether or not any requirement for the
giving of notice, the lapse of time or both, or any other condition to such
default becoming an event of default has occurred, in the payment of principal
of or premium, if any, or interest on or any other amount payable in connection
with Designated Senior Indebtedness.
"Permitted Holders" means (i) a holding company formed for the sole purpose
of owning, directly or indirectly all of the outstanding capital stock of the
Company; (ii) Edward F. Crawford, his children or other lineal descendants,
probate estate of any such individual, and any trust, so long as one or more of
the foregoing individuals is the beneficiary thereunder, and any other
corporation, partnership or other entity all of the shareholders, partners,
members or owners of which are any of the foregoing; or (iii) any employee stock
ownership plan, or any "group" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act) in which employees of the Company or its Subsidiaries beneficially
own at least 33 1/3% of the Common Stock of the
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Company or of a holding company that directly or indirectly owns all of the
outstanding Capital Stock of the Company.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Subsidiary solely for working
capital purposes and not for acquisitions arising under or in connection
with the New Credit Facility in an aggregate principal amount not to exceed
the greater of (x) $50.0 million or (y) the sum of (A) 45% of the book
value of the accounts receivable of the Company and its Subsidiaries on a
consolidated basis and (B) 25% of the book value of the inventory of the
Company and its Subsidiaries on a consolidated basis outstanding at any
time, less any mandatory prepayment actually made thereunder (to the
extent, in the case of payments of revolving credit borrowings, that the
corresponding commitments have been permanently reduced below $50.0
million) or scheduled payments actually made thereunder;
(ii) Indebtedness under the Notes;
(iii) Indebtedness not covered by any other clause of this definition
which is outstanding on the Issue Date;
(iv) Indebtedness of the Company to any Wholly Owned Subsidiary and
Indebtedness of any Wholly Owned Subsidiary to the Company or another
Wholly Owned Subsidiary;
(v) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Purchase Money Indebtedness and Capitalized Lease Obligations do not in the
aggregate exceed 5% of the Company's tangible consolidated total assets;
(vi) Interest Rate Agreements;
(vii) Refinancing Indebtedness; and
(viii) additional Indebtedness of the Company and its Subsidiaries not
to exceed $10.0 million in aggregate principal amount at any one time
outstanding.
"Permitted Investments" means Investments made on or after the Issue Date
consisting of:
(i) Investments by the Company, or by a Subsidiary thereof, in the
Company or a Wholly Owned Subsidiary;
(ii) Investments by the Company, or by a Subsidiary thereof, in a
Person, if as a result of such Investment (a) such Person becomes a Wholly
Owned Subsidiary of the Company or (b) such Person is merged, consolidated
or amalgamated with or into, or transfers or conveys substantially all of
its assets to, or is liquidated into, the Company or a Wholly Owned
Subsidiary thereof;
(iii) Investments in cash and Cash Equivalents;
(iv) reasonable and customary loans made to employees in connection
with their relocation not to exceed $1.0 million in the aggregate at any
one time outstanding;
(v) an Investment that is made by the Company or a Subsidiary thereof
in the form of any Capital Stock, bonds, notes, debentures, partnership or
joint venture interests or other securities that are issued by a third
party to the Company or such Subsidiary solely as partial consideration for
the consummation of an Asset Sale that is otherwise permitted under
"-- Certain Covenants -- Limitation on Certain Asset Sales" above;
(vi) Interest Rate Agreements entered into in the ordinary course of
the Company's or its Subsidiaries' business; and
(vii) additional Investments not to exceed $10.0 million in the
aggregate at any one time outstanding.
"Permitted Liens" means (i) Liens on property or assets of, or any shares
of Capital Stock of or secured indebtedness of, any corporation existing at the
time such corporation becomes a Subsidiary of the Company
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or at the time such corporation is merged into the Company or any of its
Subsidiaries; provided that such Liens are not incurred in connection with, or
in contemplation of, such corporation becoming a Subsidiary of the Company or
merging into the Company or any of its Subsidiaries; (ii) Liens securing
Refinancing Indebtedness; provided that any such Lien does not extend to or
cover any Property, Capital Stock or Indebtedness other than the Property,
shares or debt securing the Indebtedness so refunded, refinanced or extended;
(iii) Liens in favor of the Company or any of its Subsidiaries; (iv) Liens
securing industrial revenue bonds; (v) Liens to secure Purchase Money
Indebtedness that is otherwise permitted under the Indenture; provided that (a)
any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
sales and excise taxes, installation and delivery charges and other direct costs
of, and other direct expenses paid or charged in connection with, such purchase
or construction) of such Property, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs, and (c) such Lien does
not extend to or cover any Property other than such item of Property and any
improvements on such item; (vi) statutory liens or landlords', carriers',
warehouseman's, mechanics', suppliers', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business which do not secure any
Indebtedness and with respect to amounts not yet delinquent or being contested
in good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor; (vii) other Liens securing obligations incurred in the ordinary
course of business which obligations do not exceed $3.0 million in the aggregate
at any one time outstanding; (viii) Liens for taxes, assessments or governmental
charges that are being contested in good faith by appropriate proceedings; (ix)
Liens securing Capitalized Lease Obligations permitted to be incurred under
clause (v) of the definition of "Permitted Indebtedness"; provided that such
Lien does not extend to any property other than that subject to the underlying
lease; (x) liens to secure the New Credit Facility; (xi) Liens securing Interest
Rate Agreements; (xii) easements or other minor defect or irregularities in
title and other charges and encumbrances on property not interfering in any
material respect with the use of such property in the business of the Company or
the applicable Subsidiary; and (xiii) any extensions, substitutions,
replacements or renewals of the foregoing.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Public Equity Offering" means a public offering by the Company or by a
holding company which owns, directly or indirectly, all of the outstanding
capital stock of the Company of shares of its Common Stock (however designated
and whether voting or non-voting) and any and all rights, warrants or options to
acquire such Common Stock.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Redeemable Dividend" means, for any dividend or distribution with regard
to Disqualified Capital Stock, the quotient of the dividend or distribution
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to the
issuer of such Disqualified Capital Stock.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Indebtedness of the Company outstanding on the Issue Date or other
Indebtedness permitted to be incurred by the Company or its Subsidiaries
pursuant to the terms of the Indenture, but only to the extent that (i) the
Refinancing
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Indebtedness is subordinated to the Notes to at least the same extent as the
Indebtedness being refunded, refinanced or extended, if at all; (ii) the
Refinancing Indebtedness is scheduled to mature either (a) no earlier than the
Indebtedness being refunded, refinanced or extended, or (b) after the maturity
date of the Notes; (iii) the portion, if any, of the Refinancing Indebtedness
that is scheduled to mature on or prior to the maturity date of the Notes has a
weighted average life to maturity at the time such Refinancing Indebtedness is
incurred that is equal to or greater than the weighted average life to maturity
of the portion of the Indebtedness being refunded, refinanced or extended that
is scheduled to mature on or prior to the maturity date of the Notes; (iv) such
Refinancing Indebtedness is in an aggregate principal amount that is equal to or
less than the sum of (a) the aggregate principal amount then outstanding under
the Indebtedness being refunded, refinanced or extended, (b) the amount of
accrued and unpaid interest, if any, and premiums owed, if any, not in excess of
preexisting prepayment provisions on such Indebtedness being refunded,
refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness; and (v) such
Refinancing Indebtedness is incurred by the same Person that initially incurred
the Indebtedness being refunded, refinanced or extended.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock of
the Company or any Subsidiary of the Company or any payment made to the direct
or indirect holders (in their capacities as such) of Capital Stock of the
Company or any Subsidiary of the Company (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Capital
Stock) or in options, warrants or other rights to purchase such Capital Stock
(other than Disqualified Capital Stock), and (y) in the case of Subsidiaries of
the Company, dividends or distributions payable to the Company or to a Wholly
Owned Subsidiary of the Company); (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company or any
of its Subsidiaries (other than Capital Stock owned by the Company or a Wholly
Owned Subsidiary of the Company, excluding Disqualified Capital Stock) or any
option, warrants or other rights to purchase such Capital Stock; (iii) the
making of any principal payment on, or the purchase, defeasance, repurchase,
redemption or other acquisition or retirement for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment of any
Indebtedness which is subordinated in right of payment to the Notes other than
subordinated Indebtedness acquired in anticipation of satisfying a scheduled
sinking fund obligation, principal installment or final maturity (in each case
due within one year of the date of acquisition); (iv) the making of any
Investment or guarantee of any Investment in any Person other than a Permitted
Investment; and (v) forgiveness of any Indebtedness of an Affiliate of the
Company to the Company or a Subsidiary of the Company. For purposes of
determining the amount expended for Restricted Payments, cash distributed or
invested shall be valued at the face amount thereof and property other than cash
shall be valued at its fair market value.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in contemplation of
such leasing.
"Senior Indebtedness" means the principal of and premium, if any, and
interest on, and any and all other fees, expense reimbursement obligations and
other amounts due pursuant to the terms of all agreements, documents and
instruments providing for, creating, securing or evidencing or otherwise entered
into in connection with (a) all Indebtedness of the Company owed to lenders
under the New Credit Facility; (b) all obligations of the Company with respect
to any Interest Rate Agreement; (c) all obligations of the Company to reimburse
any bank or other person in respect of amounts paid under letters of credit,
acceptances or other similar instruments; (d) all other Indebtedness of the
Company which does not provide that it is to rank pari passu with or subordinate
to the Notes; and (e) all deferrals, renewals, extensions and refundings of, and
amendments, modifications and supplements to, any of the Senior Indebtedness
described above. Notwithstanding anything to the contrary in the foregoing,
Senior Indebtedness will not include (i) Indebtedness of the Company to any of
its Subsidiaries, or to any Affiliate of the Company or any of such Affiliate's
Subsidiaries; (ii) Indebtedness represented by the Notes; (iii) any Indebtedness
which by the express terms of the agreement or instrument creating, evidencing
or governing the same is junior or subordinate in right of
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payment to any item of Senior Indebtedness; (iv) any trade payable arising from
the purchase of goods or materials or for services obtained in the ordinary
course of business; (v) Indebtedness incurred in violation of the Indenture;
(vi) Indebtedness represented by Disqualified Capital Stock; and (vii) any
Indebtedness to or guaranteed on behalf of, any shareholders, director, officer
or employee of the Company or any Subsidiary of the Company.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which more
than 50% of the total voting power of the Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
officers or trustees thereof is held by such first-named Person or any of its
Subsidiaries, or (ii) in the case of a partnership, joint venture, association
or other business entity, with respect to which such first-named Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
"Subsidiary Indebtedness" means any Indebtedness other than (i)
Indebtedness in the form of, or represented by, bonds or other securities or any
guarantee thereof and (ii) Indebtedness which is, or may be, quoted, listed or
ordinarily purchased and sold on any stock exchange, automated trading system or
over-the-counter or other securities market (including, without prejudice to the
generality of the foregoing, the market for securities eligible for resale
pursuant to Rule 144A under the Securities Act).
"Wholly Owned Subsidiary" means any Subsidiary, all of the outstanding
voting securities (other than directors' qualifying shares) of which are owned,
directly or indirectly, by the Company.
BOOK-ENTRY, DELIVERY AND FORM
The Original Notes were issued in the form of a Note certificate (the
"Original Global Note"). The Original Global Note was deposited on the date of
the closing of the sale of the Original Notes offered hereby (the "Closing
Date") with, or on behalf of, DTC and registered in the name of a nominee of
DTC. Except for Exchange Notes issued to Non-Global Purchasers (as defined
below), the Exchange Notes will initially be issued in the form of a Global Note
(the "Exchange Global Note"). The Exchange Global Note will be deposited on the
date of closing of the Exchange Offer, with, or on behalf of DTC and registered
in the name of a nominee of DTC. "Global Notes" means the Original Global Notes
or the Exchange Global Notes, as the case may be.
The Global Note. The Company expects that pursuant to procedures
established by DTC (i) upon deposit of the Global Note, DTC will credit the
accounts of persons who have accounts with DTC ("participants") or persons who
hold interests through participants designated by such person with portions of
the Global Note and (ii) ownership of the Notes will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by DTC or its nominee (with respect to interests of participants) and the
records of participants (with respect to interests of persons other than
participants). QIBs may hold their interests in the Global Note directly through
DTC if they are participants in such system, or indirectly through organizations
that are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of the
Notes, DTC or such nominee will be considered the sole owner or holder of the
Notes represented by the Global Note for all purposes under the Indenture. No
beneficial owner of an interest in the Global Note will be able to transfer such
interest except in accordance with DTC's applicable procedures, in addition to
those provided for under the Indenture.
Payments of the principal of, premium (if any) and interest on the Global
Note will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. None of the Company, the Trustee or any Paying Agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
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The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, premium (if any) and interest on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note, as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global Note
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. If a holder
requires physical delivery of the Original Global Note, in registered form,
without interest coupons ("Certificated Security") for any reason, including to
sell Notes to persons in states which require physical delivery of such
securities or to pledge such securities, such holder must transfer its interest
in the Global Note in accordance with the normal procedures of DTC and including
the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interest in the Global Note is credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants have given such direction. However, if there is an
Event of Default under the Indenture, DTC will exchange the Global Note for
Certificated Securities, which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depository for the Global Note and a successor depository is not
appointed by the Company within 90 days, the Company will issue Certificated
Securities in exchange for the Company's Global Note.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with any resale of Exchange Notes received in
exchange for Original Notes where such Original Notes were acquired as a result
of market-making activities or other trading activities. The Company has agreed
that for a period of 180 days after the Expiration Date, it will use reasonable
efforts to make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale; provided that such
broker-dealer indicates in the Letter of Transmittal that it is a broker-dealer.
92
<PAGE> 98
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other persons. Exchange Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act, and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal.
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer agrees that, upon receipt of
notice from the Company of the happening of any event which makes any statement
in the Prospectus untrue in any material respect or which requires the making of
any changes in the Prospectus in order to make the statements therein not
misleading (which notice the Company agrees to deliver promptly to such
broker-dealer), such broker-dealer will suspend use of the Prospectus until the
Company has amended or supplemented the Prospectus to correct such misstatement
or omission and has furnished copies of the amended or supplemented Prospectus
to such broker-dealer. If the Company gives any such notice to suspend the use
of the Prospectus, it shall extend the 180-day period referred to above by the
number of days during the period from and including the date of the giving of
such notice up to and including when broker-dealers have received copies of the
supplement or amended Prospectus necessary to permit resales of Exchange Notes.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders (including any broker-dealers) and certain parties related
to the holders against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Notes will be passed
upon for the Company by Jones, Day, Reavis & Pogue, Cleveland, Ohio.
EXPERTS
The consolidated financial statements of the Company at December 31, 1995
and 1996, and for each of the three years in the period ended December 31, 1996
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
93
<PAGE> 99
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Consolidated Condensed Balance Sheet -- September 30, 1997 (Unaudited)............ F-2
Consolidated Condensed Statements of Income -- Nine Months Ended September 30, F-3
1996 and September 30, 1997 (Unaudited).........................................
Consolidated Condensed Statement of Shareholders' Equity -- Nine Months Ended F-4
September 30, 1997 (Unaudited)..................................................
Consolidated Condensed Statements of Cash Flows -- Nine Months Ended September 30, F-5
1996 and September 30, 1997 (Unaudited).........................................
Notes to Consolidated Condensed Financial Statements (Unaudited).................. F-6
Report of Ernst & Young LLP, Independent Auditors................................. F-9
Consolidated Balance Sheets -- December 31, 1995 and December 31, 1996............ F-10
Consolidated Statements of Income -- Years Ended December 31, 1994, 1995 and F-11
1996............................................................................
Consolidated Statements of Shareholders' Equity -- Years Ended December 31, 1994, F-12
1995 and 1996...................................................................
Consolidated Statements of Cash Flows -- Years Ended December 31, 1994, 1995 and F-13
1996............................................................................
Notes to Consolidated Financial Statements........................................ F-14
</TABLE>
F-1
<PAGE> 100
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30
1997
-------------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................................................... $ 3,786
Accounts receivable, less allowances for
doubtful accounts of $1,335 at September 30, 1997.......................... 82,234
Inventories................................................................... 111,720
Deferred taxes................................................................ 4,640
Other current assets.......................................................... 11,222
--------
Total Current Assets....................................................... 213,602
Property, Plant and Equipment................................................... 126,716
Less accumulated depreciation................................................. 58,719
--------
67,997
Other Assets:
Excess purchase price over net assets acquired, net........................... 68,705
Deferred taxes................................................................ 13,100
Other......................................................................... 25,378
--------
$ 388,782
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable........................................................ $ 41,161
Accrued expenses.............................................................. 31,602
Current portion of long-term liabilities...................................... 7,165
--------
Total Current Liabilities.................................................. 79,928
Long-Term Liabilities, less current portion:
Long-term debt................................................................ 127,584
Other postretirement benefits................................................. 27,416
Other......................................................................... 4,714
--------
159,714
Convertible Senior Subordinated Debentures...................................... 21,125
Shareholders' Equity:
Capital stock, par value $1 a share:
Serial preferred stock..................................................... -0-
Common stock............................................................... 10,960
Additional paid-in capital.................................................... 53,481
Retained earnings............................................................. 65,506
Treasury stock, at cost....................................................... (1,932)
--------
128,015
--------
$ 388,782
========
</TABLE>
See notes to consolidated condensed financial statements.
F-2
<PAGE> 101
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands -- except per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
--------------------
1996 1997
-------- --------
<S> <C> <C>
Net sales............................................................... $261,297 $311,916
Cost of products sold................................................... 217,293 262,060
-------- --------
Gross profit.......................................................... 44,004 49,856
Selling, general and administrative expenses............................ 28,314 31,613
-------- --------
Operating income...................................................... 15,690 18,243
Other income............................................................ (1,521) (320)
Interest expense........................................................ 5,478 6,078
-------- --------
Income from continuing operations before income taxes................. 11,733 12,485
Income taxes............................................................ 4,488 4,682
-------- --------
Income from continuing operations..................................... 7,245 7,803
Income from discontinued operations, net of tax......................... 11,642 -0-
-------- --------
Net income............................................................ $ 18,887 $ 7,803
======== ========
Per common share:
Continuing operations................................................. $ .66 $ .70
Discontinued operations............................................... 1.06 -0-
-------- --------
Net income............................................................ $ 1.72 $ .70
======== ========
Common shares used in the computation................................... 10,977 11,021
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
F-3
<PAGE> 102
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
------- ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1997....................... $10,433 $ 49,337 $ 57,703 ($ 1,775) $ 115,698
Issuance of General Aluminum Mfg. Company
earnout shares.............................. 375 3,600 3,975
Exercise of stock options..................... 152 544 2,658 3,354
Purchase of treasury stock.................... (2,815) (2,815)
Net income.................................... 7,803 7,803
------- -------- -------- -------- ---------
Balance September 30, 1997.................... $10,960 $ 53,481 $ 65,506 ($ 1,932) $ 128,015
======= ======== ======== ======== =========
</TABLE>
See notes to consolidated condensed financial statements.
F-4
<PAGE> 103
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-----------------
1996 1997
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................................. $18,887 $ 7,803
Adjustments to reconcile net income to net cash provided (used) by
continuing operations:
Discontinued operations............................................... (11,642) -0-
Depreciation and amortization......................................... 5,512 7,371
Deferred taxes........................................................ 4,500 1,000
Gain on sales of investments.......................................... (1,521) (320)
------- -------
15,736 15,854
Changes in operating assets and liabilities of continuing operations
excluding acquisitions of businesses:
Accounts receivable................................................... (1,524) (10,013)
Inventories and other current assets.................................. (346) (12,245)
Accounts payable and accrued expenses................................. (8,820) 4,528
Other................................................................. (6,755) (6,830)
------- -------
Net Cash Used by Continuing Operations.............................. (1,709) (8,706)
Net Cash Provided by Discontinued Operations........................ 1,474 -0-
------- -------
Net Cash Used by Operations......................................... (235) (8,706)
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net.......................... (8,600) (9,244)
Cost of acquisitions, net of cash acquired............................... -0- (53,933)
Investments.............................................................. (4,763) (419)
Proceeds from sales of investments....................................... 6,065 551
Proceeds from sale of discontinued operation............................. 48,522 -0-
------- -------
Net Cash Provided (Used) by Investing Activities.................... 41,224 (63,045)
FINANCING ACTIVITIES
Proceeds from bank arrangements for acquisitions......................... -0- 54,000
Proceeds from bank arrangements for operations........................... 9,500 22,000
Payments on debt......................................................... (50,976) (5,096)
Purchase of treasury stock............................................... -0- (2,815)
Issuance of common stock under stock option plan......................... 57 2,789
------- -------
Net Cash Provided (Used) by Financing Activities.................... (41,419) 70,878
Increase (Decrease) in Cash and Cash Equivalents......................... (430) (873)
Cash and Cash Equivalents at Beginning of Period......................... 2,662 4,659
------- -------
Cash and Cash Equivalents at End of Period............................... $ 2,232 $ 3,786
======= =======
</TABLE>
See notes to consolidated condensed financial statements.
F-5
<PAGE> 104
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1997
(Dollars in thousands--except per share data)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine months ended September 30, 1997
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. Certain prior year
amounts have been reclassified to conform to the 1997 presentation.
NOTE B -- SALE OF BENNETT INDUSTRIES
On July 31, 1996, the Company completed the sale of substantially all of
the assets of Bennett Industries, Inc. ("Bennett"), a wholly owned subsidiary of
the Company which manufactures plastic containers, to North American Packaging
Corporation, a wholly owned subsidiary of Southcorp Holdings Limited, an
Australian company, for $50.8 million in cash, resulting in a pretax gain of
$13.8 million recognized in the third quarter of 1996. The results of operations
and changes in cash flows for Bennett for the nine months ended September 30,
1996, have been presented as discontinued operations. Interest expense has been
allocated to discontinued operations based on the ratio of net assets
discontinued to the total net assets of the consolidated entity plus
consolidated debt.
Summary operating results of the discontinued operations, excluding the
above gain on sale of assets, for the nine months ended September 30, 1996 were
as follows:
<TABLE>
<CAPTION>
NINE
MONTHS ENDED
SEPTEMBER 30
1996
------------
<S> <C>
Net sales............................................................. $ 49,448
Costs and expenses.................................................... 44,502
--------
Income from discontinued operations before income taxes............... 4,946
Income taxes.......................................................... 1,820
--------
Net income from discontinued operations............................... $ 3,126
========
</TABLE>
NOTE C -- INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30
1997
-------------
<S> <C>
In-process and finished goods......................................... $ 86,904
Raw materials and supplies............................................ 24,816
---------
$ 111,720
=========
</TABLE>
F-6
<PAGE> 105
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED) -- CONTINUED
NOTE D -- FINANCING ARRANGEMENTS
In June 1997 the Company amended its credit agreement with a group of five
banks increasing its credit availability by $50 million to $170 million and
extending its maturity date to April 11, 2001.
NOTE E -- SHAREHOLDERS' EQUITY
At September 30, 1997, capital stock consists of (i) Serial Preferred Stock
of which 632,470 shares were authorized and none were issued and (ii) Common
Stock of which 20,000,000 shares were authorized and 11,147,462 shares were
issued and outstanding, including 187,500 shares held in escrow.
NOTE F -- NET INCOME PER COMMON SHARE
Net income per common share is based on the weighted average number of
common shares outstanding and assumes the exercise of outstanding dilutive stock
options and the issuance of certain additional shares subject to earn-out
provisions. On a fully diluted basis, both net income and common shares
outstanding are adjusted to assume the conversion of the convertible senior
subordinated debentures. Fully diluted earnings per share were as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-----------------
1996 1997
------- -------
<S> <C> <C>
Continuing operations............................................ $ .66 $ .69
Discontinued operations.......................................... .96 -0-
------- -------
Net income....................................................... $ 1.62 $ .69
======= =======
Common shares used in the computation............................ 12,128 12,211
======= =======
</TABLE>
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share", which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The impact of Statement No. 128 on the
calculation of primary earnings per share and fully diluted earnings per share
for the nine months ended September 30, 1997 and September 30, 1996 is not
expected to be material.
NOTE G -- ACQUISITIONS
On August 1, 1997, the Company acquired substantially all of the shares of
Arden Industrial Products, Inc. ("Arden") for cash of approximately $44 million.
The transaction has been accounted for as a purchase. Arden is headquartered in
Vadnais Heights, Minnesota and is a national distributor of specialty and
standard fasteners to the industrial market. Arden is included in the Company's
Logistics segment.
F-7
<PAGE> 106
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED) -- CONTINUED
NOTE G -- ACQUISITIONS -- CONTINUED
The following is the estimated value of the net assets of Arden as of
August 1, 1997:
<TABLE>
<S> <C>
Cash...................................................................... $ 2,711
Accounts receivable....................................................... 11,503
Inventories............................................................... 17,764
Property, plant and equipment............................................. 4,468
Excess purchase price over net assets acquired............................ 20,955
Other assets.............................................................. 2,222
Trade accounts payable.................................................... (6,437)
Accrued expenses.......................................................... (2,828)
Long-term liabilities..................................................... (6,358)
-------
Total estimated cost of acquisition....................................... $44,000
=======
</TABLE>
During the nine months ended September 30, 1997, the Company acquired three
other businesses for an aggregate purchase price of approximately $13 million.
On October 3, 1997 the Company acquired Arcon Fastener Corporation for $5.6
million. The following unaudited pro forma results of operations assume the
acquisitions of Arden and the other businesses discussed above occurred on
January 1, 1996. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which actually would have resulted had the acquisition occurred on the date
indicated, or which may result in the future.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-------------------
1996 1997
-------- --------
<S> <C> <C>
Net sales.................................................. $360,656 $379,530
Gross profit............................................... 74,739 71,027
Income from continuing operations.......................... 8,083 8,961
Income from continuing operations per common share......... $ .74 $ .81
======== ========
</TABLE>
F-8
<PAGE> 107
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors and Shareholders
Park-Ohio Industries, Inc.
We have audited the accompanying consolidated balance sheets of Park-Ohio
Industries, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Park-Ohio
Industries, Inc. and subsidiaries at December 31, 1996 and 1995 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Cleveland, Ohio
February 17, 1997
F-9
<PAGE> 108
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31
1995 1996
-------- --------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............................................. $ 2,662 $ 4,659
Accounts receivable, less allowances for doubtful accounts of $787 in
1995 and $1,048 in 1996............................................ 55,121 58,764
Inventories........................................................... 80,702 83,758
Deferred tax assets................................................... 8,000 3,000
Other current assets.................................................. 3,935 5,718
-------- --------
Total Current Assets.......................................... 150,420 155,899
Property, Plant and Equipment
Land and land improvements............................................ 2,401 2,599
Buildings............................................................. 20,800 21,520
Machinery and equipment............................................... 70,916 82,743
-------- --------
94,117 106,862
Less accumulated depreciation......................................... 49,691 53,054
-------- --------
44,426 53,808
Other Assets
Excess purchase price over net assets acquired, net................... 41,991 40,305
Net assets of discontinued operations................................. 33,694 -0-
Deferred taxes........................................................ 15,400 14,100
Other................................................................. 15,816 18,798
-------- --------
$301,747 $282,910
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable................................................ $ 30,859 $ 28,545
Accrued expenses...................................................... 17,013 20,695
Current portion of long-term liabilities.............................. 5,829 6,936
-------- --------
Total Current Liabilities..................................... 53,701 56,176
Long-Term Liabilities, less current portion
Long-term debt........................................................ 92,450 55,571
Other postretirement benefits......................................... 30,562 28,442
Other................................................................. 6,845 4,788
-------- --------
129,857 88,801
Convertible Senior Subordinated Debentures.............................. 22,235 22,235
Shareholders' Equity
Capital stock, par value $1 a share
Serial preferred stock:
Authorized -- 632,470 shares; Issued -- none..................... -0- -0-
Common stock:
Authorized -- 20,000,000 shares
Issued and outstanding -- 10,401,881 shares in 1995 and
10,432,998 in 1996.............................................. 10,402 10,433
Additional paid-in capital............................................ 49,184 49,337
Retained earnings..................................................... 36,368 57,703
Treasury stock, at cost, 126,225 shares in 1996....................... -0- (1,775)
-------- --------
95,954 115,698
-------- --------
$301,747 $282,910
======== ========
</TABLE>
See notes to consolidated financial statements.
F-10
<PAGE> 109
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands -- except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales................................................... $129,216 $289,501 $347,679
Costs and expenses:
Cost of products sold..................................... 104,225 240,871 289,400
Selling, general and administrative expenses.............. 16,838 30,020 38,131
Restructuring charge...................................... -0- -0- 2,652
Other income.............................................. -0- (214) (4,204)
Interest expense.......................................... 1,501 5,911 6,947
-------- -------- --------
Income from continuing operations before income
taxes................................................ 6,652 12,913 14,753
Income taxes (benefit)...................................... (1,826) (6,900) 5,060
-------- -------- --------
Income from continuing operations...................... 8,478 19,813 9,693
Discontinued operations:
Income from operation of Bennett Industries............... 4,006 4,221 3,126
Gain on disposal of Bennett Industries, net of income
taxes.................................................. -0- -0- 8,516
-------- -------- --------
Income from discontinued operations.................... 4,006 4,221 11,642
-------- -------- --------
Net income........................................... $ 12,484 $ 24,034 $ 21,335
======== ======== ========
Net income per common share:
Continuing operations..................................... $ 1.00 $ 1.93 $ .88
Discontinued operations................................... .49 .41 1.06
-------- -------- --------
Net income................................................ $ 1.49 $ 2.34 $ 1.94
======== ======== ========
Common shares used in the computation....................... 8,092 10,257 10,960
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE> 110
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994................. $ 6,771 $ 11,312 $ (150) $ -0- $ 17,933
Net income................................. 12,484 12,484
Issuance of Kay Home Products earn-out
shares................................... 1,150 10,925 12,075
Sale of common stock....................... 271 3,952 4,223
------- ------- ------- ------- --------
Balance at December 31, 1994............... 8,192 26,189 12,334 -0- 46,715
Net income................................. 24,034 24,034
Acquisition of RB&W Corporation............ 2,023 21,251 23,274
Issuance of General Aluminum Mfg. Company
earn-out shares.......................... 187 1,744 1,931
------- ------- ------- ------- --------
Balance at December 31, 1995............... 10,402 49,184 36,368 -0- 95,954
Exercise of stock options.................. 31 153 184
Purchase of treasury stock................. (1,775) (1,775)
Net Income................................. 21,335 21,335
------- ------- ------- ------- --------
Balance at December 31, 1996............... $10,433 $ 49,337 $ 57,703 $ (1,775) $115,698
======= ======= ======= ======= ========
</TABLE>
See notes to consolidated financial statements.
F-12
<PAGE> 111
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income................................................ $ 12,484 $ 24,034 $ 21,335
Adjustments to reconcile net income to net cash provided
(used) by continuing operations:
Discontinued operations.............................. (4,006) (4,221) (11,642)
Gain on sale of investments.......................... -0- -0- (1,552)
Depreciation and amortization........................ 3,213 6,278 7,998
Tax benefit resulting from reduction of valuation
allowance on deferred tax assets.................. (2,000) (8,100) -0-
Deferred income taxes................................ -0- -0- 4,500
-------- -------- --------
9,691 17,991 20,639
Changes in operating assets and liabilities excluding
acquisitions of businesses:
Accounts receivable.................................... (192) (2,479) (3,643)
Inventories............................................ (5,766) (14,914) (3,056)
Accounts payable and accrued expenses.................. 424 (5,473) (1,214)
Other.................................................. (819) (4,855) (7,040)
-------- -------- --------
Net Cash Provided (Used) by Continuing Operations.... 3,338 (9,730) 5,686
Net Cash Provided by Discontinued Operations......... 5,689 5,738 2,040
-------- -------- --------
Net Cash Provided (Used) by Operating Activities..... 9,027 (3,992) 7,726
INVESTING ACTIVITIES
Purchases of property, plant and equipment, net........... (11,749) (13,632) (15,590)
Costs of acquisitions..................................... (2,114) (35,793) -0-
Investments............................................... -0- -0- (5,427)
Proceeds from sales of investments........................ -0- -0- 6,315
Proceeds from sale of discontinued operations, net of
$4,500 of income taxes................................. -0- -0- 46,313
Other..................................................... (2,909) -0- -0-
-------- -------- --------
Net Cash Provided (Used) by Investing Activities..... (16,772) (49,425) 31,611
FINANCING ACTIVITIES
Proceeds from bank arrangements........................... 11,350 86,969 9,500
Payments on long-term debt................................ (26,661) (33,062) (45,249)
Proceeds from convertible senior subordinated debentures,
net.................................................... 20,872 -0- -0-
Issuance of common stock.................................. 4,223 -0- 184
Purchase of treasury stock................................ -0- -0- (1,775)
-------- -------- --------
Net Cash (Used)Provided by Financing Activities...... 9,784 53,907 (37,340)
-------- -------- --------
Increase in Cash and Cash Equivalents................ 2,039 490 1,997
Cash and Cash Equivalents at Beginning of Year....... 133 2,172 2,662
-------- -------- --------
Cash and Cash Equivalents at End of Year............. $ 2,172 $ 2,662 $ 4,659
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-13
<PAGE> 112
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS -- EXCEPT PER SHARE DATA)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The consolidated financial statements include the accounts
of the Company and all of its subsidiaries. All significant intercompany
accounts and transactions have been eliminated upon consolidation.
Accounting Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash Equivalents: The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents.
Inventories: Inventories are stated at the lower of cost (principally the
first-in, first-out method) or market value. If the first-in, first-out method
of inventory accounting had been used exclusively by the Company, inventories
would have been approximately $4,928 and $4,921 higher than reported at December
31, 1995 and 1996, respectively.
Major Classes of Inventories
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1995 1996
------- -------
<S> <C> <C>
In-process and finished goods......................... $58,215 $60,587
Raw materials and supplies............................ 22,487 23,171
------- -------
$80,702 $83,758
======= =======
</TABLE>
Property, Plant and Equipment: Property, plant and equipment are carried at
cost. Major additions are capitalized and betterments are charged to accumulated
depreciation; expenditures for repairs and maintenance are charged to
operations. Depreciation of fixed assets is computed principally by the
straight-line method based on the estimated useful lives of the assets.
Excess Purchase Price Over Net Assets Acquired: The Company records
amortization of excess purchase price over the fair value of net assets acquired
(see Note B) over twenty-five years using the straight-line method. Management
periodically evaluates for possible impairment the current value of these
intangibles through cash flow and income analyses of the acquired businesses.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." Statement No. 121
establishes accounting standards for determining the impairment of long-lived
assets to be held and used, certain identifiable intangibles, and goodwill
related to those assets and for long-lived assets and certain identifiable
intangibles to be disposed of. The company adopted Statement No. 121 during the
first quarter of 1996. The financial statement effect of adoption was not
material.
Pensions: The Company and its subsidiaries have pension plans, principally
noncontributory defined benefit or noncontributory defined contribution plans,
covering substantially all employees. For the defined benefit plans, benefits
are based on the employee's years of service and the Company's policy is to fund
that amount recommended by its independent actuaries. For the defined
contribution plans, the costs charged to operations and the amount funded are
based upon a percentage of the covered employees' compensation.
F-14
<PAGE> 113
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Stock-Based Compensation: The Company has elected to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" ("APB 25"), and related interpretations. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.
Income Taxes: The Company accounts for income taxes under the liability
method whereby deferred tax assets and liabilities are determined based on
temporary differences between the financial reporting and the tax bases of
assets and liabilities and are measured using the current enacted tax rates.
Net Income Per Common Share: Net income per common share is based on the
weighted average number of common shares outstanding and assumes the exercise of
outstanding dilutive stock options and the issuance of certain additional shares
subject to earn-out provisions. On a fully-diluted basis, both net income and
common shares outstanding are adjusted to assume the conversion of the
convertible senior subordinated debentures issued in 1994. Fully diluted
earnings per share were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Continuing operations............................. $ 1.04 $ 1.86 $ .88
Discontinued operations........................... .45 .37 .96
------ ------ ------
Net income........................................ $ 1.49 $ 2.23 $ 1.84
====== ====== ======
Common shares used in the computation............. 8,815 11,467 12,111
====== ====== ======
</TABLE>
During 1994 and 1995, the Company's utilization of net operating loss
carryforwards and reduction in valuation allowances for deferred tax assets (See
Note F) had the effect of increasing income per common share from continuing
operations by $.53 in 1994 and $1.18 in 1995. Accordingly, income per common
share from continuing operations on a fully taxable basis is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Pro forma income per common share from continuing
operations on a fully taxable basis............. $ .47 $ .75 $ .88
====== ====== ======
</TABLE>
Interest Rate Swap Agreements: The Company enters into interest rate swap
agreements to modify the interest characteristics of its outstanding debt. Each
interest rate swap agreement is designated with a portion of the principal
balance and term of a specific debt obligation. These agreements involve the
exchange of amounts based on a fixed interest rate for amounts based on variable
interest rates of the life of the agreement without an exchange of the notional
amount upon which the payments are based. The differential to be paid or
received as interest rates change is accrued and recognized as an adjustment of
interest expense related to the debt.
Revenue Recognition: For the majority of its operations, the Company
recognizes revenues upon shipment of its product. Revenues on long-term
contracts are recognized using the percentage of completion method of
accounting, under which the sales value of performance is recognized on the
basis of the percentage each contract's cost to date bears to the total
estimated cost. The recognition of profit, based upon anticipated final costs,
is made only after evaluation of the contract status at critical milestones. The
Company's contracts generally provide for billing of customers. Revenues earned
on contracts in process in excess of billings are classified in other current
assets in the accompanying balance sheet.
Environmental: The Company accrues environmental costs related to existing
conditions resulting from past or current operations and from which no current
or future benefit is discernible. Costs which extend the life of the related
property or mitigate or prevent future environmental contamination are
capitalized. The
F-15
<PAGE> 114
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Company records a liability when environmental assessments and/or remedial
efforts are probable and can be reasonably estimated. The estimated liability of
the Company is not discounted or reduced for possible recoveries from insurance
carriers.
Concentration of Credit Risk: The Company sells its products to customers
in diversified industries. The Company performs ongoing credit evaluations of
its customers' financial condition but does not require collateral to support
customer receivables. The Company establishes an allowance for doubtful accounts
based upon factors surrounding the credit risk of specific customers, historical
trends and other information. As of December 31, 1996 the Company had
uncollateralized receivables with six customers in the automotive and truck
industry each with several locations approximating $19,988 which represents 34%
of the Company's trade accounts receivable. During 1996, sales to these
customers amounted to approximately $103,028 which represents 30% of the
Company's net sales.
Reclassifications: Certain prior year amounts have been reclassified to
conform to the 1996 presentation.
NOTE B -- ACQUISITIONS
On March 31, 1995, the Company acquired all of the shares of RB&W
Corporation (RB&W) in exchange for 2,023,000 shares of the Company's common
stock ($11.50 market value as of March 31, 1995) and cash of $30,968. The
transaction has been accounted for as a purchase.
The table below reflects the current value of the net assets acquired of
RB&W:
<TABLE>
<S> <C>
Cash................................................ $ 510
Accounts receivable................................. 29,551
Inventories......................................... 36,131
Property, plant and equipment....................... 5,591
Excess purchase price over net assets acquired...... 25,596
Deferred tax assets................................. 13,300
Other assets........................................ 12,620
Notes payable....................................... (28,739)
Trade accounts payable.............................. (21,524)
Accrued expenses.................................... (9,172)
Long-term liabilities............................... (9,622)
--------
$ 54,242
========
</TABLE>
The following unaudited pro forma results of operations assume the
acquisition occurred on January 1, 1995. These pro forma results have been
prepared for comparative purposes only and do not purport to be indicative of
the results of continuing operations which actually would have resulted had the
acquisition occurred on the date indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Net sales.................................................... $ 336,533
Gross profit................................................. 47,255
Income from continuing operations............................ 18,797
Income from continuing operations per common share........... $ 1.74
</TABLE>
During 1995, the Company also purchased certain assets of four companies
for a total cost of $6,400 which includes $1,500 for The Ajax Manufacturing
Company, purchased from a related party. The operations of these businesses
prior to the dates of acquisition were not material to the Company.
F-16
<PAGE> 115
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
On October 15, 1993, the Company acquired General Aluminum Mfg. Company
(GAMCO), by issuing 250,000 shares of its common stock valued at $3,127 in
exchange for the outstanding shares of GAMCO. An additional 187,500 shares of
common stock valued at $1,931 which represents purchase price in excess of net
assets acquired, were issued in March, 1995 and an additional 375,000 shares of
common stock will be issued at a value to be determined at the date of issuance
during 1997 as a result of GAMCO achieving certain income levels during 1996 as
specified in the purchase agreement. Up to an additional 187,500 shares of
common stock may be issued in 1998 if GAMCO achieves certain income levels
during the year ending December 31, 1997. Throughout 1996, the 375,000 shares to
be issued in 1997 were included in the earnings per share calculation on a
weighted average basis when it appeared likely such shares would be issued
pursuant to this agreement.
NOTE C -- SALE OF BENNETT INDUSTRIES
On July 31, 1996, the Company completed the sale of substantially all of
the assets of Bennett Industries, Inc. ("Bennett"), a wholly-owned subsidiary
which manufactures plastic containers, to North America Packaging Corporation, a
wholly-owned subsidiary of Southcorp Holdings Limited, an Australian company,
for $50.8 million in cash, resulting in a pre-tax gain of $13.8 million. The
results of operations and changes in cash flows for Bennett have been classified
as discontinued operations for all periods presented in the related consolidated
statements of income and consolidated statements of cash flows, respectively.
Interest expense has been allocated to discontinued operations based on the
ratio of net assets discontinued to the total net assets of the consolidated
entity plus consolidated debt. The assets and liabilities of Bennett have been
classified in the consolidated balance sheets as net assets of discontinued
operations at December 31, 1995.
Summary operating results of the discontinued operations, excluding the
above gain on sale, for the years ended December 31, 1994, 1995 and 1996 were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Sales......................................................... $62,311 $81,929 $49,448
Costs and expenses............................................ 58,305 77,708 44,502
------- ------- -------
Income from discontinued operations before income taxes....... 4,006 4,221 4,946
Income taxes.................................................. -0- -0- 1,820
------- ------- -------
Net income from discontinued operations....................... $ 4,006 $ 4,221 $ 3,126
======= ======= =======
</TABLE>
NOTE D -- ACCRUED EXPENSES
Accrued expenses include the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1995 1996
------- -------
<S> <C> <C>
Self-insured liabilities................................................. $ 1,959 $ 2,521
Warranty and installation accruals....................................... 2,060 2,752
Accrued payroll and payroll-related items................................ 2,977 3,112
State and local taxes.................................................... 1,136 2,422
Advance billings......................................................... 1,301 1,646
Restructuring reserve (see Note M)....................................... -0- 2,653
Acquisition liabilities.................................................. 2,196 -0-
Interest payable......................................................... 780 248
Sundry................................................................... 4,604 5,341
------- -------
Totals......................................................... $17,013 $20,695
======= =======
</TABLE>
F-17
<PAGE> 116
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE E -- FINANCING ARRANGEMENTS
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1995 1996
------- -------
<S> <C> <C>
Term loan, payable in quarterly installments of $1,250 through December
31, 2001, final payment due March 31, 2002............................. $35,000 $32,500
Revolving credit maturing on March 31, 1999.............................. 59,000 26,000
Other.................................................................... 2,503 2,254
------- -------
96,503 60,754
Less current maturities.................................................. 4,053 5,183
------- -------
Total.......................................................... $92,450 $55,571
======= =======
</TABLE>
Maturities of long-term debt during each of the five years following
December 31, 1996 are approximately $5,183 in 1997, $5,325 in 1998, $31,523 in
1999, $5,526 in 2000 and $5,132 in 2001.
The Company has a credit agreement with a group of banks under which it may
borrow up to $125 million ($35 million term loan and $90 million revolving
credit commitments, respectively)on an unsecured basis. Interest is payable
quarterly at the prime lending rate (8.25% at December 31, 1996)or at the
Company's election, at LIBOR plus a percentage which fluctuates based on
specific financial ratios (which aggregated 6.6% at December 31, 1996). The
weighted average rate on borrowings was 6.6% at December 31, 1996. The credit
agreement expires on March 31, 1999.
The Company has agreements on which up to $3 million in standby letters of
credit and commercial letters of credit may be issued. In addition to the bank's
customary letter of credit fees, a 1% fee is assessed on standby letters of
credit on an annual basis. As of December 31, 1996, in addition to amounts
borrowed under the revolving credit agreement, there is $2.2 million outstanding
primarily for standby letters of credit. A fee of 1/4% is imposed by the bank
on the unused portion of available borrowings.
The credit agreement contains limitations on borrowings, investments, lease
rentals, capital expenditures and acquisitions or mergers, and requires
maintenance of specific financial ratios and a minimum net worth.
As of December 31, 1996, the Company has interest rate swap agreements for
notional borrowings of $50 million in which the Company pays a fixed rate and
receives a floating rate equal to the three month LIBOR rate. The weighted
average pay rate and receive rate under these agreements is 5.83% and 5.55%,
respectively. These agreements mature during 2000.
During 1994, the Company sold $22,235 of its 7 1/4% convertible senior
subordinated debentures and $4,200 of its common stock at $15.75 a share. The
debentures are convertible into shares of the Company's common stock at a price
of $19.32 per share or a rate of 51.76 shares per $1 thousand principal amount
of debentures and are subordinated to all senior indebtedness of the Company.
Subsequent to December 15, 1996, the debentures may be redeemed at the option of
the Company, in whole or in part, initially at 107% and thereafter at prices
declining to 100% on and after December 15, 2003 together with accrued interest.
Sinking fund payments begin in 2000 in an amount sufficient to retire annually
20% of the aggregate principal amount of debentures issued, calculated to retire
80% of the debentures prior to maturity. Interest is payable semi-annually.
F-18
<PAGE> 117
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE F -- INCOME TAXES
Significant components of the Company's net deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1995 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Postretirement benefit obligation...................................... $11,200 $10,600
Tax net operating loss carryforwards................................... 9,000 5,100
Inventory.............................................................. 4,300 4,500
Tax credits............................................................ 1,200 600
Other -- net........................................................... 5,600 3,400
------- -------
Total deferred tax assets...................................... 31,300 24,200
Deferred tax liabilities:
Tax over book depreciation............................................. 5,700 4,400
Pension................................................................ 2,200 2,700
------- -------
Total deferred tax liabilities................................. 7,900 7,100
------- -------
Net deferred tax assets.................................................. $23,400 $17,100
======= =======
</TABLE>
As of December 31, 1995, the Company reduced by $8,100 the remaining
valuation allowance on deferred tax assets relating to anticipated future income
tax benefits from utilization of net operating loss carryforwards as full
realization of these assets is expected.
The reasons for the difference between income taxes (benefit) and the
amount computed by applying the statutory Federal income tax rate to income from
continuing operations before income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Computed statutory amount..................................... $ 2,262 $ 4,400 $ 5,000
Effect of state income taxes payable.......................... -0- 500 600
Other......................................................... -0- -0- (540)
Utilization of net operating loss carryforwards............... (2,088) (3,700) -0-
Reduction in valuation allowance for deferred tax assets...... (2,000) (8,100) -0-
------- ------- -------
Income taxes (benefit).............................. $(1,826) $(6,900) $ 5,060
======= ======= =======
</TABLE>
At December 31, 1996, subsidiaries of the Company have net operating loss
carryforwards for income tax purposes of approximately $15 million subject to
certain limitations, which expire in 2001 to 2007.
NOTE G -- STOCK OPTIONS
Under the provisions of the Company's Amended and Restated 1992 Stock
Option Plan, incentive stock options or non-statutory options to purchase
850,000 shares of the Company's stock may be granted to officers and other key
employees at the market price on the respective date of grant. The option rights
are exercisable only if and after the employee shall have remained in the employ
of the Company for one year from the date the option is granted. At December 31,
1996, there were a total of 676,000 options outstanding under the Plan; 175,000
of such options became 100% exercisable after two years from the date of grant
at option prices ranging from $3.813 -- $5.125 a share and terminate five years
from the option date; 501,000 of such options become 100% exercisable after
three years from the date of grant at option prices ranging from $9.125 --
$14.25 a share and terminate ten years from the option date. During 1996, 31,167
options under this Plan were
F-19
<PAGE> 118
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
exercised at prices ranging from $5.125 -- $10.625 a share. At December 31,
1996, there were 348,992 options exercisable at option prices ranging from
$3.813 -- $14.25 a share.
The 1996 Non-Employee Director Stock Option Plan authorized the granting of
options on 250,000 shares of common stock to directors who are not employees of
the Company. Annually, each non-employee director will automatically receive
options to acquire 6,000 shares at the market price on the date of grant.
Options under this plan are exercisable six months from the date of grant. At
December 31, 1996 there were 30,000 options outstanding and exercisable under
this plan at an exercise price of $13.625. Also during 1996 the Chairman and
Chief Executive Officer of the Company was granted a non-statutory stock option
to purchase 500,000 shares of common stock at $13.625 per share which was the
market price at the date of grant. The options become 100% exercisable after
five years and shall terminate fifteen years from the option date.
Had the compensation cost for the stock options granted in 1995 and 1996
been determined based on the fair value method of FASB Statement No. 123, the
Company's net income and earnings per share would have been reduced by $223
($.02 per share) in 1995 and $1,290 ($.12 per share) in 1996. The effects on
1995 and 1996 net earnings may not be representative of the effect on future
years net earnings amounts as the compensation cost on each year's grant is
recognized over the vesting period.
Fair value was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions for 1995 and 1996,
respectively: risk-free interest rates of 6.34% and 5.25%; zero dividend yield;
expected volatility of 43% and expected option lives of 6 years for 1995 and 6
to 10 years for 1996.
NOTE H -- LEGAL PROCEEDINGS
The Company becomes involved in litigation arising out of its normal
business activities. In the opinion of management, the Company's liability, if
any, under any pending litigation would not have a material effect on its
financial position or results of operations.
NOTE I -- PENSIONS
A summary of the components of net periodic pension credit for the defined
benefit plans and the total contributions charged to pension expense for the
defined contribution plans is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1994 1995 1996
------- -------- -------
<S> <C> <C> <C>
Defined benefit plans:
Service cost............................................... $ 128 $ 287 $ 296
Interest cost.............................................. 1,469 3,362 3,249
Actual return on assets.................................... 66 (10,719) (7,499)
Net amortization and deferral.............................. (1,961) 6,315 2,795
------- -------- -------
Net periodic pension credit of defined benefit plans....... (298) (755) (1,159)
Defined contribution plans................................... 508 680 796
------- -------- -------
Total pension (credit) expense..................... $ 210 $ (75) $ (363)
======= ======== =======
</TABLE>
Assumptions used in the accounting for the defined benefit pension plans
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate......................................... 8.5 % 7.5% 7.5%
Expected long-term rate of return on assets............................ 9.5 % 8.5% 8.5%
</TABLE>
F-20
<PAGE> 119
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheets at December 31, 1995 and 1996 for the Company's
defined benefit pension plans.
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1995 1996
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.............................................. $44,223 $42,863
======= =======
Accumulated benefit obligation......................................... $45,872 $44,671
======= =======
Plan assets at fair value................................................ $58,563 $63,139
Projected benefit obligation............................................. 46,308 45,049
------- -------
Plan assets in excess of projected benefit obligation.................... 12,255 18,090
Unrecognized net gain.................................................... (2,956) (6,959)
Unrecognized prior service cost.......................................... 1,436 1,442
Unrecognized net asset at January 1, 1987 net of amortization............ (231) (203)
------- -------
Net pension asset included in other assets............................... $10,504 $12,370
======= =======
</TABLE>
The plans' assets at December 31, 1995 and 1996 are invested in listed
stocks, bonds and unallocated insurance contracts.
NOTE J -- OTHER POSTRETIREMENT BENEFITS
The Company and certain of its subsidiaries provide health care and life
insurance benefits for retired employees. Employees may become eligible for
benefits if they qualify for retirement while working for the Company.
The following table presents the plan's funded status and amounts
recognized in the consolidated balance sheets at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1995 1996
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................................................... $18,460 $17,555
Fully eligible active plan participants................................ 445 479
Other active plan participants......................................... 1,626 1,854
------- -------
Accumulated Postretirement Benefit Obligations................. 20,531 19,888
Unrecognized net gain.................................................. 10,851 10,307
------- -------
Accrued Postretirement Benefit Obligations..................... $31,382 $30,195
======= =======
</TABLE>
Net periodic benefit cost includes the following components for the years
ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Service cost..................................................... $ 58 $ 92 $ 106
Interest cost.................................................... 1,476 1,559 1,458
Net amortization and deferral.................................... (620) (819) (544)
------ ------ ------
Net Periodic Postretirement Benefit Cost............... $ 914 $ 832 $1,020
====== ====== ======
</TABLE>
F-21
<PAGE> 120
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The accumulated postretirement benefit obligation ("APBO") was determined
using an assumed discount rate of 8.5%, 7.5% and 7.5% for 1994, 1995 and 1996,
respectively. The assumed annual health care trend rate for retirees younger
than 65 was 9.0% in 1996 (10% in 1994 and 9.5% in 1995) decreasing to 6.0% in
2004. The assumed annual health care trend rate for retirees aged 65 and over
will decrease to 5.5% in 2004. A 1% change in the trend rate would increase the
APBO by 4.2% and annual expense by 11%.
NOTE K -- LEASES
Rental expense for 1994, 1995 and 1996 was $931, $3,527 and $4,751,
respectively. Future minimum lease commitments during each of the five years
following December 31, 1996 are as follows: $3,295 in 1997, $2,630 in 1998,
$2,184 in 1999, $2,044 in 2000 and $1,735 in 2001.
NOTE L -- INDUSTRY SEGMENTS
The Company operates in two industry segments: Manufactured Products and
Logistics. The Manufactured Products segment manufactures industrial products
for the airline, automotive, locomotive, trucking and housewares industries and
includes forged and machined products, metal forming, capital equipment,
permanent mold castings, industrial rubber products and consumer products.
Forged and machined products include the production, machining and finishing of
closed die forgings produced by the Company and others. Metal forming includes
the engineering and manufacturing of fasteners, cold formed parts and related
hardware. Capital equipment includes the engineering and manufacturing of
capital equipment consisting of forging presses, specialty lift trucks and
induction heating systems. Permanent mold castings include the production and
machining of permanent mold aluminum parts. Industrial rubber products include
custom made molded and lathe-cut goods and items requiring rubber-to-metal
bonding. Consumer products include molded plastic and metal indoor and outdoor
products. The Logistics segment provides supply chain management of various
commodity products including fasteners, primarily to original equipment
manufacturers.
The Company's sales are made through its own sales organization,
distributors and representatives. Intersegment metal forming sales to the
Logistics segment are eliminated in consolidation and are not included in the
figures presented. Intersegment sales are accounted for at values based on
market prices. Income allocated to segments excludes interest expense and
amortization of excess purchase price over net assets acquired. Identifiable
assets by industry segment include assets directly identified with those
operations.
F-22
<PAGE> 121
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Corporate assets generally consist of cash and cash equivalents, deferred
tax assets, and other assets.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales
Manufactured products................................. $129,216 $181,000 $196,327
Logistics............................................. -0- 108,501 151,352
-------- -------- --------
$129,216 $289,501 $347,679
======== ======== ========
Income from continuing operations before income taxes
Manufactured products................................. $ 11,011 $ 14,525 $ 16,263
Logistics............................................. -0- 8,217 9,276
-------- -------- --------
11,011 22,742 25,539
Amortization of excess purchase price over net assets
acquired............................................ (223) (1,504) (1,902)
Corporate costs....................................... (2,635) (2,414) (1,937)
Interest expense...................................... (1,501) (5,911) (6,947)
-------- -------- --------
$ 6,652 $ 12,913 $ 14,753
======== ======== ========
Identifiable assets
Manufactured products................................. $ 90,851 $162,114 $177,946
Logistics............................................. -0- 93,876 92,862
General corporate..................................... 10,520 12,063 12,102
Discontinued operations............................... 27,025 33,694 -0-
-------- -------- --------
$128,396 $301,747 $282,910
======== ======== ========
Depreciation and amortization expense
Manufactured products................................. $ 3,213 $ 5,544 $ 6,644
Logistics............................................. -0- 734 1,354
-------- -------- --------
$ 3,213 $ 6,278 $ 7,998
======== ======== ========
Capital expenditures
Manufactured products................................. $ 3,557 $ 4,974 $ 10,272
Logistics............................................. -0- 1,099 4,152
General corporate..................................... 260 237 1,054
Discontinued operations............................... 7,932 7,322 112
-------- -------- --------
$ 11,749 $ 13,632 $ 15,590
======== ======== ========
</TABLE>
The Company's manufactured products segment had sales of $28,000 in 1994,
$32,200 in 1995, and $33,728 in 1996 to Ford Motor Company (21.7%, 11.1% and
9.7% of consolidated net sales, respectively).
NOTE M -- RESTRUCTURING CHARGES AND OTHER INCOME
During the fourth quarter of 1996, the Company commenced the reorganization
of its consumer products manufacturing operations which will result in the
realignment of two manufacturing facilities and the discontinuance of certain
products lines. As a result of these actions, the Company recorded a charge of
$2,700 primarily for the writedown of certain property and equipment and
inventory to estimated net realizable value.
In December 1996, the Company negotiated full settlement of subordinated
notes receivable, resulting from the sale of two manufacturing facilities, which
were fully reserved at the date of sale. The net proceeds received of $2,700
were recorded in income in the fourth quarter. In the third quarter of 1996, the
Company sold certain securities purchased during 1996 for $6,315 which resulted
in a gain of $1,500.
F-23
<PAGE> 122
SUPPLEMENTARY FINANCIAL DATA
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------
1995 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- --------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales.................................... $ 42,331 $ 88,311 $ 77,164 $ 81,695
Gross profit................................. 8,208 14,947 11,548 13,927
Income from continuing operations............ 2,696 4,221 2,059 10,837
Income from discontinued operations.......... 1,044 600 956 1,621
Net Income................................... $ 3,740 $ 4,821 $ 3,015 $ 12,458
======= ======= ======= =======
Primary Earnings Per Share:
Continuing Operations...................... $ .31 $ .39 $ .19 $ 1.00
Discontinued Operations.................... .12 .06 .09 .15
------- ------- ------- -------
Net Income................................. $ .43 $ .45 $ .28 $ 1.15
======= ======= ======= =======
<CAPTION>
QUARTER ENDED
-------------------------------------------------------
1996 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- --------------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales.................................... $ 90,854 $ 90,693 $ 79,750 $ 86,382
Gross profit................................. 15,530 15,431 13,044 14,274
Income from continuing operations............ 2,582 2,550 2,113 2,448
Income from discontinued operations.......... 1,499 1,326 8,817 -0-
Net Income................................... $ 4,081 $ 3,876 $ 10,930 $ 2,448
======= ======= ======= =======
Primary Earnings Per Share:
Continuing Operations...................... $ .24 $ .23 $ .19 $ .22
Discontinued Operations.................... .14 .12 .81 -0-
------- ------- ------- -------
Net Income................................. $ .38 $ .35 $ 1.00 $ .22
======= ======= ======= =======
</TABLE>
NOTE 1 -- On July 31, 1996, the Company completed the sale of substantially all
of the assets of Bennett Industries, Inc., a wholly-owned subsidiary
which manufactures plastic containers, for $50.8 million in cash,
resulting in a pretax gain of $13.8 million recognized in the third
quarter of 1996. The results of operations for Bennett have been
classified as discontinued operations for all periods presented. The
assets and liabilities of Bennett have been classified in the
consolidated balance sheets as net assets of discontinued operations
at December 31, 1995.
NOTE 2 -- On March 31, 1995, the Company acquired all of the shares of RB&W
Corporation in exchange for 2,023,000 shares of the Company's common
stock and cash. The transaction has been accounted for as a purchase
and, accordingly, the operations of RB&W have been included since that
date.
NOTE 3 -- Effective December 31, 1995, the Company recorded the deferred tax
assets relating to anticipated future income tax benefits from
utilization of net operating loss carryforwards, resulting in a credit
of $8.1 million for the year ended December 31, 1995. Therefore, as of
January 1, 1996, the Company began to fully provide Federal income
taxes.
NOTE 4 -- Included in income from continuing operations for the quarter ended
September 30, 1996, is a gain on the sale of securities of $1.0
million, net of income taxes.
F-24
<PAGE> 123
===============================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY TO ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information......................... i
Incorporation of Certain Documents by
Reference................................... i
Prospectus Summary............................ 1
Risk Factors.................................. 13
The Exchange Offer............................ 19
Use of Proceeds............................... 29
Capitalization................................ 30
Unaudited Pro Forma Consolidated Financial
Data........................................ 31
Selected Historical Consolidated Financial
Data........................................ 40
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 42
Business...................................... 48
Management.................................... 61
Principal Shareholders........................ 66
Description of Other Indebtedness............. 68
Description of the Notes...................... 69
Plan of Distribution.......................... 92
Legal Matters................................. 93
Experts....................................... 93
Index to Consolidated Financial Statements.... F-1
</TABLE>
===============================================================
===============================================================
$150,000,000
PARK OHIO LOGO
OFFER TO EXCHANGE ITS
9 1/4% SENIOR SUBORDINATED
NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT FOR ANY AND
ALL OUTSTANDING 9 1/4% SENIOR
SUBORDINATED NOTES DUE 2007
-----------------
PROSPECTUS
-----------------
, 1997
===============================================================
<PAGE> 124
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 34 of the Company's Code of Regulations provides that the Company
will indemnify any director or officer or former director or officer of the
Company or any person who is or has served at the request of the Company as a
director, officer or trustee of another corporation, joint venture, trust or
other enterprise, as well as such person's heirs, executors and administrators,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement, actually and reasonably incurred by him by reason of the fact
that he is or was a director or officer or trustee in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative to the full extent and according to
the procedures and requirements set forth in the Ohio General Corporation Law as
may be in effect. Section 34 of the Company's Code of Regulations further
provides that the indemnification provided for therein will not restrict the
rights of the Company to indemnify employees, agents and others as permitted by
the Ohio General Corporation Law.
Section 1701.13(E) of the Ohio General Corporation Law provides in regard
to indemnification of directors and officers as follows:
Section 1701.13. Authority of Corporation.
* * *
(E)(1) A corporation may indemnify or agree to indemnify any person
who was or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, other than an action by
or in the right of the corporation, by reason of the fact that he is or was
a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, trustee, officer,
employee, member, manager, or agent of another corporation, domestic or
foreign, nonprofit or for profit, a limited liability company, or a
partnership, joint venture, trust, or other enterprise, against expenses,
including attorney's fees, judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action,
suit, or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, if he
had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, he had reasonable cause to believe that
his conduct was unlawful.
(2) A corporation may indemnify or agree to indemnify any person who
was or is a party, or is threatened to be made a party, to any threatened,
pending, or completed action or suit by or in the right of the corporation
to procure a judgment in its favor, by reason of the fact that he is or was
a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, trustee, officer,
employee, member, manager, or agent of another corporation, domestic or
foreign, nonprofit or for profit, a limited liability company, or a
partnership, joint venture, trust, or other enterprise, against expenses,
including attorney's fees, actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any of the following:
(a) Any claim, issue, or matter as to which such person is adjudged to
be liable for negligence or misconduct in the performance of his duty to
the corporation unless, and only to the extent that, the court of common
pleas or the court in which such action or suit was brought determines,
upon application, that,
II-1
<PAGE> 125
despite the adjudication of liability, but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for
such expenses as the court of common pleas or such other court shall deem
proper;
(b) Any action or suit in which the only liability asserted against a
director is pursuant to section 1701.95 of the Revised Code.
(3) To the extent that a director, trustee, officer, employee, member,
manager, or agent has been successful on the merits or otherwise in defense
of any action, suit, or proceeding referred to in division (E)(1) or (2) of
this section, or in defense of any claim, issue, or matter therein, he
shall be indemnified against expenses, including attorney's fees, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding.
(4) Any indemnification under division (E)(1) or (2) of this section,
unless ordered by a court, shall be made by the corporation only as
authorized in the specific case, upon a determination that indemnification
of the director, trustee, officer, employee, member, manager, or agent is
proper in the circumstances because he has met the applicable standard of
conduct set forth in division (E)(1) of this section. Such determination
shall be made as follows:
(a) By a majority vote of a quorum consisting of directors of the
indemnifying corporation who were not and are not parties to or threatened
with the action, suit, or proceeding referred to in division (E)(1) or (2)
of this section;
(b) If the quorum described in division (E)(4)(a) of this section is
not obtainable or if a majority vote of a quorum of disinterested directors
so directs, in a written opinion by independent legal counsel other than an
attorney, or a firm having associated with it an attorney, who has been
retained by or who has performed services for the corporation or any person
to be indemnified within the past five years;
(c) By the shareholders;
(d) By the court of common pleas or the court in which the action,
suit, or proceeding referred to in division (E)(1) or (2) of this section
was brought.
Any determination made by the disinterested directors under division
(E)(4)(a) or by independent legal counsel under division (E)(4)(b) of this
section shall be promptly communicated to the person who threatened or
brought the action or suit by or in the right of the corporation under
division (E)(2) of this section, and, within ten days after receipt of such
notification, such person shall have the right to petition the court of
common pleas or the court in which such action or suit was brought to
review the reasonableness of such determination.
(5)(a) Unless at the time of a director's act or omission that is the
subject of an action, suit, or proceeding referred to in division (E)(1) or
(2) of this section, the articles or the regulations of a corporation
state, by specific reference to this division, that the provisions of this
division do not apply to the corporation and unless the only liability
asserted against a director in an action, suit, or proceeding referred to
in division (E)(1) or (2) of this section is pursuant to section 1701.95 of
the Revised Code, expenses, including attorney's fees, incurred by a
director in defending the action, suit, or proceeding shall be paid by the
corporation as they are incurred, in advance of the final disposition of
the action, suit, or proceeding, upon receipt of an undertaking by or on
behalf of the director in which he agrees to do both of the following:
(i) Repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that his action or failure
to act involved an act or omission undertaken with deliberate intent to
cause injury to the corporation or undertaken with reckless disregard
for the best interest of the corporation;
(ii) Reasonably cooperate with the corporation concerning the
action, suit, or proceeding.
(b) Expenses, including attorney's fees, incurred by a director,
trustee, officer, employee, member, manager, or agent in defending any
action, suit, or proceeding referred to in division (E)(1) or (2) of this
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<PAGE> 126
section, may be paid by the corporation as they are incurred, in advance of
the final disposition of the action, suit, or proceeding, as authorized by
the directors in the specific case, upon receipt of an undertaking by or on
behalf of the director, trustee, officer, employee, member, manager, or
agent to repay such amount, if it ultimately is determined that he is not
entitled to be indemnified by the corporation.
(6) The indemnification authorized by this section shall not be
exclusive of, and shall be in addition to, any other rights granted to
those seeking indemnification under the articles, the regulations, any
agreement, a vote of shareholders or disinterested directors, or otherwise,
both as to action in their official capacities and as to action in another
capacity while holding their offices or positions, and shall continue as to
a person who has ceased to be a director, trustee, officer, employee,
member, manager, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
(7) A corporation may purchase and maintain insurance or furnish
similar protection, including, but not limited to, trust funds, letters of
credit, or self-insurance, on behalf of or for any person who is or was a
director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, trustee, officer,
employee, member, manager, or agent of another corporation, domestic or
foreign, nonprofit or for profit, a limited liability company, or a
partnership, joint venture, trust, or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under this section.
Insurance may be purchased from or maintained with a person in which the
corporation has a financial interest.
(8) The authority of a corporation to indemnify persons pursuant to
division (E)(1) or (2) of this section does not limit the payment of
expenses as they are incurred, indemnification, insurance, or other
protection that may be provided pursuant to divisions (E)(5), (6), and (7)
of this section. Divisions (E)(1) and (2) of this section do not create any
obligation to repay or return payments made by the corporation pursuant to
division (E)(5), (6), or (7).
(9) As used in division (E) of this section, "corporation" includes
all constituent entities in a consolidation or merger and the new or
surviving corporation, so that any person who is or was a director,
officer, employee, trustee, member, manager, or agent of such a constituent
entity, or is or was serving at the request of such constituent entity as a
director, trustee, officer, employee, member, manager, or agent of another
corporation, domestic or foreign, nonprofit or for profit, a limited
liability company, or a partnership, joint venture, trust, or other
enterprise, shall stand in the same position under this section with
respect to the new or surviving corporation as he would if he had served
the new or surviving corporation in the same capacity.
The Company has entered into indemnity agreements ("Indemnity Agreement")
with each of its directors and certain officers (each, an "Indemnitee") pursuant
to the Indemnity Agreement, the Company shall indemnify the Indemnitee with
respect to his activities as a director or officer of the Company and/or as a
person who is serving or has served on behalf of the Company ("representative")
as a director, officer, or trustee of another corporation, joint venture, trust
or other enterprise, domestic or foreign, in which the Company has a direct or
indirect ownership interest (an "affiliated entity") against expenses
(including, without limitation, attorneys' fees, judgments, fines, and amounts
paid in settlement) actually and reasonably incurred by him ("Expenses") in
connection with any claim against Indemnitee which is the subject of any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, investigative or otherwise and whether formal or
informal (a "Proceeding"), to which Indemnitee was, is, or is threatened to be
made a party by reason of facts which include Indemnitee's being or having been
such a director, officer or representative, to the extent of the highest and
most advantageous to the Indemnitee, as determined by the Indemnitee, of one or
any combination of the following:
(a) The benefits provided by the Company's Regulations in effect on
the date hereof, a copy of the relevant portions of which are attached
hereto as Exhibit I;
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<PAGE> 127
(b) The benefits provided by the Articles of Incorporation,
Regulations, or By-laws or their equivalent of the Company in effect at the
time Expenses are incurred by Indemnitee;
(c) The benefits allowable under Ohio law in effect at the date
hereof;
(d) The benefits allowable under the law of the jurisdiction under
which the Company exists at the time Expenses are incurred by the
Indemnitee;
(e) The benefits available under liability insurance obtained by the
Company;
(f) The benefits which would have been available to the Indemnitee
under his Executive Liability Insurance Policy; and
(g) Such other benefits as are or may be otherwise available to
Indemnitee.
The Indemnity Agreements provide for the advancement of Expenses to the
Indemnitee if the Indemnitee provides the Company with a written undertaking
that (i) the Indemnitee has notified the Company of any Proceeding; (ii) the
Indemnitee believes he should prevail in the Proceeding and (iii) that the
Indemnitee will reimburse the Company for all expenses if it is determined that
the Indemnitee is not entitled to indemnification.
The Company also maintains directors' and officers' liability insurance,
pursuant to which the directors and officers of the Company are insured against
certain liabilities, including certain liabilities under the Securities Act of
1933, as amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following Exhibits are filed herewith and made a part hereof:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- ----------------------------------------------------------------------------------
<S> <C>
3.1 Restated Articles of Incorporation of Park-Ohio Industries, Inc. (filed as Exhibit
4(a) of the Company's Registration Statement on Form S-3, filed on November 7,
1994, SEC File No. 33-86054 and incorporated by reference and made a part hereof).
3.2 Code of Regulations of Park-Ohio Industries, Inc. (filed as Exhibit 4(b) of the
Company's Registration Statement on Form S-3, filed on November 7, 1994, SEC File
No. 33-86054 and incorporated by reference and made a part hereof).
4.1 Indenture, dated November 25, 1997 by and among Park-Ohio Industries, Inc., and
Norwest Bank Minnesota, N. A. as trustee.
4.2 Credit Agreement among Park-Ohio Industries, Inc., and various financial
institutions, dated April 11, 1995 (filed as Exhibit 4 of the Form 10-Q of
Park-Ohio Industries, Inc. for the period ended March 31, 1995, SEC File No.
000-03134 and incorporated by reference and made a part hereof).
4.3 First Amendment dated as of June 19, 1995 to the Credit Agreement among Park-Ohio
Industries, Inc. and various financial institutions dated April 11, 1995 (filed as
Exhibit 4(D) of Form 10-K of Park-Ohio Industries, Inc. for the year ended
December 31, 1996, SEC File No. 000-03134 and incorporated by reference and made a
part hereof).
4.4 Second Amendment dated as of December 5, 1995 to the Credit Agreement among
Park-Ohio Industries, Inc. and various financial institutions dated April 11, 1995
(filed as Exhibit 4(E) of Form 10-K of Park-Ohio Industries, Inc., for the year
ended December 31, 1996, SEC File No. 000-03134 and incorporated by reference and
made a part hereof).
4.5 Third Amendment dated as of April 11, 1996 to the Credit Agreement among Park-Ohio
Industries, Inc. and various financial institutions dated April 11, 1995 (filed as
Exhibit 4(F) of Form 10-K of Park-Ohio Industries, Inc., for the year ended
December 31, 1996, SEC File No. 000-03134 and incorporated by reference and made a
part hereof).
</TABLE>
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<PAGE> 128
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- ----------------------------------------------------------------------------------
<S> <C>
4.6 Fourth Amendment dated as of December 31, 1996 to the Credit Agreement among
Park-Ohio Industries, Inc. and various financial institutions dated April 11, 1995
(filed as Exhibit 4(G) of Form 10-K of Park-Ohio Industries, Inc. for the year
ended December 31, 1996, SEC File No. 000-03134 and incorporated by reference and
made a part hereof).
4.7 Fifth Amendment to the Credit Agreement, dated June 23, 1997, among Park-Ohio
Industries, Inc. and various financial institutions, dated April 11, 1995 (filed
as Exhibit 99.b(3) to the Schedule 14D-1 of Park-Ohio Industries, Inc., filed on
June 23, 1997 and incorporated by reference and made a part hereof).
4.8 Sixth Amendment to the Credit Agreement, dated November 18, 1997, among Park-Ohio
Industries, Inc. and various financial institutions.
4.9 Demand Promissory Note dated December 3, 1997 from the Company to KeyBank,
National Association.
4.10 Registration Rights Agreement, dated November 25, 1997 by and among the Company
and CIBC Oppenheimer Corp., Merrill Lynch & Co. and Value Investing Partners, Inc.
5.1 Opinion of Jones, Day, Reavis & Pogue as to the validity of the securities being
offered.
10.1 Form of Indemnification Agreement entered into between Park-Ohio Industries, Inc.
and each of its directors and certain officers (filed as Exhibit 10(A) to the Form
10-K of Park-Ohio Industries, Inc. for the year ended December 31, 1992, SEC File
No. 000-03134 and incorporated by reference and made a part hereof).
10.2 Park-Ohio Industries, Inc. Amended and Restated 1992 Stock Option Plan (filed as
Exhibit A to Schedule 14A of Park-Ohio Industries, Inc. filed on May 12, 1995, SEC
File No. 000-03134 and incorporated by reference and made a part hereof).
10.3 Escrow Agreement dated October 15, 1993 among Park-Ohio Industries, Inc., Edward
F. Crawford and The Huntington Trust Company, N.A. (filed as Exhibit 28.1 to the
Form 8-K of Park-Ohio Industries, Inc., filed on November 1, 1993, SEC File No.
000-03134 and incorporated by reference and made a part hereof).
10.4 Employment Agreement between Park-Ohio Industries, Inc. and John J. Murray dated
effective January 1, 1995 (filed as Exhibit 10(a) to the Form 10-Q of Park-Ohio
Industries, Inc., for the quarter ended June 30, 1995, SEC File No. 000-03134 and
incorporated by reference and made a part hereof).
10.5 Asset Purchase Agreement dated as of May 28, 1996 among North America Packaging
Corporation, as Buyer, Bennett Industries, Inc., as Seller, and Park-Ohio
Industries, Inc. (filed as Exhibit 2 to the Form 10-Q of Park-Ohio Industries,
Inc., for the quarter ended June 30, 1996, SEC File No. 000-03134 and incorporated
by reference and made a part hereof).
10.6 Non-Statutory Stock Option Agreement dated February 22, 1996 by and between
Park-Ohio Industries, Inc., and Edward F. Crawford (filed as Appendix A to the
Definitive Proxy Statement of Park-Ohio Industries, Inc., filed on April 16, 1996,
SEC File No. 000-03134 and incorporated by reference and made a part hereof).
10.7 1996 Non-employee Director Stock Option Plan (filed as Appendix B to the
Definitive Proxy Statement of Park-Ohio Industries, Inc., filed on April 16, 1996,
SEC File No. 000-03134 and incorporated by reference and made a part hereof).
10.8 Agreement and Plan of Merger dated June 16, 1997 among Park-Ohio Industries, Inc.,
PO Acquisition Corp. and Arden Industrial Products, Inc. (filed as Exhibit 2.1 to
the Schedule 14D-1 of Park-Ohio Industries, Inc., filed on June 23, 1997 and
incorporated by reference and made a part hereof).
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- ----------------------------------------------------------------------------------
<C> <S>
11.1 Computation of Net Income Per Common Share.
12.1 Computation of Ratios.
21.1 List of Subsidiaries of Park-Ohio Industries, Inc.
23.1 Consent of Ernst & Young, LLP.
23.2 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1).
24.1 Power of Attorney.
25.1 Statement of Eligibility of Trustee, Norwest Bank Minnesota, National Association,
on Form T-1.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
(b) Financial Statement Schedules
None.
All other financial statement schedules are omitted because they are either
not applicable or the required information is included in the financial
statements or notes thereto appearing elsewhere in this Registration Statement.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in said Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes:
II-6
<PAGE> 130
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of the prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(d) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(e) The undersigned Registrant hereby undertakes to supply by means of
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-7
<PAGE> 131
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on December 22, 1997.
PARK-OHIO INDUSTRIES, INC.
By: /s/ RONALD J. COZEAN
------------------------------------
Ronald J. Cozean
General Counsel and Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------- ----------------------------------------- ------------------
<S> <C> <C>
* Chairman, President, Chief Executive December 22 1997
- ------------------------------- Officer
Edward F. Crawford (Principal Executive Officer)
* Vice President and Chief Financial December 22, 1997
- ------------------------------- Officer
James S. Walker (Principal Financial and Accounting
Officer)
* Director December 22, 1997
- -------------------------------
Lewis E. Hatch, Jr.
* Director December 22, 1997
- -------------------------------
Thomas E. McGinty
* Director December 22, 1997
- -------------------------------
Lawrence O. Selhorst
* Director December 22, 1997
- -------------------------------
James W. Wert
* Director December 22, 1997
- -------------------------------
Matthew V. Crawford
</TABLE>
- ---------------
* The undersigned, pursuant to a Power of Attorney executed by each of the
Directors and officers identified above and filed with the Securities and
Exchange Commission, by signing his name hereto, does hereby sign and execute
this Registration Statement on behalf of each of the persons noted above, in
the capacities indicated.
By: /s/ RONALD J. COZEAN December 22, 1997
-------------------------------------------
Ronald J. Cozean, Attorney-in-Fact
II-8
<PAGE> 132
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -------------------------------------------------------------------------
<C> <S> <C>
3.1 Restated Articles of Incorporation of Park-Ohio Industries, Inc. (filed
as Exhibit 4(a) of the Company's Registration Statement on Form S-3,
filed on November 7, 1994, SEC File No. 33-86054 and incorporated by
reference and made a part hereof)........................................
3.2 Code of Regulations of Park-Ohio Industries, Inc. (filed as Exhibit 4(b)
of the Company's Registration Statement on Form S-3, filed on November 7,
1994, SEC File No. 33-86054 and incorporated by reference and made a part
hereof)..................................................................
4.1 Indenture, dated November 25, 1997 by and among Park-Ohio Industries,
Inc., and Norwest Bank Minnesota, N. A. as trustee.......................
4.2 Credit Agreement among Park-Ohio Industries, Inc., and various financial
institutions, dated April 11, 1995 (filed as Exhibit 4 of the Form 10-Q
of Park-Ohio Industries, Inc. for the period ended March 31, 1995, SEC
File No. 000-03134 and incorporated by reference and made a part
hereof)..................................................................
4.3 First Amendment dated as of June 19, 1995 to the Credit Agreement among
Park- Ohio Industries, Inc. and various financial institutions dated
April 11, 1995 (filed as Exhibit 4(D) of Form 10-K of Park-Ohio
Industries, Inc. for the year ended December 31, 1996, SEC File No.
000-03134 and incorporated by reference and made a part hereof)..........
4.4 Second Amendment dated as of December 5, 1995 to the Credit Agreement
among Park-Ohio Industries, Inc. and various financial institutions dated
April 11, 1995 (filed as Exhibit 4(E) of Form 10-K of Park-Ohio
Industries, Inc., for the year ended December 31, 1996, SEC File No.
000-03134 and incorporated by reference and made a part hereof)..........
4.5 Third Amendment dated as of April 11, 1996 to the Credit Agreement among
Park-Ohio Industries, Inc. and various financial institutions dated April
11, 1995 (filed as Exhibit 4(F) of Form 10-K of Park-Ohio Industries,
Inc., for the year ended December 31, 1996, SEC File No. 000-03134 and
incorporated by reference and made a part hereof)........................
4.6 Fourth Amendment dated as of December 31, 1996 to the Credit Agreement
among Park-Ohio Industries, Inc. and various financial institutions dated
April 11, 1995 (filed as Exhibit 4(G) of Form 10-K of Park-Ohio
Industries, Inc. for the year ended December 31, 1996, SEC File No.
000-03134 and incorporated by reference and made a part hereof)..........
4.7 Fifth Amendment to the Credit Agreement, dated June 23, 1997, among
Park-Ohio Industries, Inc. and various financial institutions, dated
April 11, 1995 (filed as Exhibit 99.b(3) to the Schedule 14D-1 of
Park-Ohio Industries, Inc., filed on June 23, 1997 and incorporated by
reference and made a part hereof)........................................
4.8 Sixth Amendment to the Credit Agreement, dated November 18, 1997, among
Park-Ohio Industries, Inc. and various financial institutions............
4.9 Demand Promissory Note dated December 3, 1997 from the Company to
KeyBank, National Association............................................
4.10 Registration Rights Agreement, dated November 25, 1997 by and among the
Company and CIBC Oppenheimer Corp., Merrill Lynch & Co. and Value
Investing Partners, Inc..................................................
5.1 Opinion of Jones, Day, Reavis & Pogue as to the validity of the
securities being offered.................................................
</TABLE>
<PAGE> 133
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -------------------------------------------------------------------------
<C> <S> <C>
10.1 Form of Indemnification Agreement entered into between Park-Ohio
Industries, Inc. and each of its directors and certain officers (filed as
Exhibit 10(A) to the Form 10-K of Park-Ohio Industries, Inc. for the year
ended December 31, 1992, SEC File No. 000-03134 and incorporated by
reference and made a part hereof)........................................
10.2 Park-Ohio Industries, Inc. Amended and Restated 1992 Stock Option Plan
(filed as Exhibit A to Schedule 14A of Park-Ohio Industries, Inc. filed
on May 12, 1995, SEC File No. 000-03134 and incorporated by reference and
made a part hereof)......................................................
10.3 Escrow Agreement dated October 15, 1993 among Park-Ohio Industries, Inc.,
Edward F. Crawford and The Huntington Trust Company, N.A. (filed as
Exhibit 28.1 to the Form 8-K of Park-Ohio Industries, Inc., filed on
November 1, 1993, SEC File No. 000-03134 and incorporated by reference
and made a part hereof)..................................................
10.4 Employment Agreement between Park-Ohio Industries, Inc. and John J.
Murray dated effective January 1, 1995 (filed as Exhibit 10(a) to the
Form 10-Q of Park-Ohio Industries, Inc., for the quarter ended June 30,
1995, SEC File No. 000-03134 and incorporated by reference and made a
part hereof).............................................................
10.5 Asset Purchase Agreement dated as of May 28, 1996 among North America
Packaging Corporation, as Buyer, Bennett Industries, Inc., as Seller, and
Park-Ohio Industries, Inc. (filed as Exhibit 2 to the Form 10-Q of
Park-Ohio Industries, Inc., for the quarter ended June 30, 1996, SEC File
No. 000-03134 and incorporated by reference and made a part hereof)......
10.6 Non-Statutory Stock Option Agreement dated February 22, 1996 by and
between Park-Ohio Industries, Inc., and Edward F. Crawford (filed as
Appendix A to the Definitive Proxy Statement of Park-Ohio Industries,
Inc., filed on April 16, 1996, SEC File No. 000-03134 and incorporated by
reference and made a part hereof)........................................
10.7 1996 Non-employee Director Stock Option Plan (filed as Appendix B to the
Definitive Proxy Statement of Park-Ohio Industries, Inc., filed on April
16, 1996, SEC File No. 000-03134 and incorporated by reference and made a
part hereof).............................................................
10.8 Agreement and Plan of Merger dated June 16, 1997 among Park-Ohio
Industries, Inc., PO Acquisition Corp. and Arden Industrial Products,
Inc. (filed as Exhibit 2.1 to the Schedule 14D-1 of Park-Ohio Industries,
Inc., filed on June 23, 1997 and incorporated by reference and made a
part hereof).............................................................
11.1 Computation of Net Income Per Common Share...............................
12.1 Computation of Ratios....................................................
21.1 List of Subsidiaries of Park-Ohio Industries, Inc........................
23.1 Consent of Ernst & Young, LLP............................................
23.2 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1)..........
24.1 Power of Attorney........................................................
25.1 Statement of Eligibility of Trustee, Norwest Bank Minnesota, National
Association, on Form T-1.................................................
99.1 Form of Letter of Transmittal............................................
99.2 Form of Notice of Guaranteed Delivery....................................
</TABLE>
II-2
<PAGE> 1
Exhibit 4.1
===============================================================================
PARK-OHIO INDUSTRIES, INC., as Issuer,
and
NORWEST BANK MINNESOTA, National Association, as Trustee
--------------------
INDENTURE
Dated as of November 25, 1997
--------------------
$150,000,000
9 1/4% Senior Subordinated Notes due 2007
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- -------
<S> <C> <C>
310(a)(1)..................................................................7.10
(a)(2)...............................................................7.10
(a)(3)...............................................................N.A.
(a)(4)...............................................................N.A.
(b)..................................................................7.08; 7.10; 11.02
(b)(1)...............................................................7.10
(b)(9)...............................................................7.10
(c)..................................................................N.A.
311(a).....................................................................7.11
(b)..................................................................7.11
(c)..................................................................N.A.
312(a).....................................................................2.05
(b)..................................................................11.03
(c)..................................................................11.03
313(a).....................................................................7.06
(b)(1)...............................................................7.06
(b)(2)...............................................................7.06
(c)..................................................................11.02; 7.06
(d)..................................................................7.06
314(a).....................................................................4.02; 4.04; 11.02
(b)..................................................................N.A.
(c)(1)...............................................................11.04; 11.05
(c)(2)...............................................................11.04; 11.05
(c)(3)...............................................................N.A.
(d)..................................................................N.A.
(e)..................................................................11.05
(f)..................................................................N.A.
315(a).....................................................................7.01; 7.02
(b)..................................................................7.05; 11.02
(c)..................................................................7.01
(d)..................................................................6.05; 7.01;7.02
(e)..................................................................6.11
316(a) (last sentence).....................................................11.06
(a)(1)(A)............................................................6.05
(a)(1)(B)............................................................6.04
(a)(2)...............................................................8.02
(b)..................................................................6.07
(c)..................................................................8.04
317(a)(1)..................................................................6.08
(a)(2)...............................................................6.09
(b)..................................................................7.12
318(a).....................................................................11.01
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Indenture
<PAGE> 3
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
<TABLE>
<S> <C> <C>
Section 1.01. Definitions.........................................................................1
Section 1.02. Other Definitions..................................................................23
Section 1.03. Incorporation by Reference of Trust Indenture Act..................................24
Section 1.04. Rules of Construction..............................................................24
ARTICLE 2 THE NOTES
Section 2.01. Dating; Incorporation of Form in Indenture.........................................25
Section 2.02. Execution and Authentication.......................................................25
Section 2.03. Registrar and Paying Agent.........................................................26
Section 2.04. Paying Agent to Hold Money in Trust................................................27
Section 2.05. Noteholder Lists...................................................................27
Section 2.06. Transfer and Exchange..............................................................28
Section 2.07. Replacement Notes..................................................................28
Section 2.08. Outstanding Notes..................................................................29
Section 2.09. Temporary Notes................................................................... 29
Section 2.10. Cancellation...................................................................... 29
Section 2.11. Defaulted Interest.................................................................30
Section 2.12. Deposit of Moneys..................................................................30
Section 2.13. CUSIP Number...................................................................... 31
Section 2.14. Book-Entry Provisions for Global Notes.............................................31
Section 2.15. Special Transfer Provisions........................................................33
ARTICLE 3 REDEMPTION
Section 3.01. Notices to Trustee.................................................................36
Section 3.02. Selection by Trustee of Notes to Be Redeemed.......................................36
Section 3.03. Notice of Redemption...............................................................37
Section 3.04. Effect of Notice of Redemption.....................................................37
Section 3.05. Deposit of Redemption Price........................................................38
Section 3.06. Notes Redeemed in Part.............................................................38
Section 3.07. Optional Redemption................................................................38
ARTICLE 4 COVENANTS
Section 4.01. Payment of Notes...................................................................39
Section 4.02. SEC Reports........................................................................40
Section 4.03. Waiver of Stay, Extension or Usury Laws............................................40
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Indenture
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 4.04. Compliance Certificate.............................................................41
Section 4.05. Taxes..............................................................................42
Section 4.06. Limitation on Additional Indebtedness..............................................42
Section 4.07. Limitation on Preferred Stock of Subsidiaries......................................43
Section 4.08. Limitation on Capital Stock of Subsidiaries........................................43
Section 4.09. Limitation on Restricted Payments..................................................43
Section 4.10. Limitation on Certain Asset Sales..................................................45
Section 4.11. Limitation on Transactions with Affiliates.........................................47
Section 4.12. Limitations on Liens...............................................................48
Section 4.13. Limitation on Other Senior Subordinated Debt.......................................48
Section 4.14. Limitation on Sale and Lease-Back Transactions.....................................48
Section 4.15. Payments for Consent...............................................................49
Section 4.16. Corporate Existence................................................................49
Section 4.17. Change of Control..................................................................49
Section 4.18. Maintenance of Office or Agency....................................................52
Section 4.19. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries.......53
ARTICLE 5 SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and Sale of Assets.............................54
Section 5.02. Successor Person Substituted.......................................................55
ARTICLE 6 DEFAULTS AND REMEDIES
Section 6.01. Events of Default..................................................................55
Section 6.02. Acceleration.......................................................................58
Section 6.03. Other Remedies.....................................................................59
Section 6.04. Waiver of Past Defaults and Events of Default......................................59
Section 6.05. Control by Majority................................................................59
Section 6.06. Limitation on Suits................................................................60
Section 6.07. Rights of Holders to Receive Payment...............................................60
Section 6.08. Collection Suit by Trustee.........................................................61
Section 6.09. Trustee May File Proofs of Claim...................................................61
Section 6.10. Priorities.........................................................................62
Section 6.11. Undertaking for Costs..............................................................62
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Indenture
<PAGE> 5
<TABLE>
ARTICLE 7 TRUSTEE
<S> <C> <C>
Section 7.01. Duties of Trustee..................................................................62
Section 7.02. Rights of Trustee..................................................................64
Section 7.03. Individual Rights of Trustee.......................................................64
Section 7.04. Trustee's Disclaimer...............................................................65
Section 7.05. Notice of Defaults.................................................................65
Section 7.06. Reports by Trustee to Holders......................................................65
Section 7.07. Compensation and Indemnity.........................................................66
Section 7.08. Replacement of Trustee.............................................................67
Section 7.09. Successor Trustee by Consolidation, Merger or Conversion...........................68
Section 7.10. Eligibility; Disqualification......................................................68
Section 7.11. Preferential Collection of Claims Against Company..................................68
Section 7.12. Paying Agents......................................................................68
ARTICLE 8 AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.........................................................69
Section 8.02. With Consent of Holders............................................................70
Section 8.03. Compliance with Trust Indenture Act................................................71
Section 8.04. Revocation and Effect of Consents..................................................71
Section 8.05. Notation on or Exchange of Notes...................................................72
Section 8.06. Trustee to Sign Amendments, etc....................................................72
ARTICLE 9 DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.............................................................73
Section 9.02. Legal Defeasance...................................................................73
Section 9.03. Covenant Defeasance................................................................74
Section 9.04. Conditions to Legal Defeasance or Covenant Defeasance..............................74
Section 9.05. Deposited Money and U.S. Government Obligations to Be Held in Trust;
Other Miscellaneous Provisions....................................77
Section 9.06. Reinstatement......................................................................77
Section 9.07. Moneys Held by Paying Agent........................................................78
Section 9.08. Moneys Held by Trustee.............................................................78
ARTICLE 10 SUBORDINATION OF NOTES
Section 10.01. Notes Subordinate to Senior Indebtedness..........................................79
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Indenture
<PAGE> 6
<TABLE>
<S> <C> <C>
Section 10.02. Payment Over of Proceeds upon Dissolution, etc....................................79
Section 10.03. Suspension of Payment When Senior Indebtedness in Default.........................81
Section 10.04. Trustee's Relation to Senior Indebtedness.........................................83
Section 10.05. Subrogation to Rights of Holders of Senior Indebtedness...........................83
Section 10.06. Provisions Solely to Define Relative Rights.......................................84
Section 10.07. Trustee to Effectuate Subordination...............................................84
Section 10.08. No Waiver of Subordination Provisions.............................................85
Section 10.09. Notice to Trustee.................................................................86
Section 10.10. Reliance on Judicial Order or Certificate of Liquidating Agent....................87
Section 10.11. Rights of Trustee as a Holder of Senior Indebtedness; Preservation of
Trustee's Rights..................................................87
Section 10.12. Article Applicable to Paying Agents...............................................87
Section 10.13. No Suspension of Remedies.........................................................88
ARTICLE 11 MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls......................................................88
Section 11.02. Notices...........................................................................88
Section 11.03. Communications by Holders with Other holders......................................89
Section 11.04. Certificate and Opinion as to Conditions Precedent................................90
Section 11.05. Statements Required in Certificate and Opinion....................................90
Section 11.06. When Treasury Notes Disregarded...................................................91
Section 11.07. Rules by Trustee and Agents.......................................................91
Section 11.08. Business Days; Legal Holidays.....................................................91
Section 11.09. Governing Law.....................................................................91
Section 11.10. No Adverse Interpretation of Other Agreements.....................................92
Section 11.11. No Recourse Against Others........................................................92
Section 11.12. Successors........................................................................92
Section 11.13. Multiple Counterparts.............................................................92
Section 11.14. Table of Contents, Headings, etc..................................................92
Section 11.15. Separability......................................................................92
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Indenture
<PAGE> 7
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C> <C>
Exhibit A. Form of Note.................................................................... A-1
Exhibit B. Form of Legend for Global Notes................................................. B-1
Exhibit C Form of Assignment.............................................................. C-1
Exhibit D. Form of Certificate to Be Delivered in Connection with Transfers to
Non-QIB Accredited Investors................................................. D-1
Exhibit E. Form of Certificate to Be Delivered in Connection with Transfers
Pursuant to Regulation S..................................................... E-1
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be a
part of the Indenture
<PAGE> 8
INDENTURE, dated as of November 25, 1997, between PARK-OHIO
INDUSTRIES, INC., an Ohio corporation, as Issuer (the "Company"), and NORWEST
BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking association, as Trustee
(the "Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the holders of the Company's
9-1/4% Senior Subordinated Notes due 2007 (the "Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
------------
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a Subsidiary or is merged into or
consolidated with any other Person or which is assumed in connection with the
acquisition of assets from such Person and, in each case, not incurred by such
Person in connection with, or in anticipation or contemplation of, such Person
becoming a Subsidiary or such merger, consolidation or acquisition.
"Additional Interest" means additional interest on the Notes
which the Company agrees to pay to the holders pursuant to Section 4 of the
Registration Rights Agreement.
"Affiliate" means, with respect to any specific Person, any
other Person that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling," "controlled by," and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise.
"Agent" means any Registrar, Paying Agent, co-registrar or
agent for service of notices and demands.
"Asset Acquisition" means (a) an Investment by the Company or
any Subsidiary of the Company in any other Person
<PAGE> 9
-2-
pursuant to which such Person shall become a Subsidiary of the Company or any
Subsidiary of the Company, or shall be merged with or into the Company or any
Subsidiary of the Company or (b) the acquisition by the Company or any
Subsidiary of the Company of the assets of any Person (other than a Subsidiary
of the Company) which constitute all or substantially all of the assets of such
Person or comprise any division or line of business of such Person or any other
properties or assets of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance, assignment, transfer, lease or other disposition (including any Sale
and Lease-Back Transaction), other than to the Company or any of its Wholly
Owned Subsidiaries, in any single transaction or series of related transactions
of (a) any Capital Stock of or other equity interest in any Subsidiary of the
Company or (b) any other property or assets of the Company or of any Subsidiary
thereof; provided that Asset Sales shall not include (i) a transaction or series
of related transactions for which the Company or its Subsidiaries receive
aggregate consideration of less than $2 million; (ii) the sale, lease,
conveyance, disposition or other transfer of all or substantially all of the
assets of the Company as permitted under Section 5.01; (iii) a disposition of
inventory in the ordinary course of business; or (iv) an exchange of property
for other similar property structured on a tax-free, like-kind basis; or (v) the
issuance of shares of a wholly owned Subsidiary of the Company solely to the
shareholders of the Company in a transaction pursuant to which the Company
becomes a wholly owned direct or indirect subsidiary of such Subsidiary.
"Asset Sale Proceeds" means, with respect to any Asset Sale:
(i) cash received by the Company or any Subsidiary of the Company from such
Asset Sale (including cash received as consideration for the assumption of
liabilities incurred in connection with or in anticipation of such Asset Sale),
after (a) provision for all income or other taxes measured by or resulting from
such Asset Sale; (b) payment of all brokerage commissions, underwriting and
other fees and expenses related to such Asset Sale; (c) provision for minority
interest holders in any Subsidiary as a result of such Asset Sale; (d) repayment
of Indebtedness that is required to be repaid in connection with such Asset
Sale; and (e) deduction of appropriate amounts to be provided by the Company or
a Subsidiary of the Company as a reserve, in accordance with GAAP, against any
liabilities associated with the assets sold or disposed of in such Asset Sale
and retained by the Company or a Subsidiary after such Asset Sale,
<PAGE> 10
-3-
including, without limitation, pension and other postemployment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with the assets sold or disposed of in
such Asset Sale; and (ii) promissory notes and other noncash consideration
received by the Company or any Subsidiary of the Company from such Asset Sale or
other disposition upon the liquidation or conversion of such notes or noncash
consideration into cash.
"Attributable Indebtedness" in respect of a Sale and
Lease-Back Transaction means, as at the time of determination, the greater of
(i) the fair value of the Property subject to such arrangement; and (ii) the
present value (discounted at the rate of 10%, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Lease-Back Transaction (including any period for
which such lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any
Asset Sale, the aggregate Asset Sale Proceeds from such Asset Sale that have not
been applied in accordance with clause (iii)(a) or (iii)(b) of Section 4.10(a)
and which have not yet been the basis for an Excess Proceeds Offer in accordance
with clause (iii)(c) of such Section 4.10(a).
"Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors.
"Board of Directors" means the board of directors of the
Company or any committee authorized to act therefor.
"Board Resolution" means a copy of a resolution certified
pursuant to an Officers' Certificate to have been duly adopted by the Board of
Directors of the Company and to be in full force and effect, and delivered to
the Trustee.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated and
whether or not voting) of corporate stock, partnership interests or any other
participation, right or other interest in the nature of an equity interest in
such Person including, without limitation, Common Stock and Preferred Stock of
such Person, or any option, warrant or other security convertible into any of
the foregoing.
"Capitalized Lease Obligations" means with respect to any
Person, Indebtedness represented by obligations under a lease that is required
to be capitalized for financial report-
<PAGE> 11
-4-
ing purposes in accordance with GAAP, and the amount of such Indebtedness shall
be the capitalized amount of such obligations determined in accordance with
GAAP.
"Cash Equivalents" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation ("S&P") or
Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no
more than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $250,000,000; and (v)
shares of any mutual funds or other pooled investment vehicles, in each case
having assets of $500,000,000, investing solely in investments of the types
described in (i) through (iv) above.
"Change of Control" of the Company will be deemed to have
occurred at such time as (i) any Person (including a Person's Affiliates and
associates), other than a Permitted Holder, becomes the beneficial owner (as
defined under Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) of 50% or more of the total voting or economic power of the
Company's Common Stock; (ii) any Person (including a Person's Affiliates and
associates), other than a Permitted Holder, becomes the beneficial owner of more
than 33 1/3% of the total voting power of the Company's Common Stock, and the
Permitted Holders beneficially own, in the aggregate, a lesser percentage of the
total voting power of the Common Stock of the Company than such other Person and
do not have the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the Board of Directors of the Company;
(iii) there shall be consummated any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which the Common
<PAGE> 12
-5-
Stock of the Company would be converted into cash, securities
or other property, other than (x) a merger or consolidation of the Company in
which the holders of the Common Stock of the Company outstanding immediately
prior to the consolidation or merger hold, directly or indirectly, at least a
majority of the Common Stock of the surviving corporation immediately after such
consolidation or merger or (y) a merger of the Company with an Affiliate of the
Company (or a shell corporation with no shareholders formed solely for the
purpose of creating a holding company) for the sole purpose of creating a
holding company whose sole asset, directly or indirectly, will be all of the
outstanding capital stock of the Company; or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Company has been approved by 66 2/3% of the directors then
still in office who either were directors at the beginning of such period or
whose election or recommendation for election was previously so approved) cease
to constitute a majority of the Board of Directors of the Company.
"Common Stock" of any Person means all Capital Stock of such
Person that is generally entitled to (i) vote in the election of directors of
such Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"Company" means the party named as such in the first paragraph
of this Indenture until a successor replaces such party pursuant to Article 5 of
this Indenture and thereafter means the successor and any other obligor on the
Notes.
"Consolidated Fixed Charge Coverage Ratio" means, with respect
to any Person, the ratio of EBITDA of such Person during the four full fiscal
quarters (the "Four Quarter Period") ending on or prior to the date of the
transaction giving rise to the need to calculate the Consolidated Fixed Charge
Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of such
Person for the Four Quarter Period. In addition to and without limitation of the
foregoing, for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving effect on a pro
forma basis for the period of such calculation to (i) the incurrence (and the
application of the proceeds thereof) or repayment of any Indebtedness of such
Person or any of its Subsidiaries giving rise to the need to make such
calculation and any incurrence (and the application of the proceeds thereof) or
repayment of other Indebtedness, other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital purposes
pursuant to working capital facilities, occurring during the Four Quarter Period
or at any time subsequent to the last day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence (and the
<PAGE> 13
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application of the proceeds thereof) or repayment, as the case may be, occurred
on the first day of the Four Quarter Period; and (ii) any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of such Person or one of its
Subsidiaries (including any Person who becomes a Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any EBITDA (provided that such EBITDA shall be
included only to the extent includable pursuant to the definition of
"Consolidated Net Income") attributable to the assets which are the subject of
the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such Asset
Sale or Asset Acquisition (including the incurrence, assumption or liability for
any such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If such Person or any of its Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any Subsidiary of such Person had directly incurred or otherwise assumed such
guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate, a
eurocurrency interbank offered rate, or other rates, then the interest rate in
effect on the Transaction Date will be deemed to have been in effect during the
Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by one or more Interest Rate Agreements, shall be deemed to accrue at
the rate per annum resulting after giving effect to the operation of such
agreements.
<PAGE> 14
-7-
"Consolidated Fixed Charges" means, with respect to any
Person, for any period, the sum, without duplication, of (i) Consolidated
Interest Expense, plus (ii) the product of (x) the amount of all dividend
payments on any series of Preferred Stock of such Person (other than dividends
paid in Capital Stock (other the Disqualified Capital Stock)) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated federal, state and local tax rate of such Person,
expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any
Person, for any period, the aggregate amount of interest which, in conformity
with GAAP, would be set forth opposite the caption "interest expense" or any
like caption on an income statement for such Person and its Subsidiaries on a
consolidated basis (including, but not limited to (i) Redeemable Dividends,
whether paid or accrued; (ii) imputed interest included in Capitalized Lease
Obligations; (iii) all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing; (iv) the
net costs associated with Interest Rate Agreements and other hedging
obligations; (v) the interest portion of any deferred payment obligation; (vi)
amortization of discount or premium, if any; and (vii) all other non-cash
interest expense (other than interest amortized to cost of sales)) plus, without
duplication, all net capitalized interest for such period and all interest
incurred or paid under any guarantee of Indebtedness (including a guarantee of
principal, interest or any combination thereof) of any Person, plus the amount
of all dividends or distributions paid on Disqualified Capital Stock (other than
dividends paid or payable in shares of Capital Stock of the Company) minus
amortization of deferred financing costs and expenses.
"Consolidated Net Income" means, with respect to any Person,
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (a) the Net Income of any Person (the "other
Person") in which the Person in question or any of its Subsidiaries has less
than a 100% interest (which interest does not cause the net income of such other
Person to be consolidated into the Net Income of the Person in question in
accordance with GAAP) shall be included only to the extent of the amount of
dividends or distributions paid to the Person in question or the Subsidiary; (b)
the Net Income of any Subsidiary of the Person in question that is subject to
any restriction or limitation on the payment of dividends or the making of other
distributions shall be ex-
<PAGE> 15
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cluded to the extent of such restriction or limitation; (c)(i) the Net Income of
any Person acquired in a pooling of interests transaction for any period prior
to the date of such acquisition; and (ii) any net gain (but not loss) resulting
from an Asset Sale by the Person in question or any of its Subsidiaries other
than in the ordinary course of business shall be excluded; (d) extraordinary,
unusual and non-recurring gains and losses shall be excluded; (e) income or loss
attributable to discontinued operations (including, without limitation,
operations disposed of during such period whether or not such operations were
classified as discontinued) shall be excluded; and (f) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings of the successor corporation prior
to such consolidation, merger or transfer of assets shall be excluded.
"Convertible Senior Subordinated Debentures" means the
Company's 7 1/4% convertible senior subordinated notes due June 15, 2004.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0069.
"Default" means any event that is, or with the passing of time
or giving of notice or both would be, an Event of Default.
"Depository" means, with respect to the Notes issued in the
form of one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Company, which Person must be a clearing agency
registered under the Exchange Act.
"Designated Senior Indebtedness" means (a) any Senior
Indebtedness under the New Credit Facility and (b) any other Senior Indebtedness
which at the time of determination exceeds $25 million in aggregate principal
amount (or accreted value in the case of Indebtedness issued at a discount)
outstanding or available under a committed facility, which is specifically
designated in the instrument evidencing such Senior Indebtedness as "Designated
Senior Indebtedness" by such Person and as to which the Trustee has been given
written notice of such designation.
<PAGE> 16
-9-
"Disqualified Capital Stock" means any Capital Stock of a
Person or a Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include any Preferred Stock of a Person or Subsidiary of such
Person, with respect to either of which, under the terms of such Preferred
Stock, by agreement or otherwise, such Person or Subsidiary is obligated to pay
current dividends or distributions in cash during the period prior to the
maturity date of the Notes; provided, however, that Preferred Stock of a Person
or any Subsidiary thereof that is issued with the benefit of provisions
requiring a change of control offer to be made for such Preferred Stock in the
event of a change of control of such Person or Subsidiary, which provisions have
substantially the same effect as the provisions described in Section 4.16, shall
not be deemed to be Disqualified Capital Stock solely by virtue of such
provisions.
"EBITDA" means, with respect to any Person and its
Subsidiaries, for any period, an amount equal to (a) the sum of (i) Consolidated
Net Income for such period, plus (ii) the provision for taxes for such period
based on income or profits to the extent such income or profits were included in
computing Consolidated Net Income and any provision for taxes utilized in
computing net loss under clause (i) hereof, plus (iii) Consolidated Interest
Expense for such period (but only including Redeemable Dividends in the
calculation of such Consolidated Interest Expense to the extent that such
Redeemable Dividends have not been excluded in the calculation of Consolidated
Net Income), plus (iv) depreciation for such period on a consolidated basis,
plus (v) amortization of intangibles for such period on a consolidated basis,
plus (vi) any other non-cash items reducing Consolidated Net Income for such
period, minus (b) all non-cash items increasing Consolidated Net Income for such
period, all for such Person and its Subsidiaries determined on a consolidated
basis in accordance with GAAP; and provided, however, that, for purposes of
calculating EBITDA during any fiscal quarter, cash income from a particular
Investment of such Person shall be included only (x) if cash income has been
received by such Person with respect to such Investment during each of the
previous four fiscal quarters, or
<PAGE> 17
-10-
(y) if the cash income derived from such Investment is attributable to Cash
Equivalents.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"fair market value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Fair market value shall be determined by the Board of Directors of
the Company acting reasonably and in good faith and shall be evidenced by a
resolution of the Board of Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles
consistently applied as in effect in the United States from time to time, except
that with respect to changes in generally accepted accounting principles that
become effective following the Issue Date with respect to non-cash items, such
changes shall not be given effect if the Company and its lenders under the New
Credit Facility agree not to give effect to such changes for the purpose of
evaluating the Company and its Subsidiaries' financial condition or performance
under the New Credit Facility.
"holder" or "Noteholder" means the Person in whose name a Note
is registered on the Registrar's books.
"incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred," "incurrable," and "incurring"
shall have meanings correlative to the foregoing); provided that a change in
GAAP that results in an obligation of such Person that exists at such time
becoming Indebtedness shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to
any Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to
<PAGE> 18
-11-
the whole of the assets of such Person or only to a portion thereof), or
evidenced by bonds, notes, debentures or similar instruments or representing the
balance deferred and unpaid of the purchase price of any property (excluding,
without limitation, any balances that constitute accounts payable or trade
payables, and other accrued liabilities arising in the ordinary course of
business) if and to the extent any of the foregoing indebtedness would appear as
a liability upon a balance sheet of such Person prepared in accordance with
GAAP, and shall also include, to the extent not otherwise included (i) any
Capitalized Lease Obligations of such Person; (ii) obligations secured by a Lien
to which the Property or assets owned or held by such Person is subject, whether
or not the obligation or obligations secured thereby shall have been assumed;
(iii) guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor); (iv) all obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction; (v) Disqualified Capital Stock of such Person or any Subsidiary
thereof; and (vi) obligations of any such Person under any currency agreement or
any Interest Rate Agreement applicable to any of the foregoing (if and to the
extent such currency agreement or Interest Rate Agreement obligations would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP). The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation; provided (i)
that the amount outstanding at any time of any Indebtedness issued with original
issue discount is the principal amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP; and (ii) Indebtedness shall not
include any liability for Federal, state, local or other taxes and (iii)
Indebtedness shall not include interest on, and any and all other fees, expense
reimbursement obligations and other amounts due pursuant to any Indebtedness.
"Indenture" means this Indenture as amended, restated or
supplemented from time to time.
"Independent Financial Advisor" means an investment banking
firm of national reputation in the United States (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial in-
<PAGE> 19
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terest in the Company; and (ii) which, in the judgment of the Board of Directors
of the Company, is otherwise independent and qualified to perform the task for
which it is to be engaged.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1); (2); (3)
or (7) promulgated under the Securities Act.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Notes.
"Interest Rate Agreement" means, with respect to any Person,
any interest rate swap agreement, interest rate cap agreement, interest rate
collar agreement or other similar agreement designed to protect the party
indicated therein against fluctuations in interest rates.
"Investments" means, with respect of any Person, directly or
indirectly, any advance, account receivable (other than an account receivable
arising in the ordinary course of business of such Person), loan or capital
contribution to (by means of transfers of Property to others, payments for
Property or services for the account or use of others or otherwise), the
purchase of any Capital Stock, bonds, notes, debentures, partnership or joint
venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude (i) extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices of such Person; and (ii) the repurchase of securities of any Person by
such Person. For the purposes of the "Limitation on Restricted Payments"
covenant, the amount of any Investment shall be the original cost of such
Investment plus the cost of all additional Investments by the Company or any of
its Subsidiaries, without any adjustments for increases or decreases in value,
or write-ups, write-downs or write-offs with respect to such Investment, reduced
by the payment of dividends or distributions in connection with such Investment
or any other amounts received in respect of such Investment; provided that no
such payment of dividends or distributions or receipt of any such other amounts
shall reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Common Stock of any direct or indirect Subsidiary of the Company
such that, af-
<PAGE> 20
-13-
ter giving effect to any such sale or disposition, the Company no longer owns,
directly or indirectly, greater than 50% of the outstanding Common Stock of such
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Common
Stock of such Subsidiary, not sold or disposed of.
"Issue Date" means the date the Notes are first issued by the
Company and authenticated by the Trustee under this Indenture.
"Lien" means, with respect to any Property or assets of any
Person, any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or assets
(including, without limitation, any Capitalized Lease Obligation, conditional
sales, or other title retention agreement having substantially the same economic
effect as any of the foregoing).
"Maturity Date" means December 1, 2007.
"Moody's" means Moody's Investors Service and its successors.
"Net Income" means, with respect to any Person for any period,
the net income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means in the case of any sale of Capital Stock
by or equity contribution to any Person, the aggregate net cash proceeds
received by such Person, after payment of expenses, commissions and the like
incurred in connection therewith.
"New Credit Facility" means the Credit Agreement dated as of
April 11, 1995, between the Company, the lenders party thereto in their
capacities as lenders thereunder and Key Bank, National Association, as agent,
together with the related documents thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be or have been amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise restructuring
(including increasing the amount of available borrowings thereunder (provided
<PAGE> 21
-14-
that such increase in borrowings is permitted by the "Limitation on Additional
Indebtedness" covenant) or adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
"Non-Payment Event of Default" means any event (other than a
Payment Default) the occurrence of which entitles one or more Persons to
accelerate the maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Notes" means the securities that are issued under this
Indenture, as amended or supplemented from time to time pursuant to this
Indenture.
"Obligations" means, with respect to any Indebtedness, any
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
damages and other expenses payable under the documentation governing such
Indebtedness.
"Offering" means the offering of the Notes as described in the
Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum dated
November 19, 1997 pursuant to which the Notes were offered.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, Controller, Secretary or any
Vice-President of the Company or any Subsidiary, as the case may be.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or any Vice
President and the Chief Financial Officer, Treasurer or any Corporate Controller
of such Person that shall comply with applicable provisions of the Indenture.
"Opinion of Counsel" means a written opinion from legal
counsel which counsel is reasonably acceptable to the Trustee.
<PAGE> 22
-15-
"Payment Default" means any default, whether or not any
requirement for the giving of notice, the lapse of time or both, or any other
condition to such default becoming an Event of Default has occurred, in the
payment of principal of or premium, if any, or interest on or any other amount
payable in connection with Designated Senior Indebtedness.
"Permitted Holders" means (i) a holding company formed for the
sole purpose of owning, directly or indirectly all of the outstanding capital
stock of the Company; (ii) Edward F. Crawford, his children or other lineal
descendants, probate estate of any such individual, and any trust, so long as
one or more of the foregoing individuals is the beneficiary thereunder, and any
other corporation, partnership or other entity all of the shareholders,
partners, members or owners of which are any of the foregoing; or (iii) any
employee stock ownership plan, or any "group" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act) in which employees of the Company or its
subsidiaries beneficially own at least 33 1/3% of the Common Stock of the
Company or of a holding company that directly or indirectly owns all of the
outstanding Capital Stock of the Company.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Subsidiary solely for working
capital purposes and not for acquisitions arising under or in connection
with the New Credit Facility in an aggregate principal amount not to
exceed the greater of (x) $50 million or (y) the sum of (A) 45% of the
book value of the accounts receivable of the Company and its
Subsidiaries on a consolidated basis; and (B) 25% of the book value of
the inventory of the Company and its Subsidiaries on a consolidated
basis outstanding at any time, less any mandatory prepayment actually
made thereunder (to the extent, in the case of payments of revolving
credit borrowings, that the corresponding commitments have been
permanently reduced below $50 million) or scheduled payments actually
made thereunder;
(ii) Indebtedness under the Notes;
(iii) Indebtedness not covered by any other clause of this
definition which is outstanding on the Issue Date;
(iv) Indebtedness of the Company to any Wholly Owned Subsidiary and
Indebtedness of any Wholly Owned Subsidiary to the Company or another
Wholly Owned Subsidiary;
<PAGE> 23
-16-
(v) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Purchase Money Indebtedness and Capitalized Lease Obligations do not in
the aggregate exceed 5% of the Company's tangible consolidated total
assets;
(vi) Interest Rate Agreements;
(vii) Refinancing Indebtedness; and
(viii) additional Indebtedness of the Company and its Subsidiaries
not to exceed $10 million in aggregate principal amount at any one time
outstanding at any time.
"Permitted Investments" means Investments made on or after
the Issue Date consisting of:
(i) Investments by the Company, or by a Subsidiary thereof, in the
Company or a Wholly Owned Subsidiary;
(ii) Investments by the Company, or by a Subsidiary thereof, in a
Person, if as a result of such Investment (a) such Person becomes a
Wholly Owned Subsidiary of the Company or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company
or a Wholly Owned Subsidiary thereof;
(iii) Investments in cash and Cash Equivalents;
(iv) reasonable and customary loans made to employees in connection
with their relocation not to exceed $1 million in the aggregate at any
one time outstanding;
(v) an Investment that is made by the Company or a Subsidiary
thereof in the form of any Capital Stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are
issued by a third party to the Company or such Subsidiary solely as
partial consideration for the consummation of an Asset Sale that is
otherwise permitted by Section 4.09;
(vi) Interest Rate Agreement entered into in the ordinary course of
the Company's or its Subsidiaries business; and
<PAGE> 24
-17-
(vii) additional Investments not to exceed $10 million in the
aggregate at any one time outstanding.
"Permitted Liens" means (i) Liens on property or assets of, or
any shares of Capital Stock of or secured indebtedness of, any corporation
existing at the time such corporation becomes a Subsidiary of the Company or at
the time such corporation is merged into the Company or any of its Subsidiaries;
provided that such Liens are not incurred in connection with, or in
contemplation of, such corporation becoming a Subsidiary of the Company or
merging into the Company or any of its Subsidiaries; (ii) Liens securing
Refinancing Indebtedness; provided that any such Lien does not extend to or
cover any Property, Capital Stock or Indebtedness other than the Property,
shares or debt securing the Indebtedness so refunded, refinanced or extended;
(iii) Liens in favor of the Company or any of its Subsidiaries; (iv) Liens
securing industrial revenue bonds; (v) Liens to secure Purchase Money
Indebtedness that is otherwise permitted under the Indenture; provided that (a)
any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
sales and excise taxes, installation and delivery charges and other direct costs
of, and other direct expenses paid or charged in connection with, such purchase
or construction) of such Property, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs, and (c) such Lien does
not extend to or cover any Property other than such item of Property and any
improvements on such item; (vi) statutory liens or landlords', carriers',
warehouseman's, mechanics', suppliers', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business which do not secure any
Indebtedness and with respect to amounts not yet delinquent or being contested
in good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor; (vii) other Liens securing obligations incurred in the ordinary
course of business which obligations do not exceed $3 million in the aggregate
at any one time outstanding; (viii) Liens for taxes, assessments or governmental
charges that are being contested in good faith by appropriate proceedings; (ix)
Liens securing Capitalized Lease Obligations permitted to be incurred under
clause (v) of the definition of "Permitted Indebtedness"; provided that such
Lien does not extend to any property other than that subject to the underlying
lease; (x) Liens to secure the New Credit Facility; (xi) Liens securing Interest
Rate Agreements; (xii) easements or other minor defect or irregularities in
title and other charges and encumbrances on property not interfering in any
ma-
<PAGE> 25
-18-
terial respect with the use of such property in the business of the Company or
the applicable Subsidiary; and (xiii) any extensions, substitutions,
replacements or renewals of the foregoing.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Private Placement Legend" means the legend initially set
forth on the Notes in the form set forth on Exhibit A.
"Property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
Subsidiaries under GAAP.
"Public Equity Offering" means a public offering by the
Company or by a holding company which owns, directly or indirectly, all of the
outstanding capital stock of the Company of shares of its Common Stock (however
designated and whether voting or non-voting) and any and all rights, warrants or
options to acquire such Common Stock.
"Purchase Money Indebtedness" means any Indebtedness incurred
in the ordinary course of business by a Person to finance the cost (including
the cost of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost; and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified in Rule 144A promulgated under the Securities Act.
"Redeemable Dividend" means, for any dividend or distribution
with regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum statutory
federal income tax rate
<PAGE> 26
-19-
(expressed as a decimal number between 1 and 0) then applicable to the issuer of
such Disqualified Capital Stock.
"Redemption Date" when used with respect to any Note to be
redeemed means the date fixed for such redemption pursuant to this Indenture.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances or extends any Indebtedness of the Company outstanding on the Issue
Date or other Indebtedness permitted to be incurred by the Company or its
Subsidiaries pursuant to the terms of this Indenture, but only to the extent
that (i) the Refinancing Indebtedness is subordinated to the Notes to at least
the same extent as the Indebtedness being refunded, refinanced or extended, if
at all; (ii) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or extended, or (b)
after the maturity date of the Notes; (iii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the maturity
date of the Notes has a weighted average life to maturity at the time such
Refinancing Indebtedness is incurred that is equal to or greater than the
weighted average life to maturity of the portion of the Indebtedness being
refunded, refinanced or extended that is scheduled to mature on or prior to the
maturity date of the Notes; (iv) such Refinancing Indebtedness is in an
aggregate principal amount that is equal to or less than the sum of (a) the
aggregate principal amount then outstanding under the Indebtedness being
refunded, refinanced or extended, (b) the amount of accrued and unpaid interest,
if any, and premiums owed, if any, not in excess of preexisting prepayment
provisions on such Indebtedness being refunded, refinanced or extended, and (c)
the amount of customary fees, expenses and costs related to the incurrence of
such Refinancing Indebtedness; and (v) such Refinancing Indebtedness is incurred
by the same Person that initially incurred the Indebtedness being refunded,
refinanced or extended.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of November 25, 1997 among the Company and CIBC Wood Gundy
Securities Corp., Merrill Lynch & Co. and Value Investing Partners, Inc., as
Initial Purchasers.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Responsible Officer" when used with respect to the Trustee,
means any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) or
<PAGE> 27
-20-
any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Payment" means any of the following: (i) the
declaration or payment of any dividend or any other distribution or payment on
Capital Stock of the Company or any Subsidiary of the Company or any payment
made to the direct or indirect holders (in their capacities as such) of Capital
Stock of the Company or any Subsidiary of the Company (other than (x) dividends
or distributions payable solely in Capital Stock (other than Disqualified
Capital Stock) or in options, warrants or other rights to purchase such Capital
Stock (other than Disqualified Capital Stock), and (y) in the case of
Subsidiaries of the Company, dividends or distributions payable to the Company
or to a Wholly Owned Subsidiary of the Company); (ii) the purchase, redemption
or other acquisition or retirement for value of any Capital Stock of the Company
or any of its Subsidiaries (other than Capital Stock owned by the Company or a
Wholly Owned Subsidiary of the Company, excluding Disqualified Capital Stock) or
any option, warrants or rights to purchase such Capital Stock; (iii) the making
of any principal payment on, or the purchase, defeasance, repurchase, redemption
or other acquisition or retirement for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment of any Indebtedness which
is subordinated in right of payment to the Notes other than subordinated
Indebtedness acquired in anticipation of satisfying a scheduled sinking fund
obligation, principal installment or final maturity (in each case due within one
year of the date of acquisition); (iv) the making of any Investment or guarantee
of any Investment in any Person other than a Permitted Investment; and (v)
forgiveness of any Indebtedness of an Affiliate of the Company to the Company or
a Subsidiary of the Company. For purposes of determining the amount expended for
Restricted Payments, cash distributed or invested shall be valued at the face
amount thereof and property other than cash shall be valued at its fair market
value.
"Restricted Security" has the meaning set forth in Rule
144(a)(3) promulgated under the Securities Act; provided that the Trustee shall
be entitled to request and conclusively rely upon an Opinion of Counsel with
respect to whether any Note is a Restricted Security.
<PAGE> 28
-21-
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Sale and Lease-Back Transaction" means any arrangement with
any person providing for the leasing by the Company or any Subsidiary of the
Company of any real or tangible personal property, which property has been or is
to be sold or transferred by the Company or such Subsidiary to such Person in
contemplation of such leasing.
"S&P" means Standard & Poor's Ratings Service, a division of
McGraw Hill, Inc., and its successors.
"SEC" means the United States Securities and Exchange
Commission as constituted from time to time or any successor performing
substantially the same functions.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder.
"Senior Indebtedness" means the principal of and premium, if
any, and interest on, and any and all other fees, expense reimbursement
obligations and other amounts due pursuant to the terms of all agreements,
documents and instruments providing for, creating, securing or evidencing or
otherwise entered into in connection with (a) all Indebtedness of the Company
owed to lenders under the New Credit Facility; (b) all obligations of the
Company with respect to any Interest Rate Agreement; (c) all obligations of the
Company to reimburse any bank or other person in respect of amounts paid under
letters of credit, acceptances or other similar instruments; (d) all other
Indebtedness of the Company which does not provide that it is to rank pari passu
with or subordinate to the Notes; and (e) all deferrals, renewals, extensions
and refundings of, and amendments, modifications and supplements to, any of the
Senior Indebtedness described above. Notwithstanding anything to the contrary in
the foregoing, Senior Indebtedness will not include (i) Indebtedness of the
Company to any of its Subsidiaries, or to any Affiliate of the Company or any of
such Affiliate's Subsidiaries; (ii) Indebtedness represented by the Notes; (iii)
any Indebtedness which by the express terms of the agreement or instrument
creating, evidencing or governing the same is junior or subordinate in right of
payment to any item of Senior Indebtedness; (iv) any trade payable arising from
the purchase of goods or materials or for services obtained in the ordinary
course of business; (v) Indebtedness incurred in violation of the Indenture;
(vi) Indebtedness represented by Disqualified Capital Stock; and (vii) any
Indebtedness to or guar-
<PAGE> 29
-22-
anteed on behalf of, any shareholders, director, officer or employee of the
Company or any Subsidiary of the Company.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired; (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
"Subsidiary Indebtedness" means any Indebtedness other than
(i) Indebtedness in the form of, or represented by, bonds or other securities or
any guarantee thereof; and (ii) Indebtedness which is, or may be, quoted, listed
or ordinarily purchased and sold on any stock exchange, automated trading system
or over-the counter or other securities market (including, without prejudice to
the generality of the foregoing, the market for securities eligible for resale
pursuant to Rule 144A under the Securities Act).
"TIA" means the Trust Indenture Act of 1939, as amended (15
U.S. Code ss.ss. 77aaa-77bbbb), as in effect on the date of this Indenture
(except as provided in Section 8.03 hereof).
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer trust accounts.
"Trustee" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
the successor.
"U.S. Government Obligations" means (a) securities that are
direct obligations of the United States of America for the payment of which its
full faith and credit are pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as
<PAGE> 30
-23-
a full faith and credit obligation by the United States of America, which, in
either case, are not callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act) as custodian with respect to any such
U.S. Government Obligation or a specific payment of principal of or interest on
any such U.S. Government Obligation held by such custodian for the account of
the holder of such depository receipt; provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or a specific payment of
principal or interest on any such U.S. Government Obligation held by such
custodian for the account of the holder of such depository receipt.
"Wholly Owned Subsidiary" means any Subsidiary all of the
outstanding Voting Securities (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Company.
Section 1.02. Other Definitions.
------------------
The definitions of the following terms may be found in the
sections indicated as follows:
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Affiliate Transaction"...................................................... 4.11
"Agent Members".............................................................. 2.14
"Business Day"............................................................... 11.08
"Change of Control Offer".................................................... 4.17
"Change of Control Payment Date"............................................. 4.17
"Covenant Defeasance"........................................................ 9.03
"Event of Default"........................................................... 6.01
"Excess Proceeds Offer"...................................................... 4.10
"Global Notes"............................................................... 2.14
"Initial Blockage Period".................................................... 10.03
"Legal Defeasance"........................................................... 9.02
"Legal Holiday".............................................................. 11.08
"Other Notes................................................................. 2.01
"Paying Agent"............................................................... 2.03
"Payment Blockage Period".................................................... 10.03
"Physical Notes"............................................................. 2.01
"Registrar".................................................................. 2.03
"Regulation S Notes"......................................................... 2.01
"Reinvestment Date".......................................................... 4.10
</TABLE>
<PAGE> 31
-24-
<TABLE>
<S> <C>
"Restricted Global Note"..................................................... 2.14
"Rule 144A Notes"............................................................ 2.01
</TABLE>
Section 1.03. Incorporation by Reference of Trust
Indenture Act.
------------------------------------
Whenever this Indenture refers to a provision of the TIA, the
portion of such provision required to be incorporated herein in order for this
Indenture to be qualified under the TIA is incorporated by reference in and made
a part of this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor on the indenture securities" means the Company or any
other obligor on the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined in the TIA by reference to another statute or defined by SEC rule
have the meanings therein assigned to them.
Section 1.04. Rules of Construction.
-----------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether
defined expressly or by reference;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular; and
<PAGE> 32
-25-
(5) words used herein implying any gender shall apply to
every gender.
ARTICLE 2
THE NOTES
Section 2.01. Dating; Incorporation of Form in
Indenture.
----------------------------------
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A which is incorporated in and
made part of this Indenture. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company may use
"CUSIP" numbers in issuing the Notes. The Company shall approve the form of the
Notes.
Without limiting the generality of the foregoing, Notes
offered and sold to Qualified Institutional Buyers in reliance on Rule 144A
("Rule 144A Notes") shall bear the Private Placement Legend and include the form
of assignment set forth in EXHIBIT C-1, Notes offered and sold in offshore
transactions in reliance on Regulation S ("Regulation S Notes") shall bear the
Private Placement Legend and include the form of assignment set forth in EXHIBIT
C-2, and Notes offered and sold to Institutional Accredited Investors in
transactions exempt from registration under the Securities Act not made in
reliance on Rule 144A or Regulation S ("Other Notes") may be represented by the
Restricted Global Note or, if such an investor may not hold an interest in the
Restricted Global Note, a physical note ("Physical Note") in each case bearing
the Private Placement Legend. Each Note shall be dated the date of its
authentication.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
Section 2.02. Execution and Authentication.
------------------------------
The Notes shall be executed on behalf of the Company by two
Officers of the Company or an Officer and an Assistant
<PAGE> 33
-26-
Secretary of the Company. Such signature may be either manual or facsimile. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the Notes
and may be in facsimile form.
If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee authenticates the Note, the Note shall be
valid nevertheless.
A Note shall not be valid until the Trustee manually signs the
certificate of authentication on the Note. Such signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee or an authenticating agent shall authenticate
Notes for original issue in the aggregate principal amount of $150,000,000 upon
a Company Request. The aggregate principal amount of Notes outstanding at any
time may not exceed such amount except as provided in Section 2.07 hereof. Upon
receipt of the Company Request, the Trustee shall authenticate an additional
series of Notes in an aggregate principal amount not to exceed $150,000,000 for
issuance in exchange for all Notes previously issued pursuant to an exchange
offer registered under the Securities Act or pursuant to a Private Exchange (as
defined in the Registration Rights Agreement). Exchange Notes may have such
distinctive series designation as and such changes in the form thereof as are
specified in the Company Request referred to in the preceding sentence. The
Notes shall be issuable only in registered form without coupons and only in
denominations of $1,000 and integral multiples thereof.
The Trustee may appoint an authenticating agent to
authenticate Notes. An authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes 941959484authentication by such agent. An authenticating agent
has the same right as an Agent to deal with the Company or an Affiliate.
Section 2.03. Registrar and Paying Agent.
---------------------------
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar"), an
office or agency located in the Borough of Manhattan, City of New York, State of
New York where Notes may be presented for payment ("Paying Agent") and an office
or agency where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The
<PAGE> 34
-27-
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may have one or more co-registrars and one or more additional paying
agents. Neither the Company nor any Affiliate may act as Paying Agent. The
Company may change any Paying Agent, Registrar or co-registrar without notice to
any Noteholder.
The Company shall enter into an appropriate agency agreement
with any Registrar or Paying Agent not a party to this Indenture. The agreement
shall implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or agent for service
of notices and demands, or fails to give the foregoing notice, the Trustee shall
act as such. The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
------------------------------------
On or before each due date of the principal of and interest on
any Notes, the Company shall deposit with the Paying Agent a sum sufficient to
pay such principal and interest so becoming due. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee and the
Trustee, may at any time during the continuance of any Payment Default, upon
written request to a Paying Agent, require such Paying Agent to forthwith pay to
the Trustee all sums so held in trust by such Paying Agent together with a
complete accounting of such sums. Upon doing so, the Paying Agent shall have no
further liability for the money.
Section 2.05. Noteholder Lists.
------------------
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Noteholders and shall otherwise comply with TIA Section 312(a). If
the Trustee is not the Registrar, the Company shall furnish to the Trustee on or
before each May 15 and November 15 in each year, and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Noteholders.
<PAGE> 35
-28-
Section 2.06. Transfer and Exchange.
---------------------
Subject to Sections 2.14 and 2.15, when a Note is presented to
the Registrar with a request to register the transfer thereof, the Registrar
shall register the transfer as requested if the requirements of applicable law
are met and, when Notes are presented to the Registrar with a request to
exchange them for an equal principal amount of Notes of other authorized
denominations, the Registrar shall make the exchange as requested provided that
every Note presented or surrendered for registration of transfer or exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar duly executed by the holder
thereof or his attorney duly authorized in writing. To permit transfers and
exchanges, upon surrender of any Note for registration of transfer at the office
or agency maintained pursuant to Section 2.03 hereof, the Company shall execute
and the Trustee shall authenticate Notes at the Registrar's request. Any
exchange or transfer shall be without charge, except that the Company may
require payment by the holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation to a transfer or exchange,
but this provision shall not apply to any exchange pursuant to Sections 2.09,
3.06 or 8.05 hereof. The Trustee shall not be required to register transfers of
Notes or to exchange Notes for a period of 15 days before selection of any Notes
to be redeemed. The Trustee shall not be required to exchange or register
transfers of any Notes called or being called for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part.
Any holder of the Global Note shall, by acceptance of such
Global Note, agree that transfers of the beneficial interests in such Global
Note may be effected only through a book entry system maintained by the holder
of such Global Note (or its agent), and that ownership of a beneficial interest
in the Global Note shall be required to be reflected in a book entry.
Section 2.07. Replacement Notes.
------------------
If a mutilated Note is surrendered to the Trustee or if the
holder of a Note presents evidence to the satisfaction of the Company and the
Trustee that the Note has been lost, destroyed or wrongfully taken, the Company
shall issue and the Trustee shall authenticate a replacement Note if the
Trustee's requirements are met. An indemnity bond may be required by the Company
or the Trustee that is sufficient in the judgment of the Company and the Trustee
to protect the Company, the Trustee
<PAGE> 36
-29-
or any Agent from any loss which any of them may suffer if a Note is replaced.
In every case of destruction, loss or theft, the applicant shall also furnish to
the Company and to the Trustee evidence to their satisfaction of the
destruction, loss or the theft of such Note and the ownership thereof. The
Company and the Trustee may charge for its expenses in replacing a Note. Every
replacement Note is an additional obligation of the Company.
Section 2.08. Outstanding Notes.
------------------
Notes outstanding at any time are all Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section 2.08 as not outstanding.
If a Note is replaced pursuant to Section 2.07, it ceases to
be outstanding until the Company and the Trustee receive proof satisfactory to
each of them that the replaced Note is held by a bona fide purchaser.
If a Paying Agent holds on a Redemption Date or Maturity Date
money sufficient to pay the principal of, premium, if any, and accrued interest
on Notes payable on that date, then on and after that date such Notes cease to
be outstanding and interest on them ceases to accrue.
Subject to Section 11.06, a Note does not cease to be
outstanding solely because the Company or an Affiliate holds the Note.
Section 2.09. Temporary Notes.
----------------
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form, and shall carry all rights, of definitive
Notes but may have variations that the Company considers appropriate for
temporary Notes. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes
presented to it.
Section 2.10. Cancellation.
-------------
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee
shall cancel and
<PAGE> 37
-30-
destroy or return to the Company in accordance with its normal practice, all
Notes surrendered for transfer, exchange, payment or cancellation unless the
Company instructs the Trustee in writing to deliver the Notes to the Company.
Subject to Section 2.07 hereof, the Company may not issue new Notes to replace
Notes in respect of which it has previously paid all principal, premium and
interest accrued thereon, or delivered to the Trustee for cancellation.
Section 2.11. Defaulted Interest.
-------------------
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted amounts, plus any interest payable on defaulted
amounts pursuant to Section 4.01 hereof, to the persons who are Noteholders on a
subsequent special record date. The Company shall fix the special record date
and payment date in a manner satisfactory to the Trustee and provide the Trustee
at least 20 days notice of the proposed amount of default interest to be paid
and the special payment date. At least 15 days before the special record date,
the Company shall mail or cause to be mailed to each Noteholder at his address
as it appears on the Notes register maintained by the Registrar a notice that
states the special record date, the payment date (which shall be not less than
five nor more than ten days after the special record date), and the amount to be
paid. In lieu of the foregoing procedures, the Company may pay defaulted
interest in any other lawful manner satisfactory to the Trustee.
Section 2.12. Deposit of Moneys.
------------------
Prior to 11:00 a.m., New York City time, on each Interest
Payment Date and Maturity Date, the Company shall have deposited with the Paying
Agent in immediately available funds money sufficient to make cash payments, if
any, due on such Interest Payment Date or Maturity Date, as the case may be, in
a timely manner which permits the Trustee to remit payment to the holders on
such Interest Payment Date or Maturity Date, as the case may be. The principal
and interest on Global Notes shall be payable to the Depository or its nominee,
as the case may be, as the sole registered owner and the sole holder of the
Global Notes represented thereby. The principal and interest on Notes in
certificated form shall be payable at the office of the Paying Agent.
<PAGE> 38
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Section 2.13. CUSIP Number.
-------------
The Company in issuing the Notes may use one or more "CUSIP"
numbers, and if so, the Trustee shall use the appropriate CUSIP number(s) in
notices of redemption or exchange as a convenience to holders; provided that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number(s) printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes.
Section 2.14. Book-Entry Provisions for Global Notes.
---------------------------------------
(a) Rule 144A Notes and Other Notes which may be held in
global form, other than Regulation S Notes, initially shall be represented by
one or more notes in registered, global form without interest coupons
(collectively, the "Restricted Global Note"). Regulation S Notes initially shall
be represented by one global note in registered form without interest coupons
(collectively, the "Regulation S Global Note," and, together with the Restricted
Global Note, the "Global Notes"). The Global Notes initially shall (i) be
registered in the name of The Depository Trust Company (the "Depository") or the
nominee of the Depository, in each case for credit to an account of an Agent
Member (as defined below); (ii) be delivered to the Trustee as custodian for the
Depository; and (iii) bear legends as set forth in EXHIBIT B.
Members of, or direct or indirect participants in, the
Depository ("Agent Members") shall have no rights under this Indenture with
respect to any Global Note held on their behalf by the Depository, or the
Trustee as its custodian, or under the Global Notes, and the Depository may be
treated by the Company, the Trustee and any agent of the Company or the Trustee
as the absolute owner of the Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices governing the exercise of the rights of a holder of any
Note.
(b) Transfers of Global Notes shall be limited to
transfer in whole, but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in the Global Notes may be
transferred or exchanged for Physical Notes upon receipt by the Trustee of
written instruc-
<PAGE> 39
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tions from the Depository or its nominee on behalf of any beneficial owner and
in accordance with the rules and procedures of the Depository and the provisions
of Section 2.15. In addition, a Global Note shall be exchangeable for Physical
Notes if (i) the Depository (x) notifies the Company that it is unwilling or
unable to continue as depository for such Global Note and the Company thereupon
fails to appoint a successor depository or (y) has ceased to be a clearing
agency registered under the Exchange Act; (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of such
Physical Notes or (iii) there shall have occurred and be continuing a Default or
an Event of Default with respect to the Notes. In all cases, Physical Notes
delivered in exchange for any Global Note or beneficial interests therein shall
be registered in the names, and issued in any approved denominations, requested
by or on behalf of the Depository (in accordance with its customary procedures).
(c) In connection with any transfer or exchange of a
portion of the beneficial interest in any Global Note to beneficial owners
pursuant to paragraph (b), the Registrar shall (if one or more Physical Notes
are to be issued) reflect on its books and records the date and a decrease in
the principal amount of the Global Note in an amount equal to the principal
amount of the beneficial interest in the Global Note to be transferred, and the
Company shall execute, and the Trustee shall upon receipt of a written order
from the Company authenticate and make available for delivery, one or more
Physical Notes of like tenor and amount.
(d) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall
be deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depository in writing in exchange for its
beneficial interest in the Global Notes, an equal aggregate principal amount of
Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Security
delivered in exchange for an interest in a Global Note pursuant to paragraph
(b), (c) or (d) shall, except as otherwise provided by paragraphs (a)(i)(x); and
(c) of Section 2.15, bear the legend regarding transfer restrictions applicable
to the Physical Notes set forth in Exhibit A.
(f) On or prior to the 40th-day after the later of the
commencement of the offering of the Notes represented by
<PAGE> 40
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the Regulation S Global Note and the issue date of such Notes (such period
through and including such 40th day, the "Restricted Period"), a beneficial
interest in a Regulation S Global Note may be transferred to a Person who takes
delivery in the form of an interest in the corresponding Restricted Global Note
only upon receipt by the Trustee of a written certification from the transferor
to the effect that such transfer is being made (i)(a) to a Person whom the
transferor reasonably believes is a Qualified Institutional Buyer in a
transaction meeting the requirements of Rule 144A or (b) pursuant to another
exemption from the registration requirements under the Securities Act which is
accompanied by an opinion of counsel regarding the availability of such
exemption and (ii) in accordance with all applicable securities laws of any
state of the United States or any other jurisdiction.
(g) Beneficial interests in the Restricted Global Note may be
transferred to a Person who takes delivery in the form of an interest in the
Regulation S Global Note, whether before or after the expiration of the
Restricted Period, only if the transferor first delivers to the Trustee a
written certificate to the effect that such transfer is being made in accordance
with Rule 903 or 904 of Regulation S or Rule 144 (if available) and that, if
such transfer occurs prior to the expiration of the Restricted Period, the
interest transferred will be held immediately thereafter through Euroclear or
CEDEL.
(h) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an interest in another
Global Note shall, upon transfer, cease to be an interest in such Global Note
and become an interest in such other Global Note and, accordingly, shall
thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(i) The holder of any Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a holder is
entitled to take under this Indenture or the Notes.
Section 2.15. Special Transfer Provisions.
----------------------------
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
AND NON-U.S. PERSONS. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any Institu-
<PAGE> 41
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tional Accredited Investor which is not a QIB or to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Security, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after
November, 1998 or (y) (1) in the case of a transfer to an Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. Persons),
the proposed transferee has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto or (2) in the case of a
transfer to a Non-U.S. Person (including a QIB), the proposed
transferor has delivered to the Registrar a certificate substantially
in the form of Exhibit E hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above; and (y)
instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date; and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in a Global Note to be transferred;
and (b) the Company shall execute and the Trustee shall authenticate and make
available for delivery one or more Physical Notes of like tenor and amount.
(b) TRANSFERS TO QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of a Note constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Note stating, or
has otherwise advised the Company and the Registrar in writing, that it
is purchasing the Note for its own account or an account with respect
to which it exercises sole investment discretion and that it and any
such
<PAGE> 42
-35-
account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Securities to be transferred consist of Physical Notes which after
transfer are to be evidenced by an interest in the Global Note, upon
receipt by the Registrar of instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of the Global Note in an amount equal to the principal
amount of the Physical Notes to be transferred, and the Trustee shall
cancel the Physical Notes so transferred.
(c) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange
or replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Securities bearing the Private Placement
Legend, the Registrar shall deliver only Notes that bear the Private Placement
Legend unless (i) the circumstances contemplated by paragraph (a)(i)(x) of this
Section 2.15 exist; (ii) there is delivered to the Registrar an Opinion of
Counsel reasonably satisfactory to the Company and the Trustee to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act or
(iii) such Note has been sold pursuant to an effective registration statement
under the Securities Act.
(d) GENERAL. By its acceptance of any Note bearing the
Private Placement Legend, each holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Note only as
provided in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.14 or this Section
2.15. The Company shall have the right to inspect and make copies of all such
letters, notices
<PAGE> 43
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or other written communications at any reasonable time upon
the giving of reasonable notice to the Registrar.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
-------------------
If the Company elects to redeem Notes pursuant to Section 3.07
hereof; (i) at least 60 days prior to the Redemption Date in the case of a
partial redemption; (ii) at least 45 days prior to the Redemption Date in the
case of a total redemption or (iii) during such other period as the Trustee may
agree to, the Company shall notify the Trustee in writing of the Redemption
Date, the principal amount of Notes to be redeemed and the redemption price, and
deliver to the Trustee an Officers' Certificate stating that such redemption
will comply with the conditions contained in Section 3.07 hereof, as
appropriate.
Section 3.02. Selection by Trustee of Notes to Be Redeemed.
----------------------------------------------
In the event that fewer than all of the Notes are to be
redeemed, the Trustee shall select the Notes to be redeemed, if the Notes are
listed on a national securities exchange, in accordance with the rules of such
exchange or, if the Notes are not so listed, on either a pro rata basis or by
lot, or such other method as it shall deem fair and equitable; provided,
however, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Notes or portion thereof for redemption shall
be made by the Trustee on a pro rata basis, unless such a method is prohibited.
The Trustee shall promptly notify the Company of the Notes selected for
redemption and, in the case of any Notes selected for partial redemption, the
principal amount thereof to be redeemed. The Trustee may select for redemption
portions of the principal of the Notes that have denominations larger than
$1,000. Notes and portions thereof the Trustee selects shall be redeemed in
amounts of $1,000 or whole multiples of $1,000. For all purposes of this
Indenture unless the context otherwise requires, provisions of this Indenture
that apply to Notes called for redemption also apply to portions of Notes called
for redemption.
<PAGE> 44
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Section 3.03. Notice of Redemption.
---------------------
At least 30 days, and no more than 60 days, before a
Redemption Date, the Company shall mail, or cause to be mailed, a notice of
redemption by first-class mail to each holder of Notes to be redeemed at his or
her last address as the same appears on the registry books maintained by the
Registrar pursuant to Section 2.03 hereof.
The notice shall identify the Notes to be redeemed (including
the CUSIP number(s) thereof) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) if any Note is being redeemed in part, the portion of
the principal amount of such Note to be redeemed and that, after the
Redemption Date and upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(6) that unless the Company defaults in making the
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the Redemption Date;
(7) the paragraph of Section 3.07 hereof pursuant to which
the Notes called for redemption are being redeemed; and
(8) the aggregate principal amount of Notes that are being
redeemed.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's sole expense.
Section 3.04. Effect of Notice of Redemption.
-------------------------------
Once the notice of redemption described in Section 3.03 is
mailed, Notes called for redemption become due and payable on the Redemption
Date and at the redemption price, including any premium, plus interest accrued
to the Redemption
<PAGE> 45
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Date. Upon surrender to the Paying Agent, such Notes shall be paid at the
redemption price, including any premium, plus interest accrued to the Redemption
Date, provided that if the Redemption Date is after a regular interest payment
record date and on or prior to the Interest Payment Date, the accrued interest
shall be payable to the holder of the redeemed Notes registered on the relevant
record date, and provided, further, that if a Redemption Date is a Legal
Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
Section 3.05. Deposit of Redemption Price.
----------------------------
On or prior to 10:00 A.M., New York City time, on each
Redemption Date, the Company shall deposit with the Paying Agent in immediately
available funds money sufficient to pay the redemption price of and accrued
interest on all Notes to be redeemed on that date other than Notes or portions
thereof called for redemption on that date which have been delivered by the
Company to the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay
the redemption price of and accrued interest on Notes called for redemption
shall have been made available in accordance with the preceding paragraph, the
Notes called for redemption will cease to accrue interest and the only right of
the holders of such Notes will be to receive payment of the redemption price of
and, subject to the first proviso in Section 3.04, accrued and unpaid interest
on such Notes to the Redemption Date. If any Note called for redemption shall
not be so paid, interest will be paid, from the Redemption Date until such
redemption payment is made, on the unpaid principal of the Note and any interest
not paid on such unpaid principal, in each case, at the rate and in the manner
provided in the Notes.
Section 3.06. Notes Redeemed in Part.
-----------------------
Upon surrender of a Note that is redeemed in part, the Trustee
shall authenticate for a holder a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
--------------------
(a) The Company may redeem the Notes, in whole or in
part, at any time on or after December 1, 2002 at the following redemption
prices (expressed as a percentage of principal
<PAGE> 46
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amount), together, in each case, with accrued and unpaid interest to the
Redemption Date, if redeemed during the twelve-month period beginning on
December 1 of each year listed below:
Year Percentage
---- ----------
2002............................................ 104.625%
2003............................................ 103.083%
2004............................................ 101.542%
2005 and thereafter............................. 100.0000%
(b) Notwithstanding the foregoing, the Company may redeem in
the aggregate up to 35% of the original principal amount of Notes at any time
and from time to time prior to December 1, 2000 at a redemption price equal to
109.25% of the aggregate principal amount so redeemed plus accrued and unpaid
interest, if any, to the Redemption Date out of the Net Proceeds of one or more
Public Equity Offerings; provided that at least 65% of the principal amount of
Notes originally issued remains outstanding immediately after the occurrence of
any such redemption and that any such redemption occurs within 60 days following
the closing of any such Public Equity Offering.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
-----------------
The Company shall pay the principal of and interest (including
all Additional Interest as provided in the Registration Rights Agreement) on the
Notes on the dates and in the manner provided in the Notes and this Indenture.
An installment of principal or interest shall be considered paid on the date it
is due if the Trustee or Paying Agent holds on that date money designated for
and sufficient to pay such installment.
The Company shall pay interest on overdue principal (including
post-petition interest in a proceeding under any Bankruptcy Law), and overdue
interest, to the extent lawful, at the rate specified in the Notes.
<PAGE> 47
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Section 4.02. SEC Reports.
------------
(a) The Company will file with the SEC all information,
documents and reports to be filed with the SEC pursuant to Section 13 or 15(d)
of the Exchange Act, whether or not the Company is subject to such filing
requirements so long as the SEC will accept such filings. The Company (at its
own expense) will file with the Trustee within 15 days after it files them with
the SEC, copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe) which the Company files with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act. Upon qualification of this
Indenture under the TIA, the Company shall also comply with the provisions of
TIA section 314(a). Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
(b) At the Company's expense, regardless of whether the
Company is required to furnish such reports and other information referred to in
paragraph (a) above to its stockholders pursuant to the Exchange Act, the
Company shall cause such reports and other information to be mailed to the
holders at their addresses appearing in the register of Notes maintained by the
Registrar within 15 days after it files them with the SEC.
(c) The Company will, upon request, provide to any holder of
Notes or any prospective transferee of any such holder any information
concerning the Company (including financial statements) necessary in order to
permit such holder to sell or transfer Notes in compliance with Rule 144A under
the Securities Act.
Section 4.03. Waiver of Stay, Extension or Usury Laws.
----------------------------------------
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead (as a defense or
otherwise) or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law which would prohibit
or forgive the Company from paying all or any portion of the principal of,
premium, if any, and/or interest on the Notes as contemplated
<PAGE> 48
-41-
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
Section 4.04. Compliance Certificate.
-----------------------
(a) The Company shall deliver to the Trustee, within 120 days
after the end of each fiscal year and on or before 60 days after the end of the
first, second and third quarters of each fiscal year, an Officers' Certificate
(one of the signers of which shall be the principal executive officer, principal
financial officer or principal accounting officer of the Company) stating that a
review of the activities of the Company and its Subsidiaries during such fiscal
year or fiscal quarter, as the case may be, has been made under the supervision
of the signing Officers with a view to determining whether each has kept,
observed, performed and fulfilled its obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge each has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all or
such Defaults or Events of Default of which he or she may have knowledge and
what action each is taking or proposes to take with respect thereto) and that to
the best of his or her knowledge no event has occurred and remains in existence
by reason of which payments on account of the principal of or interest, if any,
on the Notes is prohibited or if such event has occurred, a description of the
event and what action each is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.02 above shall be
accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention which would lead them to believe that the
Company has violated any provisions of this Article 4 or Article 5 hereof or, if
any such violation
<PAGE> 49
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has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly for
any failure to obtain knowledge of any such violation.
(c) The Company will, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
Section 4.05. Taxes.
------
The Company shall, and shall cause each of its Subsidiaries
to, pay prior to delinquency all material taxes, assessments, and governmental
levies except as contested in good faith and by appropriate proceedings.
Section 4.06. Limitation on Additional Indebtedness.
--------------------------------------
The Company will not, directly or indirectly, incur (as
defined) any Indebtedness (including Acquired Indebtedness); provided that if no
Default or Event of Default shall have occurred and be continuing at the time or
as a consequence of the incurrence of such Indebtedness, the Company may incur
Indebtedness (including Acquired Indebtedness) if after giving effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Company's Consolidated Fixed Charge Coverage Ratio is at least 2.25
to 1. In addition, none of the Subsidiaries of the Company will, directly or
indirectly, incur any Subsidiary Indebtedness; provided that if no Default or
Event of Default shall have occurred and be continuing at the time or as a
consequence of the incurrence of such Subsidiary Indebtedness, any of the
Company's Subsidiaries may incur Subsidiary Indebtedness if, after giving effect
to the incurrence of such Subsidiary Indebtedness and the receipt and
application of the proceeds thereof, such Subsidiary's Consolidated Fixed Charge
Coverage Ratio is at least 2.5 to 1.
Notwithstanding the foregoing, the Company and its
Subsidiaries may incur Permitted Indebtedness; provided that the Company will
not incur any Permitted Indebtedness that ranks junior in right of payment to
the Notes that has a maturity or mandatory sinking fund payment prior to the
maturity of the Notes.
<PAGE> 50
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Section 4.07. Limitation on Preferred Stock of Subsidiaries.
----------------------------------------------
The Company will not permit any of its Subsidiaries to issue
any Preferred Stock (except Preferred Stock issued to the Company or a Wholly
Owned Subsidiary of the Company) or permit any Person (other than the Company or
a Wholly Owned Subsidiary of the Company) to hold any such Preferred Stock
unless the Company or such Subsidiary would be entitled to incur or assume
Indebtedness under Section 4.06 above (other than Permitted Indebtedness) in the
aggregate principal amount equal to the aggregate liquidation value of the
Preferred Stock to be issued.
Section 4.08. Limitation on Capital Stock of Subsidiaries.
--------------------------------------------
The Company will not (i) sell, pledge, hypothecate or
otherwise convey or dispose of any Capital Stock of a Subsidiary of the Company
or (ii) permit any of its Subsidiaries to issue any Capital Stock, other than to
the Company or a Wholly Owned Subsidiary of the Company. The foregoing
restrictions shall not apply to an Asset Sale made in compliance with Sections
4.07 and 4.10 hereof.
Section 4.09. Limitation on Restricted Payments.
---------------------------------
The Company will not make, and will not permit any of its
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such Restricted
Payment;
(b) immediately after giving pro forma effect to such
Restricted Payment, the Company could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under Section 4.06 above; and
(c) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made after the
Issue Date does not exceed the sum of (1) 50% of the Company's cumulative
Consolidated Net Income (or minus 100% of any cumulative deficit in Consolidated
Net Income during such period) plus (2) 100% of the aggregate Net Proceeds
received by the Company from the issue or sale after the Issue Date of Capital
Stock (other than Disqualified Capital Stock or
<PAGE> 51
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Capital Stock of the Company issued to any Subsidiary of the Company) of the
Company or any Indebtedness or other securities of the Company convertible into
or exercisable or exchangeable for Capital Stock (other than Disqualified
Capital Stock) of the Company which has been so converted, exercised or
exchanged, as the case may be plus (3) without duplication of any amounts
included in clause (c)(2) above, 100% of the aggregate Net Proceeds received by
the Company of any equity contribution from a holder of the Company's Capital
Stock, plus (4) $5,000,000, excluding in the case of clauses (c)(2) and (3), any
Net Proceeds from a Public Equity Offering to the extent used to redeem the
Notes. For purposes of determining under this clause (c) the amount expended for
Restricted Payments, cash distributed shall be valued at the face amount thereof
and property other than cash shall be valued at its fair market value.
The provisions of this covenant shall not prohibit (i) the
payment of any distribution within 60 days after the date of declaration
thereof, if at such date of declaration such payment would comply with the
provisions of the Indenture; (ii) the repurchase, redemption or other
acquisition or retirement of any shares of Capital Stock of the Company or
Indebtedness subordinated to the Notes by conversion into, or by or in exchange
for, shares of Capital Stock of the Company (other than Disqualified Capital
Stock); or out of the Net Proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Company) of other shares of Capital Stock of the
Company (other than Disqualified Capital Stock); (iii) the redemption or
retirement of Indebtedness of the Company subordinated to the Notes in exchange
for, by conversion into, or out of the Net Proceeds of, a substantially
concurrent sale or incurrence of Indebtedness of the Company (other than any
Indebtedness owed to a Subsidiary) that is contractually subordinated in right
of payment to the Notes to at least the same extent as the Indebtedness being
redeemed or retired; (iv) the retirement of any shares of Disqualified Capital
Stock of the Company by conversion into, or by exchange for, shares of
Disqualified Capital Stock of the Company, or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Disqualified Capital Stock of the Company; (v) so long as no
Default or Event of Default shall have occurred and be continuing, payments made
with respect to extinguishment of fractional shares or odd-lot shares not to
exceed $250,000 in the aggregate; (vi) payments to a holding company that,
directly or indirectly, owns all of the outstanding Capital Stock of the
Company, in amounts sufficient to pay: (w) franchise taxes and other fees
required to main-
<PAGE> 52
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tain its corporate existence, (x) costs associated with preparation of required
documents for filing with the Securities and Exchange Commission and with any
exchange on which such company's securities are traded, (y) federal, state,
foreign and local taxes to the extent that such taxes are attributable to the
ownership of the Company and its Subsidiaries, and (z) other operating or
administrative costs of up to $200,000 per year; or (vii) payments, directly or
indirectly, to employees to repurchase Capital Stock or other securities of the
Company or of a holding company that, directly or indirectly, owns all of the
outstanding Capital Stock of the Company upon the death, disability or
termination of employment of such employees, in amounts not to exceed, in the
aggregate, $1,500,000 per year; provided that in calculating the aggregate
amount of Restricted Payments made subsequent to the Issue Date for purposes of
clause (c) of the immediately preceding paragraph, amounts expended pursuant to
clauses (i), (v) and (vii) shall be included in such calculation.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant described above were computed, which
calculations may be based upon the Company's latest available financial
statements, and that no Default or Event of Default has occurred and is
continuing and no Default or Event of Default will occur immediately after
giving effect to any such Restricted Payments.
Section 4.10. Limitation on Certain Asset Sales.
----------------------------------
The Company will not, and will not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company or such
applicable Subsidiary, as the case may be, receives consideration at the time of
such sale or other disposition at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good faith by the Board
of Directors of the Company, and evidenced by a board resolution); (ii) not less
than 80% of the consideration received by the Company or such applicable
Subsidiary, as the case may be, is in the form of cash or Cash Equivalents; and
(iii) the Asset Sale Proceeds received by the Company or such Subsidiary are
applied (a) first, to the extent the Company or any such Subsidiary, as the case
may be, elects, or is required, to prepay, repay or purchase indebtedness under
any then existing Senior Indebtedness of the Company or any such Subsidiary
within 12 months days following the receipt of the
<PAGE> 53
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Asset Sale Proceeds from any Asset Sale; provided that any such repayment shall
result in a permanent reduction of the commitments thereunder in an amount equal
to the principal amount so repaid; (b) second, to the extent of the balance of
Asset Sale Proceeds after application as described above, to the extent the
Company elects, to an investment in assets (including Capital Stock or other
securities purchased in connection with the acquisition of Capital Stock or
property of another Person) used or useful in businesses similar or ancillary to
the business of the Company or any such Subsidiary as conducted on the Issue
Date; provided that such investment occurs on or prior to the 365th day
following receipt of such Asset Sale Proceeds (the "Reinvestment Date"); and (c)
third, if on the Reinvestment Date the Available Asset Sale Proceeds exceed $10
million, the Company shall apply an amount equal to such Available Asset Sale
Proceeds to an offer to repurchase the Notes, at a purchase price in cash equal
to 100% of the principal amount thereof plus accrued and unpaid interest, if
any, to the purchase date (an "Excess Proceeds Offer"). If an Excess Proceeds
Offer is not fully subscribed, the Company may retain the portion of the
Available Asset Sale Proceeds not required to repurchase Notes.
If the Company is required to make an Excess Proceeds Offer,
the Company shall mail, within 30 days following the Reinvestment Date, a notice
to the holders stating, among other things: (1) that such holders have the right
to require the Company to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the purchase date; (2) the
purchase date, which shall be no earlier than 30 days and not later than 45 days
from the date such notice is mailed; (3) the instructions that each holder must
follow in order to have such Notes purchased; and (4) the calculations used in
determining the amount of Available Asset Sale Proceeds to be applied to the
purchase of such Notes.
In the event of the transfer of substantially all of the
property and assets of the Company and its Subsidiaries as an entirety to a
Person in a transaction permitted under Section 5.01 below, the successor Person
shall be deemed to have sold the properties and assets of the Company and its
Subsidiaries not so transferred for purposes of this covenant, and shall comply
with the provisions of this covenant with respect to such deemed sale as if it
were an Asset Sale.
<PAGE> 54
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The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to an Excess Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of this Indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of this Indenture by virtue
thereof.
Section 4.11. Limitation on Transactions with Affiliates.
-------------------------------------------
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate (each an "Affiliate Transaction") or extend, renew, waive or otherwise
modify the terms of any Affiliate Transaction entered into prior to the Issue
Date unless (i) such Affiliate Transaction is between or among the Company and
its Wholly Owned Subsidiaries; or (ii) the terms of such Affiliate Transaction
are fair and reasonable to the Company or such Subsidiary, as the case may be,
and the terms of such Affiliate Transaction are at least as favorable as the
terms which could be obtained by the Company or such Subsidiary, as the case may
be, in a comparable transaction made on an arm's-length basis between
unaffiliated parties. In any Affiliate Transaction (or any series of related
Affiliate Transactions which are similar or part of a common plan) involving an
amount or having a fair market value in excess of $2 million which is not
permitted under clause (i) above, the Company must obtain a resolution of the
Board of Directors of the Company certifying that such Affiliate Transaction
complies with clause (ii) above. In any Affiliate Transaction (or any series of
related Affiliate Transactions which are similar or part of a common plan)
involving an amount or having a fair market value in excess of $10 million which
is not permitted under clause (i) above, the Company must obtain a favorable
written opinion as to the fairness of such transaction or transactions, as the
case may be, from an Independent Financial Advisor.
The foregoing provisions will not apply to (i) any Restricted
Payment that is not prohibited by the provisions described under Section 4.09
above or (ii) reasonable fees and compensation paid to and indemnity provided on
behalf of, offi-
<PAGE> 55
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cers, directors or employees of the Company or any Subsidiary of the Company as
determined in good faith by the Company's Board of Directors or senior
management.
Section 4.12. Limitations on Liens.
---------------------
The Company will not, and will not permit any of its
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens) upon any property
or asset of the Company or any of its Subsidiaries or any shares of Capital
Stock or Indebtedness of any Subsidiary of the Company which owns property or
assets, now owned or hereafter acquired, unless (i) if such Lien secures
Indebtedness which is pari passu with the Notes, then the Notes are secured on
an equal and ratable basis with the obligations so secured until such time as
such obligation is no longer secured by a Lien or (ii) if such Lien secures
Indebtedness which is subordinated to the Notes, any such Lien shall be
subordinated to the Lien granted to the holders of the Notes to the same extent
as such Indebtedness is subordinated to the Notes.
Section 4.13. Limitation on Other Senior Subordinated Indebtedness.
-----------------------------------------------------
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, incur, contingently or otherwise, any
Indebtedness that is both (i) subordinated in right of payment to any Senior
Indebtedness of the Company or any of its Subsidiaries, as the case may be and
(ii) senior in right of payment to the Notes. For purposes of this covenant,
Indebtedness is deemed to be senior in right of payment to the Notes, if it is
not explicitly subordinated in right of payment to Senior Indebtedness at least
to the same extent as the Notes are subordinated to such Senior Indebtedness.
Section 4.14. Limitation on Sale and Lease-Back Transactions.
-----------------------------------------------
The Company will not, and will not permit any of its
Subsidiaries to, enter into any Sale and Lease-Back Transaction unless (i) the
consideration received in such Sale and Lease-Back Transaction is at least equal
to the fair market value of the property sold, as determined in good faith by
the Board of Directors of the Company and evidenced by a board resolution; and
(ii) the Company could incur the Attributable Indebtedness in respect of such
Sale and Lease-Back Transaction in compliance with Section 4.06 above.
<PAGE> 56
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Section 4.15. Payments for Consent.
--------------------
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the Notes unless such consideration
is offered to be paid or agreed to be paid to all holders of the Notes which so
consent, waive or agree to amend in the time frame set forth in solicitation
documents relating to such consent, waiver or agreement.
Section 4.16. Corporate Existence.
-------------------
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each Subsidiary, in accordance with the respective organizational documents (as
the same may be amended from time to time) of each Subsidiary and the rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the holders.
Section 4.17. Change of Control.
------------------
Upon the occurrence of a Change of Control, the Company shall
be obligated to make an offer to purchase (the "Change of Control Offer") each
holder's outstanding Notes at a purchase price (the "Change of Control Purchase
Price") equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the Change of Control Payment Date (as defined) in
accordance with the procedures set forth in this Section 4.17.
Within 20 days of the occurrence of a Change of Control, the
Company shall (i) cause a notice of the Change of Control Offer to be sent at
least once to the Dow Jones News Service or similar business news service in the
United States; and (ii) send by first-class mail, postage prepaid, to the
Trustee and to each holder of the Notes, at the address appear-
<PAGE> 57
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ing in the register maintained by the Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant
to this covenant and that all Notes tendered will be accepted for
payment;
(2) the Change of Control Purchase Price and the purchase
date (which shall be a Business Day no earlier than 30 days nor later
than 45 days from the date such notice is mailed (the "Change of
Control Payment Date"));
(3) that any Note not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(5) that holders accepting the offer to have their Notes
purchased pursuant to a Change of Control Offer will be required to
surrender the Notes to the Paying Agent at the address specified in the
notice prior to the close of business on the Business Day preceding the
Change of Control Payment Date;
(6) that holders will be entitled to withdraw their
acceptance if the Paying Agent receives, not later than the close of
business on the third Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the holder, the principal amount of the Notes
delivered for purchase, and a statement that such holder is withdrawing
his election to have such Notes purchased;
(7) that holders whose Notes are being purchased only in
part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered;
(8) any other procedures that a holder must follow to accept
a Change of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
<PAGE> 58
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On the Change of Control Payment Date, the Company shall, to
the extent lawful; (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Notes or portions thereof so
tendered; and (iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Company. The Paying Agent shall promptly mail to each
holder of Notes so accepted payment in an amount equal to the purchase price for
such Notes, and the Company shall execute and issue, and the Trustee shall
promptly authenticate and mail to such holder, a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered; provided that each
such new Note shall be issued in an original principal amount in denominations
of $1,000 and integral multiples thereof.
If the New Credit Facility is in effect, or any amounts are
owing thereunder or in respect thereof, at the time of the occurrence of a
Change of Control, prior to the mailing of the notice to holders described in
this Section 4.17 but in any event within 20 days following any Change of
Control, the Company covenants to (i) repay in full all obligations and
terminate all commitments under or in respect of the New Credit Facility and all
other Senior Indebtedness the terms of which require repayment upon a Change of
Control or offer to repay in full all obligations and terminate all commitments
under or in respect of the New Credit Facility and all such Senior Indebtedness
and repay the Indebtedness owed to each such lender who has accepted such offer
or (ii) obtain the requisite consents under the New Credit Facility and all such
other Senior Indebtedness to permit the repurchase of the Notes as described
above. The Company must first comply with the covenant described in the
preceding sentence before it shall be required to purchase Notes in the event of
a Change of Control; provided that the Company's failure to comply with the
covenant described in the preceding sentence constitutes an Event of Default
described in clause (iii) under Section 6.01 below if not cured within 30 days
after the notice required by such clause. As a result of the foregoing, a holder
of the Notes may not be able to compel the Company to purchase the Notes unless
the Company is able at the time to refinance all of the obligations under or in
respect of the New Credit Facility and all such other Senior Indebtedness or
obtain requisite consents under the New Credit Facility and all such other
Senior Indebtedness.
(i) If the Company or any Subsidiary thereof has issued any
outstanding (A) indebtedness that is subordinated in
<PAGE> 59
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right of payment to the Notes or (B) Preferred Stock, and the Company or such
Subsidiary is required to make a Change of Control Offer or to make a
distribution with respect to such subordinated indebtedness or Preferred Stock
in the event of a Change of Control, the Company shall not consummate any such
offer or distribution with respect to such subordinated indebtedness or
Preferred Stock until such time as the Company shall have paid the Change of
Control Purchase Price in full to the holders of Notes that have accepted the
Company's Change of Control Offer and shall otherwise have consummated the
Change of Control Offer made to holders of the Notes; and (ii) the Company will
not issue Indebtedness that is subordinated in right of payment to the Notes or
Preferred Stock with change of control provisions requiring the payment of such
Indebtedness or Preferred Stock prior to the payment of the Notes in the event
of a Change in Control under this Indenture.
The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the
provisions of this Section 4.17, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this section by virtue thereof.
Section 4.18. Maintenance of Office or Agency.
--------------------------------
The Company shall maintain an office or agency where Notes may
be surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee as set forth in Section 11.02.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company shall give prompt written notice to the Trustee of such designation
or re-
<PAGE> 60
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scission and of any change in the location of any such other office or agency.
The Company hereby initially designates the Corporate Trust
Office of the Trustee set forth in Section 11.02 as such office of the Company.
Section 4.19. Limitation on Dividend and Other
Payment Restrictions Affecting Subsidiaries.
--------------------------------------------
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary of the Company to (a)(i) pay dividends or make any other
distributions to the Company or any Subsidiary of the Company (A) on its Capital
Stock or (B) with respect to any other interest or participation in, or measured
by, its profits or (ii) repay any Indebtedness or any other obligation owed to
the Company or any Subsidiary of the Company; (b) make loans or advances or
capital contributions to the Company or any of its Subsidiaries; or (c) transfer
any of its properties or assets to the Company or any of its Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of: (i)
encumbrances or restrictions existing on the Issue Date to the extent and in the
manner such encumbrances and restrictions are in effect on the Issue Date, (ii)
applicable law, (iii) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person (including any Subsidiary of the Person), so acquired, (iv) customary
non-assignment provisions in leases or other agreements entered in the ordinary
course of business and consistent with past practices, (v) Refinancing
Indebtedness; provided that such restrictions are no more restrictive than those
contained in the agreements governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded, or (vi) customary
restrictions in security agreements or mortgages securing Indebtedness of the
Company or a Subsidiary to the extent such restrictions restrict the transfer of
the property subject to such security agreements and mortgages.
<PAGE> 61
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ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and Sale of Assets.
-------------------------------------------------------
The Company will not and will not permit any of its
Subsidiaries to consolidate with, merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the assets of
the Company (as an entirety or substantially as an entirety in one transaction
or a series of related transactions), to any Person unless: (i) the Company or
such Subsidiary, as the case may be, shall be the continuing Person, or the
Person (if other than the Company or such Subsidiary) formed by such
consolidation or into which the Company or such Subsidiary, as the case may be,
is merged or to which the properties and assets of the Company or such
Subsidiary, as the case may be, are sold, assigned, transferred, leased,
conveyed or otherwise disposed of shall be a corporation organized and existing
under the laws of the United States or any State thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all of the
obligations of the Company or such Subsidiary, as the case may be, under the
Indenture, the Notes and the obligations thereunder shall remain in full force
and effect; (ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; and (iii) immediately after giving effect to such transaction on a
pro forma basis the Company or such Person could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under Section 4.06
above provided, however that this provision will not prevent the Company from
merging into an Affiliate of the Company for the sole purpose of creating a
holding company whose sole asset will be all of the outstanding capital stock of
the Company or shares of a shell corporation whose only assets are all of the
outstanding capital stock of the Company.
In connection with any consolidation, merger or transfer of
assets contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and
<PAGE> 62
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that all conditions precedent herein provided for relating to such transaction
or transactions have been complied with.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
Section 5.02. Successor Person Substituted.
-----------------------------
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company or any Subsidiary in accordance
with Section 5.01 above, the successor corporation formed by such consolidation
or into which the Company is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or such Subsidiary under this Indenture with the same effect as if
such successor corporation had been named as the Company or such Subsidiary
herein, and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
-------------------
The following events are defined as "Events of Default":
(i) a default in payment of any principal of, or premium, if
any, on the Notes whether at maturity, upon redemption or otherwise
(whether or not such payment shall be prohibited by the subordination
provisions of the Indenture);
(ii) a default for 30 days in payment of any interest on the
Notes;
(iii) default by the Company or any Subsidiary in the
observance or performance of any other covenant in the
<PAGE> 63
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Notes or this Indenture for 30 days after written notice from
the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding (except in the
case of a default with respect to the "Change of Control" or
"Merger, Consolidation or Sale of Assets" covenant which shall
constitute an Event of Default with such notice requirement
but without such passage of time requirement);
(iv) failure to pay when due principal, interest or premium
in an aggregate amount of $5 million or more with respect to any
Indebtedness of the Company or any Subsidiary thereof, or the
acceleration of any such Indebtedness aggregating $3 million or more
which default shall not be cured, waived or postponed pursuant to an
agreement with the holders of such Indebtedness within 60 days after
written notice as provided in this Indenture, or such acceleration
shall not be rescinded or annulled within 20 days after written notice
as provided in this Indenture;
(v) any final judgment or judgments which can no longer be
appealed for the payment of money in excess of $5 million shall be
rendered against the Company or any Subsidiary thereof, and shall not
be discharged for any period of 60 consecutive days during which a stay
of enforcement shall not be in effect;
(vi) failure to redeem or otherwise retire the Convertible
Senior Subordinated Debentures by the end of the thirtieth day
following the Issue Date; provided that if such thirtieth day is not a
Business Day (as defined in the indenture relating to the Convertible
Senior Subordinated Debentures), such period shall extend to the end of
the next Business Day; and
(vii) certain events involving bankruptcy, insolvency or
reorganization of the Company or any Subsidiary thereof.
The Trustee may withhold notice to the holders of the Notes of
any default (except in payment of principal or premium, if any, or interest on
the Notes) if the Trustee considers it to be in the best interest of the holders
of the Notes to do so.
If an Event of Default (other than an Event of Default
resulting from certain events of bankruptcy, insolvency
<PAGE> 64
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or reorganization or a failure to redeem the Convertible Senior Subordinated
Debentures) shall have occurred and be continuing, then the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding may declare to be immediately due and payable the entire principal
amount of all the Notes then outstanding plus accrued interest to the date of
acceleration; and (i) such amounts shall become immediately due and payable or
(ii) if there are any amounts outstanding under the New Credit Facility, such
amounts shall become immediately due and payable upon the first to occur of an
acceleration under the New Credit Facility or five business days after receipt
by the Company and the representative under the New Credit Facility of a notice
of acceleration; provided, however, that after such acceleration but before a
judgment or decree based on acceleration is obtained by the Trustee, the holders
of a majority in aggregate principal amount of outstanding Notes may, under
certain circumstances, rescind and annul such acceleration if (i) all Events of
Default, other than nonpayment of principal, premium, if any, or interest that
has become due solely because of the acceleration, have been cured or waived as
provided in this Indenture; (ii) to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such declaration of acceleration, has
been paid; and (iii) in the event of the cure or waiver of an Event of Default
of the type described in clause (vii) of the above Events of Default, the
Trustee shall have received an officers' certificate and an opinion of counsel
that such Event of Default has been cured or waived. No such rescission shall
affect any subsequent Default or impair any right consequent thereto. In case an
Event of Default resulting from certain events of bankruptcy, insolvency or
reorganization shall occur, the principal, premium and interest amount with
respect to all of the Notes shall be due and payable immediately without any
declaration or other act on the part of the Trustee or the holders of the Notes.
The holders of a majority in principal amount of the Notes
then outstanding shall have the right to waive any existing default or
compliance with any provision of this Indenture or the Notes and to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, subject to certain limitations provided for in this Indenture and
under this Trust Indenture Act.
No holder of any Note will have any right to institute any
proceeding with respect to this Indenture or for any remedy thereunder, unless
such holder shall have previously
<PAGE> 65
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given to the Trustee written notice of a continuing Event of Default and unless
the holders of at least 25% in aggregate principal amount of the outstanding
Notes shall have made written request and offered reasonable indemnity to the
Trustee to institute such proceeding as Trustee, and unless the Trustee shall
not have received from the holders of a majority in aggregate principal amount
of the outstanding Notes a direction inconsistent with such request and shall
have failed to institute such proceeding within 60 days. Notwithstanding the
foregoing, such limitations do not apply to a suit instituted on such Note on or
after the respective due dates expressed in such Note.
Section 6.02. Acceleration.
-------------
If an Event of Default (other than an Event of Default arising
under Section 6.01(vii) with respect to the Company) occurs and is continuing,
the Trustee by notice to the Company, or the holders of not less than 25% in
aggregate principal amount of the Notes then outstanding may by written notice
to the Company and the Trustee declare to be immediately due and payable the
entire principal amount of all the Notes then outstanding plus accrued but
unpaid interest to the date of acceleration and (i) such amounts shall become
immediately due and payable or (ii) if there are any amounts outstanding under
or in respect of the New Credit Facility, such amounts shall become due and
payable upon the first to occur of an acceleration of amounts under or in
respect of the New Credit Facility or five Business Days after receipt by the
Company and the Representative of notice of the acceleration of the Notes;
provided, however, that after such acceleration but before a judgment or decree
based on such acceleration is obtained by the Trustee, the holders of a majority
in aggregate principal amount of the outstanding Notes may, under certain
circumstances, rescind and annul such acceleration and its consequences if all
existing Events of Default, other than the nonpayment of accelerated principal,
premium or interest that has become due solely because of the acceleration, have
been cured or waived and if the rescission would not conflict with any judgment
or decree. No such rescission shall affect any subsequent Default or impair any
right consequent thereto. In case an Event of Default specified in Section
6.01(vii) with respect to the Company occurs, such principal, premium, if any,
and interest amount with respect to all of the Notes shall be due and payable
immediately without any declaration or other act on the part of the Trustee or
the holders of the Notes.
<PAGE> 66
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Section 6.03. Other Remedies.
---------------
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture and may
take any necessary action requested of it as Trustee to settle, compromise,
adjust or otherwise conclude any proceedings to which it is a party.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Noteholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy.
All available remedies are cumulative.
Section 6.04. Waiver of Past Defaults and Events of Default.
----------------------------------------------
Subject to Sections 6.02, 6.07 and 8.02 hereof, the holders of
a majority in principal amount of the Notes then outstanding have the right to
waive any existing Default or Event of Default or compliance with any provision
of this Indenture or the Notes. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereto.
Section 6.05. Control by Majority.
--------------------
The holders of a majority in principal amount of the Notes
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee by this Indenture. The Trustee, however, may
refuse to follow any direction that conflicts with law or this Indenture or that
the Trustee determines may be unduly prejudicial to the rights of another
Noteholder not taking part in such direction, and the Trustee shall have the
right to decline to follow any such direction if the Trustee, being advised by
counsel, determines that the action so directed may not lawfully be taken or if
the Trustee in good faith shall, by a Trust Officer, determine that
<PAGE> 67
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the proceedings so directed may involve it in personal liability; provided that
the Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Section 6.06. Limitation on Suits.
--------------------
Subject to Section 6.07 below, a Noteholder may not institute
any proceeding or pursue any remedy with respect to this Indenture or the Notes
unless:
(1) the holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the holders of at least 25% in aggregate principal
amount of the Notes then outstanding make a written request to the
Trustee to pursue the remedy;
(3) such holder or holders offer to the Trustee indemnity
reasonably satisfactory to the Trustee against any loss, liability or
expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60 day period by the holders of a
majority in aggregate principal amount of the Notes then outstanding.
A Noteholder may not use this Indenture to prejudice the
rights of another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. Rights of Holders to Receive Payment.
-------------------------------------
Notwithstanding any other provision of this Indenture, the
right of any holder of a Note to receive payment of principal of, or premium, if
any, and interest of the Note on or after the respective due dates expressed in
the Note, or to bring suit for the enforcement of any such payment on or after
such respective dates, is absolute and unconditional and shall not be impaired
or affected without the consent of the holder.
<PAGE> 68
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Section 6.08. Collection Suit by Trustee.
----------------------------
If an Event of Default in payment of principal, premium or
interest specified in Section 6.01(1) or (2) hereof occurs and is continuing,
the Trustee may recover judgment in its own name and as trustee of an express
trust against the Company (or any other obligor on the Notes) for the whole
amount of unpaid principal and accrued interest remaining unpaid, together with
interest on overdue principal and, to the extent that payment of such interest
is lawful, interest on overdue installments of interest, in each case at the
rate then borne by the Notes, and such further amounts as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
Section 6.09. Trustee May File Proofs of Claim.
---------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Company (or any
other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same after
deduction of its charges and expenses to the extent that any such charges and
expenses are not paid out of the estate in any such proceedings and any
custodian in any such judicial proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such
proceedings.
<PAGE> 69
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Section 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07
hereof;
SECOND: to Noteholders for amounts due and unpaid on the
Notes for principal, premium, if any, and interest as to each, ratably,
without preference or priority of any kind, according to the
amounts due and payable on the Notes; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
holder pursuant to Section 6.07 hereof or a suit by holders of more than 10% in
principal amount of the Notes then outstanding.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
------------------
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent man would exer-
<PAGE> 70
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cise or use under the same circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture but, in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 7.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Sections 6.02 and 6.05 hereof.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
satisfactory to it against such risk or liability is not reasonably assured to
it.
(e) Whether or not therein expressly so provided, paragraphs
(a), (b), (c), and (d) of this Section 7.01 shall
<PAGE> 71
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govern every provision of this Indenture that in any way relates to the Trustee.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by the law.
Section 7.02. Rights of Trustee.
------------------
Subject to Section 7.01 hereof:
(1) The Trustee may rely on any document reasonably believed
by it to be genuine and to have been signed or presented by the proper
person. The Trustee need not investigate any fact or matter stated in
the document.
(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, or both,
which shall conform to the provisions of Sections 11.04 and 11.05
hereof. The Trustee shall be protected and shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(3) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed by
it with due care.
(4) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(5) The Trustee may consult with counsel of its selection,
and the advice or opinion of such counsel as to matters of law shall be
full and complete authorization and protection from liability in
respect of any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such
counsel.
Section 7.03. Individual Rights of Trustee.
-----------------------------
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may make loans to, accept deposits from,
perform services for or otherwise deal
<PAGE> 72
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with the Company, or any Affiliates thereof, with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. The Trustee,
however, shall be subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
---------------------
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Company's use of the proceeds from the sale of Notes or any money paid to the
Company pursuant to the terms of this Indenture and it shall not be responsible
for any statement in the Notes other than its certificate of authentication.
Section 7.05. Notice of Defaults.
--------------------
If a Default occurs and is continuing and if it is known to
the Trustee, the Trustee shall mail to each Noteholder notice of the Default
within 90 days after it occurs. Except in the case of a Default in payment of
the principal of, or premium, if any, or interest on any Note the Trustee may
withhold the notice if and so long as the board of directors of the Trustee, the
executive committee or any trust committee of such board and/or its Trust
Officers in good faith determine(s) that withholding the notice is in the
interest of the Noteholders.
Section 7.06. Reports by Trustee to Holders.
------------------------------
If required by TIA ss. 313(a), within 60 days after May 15 of
any year, commencing the May 15 following the date of this Indenture, the
Trustee shall mail to each Noteholder a brief report dated as of such May 15
that complies with TIA ss. 313(a). The Trustee shall also comply with TIA ss.
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c) and TIA ss. 313(d).
Reports pursuant to this Section 7.06 shall be transmitted by
mail:
(1) to all registered holders of Notes, as the names and
addresses of such holders appear on the Registrar's books; and
(2) to such holder of Notes as have, within the two years
preceding such transmission, filed their names and addresses with the
Trustee for that purpose.
<PAGE> 73
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A copy of each report at the time of its mailing to
Noteholders shall be filed with the SEC and each stock exchange, if any, on
which the Notes are listed. The Company shall promptly notify the Trustee when
the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
---------------------------
The Company shall pay to the Trustee from time to time
reasonable compensation for its services rendered hereunder (which compensation
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust). The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it in
connection with its duties under this Indenture, including the reasonable fees
and expenses of the Trustee's agents and counsel.
The Company shall indemnify each of the Trustee and any
predecessor Trustee for, and hold it harmless against, any and all loss, damage,
claim, liability or reasonable expense, incurred by it in connection with the
acceptance or performance of its duties under this Indenture including the
reasonable costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder (including, without limitation, settlement costs). The Trustee shall
notify the Company in writing promptly of any claim asserted against the Trustee
for which it may seek indemnity. However, the failure by the Trustee to so
notify the Company shall not relieve the Company of its obligations hereunder
except to the extent the Company is prejudiced thereby.
Notwithstanding the foregoing, the Company need not reimburse
the Trustee for any expense or indemnify it against any loss or liability
incurred by the Trustee through its negligence, bad faith or willful misconduct.
To secure the payment obligations of the Company in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee except such money or property held in trust to pay
principal of and interest on particular Notes. The obligations of the Company
under this Section 7.07 to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, disbursements and advances shall survive the satisfaction
and discharge of this Indenture.
<PAGE> 74
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When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(6) or (7) hereof occurs, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
For purposes of this Section 7.07, the term "Trustee" shall
include any trustee appointed pursuant to Article 9.
Section 7.08. Replacement of Trustee.
-----------------------
The Trustee may resign by so notifying the Company in writing.
The holders of a majority in principal amount of the outstanding Notes may
remove the Trustee by notifying the removed Trustee in writing and may appoint a
successor Trustee with the Company's written consent which consent shall not be
unreasonably withheld. The Company may remove the Trustee at its election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the holders of at least 10% in principal amount of the outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
<PAGE> 75
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A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Company's obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Consolidation, Merger or Conversion.
---------------------------------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, subject to Section 7.10 hereof, the successor corporation without
any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
------------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1) and (2) in every respect. The Trustee shall
have a combined capital and surplus of at least $100,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA ss. 310(b), including the provision in ss. 310(b)(1).
Section 7.11. Preferential Collection of Claims Against Company.
---------------------------------------------------
The Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311 (b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
Section 7.12. Paying Agents.
--------------
The Company shall cause each Paying Agent other than the
Trustee to execute and deliver to it and the Trustee an instrument in which such
agent shall agree with the Trustee, subject to the provisions of this Section
7.12:
<PAGE> 76
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(A) that it will hold all sums held by it as agent for the
payment of principal of, or premium, if any, or interest on, the Notes
(whether such sums have been paid to it by the Company or by any
obligor on the Notes) in trust for the benefit of holders of the Notes
or the Trustee;
(B) that it will at any time during the continuance of any
Event of Default, upon written request from the Trustee, deliver to the
Trustee all sums so held in trust by it together with a full accounting
thereof; and
(C) that it will give the Trustee written notice within three
(3) Business Days of any failure of the Company (or by any obligor on
the Notes) in the payment of any installment of the principal of,
premium, if any, or interest on, the Notes when the same shall be due
and payable.
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.
---------------------------
From time to time, the Company and the Trustee may, without
the consent of holders of the Notes amend or supplement this Indenture for
certain specified purposes, including:
(1) to provide for uncertificated Notes in addition to
certificated Notes;
(2) to cure any ambiguity, defect or inconsistency; or
(3) to make any other change that does not, in the opinion
of the Trustee, materially and adversely affect the rights of any
Noteholders hereunder.
The Trustee is hereby authorized to join with the Company in
the execution of any supplemental indenture authorized or permitted by the terms
of this Indenture and to make any further appropriate agreements and
stipulations which may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture which adversely af-
<PAGE> 77
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fects its own rights, duties or immunities under this Indenture.
Section 8.02. With Consent of Holders.
------------------------
The Company and the Trustee may modify or supplement this
Indenture with the consent of the holders of at least a majority in principal
amount of the outstanding Notes. The holders of not less than a majority in
aggregate principal amount of the outstanding Notes may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes without notice to any Noteholder. Subject to Section 8.04, without the
consent of each Noteholder affected, however, an amendment, supplement or
waiver, including a waiver pursuant to Section 6.04, may not:
(1) reduce the amount of Notes whose holders must consent to
an amendment, supplement or waiver to this Indenture or the Notes;
(2) reduce the rate of or change the time for payment of
interest, including defaulted interest, on any Note;
(3) reduce the principal of or premium on or change the
stated maturity of any Note or change the date on which any Notes may
be subject to redemption or repurchase or reduce the redemption or
repurchase price therefor;
(4) make any Note payable in money other than that stated in
the Note or change the place of payment from New York, New York;
(5) waive a default on the payment of the principal of,
interest on, or redemption payment with respect to any Note;
(6) make any change in provisions of this Indenture
protecting the right of each holder of Notes to receive payment of
principal of and interest on such Note on or after the due date thereof
or to bring suit to enforce such payment, or permitting holders of a
majority in principal amount of Notes to waive Defaults or Events of
Default;
(7) amend, change or modify in any material respect the
obligation of the Company to make and consummate a Change of Con-
<PAGE> 78
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trol Offer in the event of a Change of Control or make and consummate
an Asset Sale Offer with respect to any Asset Sale that has been
consummated or modify any of the provisions or definitions with respect
thereto; or
(8) modify or change any provision of this Indenture or the
related definitions affecting the subordination or ranking of the Notes
in a manner which adversely affects the holders of Notes.
After an amendment, supplement or waiver under this Section
8.02 becomes effective, the Company shall mail to the holders a notice briefly
describing the amendment, supplement or waiver.
Upon the request of the Company, accompanied by a Board
Resolution authorizing the execution of any such supplemental indenture, and
upon the receipt by the Trustee of evidence reasonably satisfactory to the
Trustee of the consent of the Noteholders as aforesaid and upon receipt by the
Trustee of the documents described in Section 8.06 hereof, the Trustee shall
join with the Company in the execution of such supplemental indenture unless
such supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the holders under
this Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
Section 8.03. Compliance with Trust Indenture Act.
------------------------------------
Every amendment to or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect.
Section 8.04. Revocation and Effect of Consents.
----------------------------------
Until an amendment, supplement, waiver or other action becomes
effective, a consent to it by a holder of a Note is a continuing consent
conclusive and binding upon such holder and every subsequent holder of the same
Note or portion thereof, and of any Note issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Note. Any such holder or subsequent holder, however, may revoke
the consent as to his Note
<PAGE> 79
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or portion of a Note, if the Trustee receives the notice of revocation before
the date the amendment, supplement, waiver or other action becomes effective.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the holders entitled to consent to any
amendment, supplement, or waiver. If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were holders at such
record date (or their duly designated proxies), and only such Persons, shall be
entitled to consent to such amendment, supplement, or waiver or to revoke any
consent previously given, whether or not such Persons continue to be holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date unless the consent of the requisite number
of holders has been obtained.
After an amendment, supplement, waiver or other action becomes
effective, it shall bind every Noteholder, unless it makes a change described in
any of clauses (1) through (8) of Section 8.02 hereof. In that case the
amendment, supplement, waiver or other action shall bind each holder of a Note
who has consented to it and every subsequent holder of a Note or portion of a
Note that evidences the same debt as the consenting holder's Note.
Section 8.05. Notation on or Exchange of Notes.
---------------------------------
If an amendment, supplement, or waiver changes the terms of a
Note, the Trustee may request the holder of the Note to deliver it to the
Trustee. In such case, the Trustee shall place an appropriate notation on the
Note about the changed terms and return it to the holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Note shall
issue and the Trustee shall authenticate a new security that reflects the
changed terms. Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment supplement or waiver.
Section 8.06. Trustee to Sign Amendments, etc.
---------------------------------
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article 8 if the amendment, supplement or waiver
does not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may, but need not, sign it. In signing or
refusing to sign such amendment, supplement or waiver the Trustee shall be
entitled to receive and, subject to Section 7.01 hereof,
<PAGE> 80
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shall be fully protected in relying upon an Officers' Certificate and an Opinion
of Counsel stating that such amendment, supplement or waiver is authorized or
permitted by this Indenture. The Company may not sign an amendment or supplement
until the Board of Directors of the Company approves it.
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.
-----------------------
The Company may terminate its obligations under the Notes and
this Indenture, except the obligations referred to in the last paragraph of this
Section 9.01, if there shall have been cancelled by the Trustee or delivered to
the Trustee for cancellation all Notes theretofore authenticated and delivered
(other than any Notes that are asserted to have been destroyed, lost or stolen
and that shall have been replaced as provided in Section 2.07 hereof) and the
Company has paid all sums payable by it hereunder or deposited all required sums
with the Trustee.
After such delivery the Trustee upon request shall acknowledge
in writing the discharge of the Company's obligations under the Notes and this
Indenture except for those surviving obligations specified below.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company in Sections 7.07, 9.05 and 9.06 hereof
shall survive.
Section 9.02. Legal Defeasance.
-----------------
The Company may elect to be discharged from its obligations
with respect to the Notes on the date the conditions set forth in Section 9.04
below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by the Notes and to have
satisfied all its other obligations under such Notes and this Indenture insofar
as such Notes are concerned (and the Trustee, at the expense of the Company,
shall, subject to Section 9.06 hereof, execute proper instruments acknowledging
the same), except for the following which shall survive until otherwise
terminated or discharged hereunder: (A) the rights of
<PAGE> 81
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holders of outstanding Notes to receive solely from the trust funds described in
Section 9.04 hereof and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due; (B) the Company's obligations with respect to such Notes
under Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08 and 4.18 hereof; (C) the
rights, powers, trusts, duties, and immunities of the Trustee hereunder
(including claims of, or payments to, the Trustee under or pursuant to Section
7.07 hereof); and (D) this Article 9. Subject to compliance with this Article 9,
the Company may exercise its option under this Section 9.02 with respect to the
Notes notwithstanding the prior exercise of its option under Section 9.03 below
with respect to the Notes.
Section 9.03. Covenant Defeasance.
--------------------
At the option of the Company, pursuant to a Board Resolution,
the Company shall be released from its obligations under Sections 4.02 through
4.17 hereof, inclusive, Section 4.19, and Section 5.01 hereof with respect to
the outstanding Notes on and after the date the conditions set forth in Section
9.04 hereof are satisfied (hereinafter, "Covenant Defeasance"). For this
purpose, such Covenant Defeasance means that the Company may omit to comply with
and shall have no liability in respect of any term, condition or limitation set
forth in any such specified Section or portion thereof, whether directly or
indirectly by reason of any reference elsewhere herein to any such specified
Section or portion thereof or by reason of any reference in any such specified
Section or portion thereof to any other provision herein or in any other
document, but the remainder of this Indenture and the Notes shall be unaffected
thereby.
Section 9.04. Conditions to Legal Defeasance or Covenant Defeasance.
------------------------------------------------------
The following shall be the conditions to application of
Section 9.02 or Section 9.03 hereof to the outstanding Notes:
(1) the Company shall irrevocably have deposited or caused
to be deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 hereof who shall agree to comply with the
provisions of this Article 9 applicable to it) as funds in trust for
the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the
<PAGE> 82
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holders of the Notes, (A) money in an amount; (B) U.S. Government
Obligations which through the payment of principal and interest in
respect thereof in accordance with their terms will provide, not later
than the due date of any payment, money in an amount; or (C) a
combination thereof, sufficient, in the opinion of a
nationally-recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge, the principal of, premium, if
any, and accrued interest on the outstanding Notes at the maturity date
of such principal, premium, if any, or interest, or on dates for
payment and redemption of such principal, premium, if any, and interest
selected in accordance with the terms of this Indenture and of the
Notes;
(2) no Event of Default or Default shall have occurred and
be continuing on the date of such deposit or insofar as Events of
Default from bankruptcy, insolvency or reorganization events are
concerned, at any time in the period ending on the 91st day after the
date of deposit;
(3) such Legal Defeasance or Covenant Defeasance shall not
cause the Trustee to have a conflicting interest for purposes of the
TIA with respect to any securities of the Company;
(4) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under this
Indenture or any other material agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound;
(5) the Company shall have delivered to the Trustee an
Opinion of Counsel stating that, as a result of such Legal Defeasance
or Covenant Defeasance, neither the trust nor the Trustee will be
required to register as an investment company under the Investment
Company Act of 1940, as amended;
(6) in the case of an election under Section 9.02 above, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that the Company has received from, or there has been published
by, the Internal Revenue Service a ruling to the effect that the
holders of the Notes or persons in their positions will not recognize
in-
<PAGE> 83
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come, gain or loss for Federal income tax purposes as a result of such
deposit, Legal Defeasance and discharge and will be subject to federal
income tax on the same amount and in the same manner, and at the same
times, as would have been the case if such deposit, Legal Defeasance
and discharge had not occurred;
(7) in the case of an election under Section 9.03 hereof,
the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that the holders of the Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such
deposit, Covenant Defeasance and discharge and will be subject to
federal income tax on the same amount, and in the same manner and at
the same times, as would have been the case if such deposit, Covenant
Defeasance and discharge had not occurred;
(8) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to either the Legal
Defeasance under Section 9.02 above or the Covenant Defeasance under
Section 9.03 hereof (as the case may be) have been complied with;
(9) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit under clause (1) was not
made by the Company with the intent of defeating, hindering, delaying
or defrauding any other creditors of the Company or others;
(10) the Company shall have delivered to the Trustee an
opinion of counsel to the effect that (i) the trust funds will not be
subject to any rights of holders of Senior Indebtedness, including,
without limitation, those arising under this Indenture and (ii) after
the 91st day following the deposit, the trust funds will not be subject
to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally;
(11) the Company shall have paid or duly provided for payment
under terms mutually satisfactory to the Company and the Trustee all
amounts then due to the Trustee pursuant to Section 7.07 hereof; and
(12) certain other customary conditions precedent are
satisfied.
<PAGE> 84
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Section 9.05. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
--------------------------------------
All money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee pursuant to Section 9.04 hereof in
respect of the outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent as the Trustee may
determine, to the holders of such Notes, of all sums due and to become due
thereon in respect of principal, premium, if any, and accrued interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 9.04 hereof or the principal, premium,
if any, and interest received in respect thereof other than any such tax, fee or
other charge which by law is for the account of the holders of the outstanding
Notes.
Anything in this Article 9 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 9.04 hereof which, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 9.06. Reinstatement.
--------------
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 9 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
9.01 hereof; provided, however, that if the Company has made any payment of
principal of, premium, if any, or accrued interest on any Notes because of the
reinstatement of
<PAGE> 85
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their obligations, the Company shall be subrogated to the rights of the holders
of such Notes to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
Section 9.07. Moneys Held by Paying Agent.
----------------------------
In connection with the satisfaction and discharge of this
Indenture, all moneys then held by any Paying Agent under the provisions of this
Indenture shall, upon demand of the Company, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.01 hereof, to the
Company, and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
Section 9.08. Moneys Held by Trustee.
-----------------------
Any moneys deposited with the Trustee or any Paying Agent or
then held by the Company in trust for the payment of the principal of, or
premium, if any, or interest on any Note that are not applied but remain
unclaimed by the holder of such Note for two years after the date upon which the
principal of, or premium, if any, or interest on such Note shall have
respectively become due and payable shall be repaid to the Company upon Company
Request, or if such moneys are then held by the Company in trust, such moneys
shall be released from such trust; and the holder of such Note entitled to
receive such payment shall thereafter, as an unsecured general creditor, look
only to the Company for the payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money shall thereupon cease;
provided, however, that the Trustee or any such Paying Agent, before being
required to make any such repayment, may, at the expense of the Company, either
mail to each Noteholder affected, at the address shown in the register of the
Notes maintained by the Registrar pursuant to Section 2.03 hereof, or cause to
be published once a week for two successive weeks, in a newspaper published in
the English language, customarily published each Business Day and of general
circulation in the City of New York, New York, a notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such mailing or publication, any unclaimed balance of
such moneys then remaining will be repaid to the Company. After payment to the
Company or the release of any money held in trust by the Company, Noteholders
entitled to the money must look only to the Company for payment as general
creditors unless applicable abandoned property law designates another person.
<PAGE> 86
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ARTICLE 10
SUBORDINATION OF NOTES
Section 10.01. Notes Subordinate to Senior Indebtedness.
-----------------------------------------
The Company covenants and agrees, and each holder of Notes, by
its acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article 10, the Indebtedness
represented by the Notes and the payment of the principal of, premium, if any,
and interest on the Notes are hereby expressly made subordinate and subject in
right of payment as provided in this Article 10 to the prior payment in full in
cash of all existing and future Senior Indebtedness of the Company.
This Article 10 shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of or continue to
hold Senior Indebtedness; and such provisions are made for the benefit of the
holders of Senior Indebtedness; and such holders are made obligees hereunder and
they or each of them may enforce such provisions.
Section 10.02. Payment Over of Proceeds upon Dissolution,
etc.
-------------------------------------------
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, arrangement, liquidation, reorganization,
dissolution or other winding up or other similar case or proceeding in
connection therewith, whether or not involving insolvency or bankruptcy,
relative to the Company or to its creditors, as such, or to the Company's
assets, whether voluntary or involuntary or (b) any general assignment for the
benefit of creditors or other marshalling of assets or liabilities of the
Company (except in connection with the merger or consolidation of the Company or
its liquidation or dissolution following the transfer of all or substantially
all of its assets, upon the terms and conditions permitted by Section 5.01),
then and in any such event:
(1) the holders of Senior Indebtedness of the Company will
be entitled to receive payment and satisfaction in full in cash of all
amounts due on or in respect of all Senior Indebtedness of the Company
before the holders of the Notes are entitled to receive or retain any
payment or distribution of any kind or character on account of the
Notes;
<PAGE> 87
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(2) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities,
including without limitation, by set-off or otherwise to which the
holders or the Trustee would be entitled but for the provisions of this
Article 10 shall be paid by the liquidating trustee or agent or other
Person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or otherwise, directly to
the holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Senior Indebtedness may
have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness held or represented by
each, to the extent necessary to make payment in full in cash of all
Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to the
holders of such Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing
provisions of this Section 10.02, the Trustee or the holder of any Note
shall have received any payment or distribution of assets of the
Company of any kind, whether in cash, property or securities,
including, without limitation, by way of set-off or otherwise, in
respect of the Notes before all Senior Indebtedness of the Company is
paid and satisfied in full in cash, then such payment or distribution
will be held by the recipient in trust for the benefit of holders of
Senior Indebtedness and will be immediately paid over or delivered to
the holders of Senior Indebtedness or their representative or
representatives to the extent necessary to make payment in full of all
Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for
the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the
Company with or into, another Person or the liquidation or dissolution of the
Company following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Article 5 hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Company for the purposes of this
Article 10 if the Person formed by such consolidation or the surviving entity of
such
<PAGE> 88
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merger or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in such Article 5 hereof.
Section 10.03. Suspension of Payment When Senior Indebtedness in Default.
----------------------------------------------------------
(a) Unless Section 10.02 hereof shall be applicable, after the
occurrence of a Payment Default on Designated Senior Indebtedness, no payment or
distribution of any kind or character (including, without limitation, cash,
property and any payment or distribution which may be payable or deliverable by
reason of the payment of any other Indebtedness of the Company being
subordinated to the payment of the Notes by the Company) may be made by or on
behalf of the Company or any Subsidiary of the Company, including, without
limitation, by way of set-off or otherwise, for or on account of the Notes, or
for or on account of the purchase, redemption or other acquisition of any Notes,
and neither the Trustee nor any holder or owner of any Notes shall take or
receive from the Company or any Subsidiary of the Company, directly or
indirectly in any manner, payment in respect of all or any portion of Notes
commencing on the date of receipt by the Trustee of written notice from the
representative of the holders of Designated Senior Indebtedness (the
"Representative") of the occurrence of such Payment Default, and in any such
event, such prohibition shall continue until such Payment Default is cured,
waived in writing or otherwise ceases to exist. At such time as the prohibition
set forth in the preceding sentence shall no longer be in effect, subject to the
provisions of the following paragraph (b), the Company shall resume making any
and all required payments in respect of the Notes, including any missed
payments.
(b) Unless Section 10.02 hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness,
no payment or distribution of any assets of the Company of any kind or character
(including, without limitation, cash, property and any payment or distribution
which may be payable or deliverable by reason of the payment of any other
indebtedness of the Company being subordinated to the payment of the Notes by
the Company) may be made by the Company or any Subsidiary of the Company,
including, without limitation, by way of set-off or otherwise, for or on account
of the Notes, or for or on account of the purchase, redemption or other
acquisition of any Notes, and neither the Trustee nor any holder or owner of any
Notes shall take or re-
<PAGE> 89
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ceive from the Company or any Subsidiary of the Company, directly or indirectly
in any manner, payment in respect of all or any portion of the Notes for a
period (a "Payment Blockage Period") commencing on the date of receipt by the
Trustee of written notice from the Representative of such Non-Payment Event of
Default unless and until (subject to any blockage of payments that may then be
in effect under the preceding paragraph) the earliest of (x) more than 179 days
shall have elapsed since receipt of such written notice by the Trustee, (y) such
Non-Payment Event of Default shall have been cured or waived in writing or
otherwise shall have ceased to exist or such Designated Senior Indebtedness
shall have been paid in full or (z) such Payment Blockage Period shall have been
terminated by written notice to the Company or the Trustee from such
Representative, after which, in the case of clause (x), (y) or (z), the Company
shall resume making any and all required payments in respect of the Notes,
including any missed payments. Notwithstanding any other provision of this
Indenture, in no event shall a Payment Blockage Period commenced in accordance
with the provisions of this Indenture described in this paragraph extend beyond
179 days from the date of the receipt by the Trustee of the notice referred to
above (the "Initial Blockage Period"). Any number of additional Payment Blockage
Periods may be commenced during the Initial Blockage Period; provided, however,
that no such additional Payment Blockage Period shall extend beyond the Initial
Blockage Period. After the expiration of the Initial Blockage Period, no Payment
Blockage Period may be commenced until at least 180 consecutive days have
elapsed from the last day of the Initial Blockage Period. Notwithstanding any
other provision of this Indenture, no Non-Payment Event of Default with respect
to Designated Senior Indebtedness which existed or was continuing on the date of
the commencement of any Payment Blockage Period initiated by the Representative
shall be, or be made, the basis for the commencement of a second Payment
Blockage Period initiated by the Representative, whether or not within the
Initial Blockage Period, unless such Non-Payment Event of Default shall have
been cured or waived for a period of not less than 90 consecutive days.
(c) In the event that, notwithstanding the foregoing, the
Trustee or the holder of any Note shall have received any payment prohibited by
the foregoing provisions of this Section 10.03, then and in such event such
payment shall be paid over and delivered forthwith to the authorized Person
initiating the Payment Blockage Period, in trust for distribution to the holders
of Senior Indebtedness or, if no amounts are then due in respect of Senior
Indebtedness, promptly returned to the
<PAGE> 90
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Company, or otherwise as a court of competent jurisdiction shall direct.
Section 10.04. Trustee's Relation to Senior Indebtedness.
------------------------------------------
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article 10, and no implied
covenants or obligations with respect to the holders of Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Indebtedness and the
Trustee shall not be liable to any holder of Senior Indebtedness if it shall
mistakenly pay over or deliver to holders, the Company or any other Person
moneys or assets to which any holder of Senior Indebtedness shall be entitled by
virtue of this Article 10 or otherwise.
Section 10.05. Subrogation to Rights of Holders of Senior Indebtedness.
-------------------------------------------------------
Upon the payment in full of all Senior Indebtedness, the
holders of the Notes shall be subrogated to the rights of the holders of such
Senior Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of,
premium, if any and interest on the Notes shall be paid in full. For purposes of
such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the holders of the
Notes or the Trustee would be entitled except for the provisions of this Article
10, and no payments over pursuant to the provisions of this Article 10 to the
holders of Senior Indebtedness by holders of the Notes or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Indebtedness and
the holders of the Notes, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
If any payment or distribution to which the holders would
otherwise have been entitled but for the provisions of this Article 10 shall
have been applied, pursuant to the provisions of this Article 10, to the payment
of all amounts payable under the Senior Indebtedness of the Company, then and in
such case the holders shall be entitled to receive from the holders of such
Senior Indebtedness at the time outstanding any payments or distributions
received by such holders of such Senior Indebtedness in excess of the amount
sufficient to pay all
<PAGE> 91
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amounts payable under or in respect of such Senior Indebtedness in full in cash.
Section 10.06. Provisions Solely to Define Relative Rights.
---------------------------------------------
The provisions of this Article 10 are and are intended solely
for the purpose of defining the relative rights of the holders of the Notes on
the one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Notes is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the holders of the Notes, the obligation of
the Company, which is absolute and unconditional, to pay to the holders of the
Notes the principal of, premium, if any, and interest on the Notes as and when
the same shall become due and payable in accordance with their terms; or (b)
affect the relative rights against the Company of the holders of the Notes and
creditors of the Company other than the holders of Senior Indebtedness; or (c)
prevent the Trustee or the holder of any Note from exercising all remedies
otherwise permitted by applicable law upon a Default or an Event of Default
under this Indenture, subject to the rights, if any, under this Article 10 of
the holders of Senior Indebtedness (1) in any case, proceeding, dissolution,
liquidation or other winding-up, assignment for the benefit of creditors or
other marshaling of assets and liabilities of the Company referred to in Section
10.02 hereof, to receive, pursuant to and in accordance with such Section, cash,
property and securities otherwise payable or deliverable to the Trustee or such
holder, or (2) under the conditions specified in Section 10.03, to prevent any
payment prohibited by such Section or enforce their rights pursuant to Section
10.03(c) hereof.
The failure to make a payment on account of principal of,
premium, if any, or interest on the Notes by reason of any provision of this
Article 10 shall not be construed as preventing the occurrence of a Default or
an Event of Default hereunder.
Section 10.07. Trustee to Effectuate Subordination.
------------------------------------
Each holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
re-
<PAGE> 92
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organization of the Company whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of the Company owing to such holder in the form required in
such proceedings and the causing of such claim to be approved. If the Trustee
does not file such a claim prior to 30 days before the expiration of the time to
file such a claim, the holders of Senior Indebtedness, or any authorized Person,
may file such a claim on behalf of holders of the Notes.
Section 10.08. No Waiver of Subordination Provisions.
--------------------------------------
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Company with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this
Section 10.08, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Trustee or the holders of the
Notes, without incurring responsibility to the holders of the Notes and without
impairing or releasing the subordination provided in this Article 10 or the
obligations hereunder of the holders of the Notes to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (3) release any Person liable in any manner for the collection or
payment of Senior Indebtedness; and (4) exercise or refrain from exercising any
rights against the Company and any other Person; provided, however, that in no
event shall any such actions limit the right of the holders of the Notes to take
any action to accelerate the maturity of the Notes pursuant to Article 6 hereof
or to pursue any rights or remedies hereunder or under applicable laws if the
taking of such action does not otherwise violate the terms of this Indenture.
<PAGE> 93
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Section 10.09. Notice to Trustee.
------------------
(a) The Company shall give prompt written notice to the
Trustee of any fact known to the Company which would prohibit the making of any
payment to or by the Trustee at its Corporate Trust Office in respect of the
Notes. Notwithstanding the provisions of this Article 10 or any other provision
of this Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee in respect of the Notes, unless and until the Trustee shall have
received written notice thereof from the Company or a holder of Senior
Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
this Section 10.09, shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section 10.09 at least five Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose under this Indenture (including, without limitation, the payment of the
principal of, premium, if any, or interest on any Note), then, anything herein
contained to the contrary notwithstanding but without limiting the rights and
remedies of the holders of Senior Indebtedness or any trustee, fiduciary or
agent therefor, the Trustee shall have full power and authority to receive such
money and to apply the same to the purpose for which such money was received and
shall not be affected by any notice to the contrary which may be received by it
within five Business Days prior to such date; nor shall the Trustee be charged
with knowledge of the curing of any such default or the elimination of the act
or condition preventing any such payment unless and until the Trustee shall have
received an Officers' Certificate to such effect.
(b) Subject to the provisions of Section 7.01 hereof, the
Trustee shall be entitled to rely on the delivery to it of a written notice to
the Trustee and the Company by a Person representing itself to be a holder of
Senior Indebtedness (or a trustee, fiduciary or agent therefor) to establish
that such notice has been given by a holder of Senior Indebtedness (or a
trustee, fiduciary or agent therefor); provided, however, that failure to give
such notice to the Company shall not affect in any way the ability of the
Trustee to rely on such notice. In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any Person
as a holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 10, the Trustee may request such Person to furnish
evidence
<PAGE> 94
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to the reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article 10, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
Section 10.10. Reliance on Judicial Order or Certificate of Liquidating Agent.
---------------------------------------------------------------
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee, subject to the provisions of
Section 7.01 hereof, and the holders shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the holders, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
Senior Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 10; provided that the foregoing shall
apply only if such court has been fully apprised of the provisions of this
Article 10.
Section 10.11. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
------------------------------------------------------
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article 10 with respect to any Senior
Indebtedness which may at any time be held by it, to the same extent as any
other holder of Senior Indebtedness, and nothing in this Indenture shall deprive
the Trustee of any of its rights as such holder. Nothing in this Article 10
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 7.07 hereof.
Section 10.12. Article Applicable to Paying Agents.
------------------------------------
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then
<PAGE> 95
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acting hereunder, the term "Trustee" as used in this Article 10 shall in such
case (unless the context otherwise requires) be construed as extending to and
including such Paying Agent within its meaning as fully for all intents and
purposes as if such Paying Agent were named in this Article 10 in addition to or
in place of the Trustee.
Section 10.13. No Suspension of Remedies.
-------------------------
Nothing contained in this Article 10 shall limit the right of
the Trustee or the holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article 6 or to pursue any rights or remedies
hereunder or under applicable law, subject to the rights, if any, under this
Article 10 of the holders, from time to time, of Senior Indebtedness.
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
Section 11.02. Notices.
--------
Any notice or communication shall be given in writing and
delivered in person, sent by facsimile, delivered by commercial courier service
or mailed by first-class mail, postage prepaid, addressed as follows:
If to the Company:
Park-Ohio Industries, Inc.
23000 Euclid Avenue
Cleveland, Ohio 44117
Attention: Ronald J. Cozean, Esq.
<PAGE> 96
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Copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: David P. Porter, Esq.
If to the Trustee:
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Fax Number: (612) 667-9825
Such notices or communications shall be effective when
received and shall be sufficiently given if so given within the time prescribed
in this Indenture.
The Company or the Trustee by written notice to the others may
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Noteholder shall be
mailed to him by first-class mail, postage prepaid, at his address shown on the
register kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or
any defect in it shall not affect its sufficiency with respect to other
Noteholders. If a notice or communication to a Noteholder is mailed in the
manner provided above, it shall be deemed duly given, whether or not the
addressee receives it.
In case by reason of the suspension of regular mail service,
or by reason of any other cause, it shall be impossible to mail any notice as
required by this Indenture, then such method of notification as shall be made
with the approval of the Trustee shall constitute a sufficient mailing of such
notice.
Section 11.03. Communications by Holders with Other Holders.
---------------------------------------------
Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this
<PAGE> 97
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Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else
shall have the protection of TIA ss. 312(c).
Section 11.04. Certificate and Opinion as to Conditions Precedent.
---------------------------------------------------
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate (which shall include the
statements set forth in Section 11.05 below) stating that, in the
opinion of the signers, all conditions precedent, if any, provided for
in this Indenture relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel (which shall include the
statements set forth in Section 11.05 below) stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with.
Section 11.05. Statements Required in Certificate and Opinion.
------------------------------------------------
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it or
he has made such examination or investigation as is necessary to enable
it or him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such covenant or condition has been complied with.
<PAGE> 98
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Section 11.06. When Treasury Notes Disregarded.
---------------------------------
In determining whether the holders of the required aggregate
principal amount of Notes have concurred in any direction, waiver or consent,
Notes owned by the Company or any other obligor on the Notes or by any Affiliate
of any of them shall be disregarded, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes which the Trustee actually knows are so owned shall be so
disregarded. Notes so owned which have been pledged in good faith shall not be
disregarded if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to the Notes and that the pledgee is not
the Company or any other obligor upon the Notes or any Affiliate of any of them.
Section 11.07. Rules by Trustee and Agents.
----------------------------
The Trustee may make reasonable rules for action by or
meetings of Noteholders. The Registrar and Paying Agent may make reasonable
rules for their functions.
Section 11.08. Business Days; Legal Holidays.
------------------------------
A "Business Day" is a day that is not a Legal Holiday. A
"Legal Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day
on which banking institutions are not required to be open in the State of New
York. If a payment date is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
Section 11.09. Governing Law.
--------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
<PAGE> 99
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Section 11.10. No Adverse Interpretation of Other Agreements.
----------------------------------------------
This Indenture may not be used to interpret another indenture,
loan, security or debt agreement of the Company or any Subsidiary thereof. No
such indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 11.11. No Recourse Against Others.
---------------------------
A director, officer, employee, stockholder or incorporator, as
such, of the Company shall not have any liability for any obligations of the
Company under the Notes or this Indenture or for any claim based on, in respect
of or by reason of such obligations or their creations. Each Noteholder by
accepting a Note waives and releases all such liability. Such waiver and release
are part of the consideration for the issuance of the Notes.
Section 11.12. Successors.
-----------
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee, any additional trustee
and any Paying Agents in this Indenture shall bind its successor.
Section 11.13. Multiple Counterparts.
-----------------------
The parties may sign multiple counterparts of this Indenture.
Each signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 11.14. Table of Contents, Headings, etc.
---------------------------------
The table of contents, cross-reference sheet and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 11.15. Separability.
-------------
Each provision of this Indenture shall be considered separable
and if for any reason any provision which is not essential to the effectuation
of the basic purpose of this Indenture or the Notes shall be invalid, illegal or
unenforceable,
<PAGE> 100
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the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
<PAGE> 101
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IN WITNESS WHEREOF, the parties have caused this Indenture to
be duly executed, and the Company's corporate seal to be hereunto affixed and
attested, all as of the date and year first written above.
PARK-OHIO INDUSTRIES, INC.
By: /s/ James S. Walker
------------------------------
Name:
Title:
ATTEST:
/s/ Ronald J. Cozean
- ----------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By: /s/ Ray Haverstock
------------------------------
Name:
Title:
<PAGE> 102
EXHIBIT A
(FACE OF NOTE)
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES (1) THAT IT WILL
NOT PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE OF THIS NOTE AND THE LAST DATE
ON WHICH THE COMPANY, OR ANY AFFILIATE OF THE COMPANY, WAS THE OWNER OF THIS
SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), RESELL OR OTHERWISE TRANSFER
THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE
UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S.
BROKER-DEALER) TO THE COMPANY AND TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT; AND (2) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE PRIOR TO THE RESALE RESTRICTION
TERMINATION DATE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE ACT.
A-1
<PAGE> 103
CUSIP
Number
PARK-OHIO INDUSTRIES, INC.
9 1/4% SENIOR SUBORDINATED NOTE DUE 2007
Park-Ohio Industries, Inc., an Ohio corporation (the
"Company", which term includes any successor corporation), for value received
promises to pay to CEDE & CO. or registered assigns the principal sum of $
Dollars, on December 1, 2007.
Interest Payment Dates: June 1 and December 1, commencing
June 1, 1998
Record Dates: May 15 and November 15
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
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<PAGE> 104
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
PARK-OHIO INDUSTRIES, INC.
By:
--------------------------------
By:
--------------------------------
[SEAL]
Certificate of Authentication:
This is one of the 9 1/4% Senior
Subordinated Notes due 2007 referred
to in the within-mentioned Indenture
Dated:
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
-----------------------------
Authorized Signatory
A-3
<PAGE> 105
(REVERSE SIDE)
PARK-OHIO INDUSTRIES, INC.
9 1/4% SENIOR SUBORDINATED NOTE DUE 2007
1. INTEREST.
PARK-OHIO INDUSTRIES, Inc., an Ohio corporation (the
"Company"), promises to pay interest on the principal amount of this Note
semiannually on June 1 and December 1 of each year (each an "Interest Payment
Date"), commencing on June 1, 1998, at the rate of 9 1/4% per annum. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of the original
issuance of the Notes.
The Company shall pay interest on overdue principal, and on
overdue premium, if any, and overdue interest, to the extent lawful, at the rate
equal to 1% per annum in excess of the rate borne by the Notes.
2. METHOD OF PAYMENT.
The Company will pay interest on this Note provided for in
Paragraph 1 above (except defaulted interest) to the person who is the
registered holder of this Note at the close of business on the May 15 or
November 15 preceding the Interest Payment Date (whether or not such day is a
Business Day). The holder must surrender this Note to a Paying Agent to collect
principal payments. The Company will pay principal, premium, if any, and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts; provided, however, that the
Company may pay principal, premium, if any, and interest by check payable in
such money. It may mail an interest check to the holder's registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, Norwest Bank Minnesota, National Association, a
national banking association (the "Trustee"), will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to the holders of the Notes. Neither the Company nor any of its Subsidiaries or
Af-
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<PAGE> 106
filiates may act as Paying Agent but may act as registrar or co-registrar.
4. INDENTURE; RESTRICTIVE COVENANTS.
The Company issued this Note under an Indenture dated as of
November 25, 1997 (the "Indenture") between the Company and the Trustee. The
terms of this Note include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture. This
Note is subject to all such terms, and the holder of this Note is referred to
the Indenture and said Trust Indenture Act for a statement of them. All
capitalized terms in this Note, unless otherwise defined, have the meanings
assigned to them by the Indenture.
The Notes are general unsecured obligations of the Company
limited to $150,000,000 aggregate principal amount. The Indenture imposes
certain restrictions on, among other things, the incurrence of indebtedness, the
incurrence of liens and the issuance of preferred stock by the Company and its
subsidiaries, mergers and sale of assets, the payments of dividends on, or the
repurchase of, capital stock of the Company and its subsidiaries, certain other
restricted payments by the Company and its subsidiaries, certain transactions
with, and investments in, its affiliates, certain sale and lease-back
transactions and a provision regarding change-of-control transactions.
5. SUBORDINATION.
The Indebtedness evidenced by the Notes is, to the extent and
in the manner provided in the Indenture, subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness as defined in
the Indenture, and this Note is issued subject to such provisions. Each holder
of this Note, by accepting the same; (a) agrees to and shall be bound by such
provisions; (b) authorizes and directs the Trustee, on behalf of such holder, to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture; and (c) appoints the Trustee
attorney-in-fact of such holder for such purpose; provided, however, that the
Indebtedness evidenced by this Note shall cease to be so subordinate and subject
in right of payment upon any defeasance of this Note referred to in Paragraph 18
below.
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<PAGE> 107
6. OPTIONAL REDEMPTION.
The Company may redeem the Notes, in whole or in part, at any
time on or after December 1, 2002 at the redemption prices set forth in Section
3.07 of the Indenture, together, in each case, with accrued and unpaid interest
to the redemption date.
In addition, the Company may redeem Notes out of the Net
Proceeds of one or more Public Equity Offerings at the redemption price, in the
amount and under the terms set forth in the Indenture.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at
least 30 days but not more than 60 days prior to the redemption date to each
holder of Notes to be redeemed at its registered address as it shall appear on
the register of the Notes maintained by the Registrar. On and after any
Redemption Date, interest will cease to accrue on the Notes or portions thereof
called for redemption unless the Company shall fail to redeem any such Note.
8. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales
be used, subject to further limitations contained therein, to make an offer to
purchase certain amounts of Notes in accordance with the procedures set forth in
the Indenture. The Company is also required to make an offer to purchase Notes
upon occurrence of a Change of Control in accordance with procedures set forth
in the Indenture.
9. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the
Company and CIBC Wood Gundy Securities Corp., Merrill Lynch & Co. and Value
Investing Partners, Inc., as Initial Purchasers of the Notes, the Company will
be obligated to consummate an exchange offer pursuant to which the holder of
this Note shall have the right to exchange this Note for Notes of a separate
series issued under the Indenture (or a trust indenture substantially identical
to the Indenture in accordance with the terms of the Registration Rights
Agreement) which have been registered under the Securities Act, in like
principal amount and having substantially identical terms as the Notes. The
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<PAGE> 108
holders shall be entitled to receive certain additional interest payments in the
event such exchange offer is not consummated and upon certain other conditions,
all pursuant to and in accordance with the terms of the Registration Rights
Agreement.
10. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in
denominations of $1,000 and integral multiples thereof. A holder may register
the transfer or exchange of Notes in accordance with the Indenture. The
Registrar may require a holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Note selected for redemption or register the transfer of or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed or any Note after it is called for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
11. PERSONS DEEMED OWNERS.
The registered holder of this Note may be treated as the owner
of it for all purposes.
12. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on
any Note remains unclaimed for two years, the Trustee or Paying Agent will pay
the money back to the Company at its request. After that, holders entitled to
money must look to the Company for payment as general creditors unless an
"abandoned property" law designates another person.
13. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may
be modified, amended or supplemented by the Company and the Trustee with the
consent of the holders of at least a majority in principal amount of the Notes
then outstanding and any existing default or compliance with any provision may
be waived in a particular instance with the consent of the holders of a majority
in principal amount of the Notes then outstanding. Without the consent of
holders, the Company and the Trustee may amend the Indenture or the Notes or
supplement the Indenture for certain specified purposes including providing for
A-7
<PAGE> 109
uncertificated Notes in addition to certificated Notes, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
materially and adversely affect the rights of any holder.
14. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of
its predecessor under the Notes and the Indenture and immediately before and
thereafter no Default exists and certain other conditions are satisfied, the
predecessor corporation will be released from those obligations.
15. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event
of Default (other than an Event of Default pursuant to Section 6.01(vii) of the
Indenture with respect to the Company) occurs and is continuing, the Trustee by
notice to the Company, or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding, may declare to be immediately
due and payable the entire principal amount of all the Notes then outstanding
plus accrued but unpaid interest to the date of acceleration; provided, however,
that after such acceleration but before judgment or decree based on such
acceleration is obtained by the Trustee, the holders of a majority in aggregate
principal amount of the outstanding Notes may, under certain circumstances,
rescind and annul such acceleration and its consequences if all existing Events
of Default, other than the nonpayment of principal, premium or interest that has
become due solely because of the acceleration, have been cured or waived and if
the rescission would not conflict with any judgment or decree. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto. In case an Event of Default specified in Section 6.01(vii) of the
Indenture with respect to the Company occurs, such principal amount, together
with premium, if any, and interest with respect to all of the Notes, shall be
due and payable immediately without any declaration or other act on the part of
the Trustee or the holders of the Notes.
16. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company and may otherwise deal with the Company as if it were not
Trustee.
A-8
<PAGE> 110
17. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Notes or the Indenture or for any
claim based on, in respect or by reason of, such obligations or their creation.
The holder of this Note by accepting this Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of this Note.
18. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain covenants in the
Indenture upon compliance by the Company with certain conditions set forth in
the Indenture.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a holder of
a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (joint tenants with right of survivorship and
not as tenants in common), CUST (= Custodian), and U/G/M/A (Uniform Gifts to
Minors Act).
20. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP Numbers
to be printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to holders of the Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
21. GOVERNING LAW.
THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PRO-
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<PAGE> 111
CEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THE NOTES.
THE COMPANY WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN
REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO:
Park-Ohio Industries, Inc., 23000 Euclid Avenue, Cleveland, Ohio 44117,
Attention: Secretary.
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<PAGE> 112
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note
purchased by the Company pursuant to Section 4.10 or Section 4.17 of the
Indenture, check the appropriate box:
- Section 4.10 - Section 4.17
If you want to have only part of the Note purchased by the Company pursuant to
Section 4.09 or Section 4.16 of the Indenture, state the amount you elect to
have purchased:
$
------------------------
Date:
--------------------
Your Signature:
-------------------------------------
(Sign exactly as your name appears on the face
of this Note)
- ----------------------------
Signature Guaranteed
<PAGE> 113
EXHIBIT B
---------
FORM OF LEGEND FOR GLOBAL NOTES
Any Global Note authenticated and delivered hereunder shall
bear a legend (which would be in addition to any other legends required in the
case of a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS
NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE,
AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE
OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION)
(THE "DEPOSITORY") TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
<PAGE> 114
EXHIBIT C-1
[FORM OF ASSIGNMENT FOR 144A NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided
by Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.
Date: Your Signature:
------------------------- --------------------------
--------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:
---------------------------------
C-1-1
<PAGE> 115
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: __________________ ____________________________
NOTICE: To be executed by
an executive officer
C-1-2
<PAGE> 116
EXHIBIT C-2
[FORM OF ASSIGNMENT FOR REGULATION S NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided
by Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.
Date: Your Signature:
---------------------- -----------------------------------
--------------------------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ____________________________________
C-2-1
<PAGE> 117
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: __________________ __________________________
NOTICE: To be executed by
an executive officer
C-2-2
<PAGE> 118
EXHIBIT D
---------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
-----------, ----
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Re: Park-Ohio Industries, Inc.
(the "Company") 9 1/4% Senior
Subordinated Notes due 2007
(the "Notes")
-------------------------------
Dear Sirs:
In connection with our proposed purchase of $_______ aggregate
principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the
Indenture dated as of November 25, 1997 relating to the Notes and the
undersigned agrees to be bound by, and not to resell, pledge or
otherwise transfer the Securities except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended
(the "Securities Act").
2. We understand that the Notes have not been registered under
the Securities Act, and that the Notes may not be offered or sold
except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Notes within two years
after the original issuance of the Notes, we will do so only (A) to the
Company or any subsidiary thereof; (B) inside the United States in
compliance with Rule 144A under the Securities Act, to a "qualified
institutional buyer" (as defined in Rule 144A); (C) inside the United
States to an "accredited investor" (as defined below) that, prior to
such transfer, furnishes to you a signed letter substantially in the
form of this letter; (D) outside the United States to a foreign person
in compliance with Rule 904 of Regulation S under the Securities Act;
(E) pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available), or (F) pursuant to an
effective registration statement under the Securities
D-1
<PAGE> 119
Act, and we further agree to provide to any person purchasing any of
the Notes from us a notice advising such purchaser that resales of the
Notes are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we
will be required to furnish to you and the Company such certifications,
legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that the Notes purchased
by us will bear a legend to the foregoing effect.
4. We are an "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) and have such
knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment.
5. We are acquiring the Notes purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
6. We are not acquiring the Notes with a view toward the
distribution thereof in a transaction that would violate the Securities
Act or the securities laws of any state of the United States or any
other applicable jurisdiction.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
------------------------
Authorized Signature
D-2
<PAGE> 120
EXHIBIT E
---------
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
--------------, ----
Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Re: Park-Ohio Industries, Inc.
(the "Company") 9 1/4% Senior
Subordinated Notes due 2007
(the "Notes")
------------------------------
Dear Sirs:
In connection with our proposed sale of $___________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through
the facilities of a designated off-shore securities market and neither
we nor any person acting on our behalf knows that the transaction has
been pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
E-1
<PAGE> 121
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-----------------------
Authorized Signature
E-2
<PAGE> 1
Exhibit 4.8
SIXTH AMENDMENT AGREEMENT
This Sixth Amendment Agreement is made as of the 18th day of November,
1997, by and among PARK-OHIO INDUSTRIES, INC., an Ohio corporation ("Borrower"),
KEYBANK NATIONAL ASSOCIATION (successor by merger to Society National Bank), as
Agent ("Agent") and the banking institutions listed on Annex 1 attached hereto
and made a part hereof ("Banks"):
WHEREAS, Borrower, Agent and the Banks are parties to a certain Credit
Agreement dated as of April 11, 1995, as amended and as it may from time to time
be further amended, restated or otherwise modified, which provides, among other
things, for a revolving credit and a term loan aggregating One Hundred
Seventy-Five Million Dollars, all upon certain terms and conditions ("Credit
Agreement");
WHEREAS, Borrower, Agent and the Banks desire to amend the Credit
Agreement to reduce the amount of the credit facility to Fifty Million Dollars
($50,000,000) and to modify certain other provisions thereof;
WHEREAS, each term used herein shall be defined in accordance with the
Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein and for other valuable considerations, Borrower, Agent and the
Banks agree as follows:
1. As used in this Sixth Amendment Agreement, "Effective Date" shall
mean the date when all of the following shall have occurred:
(a) Borrower shall have made a prepayment in full of the Term Loan in
an amount equal to the unpaid principal balance of the Term Loan, together with
all interest accrued thereon through the date of such prepayment.
(b) Borrower shall have made a prepayment of the Revolving Loans such
that the aggregate principal amount of all outstanding Revolving Loans shall not
exceed Fifty Million Dollars ($50,000,000).
(c) With respect to each prepayment of a LIBOR Loan pursuant to (a) and
(b) hereof, Borrower shall have paid to Agent, for the account of each of the
Banks, any prepayment penalty required to be paid pursuant to Section 2.4 of the
Credit Agreement as a result of such prepayment.
(d) Borrower shall have complied with each of the conditions set forth
in Section 19 of this Sixth Amendment Agreement.
(e) Borrower shall have furnished to Agent and each Bank a copy of the
Indenture and ancillary documents relating to the Senior Subordinated Notes,
including, but not limited to any Offering Memorandum prepared in connection
therewith, certified by the Secretary of Borrower as
<PAGE> 2
being true and complete, which Indenture shall be substantially in the form of
the draft of the Indenture delivered to Agent on or prior to the date of this
Sixth Amendment Agreement.
(f) The Senior Subordinated Notes shall have been issued to the Senior
Subordinated Noteholders.
(g) A portion of the proceeds of the Senior Subordinated Notes shall
have been placed in escrow pursuant to the provisions of the indenture relating
to the 7.25% Convertible Senior Subordinated Debentures, due June 15, 2004, for
payment in full of all Indebtedness outstanding under such debentures, and the
then remaining balance of such proceeds shall have been paid and applied (i) as
a prepayment in full of the Term Loan pursuant to subpart (a) of this Section 1
and (ii) as a partial prepayment of the Revolving Loans.
(h) Borrower shall have delivered to Agent an opinion of counsel for
Borrower (in the form agreed to by Agent and Borrower on or prior to the date of
this Sixth Amendment Agreement) with respect to the transactions contemplated by
the Indenture and with respect to this Sixth Amendment Agreement.
All of the subparts of this Section 1 shall be deemed to have occurred
simultaneously if all of such subparts shall have occurred and none shall be
deemed to have occurred if any one of them shall not have occurred.
2. As of the Effective Date, Article I of the Credit Agreement is
hereby amended to delete the definitions of "Revolving Credit Commitment" and
"Total Commitment Amount" in their entirety and to insert in place thereof the
following:
"Revolving Credit Commitment" shall mean the obligation
hereunder of the Banks, during the Commitment Period, to make Revolving
Loans up to an aggregate principal amount outstanding at any time equal
to Fifty Million Dollars ($50,000,000) (or such lesser amount as shall
be determined pursuant to Section 2.5 hereof).
"Total Commitment Amount" shall mean the obligation hereunder
of the Banks, during the Commitment Period, to make Revolving Loans to
Borrower up to the maximum aggregate principal amount outstanding at
any time equal to Fifty Million Dollars ($50,000,000) (or such lesser
amount as shall be determined pursuant to Section 2.5 hereof).
3. Article I of the Credit Agreement is hereby amended to delete the
definitions of "Consolidated Cash-In-Flow", "Consolidated Cash-Out-Flow",
"Subsidiary" and "Total Funded Indebtedness" in their entirety and to insert in
place thereof, respectively, the following:
"Consolidated Cash-In-Flow" shall mean, for the time period in
question and on a consolidated basis and in accordance with generally
accepted accounting principles not inconsistent with Borrower's present
accounting procedures, the aggregate of (a) Consolidated Net Earnings,
plus (b) Consolidated Depreciation, Obsolescence and
2
<PAGE> 3
Amortization Charges, minus (c) Capital Distributions (provided that
Borrower's repurchase of the 7.25% Convertible Senior Subordinated
Debentures, due June 15, 2004, after the Effective Date (as described
in the Sixth Amendment Agreement, dated as of November 18, 1997 to this
Credit Agreement) shall not constitute a Capital Distribution for
purposes of determining Consolidated Cash-In-Flow).
"Consolidated Cash-Out-Flow" shall mean, for the time period
in question and on a consolidated basis and in accordance with
generally accepted accounting principles not inconsistent with
Borrower's present accounting procedures, the aggregate of (a) the
current portion of Funded Indebtedness for the period in question as of
the end of that period, (b) all Capital Expenditures, and (c) all
capital assets acquired for cash (nonborrowed money) as a result of one
or more corporate acquisitions, mergers and/or consolidations;
provided, however, that Borrower's repayment of the Term Loan and
Revolving Loans with the proceeds of the Senior Subordinated Notes
after the Effective Date (as described in the Sixth Amendment
Agreement, dated as of November 18, 1997 to this Credit Agreement)
shall be excluded from Consolidated Cash-Out-Flow.
"Subsidiary" of Borrower or any of its Subsidiaries shall mean
(a) a corporation more than fifty percent (50%) of the voting power or
capital stock of which is owned, directly or indirectly, by Borrower or
by one or more other Subsidiaries of Borrower or by Borrower and one or
more Subsidiaries of Borrower, (b) a partnership or limited liability
company of which Borrower, one or more other Subsidiaries of Borrower
or Borrower and one or more Subsidiaries of Borrower, directly or
indirectly, is a general partner or managing member, as the case may
be, or otherwise has the power to direct the policies, management and
affairs thereof, or (c) any other Person (other than a corporation) in
which Borrower, one or more other Subsidiaries of Borrower or such
Person, directly or indirectly, has at least a majority ownership
interest or the power to direct the policies, management and affairs
thereof.
"Total Funded Indebtedness" shall mean, on a consolidated
basis and in accordance with generally acceptable accounting principles
not inconsistent with Borrower's present accounting procedures, all
Funded Indebtedness of Borrower.
4. Article I of the Credit Agreement is hereby amended to add the
following new definitions thereto:
"Companies" shall mean Borrower and all Subsidiaries.
"Compliance Certificate" shall mean a certificate in the form
of Exhibit C attached hereto.
"Financial Officer" shall mean any of the following officers:
chief executive officer, president, chief financial officer, director
of finance or controller.
3
<PAGE> 4
"Funded Indebtedness" shall mean, for any period, all
Indebtedness that is funded, including, but not limited to, current,
long-term and Subordinated Indebtedness; provided, however, that (a)
reimbursement obligations (contingent or otherwise) under any letter of
credit, banker's acceptance, interest rate swap, cap, collar or floor
agreement or other interest rate management device shall not be deemed
to be "funded" so long as such obligation remains solely a contingent
obligation, and (b) any guaranty shall be deemed to be "funded" but
shall be measured without duplication to Indebtedness otherwise
included as "funded".
"Indenture" shall mean that certain Indenture dated in
November of 1997, between Borrower and Norwest Bank Minnesota, National
Association, as trustee, pursuant to which the Senior Subordinated
Notes will be issued to the Senior Subordinated Noteholders.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
corporation, limited liability company, institution, trust, estate,
government or other agency or political subdivision thereof or any
other entity.
"Senior Subordinated Noteholder" shall mean any one of the
Senior Subordinated Noteholders under the Indenture.
"Senior Subordinated Notes" shall mean the Senior Subordinated
Notes issued pursuant to the Indenture in November of 1997 and due in
2007.
5. Section 5.3 of the Credit Agreement is hereby amended to add the
following new subpart (f) thereto:
(f) concurrently with the delivery of the financial
statements in (a) and (b) above, a Compliance Certificate.
6. As of the Effective Date, Section 5.11 of the Credit Agreement is
hereby deleted in its entirety with the following being inserted in place
thereof:
SECTION 5.11. BORROWING. The Companies shall not create, incur
or have outstanding any obligation for borrowed money or any
Indebtedness of any kind; provided that this Section shall not apply to
(a) the Loans; (b) any loans granted to Borrower evidenced by
promissory notes issued pursuant to any other agreement hereafter in
effect so long as the aggregate principal amount of all such loans does
not exceed Two Hundred Fifty Thousand Dollars ($250,000) at any one
time outstanding; (c) the Indebtedness set forth in Annex 2 attached
hereto and made a part hereof, provided that the 7.25% Convertible
Senior Subordinated Debentures, due June 15, 2004 shall be specifically
deleted therefrom; (d) loans to a Company from a Company so long as
each such Company is Borrower or a Guarantor of Payment; or (e) the
Indebtedness evidenced by the Senior Subordinated Notes up to an
aggregate principal amount of One Hundred Seventy Five Million Dollars
($175,000,000), which proceeds shall be used solely for (i) payment of
the 7.25% Convertible Senior Subordinated Debentures, due June 15,
2004, (ii) payment of the Term
4
<PAGE> 5
Loan, (iii) payment of the Revolving Loans, and (iv) working capital
purposes in the ordinary course of business.
7. Section 5.17 of the Credit Agreement is hereby deleted in its
entirety with the following being inserted in place thereof:
SECTION 5.17. NOTICE.
(a) Borrower shall cause a Financial Officer of Borrower to
promptly notify Agent and the Banks whenever any Possible Default or
Event of Default may occur hereunder or any other representation or
warranty made in Article VI hereof or elsewhere in this Credit
Agreement or in any Related Writing may for any reason cease in any
material respect to be true and complete; and
(b) Borrower shall provide notice to Agent and the Banks
contemporaneously with any notice provided to the trustee or the Senior
Subordinated Noteholders under the Indenture or the Senior Subordinated
Notes.
8. Section 5.20 of the Credit Agreement is hereby deleted in its
entirety with the following being inserted in place thereof:
SECTION 5.20. Borrower's use of the proceeds of the Revolving
Credit Commitment shall be solely for working capital purposes of
Borrower and the Guarantors of Payment, in the ordinary course of
business (which shall specifically exclude any acquisition or
investment (other than investments allowed pursuant to subparts (i),
(ii) and (iii) of Section 5.14 hereof)).
9. Section 5.25 of the Credit Agreement is hereby deleted in its
entirety with the following being inserted in place thereof:
SECTION 5.25. TOTAL DEBT TO CAPITALIZATION. Borrower and its
Consolidated Subsidiaries will not suffer or permit at any time, on a
consolidated basis, the ratio of (a) Total Funded Indebtedness to (b)
Total Funded Indebtedness plus Equity, to exceed (i) .60 to 1.00 on
June 30, 1997 through March 30, 1998, (ii) .55 to 1.00 on March 31,
1998 through December 31, 1998, and (iii) .50 to 1.00 on January 1,
1999 and thereafter, based upon Borrower's financial statements for the
most recent calendar quarter.
10. Article VII of the Credit Agreement is hereby amended to add the
following new Sections thereto:
SECTION 7.10. DESIGNATED SENIOR INDEBTEDNESS. If any Company
shall incur or permit to exist any Designated Senior Indebtedness (as
defined in the Indenture) other than the Debt.
5
<PAGE> 6
SECTION 7.11. SENIOR SUBORDINATED INDEBTEDNESS. If (a) any
Event of Default (as defined in the Indenture), or any event or
condition which with the lapse of time or giving of notice or both
would constitute an Event of Default (as defined in the Indenture),
shall exist under the Indenture, the Senior Subordinated Notes or any
agreement executed by Borrower in connection therewith, (b) without the
prior written consent of Agent and the Majority Banks, the Indenture or
the Senior Subordinated Notes shall be amended or modified in any
respect, (c) the Senior Subordinated Notes shall be accelerated for any
reason, or (d) if the Indebtedness evidenced by the Senior Subordinated
Notes, or any portion thereof, shall at any time fail or cease to be
Subordinated to the Debt, or any portion of the Debt, including, but
not limited to, the principal of each Note, all interest thereon and
all commitment and other fees under this Credit Agreement.
SECTION 7.12. EFFECTIVENESS OF SIXTH AMENDMENT. If the Senior
Subordinated Notes shall have been issued and the Effective Date (as
described in the Sixth Amendment Agreement, dated as of November 18,
1997 to this Credit Agreement) shall not have occurred.
11. Section 8.1 of the Credit Agreement is hereby deleted in its
entirety with the following being inserted in place thereof:
SECTION 8.1. OPTIONAL DEFAULTS. If any Event of Default
referred to in Section 7.1, 7.2., 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.10,
7.11 or 7.12 hereof shall occur, the Majority Banks shall have the
right in their discretion, by directing Agent, on behalf of the Banks,
to give written notice to Borrower, to
(a) terminate the Commitments and the credits hereby
established, if not theretofore terminated, and, immediately upon such
election, the obligations of the Banks, and each thereof, to make any
further Loan or Loans hereunder, immediately shall be terminated,
and/or
(b) accelerate the maturity of all of the Debt (if it be not
already due and payable), whereupon all of the Debt shall become and
thereafter be immediately due and payable in full without any
presentment or demand and without any further or other notice of any
kind, all of which are hereby waived by Borrower.
12. As of the Effective Date, the Term Loan Commitment shall be deemed
to have been terminated.
13. After the Term Loan has been paid in full pursuant to Section 1 of
this Sixth Amendment Agreement, each Bank will mark its Term Note being prepaid
"Canceled" and return the same to Agent for delivery to Borrower.
14. After the date of this Sixth Amendment Agreement, and any provision
of the Credit Agreement to the contrary notwithstanding, no Company shall (a)
acquire the assets or stock of any
6
<PAGE> 7
Person, (b) make or hold any investment in any stocks, bonds or securities of
any kind for the purpose of acquiring the assets or stock of any Person, or, to
the extent such investments (described in subpart (b) hereof) already exist,
Borrower shall take no further or additional action to consummate or continue
any such efforts which would have the effect of pursuing an acquisition.
15. Within fourteen (14) days after the date of this Sixth Amendment
Agreement, (a) Borrower shall cause Friendly & Safe Packaging Systems, Inc. to
execute and deliver to Agent (i) a Guaranty of Payment, and (ii) an officer's
certificate certifying the names of the officers of such Company authorized to
sign the Guaranty of Payment, together with the true signatures of such officers
and certified copies of (A) the resolutions of the board of directors of such
Company evidencing approval of the execution and delivery of the Guaranty of
Payment and the execution of other Related Writings to which such Company is a
party, and (B) the Articles (or Certificate) of Incorporation and all amendments
thereto of such Company; and (b) Borrower shall deliver an opinion of counsel
acceptable to Agent with respect to Friendly & Safe Packaging System, Inc.
16. As of the Effective Date, the Credit Agreement is hereby amended by
deleting Annex 1 thereof in its entirety and by inserting in place thereof a new
Annex 1, in the form of Annex 1 attached hereto.
17. As of the Effective Date, the Credit Agreement is hereby amended by
deleting Exhibit A in its entirety and by substituting in place thereof a new
Exhibit A in the form of Exhibit A attached hereto.
18. The Credit Agreement is hereby amended by adding a new Exhibit C in
the form of Exhibit C attached hereto.
19. Concurrently with the execution of this Sixth Amendment Agreement,
Borrower shall:
(a) execute and deliver to Agent new Revolving Credit Notes dated as of
April 11, 1995, made payable to each Bank and in the form and substance of
Exhibit A attached hereto;
(b) pay all legal fees and expenses of Agent incurred on or prior to
the date hereof in connection with this Sixth Amendment Agreement, the Credit
Agreement, the issuance of the Senior Subordinated Notes, and the preparation
and negotiation of all loan documentation, whether executed or unexecuted,
involving Borrower, Agent and the Banks;
(c) cause each Guarantor of Payment to consent and agree to and
acknowledge the terms of this Sixth Amendment Agreement;
(d) (i) cause each of Advance Vehicles, Inc., Arden Industrial
Products, Inc. and General Aluminum Manufacturing Company II to execute and
deliver to Agent (A) a Guaranty of Payment; and (B) an officer's certificate
certifying the names of the officers of each such Company authorized to sign the
Guaranty of Payment, together with the true signatures of such officers and
certified
7
<PAGE> 8
copies of (x) the resolutions of the board of directors of such Company
evidencing approval of the execution and delivery of the Guaranty of Payment and
the execution of other Related Writings to which such Company is a party, and
(y) the Articles (or Certificate) of Incorporation and all amendments thereto of
such Company; and (ii) deliver to Agent an opinion of counsel acceptable to
Agent; and
(e) provide such other items as may be reasonably required by Agent or
the Banks on or prior to the date of this Sixth Amendment Agreement.
20. Agent shall hold the new Revolving Credit Notes in escrow until the
Effective Date. On the Effective Date, Agent shall deliver to each Bank its new
Revolving Credit Note. After a Bank receives a new Revolving Credit Note, such
Bank will mark its Revolving Credit Note being replaced thereby "Replaced" and
return the same to Agent for delivery to Borrower;
21. Borrower hereby represents and warrants to Agent and the Banks that
(a) Borrower has the legal power and authority to execute and deliver this Sixth
Amendment Agreement; (b) the officers executing this Sixth Amendment Agreement
have been duly authorized to execute and deliver the same and bind Borrower with
respect to the provisions hereof; (c) the execution and delivery hereof by
Borrower and the performance and observance by Borrower of the provisions hereof
do not violate or conflict with the organizational agreements of Borrower or any
law applicable to Borrower or result in a breach of any provision of or
constitute a default under any other agreement, instrument or document binding
upon or enforceable against Borrower; (d) no Possible Default or Event of
Default exists under the Credit Agreement, nor will any occur immediately after
the execution and delivery of this Sixth Amendment Agreement or by the
performance or observance of any provision hereof; (e) neither Borrower nor any
Subsidiary has any claim or offset against, or defense or counterclaim to, any
of Borrower's or any Subsidiary's obligations or liabilities under the Credit
Agreement or any Related Writing, and Borrower and each Subsidiary hereby waives
and releases Agent and each of the Banks and their respective directors,
officers, employees, attorneys, affiliates and subsidiaries from any and all
such claims, offsets, defenses and counterclaims of which Borrower and any
Subsidiary is aware, such waiver and release being with full knowledge and
understanding of the circumstances and effect thereof and after having consulted
legal counsel with respect thereto; and (f) this Sixth Amendment Agreement
constitutes a valid and binding obligation of Borrower in every respect,
enforceable in accordance with its terms.
22. Each reference that is made in the Credit Agreement or any other
writing to the Credit Agreement shall hereafter be construed as a reference to
the Credit Agreement as amended hereby. Except as herein otherwise specifically
provided, all provisions of the Credit Agreement shall remain in full force and
effect and be unaffected hereby. This Sixth Amendment Agreement is a Related
Writing as defined in the Credit Agreement.
8
<PAGE> 9
Address: 200 Public Square MELLON BANK, N.A.
29th Floor
Cleveland, OH 44114-2301 By: /s/ Henry W. Centa
Attn: Corporate Banking Div. ----------------------------------
Henry W. Centa, Vice President
Address: 1900 East Ninth Street NATIONAL CITY BANK
Cleveland, OH 44114-0756
Attn: Metro/Ohio Division By: /s/ Anthony J. DiMare
Loc.# 2104 ----------------------------------
Anthony J. DiMare, Senior
Vice President
The undersigned consent and agree to and acknowledge the terms of this
Sixth Amendment Agreement:
CASTLE RUBBER COMPANY
KAY HOME PRODUCTS, INC.
GENERAL ALUMINUM MFG. COMPANY
BLUE FALCON INVESTMENTS, INC.
RB&W CORPORATION
BLUE FALCON FORGE, INC.
TOCCO, INC.
THE AJAX MANUFACTURING COMPANY
CICERO FLEXIBLE PRODUCTS, INC.
SUMMERSPACE, INC.
By: /s/ James S. Walker
------------------------------------
James S. Walker, Treasurer of each
of the Companies listed above
and /s/ Ronald J. Cozean
------------------------------------
Ronald J. Cozean, Secretary of each
of the Companies listed above
10
<PAGE> 10
ANNEX 1
<TABLE>
<CAPTION>
REVOLVING CREDIT TERM LOAN
COMMITMENT COMMITMENT MAXIMUM
BANKING INSTITUTIONS PERCENTAGE AMOUNT AMOUNT AMOUNT
<S> <C> <C> <C> <C>
KeyBank National Association,
f.k.a. Society National Bank 35% $ 17,500,000 $0 $ 17,500,000
NBD Bank 25% $ 12,500,000 $0 $ 12,500,000
The Huntington National Bank 25% $ 12,500,000 $0 $ 12,500,000
National City Bank 10% $ 5,000,000 $0 $ 5,000,000
Mellon Bank, N.A. 5% $ 2,500,000 $0 $ 2,500,000
---- ------------ -- ------------
TOTAL 100% $ 50,000,000 $0
TOTAL COMMITMENT
AMOUNT $ 50,000,000
</TABLE>
11
<PAGE> 11
EXHIBIT A
REVOLVING CREDIT NOTE
$_______________ Cleveland, Ohio
As of April 11, 1995
FOR VALUE RECEIVED, the undersigned PARK-OHIO INDUSTRIES, INC. (the
"Borrower") promises to pay on April 11, 2001, to the order of _________ (the
"Bank") at the Main Office of KeyBank National Association (successor by merger
to Society National Bank), as Agent, 127 Public Square, Cleveland, Ohio
44114-1306 the principal sum of
_______________________________________________________________________DOLLARS
or the aggregate unpaid principal amount of all Revolving Loans made by Bank to
Borrower pursuant to Section 2.1 of the Credit Agreement, as hereinafter
defined, whichever is less, in lawful money of the United States of America. As
used herein, "Credit Agreement" means the Credit Agreement dated as of April 11,
1995, among Borrower, the banks named therein and KeyBank National Association,
as Agent, as amended and as such agreement may be from time to time further
amended, restated or otherwise modified. Capitalized terms used herein shall
have the meanings ascribed to them in the Credit Agreement.
Borrower also promises to pay interest on the unpaid principal amount
of each Revolving Loan from time to time outstanding, from the date of such
Revolving Loan until the payment in full thereof, at the rates per annum which
shall be determined in accordance with the provisions of Section 2.1A of the
Credit Agreement. Such interest shall be payable on each date provided for in
such Section 2.1A; provided, however, that interest on any principal portion
which is not paid when due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Prime Rate Loans and LIBOR Loans, and payments of principal of any thereof,
shall be shown on the records of Bank by such method as Bank may generally
employ; provided, however, that failure to make any such entry shall in no way
detract from Borrower's obligations under this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit Agreement, the principal hereof
and the unpaid interest thereon shall bear interest, until paid, at a rate per
annum which shall be two per cent (2%) in excess of the Adjusted Prime Rate from
time to time in effect. All payments of principal of and interest on this Note
shall be made in immediately available funds.
<PAGE> 12
In the event of a failure to pay interest or principal when the same
becomes due, Bank may collect and Borrower agrees to pay a late charge of an
amount equal to the greater of (a) ten per cent (10%) of the amount of such late
payment, or (b) Twenty Five Dollars ($25).
This Note is one of the Revolving Credit Notes referred to in the
Credit Agreement. Reference is made to the Credit Agreement for a description of
the right of the undersigned to anticipate payments hereof, the right of the
holder hereof to declare this Note due prior to its stated maturity, and other
terms and conditions upon which this Note is issued.
The undersigned authorizes any attorney at law at any time or times
after the maturity hereof (whether maturity occurs by lapse of time or by
acceleration) to appear in any state or federal court of record in the United
States of America, to waive the issuance and service of process, to admit the
maturity of this Note and the nonpayment thereof when due, to confess judgment
against the undersigned in favor of the holder of this Note for the amount then
appearing due, together with interest and costs of suit, and thereupon to
release all errors and to waive all rights of appeal and stay of execution. The
foregoing warrant of attorney shall survive any judgment, and if any judgment be
vacated for any reason, the holder hereof nevertheless may thereafter use the
foregoing warrant of attorney to obtain an additional judgment or judgments
against the undersigned. The undersigned agrees that the Agent or the Banks'
attorney may confess judgment pursuant to the foregoing warrant of attorney. The
undersigned further agrees that the attorney confessing judgment pursuant to the
foregoing warrant of attorney may receive a legal fee or other compensation from
the Agent or the Banks.
PARK-OHIO INDUSTRIES, INC.
By:____________________________________
James S. Walker, Vice President
and____________________________________
Ronald J. Cozean, Secretary
"WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE."
2
<PAGE> 13
EXHIBIT C
COMPLIANCE CERTIFICATE
For Fiscal Quarter ended ____________________
THE UNDERSIGNED HEREBY CERTIFIES THAT:
(1) The undersigned is the duly elected Financial Officer, as defined
in the Credit Agreement (as hereinafter defined) of PARK-OHIO INDUSTRIES, INC.,
an Ohio corporation ("Borrower");
(2) The undersigned is familiar with the terms of that certain Credit
Agreement, dated as of April 11, 1995, among the undersigned, the Banks, as
defined in the Credit Agreement, and KeyBank National Association, as Agent (as
the same may be amended, restated or otherwise modified, the "Credit Agreement",
the terms defined therein and not otherwise defined in this Certificate being
used herein as therein defined), and the terms of the other loan documents, and
the undersigned has made, or has caused to be made under my supervision, a
review in reasonable detail of the transactions and condition of Borrower and
its Subsidiaries during the accounting period covered by the attached financial
statements;
(3) The review described in paragraph (2) above did not disclose, and
we have no knowledge of, the existence of any condition or event which
constitutes or constituted an Possible Default or Event of Default, at the end
of the accounting period covered by the attached financial statements or as of
the date of this Certificate;
(4) The representations and warranties made by Borrower contained in
the Credit Agreement are true and correct as though made on and as of the date
hereof; and,
(5) Set forth on Attachment I hereto are calculations of the financial
covenants set forth in Section 5.7, 5.8, 5.9, 5.10, 5.21 and 5.25 of the Credit
Agreement, which calculations show compliance with the terms thereof.
IN WITNESS WHEREOF, the undersigned has executed this certificate the
___ day of _________, 19___.
PARK-OHIO INDUSTRIES, INC.
By: _______________________________
Title: ____________________________
<PAGE> 1
Exhibit 4.9
DEMAND MASTER PROMISSORY NOTE
$50,000,000.00 Cleveland, Ohio
December 3, 1997
FOR VALUE RECEIVED, PARK-OHIO INDUSTRIES, INC., an Ohio corporation,
23000 Euclid Avenue, Euclid, Ohio 44117 ("Borrower") promises to pay to the
order of KEYBANK NATIONAL ASSOCIATION, 127 Public Square, Cleveland, Ohio
44114-1306 ("Bank") at any of its offices, the principal sum of FIFTY MILLION
AND 00/100 DOLLARS, or the aggregate unpaid principal amount of all Advances
made by Bank to Borrower hereunder, whichever is less, in lawful money of the
United States of America, on the earlier of DEMAND or the Maturity Date.
Advances may be requested hereunder by Borrower as Prime Rate Advances
or LIBOR Advances. Borrower promises to pay interest (based on a year having 360
days and calculated for the actual number of days elapsed) on the daily
principal balance of each Advance at a rate per annum equal to the Interest Rate
applicable to such Advance, with such interest to be due and payable (a) with
respect to any Prime Advance, commencing December 31, 1997, and continuing on
the last day of each succeeding March, June, September and December of each year
and on the Maturity Date; and (b) with respect to any LIBOR Advance, on the last
day of the Interest Period applicable to such Advance; provided that, if the
Interest Period for any LIBOR Advance exceeds three (3) months, the interest
must be paid every three (3) months, commencing three (3) months from the date
of such Advance. The daily principal balance of each Advance that remains
outstanding after the Maturity Date shall bear interest at a rate per annum
equal to the Default Rate. No LIBOR Advance may be prepaid prior to the end of
the Interest Period applicable thereto, except that each LIBOR Advance must be
paid upon the Maturity Date and any prepayment of a LIBOR Advance resulting
therefrom shall be subject to the reimbursement provisions set forth below.
Borrower may prepay any Prime Advance.
The Line of Credit is intended to be a replacement of the Credit
Agreement dated April 11, 1995, as amended, and constitutes "New Credit
Facility", as defined in the Indenture. This Note shall serve as a master note
to evidence all Advances; provided, however, that the aggregate unpaid principal
amount of all Advances shall not at any one time outstanding exceed the Line of
Credit. Borrower shall make an immediate prepayment on this Note in the event
that the aggregate unpaid principal amount of all Advances shall at any time
exceed the Line of Credit and such prepayment shall be subject to the
reimbursement provisions set forth below. Bank shall record (a) the principal
amount of each Advance and the Interest Period, if any, and the Interest Rate
applicable thereto, and (b) the amount of any principal, interest or other
payment and the applicable dates with respect thereto, by such method as Bank
may generally employ; provided, however, that failure to make any such entry
shall in no way detract from Borrower's obligations under this Note. The
aforesaid information with respect to the Advances set forth on the records of
Bank shall be rebuttably presumptive evidence of the principal and interest
owing and unpaid on this Note. Borrower shall provide notice to Bank of a
requested LIBOR Advance no fewer than two (2) Business Days (prior to 11:00 A.M.
Cleveland time) prior to the proposed date of borrowing. Borrower may request
same day borrowings with respect to Prime Advances. Borrower's request for any
Advance shall be in an amount of not less than Five Hundred Thousand Dollars
($500,000). Whenever any payment to
1
<PAGE> 2
be made under this Note shall be due on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall in each case be included in the computation of the interest payable
hereunder; provided, however, that with respect to any LIBOR Advance, if the
next succeeding Business Day falls in the succeeding calendar month, such
payment shall be made on the preceding Business Day and the relevant Interest
Period shall be adjusted accordingly. Borrower waives presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note.
If any LIBOR Advance becomes due and payable or is prepaid prior to the
end of the Interest Period applicable thereto, Borrower also promises to
reimburse Bank on demand for any resulting loss, cost or expense incurred by
Bank as a result thereof, including, without limitation, any loss incurred in
obtaining, liquidating or employing deposits from third parties, but excluding
loss of margin for the period after any such payment. If, because of the
introduction of or any change in, or because of any judicial, administrative or
other governmental interpretation of any law or regulation, there shall be any
increase in the cost to Bank of making, funding, maintaining or allocating
capital to any LIBOR Advance, then Borrower shall, from time to time upon demand
by Bank, pay to Bank additional amounts sufficient to compensate Bank for such
increased cost. If, because of the introduction of or any change in, or because
of any judicial, administrative or other governmental interpretation of, any law
or regulation, it becomes unlawful for Bank to make, fund or maintain any LIBOR
Advance, then Bank's obligation to make, fund or maintain any such LIBOR Advance
shall terminate and each affected outstanding LIBOR Advance shall be converted
to a Prime Advance on the earlier of the last day of the applicable Interest
Period for each such Advance or the date the making, funding or maintaining of
each such Advance becomes unlawful.
Borrower agrees to provide to Bank, within ten (10) days of Bank's
written request, such other information about the financial condition,
properties and operations of Borrower and its subsidiaries as Bank may from time
to time reasonably request. Borrower shall provide notice to Bank
contemporaneously with any notice provided to the trustee or the Senior
Subordinated Noteholders under the Indenture or the Senior Subordinated Notes.
Upon the occurrence of any Event of Default and at all times
thereafter, at the option of Bank (but automatically with respect to Events of
Default (j) through (m)), all Obligations shall become immediately due and
payable, Bank may terminate the Line of Credit and no further Advance may be
requested by Borrower. In addition, Bank may apply or setoff any Deposit Account
against all Obligations, all without any notice to or demand upon Borrower, in
addition to any other rights and remedies Bank may have pursuant to law, this
Note or any other instruments or agreements, which rights and remedies shall be
cumulative.
This Note shall bind Borrower and Borrower's successors and assigns and
shall inure to the benefit of Bank and its successors and assigns. Borrower may
not assign or otherwise transfer any of its rights under this Note without the
express written consent of Bank. All provisions hereof shall be subject to,
governed by, and construed in accordance with Ohio law, without regard to
principles of conflict of laws. Unenforceability of any provision hereof or any
application of any provision hereof shall not affect the enforceability of any
other provision or application of any provision. This
2
<PAGE> 3
Note constitutes a final written expression of all of the terms of this
instrument, is a complete and exclusive statement of those terms and supersedes
all oral representations, negotiations and prior writings, if any, with respect
to the subject matter hereof. The relationship between Borrower and Bank with
respect to this Note is and shall be solely that of debtor and creditor,
respectively, and Bank shall have no fiduciary obligation toward Borrower with
respect to this Note or the transactions contemplated hereby. Any amendment or
waiver hereof or any waiver of any right or remedy otherwise available must be
in writing and signed by the party against whom enforcement of the amendment or
waiver is sought.
For the purposes of this Note, the following terms shall have the
following meanings:
"ADVANCES" means, collectively, all loan advances made by Bank to
Borrower, at the sole discretion and option of Bank, Borrower acknowledging that
the Line of Credit relating to this Note is purely discretionary and Bank may,
without prior notice to Borrower, refuse to honor any request by Borrower for
borrowing hereunder; "ADVANCE" means any of the Advances.
"BUSINESS DAY" means a day of the year on which banks are not required
or authorized to close in Cleveland, Ohio and, if the applicable Business Day
relates to any LIBOR Advance, on which dealings are carried on in the London
interbank eurodollar market.
"DEFAULT INTEREST RATE" means a floating rate per annum equal to the
greater of (a) three percent (3%) in excess of the Prime Rate from time to time
in effect, which rate shall be immediately adjusted to correspond with each
change in the Prime Rate, or (b) sixteen percent (16%).
"DEPOSIT ACCOUNT" means any demand, time, statement, savings, passbook
or similar account or balance (including, without limitation, any certificate of
deposit) presently or at any time hereafter maintained with Bank at any of its
foreign or domestic offices either by Borrower severally or jointly by Borrower
and another person or organization.
"EUROCURRENCY RESERVE PERCENTAGE" means, for any Interest Period in
respect of any LIBOR Advance, as of any date of determination, the aggregate of
the then stated maximum reserve percentages (including any marginal, special,
emergency or supplemental reserves), expressed as a decimal, applicable to such
Interest Period (if more than one such percentage is applicable, the daily
average of such percentages for those days in such Interest Period during which
any such percentage shall be so applicable) by the Board of Governors of the
Federal Reserve System, any successor thereto, or any other banking authority,
domestic or foreign, to which the Lender may be subject in respect to
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Federal Reserve Board) or in respect of any other category
of liabilities including deposits by reference to which the interest rate on
LIBOR Advances is determined or any category of extension of credit or other
assets that include the LIBOR Advances. For purposes hereof, such reserve
requirements shall include, without limitation, those imposed under Regulation D
of the Federal Reserve Board and the LIBOR Advances shall be deemed to
constitute Eurocurrency Liabilities subject to such reserve requirements without
benefit of credits for proration, exceptions or offsets which may be available
from time to time to any Bank under said Regulation D.
3
<PAGE> 4
"EVENT OF DEFAULT" means the occurrence of any of the following events:
(a) failure of Borrower to pay or perform any Obligation when it becomes due and
payable; (b) untruthfulness, proved to the satisfaction of Bank, of any
statement, representation or certification contained in any financial statement,
credit application or other document given by Borrower in connection with any
Advance; (c) any condition or event which Bank determines has or is reasonably
likely to have a material and adverse effect on the business, prospects,
operations or financial condition of Borrower or on the rights and remedies of
Bank under this Note or the ability of Borrower to perform its obligations
hereunder; (d) breach by Borrower of any provision, agreement, representation,
warranty or covenant set forth in this Note, in any other instrument, document
or agreement evidencing or relating to any Obligation, or in any mortgage deed,
assignment, pledge or security agreement given as or evidencing security for any
Obligation of Borrower; (e) Borrower shall incur or permit to exist any
Designated Senior Indebtedness (as defined in the Indenture) other than the
Obligations; (f) any Event of Default (as defined in the Indenture), or any
event or condition which with the lapse of time or giving of notice or both
would constitute an Event of Default (as defined in the Indenture), shall exist
under the Indenture, the Senior Subordinated Notes or any agreement executed by
Borrower in connection therewith; (g) without the prior written consent of Bank,
the Indenture or the Senior Subordinated Notes shall be amended or modified in
any respect; (h) the Senior Subordinated Notes shall be accelerated for any
reason; (i) any judgment, attachment, execution, or similar process is rendered,
issued, or levied against Borrower or any material amount of its property and is
not fully satisfied, released, vacated, or bonded within thirty (30) days after
its rendering, issue or levy; (j) dissolution, termination of existence,
insolvency, business failure or appointment of a receiver of any part of the
property of Borrower; (k) assignment for the benefit of creditors by Borrower;
(l) failure or inability of Borrower to pay its debts as they come due; or (m)
the commencement of any proceedings under any bankruptcy or insolvency laws by
or against Borrower or any of its subsidiaries.
"INDENTURE" means that certain Indenture dated as of November 25, 1997,
between Borrower and Norwest Bank Minnesota, National Association, as trustee,
pursuant to which the Senior Subordinated Notes have been issued to the Senior
Subordinated Noteholders.
"INTEREST PERIOD" means with respect to any LIBOR Advance, the period
commencing on the date such Advance is made and ending on the last day of such
period as selected by Borrower pursuant to the provisions below and, thereafter,
each subsequent period commencing on the last day of the immediately preceding
Interest Period and ending on the last day of such period as selected by
Borrower pursuant to the provisions below. The duration of each Interest Period
for any LIBOR Advance shall be one (1) month, two (2) months or three (3)
months, in each case as Borrower may select upon notice, as set forth herein,
provided that if Borrower fails to so select the duration of any Interest
Period, the LIBOR Advance shall be converted to a Prime Advance.
"INTEREST RATE" means (a) as to any Prime Advance, that floating rate
per annum equal to the Prime Rate minus one percent (1%), which rate shall be
immediately adjusted to correspond with each change in the Prime Rate, and (b)
as to any LIBOR Advance, that fixed rate per annum equal to one hundred fifty
(150) basis points in excess of the LIBOR Rate.
4
<PAGE> 5
"LIBOR ADVANCE" means any Advance that bears interest determined with
reference to the LIBOR Rate.
"LIBOR RATE" means, for any Interest Period with respect to a LIBOR
Advance, the quotient (rounded upwards, if necessary, to the nearest one
sixteenth of one percent (1/16th of 1%) of: (a) the per annum rate of interest,
determined by Bank in accordance with its usual procedures (which determination
shall be conclusive absent manifest error) as of approximately 11:00 A.M.
(London time) two (2) Business Days prior to the beginning of such Interest
Period pertaining to such LIBOR Advance, as provided by Telerate Service,
Bloomberg's or Reuters (or any other similar company or service that provides
rate quotations comparable to those currently provided by such companies as the
rate in the London interbank market for dollar deposits in immediately available
funds with a maturity comparable to such Interest Period) DIVIDED BY (b) a
number equal to 1.00 MINUS the Eurocurrency Reserve Percentage. In the event
that such rate quotation is not available for any reason, then the rate (for
purposes of clause (a) hereof) shall be the rate, determined by Bank as of
approximately 11:00 A.M. (London time) two (2) Business Days prior to the
beginning of such Interest Period pertaining to such LIBOR Advance, to be the
average (rounded upwards, if necessary, to the nearest one sixteenth of one
percent (1/16th of 1%)) of the per annum rates at which dollar deposits in
immediately available funds in an amount comparable to such LIBOR Advance and
with a maturity comparable to such Interest Period are offered to the prime
banks by leading banks in the London interbank market. The LIBOR Rate shall be
adjusted automatically on and as of the effective date of any change in the
Eurocurrency Reserve Percentage.
"LINE OF CREDIT" means the uncommitted line of credit established by
Bank for Borrower pursuant to which Borrower may request such Advances as Bank
may be willing to grant up to the aggregate principal amount at any one time
outstanding of Fifty Million Dollars ($50,000,000).
"MATURITY DATE" means the earlier of (a) April 30, 1999, or (b) demand.
"OBLIGATION" means any present or future obligation, indebtedness or
liability of Borrower owed to Bank, of whatever kind and however evidenced,
together with all extensions, renewals, amendments, restatements and
substitutions thereof or therefor (including, without limitation, each Advance
evidenced by this Note or pursuant to the Line of Credit).
"PRIME ADVANCE" means any Advance that bears interest determined with
reference to the Prime Rate.
"PRIME RATE" means that interest rate established from time to time by
Bank as Bank's prime rate, whether or not such rate is publicly announced; the
Prime Rate may not be the lowest interest rate charged by Bank for commercial or
other extensions of credit. Each change in the Prime Rate shall be effective
immediately from and after such change.
"SENIOR SUBORDINATED NOTEHOLDER" means any one of the Senior
Subordinated Noteholders under the Indenture.
5
<PAGE> 6
"SENIOR SUBORDINATED NOTES" means the Senior Subordinated Notes issued
pursuant to the Indenture dated November 25, 1997 and due in 2007.
Borrower authorizes any attorney at law at any time or times after the
maturity hereof (whether maturity occurs by lapse of time or by acceleration) to
appear in any state or federal court of record in the United States of America,
to waive the issuance and service of process, to admit the maturity of this Note
and the nonpayment thereof when due, to confess judgment against the undersigned
in favor of the holder of this Note for the amount then appearing due, together
with interest and costs of suit, and thereupon to release all errors and to
waive all rights of appeal and stay of execution. The foregoing warrant of
attorney shall survive any judgment, and if any judgment be vacated for any
reason, the holder hereof nevertheless may thereafter use the foregoing warrant
of attorney to obtain an additional judgment or judgments against the
undersigned. The undersigned agrees that Bank's attorney may confess judgment
pursuant to the foregoing warrant of attorney. The undersigned further agrees
that the attorney confessing judgment pursuant to the foregoing warrant of
attorney may receive a legal fee or other compensation from Bank.
PARK-OHIO INDUSTRIES, INC.
By: /s/ Authorized Signatory
________________________________________
Title: _____________________________________
And: /s/ Authorized Signatory
_______________________________________
Title: _____________________________________
===============================================================================
"WARNING -- BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE
AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY
BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE
POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS
OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY
WITH THE AGREEMENT OR ANY OTHER CAUSE."
===============================================================================
6
<PAGE> 1
Exhibit 4.10
-----------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of November 25, 1997
by and among
PARK-OHIO INDUSTRIES, INC.
and
THE INITIAL PURCHASERS
named herein
-----------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions.........................................................1
2. Exchange Offer......................................................5
3. Shelf Registration..................................................9
4. Additional Interest................................................10
5. Registration Procedures............................................12
6. Registration Expenses..............................................23
7. Indemnification....................................................24
8. Rules 144 and 144A.................................................28
9. Underwritten Registrations.........................................28
10. Miscellaneous......................................................29
(a) Remedies......................................................29
(b) Enforcement...................................................29
(c) No Inconsistent Agreements....................................29
(d) Adjustments Affecting Registrable Notes.......................29
(e) Amendments and Waivers........................................30
(f) Notices.......................................................30
(g) Successors and Assigns........................................31
(h) Counterparts..................................................31
(i) Headings......................................................31
(j) Governing Law.................................................31
(k) Severability..................................................31
(l) Entire Agreement..............................................31
(m) Joint and Several Obligations............................. Error! Book
(n) Notes Held by the Company or their
Affiliates....................................................32
</TABLE>
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of November
25, 1997, by and among Park-Ohio Industries, Inc., an Ohio corporation (the
"Company"), and CIBC Oppenheimer Corp. ("CIBC") and Merrill Lynch & Co. and
Value Investors Partners, Inc., as initial purchasers (collectively, the
"Initial Purchasers").
This Agreement is entered into in connection with the Securities
Purchase Agreement, dated as of November 19, 1997 among the Company and the
Initial Purchasers (the "Purchase Agreement") relating to the sale by the
Company to the Initial Purchasers of $150,000,000 aggregate principal amount of
the Company's 9 1/4% Senior Subordinated Notes due 2007 (the "Notes"). In order
to induce the Initial Purchasers to enter into the Purchase Agreement, the
Company has agreed to provide the registration rights set forth in this
Agreement to the Initial Purchasers and their direct and indirect transferees
and assigns. The execution and delivery of this Agreement is a condition to the
Initial Purchasers' obligation to purchase the Notes under the Purchase
Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
ADDITIONAL INTEREST: See Section 4(a).
ADVICE: See Section 5.
APPLICABLE PERIOD: See Section 2 (b).
CLOSING: See the Purchase Agreement.
COMPANY: See the introductory paragraph to this Agreement.
EFFECTIVENESS DATE: The 130th day after the Issue Date.
EFFECTIVENESS PERIOD: See Section 3(a).
EVENT DATE: See Section 4(c).
<PAGE> 4
-2-
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2(a).
EXCHANGE OFFER. See Section 2(a).
EXCHANGE REGISTRATION STATEMENT: See Section 2(a).
FILING DATE: The 45th day after the Issue Date.
HOLDER: Any holder of a Registrable Note or Registrable
Notes.
INDEMNIFIED PERSON: See Section 7(c).
INDEMNIFYING PERSON: See Section 7(c).
INDENTURE: The Indenture, dated as of November 25, 1997, among
the Company and Norwest Bank Minnesota, National Association, as trustee,
pursuant to which the Notes are being issued, as amended or supplemented from
time to time in accordance with the terms thereof.
INITIAL PURCHASERS: See the introductory paragraph to this
Agreement.
INITIAL SHELF REGISTRATION: See Section 3(a).
INSPECTORS: See Section 5(o).
ISSUE DATE: The date on which the original Notes are sold to
the Initial Purchasers pursuant to the Purchase Agreement.
LIEN: See the Indenture.
NASD: See Section 5(t).
NOTES: See the introductory paragraphs to this Agreement.
PARTICIPANT: See Section 7(a).
PARTICIPATING BROKER-DEALER: See Section 2(b).
<PAGE> 5
-3-
PERSON: An individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
PRIVATE EXCHANGE:. See Section 2 (b).
PRIVATE EXCHANGE NOTES: See Section 2(b).
PROSPECTUS: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Notes covered by such Registration Statement, and all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the introductory paragraphs to this
Agreement.
RECORDS: See Section 5(o).
REGISTRABLE NOTES: The Notes upon original issuance of the
Notes and at all times subsequent thereto and, if issued, the Private Exchange
Notes, until in the case of any such Notes or any such Private Exchange Notes,
as the case may be, (i) a Registration Statement covering such Notes or such
Private Exchange Notes has been declared effective by the SEC and such Notes or
such Private Exchange Notes, as the case may be, have been disposed of in
accordance with such effective Registration Statement, (ii) such Notes or such
Private Exchange Notes, as the case may be, are sold in compliance with Rule
144, (iii) in the case of any Note, such Note has been exchanged for an Exchange
Note or Exchange Notes pursuant to an Exchange Offer or (iv) such Notes or such
Private Exchange Notes, as the case may be, cease to be outstanding.
REGISTRATION DEFAULT: See Section 4(a).
REGISTRATION STATEMENT: Any registration statement of the
Company, including, but not limited to, the Exchange Registration Statement,
which covers any of the Registrable Notes pursuant to the provisions of this
Agreement, including
<PAGE> 6
-4-
the Prospectus, amendments and supplements to such registration statement,
including post-effective amendments, all exhibits, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
RULE 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES ACT: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
SHELF NOTICE: See Section 2(c).
SHELF REGISTRATION: See Section 3(b).
SUBSEQUENT SHELF REGISTRATION: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A
registration in which securities of the Company are sold to an underwriter(s)
for reoffering to the public.
<PAGE> 7
-5-
2. EXCHANGE OFFER
(a) The Company agrees to use its best efforts to file with
the SEC as soon as practicable after the Closing, but in no event later than the
Filing Date, an offer to exchange (the "Exchange Offer") any and all of the
Registrable notes (other than the Private Exchange notes, if any) for a like
aggregate principal amount of debt securities of the Company, which are
identical to the Notes (the "Exchange Notes") (and which are entitled to the
benefits of the Indenture or a trust indenture which is substantially identical
to the Indenture (other than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with any requirements of the SEC to
effect or maintain the qualification thereof under the TIA) and which, in either
case, has been qualified under the TIA), except that the Exchange Notes (other
than the Private Exchange Notes, if any) shall have been registered pursuant to
an effective registration statement under the Securities Act and will not
contain terms with respect to transfer restrictions. The Exchange Offer will be
registered under the Securities Act on the appropriate form (the "Exchange
Registration Statement") and will comply with all applicable tender offer rules
and regulations under the Exchange Act. The Company agrees to use its best
efforts to (x) cause the Exchange Registration Statement to become effective
under the Securities Act on or before the Effectiveness Date; (y) keep the
Exchange Offer open for at least 30 days (or longer if required by applicable
law) after the date that Notice of the Exchange Offer is mailed to Holders; and
(z) consummate the Exchange Offer on or prior to the 60th day following the date
on which the Exchange Registration Statement is declared effective. Each Holder
who participates in the Exchange Offer will be required to represent that any
Exchange Notes received by it will be acquired in the ordinary course of its
business, that at the time of the consummation of the Exchange Offer such Holder
will have no arrangement or understanding with any Person to participate in the
distribution of the Exchange Notes in violation of the provisions of the
Securities act, that such Holder is not an affiliate of the Company within the
meaning of Rule 405 promulgated under the Securities Act, that such Holder is
not an affiliate of the Company within the meaning of Rule 405 promulgated under
the Securities Act or if it is such an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act, to the
extent applicable and that is not acting on behalf of any Person who could not
truthfully make the foregoing representations. Upon consummation of the Exchange
Offer in accordance with this Section 2, the provisions of this Agreement shall
continue to apply, MUTATIS MUTANDIS, solely with respect to Registrable notes
that are Private Exchange Notes and Exchange Notes held by Par-
<PAGE> 8
-6-
ticipating Broker-Dealers, and the Company shall have no further obligation to
register Registrable Notes (other than Private Exchange Notes and Exchange Notes
held by Participating Broker-Dealers) pursuant to Section 3 of this Agreement.
(b) The Company shall include within the Prospectus contained
in the Exchange Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchasers, which shall
contain a summary statement of the positions taken or policies made by the staff
of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of Exchange Notes received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the staff of the SEC or such
positions or policies, in the reasonable judgment of the Initial Purchasers,
represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall also allow the use of the Prospectus by all Persons
subject to the prospectus delivery requirements of the Securities Act, including
all Participating Broker-Dealers, and include a statement describing the means
by which Participating Broker-Dealers may resell the Exchange Notes.
The Company shall use its best efforts to keep the Exchange
Registration Statement effective and to amend and supplement the Prospectus
contained therein, in order to permit such Prospectus to be lawfully delivered
by all Persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such Persons must comply with such requirements
in order to resell the Exchange Notes, PROVIDED that such period shall not
exceed 180 days (or such longer period if extended pursuant to the last
paragraph of Section 5) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers holds any Notes acquired by it and having, or which are reasonably
likely to be determined to have, the status as an unsold allotment in the
initial distribution, the Company, upon the request of the Initial Purchasers
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to the Initial Purchasers, in exchange (the "Private
Exchange") for the Notes held by the Initial Purchasers, a like principal amount
of debt securities of the Company that are identical in all material respects to
the Exchange Notes (the "Private Exchange Notes") (and which are issued pursuant
to the same indenture as the Exchange
<PAGE> 9
-7-
Notes) except for the placement of a restrictive legend on the Private Exchange
Notes. If possible, the Private Exchange Notes shall bear the same CUSIP number
as the Exchange Notes. Interest On the Exchange Notes and Private Exchange Notes
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange thereof or, if no interest has been paid on
the Notes, from the Issue Date.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming art
of the Exchange Registration Statement, together with an appropriate
letter of transmittal and related documents;
(ii) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York; and
(iii) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business day
on which the Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Notes tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange;
(ii) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly
to each Holder of Notes, Exchange Notes or Private Exchange Notes, as
the case may be, equal in principal amount to the Notes of such Holder
so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture substantially identical to
the Indenture, which in either event will provide that (1) the Exchange Notes
will not be subject to the transfer restrictions set forth in the Indenture and
(2) the Private Exchange Notes will be subject to the transfer restric-
<PAGE> 10
-8-
tions set forth in the Indenture. The Indenture or such indenture shall
provide that the Exchange Notes, the Private Exchange Notes and the Notes will
vote and consent together on all matters as one class and that neither the
Exchange Notes, the Private Exchange Notes nor the Notes will have the right to
vote or consent as a separate class on any matter.
(c) If (1) prior to the consummation of the Exchange Offer,
the Company or Holders of at least a majority in aggregate principal amount of
the Registrable Notes reasonably determine in good faith that (i) the Exchange
Notes would not, upon receipt, be tradable by such Holders which are not
affiliates (within the meaning of the Securities Act) of the Company without
restriction under the Securities Act and without restrictions under applicable
state securities laws, (ii) the interests of the Holders under this Agreement
would be adversely affected by the consummation of the Exchange Offer or (iii)
after conferring with counsel, the SEC is unlikely to permit the commencement of
the Exchange Offer prior to the Effectiveness Date, (2) subsequent to the
consummation of the Private Exchange, any holder of the Private Exchange Notes
so requests or (3) the Exchange Offer is commenced and not consummated within 60
days of the date on which the Exchange Registration Statement is declared
effective, then the Company shall promptly deliver to the Holders and the
Trustee written notice thereof (the "Shelf Notice") and shall file an Initial
Shelf Registration pursuant to Section 3. Following the delivery of a Shelf
Notice to the Holders of Registrable Notes (in the circumstances contemplated by
clauses (1) and (3) of the preceding sentence), the Company shall not have any
further obligation to conduct the Exchange Offer or the Private Exchange under
this Section 2.
(d) As a condition to its participation in the exchange Offer
pursuant to the terms of this Agreement, each Holder represents and warrants to
the Company that, (A) it is not an affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any Person to participate in, a distribution of the Exchange
Notes to be issued in the Exchange Offer, and (C) it is acquiring the Exchange
Notes in its ordinary course of business. Each Holder hereby acknowledges and
agrees that any Participating Broker-Dealer and any Holder using the Exchange
Offer to participate in a distribution of Exchange Notes (1) could not under
Commission policy as in effect on the date of this Agreement rely on the
position of the Commission enunciated in MORGAN STANLEY AND CO. INC. (available
June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available May 13,
<PAGE> 11
-9-
1988), as interpreted in the Commission's letter to Shearman & Sterling dated
July 2, 1993, and similar no-action letters, and (2) must comply with the
registration and prospectus delivery requirements of the Act in connection with
a secondary resale transaction and that such a secondary resale transaction must
be covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K if the resales are of Notes obtained by such Holder in exchange
for Notes acquired by such Holder directly from the Company or an affiliate
thereof.
3. SHELF REGISTRATION
If a Shelf Notice is delivered as contemplated by Section
2(c), then:
(a) INITIAL SHELF REGISTRATION. The Company shall prepare and
file with the SEC a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the Registrable Notes (the
"Initial Shelf Registration"). If the Company shall have not yet filed an
Exchange Registration Statement, the Company shall use its best efforts to file
with the SEC the Initial Shelf Registration on or prior to the Filing Date. In
any other instance, the Company shall use its best efforts to file with the SEC
the Initial Shelf Registration within 30 days of the delivery of the Shelf
Notice. The Initial Shelf Registration shall be on Form 5-1 or another
appropriate form permitting registration of such Registrable Notes for resale by
such Holders in the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Company shall not permit
any securities other than the Registrable Notes to be included in the Initial
Shelf Registration or any Subsequent Shelf Registration. The Company shall use
its best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act, if an Exchange Registration Statement has
not yet been declared effective, on or prior to the Effectiveness Date, or, in
any other instance, as soon as practicable thereafter and in no event later than
45 days after filing of the Initial Shelf Registration, and to keep the Initial
Shelf Registration continuously effective under the Securities Act until the
date which is 24 months from the date on which such Initial Shelf Registration
is declared effective (subject to extension pursuant to the last paragraph of
Section 5 hereof), or such shorter period ending when (i) all Registrable Notes
covered by the Initial Shelf Registration have been sold in the manner set forth
and as contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf
Registration covering all of the Regis-
<PAGE> 12
-10-
trable Notes has been declared effective under the Securities Act (the
"Effectiveness Period").
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period, the Company shall use its
best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 45 days of such cessation
of effectiveness amend the Shelf Registration in a manner reasonably expected to
obtain the withdrawal of the order suspending the effectiveness thereof, or file
an additional "shelf" Registration Statement pursuant to Rule 415 covering all
of the Registrable Notes (a "Subsequent Shelf Registration"). If a Subsequent
Shelf Registration is filed, the Company shall use its best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after such filing and to keep such Registration Statement continuously effective
for a period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration or any
Subsequent Shelf Registration was previously continuously effective. As used
herein the term "Shelf Registration" means the Initial Shelf Registration and
any Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if requested by the
Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter(s) of such
Registrable Notes.
4. ADDITIONAL INTEREST
(a) The Company and the Initial Purchasers agree that the
Holders of Registrable Notes will suffer damages if the Company fails to fulfill
its obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay additional interest on the Notes ("Additional
Interest") under the circumstances and to the extent set forth below:
(i) if neither the Exchange Registration Statement nor the
Initial Shelf Registration has been filed on or prior to the Filing
Date;
<PAGE> 13
-11-
(ii) if neither the Exchange Registration Statement nor the
Initial Shelf Registration has been declared effective on or prior to
the Effectiveness Date;
(iii) if an Initial Shelf Registration required by Section
2(c) (2) has not been filed on or prior to the date required by Section
3 (a);
(iv) if an Initial Shelf Registration required by Section 2(c)
(2) has not been declared effective on or prior to the date required by
Section 3 (a); and/or
(v) if (A) the Company has not exchanged the Exchange Notes
for all Notes validly tendered in accordance with the terms of the
Exchange Offer on or prior to 60 days after the Exchange Registration
Statement was declared effective or (B) the Exchange Registration
Statement ceases to be effective at any time prior to the time that the
Exchange Offer is consummated or (C) if applicable, the Shelf
Registration has been declared effective and such Shelf Registration
ceases to be effective at any time during the Effectiveness Period;
(each such event referred to in clauses (i) through (v) above is a "Registration
Default"), the sole remedy available to Holders of the Notes will be the
immediate accrual of Additional Interest as follows: the per annum interest rate
on the Notes will increase by 50 basis points during the first 90-day period
following the occurrence of a Registration Default and until it is waived or
cured; and the per annum interest rate will increase by an additional 25 basis
points for each subsequent 90-day period during which the Registration Default
remains uncured, up to a maximum additional interest rate of 200 basis points
per annum, PROVIDED, that only Holders of Private Exchange Notes shall be
entitled to receive Additional Interest as a result of a Registration Default
pursuant to clause (iii) or (iv), PROVIDED, FURTHER, that (1) upon the filing of
the Exchange Registration Statement or the Initial Shelf Registration (in the
case of (i) above), (2) upon the effectiveness of the Exchange Registration
Statement or a Shelf Registration (in the case of (ii) above), (3) upon the
filing of the Shelf Registration (in the case of (iii) above), (4) upon the
effectiveness of the Shelf Registration (in the case of (iv) above), or (5) upon
the exchange of Exchange Notes for all Notes tendered (in the case of (v) (A)
above), or upon the effectiveness of the Exchange Registration Statement which
had ceased to remain effective (in the case of (v) (B) above), or upon the
effectiveness of the Shelf Registration which had
<PAGE> 14
-12-
ceased to remain effective (in the case of (v) (C) above), Additional Interest
on the Notes as a result of such clause (i), (ii), (iii), (iv) or (v) (or the
relevant subclause thereof), as the case may be, shall cease to accrue and the
interest rate on the Notes will revert to the interest rate originally borne by
the Notes.
(b) The Company shall notify the Trustee within one business
day after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a) (i), (a) (ii) or (a) (iii) of this
Section 4 will be payable in cash semi-annually on each June 1 and December 1
(to the Holders of record on the May 15 and November 15 immediately preceding
such dates), commencing with the first such date occurring after any such
Additional Interest commences to accrue and until such Registration Default is
cured, by depositing with the Trustee, in trust for the benefit of such Holders,
immediately available funds in sums sufficient to pay such Additional Interest.
The amount of Additional Interest will be determined by multiplying the
applicable Additional Interest rate by the principal amount of the Registrable
Notes, multiplied by a fraction, the numerator of which is the number of days
such Additional Interest rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months and, in the case
of a partial month, the actual number of days elapsed), and the denominator of
which is 360.
5. REGISTRATION PROCEDURES
In connection with the filing of any Registration Statement
pursuant to Section 2 or 3 hereof, the Company shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the
Company shall:
(a) Prepare and file with the SEC, prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by
Section 2 or 3, and use their respective best efforts to cause each
such Registration Statement to become effective and remain effective as
provided herein, PROVIDED that, if (1) such filing is pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, before filing any
Reg-
<PAGE> 15
-13-
istration Statement or Prospectus or any amendments or supplements
thereto, the Company shall, if requested, furnish to and afford the
Holders of the Registrable Notes covered by such Registration Statement
and each such Participating Broker-Dealer, as the case may be, their
counsel and the managing underwriter(s), if any, a reasonable
opportunity to review copies of all such documents (including copies of
any documents to be incorporated by reference therein and all exhibits
thereto) proposed to be filed (at least 5 business days prior to such
filing). The Company shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which
the Holders must be afforded an opportunity to review prior to the
filing of such document, if the Holders of a majority in aggregate
principal amount of the Registrable Notes covered by such Registration
Statement, or such Participating Broker-Dealer, as the case may be,
their counsel, or the managing underwriter(s), if any, shall reasonably
object.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange
Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the
Effectiveness Period or the Applicable Period, as the case may be;
cause the related Prospectus to be supplemented by any prospectus
supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force)
under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act applicable to them with respect to
the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and
with respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus; the Company
shall be deemed not to have used its best efforts to keep a
Registration Statement effective during the Applicable Period if any of
them voluntarily takes any action that would result in selling Holders
of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell
such Registrable Notes or such Exchange Notes during that period unless
such action is required by applicable law or unless the Company
complies with this Agreement, including without limitation, the
provisions of clause 5(c)(v) below.
<PAGE> 16
-14-
(c) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, notify the selling Holders
of Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriter(s), if any,
promptly (but in any event within two business days), and confirm such
notice in writing, (i) when a Prospectus or any prospectus supplement
or post-effective amendment thereto has been filed, and, with respect
to a Registration Statement or any post-effective amendment thereto,
when the same has become effective under the Securities Act (including
in such notice a written statement that any Holder may, upon request,
obtain, without charge, one conformed copy of such Registration
Statement or post-effective amendment thereto including financial
statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the
SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
preliminary Prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a Prospectus is required by the
Securities Act to be delivered in connection with sales of the
Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of the Company
contained in any Agreement (including any underwriting Agreement)
contemplated by Section 5(n) below cease to be true and correct, (iv)
of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale
in any jurisdiction, or the initiation or threatening of any proceeding
for such purpose, (v) of the happening of any event or any information
becoming known that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in, or amendments or
supplements to, such Registration Statement, Prospectus or documents so
that, in the case of the Registration Statement, it will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated
<PAGE> 17
-15-
therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be
appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, use their best efforts to
prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use
of a Prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Notes or the Exchange Notes to
be sold by any Participating Broker-Dealer, for sale in any
jurisdiction, and, if any such order is issued, to use their best
efforts to obtain the withdrawal of any such order at the earliest
possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if requested by the managing underwriter(s), if any, or the Holders of
a majority in aggregate principal amount of the Registrable Notes being
sold in connection with an underwritten offering, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriter(s), if any, or such Holders
reasonably request to be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of
the matters to be incorporated in such Prospectus supplement or
post-effective amendment.
(f) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes who so requests and to each such
Participating Broker-Dealer who so requests and
<PAGE> 18
-16-
to counsel and the managing underwriter(s), if any, without charge, one
conformed copy of the Registration Statement or Registration Statements
and each post-effective amendment thereto, including financial
statements and schedules, and, if requested, all documents incorporated
or deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, deliver to each selling
Holder of Registrable Notes, or each such Participating Broker-Dealer,
as the case may be, their counsel, and the managing underwriter or
underwriters, if any, without charge, as many copies of the Prospectus
or Prospectuses (including each form of preliminary Prospectus) and
each amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject
to the last paragraph of this Section 5, the Company hereby consents to
the use of such Prospectus and each amendment or supplement there to by
each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the managing
underwriter or underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Notes covered
by, or the sale by Participating Broker-Dealers of the Exchange Notes
pursuant to, such Prospectus and any amendment or supplement there to.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Registration
Statement by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, to use their best efforts
to register or qualify, and to cooperate with the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case
may be, the managing underwriter or underwriters, if any, and their
respective counsel in connection with the registration or qualification
of (or exemption from such registration or qualification), such
Registrable Notes for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any selling
Holder, Participating Broker-Dealer, or the managing underwriter or
underwriters, if any, reasonably re-
<PAGE> 19
-17-
quest in writing, PROVIDED that where Exchange Notes held by
Participating Broker-Dealers or Registrable Notes are offered other
than through an underwritten offering, the Company agrees to cause its
counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5 (h);
keep each such registration or qualification (or exemption thereofrom)
effective during the period such Registration Statement is required to
be kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions
of the Exchange Notes held by Participating Broker-Dealers or the
Registrable Notes covered by the applicable Registration Statement;
PROVIDED that the Company shall not be required to (A) qualify
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or
(C) subject itself to taxation in excess of a nominal dollar amount in
any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Notes to be in such denominations
and registered in such names as the managing underwriter or
underwriters, if any, or Holders may reasonably request.
(j) Use its best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the managing underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Notes, except as may be required solely as a consequence of the nature
of such selling Holder's business, in which case the Company will
cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is re-
<PAGE> 20
-18-
quired to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, upon the occurrence of any event contemplated by paragraph 5
(c) (v) or 5 (c) (vi), as promptly as reasonably practicable prepare
and (subject to Section 5(a)) file with the SEC, at the joint and
several expense of the Company, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Notes being
sold thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(l) Use its best efforts to cause the Registrable Notes
covered by a Registration Statement or the Exchange Notes, as the case
may be, to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement or the
Exchange Notes, as the case may be, or the managing underwriter or
underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with certificates for the Registrable Notes or Exchange Notes, as the
case may be, in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes or
Exchange Notes, as the case may be.
(n) In connection with an underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an underwriting
Agreement as is customary in underwritten offerings of debt securities
similar to the Notes and take all such other actions as are reasonably
requested by the managing underwriter(s), if any, in order to expedite
or facilitate the registration or the disposition of such Registrable
Notes, and in such connection, (i) make such representations and
warranties to the managing underwriter or underwriters on behalf of any
underwriters, with respect to the business of the Company and
<PAGE> 21
-19-
its subsidiaries and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings of debt securities similar to
the Notes, and confirm the same if and when requested; (ii) obtain
opinions of counsel to the Company and updates thereof in form and
substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the managing underwriter or underwriters
covering the matters customarily covered in opinions requested in
underwritten offerings of debt securities similar to the Notes and such
other matters as may be reasonably requested by the managing
underwriter(s); (iii) obtain "cold comfort" letters and updates thereof
in form and substance reasonably satisfactory to the managing
underwriter or underwriters from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of any of the Company or
of any business acquired by the Company for which financial statements
and financial data are, or are required to be, included in the
Registration Statement), addressed to the managing underwriter or
underwriters on behalf of any underwriters, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings of
debt securities similar to the Notes and such other matters as may be
reasonably requested by the managing underwriter or underwriters; and
(iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable
than those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal
amount of Registrable Notes covered by such Registration Statement and
the managing underwriter or underwriters or agents) with respect to all
parties to be indemnified pursuant to said Section. The above shall be
done at each closing under such underwriting agreement, or as and to
the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes
<PAGE> 22
-20-
being sold, or each such Participating Broker-Dealer, as the case may
be, the managing underwriter or underwriters participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant
or other agent retained by any such selling Holder or each such
Participating Broker-Dealer, as the case may be (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries
(collectively, the "Records") as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities,
and cause the officers, directors and employees of the Company and its
subsidiaries to supply all information in each case reasonably
requested by any such Inspector in connection with such Registration
Statement. Records which the Company determines, in good faith, to be
confidential and any Records which it must notify the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a material
misstatement or material omission in such Registration Statement, (ii)
the release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction or (iii) the information
in such Records has been made generally available to the public. Each
selling Holder of such Registrable Notes and each such Participating
Broker-Dealer or underwriter will be required to agree that information
obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company or for any purpose other
than in connection with such Registration Statement unless and until
such is made generally available to the public. Each selling Holder of
such Registrable Notes and each such Participating Broker-Dealer will
be required to further agree that it will, upon learning that
disclosure of such Records is sought in a court of competent
jurisdiction, give prompt notice to the Company and allow the Company
to undertake appropriate action to prevent disclosure of the Records
deemed confidential at their expense.
(p) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective date of the
Exchange Registration Statement or the first Registration Statement
<PAGE> 23
-21-
relating to the Registrable Notes; and in connection therewith,
cooperate with the trustee under any such indenture and the Holders of
the Registrable Notes, to effect such changes to such indenture as may
be required for such indenture to be so qualified in accordance with
the terms of the TIA; and execute, and use its best efforts to cause
such trustee to execute, all documents as may be required to effect
such changes, and all other forms and documents required to be filed
with the SEC to enable such indenture to be so qualified in a timely
manner.
(q) Comply with all applicable rules and regulations of the
SEC and make generally available to its security-holders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the
first fiscal quarter of the Company after the effective date of a
Registration Statement, which statements shall cover said 12-month
periods.
(r) Upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company, in a form
customary for underwritten offerings of debt securities similar to the
Notes, addressed to the Trustee for the benefit of all Holders of
Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, and which includes an opinion that (i)
the Company has duly authorized, executed and delivered the Exchange
Notes and Private Exchange Notes and the related indenture and (ii)
each of the Exchange Notes or the Private Exchange Notes, as the case
may be, and related indenture constitute a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its respective terms (with customary exceptions)
(s) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Company (or to such other Person as directed by the Company) in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be, the
<PAGE> 24
-22-
Company shall mark, or cause to be marked, on such Registrable Notes
that such Registrable Notes are being canceled in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be; and,
in no event shall such Registrable Notes be marked as paid or otherwise
satisfied.
(t) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD")
(u) Use their respective best efforts to take all other
reasonable steps necessary to effect the registration of the
Registrable Notes covered by a Registration Statement contemplated
hereby.
The Company may require each seller of Registrable Notes or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Company such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, as the
Company may, from time to time, reasonably request. The Company may exclude from
such registration the Registrable Notes of any seller or Participating
Broker-Dealer who unreasonably fails to furnish such information within a
reasonable time after receiving such request. Each seller as to which any Shelf
Registration is being effected agrees to furnish promptly to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5(c) (ii), 5(c) (iv), 5(c) (v), or 5(c) (vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Sec-
<PAGE> 25
-23-
tion 5(k), or until it is advised in writing (the "Advice") by the Company that
the use of the applicable Prospectus may be resumed, and has received copies of
any amendments or supplements thereto. In the event the Company shall give any
such notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to be
sold by such Holder or Participating Broker-Dealer, as the case may be, shall
have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) or (y) the Advice.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company,
whether or not the Exchange Offer or a Shelf Registration is filed or becomes
effective, including, without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings required to be
made with the NASD in connection with an underwritten offering and (B) fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of counsel in connection
with Blue Sky qualifications of the Registrable Notes or Exchange Notes and
determination of the eligibility of the Registrable Notes or Exchange Notes for
investment under the laws of such jurisdictions in the United States (x) where
the Holders of Registrable Notes are located, in the case of the Exchange Notes,
or (y) as provided in Section 5(h), in the case of Registrable Notes or Exchange
Notes to be sold by a Participating Broker-Dealer during the Applicable
Period)), (ii) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Notes or Exchange Notes in a form eligible
for deposit with The Depository Trust Company and of printing Prospectuses if
the printing of Prospectuses is reasonably requested by the managing underwriter
or underwriters, if any, or, in respect of Registrable Notes or Exchange Notes
to be sold by any Participating Broker-Dealer during the Applicable Period, by
the Holders of a majority in aggregate principal amount of the Registrable Notes
included in any Registration Statement or of such Exchange Notes, as the case
may be), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and fees and disbursements of special
counsel for the sellers of Registrable Notes (subject to the provisions of
Section 6(b)),
<PAGE> 26
-24-
(v) fees and disbursements of all independent certified public accountants
referred to in Section 5(n) (iii) (including, without limitation, the expenses
of any special audit and "cold comfort" letters required by or incident to such
performance), (vi) rating agency fees, (vii) Securities Act liability insurance,
if the Company desires such insurance, (viii) fees and expenses of the Trustee,
(ix) fees and expenses of all other Persons retained by the Company, (x)
internal expenses of the Company (including, without limitation, all salaries
and expenses of officers and employees of the Company performing legal or
accounting duties), (xi) the expense of any annual audit, (xii) the fees and
expenses incurred in connection with any listing of the securities to be
registered on any securities exchange, (xiii) the fees and disbursements of
underwriters, if any, customarily paid by issuers or sellers of securities (but
not including any underwriting discounts or commissions or transfer taxes, if
any, attributable to the sale of the Registrable Notes which discounts,
commissions or taxes shall be paid by Holders or such Registrable Notes) and
(xiv) the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to comply with this
Agreement.
(b) In connection with any Shelf Registration hereunder, the
Company shall reimburse the Holders of the Registrable Notes being registered in
such registration for the reasonable fees and disbursements of not more than one
counsel (in addition to appropriate local counsel) chosen by the Holders of a
majority in aggregate principal amount of the Registrable Notes to be included
in such Registration Statement and other reasonable out-of-pocket expenses of
the Holders of Registrable Notes incurred in connection with the registration of
the Registrable Notes. The Company shall not have any obligation to pay any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities.
7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each
Holder of Registrable Notes and each Participating Broker-Dealer selling
Exchange Notes during the Applicable Period, the officers and directors of each
such Person, and each Person, if any, who controls any such Person within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act (each, a "Participant"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, the reasonable legal
fees and other expenses actu-
<PAGE> 27
-25-
ally incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary Prospectus,
or caused by, arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
relating to any Participant furnished to the Company in writing by such
Participant expressly for use therein; PROVIDED that the foregoing indemnity
with respect to any preliminary Prospectus shall not inure to the benefit of any
Participant (or to the benefit of an officer or director of such Participant or
any Person controlling such Participant) from whom the Person asserting any such
losses, claims, damages or liabilities purchased Registrable Notes or Exchange
Notes if such untrue statement or omission or alleged untrue statement or
omission made in such preliminary Prospectus is eliminated or remedied in the
related Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) and a copy of the related
Prospectus (as so amended or supplemented) shall have been furnished to such
Participant at or prior to the sale of such Registrable or Exchange Notes, as
the case may be, to such Person.
(b) Each Participant will be required to agree, severally and
not jointly, to indemnify and hold harmless the Company, its directors and
officers and each Person who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from the Company to each Participant, but only with
reference to information relating to such Participant furnished to the Company
in writing by such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
Prospectus. The liability of any Participant under this paragraph (b) shall in
no event exceed the proceeds received by such Participant from sales of
Registrable Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of
<PAGE> 28
-26-
which indemnity may be sought pursuant to either paragraph (a) or (b) of this
Section 7, such Person (the Indemnified Person") shall promptly notify the
Person against whom such indemnity may be sought (the "Indemnifying Person") in
writing, and the Indemnifying Person, upon request of the Indemnified Person,
shall retain one counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person and any others the Indemnifying Person may
reasonably designate in such proceeding and shall pay the reasonable fees and
expenses incurred by such counsel related to such proceeding. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed in writing to the contrary, (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named parties in
any such proceeding (including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and such Indemnified Person shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to any
such Indemnifying Person. It is understood that the Indemnifying Person shall
not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate law
firm (in addition to any local counsel) for all Indemnified Persons, and that
all such fees and expenses shall be reimbursed as they are incurred. Any such
separate firm for the Participants and such control Persons of Participants
shall be designated in writing by Participants who sold a majority in interest
of Registrable Notes and Exchange Notes sold by all such Participants and any
such separate firm for the Company, it directors, its officers and such control
Persons of the Company shall be designated in writing by the Company. The
Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its prior written consent, but if settled with such consent or
if there be a final judgment for the plaintiff for which the Indemnified Person
is entitled to indemnification pursuant to this Agreement, the Indemnifying
Person agrees to indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have requested an
Indemnifying Person to reimburse the Indemnified Person for reasonable fees and
expenses incurred by counsel as contemplated by the third sentence of this
paragraph, the Indemnifying Person agrees that it shall be liable for any
settlement of any proceeding ef-
<PAGE> 29
-27-
fected without its written consent if (i) such settlement is entered into more
than 30 days after receipt by such Indemnifying Person of the aforesaid request
and (ii) such Indemnifying Person shall not have reimbursed the Indemnified
Person in accordance with such request prior to the date of such settlement;
PROVIDED, however, that the Indemnifying Person shall not be liable for any
settlement effected without its consent pursuant to this sentence if the
Indemnifying Party is contesting, in good faith, the request for reimbursement.
No Indemnifying Person shall, without the prior written consent of the
Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement includes an unconditional release of such Indemnified
Person from all liability on claims that are the subject matter of such
proceeding.
(d) If the indemnification provided for in paragraphs (a) and
(b) of this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraphs, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the Company on the one hand and the Participants on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and the Participants on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or by
the Participants and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include,
<PAGE> 30
-28-
subject to the limitations set forth above, any reasonable legal or other
expenses actually incurred by such Indemnified Person in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, in no event shall a Participant be required to
contribute any amount in excess of the amount by which proceeds received by such
Participant from sales of Registrable Notes or Exchange Notes exceeds the amount
of any damages that such Participant has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
------------------
The Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder in a timely manner and, if at any
time the Company is not required to file such reports, it will, upon the request
of any Holder of Registrable Notes, make publicly available other information of
a like nature so long as necessary to permit sales pursuant to Rule 144 or Rule
144A. The Company further covenants that so long as any Registrable Notes remain
outstanding to make available to any Holder of Registrable Notes in connection
with any sale thereof, the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Registrable Notes pursuant to
(a) such Rule 144A, or (b) any similar rule or regulation hereafter adopted by
the SEC.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Company.
<PAGE> 31
-29-
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
10. Miscellaneous
-------------
(a) REMEDIES. In the event of a breach by the Company of any
of its obligations under this Agreement, other than the occurrence of an event
which requires payment of Additional Interest, each Holder of Registrable Notes,
in addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchaser, in the Purchase Agreement or
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees, jointly and severally, that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate.
(b) ENFORCEMENT. The Trustee shall be authorized to enforce
the provisions of this Agreement for the ratable benefit of the Holders.
(c) NO INCONSISTENT AGREEMENTS. The Company has not, as of the
date hereof, and shall not, after the date of this Agreement, enter into any
Agreement with respect to any of its securities that is inconsistent with the
rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not entered and
will not enter into any Agreement with respect to any of its securities which
will grant to any Person piggy-back rights with respect to a Registration
Statement required to be filed under this Agreement.
(d) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Company shall
not, directly or indirectly, take any action with respect to the Registrable
Notes as a class that would adversely affect the ability of the Holders of
Registrable Notes
<PAGE> 32
-30-
to include such Registrable Notes in a registration undertaken pursuant to this
Agreement.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of Holders
of at least a majority of the then outstanding aggregate principal amount of
Registrable Notes. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders of Registrable Notes whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Notes may be given by Holders of at least a majority in aggregate principal
amount of the Registrable Notes being sold by such Holders pursuant to such
Registration Statement, PROVIDED that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.
(f) NOTICES. All notices and other communications (including
without limitation any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Notes or any Participating
Broker-Dealer, at the most current address given by the Trustee to the
Company; and
(ii) if to the Company, with a copy to Jones, Day, Reavis &
Pogue, 901 Lakeside Avenue, Cleveland, Ohio 44114 Attention: David P.
Porter, Esq., Park-Ohio Industries, Inc., 23000 Euclid Avenue,
Cleveland, Ohio 44117, Attention: Ronald J.
Cozean, Esq.
All such notices and communications shall be deemed to have
been duly given: (i) when delivered by hand, if personally delivered; (ii) five
business days after being deposited in the mail, postage prepaid, if mailed;
(iii) one business day after being timely delivered to a next-day air courier;
and (iv) when receipt is acknowledged by the addressee, if telecopied.
<PAGE> 33
-31-
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
under the Indenture at the address specified in such Indenture.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Notes.
(h) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
(i) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction.
(l) ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final
expression of their Agreement, and is intended to be a complete and exclusive
statement of the Agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein.
<PAGE> 34
-32-
(m) NOTES HELD BY THE COMPANY OR THEIR AFFILIATES. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Notes is required hereunder, Registrable Notes held by the Company or its
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
<PAGE> 35
IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.
PARK-OHIO INDUSTRIES, INC.
By: /s/ Ronald J. Cozean
---------------------------------
Name: Ronald J. Cozean
Title: General Counsel and Secretary
<PAGE> 36
The foregoing Agreement is hereby confirmed and accepted as of
the date first above written.
CIBC OPPENHEIMER CORP.
By: /s/ Mark Dalton
-----------------------
Name: Mark Dalton
Title: Managing Director
MERRILL LYNCH & CO.
By: /s/ Bennett Rosenthal
-----------------------
Name: Bennett Rosenthal
Title: Managing Director
VALUE INVESTING PARTNERS, INC.
By: /s/ Steven Solmonson
-----------------------
Name: Steven Solmonson
Title: President
<PAGE> 1
Exhibit 5.1
December 22, 1997
Park-Ohio Industries, Inc.
23000 Euclid Avenue
Cleveland, Ohio 44117
Re: 9 1/4% Senior Subordinated Notes due 2007
--------------------------------------------
Ladies and Gentlemen:
We are acting as counsel for Park-Ohio Industries, Inc., an Ohio
corporation (the "Company"), in connection with the proposed issuance of
$150,000,000 aggregate principal amount of the Company's 9 1/4% Senior
Subordinated Notes Due 2007 (the "Notes"), pursuant to an Indenture, dated as of
November 25, 1997 (the "Indenture"), between the Company and Harris Trust and
Savings Bank, as Trustee (the "Trustee"), and an Exchange and Registration
Rights Agreement, dated as of November 25, 1997, by and among the Company, CIBC
Oppenheimer Corp., Merrill Lynch & Co. and Value Investing Partners Inc. (the
"Registration Rights Agreement").
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion, and based thereupon, we are of
the opinion that the Notes have been duly authorized, and when duly executed by
authorized officers of the Company, authenticated by the Trustee, and issued in
accordance with the Indenture and the Registration Rights Agreement, will be
binding obligations of the Company, entitled to the benefits of the Indenture.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement on Form S-4 filed by the Company to effect registration
of the Notes under the Securities Act of 1933 and to the reference to us under
the caption "Legal Matters" in the Prospectus constituting a part of such
Registration Statement.
Very truly yours,
/s/ Jones, Day, Reavis & Pogue
<PAGE> 1
OP EXHIBIT 11.1
PARK-OHIO INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(In Thousands - Except Per Share Data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
---- ---- ---- ----------- -----------
<S> <C> <C> <C> <C> <C>
Income from continuing operations $ 8,478 $ 19,813 $ 9,693 $ 7,245 $ 7,803
Amortization of imputed goodwill associated
with the earnout shares (398) (77) (84) (63) (63)
----------- ------------ ------------ ----------- -----------
Income from continuing operations related to
shareholders of Common Stock (Primary) 8,080 19,736 9,609 7,182 7,740
Interest associated with convertible senior
subordinated debentures 1,009 1,612 999 792 728
----------- ------------ ------------ ----------- -----------
Income from continuing operations related to
shareholders of Common Stock (Fully
diluted) $ 9,089 $ 21,348 $ 10,608 $ 7,974 $ 8,468
=========== ============ ============ =========== ===========
Discontinued operations $ 4,006 $ 4,221 $ 11,642 $ 11,642 $ -0-
=========== ============ ============ =========== ===========
Net income related to shareholders of Common
Stock (Primary) $ 12,086 $ 23,957 $ 21,251 $ 18,824 $ 7,740
=========== ============ ============ =========== ===========
Net income related to shareholders of Common
Stock (Fully diluted) $ 13,095 $ 25,569 $ 22,250 $ 19,616 $ 8,468
=========== ============ ============ =========== ===========
PRIMARY COMPUTATION
Average shares outstanding during the period 6,949,695 9,885,958 10,433,096 10,406,000 10,650,000
Effect of General Aluminum Mfg. Company
earnout shares deemed to be issued 187,500 187,500 187,500 188,000 188,000
Effect of Kay Home Products, Inc.
earnout shares deemed to be issued 796,973 -0- -0- -0- -0-
Effect of dilutive stock options based on
the treasury stock method using the
average market price for the period 157,854 183,789 339,583 383,000 183,000
----------- ------------ ------------ ----------- -----------
Shares used 8,092,022 10,257,247 10,960,179 10,977,000 11,021,000
=========== ============ ============ =========== ===========
Per share of Common Stock:
Continuing operations $ 1.00 $ 1.93 $ .88 $ .66 $ .70
Discontinued operations .49 .41 1.06 1.06 -0-
----------- ------------ ------------ ----------- -----------
Net income $ 1.49 $ 2.34 $ 1.94 $ 1.72 $ .70
=========== ============ ============ =========== ===========
FULLY DILUTED COMPUTATION
Average shares outstanding per primary
computation above 8,092,022 10,257,247 10,960,179 10,977,000 11,021,000
Additional effect of dilutive stock
options based on the treasury stock
method using the end of period market
price, if higher than the average
market price -0- 59,276 -0- -0- 72,000
Effect of assuming conversion of the
Convertible Senior Subordinated
Debentures 723,258 1,150,880 1,150,880 1,151,000 1,118,000
----------- ------------ ------------ ----------- -----------
Shares used 8,815,280 11,467,403 12,111,059 12,128,000 12,211,000
Per share of common stock: =========== ============ ============ =========== ===========
Continuing operations $ 1.04 $ 1.86 $ .88 $ .66 $ .69
Discontinued operations .45 .37 .96 .96 -0-
----------- ------------ ------------ ----------- -----------
Net income $ 1.49 $ 2.23 $ 1.84 $ 1.62 $ .69
=========== ============ ============ =========== ===========
</TABLE>
<PAGE> 1
EXHIBIT 12.1
Park-Ohio Industries, Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
(In thousands except ratio data)
<TABLE>
<CAPTION>
Pro Forma
Year Ended December 31, Nine Months Nine Months Nine Months Pro Forma
------------------------------------ Ended Ended Ended Year Ended
September 30, September 30, September 30, December 31,
1992 1993 1994 1995 1996 1996 1997 1997 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings from
continuing
operations before
income taxes $(8,681) $3,929 6,652 12,913 14,753 11,733 12,485 11,579 12,872
Fixed Charges 1,014 1,352 2,370 7,192 8,787 6,779 7,613 13,402 17,604
------- ------ ----- ------ ------ ------ ------ ------ ------
Earnings Available
for Fixed Charges (7,667) 5,281 9,022 20,105 23,540 18,512 20,098 24,981 30,476
======= ====== ===== ====== ====== ====== ====== ====== ======
Fixed Charges:
Interest Component
of Rent Expense 510 669 783 1,176 1,584 1,188 1,535 1,793 2,124
Interest Expense 504 683 1,501 5,911 6,947 5,478 6,078 11,609 15,480
Amortization of
Deferred Financing Costs -- -- 86 105 256 113 -- -- --
Total Fixed Charges 1,014 1,352 2,370 7,192 8,787 6,779 7,613 13,402 17,604
Ratio of Earnings to
Fixed Charges (a) -- 3.9x 3.8x 2.8x 2.7x 2.7x 2.6x 1.9x 1.7x
<FN>
(a) For 1992, the Company's earnings were insufficient to cover fixed charges by $8.7 million
</TABLE>
<PAGE> 1
Exhibit 21.1
List of Subsidiaries
<TABLE>
<CAPTION>
Principal Operating Subsidiary State of Incorporation
- ------------------------------ ----------------------
<S> <C>
Advance Vehicles, Inc. OH
Arden Industrial Products, Inc. MN
Blue Falcon Forge, Inc. PA
Castle Rubber Company PA
Cicero Flexible Products, Inc. OH
General Aluminum Manufacturing Company II OH
General Aluminum Manufacturing Company OH
Kay Home Products, Inc. OH
RB&W Corporation DE
The Ajax Manufacturing Company OH
Tocco, Inc. AL
RB&W Corporation of Canada Ontario, Canada
RB&W Logistics Canada, Inc./Logistique RB&W Canada, Inc. Alberta, Canada
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Summary
Historical and Pro Forma Consolidated Financial Data," "Selected Historical
Consolidated Financial Data," and "Experts" and to the use of our report dated
February 17, 1997, in the Registration Statement on Form S-4 and the related
Prospectus of Park-Ohio Industries, Inc. for the registration of $150,000,000 of
its 9 1/4% Senior Subordinated Notes due 2007.
/s/ Ernst & Young LLP
Cleveland, Ohio
December 19, 1997
2
<PAGE> 1
Exhibit 24.1
DIRECTORS AND OFFICERS OF
PARK-OHIO INDUSTRIES, INC.
REGISTRATION STATEMENT ON FORM S-4
POWER OF ATTORNEY
The undersigned directors and officers of Park-Ohio
Industries, Inc., an Ohio corporation (the "Corporation"), do hereby constitute
and appoint, James S. Walker, Ronald J. Cozean, and Matthew V. Crawford, and
each of them, with full power of substitution and resubstitution, as
attorneys-in-fact or attorney-in-fact of the undersigned, for him/her and in
his/her name, place and stead, to execute and file with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933 one or
more Registration Statement(s) on Form S-4 relating to the registration for sale
of Corporation's 9 1/4% Senior Subordinated Notes due 2007 (the "Securities"),
with any and all amendments, supplements and exhibits thereto (including
pre-effective and post-effective amendments or supplements), to execute and file
any and all other applications or other documents to be filed with the
Commission and all documents required to be filed with any state securities
regulating board or commission pertaining to such Securities registered pursuant
to the Registration Statement(s) on Form S-4, with any and all amendments,
supplements and exhibits thereto each such attorney to have full power to act
with or without the others, and to have full power and authority to do and
perform, in the name and on behalf of the undersigned, every act whatsoever
necessary, advisable or appropriate to be done in the premises as fully and to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and approving the act of said attorneys and any of them and any such
substitute.
EXECUTED as of December 15, 1997.
/s/ Edward F. Crawford /s/ James S. Walker
- --------------------------------------- -----------------------------------
Edward F. Crawford James S. Walker
President, Chief Executive Officer Vice President and Chief Financial
and Chairman of the Board Officer
/s/ Felix J. Tarorick /s/ Ronald J. Cozean
- --------------------------------------- -----------------------------------
Felix J. Tarorick Ronald J. Cozean
Vice President of Operations, Secretary and General Counsel
President of Metal Forming Group
/s/ Matthew V. Crawford /s/ Patrick W. Fogarty
- --------------------------------------- -----------------------------------
Matthew V. Crawford Patrick W. Fogarty
Assistant Secretary, Corporate Counsel Director of Finance
and Director
/s/ Lewis E. Hatch /s/ Thomas E. McGinty
- --------------------------------------- -----------------------------------
Lewis E. Hatch, Jr. Thomas E. McGinty
Director Director
/s/ Lawrence O. Selhorst /s/ James W. Wert
- --------------------------------------- -----------------------------------
Lawrence O. Selhorst James W. Wert
Director Director
<PAGE> 1
Exhibit 25.1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------------
___CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. NATIONAL BANKING ASSOCIATION 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
SIXTH STREET AND MARQUETTE AVENUE
Minneapolis, Minnesota 55479
(Address of principal executive offices) (Zip code)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
PARK-OHIO INDUSTRIES, INC.
(Exact name of obligor as specified in its charter)
OHIO 34-6520107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2300 EUCLID AVENUE
CLEVELAND, OHIO 44117
(Address of principal executive offices) (Zip code)
-----------------------------
9.25% SENIOR SUBORDINATED NOTES DUE 2007
(Title of the indenture securities)
===============================================================================
<PAGE> 2
Item 1. GENERAL INFORMATION. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. FOREIGN TRUSTEE. Not applicable.
Item 16. LIST OF EXHIBITS. List below all exhibits filed as a part of
this Statement of Eligibility. Norwest Bank
incorporates by reference into this
Form T-1 the exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of
the trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of
the trustee to commence business issued
June 28, 1872, by the Comptroller of the
Currency to The Northwestern National Bank
of Minneapolis.*
b. A copy of the certificate of the Comptroller
of the Currency dated January 2, 1934,
approving the consolidation of The
Northwestern National Bank of Minneapolis
and The Minnesota Loan and Trust Company of
Minneapolis, with the surviving entity being
titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January
12, 1943, as to change of corporate title of
Northwestern National Bank and Trust Company
of Minneapolis to Northwestern National Bank
of Minneapolis.*
<PAGE> 3
d. A copy of the letter dated May 12, 1983 from
the Regional Counsel, Comptroller of the
Currency, acknowledging receipt of notice of
name change effective May 1, 1983 from
Northwestern National Bank of Minneapolis to
Norwest Bank Minneapolis, National
Association.*
e. A copy of the letter dated January 4, 1988
from the Administrator of National Banks for
the Comptroller of the Currency certifying
approval of consolidation and merger
effective January 1, 1988 of Norwest Bank
Minneapolis, National Association with
various other banks under the title of
"Norwest Bank Minnesota, National
Association."*
Exhibit 3. A copy of the authorization of the trustee to
exercise corporate trust powers issued January 2,
1934, by the Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 7. A copy of the latest report of condition of the
trustee published pursuant to law or the requirements
of its supervising or examining authority has been
filed with the Securities and Exchange Commission
pursuant to a hardship exemption and is incorporated
herein by reference.
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with registration
statement number 33-66026.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 19th day of December, 1997.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Jane Y. Schweiger
----------------------
Jane Y. Schweiger
Corporate Trust Officer
<PAGE> 5
EXHIBIT 6
December 19, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/ Jane Y. Schweiger
----------------------
Jane Y. Schweiger
Corporate Trust Officer
<PAGE> 1
EXHIBIT 99.1
PARK-OHIO INDUSTRIES, INC.
LETTER OF TRANSMITTAL
9 1/4% SENIOR SUBORDINATED NOTES DUE 2007
CUSIP 700677AC1
TO: NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, THE EXCHANGE AGENT
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JANUARY ,
1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF ORIGINAL NOTES MAY BE
WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
P.O. Box 1517 Norwest Center
Minneapolis, MN 55480-1517 Sixth and Marquette
Minneapolis, MN 55479-0113
By Hand: By Facsimile:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
Northstar East, 12th Floor (612) 667-4927
608 2nd Avenue Confirm by telephone:
Minneapolis, MN 55402 (612) 667-9764
</TABLE>
------------------------
Delivery of this instrument to an address other than as set forth above or
transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EXCHANGE NOTES FOR THEIR
ORIGINAL NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT
WITHDRAW) THEIR ORIGINAL NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION
DATE.
The undersigned acknowledges receipt of the Prospectus dated December ,
1997 (the "Prospectus") of Park-Ohio Industries, Inc. (the "Company") and this
Letter of Transmittal (the "Letter of Transmittal"), which together constitute
the Company's offer (the "Exchange Offer") to exchange $1,000 principal amount
of its 9 1/4% Senior Subordinated Notes due 2007 (the "Exchange Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which the Prospectus
is a part, for each $1,000 principal amount of its outstanding 9 1/4% Senior
Subordinated Notes due 2007 (the "Original Notes"), of which $150,000,000
principal amount is outstanding, upon the terms and conditions set forth in the
Prospectus. Other capitalized terms used but not defined herein have the meaning
given to them in the Prospectus.
For each Original Note accepted for exchange, the holder of such Original
Note will receive an Exchange Note having a principal amount equal to that of
the surrendered Original Note. Interest on the Exchange Notes will accrue from
the last interest payment date on which interest was paid on the Original Notes
surrendered in exchange therefor or, if no interest has been paid on the
Original Notes, from the date of original issue of the Original Notes. Holders
of Original Notes accepted for exchange will be deemed to have waived the right
to receive any other payments or accrued interest on the Original Notes. The
Company reserves the right, at any time or from time to time, to extend the
Exchange Offer at its discretion, in which event the term "Expiration Date"
shall mean the latest time and date to which the Exchange Offer is extended. The
Company shall notify the Exchange Agent of any extension by oral (promptly
confirmed in writing) or written notice and will make a
<PAGE> 2
public announcement thereof, each prior to 9:00 A.M., New York City time, on the
next business day after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by Holders if: (i) certificates
representing Original Notes are to be physically delivered to the Exchange Agent
herewith by Holders; (ii) tender of Original Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company
("DTC"), pursuant to the procedures set forth in the Prospectus under "The
Exchange Offer -- Procedures for Tendering" by any financial institution that is
a participant in DTC and whose name appears on a security position listing as
the owner of Original Notes; or (iii) tender of Original Notes is to be made
according to the guaranteed delivery procedures set forth in the prospectus
under "The Exchange Offer -- Guaranteed Delivery Procedures." DELIVERY OF
DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The term "Holder" with respect to the Exchange Offer means any person: (i)
in whose name Original Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered Holder, or (ii) whose Original Notes are held of record by DTC who
desires to deliver such Original Notes by book-entry transfer at DTC. The
undersigned has completed, executed and delivered this Letter of Transmittal to
indicate the action the undersigned desires to take with respect to the Exchange
Offer.
The instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent. See Instruction 11 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR ORIGINAL
NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
<TABLE>
<CAPTION>
DESCRIPTION OF 9 1/4% SENIOR SUBORDINATED NOTES DUE 2007 (ORIGINAL NOTES)
AGGREGATE PRINCIPAL
PRINCIPAL AMOUNT
AMOUNT TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED (IF LESS
(PLEASE FILL IN, IF BLANK) NUMBER(S)* BY CERTIFICATE(S) THAN ALL)**
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
TOTAL
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Original Notes will be deemed to have tendered the
entire aggregate principal amount represented by the column labeled
"Aggregate Principal Amount Represented by Certificate(s)," If the space
provided above is inadequate, list the certificate numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
The minimum permitted tender is $1,000 in principal amount of Original
Notes. All other tenders must be integral multiples of $1,000.
<PAGE> 3
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Original Notes in a principal
amount not tendered or not accepted for exchange, or Exchange Notes issued in
exchange for Original Notes accepted for exchange, are to be issued in the name
of someone other than the undersigned, or if the Original Notes tendered by
book-entry transfer that are not accepted for exchange are to be credited to an
account maintained by DTC.
Issue certificate(s) to:
Name: ..........................................................................
(Please Print)
Address: .......................................................................
................................................................................
(Include Zip Code)
................................................................................
(Tax Identification or Social Security No.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Original Notes in a principal
amount not tendered or not accepted for exchange, or Exchange Notes issued in
exchange for Original Notes accepted for exchange, are to be sent to someone
other than the undersigned, or to the undersigned at an address other than that
shown above.
Mail to:
Name: ..........................................................................
(Please Print)
Address: .......................................................................
................................................................................
(Include Zip Code)
................................................................................
(Tax Identification or Social Security No.)
<PAGE> 4
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
- --------------------------------------------------------------------------------
DTC Book-Entry Account Number:
- -----------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
- -------------------------------------------------------------------------------
Window Ticket Number (if any):
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
- -----------------------------------------------------------
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number:
- --------------------------------------------------------------------------------
Transaction Code Number:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
<PAGE> 5
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to the Company the principal amount of Original Notes indicated
above. Subject to and effective upon the acceptance for exchange of the
principal amount of Original Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Original Notes
tendered hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company and as Trustee under the
Indenture for the Original Notes and Exchange Notes) with respect to the
tendered Original Notes with full power of substitution to (i) deliver
certificates for such Original Notes to the Company, or transfer ownership of
such Original Notes on the account books maintained by DTC and deliver all
accompanying evidence of transfer and authenticity to, or upon the order of, the
Company and (ii) present such Original Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of beneficial
ownership of such Original Notes, all in accordance with the terms and subject
to the conditions of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Original Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim, when the same are acquired by the Company. The
undersigned hereby further represents that any Exchange Notes acquired in
exchange for Original Notes tendered hereby will have been acquired in the
ordinary course of business of the Holder receiving such Exchange Notes, whether
or not such person is the Holder, that neither the Holder nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes and that neither the Holder nor any such
other person is an "affiliate," as defined in Rule 405 under the Securities Act,
of the Company or any of its subsidiaries.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "SEC") that the Exchange Notes issued in exchange for the
Original Notes pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof (other than any such holder that is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangements with any person to participate in the distribution of such
Exchange Notes. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Original Notes that
were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection with
any resale of such Exchange Notes; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
The undersigned hereby acknowledges and agrees that any broker-dealer and
any Holder using the Exchange Offer to participate in a distribution of Exchange
Notes could not rely on the SEC staff position set forth in certain no-action
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or Item 508, as applicable, of Regulation S-K
if the resales are of Exchange Notes obtained by such Holder in exchange for
Original Notes acquired by such Holder directly from the Company or an affiliate
of the Company.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer and purchase of the Original
Notes tendered hereby. All authority conferred or agreed to be conferred by this
Letter of Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and
<PAGE> 6
assigns, trustees in bankruptcy or other legal representatives of the
undersigned. This tender may be withdrawn only in accordance with the procedures
set forth in "The Exchange Offer -- Withdrawal of Tenders" section of the
Prospectus.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Original Notes when, as and if the Company has given
oral or written notice thereof to the Exchange Agent.
If any tendered Original Notes are not accepted for exchange pursuant to
the Exchange Offer for any reason, certificates for any such unaccepted Original
Notes will be returned (except as noted below with respect to tenders through
DTC), without expense, to the undersigned at the address shown below or at a
different address as may be indicated under "Special Delivery Instructions" as
promptly as practicable after the Expiration Date.
The undersigned understands that tenders of Original Notes pursuant to the
procedures described under the caption "The Exchange Offer -- Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Payment and Delivery
Instructions," please issue the certificates representing the Exchange Notes
issued in exchange for the Original Notes accepted for exchange and return any
Original Notes not tendered or not exchanged in the name(s) of the undersigned
(or in either such event in the case of the Original Notes tendered by DTC, by
credit to the undersigned's account, at DTC). Similarly, unless otherwise
indicated under "Special Payment and Delivery Instructions," please send the
certificates representing the Exchange Notes issued in exchange for the Original
Notes accepted for exchange and any certificates for Original Notes not tendered
or not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below the undersigned's signature(s), unless, in either
event, tender is being made through DTC. In the event that both "Special Payment
Instructions" and "Special Payment and Delivery Instructions" are completed,
please issue the certificates representing the Exchange Notes issued in exchange
for the Original Notes accepted for exchange and return any Original Notes not
tendered or not exchanged in the name(s) of, and send said certificates to, the
person(s) so indicated. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Payment Instructions" and "Special Delivery
Instructions" to transfer any Original Notes from the name of the registered
Holder(s) thereof if the Company does not accept for exchange any of the
Original Notes so tendered.
Holders of Original Notes who wish to tender their Original Notes and (i)
whose Original Notes are not immediately available or (ii) who cannot deliver
their Original Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent, or cannot complete the procedure for book-entry
transfer, prior to the Expiration Date, may tender their Original Notes
according to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer -- Guaranteed Delivery Procedures." See
Instruction 1 regarding the completion of the Letter of Transmittal printed
below.
<PAGE> 7
PLEASE SIGN HERE WHETHER OR NOT
ORIGINAL NOTES ARE BEING PHYSICALLY TENDERED HEREBY
<TABLE>
<S> <C>
X ............................................................... .........................
Date
X ............................................................... .........................
Signature(s) of Registered Holder(s) or Authorized Signatory Date
</TABLE>
Area Code and Telephone Number: ................................................
The above lines must be signed by the registered Holder(s) of Original Notes as
their name(s) appear(s) on the Original Notes or, if the Original Notes are
tendered by a participant in DTC, as such participant's name appears on a
security position listing as the owner of Original Notes, or by person(s)
authorized to become registered Holder(s) by a properly completed bond power
from the registered Holder(s), a copy of which must be transmitted with this
Letter of Transmittal. If Original Notes to which this Letter of Transmittal
relates are held of record by two or more joint Holders, then all such Holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person must (i)
set forth his or her full title below and (ii) unless waived by the Company,
submit evidence satisfactory to the Company of such person's authority to act.
See Instruction 4 regarding the completion of this Letter of Transmittal printed
below.
Name(s): .......................................................................
................................................................................
(Please Print)
Capacity: ......................................................................
Address: .......................................................................
(Include Zip Code)
SIGNATURE GUARANTEE BY AN ELIGIBLE INSTITUTION
(If Required by Instruction 4)
Certain signatures must be Guaranteed by an Eligible Institution.
................................................................................
(Authorized Signature)
................................................................................
(Title)
................................................................................
(Name of Firm)
Dated: .........................................................................
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES. This
Letter is to be completed by noteholders, either if certificates are to be
forwarded herewith or if tenders are to be made pursuant to the procedures for
delivery by book-entry transfer set forth in "The Exchange Offer -- Book-Entry
Transfer" section of the Prospectus. Certificates for all physically tendered
Original Notes, or Book-Entry Confirmation, as the case may be, as well as a
properly completed and duly executed Letter (or manually signed facsimile
hereof) and any other documents required by this Letter, must be received by the
Exchange Agent at the address set forth herein on or prior to the Expiration
Date, or the tendering holder must comply with the guaranteed delivery
procedures set forth below. Original Notes tendered hereby must be in
denominations of principal amount of maturity of $1,000 and any integral
multiple thereof.
Noteholders whose certificates for Original Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Original Notes pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined in Instruction 4 below), (ii) prior to the
Expiration Date, the Exchange Agent must receive from such Eligible Institution
a properly completed and duly executed Letter (or facsimile thereof) and Notice
of Guaranteed Delivery, substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Original Notes and the amount of Original Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within five Nasdaq National Market ("Nasdaq") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Original Notes, or a Book-Entry Confirmation, and any other
documents required by the Letter will be deposited by the Eligible Institution
with the Exchange Agent, and (iii) the certificates for all physically tendered
Original Notes, in proper form for transfer, or Book-Entry Confirmation, as the
case may be, and all other documents required by this Letter, are received by
the Exchange Agent within five Nasdaq trading days after the date of execution
of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Original Notes and all other
required documents is at the election and risk of the tendering holders, but the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. If Original Notes are sent by mail, it is suggested that the
mailing be made sufficiently in advance of the Expiration Date to permit the
delivery to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
See "The Exchange Offer" section in the Prospectus.
2. TENDER BY HOLDER. Only a holder of Original Notes may tender such
Original Notes in the Exchange Offer. Any beneficial holder of Original Notes
who is not the registered holder and who wishes to tender should arrange with
the registered holder to execute and deliver this Letter on his or her behalf or
must, prior to completing and executing this Letter and delivering his or her
Original Notes, either make appropriate arrangements to register ownership of
the Original Notes in such holder's name or obtain a properly completed bond
power from the registered holder.
3. PARTIAL TENDERS. Tenders of Original Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Original Notes is tendered, the tendering holder should fill in the principal
amount tendered in the fourth column of the box entitled "Description of 9 1/4%
Senior Subordinated Notes due 2007 (Original Notes)" above. The entire principal
amount of Original Notes delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated. If the entire principal amount of all
Original Notes is not tendered, then Original Notes for the principal amount of
Original Notes not tendered and a certificate or certificates representing
Exchange Notes issued in exchange for any Original Notes accepted will be sent
to the Holder at his or her registered address, unless a different address is
provided in the appropriate box on this Letter of Transmittal, promptly after
the Original Notes are accepted for exchange.
<PAGE> 9
4. SIGNATURES ON THIS LETTER; POWERS OF ATTORNEY AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter is signed by the registered holder of
the Original Notes tendered hereby, the signature must correspond exactly with
the name as written on the face of the certificates without any change
whatsoever.
If any tendered Original Notes are owned of record by two or more joint
owners, all such owners must sign this Letter.
If any tendered Original Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the
Original Notes specified herein and tendered hereby, no endorsements of
certificates or separate powers of attorney are required. If, however, the
Exchange Notes are to be issued, or any untendered Original Notes are to be
reissued, to a person other than the registered holder, then endorsements of any
certificates transmitted hereby or separate powers of attorney are required.
Signatures on such certificate(s) must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names on the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or powers of attorney are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Original Notes or signatures on powers of
attorney required by this Instruction 4 must be guaranteed by a firm which is a
participant in a recognized signature guarantee medallion program ("Eligible
Institutions").
Signatures on this Letter must be guaranteed by an Eligible Institution
unless the Original Notes are tendered (i) by a registered holder of Original
Notes (which term, for purposes of the Exchange Offer, includes any participant
in the Book-Entry Transfer Facility system whose name appears on a security
position listing as the holder of such Original Notes) who has not completed the
box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on this Letter, or (ii) for account of an Eligible Institution.
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box or boxes, the name and address to which Exchange
Notes or substitute Original Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal (or in the case of
tender of Original Notes through DTC, if different from DTC). In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated. Noteholders tendering
Original Notes by book-entry transfer may request that Original Notes not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such noteholder may designate hereon. If no such instructions are
given, such Original Notes not exchanged will be returned to the name and
address of the person signing this Letter.
6. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a holder
whose offered Original Notes are accepted for exchange must provide the Company
(as payer) with his, her or its correct taxpayer identification number ("TIN"),
which, in the case of an exchanging holder who is an individual, is his or her
social security number. If the Company is not provided with the correct TIN or
an adequate basis for exemption, such holder may be subject to a $50 penalty
imposed by the Internal Revenue Service (the "IRS"), and payments made with
respect to Original Notes purchased pursuant to the Exchange Offer may be
subject to backup withholding at a 31% rate. If withholding results in an
overpayment of taxes, a refund may be obtained. Exempt holders (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9."
<PAGE> 10
To prevent backup withholding, each exchanging holder must provide his, her
or its correct TIN by completing the Substitute Form W-9 enclosed herewith,
certifying that the TIN provided is correct (or that such Holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has been notified by the IRS that he, she or it is subject to backup withholding
as a result of a failure to report all interest or dividends, or (iii) the IRS
has notified the holder that he, she or it is no longer subject to backup
withholding. In order to satisfy the Exchange Agent that a foreign individual
qualifies as an exempt recipient, such holder must submit a statement signed
under penalty of perjury attesting to such exempt status. Such statements may be
obtained from the Exchange Agent. If the Original Notes are in more than one
name or are not in the name of the actual owner, consult the Substitute Form W-9
for information on which TIN to report. If you do not provide your TIN to the
Company within 60 days, backup withholding will begin and continue until you
furnish your TIN to the Company.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Original Notes pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Original Notes for
principal amounts not tendered or accepted for exchange are to be delivered to,
or are to be registered or issued in the name of, any person other than the
registered holder of the Original Notes tendered hereby, or if tendered Original
Notes are registered in the name of any person other than the person signing
this Letter of Transmittal, or if a transfer tax is imposed for any reason other
than the exchange of Original Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered holder or
on any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Original Notes listed in this Letter of
Transmittal.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify specified conditions in the Exchange Offer in the case of any
Original Notes tendered.
9. NO CONDITIONAL TRANSFERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Original Notes, by
execution of this Letter, shall waive any right to receive notice of the
acceptance of their Original Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of
Original Notes nor shall any of them incur any liability for failure to give any
such notice.
10. MUTILATED, LOST, STOLEN OR DESTROYED ORIGINAL NOTES. Any tendering
holder whose Original Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated herein for further
instructions.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance for additional copies of the Prospectus, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be directed to the
Exchange Agent at the address specified in the Prospectus.
<PAGE> 11
(DO NOT WRITE IN THE SPACE BELOW)
<TABLE>
<CAPTION>
CERTIFICATE ORIGINAL NOTES ORIGINAL NOTES
SURRENDERED TENDERED ACCEPTED
- ------------------- ------------------- -------------------
<S> <C> <C>
- ------------------ ------------------ ------------------
- ------------------ ------------------ ------------------
================== ================== ==================
</TABLE>
Delivery Prepared by______________Checked By______________ Date___________
<PAGE> 12
PAYER'S NAME: PARK-OHIO INDUSTRIES, INC.
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of the person or entity whose number you enter in
Part I below. See instructions if your name has changed.)
- ---------------------------------------------------------------------------------------------------------
Address
- ---------------------------------------------------------------------------------------------------------
City, state and ZIP Code
- ---------------------------------------------------------------------------------------------------------
List account number(s) here (optional)
- ---------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- Please provide your Tax-
FORM W-9 payer Identification Number -----------------------------------
("TIN") in the box at right and Social Security Number
DEPARTMENT OF THE TREASURY certify by signing and dating
INTERNAL REVENUE SERVICE below. OR
----------------------------------
TIN
----------------------------------------------------------------------
PART II -- Check the box if you are NOT subject to backup withholding
under the provisions of section 3408(a)(1)(C) of the Internal Revenue
Code because (1) you have not been notified that you are subject to
backup withholding as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has notified you that
you are no longer subject to backup withholding. [ ]
----------------------------------------------------------------------
PART III -- AWAITING TIN
- ---------------------------------------------------------------------------------------------------------
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER
- ---------------------------------------------------------------------------------------------------------
CERTIFICATION -- Under the penalties of perjury, I certify that the information provided on this form is
true, correct and complete.
- ---------------------------------------------------------------------------------------------------------
SIGNATURE DATE
- ---------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 13
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<CAPTION>
-------------------------------------------------------
GIVE THE
FOR THIS TYPE SOCIAL SECURITY
OF ACCOUNT: NUMBER OF --
-------------------------------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for incompetent person(3)
a designated ward, minor
or incompetent person
7. a. The usual revocable The grantor trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is not a
legal and valid trust
under State law
8. Sole proprietorship The owner(4)
account
<CAPTION>
-------------------------------------------------------
GIVE THE
FOR THIS TYPE SOCIAL SECURITY
OF ACCOUNT: NUMBER OF --
-------------------------------------------------------
<S> <C> <C>
9. A valid trust, estate or The legal entity (do not
pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State
or local government,
school district, or
prison) that receives
agricultural program
payments
</TABLE>
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE
CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE> 14
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(l).
- An entity registered at all times under the Investment Company Act of
1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend,
interest, or other payments to give tax-payer identification numbers to payers
who must report for payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1994, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail
to include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If
you make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
9 1/4% SENIOR SUBORDINATED NOTES DUE 2007
OF
PARK-OHIO INDUSTRIES, INC.
CUSIP 700677AC1
As set forth in the Prospectus dated December , 1997 (the "Prospectus"),
of Park-Ohio Industries, Inc. (the "Company") and in the accompanying Letter of
Transmittal and instructions thereto (the "Letter of Transmittal"), this form or
one substantially equivalent hereto must be used to accept the Company's
Exchange Offer (the "Exchange Offer") to exchange all of its outstanding 9 1/4%
Senior Subordinated Notes due 2007 (the "Original Notes") for its 9 1/4% Senior
Subordinated Notes due 2007, which have been registered under the Securities Act
of 1933, as amended, if certificates for the Original Notes are not immediately
available or if the Original Notes, the Letter of Transmittal or any other
documents required thereby cannot be delivered to the Exchange Agent, or the
procedure for book-entry transfer cannot be completed, prior to 5:00 P.M., New
York City time, on the Expiration Date (as defined in the Prospectus). This form
may be delivered by an Eligible Institution by hand or transmitted by facsimile
transmission, overnight courier or mail to the Exchange Agent as set forth
below. Capitalized terms used but not defined herein have the meaning given to
them in the Prospectus.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JANUARY ,
1998, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF ORIGINAL
NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE BUSINESS DAY PRIOR
TO THE EXPIRATION DATE.
To: Norwest Bank Minnesota, National Association, The Exchange Agent
<TABLE>
<S> <C>
By Registered or Certified Mail: By Overnight Courier:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
P.O. Box 1517 Norwest Center
Minneapolis, MN 55480-1517 Sixth and Marquette
Minneapolis, MN 55479-0113
By Hand: By Facsimile:
Norwest Bank Minnesota, National Association Norwest Bank Minnesota, National Association
Corporate Trust Operations Corporate Trust Operations
Northstar East, 12th Floor (612) 667-4927
608 2nd Avenue Confirm by telephone:
Minneapolis, MN 55402 (612) 667-9764
</TABLE>
------------------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS
VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID
DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal to be used to tender Original Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the Letter
of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Park-Ohio Industries, Inc. an Ohio
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus and the Letter of Transmittal (which together constitute
the "Exchange Offer"), receipt of which is hereby acknowledged, Original Notes
pursuant to the guaranteed delivery procedures set forth in Instruction I of the
Letter of Transmittal.
The undersigned understands that tenders of Original Notes will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understands that tenders of Original Notes pursuant to the Exchange
Offer may be withdrawn only in accordance with the procedures set forth in "The
Exchange Offer -- Withdrawal of Tenders" section of the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW.
<TABLE>
<S> <C>
Certificate No(s). for Original Notes (if
available) Address
- --------------------------------------------- ---------------------------------------------
- --------------------------------------------- ---------------------------------------------
Principal Amount of Original Notes Area Code and Tel. No.
- --------------------------------------------- ---------------------------------------------
- --------------------------------------------- ---------------------------------------------
Name(s) of Record Holder(s) Signature(s)
- --------------------------------------------- ---------------------------------------------
- --------------------------------------------- ---------------------------------------------
Dated:
---------------------------------------------
If Original Notes will be delivered by
book-entry transfer at the Depository Trust
Company,
Depository Account No:
---------------------------------------------
</TABLE>
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Original Notes exactly as its (their) name(s) appear on
certificates for Original Notes or on a security position listing as the owner
of Original Notes, or by person(s) authorized to become registered holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information:
<PAGE> 3
PLEASE PRINT NAME(S) AND ADDRESS(ES)
NAME(S):
................................................................................
................................................................................
................................................................................
CAPACITY:
................................................................................
ADDRESS(ES):
................................................................................
................................................................................
<PAGE> 4
GUARANTEE
(Not To Be Used for Signature Guarantee)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., or a commercial bank
or trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a)
represents that the above named person(s) "own(s)" the Original Notes tendered
hereby within the meaning of Rule 14e-4 under the Exchange Act, (b) represents
that such tender of Original Notes complies with Rule 14e-4 under the Exchange
Act and (c) guarantees that delivery to the Exchange Agent of certificates for
the Original Notes tendered hereby, in proper form for transfer (or confirmation
of the book-entry transfer of such Original Notes into the Exchange Agent's
Account at the Depository Trust Company, pursuant to the procedures for
book-entry transfer set forth in the Prospectus), with delivery of a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signatures and any other required documents, will be
received by the Exchange Agent at one of its addresses set forth above within
five business days after the Expiration Date.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL
AND ORIGINAL NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD
SET FORTH AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE
UNDERSIGNED.
Name of Firm:_________________________________________________________________
Address:_____________________________________________________________________
(Zip Code)
Area Code and Tel. No.:________________________________________________________
Authorized Signature:_________________________________________________________
Name:________________________________________________________________________
(Please Type or Print)
Title:_______________________________________________________________________
Date: ______________________________________
NOTE: DO NOT SEND ORIGINAL NOTES WITH THIS FORM; ORIGINAL NOTES SHOULD BE SENT
WITH YOUR LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE
AGENT WITHIN FIVE NASDAQ NATIONAL MARKET TRADING DAYS AFTER THE EXPIRATION
DATE.
