<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 12, 1996
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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EXIDE ELECTRONICS GROUP, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C> <C>
DELAWARE 3698 22-2231834
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
8609 SIX FORKS ROAD
RALEIGH, NORTH CAROLINA 27615
(919) 872-3020
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
---------------------
NICHOLAS J. COSTANZA, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
EXIDE ELECTRONICS GROUP, INC.
8609 SIX FORKS ROAD
RALEIGH, NORTH CAROLINA 27615
(919) 872-3020
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
<TABLE>
<S> <C>
BRAD S. MARKOFF, ESQ. KIRK A. DAVENPORT
SMITH HELMS MULLISS & MOORE, L.L.P. LATHAM & WATKINS
316 W. EDENTON STREET 885 THIRD AVENUE, SUITE 1000
RALEIGH, NORTH CAROLINA 27603 NEW YORK, NEW YORK 10022
(919) 755-8700 (212) 906-1200
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of 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. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
TITLE OF EACH AMOUNT PROPOSED AGGREGATE AMOUNT OF
CLASS OF SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER NOTE(1) PRICE(1) FEE
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<S> <C> <C> <C> <C>
11 1/2% Senior Subordinated Notes
due 2006........................ $125,000,000 100% $125,000,000 $43,103
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
EXIDE ELECTRONICS GROUP, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF THE INFORMATION
REQUIRED BY PART I OF FORM S-4
<TABLE>
<C> <S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus............... Outside Front Cover Page; Cross Reference
Sheet; Inside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................... Inside Front Cover Page; Information
Incorporated by Reference; Outside Back Cover
Page
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information................ Prospectus Summary; Risk Factors; Selected
Historical Consolidated Financial Data
4. Terms of the Transaction....................... The Exchange Offer; Certain United States
Federal Income Tax Considerations;
Description of Notes
5. Pro Forma Financial Information................ Prospectus Summary; Unaudited Pro Forma
Combined Financial Statements
6. Material Contracts with the Company Being
Acquired..................................... Not Applicable
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters................................. Not Applicable
8. Interests of Named Experts and Counsel......... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................. Not Applicable
10. Information with Respect to S-3 Registrants.... Prospectus Summary; The Deltec Acquisition;
Capitalization; Selected Historical
Consolidated Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Principal
Shareholders; Description of New Credit
Facility; Description of Notes; Description
of Capital Stock; Financial Statements
11. Incorporation of Certain Information by
Reference.................................... Information Incorporated by Reference
12. Information with Respect to S-2 or S-3
Registrants.................................. Not Applicable
13. Incorporation of Certain Information by
Reference.................................... Not Applicable
14. Information with Respect to Registrants Other
Than S-3 or S-2 Registrants.................. Not Applicable
15. Information with Respect to S-3 Companies...... Not Applicable
16. Information with Respect to S-2 or S-3
Companies.................................... Not Applicable
17. Information with Respect to Companies Other
Than S-2 or S-3 Companies.................... Not Applicable
18. Information if Proxies, Consents or
Authorizations are to be Solicited........... Not Applicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in
an Exchange Offer............................ Management; The Exchange Offer
</TABLE>
<PAGE> 3
SUBJECT TO COMPLETION, DATED APRIL , 1996
PROSPECTUS
OFFER TO EXCHANGE
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B
FOR ALL OUTSTANDING 11 1/2% SENIOR SUBORDINATED NOTES DUE 2006, SERIES A
OF
EXIDE ELECTRONICS GROUP, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON , 1996 UNLESS EXTENDED.
---------------------
Exide Electronics Group, Inc., a Delaware corporation (the "Company" or
"Exide Electronics"), hereby offers (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"), to exchange $1,000
principal amount of its 11 1/2% Senior Subordinated Notes due 2006, Series B
(the "Series B Notes"), which exchange has been registered under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a registration
statement of which this Prospectus is a part (the "Registration Statement"), for
each $1,000 principal amount of its outstanding 11 1/2% Senior Subordinated
Notes due 2006, Series A (the "Series A Notes"), of which $125.0 million in
aggregate principal amount are outstanding as of the date hereof. The form and
terms of the Series B Notes are the same as the form and terms of the Series A
Notes except that (i) the exchange will have been registered under the
Securities Act, and, therefore, the Series B Notes will not bear legends
restricting the transfer thereof, and (ii) holders of the Series B Notes will
not be entitled to certain rights of holders of the Series A Notes under the
Registration Rights Agreement (as defined herein), which rights will terminate
upon the consummation of the Exchange Offer. The Series B Notes will evidence
the same debt as the Series A Notes (which they replace) and will be entitled to
the benefits of an indenture dated as of March 13, 1996 governing the Series A
Notes and the Series B Notes (the "Indenture"). The Series A Notes and the
Series B Notes are sometimes referred to herein collectively as the "Notes." See
"The Exchange Offer" and "Description of Notes."
The Series B Notes will bear interest at the same rate and on the same
terms as the Series A Notes. Consequently, the Series B Notes will bear interest
at the rate of 11 1/2% per annum and the interest will be payable semiannually
on March 15 and September 15 of each year, commencing September 15, 1996. The
Series B Notes will bear interest from and including the date of issuance of the
Series A Notes (March 13, 1996). Holders whose Series A Notes are accepted for
exchange will be deemed to have waived the right to receive any interest accrued
on the Series A Notes. On or after March 15, 2001, the Series B Notes will be
redeemable at the option of the Company, in whole or in part, at the redemption
prices set forth herein, plus accrued and unpaid interest and Liquidated Damages
(as defined), if any, to the date of redemption. Upon a Change of Control (as
defined herein), holders of the Series B Notes will have the right to require
the Company to purchase their Series B Notes, in whole or in part, at a price
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase.
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Debt (as defined herein) of
the Company, including borrowings under the New Credit Facility (as defined
herein). The Notes are guaranteed (the "Subsidiary Guarantees") by all of the
Company's existing and future domestic subsidiaries (collectively, the
"Guarantors"). The Subsidiary Guarantees will be subordinated in right of
payment to all existing and future Senior Debt of the Guarantors, including
guarantees of the New Credit Facility. The Notes, the Subsidiary Guarantees and
borrowings under the New Credit Facility will be effectively subordinated to the
indebtedness of foreign subsidiaries of the Company. As of December 31, 1995, on
a pro forma basis after giving effect to the Deltec Acquisition (as defined
herein), the New Credit Facility and the Offering (as defined herein), the
Company and its subsidiaries would have had $141.8 million of Senior Debt and
indebtedness of foreign subsidiaries that would effectively rank senior in right
of payment to the Notes and the Subsidiary Guarantees. The Indenture permits the
Company and its subsidiaries to incur additional indebtedness, including Senior
Debt, subject to certain limitations, and will prohibit the incurrence of any
indebtedness that is senior to the Notes and subordinated to any Senior Debt.
The Company will accept for exchange any and all validly tendered Series A
Notes not withdrawn prior to 5:00 p.m., New York City time, on , 1996
unless the Exchange Offer is extended by the Company, in its sole discretion
(the "Expiration Date"). Tenders of Series A 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 -- Conditions." Series A Notes may be
tendered only in integral multiples of $1,000.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is , 1996
<PAGE> 4
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Series B Notes issued pursuant to this
Exchange Offer in exchange for Series A Notes may be offered for resale, resold
and otherwise transferred by a holder thereof (other than (i) a broker-dealer
who purchases such Series B Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii) a
person that is an affiliate of the Company within the meaning of Rule 405 under
the Securities Act), without compliance with the registration and prospectus
delivery requirements of the Securities Act; provided that the holder is
acquiring the Series B Notes in the ordinary course of its business and is not
participating, and had no arrangement or understanding with any person to
participate, in the distribution of the Series B Notes. Holders of Series A
Notes wishing to accept the Exchange Offer must represent to the Company, as
required by the Registration Rights Agreement, that such conditions have been
met. Each broker-dealer that receives the Series B Notes for its own account in
exchange for the Series A Notes, where such Series A 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 Series B Notes.
Prior to this Exchange Offer, there has been no public market for the
Notes. The Company does not intend to list the Notes on any securities exchange,
but the Series A Notes are eligible for trading in the National Association of
Securities Dealers, Inc.'s Private Offerings, Resales and Trading through
Automatic Linkages (PORTAL) market. There can be no assurance that an active
market for the Notes will develop. To the extent that a market for the Notes
does develop, the market value of the Notes will depend on market conditions
(such as yields on alternative investments), general economic conditions, the
Company's financial condition and certain other factors. Such conditions might
cause the Notes, to the extent that they are traded, to trade at a significant
discount from face value. See "Risk Factors--Absence of Public Market for the
Notes."
Each broker-dealer that receives Series B 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 Series B Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Series B Notes received in exchange for Series A Notes where
such Series A Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has indicated
its intention to make this Prospectus (as it may be amended or supplemented)
available to any broker-dealer for use in connection with any such resale for a
period of 365 days from the date on which the Registration Statement is declared
effective. See "Plan of Distribution."
The Company will not receive any proceeds from, and has agreed to bear the
expenses of, this Exchange Offer. No underwriter is being used in connection
with this Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF SERIES A NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
SEE "RISK FACTORS," ON PAGES THROUGH , FOR A DISCUSSION OF
CERTAIN FACTORS THAT INVESTORS SHOULD CONSIDER IN CONNECTION WITH THIS EXCHANGE
OFFER AND AN INVESTMENT IN THE SERIES B NOTES.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF
TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
2
<PAGE> 5
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS OFFERING TRANSACTIONS IN THE SERIES B NOTES, WHETHER OR NOT
PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS IN
CONNECTION THEREWITH. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
The Series B Notes will be available initially only in book-entry form. The
Company expects that the Series B Notes issued pursuant to this Exchange Offer
will be issued in the form of one or more fully registered global notes that
will be deposited with, or on behalf of, the Depository Trust Company ("DTC" or
the "Depositary") and registered in its name or in the name of Cede & Co., as
its nominee. Beneficial interests in the global note representing the Series B
Notes will be shown on, and transfers thereof will be effected only through,
records maintained by the Depositary and its participants. After the initial
issuance of such global note, Series B Notes in certificated form will be issued
in exchange for the global note in accordance with the terms and conditions of
the Indenture. See "Description of Notes--Book Entry."
---------------------
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the Series B Notes offered hereby.
As permitted by the rules and regulations of the Commission, this Prospectus
omits certain information, exhibits and undertakings contained in the
Registration Statement. For further information with respect to the Company and
the Series B Notes offered hereby, reference is made to the Registration
Statement, including the exhibits thereto and the financial statements, notes
and schedules filed as a part thereof. The Company is subject to the periodic
reporting and other informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and, in accordance therewith, files
reports, proxy statements, information statements and other information ("SEC
Reports") with the Commission. Such SEC Reports may 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 500 West Madison Street, Suite 1400, Chicago, Illinois 60661,
and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material may be obtained by mail from the public reference branch of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Company has agreed that, whether or not it is required by the Exchange
Act to file SEC Reports with the Commission, so long as any Notes are
outstanding, the Company will furnish to the Holders of Notes copies of all
quarterly and annual financial information that would be contained in Forms 10-Q
and 10-K and all current reports that would be filed on Form 8-K. In addition,
the Company has agreed that, for so long as any Notes remain outstanding, it
will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
3
<PAGE> 6
INFORMATION INCORPORATED BY REFERENCE
The following documents or information have been filed by the Company with
the Commission and are incorporated herein by reference:
The Company's Annual Report on Form 10-K for the year ended September
30, 1995.
The Company's Current Report on Form 8-K filed with the Commission on
October 20, 1995.
The Company's Current Report on Form 8-K filed with the Commission on
November 17, 1995.
The Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995.
The information under the heading "Executive Compensation and Related
Information" in the Company's Notice of Annual Meeting and Proxy
Statement dated January 26, 1996.
The Company's Current Report on Form 8-K filed with the Commission on
February 21, 1996.
The Company's Current Report on Form 8-K/A filed with the Commission on
March 22, 1996.
The Company's Current Report on Form 8-K filed with the Commission on
March 27, 1996.
All documents subsequently filed by the Company with the Commission
pursuant to Sections 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 covered by
this Prospectus will be deemed incorporated by reference into this Prospectus
and a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein 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
DIRECTED TO THE CHIEF FINANCIAL OFFICER OF THE COMPANY AT 8609 SIX FORKS ROAD,
RALEIGH, NORTH CAROLINA 27615 (TELEPHONE NUMBER: (919) 872-3020). IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY NO LATER
THAN FIVE BUSINESS DAYS PRIOR TO THE EXPIRATION DATE.
4
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the Financial Statements and Unaudited Pro Forma Combined Financial Statements
and notes thereto, appearing elsewhere in this Prospectus. As used in this
Prospectus, the term "Company" refers to the Company and its subsidiaries,
unless the context otherwise requires. The Company's fiscal year ends on
September 30. References to a particular fiscal year are to the twelve-month
period ended on September 30 of the year indicated.
THE COMPANY
Exide Electronics Group, Inc. ("Exide Electronics" or the "Company") is one
of the world's leading manufacturers and marketers of uninterruptible power
supply ("UPS") products and power management software, as well as one of the
industry's largest UPS service providers. UPS products protect microprocessors
and other sensitive electronic equipment against electrical power interruptions
by providing temporary backup power. More sophisticated UPS systems also provide
additional protection against power distortions by continuously cleaning and
conditioning electrical power. The Company believes that it is one of only three
companies providing a full range of UPS products and services on a worldwide
basis. The Company's UPS products include small systems for use with personal
computers, workstations, client/server platforms and local and wide area
networks, and large systems for use with mainframe computers and data centers.
In addition, the Company's UPS products protect other types of sensitive
electronic equipment, including telecommunication systems, medical and
laboratory equipment, automated bank teller machines, industrial process
controls, and air traffic control and other transportation systems. Based on a
recent independent survey that divided domestic UPS product sales into two
segments, one for systems designed for power ratings above 5 kilovolt amperes
("kVA") and one for systems at or below 5 kVA , the Company (after giving effect
to the Deltec Acquisition (as defined below)) will have a leading position in
each of the two defined segments, ranking first for products above 5 kVA and
second for products at or below 5 kVA. (Source: Venture Development Corporation,
1995 (the "VDC Report")).
Based on internal research, the Company believes that total worldwide sales
of UPS products and services have grown approximately 20% since 1993 to
approximately $4.2 billion in 1995. The growth in the UPS industry is being
driven by the rapid proliferation of computers and related electronic systems in
a wide range of industries, including manufacturing, financial services,
utilities, telecommunications and transportation. This growth is being
compounded by the on-going transition from single-site mainframe systems to
multi-site network-based systems. To insure continued reliable operations,
computers and other electronic systems require the protection offered by UPS
products. The operations of such systems can be affected by a variety of
distortions in electrical power, including under-voltages (sags), over-voltages
(surges), transients (spikes), temporary power reductions (brownouts) and
complete power interruptions (blackouts). Any of these power distortions can
cause sensitive electronic equipment to malfunction or "crash," increasing the
likelihood of costly system downtime, information loss, and damage to equipment
and software. The need for UPS protection is particularly acute in certain
international markets where the quality of electrical power is poor.
On March 13, 1996, the Company completed its acquisition (the "Deltec
Acquisition") of Deltec Power Systems, Inc. and its subsidiaries (collectively,
"Deltec"). Deltec is one of the world's largest manufacturers and marketers of
off-line and line-interactive small UPS systems. Off-line UPS systems provide
temporary back-up power without the power conditioning features of an on-line
system, while line-interactive UPS systems are hybrid systems that provide
limited power conditioning features. The majority of UPS products sold by the
Company historically have been more sophisticated on-line systems, which
continuously condition the power supply in addition to providing a back-up power
source. Off-line and line-interactive products, such as those manufactured by
Deltec, are generally less expensive than on-line systems and are suitable for
applications where system downtime may be less costly, such as personal or small
business uses. With the addition of Deltec's product line and small systems
manufacturing and distribution capabilities, the Company believes that it has
become one of only a few companies that is a leading manufacturer and worldwide
marketer of UPS systems in each of the major product segments of the UPS
industry. On a pro forma basis
5
<PAGE> 8
after giving effect to the Deltec Acquisition, the Company would have had
revenues and EBITDA (as defined herein) of $515.2 million and $57.2 million,
respectively, for the last twelve months ("LTM") ended December 31, 1995.
The Company currently manufactures substantially all of its products at its
manufacturing facilities in Raleigh and Wilmington, North Carolina and Dallas,
Texas. Deltec manufactures substantially all of its products at manufacturing
facilities in San Diego, California, Tijuana, Mexico and Espoo, Finland near
Helsinki. The Company's large systems are sold through a direct sales force,
while both the Company's and Deltec's small systems are generally sold through
Value-Added Resellers ("VARs"), Original Equipment Manufacturers ("OEMs") and
distributors.
BUSINESS STRATEGY
The Company's business strategy is to continue to expand its sales and
profitability by providing its customers with Strategic Power Management through
a full range of product and service solutions at competitive prices. The Company
believes that its recent strategic acquisitions of Deltec, International Power
Machines Corporation ("IPM") and Lectro Products, Inc. ("Lectro") give the
Company one of the broadest product offerings in the global UPS industry,
including a wide range of off-line, line-interactive and on-line products
operating across a broad spectrum of kVA power ratings and applications. These
acquisitions also enable the Company to offer an expanded line of service
options, and provide the Company with one of the industry's largest global
distribution networks. To strengthen its global competitive position and improve
profitability, the Company intends to pursue a business strategy that
incorporates the following elements:
Increase its presence in the small systems segment. As a result of the
trend in the computer industry towards client-server computing and the
proliferation of personal computers, workstations, client/server platforms,
networks, and other microprocessor-based electronic equipment, industry sales of
small UPS systems grew approximately 28% from 1993 to 1995. During the same
period, the Company's sales of small systems products grew approximately 66% and
constituted approximately 38% of the Company's total revenues in fiscal 1995.
According to the VDC Report, sales of small systems in the U.S. are expected to
continue to grow significantly through 1999. The Company believes that the
Deltec Acquisition further improves the Company's competitive position in the
small systems segment because Deltec is particularly strong in sales of off-line
and line-interactive products, segments where the Company has traditionally not
had an extensive product offering. The Company plans to expand Deltec's existing
product line and believes that Deltec's small systems expertise, established
distribution channels and strong OEM relationships provide the Company with a
strategic platform to increase its small systems revenues and profitability.
Expand its international sales. The Company believes that international
markets accounted for approximately two-thirds of the worldwide market for UPS
products and services in 1995. Approximately 31% of the Company's fiscal 1995
sales were derived from products and services sold outside the U.S. The Company
anticipates significant growth in international markets due to the unreliability
of electric power in many foreign countries. Accordingly, the Company plans to
continue to develop products designed specifically to meet the unique power
needs of select international markets and establish joint ventures and other
strategic partnerships to design, manufacture and distribute UPS products to
serve these markets. The Company believes that its global distribution and
service networks, which were expanded through the acquisition of IPM (the "IPM
Acquisition"), have been significantly expanded with the Deltec Acquisition.
Deltec's broad line of high performance products, designed for the international
market, enhances the Company's position as one of the leaders in international
UPS sales.
Establish a leading position in emerging technologies. In response to
rapid growth in a number of new technologies that depend upon electrical power,
the Company has created the Emerging Technologies Group ("ETG"). ETG will
aggressively seek out opportunities to develop new small system UPS products
utilizing new technologies or serving new applications. ETG's initial efforts
will focus on low-end rectifiers and power supplies for the broadband cable
television and telecommunications industries, product lines acquired as part
6
<PAGE> 9
of the acquisition of Lectro (the "Lectro Acquisition"). The Company plans to
utilize these product lines as a platform to enter the rapidly expanding
wireless and personal communication services markets.
Redefine its large systems focus. The Company believes that the market for
large UPS products is relatively mature, and that the demand for such systems
will not grow significantly over the next several years. Historically, large UPS
systems were used to support the power requirements of large mainframe
computers. With the movement away from mainframe systems to smaller data centers
and office environments, there has been a need for large UPS systems operating
at lower kVA ratings. Accordingly, the Company's future efforts in the large
systems segment will generally be directed at reducing cost and product
development time by incorporating new features and functionality into existing
technology rather than developing entirely new product platforms. The Company is
also pursuing new commercial applications for its large systems products in
several markets, including healthcare and industrial process control.
Expand its service business. The Company's Worldwide Services Group
("WSG") is one of the world's leading UPS service organizations. Due to the
scheduled decline in service revenues under one large contract with the federal
government, the Company is projecting a decline in its total service revenues.
Excluding this one contract, however, the Company is anticipating growth in its
commercial service business with the introduction of new service offerings that
complement its Strategic Power Management focus, including offering support
services for non-UPS power equipment such as generators, switchgear, breakers
and power distribution systems, as well as providing power quality analysis and
remote systems monitoring. In addition, the Company is developing programs to
provide service support for OEMs and the federal government, which have
historically provided their own service and product support, but are
increasingly looking to out-source such services. The Company also plans to
target service sales to third party power management vendors.
Improve financial performance. The Company has implemented several
programs to reduce operating costs and to improve manufacturing productivity,
including programs designed to increase the commonality of parts in product
design in order to reduce inventory levels and the number of suppliers. In
addition, the Company is in the process of consolidating the manufacturing
facilities acquired in the IPM Acquisition and Lectro Acquisition into the
Company's existing manufacturing facilities. The Company also believes that it
can significantly reduce manufacturing costs by manufacturing certain
sub-assemblies and low-end products formerly sourced from Asian contractors at
Deltec's low-cost manufacturing facility in Tijuana, Mexico.
There can be no assurance that the Company will be successful in
implementing its business strategy. See "Risk Factors."
THE DELTEC ACQUISITION
Pursuant to a stock purchase agreement (the "Acquisition Agreement"), the
Company acquired Deltec from Fiskars Oy Ab and Fiskars Holdings, Inc.
(collectively "Fiskars") on March 13, 1996. Deltec designs, manufactures,
markets, sells and services a broad line of UPS products and power management
software worldwide through its principal operating subsidiaries, Deltec
Electronics Corporation ("Deltec EC"), which is headquartered in San Diego,
California and FPS Power Systems Oy Ab ("FPS"), which is based in Espoo,
Finland. The purchase price of approximately $188.1 million was comprised of
approximately $158.5 million in cash, 825,000 shares of common stock, par value
$0.01 per share, of the Company (the "Common Stock"), valued at $14.00 per
share, and 1,000,000 shares of the Company's Series G convertible preferred
stock (the "Series G Preferred Stock"), valued at $18.00 per share. The Series G
Preferred Stock is convertible into Common Stock on a one-for-one basis (subject
to adjustment under certain circumstances), has a per annum dividend rate of
$0.80 per share through March 31, 2001 and $1.20 per share thereafter, and is
subject to redemption under certain circumstances. The purchase price was
determined based on an assumption that the net book value of Deltec on the
closing would be approximately $28.7 million. The purchase price will be
adjusted upward or downward to the extent the closing date net book value (as
adjusted for certain excluded assets and liabilities) differs from this amount.
Such determination is expected to be made within 90 days of the closing date, as
provided in the Acquisition Agreement. Based on Deltec's net book value, as
adjusted, at December 31, 1995, the Company would have owed Fiskars additional
cash of $6.2 million.
7
<PAGE> 10
The Company financed the cash portion of the purchase price due on closing,
excluding transaction costs, with (i) the net proceeds of the sale of 125,000
units (the "Units") comprised of $125.0 million of the Series A Notes and
warrants (the "Warrants") to purchase 643,750 shares of Common Stock (the
"Offering"), which net proceeds were $121.3 million (before payment of
transaction costs) and (ii) $36.7 million of borrowings under a new credit
facility (the "New Credit Facility"). The balance of the purchase price ($0.5
million to redeem 50 shares of outstanding Deltec preferred stock) will be paid
on January 8, 1997. In addition, under the terms of the Acquisition Agreement,
the Company paid $4.0 million to Fiskars in payment of certain interest carrying
costs associated with Fiskars' agreement to extend the time for closing the
Deltec Acquisition. At the closing, the Company made a prepayment of $3.0
million to Fiskars related to the variable purchase price adjustment, which
would have been $6.2 million based on Deltec's net book value at December 31,
1995. An additional payment of $3.7 million was made to Fiskars, which
represented excess cash that remained in Deltec following the closing.
The New Credit Facility provides for term and revolving credit facilities
in the aggregate amount of up to $175.0 million, $134.4 million of which was
outstanding following the March 13, 1996 closing of the Offering and the Deltec
Acquisition. See "The Deltec Acquisition" and "Description of New Credit
Facility."
8
<PAGE> 11
THE EXCHANGE OFFER
THE EXCHANGE OFFER......... The Company is hereby offering to exchange $1,000
principal amount of Series B Notes for each $1,000
principal amount of Series A Notes that are
properly tendered and accepted. The Company will
issue Series B Notes on or promptly after the
Expiration Date. As of the date hereof, there is
$125.0 million aggregate principal amount of Series
A Notes outstanding. See "The Exchange Offer."
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 Series
B Notes issued pursuant to this Exchange Offer in
exchange for Series A Notes may be offered for
resale, resold and otherwise transferred by a
holder thereof (other than (i) a broker-dealer who
purchases such Series B Notes directly from the
Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act
or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the
Securities Act), without compliance with the
registration and prospectus delivery requirements
of the Securities Act; provided that the holder is
acquiring the Series B Notes in the ordinary course
of its business and is not participating, and had
no arrangement or understanding with any person to
participate, in the distribution of the Series B
Notes. Each broker-dealer that receives the Series
B Notes for its own account in exchange for the
Series A Notes, where such Series A 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
Series B Notes.
REGISTRATION RIGHTS
AGREEMENT................ The Units, which are comprised of the Series A
Notes and the Warrants, were sold by the Company on
March 13, 1996 to Donaldson, Lufkin & Jenrette
Securities Corporation, J.P. Morgan Securities Inc.
and NationsBanc Capital Markets, Inc.
(collectively, the "Initial Purchasers") pursuant
to a Purchase Agreement dated March 7, 1996 by and
among the Company and the Initial Purchasers (the
"Purchase Agreement"). Pursuant to the Purchase
Agreement, the Company and the Initial Purchasers
entered into a Registration Rights Agreement dated
as of March 13, 1996 (the "Registration Rights
Agreement"), which grants the holders of the Series
A Notes certain exchange and registration rights.
This Exchange Offer is intended to satisfy such
rights, which terminate upon the consummation of
the Exchange Offer. The holders of the Series B
Notes will not be entitled to any exchange or
registration rights with respect to the Series B
Notes. See "The Exchange Offer--Termination of
Certain Rights."
EXPIRATION DATE............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1996, unless
the Exchange Offer is extended by the Company, in
its sole 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
SERIES B NOTES AND SERIES A
NOTES.................... The Series B Notes will bear interest from and
including the date of issuance of the Series A
Notes (March 13, 1996). Holders whose
9
<PAGE> 12
Series A Notes are accepted for exchange will be
deemed to have waived the right to receive any
interest accrued on the Series A Notes.
CONDITIONS TO THE EXCHANGE
OFFER.................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Series A Notes being
tendered for exchange. See "The Exchange
Offer--Conditions."
PROCEDURES FOR TENDERING
SERIES A NOTES........... Each holder of Series A 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 such Series A Notes and any other required
documentation to American Bank National
Association, as exchange agent (the "Exchange
Agent"), at the address set forth herein. By
executing the Letter of Transmittal, each holder
will represent to and agree with the Company that,
among other things, (i) the Series B Notes to be
acquired by such holder of the Series A Notes in
connection with the Exchange Offer are being
acquired by such holder in the ordinary course of
its business, (ii) such holder has no arrangement
or understanding with any person to participate in
a distribution of Series B Notes, (iii) if such
holder is a broker-dealer registered under the
Exchange Act or is participating in the Exchange
Offer for the purposes of distributing the Series B
Notes, such holder will comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with a
secondary resale transaction of the Series B Notes
acquired by such person and cannot rely on the
position of the staff of the Commission set forth
in no-action letters (see "The Exchange Offer --
Resale of Series B Notes"), (iv) such holder
understands that a secondary resale transaction
described in clause (iii) above and any resales of
Series B Notes obtained by such holder in exchange
for Series A 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) such holder is not an
"affiliate," as defined in Rule 405 under the
Securities Act, of the Company. If the holder is a
broker-dealer that will receive Series B Notes for
its own account in exchange for Series A Notes that
were acquired as a result of market-making
activities or other trading activities, such holder
is required to acknowledge in the Letter of
Transmittal that such holder will deliver a
prospectus in connection with any resale of such
Series B Notes; however, by so acknowledging and by
delivering a prospectus, such holder will not be
deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. See "The
Exchange Offer--Procedures for Tendering."
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS....... Any beneficial owner whose Series A Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender such Series A Notes in the
Exchange Offer should contact such registered
holder promptly and instruct such registered holder
to tender on such beneficial owner's behalf. If
such beneficial
10
<PAGE> 13
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 Series A Notes, either make appropriate
arrangements to register ownership of the Series A
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 and may not be able to be
completed prior to the Expiration Date. See "The
Exchange Offer--Procedures for Tendering."
GUARANTEED DELIVERY
PROCEDURES............... Holders of Series A Notes who wish to tender their
Series A Notes and whose Series A Notes are not
immediately available or who cannot deliver their
Series A 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 Series A Notes
according to the guaranteed delivery procedures set
forth under "The Exchange Offer--Guaranteed
Delivery Procedures."
ACCEPTANCE OF THE SERIES A
NOTES AND DELIVERY OF THE
SERIES B NOTES........... Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company will
accept for exchange any and all Series A Notes that
are properly tendered in the Exchange Offer prior
to the Expiration Date. The Series B 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 Series A Notes may be withdrawn at any
time prior to the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders."
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS........... For a discussion of certain material federal income
tax considerations relating to the exchange of the
Series B Notes for the Series A Notes, see "Certain
Federal Income Tax Considerations."
EXCHANGE AGENT............. American Bank National Association is serving as
the Exchange Agent in connection with the Exchange
Offer.
THE SERIES B NOTES
The Exchange Offer applies to $125.0 million aggregate principal amount of
the Series A Notes. The form and terms of the Series B Notes are the same as the
form and terms of the Series A Notes except that (i) the exchange will have been
registered under the Securities Act and, therefore, the Series B Notes will not
bear legends restricting their transfer, and (ii) holders of the Series B Notes
will not be entitled to certain rights of holders of the Series A Notes under
the Registration Rights Agreement, which rights will terminate upon consummation
of the Exchange Offer. The Series B Notes will evidence the same debt as the
Series A Notes (which they replace) and will be issued under, and be entitled to
the benefits of, the Indenture. See "Description of Notes" for further
information and for definitions of certain capitalized terms used below.
THE SERIES B NOTES:
MATURITY DATE.............. March 15, 2006
INTEREST................... The Series B Notes will bear interest at the rate
of 11 1/2% per annum, which will be payable in cash
semi-annually on March 15 and September 15 of each
year, commencing September 15, 1996.
11
<PAGE> 14
OPTIONAL REDEMPTION........ The Series B Notes may be redeemed at the option of
the Company, in whole or in part, on or after March
15, 2001, at the redemption prices set forth
herein, plus accrued and unpaid interest and
Liquidated Damages (as defined herein), if any,
through the redemption date. See "Description of
Notes--Optional Redemption."
GUARANTEES................. The Series B Notes will be guaranteed (the
"Subsidiary Guarantees") on an unsecured senior
subordinated basis by all of the Company's existing
and future domestic subsidiaries (collectively, the
"Guarantors").
RANKING.................... The Series B Notes will be general unsecured
obligations of the Company, subordinated in right
of payment to all existing and future Senior Debt
(as defined herein) of the Company, including
borrowings under the New Credit Facility. In
addition, the Series B Notes will be effectively
subordinate to the indebtedness of foreign
subsidiaries of the Company. On a pro forma basis
after giving effect to the Offering, the Deltec
Acquisition and the New Credit Facility, as of
December 31, 1995, the Company and its subsidiaries
would have had approximately $141.8 million of
outstanding Senior Debt and indebtedness of foreign
subsidiaries, $133.9 million of which would have
been secured.
CHANGE OF CONTROL OFFER.... Upon a Change of Control, the holders of the Series
B Notes will have the right to require the Company
to purchase their Series B Notes, in whole or in
part, at a price equal to 101% of the aggregate
principal amount thereof. See "Description of
Notes--Repurchase at the Option of Holders--Change
of Control."
CERTAIN COVENANTS.......... The Indenture under which the Series B Notes will
be issued contains certain covenants with respect
to the Company and its subsidiaries that limit the
ability of the Company and its subsidiaries to,
among other things, (i) incur additional
Indebtedness (as defined herein) and issue
preferred stock, (ii) pay dividends or make other
distributions or make certain other Restricted
Payments (as defined), (iii) layer Indebtedness,
(iv) create certain liens, (v) sell assets of the
Company or its subsidiaries, (vi) enter into
certain transactions with affiliates, (vii) enter
into certain mergers or consolidations, (viii)
enter into sale and leaseback transactions, or (ix)
sell or issue capital stock of the Company's
subsidiaries.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH THE EXCHANGE OFFER AND AN INVESTMENT IN THE SERIES B NOTES, SEE "RISK
FACTORS."
12
<PAGE> 15
SUMMARY PRO FORMA FINANCIAL DATA
The following table presents summary unaudited pro forma combined financial
information derived from the Unaudited Pro Forma Combined Financial Statements
included elsewhere in this Prospectus. The summary pro forma combined financial
information gives effect to the Deltec Acquisition, the conversion of the
Convertible Subordinated Notes (as defined), the New Credit Facility and the
Offering (collectively, the "Transactions") as if they had occurred as of
October 1, 1994 for purposes of the pro forma combined statements of operations
data and other financial data, and as of December 31, 1995 for purposes of the
pro forma combined balance sheet data.
The Unaudited Pro Forma Combined Financial Statements do not purport to
present the actual financial position or results of operations of the Company
had the transactions and events assumed therein in fact occurred on the dates
specified, nor are they necessarily indicative of the results of operations that
may be achieved in the future. The Unaudited Pro Forma Combined Financial
Statements are based on certain assumptions and adjustments described in the
notes to the Unaudited Pro Forma Combined Financial Statements and should be
read in conjunction therewith and with "The Deltec Acquisition," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical Consolidated Financial Statements of Exide Electronics and the
historical Combined/Consolidated Financial Statements of Deltec and the related
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED DECEMBER 31, LTM ENDED
SEPTEMBER 30, --------------------- DECEMBER 31,
1995(1) 1994 1995 1995(2)
------------- -------- -------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Product revenues............................ $ 368,767 $ 88,516 $ 98,025 $378,276
Service revenues............................ 138,526 33,024 31,386 136,888
------------- -------- -------- ------------
Total revenues......................... 507,293 121,540 129,411 515,164
Gross profit................................ 151,223 34,534 41,966 158,655
Income from operations...................... 18,884(3) 329 10,223 28,778(3)
Interest expense............................ 30,180 10,515 7,054 26,719
Net income.................................. (6,273)(3) (5,964) 1,833 1,523(3)
OTHER DATA:
EBITDA(4)................................... $ 55,445 $ 13,493 $ 15,223 $ 57,175
Depreciation................................ 9,224 2,217 2,469 9,476
Amortization................................ 19,637 10,947 2,531 11,221
Capital expenditures........................ 14,730 2,902 4,677 16,505
Ratio of EBITDA to interest expense......... 1.8x 1.3x 2.2x 2.1x
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------
EXIDE
ELECTRONICS PRO FORMA
HISTORICAL COMBINED
----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.................................................... $ 108,033 $ 143,621
Total assets....................................................... 253,939 499,989
Long-term debt..................................................... 76,416 256,800
Preferred stock (redeemable after Sept. 30, 2006).................. -- 18,000
Common shareholders' equity........................................ 92,588 101,907
</TABLE>
13
<PAGE> 16
SUMMARY HISTORICAL FINANCIAL DATA
The summary historical financial data presented in the table below has been
derived from the Company's Consolidated Financial Statements and the related
notes thereto and Deltec's Combined/Consolidated Financial Statements and the
related notes thereto included elsewhere in this Prospectus and should be read
in conjunction therewith. The Company's historical financial data for the three
months ended December 31, 1994 and 1995 and for the LTM ended December 31, 1995
and Deltec's historical financial data for the three months ended December 31,
1994 and 1995 and the year ended September 30, 1995 are unaudited but, in the
opinion of management, include all material adjustments (consisting only of
normal recurring entries) necessary for a fair presentation of such data in all
material respects. The statement of operations data for the three months ended
December 31, 1995 is not necessarily indicative of the results that may be
expected for a complete fiscal year. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
EXIDE ELECTRONICS
<TABLE>
<CAPTION>
THREE MONTHS ENDED LTM
YEAR ENDED SEPTEMBER 30, DECEMBER 31, ENDED
-------------------------------- --------------------- DEC. 31,
1993 1994 1995 1994 1995 1995(2)
-------- -------- -------- ------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Product revenues............ $220,143 $259,403 $271,482 $63,896 $57,659 $265,245
Service revenues............ 97,799 104,580 119,496 28,170 25,644 116,970
-------- -------- -------- ------- ----------- --------
Total revenues......... 317,942 363,983 390,978 92,066 83,303 382,215
Gross profit................ 85,495 98,695 103,865 23,684 22,215 102,396
Income from operations...... 20,397 18,462(5) 16,270(3) 4,580 2,249 13,939(3)
Net income.................. 10,832(6) 9,175(5) 7,385(3) 2,249 413 5,549(3)
OTHER DATA:
EBITDA(4)................... $ 27,347 $ 31,889 $ 33,415 $ 6,795 $ 4,702 $ 31,322
Depreciation................ 5,304 6,105 6,683 1,562 1,841 6,962
Amortization................ 1,646 2,325 2,762 653 612 2,721
Capital expenditures........ 8,255 8,735 12,497 2,332 3,938 14,103
</TABLE>
DELTEC
<TABLE>
<CAPTION>
YEAR
YEAR ENDED DECEMBER ENDED THREE MONTHS ENDED LTM
31, SEPT. DECEMBER 31, ENDED
------------------- 30, --------------------- DEC. 31,
1993 1994 1995(1) 1994 1995 1995
-------- -------- -------- ------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Product revenues............ $ 60,446 $ 80,236 $ 97,285 $24,620 $40,366 $113,031
Service revenues............ 14,982 16,960 19,030 4,854 5,742 19,918
-------- -------- -------- ------- ----------- --------
Total revenues......... 75,428 97,196 116,315 29,474 46,108 132,949
Gross profit................ 28,749 38,518 44,858 11,500 18,701 52,059
Income from operations...... 4,189 6,049 6,581 2,779 6,223 10,025
Net income.................. 4,484(6) 3,156 3,288 1,550 3,551 5,289
OTHER DATA:
EBITDA(4)................... $ 9,016 $ 12,332 $ 14,030 $ 4,698 $ 8,521 $ 17,853
Depreciation................ 1,358 1,690 2,041 530 503 2,014
Amortization................ 1,991 2,295 2,485 675 593 2,403
Capital expenditures........ 1,456 1,634 2,233 570 739 2,402
</TABLE>
14
<PAGE> 17
- ---------------
(1) Deltec operating data for the year ended September 30, 1995 was derived from
the Deltec Statements of Income for the last three months of the year ended
December 31, 1994, and the Deltec Statements of Income for the nine months
ended September 30, 1995.
(2) Exide Electronics operating data for the LTM ended December 31, 1995 was
derived from the Exide Electronics Statements of Operations for the last
nine months of the year ended September 30, 1995 and the three months ended
December 31, 1995.
(3) Exide Electronics income from operations and net income for the year ended
September 30, 1995 and LTM ended December 31, 1995 include one-time merger,
acquisition and litigation charges of $7,700 ($5,597 after tax). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations--Litigation Expense" and "--Merger and
Acquisition Expense."
(4) EBITDA represents income from operations plus depreciation and amortization
(including, for pro forma combined EBITDA, the amortization of purchase
accounting adjustments), a non-recurring 1994 Exide Electronics litigation
charge of $4,997, non-recurring 1995 Exide Electronics merger, acquisition
and litigation charges of $7,700 and Deltec royalty expense payable to
Fiskars which is not being charged after the Deltec Acquisition. Pro forma
EBITDA also includes pro forma adjustments to reflect $8.0 million of
annual estimated cost savings resulting from the Deltec Acquisition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations--Litigation Expense" and "--Merger and
Acquisition Expense." While EBITDA should not be construed as a substitute
for income from operations, net income and cash flows from operating
activities in analyzing operating performance, financial position and cash
flows, the Company has included EBITDA because it is commonly used by
certain investors and analysts to analyze and compare companies on the
basis of operating performance, leverage and liquidity and to determine a
company's ability to service debt. See Note 2 of the Notes to the Unaudited
Pro Forma Combined Financial Statements.
(5) Exide Electronics income from operations and net income for the year ended
September 30, 1994 include a one-time litigation charge of $4,997 ($2,936
after tax). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations--Litigation
Expense".
(6) Exide Electronics net income for the year ended September 30, 1993 and
Deltec net income for the year ended December 31, 1993 were increased
$1,000 and $1,509, respectively, for the cumulative effect of an accounting
change for income taxes.
15
<PAGE> 18
RISK FACTORS
In evaluating this Exchange Offer and an investment in the Series B Notes,
prospective investors should consider carefully the following factors in
addition to the other information presented in the Prospectus.
FAILURE TO EXCHANGE SERIES A NOTES
The Series B Notes will be issued in exchange for Series A Notes only after
timely receipt by the Exchange Agent of such Series A Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Series A Notes desiring to tender such Series A
Notes in exchange for Series B Notes should allow sufficient time to ensure
timely delivery. Neither the Exchange Agent nor the Company is under any duty to
give notification of defects or irregularities with respect to tenders of Series
A Notes for exchange. Series A Notes that are not tendered or are tendered but
not accepted will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof. In addition, any
holder of Series A Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Series B Notes will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Series B Notes for its own account in exchange for Series A Notes, where such
Series A Notes were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Series B Notes. To
the extent that Series A Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Series A Notes
could be adversely affected due to the limited amount, or "float," of the Series
A Notes that are expected to remain outstanding following the Exchange Offer.
Generally, a lower "float" of a security could result in less demand to purchase
such security and could, therefore, result in lower prices for such security.
For the same reason, to the extent that a large amount of Series A Notes are not
tendered or are tendered and not accepted in the Exchange Offer, the trading
market for the Series B Notes could be adversely affected. See "Plan of
Distribution" and "The Exchange Offer."
LEVERAGE
The Company incurred substantial indebtedness in connection with the Deltec
Acquisition and, as a result, is highly leveraged. As of December 31, 1995,
after giving pro forma effect to the Transactions, the Company would have had
total indebtedness of $263.6 million, preferred stock of $18.0 million and
common shareholders' equity of $101.9 million and a ratio of earnings to fixed
charges for the LTM ended December 31, 1995, of 1.1 to 1 and for the three
months ended December 31, 1995, of 1.4 to 1. While pro forma earnings, as
adjusted to eliminate non-cash fixed charges of depreciation and amortization,
would have exceeded fixed charges by $19.4 million for the year ended September
30, 1995 and by $3.3 million for the three months ended December 31, 1994, pro
forma earnings, after deducting depreciation and amortization, were inadequate
to cover fixed charges by $9.5 million for the year ended September 30, 1995 and
$9.9 million for the three months ended December 31, 1994. Pro forma interest
expense for the LTM ended December 31, 1995 would have been $26.7 million. The
Company may incur additional indebtedness in the future, subject to limitations
imposed by the Indenture and the New Credit Facility. See "Capitalization" and
Unaudited Pro Forma Combined Financial Statements.
The Company's ability to make scheduled payments of principal of, or to pay
interest on, or to refinance its indebtedness (including the Notes) depends on
its future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors
beyond its control. Based upon the current level of operations and anticipated
growth, the Company believes that cash flow from operations, together with
available borrowings under the New Credit Facility and other sources of
liquidity, will be adequate to meet the Company's anticipated future
requirements for working capital, capital expenditures and scheduled payments of
principal of and interest on its indebtedness, including the Notes. There can be
no assurance, however, that the Company's business will generate sufficient cash
flow from operations or that future working capital borrowings will be available
in an amount sufficient to enable the Company to service its indebtedness,
including the Notes, or make necessary capital expenditures. See
16
<PAGE> 19
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Financial Condition" and "--Risks Related to
Projections."
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including, but not limited to, the
following: (i) a substantial portion of the Company's cash flow from operations
will be required to be dedicated to debt service and will not be available for
other purposes; (ii) the Company's ability to obtain additional financing in the
future could be limited; (iii) certain of the Company's borrowings are at
variable rates of interest, which could result in higher interest expense in the
event of increases in interest rates; and (iv) the Indenture and the New Credit
Facility will contain financial and restrictive covenants that limit the ability
of the Company to, among other things, borrow additional funds, dispose of
assets or pay cash dividends. Failure by the Company to comply with such
covenants could result in an event of default which, if not cured or waived,
would have a material adverse effect on the Company. In addition, the degree to
which the Company is leveraged could prevent it from repurchasing all Notes
tendered to it upon the occurrence of a Change of Control. See "Description of
Notes" and "Description of New Credit Facility."
SUBORDINATION
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all Senior Debt of the Company (which will
include all indebtedness under the New Credit Facility) and will rank senior in
right of payment to all future subordinated indebtedness of the Company. As of
December 31, 1995, after giving pro forma effect to the Transactions, the
Company had approximately $141.8 million of Senior Debt. The Indenture and the
New Credit Facility will permit the Company to incur additional Senior Debt in
the future, subject to certain conditions. Moreover, the Indenture will not
limit the Company's ability to secure Senior Debt. In addition, as of December
31, 1995, after giving pro forma effect to the Transactions, the Company would
have had available borrowings of $41.5 million under the revolving portion of
the New Credit Facility. In the event of the insolvency, liquidation,
reorganization, dissolution or other winding-up of the Company or upon a default
in payment with respect to, or the acceleration of, or if a judicial proceeding
is pending with respect to any default under, any Senior Debt, the lenders under
the New Credit Facility and any other creditors who are holders of Senior Debt
must be paid in full before a holder of Notes may be paid. Accordingly, there
may be insufficient assets remaining after such payments to pay principal of or
interest on the Notes. See "Description of Notes--Subordination."
The amounts outstanding under the New Credit Facility will be subject to
mandatory prepayment with (i) the proceeds of certain asset sales and the
proceeds of certain debt incurrences, (ii) 50% of the proceeds of equity
issuances in excess of $200,000 in any fiscal year, and (iii) on an annual
basis, 50% of the Company's Excess Cash Flow (as defined in the New Credit
Facility) subject to certain dollar thresholds. The New Credit Facility also
will provide that certain change of control events with respect to the Company
would constitute a default thereunder. Any future credit agreements or other
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event that the Company makes
certain asset sales or a change of control occurs at a time when the Company is
prohibited from repurchasing Notes, the Company could seek the consent of its
lenders of Senior Debt to the repurchase of Notes or could attempt to refinance
the borrowings that contain such prohibitions. If the Company does not obtain
such a consent or repay such borrowings, the Company will remain prohibited from
repurchasing Notes. The Company's failure to repurchase tendered Notes at a time
when such repurchase is required by the Indenture would constitute an Event of
Default thereunder which would, in turn, constitute a default under the New
Credit Facility. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the holders of Notes. See
"Description of Notes--Subordination," and "Description of New Credit Facility."
FRAUDULENT CONVEYANCE CONSIDERATIONS
The Guarantors will guarantee the due and punctual payment of principal of,
premium, if any, and interest on the Notes and the performance of the other
obligations of the Company under the Notes and the Indenture. The Subsidiary
Guarantees are general unsecured obligations of the Guarantors and are subordi-
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<PAGE> 20
nated in right of payment to all senior indebtedness of the Guarantors,
including the Guarantors' guarantees of indebtedness under the New Credit
Facility.
It is possible that creditors of the Guarantors may challenge the
Subsidiary Guarantees as a fraudulent conveyance under relevant federal and
state statutes, and, under certain circumstances (including a finding that a
Guarantor was insolvent at the time its Subsidiary Guarantee was issued), a
court could hold that the obligations of the Guarantors under the Subsidiary
Guarantees may be voided or are subordinate to other obligations of the
Guarantors. In addition, it is possible that the amount for which each Guarantor
is liable under its Subsidiary Guarantees may be limited. The measure of
insolvency for purposes of the foregoing may vary depending upon the law of the
jurisdiction that is being applied. Generally, however, a company would be
considered insolvent if the sum of its debts is greater than all of its property
at a fair valuation or if the present fair saleable value of its assets is less
than the amount that will be required to pay its probable liability on its
existing debts as they become absolute and mature. The Indenture will provide
that the obligations of the Guarantors under the Subsidiary Guarantees will be
limited to amounts which will not result in the Subsidiary Guarantees being a
fraudulent conveyance under applicable law. See "Description of
Notes--Subsidiary Guarantees."
HOLDING COMPANY STRUCTURE
The Company is a holding company that conducts substantially all of its
business operations through its subsidiaries; therefore, the Notes will be
effectively subordinated to all existing and future liabilities (including trade
payables) of the Company's subsidiaries. Consequently, the Company's operating
cash flow and its ability to service its indebtedness, including the Notes, is
dependent upon the cash flow of its subsidiaries and the payment of funds by
such subsidiaries to the Company in the form of loans, dividends or otherwise.
Because the Company's subsidiaries are separate and distinct legal entities
apart from the Company, all of the Company's domestic subsidiaries have agreed
to guarantee payment of the Notes on a senior subordinated basis and the
Indenture will contain financial and restrictive covenants that limit the
ability of the Company and its subsidiaries to, among other things, borrow
additional funds, dispose of assets or pay cash dividends. The Company's foreign
subsidiaries, however, will not be Guarantors, and as a result, creditors of
those subsidiaries will have claims that would effectively rank senior (as to
the assets of such subsidiaries) to the claims of the Holders of Notes. See Note
18 to the Exide Electronics Notes to annual consolidated financial statements,
Note 6 to the Exide Electronics Notes to interim consolidated financial
statements and Note 13 to the Deltec Notes to the combined/consolidated
financial statements. In addition, the New Credit Facility will be secured by
inventory, receivables and a pledge of a portion of the capital stock of certain
of the Company's subsidiaries, including the Guarantors. See "Description of New
Credit Facility."
INTEGRATION OF ACQUISITIONS
The Company is currently experiencing rapid growth. The Deltec Acquisition,
the IPM Acquisition and the Lectro Acquisition have significantly increased the
size of the Company and the scope of its markets. On a pro forma basis, after
giving effect to the IPM Acquisition and the Deltec Acquisition as if they had
occurred on October 1, 1994, the Company's revenues would have grown to $507.3
million in fiscal 1995 from its actual Exide Electronics revenues of $326.6
million in fiscal 1994, an increase of 55.3%. In addition, the Company has grown
from approximately 1,400 employees prior to the 1995 IPM Acquisition to
approximately 2,400 employees following the Deltec Acquisition. The integration
of these additional employees, as well as the integration of each entity's
existing product offerings, manufacturing facilities and distribution networks
will require substantial attention from the newly integrated management team.
Any inability of the Company to successfully integrate these companies in a
timely and efficient manner could have an adverse effect on the Company's
business.
COMPETITION
The Company is one of only three global companies providing a full range of
UPS products and services. The UPS industry, however, is highly competitive on
both a worldwide basis and a regional geographic basis. The Company competes,
and will continue to compete, with several U.S. and foreign firms with respect
to small and large UPS products, both on a worldwide basis and in various
geographic regions, and within
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<PAGE> 21
individual UPS product and application niches. Among such competitors, certain
of which are larger and have greater financial and other resources than the
Company, are a division of Emerson Electric Co., a company that is larger than
the Company; American Power Conversion Corporation, a leading manufacturer and
seller of small UPS products on a worldwide basis; and a subsidiary of Groupe
Schneider, S.A., a diversified worldwide company that has UPS operations in the
U.S. and is the leading manufacturer and seller of UPS products in Europe. The
future success of the Company will depend primarily upon its continued ability
to design, manufacture and market products incorporating new technological
developments that address the changing needs of its customers on a
cost-effective and timely basis. There can be no assurance that the Company will
be able to produce successful products or that new products will achieve market
acceptance.
GOVERNMENT CONTRACT MATTERS
Sales to the federal government accounted for approximately 35%, 33% and
27% of the Company's total revenues for fiscal 1993, 1994 and 1995,
respectively. A significant portion of the Company's sales to the federal
government in recent years have been under a five-year contract awarded to the
Company by the Air Force Logistics Command (the "ALC Contract") in May 1988
following a competitive procurement. A significant portion of the orders
received by the Company under the ALC Contract has been for the Federal Aviation
Administration Air Route Traffic Control Center Modernization Program (the "FAA
Program"). Despite the large proportion of sales to the federal government, such
sales actually declined by approximately 12% in fiscal 1995 versus fiscal year
1994, reflecting the scheduled decline in large systems sales due to the
completion of most product shipments under the FAA Program. As of September 30,
1995, a significant portion of the Company's backlog related to orders received
under the FAA Program. The period during which orders could be placed under the
FAA Program expired in May 1993. Although expiration of the program does not
affect orders received prior to expiration and delivery on the remainder of such
orders, sales to the federal government in fiscal 1996 are expected to decline
by approximately 40-50%.
The Company's contracts with the federal government have no significant
minimum purchase commitments, and the government may cease purchases under these
contracts at any time for any reason. These contracts are subject to termination
for the convenience of the government pursuant to the terms of the contracts.
The Company's compliance with government contract regulations is audited or
reviewed from time to time by government auditors. Under federal government
regulations, certain costs are not allowable as costs for which the government
will reimburse the Company. Government auditors may recommend that certain
charges be treated as unallowable and reimbursement be made to the government.
The Company provides for estimated unallowable charges and voluntary refunds in
its financial statements and believes that its provisions are adequate as of
December 31, 1995.
FOREIGN OPERATIONS; RISK OF CURRENCY FLUCTUATIONS
The Company manufactures and markets its products worldwide through several
foreign subsidiaries and independent agents. The Company's worldwide operations
are subject to the risks normally associated with foreign operations, including,
but not limited to, the disruption of markets, changes in export or import laws,
restrictions on currency exchanges, and the modification or introduction of
other governmental policies with potentially adverse effects.
Approximately 31% of the Company's fiscal 1995 sales were derived from
products and services sold outside the U.S. The U.S. dollar value of these
revenues sometimes varies with currency exchange rate fluctuations, and the
Company may be exposed to exchange losses based upon such fluctuations, which
losses could have a material adverse effect on the Company's financial results
and its ability to meet interest and principal obligations on its U.S. dollar
denominated debt. Although the Company has entered into hedging transactions to
reduce its exposure to such foreign currency exchange risks, there can be no
assurance that these hedging transactions will protect the Company from all such
exchange losses.
ABSENCE OF PUBLIC MARKET
As of the date hereof, the only registered holder of the Series A Notes is
Cede & Co., as the nominee of DTC. The Company believes that, as of the date
hereof, such holder is not an "affiliate" (as such term is
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<PAGE> 22
defined in Rule 405 under the Securities Act) of the Company. Prior to the
Offering, there had been no market for the Notes and there can be no assurance
that such a market will develop or, if such a market develops, as to the
liquidity of such market. The Series B Notes will not be listed on any
securities exchange, but the Series A Notes are eligible for trading in the
National Association of Securities Dealers, Inc.'s Private Offerings, Resales
and Trading through Automatic Linkages (PORTAL) market. The Series B Notes are
new securities for which there is currently no market. The Series B Notes may
trade at a discount from their initial offering price, depending upon prevailing
interest rates, the market for similar securities, the performance of the
Company and other factors. The Company has been advised by the Initial
Purchasers that they intend to make a market in the Series B Notes, as well as
the Series A Notes, as permitted by applicable laws and regulations; however,
the Initial Purchasers are not obligated to do so and any such market making
activities may be discontinued at any time without notice. In addition, such
market making activities may be limited during the Exchange Offer and the
pendency of the Shelf Registration Statement (as defined in the Registration
Rights Agreement). Therefore, there can be no assurance that an active market
for the Notes will develop. See "The Exchange Offer" and "Plan of Distribution."
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<PAGE> 23
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Series A Notes were sold by the Company on March 13, 1996 (the "Closing
Date") to the Initial Purchasers pursuant to the Purchase Agreement. The Initial
Purchasers subsequently sold the Series A Notes to (i) "qualified institutional
buyers" ("QIBs"), as defined in Rule 144A under the Securities Act ("Rule
144A"), in reliance on Rule 144A and (ii) a limited number of institutional
"accredited investors" ("Accredited Institutions"), as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act. As a condition to the sale
of the Series A Notes, the Company and the Initial Purchasers entered into the
Registration Rights Agreement on March 13, 1996. 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
Series B Notes within 30 days after the Closing Date, (ii) use its best efforts
to cause such Registration Statement to become effective under the Securities
Act within 120 days after the Closing Date and (iii) upon effectiveness of the
Registration Statement, to commence the Exchange Offer, maintain the
effectiveness of the Registration Statement for at least 20 business days (or a
longer period if required by law) and deliver to the Exchange Agent Series B
Notes in the same aggregate principal amount as the Series A Notes that were
tendered by holders thereof pursuant to the Exchange Offer. A copy of the
Registration Rights Agreement has been filed 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.
RESALE OF THE SERIES B NOTES
With respect to the Series B 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 Series B 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 that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) who exchanges Series A Notes for Series B 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 a
distribution of the Series B Notes, will be allowed to resell Series B Notes to
the public without further registration under the Securities Act and without
delivering to the purchasers of the Series B Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires Series B Notes in the Exchange Offer for the purpose of distributing or
participating in the distribution of the Series B 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 Series B Notes for its
own account in exchange for Series A Notes, where such Series A 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 Series B Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Series B Notes received in exchange for Series A Notes where such Series A 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 365 days from the date on which the Registration Statement is
declared effective. See "Plan of Distribution."
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<PAGE> 24
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Series A
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Company will issue $1,000 principal amount of Series B Notes in exchange for
each $1,000 principal amount of outstanding Series A Notes surrendered pursuant
to the Exchange Offer. Series A Notes may be tendered only in integral multiples
of $1,000.
The form and terms of the Series B Notes are the same as the form and terms
of the Series A Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the Series B Notes will not bear legends
restricting their transfer and (ii) holders of the Series B Notes will not be
entitled to any of the rights of holders of Series A Notes under the
Registration Rights Agreement, which rights will terminate upon the consummation
of the Exchange Offer. The Series B Notes will evidence the same debt as the
Series A 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 Series
A Notes, such that both series of Notes will be treated as a single class of
debt securities under the Indenture.
As of the date of this Prospectus, $125.0 million in aggregate principal
amount of the Series A Notes are outstanding and registered in the name of Cede
& Co., as nominee for DTC. Only a registered holder of the Series A 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 Series A Notes entitled to participate in the Exchange Offer.
Holders of the Series A 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 Series A
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 Series A Notes for the purposes of receiving the Series B Notes from
the Company.
Holders who tender Series A 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 Series
A 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; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1996, unless the Company, in its sole discretion, extends
the Exchange Offer, 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 (i) notify the
Exchange Agent of any extension by oral or written notice, (ii) mail to the
registered holders an announcement thereof, and (iii) issue a press release or
other public announcement, which shall include disclosure of the approximate
number of Series A Notes deposited to date, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. 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 Series A Notes, (ii) to extend the Exchange Offer, or (iii) if any
conditions set forth below under "--Conditions" shall not have been satisfied,
to terminate the Exchange Offer by giving oral or written notice of such delay,
extension or
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<PAGE> 25
termination to the Exchange Agent. 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, 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
the registered holders, if the Exchange Offer would otherwise expire during such
five to ten business day period.
INTEREST ON THE SERIES B NOTES
The Series B Notes will bear interest at a rate equal to 11 1/2% per annum.
Interest on the Series B Notes will be payable semi-annually on each March 15
and September 15, commencing September 15, 1996. Holders of Series B Notes will
receive interest on September 15, 1996 from the date of initial issuance of the
Series B Notes, plus an amount equal to the accrued interest on the Series A
Notes from the date of initial delivery to the date of exchange thereof for
Series B Notes. Holders of Series A Notes that are accepted for exchange will be
deemed to have waived the right to receive any interest accrued on the Series A
Notes.
PROCEDURES FOR TENDERING
Only a registered holder of Series A Notes may tender such Series A Notes
in the Exchange Offer. To tender in the Exchange Offer, a holder of Series A
Notes must complete, sign and date the Letter of Transmittal, or facsimile
thereof, have the signatures thereon guaranteed if required by the Letter of
Transmittal, and mail or otherwise deliver such Letter of Transmittal or such
facsimile 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 Series A Notes must be received by the Exchange Agent
along with the Letter of Transmittal, (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Series A Notes, if such procedure
is available, into the Exchange Agent's account at the Depositary pursuant to
the procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described below.
The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF SERIES A 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. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR SERIES A 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(s) of the Series A Notes whose Series A 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
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 such owner's Series A Notes, either make appropriate
arrangements to register ownership of the Series A 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.
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 (as defined below) unless the Series A Notes tendered
pursuant thereto are tendered (i) by a registered holder who has not completed
the box titled "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible
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<PAGE> 26
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 an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act
which is a member of one of the recognized signature guarantee programs
identified in the Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Series A Notes listed therein, such Series A Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Series A
Notes.
If the Letter of Transmittal or any Series A Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Series A Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Series A 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
Series A Notes not properly tendered or any Series A 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 Series A 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 Series A Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Series A Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Series A 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 Series A Notes that
are not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Series A Notes that are not tendered pursuant to the
Exchange Offer, the Company reserves the right in its sole discretion to
purchase or make offers for any Series A Notes that remain outstanding
subsequent to the Expiration Date or, as set forth below under "--Conditions,"
to terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Series A 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 of Series A Notes will represent to the Company
that, among other things, (i) the Series B Notes to be acquired by such holder
of Series A Notes in connection with the Exchange Offer are being acquired by
such holder in the ordinary course of business of such holder, (ii) such holder
has no arrangement or understanding with any person to participate in the
distribution of Series B Notes, (iii) such 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 purposes of distributing the Series
B Notes must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction of the
Series B 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) such holder
understands that a secondary resale transaction described in clause (iii) above
and any resales of Series B Notes obtained by such holder in exchange for Series
A 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) such holder is not an "affiliate," as defined in Rule
405 under the Securities Act, of the Company. If the holder is a broker-dealer
that will receive
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<PAGE> 27
Series B Notes for such holder's own account in exchange for Series A Notes that
were acquired as a result of market-making activities or other trading
activities, such holder will be required to acknowledge in the Letter of
Transmittal that such holder will deliver a prospectus in connection with any
resale of such Series B Notes; however, by so acknowledging and by delivering a
prospectus, such holder will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
RETURN OF SERIES A NOTES
If any tendered Series A Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Series A Notes are
withdrawn or are submitted for a greater principal amount than the holders
desire to exchange, such unaccepted, withdrawn or non-exchanged Series A Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Series A Notes tendered by book-entry transfer into the Exchange Agent's
account at the Depositary pursuant to the book-entry transfer procedures
described below, such Series A Notes will be credited to an account maintained
with the Depositary) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Series A Notes at the Depositary for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make
book-entry delivery of Series A Notes by causing the Depositary to transfer such
Series A Notes into the Exchange Agent's account at the Depositary in accordance
with the Depositary's procedures for transfer. However, although delivery of
Series A Notes may be effected through book-entry transfer at the Depositary,
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 Series A Notes and (i) whose Series A
Notes are not immediately available or (ii) who cannot deliver their Series A
Notes, 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 Series A Notes and
the principal amount of Series A Notes tendered, stating that the tender is
being made thereby and guaranteeing that, within three 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
Series A Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Series A
Notes in proper form for transfer and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within three 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 Series A Notes according to the
guaranteed delivery procedures set forth above.
25
<PAGE> 28
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series A Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Series A 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 Series A Notes to be withdrawn (the "Depositor"), (ii) identify the Series A
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Series A Notes), and (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Series A 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 Series A Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Series B Notes will be issued with respect thereto unless
the Series A Notes so withdrawn are validly retendered. Properly withdrawn
Series A Notes may be retendered by following one of the procedures described
above under "--Procedures for Tendering" at any time prior to the Expiration
Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Series B Notes for, any
Series A Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Series A Notes, if the Exchange Offer violates applicable
law, rules or regulations or an applicable interpretation of the staff of the
Commission.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Series A
Notes and return all tendered Series A Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Series A Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Series A Notes (see "--Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Series A Notes that 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 Series A Notes, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during such
five to ten business day period.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Series A 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 such
holders (including any broker-dealers) and certain parties related to such
holders against certain liabilities (including liabilities under the Securities
Act), (ii) to provide, upon the request of any holder of a transfer-restricted
Series A Note, the information required by Rule 144A(d)(4) under the Securities
Act in order to permit resales of such Series A 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 Series A Notes by broker-dealers for a period of 365 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 365 days from the date on which the
Registration Statement is declared effective.
LIQUIDATED DAMAGES
In the event of a Registration Default (as defined in the Registration
Rights Agreement), the Company is required to pay liquidated damages to each
holder of Transfer Restricted Securities (as defined below),
26
<PAGE> 29
during the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to $0.05 per week per $1,000 principal
amount of Series A Notes constituting Transfer Restricted Securities held by
such holder. Transfer Restricted Securities shall mean each Series A Note until
(i) the date on which such Series A Note has been exchanged for a Series B Note
in the Exchange Offer, (ii) the date on which such Series A Note has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement (as defined in the Registration Rights
Agreement), or (iii) the date on which such Series A Note is distributed to the
public pursuant to Rule 144(k) under the Securities Act. The amount of the
liquidated damages will increase by an additional $0.05 per week per $1,000
principal amount of Series A Notes constituting Transfer Restricted Securities
for each subsequent 90-day period until all Registration Defaults have been
cured, up to a maximum amount of liquidated damages of $0.50 per week per $1,000
principal amount of Series A Notes constituting Transfer Restricted Securities.
Following the cure of all Registration Defaults, the payment of liquidated
damages will cease. The filing and effectiveness of the Registration Statement
of which this Prospectus is a part and the consummation of the Exchange Offer
will eliminate all rights of the holders of Series A Notes eligible to
participate in the Exchange Offer to receive damages that would have been
payable if such actions had not occurred.
EXCHANGE AGENT
American Bank National Association has been appointed as Exchange Agent of
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand Delivery:
American Bank National Association American Bank National Association
101 East Fifth Street 101 East Fifth Street
St. Paul, Minnesota 55101 St. Paul, Minnesota 55101
Attention: Corporate Trust Department Attention: Corporate Trust Department
By Overnight Delivery: By Facsimile:
American Bank National Association (612) 229-6415
101 East Fifth Street Confirm by Telephone:
St. Paul, Minnesota 55101 (612) 229-2600
Attention: Corporate Trust Department
</TABLE>
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 in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances 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 Exchange Offer will be paid by
the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Series A Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Series A 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.
27
<PAGE> 30
CONSEQUENCE OF FAILURES TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Series A
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Series A Notes that are not exchanged for the Series B Notes pursuant
to the Exchange Offer will remain restricted securities. Accordingly, such
Series A Notes may be resold only (i) to a person whom the seller reasonably
believes is a QIB 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.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Series B Notes.
28
<PAGE> 31
THE DELTEC ACQUISITION
Pursuant to the Acquisition Agreement, the Company acquired Deltec from
Fiskars on March 13, 1996. Deltec designs, manufactures, markets, sells and
services a broad line of uninterruptible power systems products and power
management software worldwide through its principal operating subsidiaries,
Deltec EC, which is headquartered and has a plant in San Diego, California and a
plant in Tijuana, Mexico, and FPS, which is based and has a manufacturing
facility in Espoo, Finland. Deltec is one of the world's largest manufacturers
of UPS systems, with revenues of $132.9 million for the year ended December 31,
1995.
The purchase price of approximately $188.1 million was comprised of
approximately $158.5 million in cash ($158.0 million of which was paid at the
closing or the day immediately following), 825,000 shares of Common Stock,
valued at $14.00 per share, and 1,000,000 shares of the Series G Preferred
Stock, valued at $18.00 per share. The Series G Preferred Stock is convertible
into Common Stock on a one-for-one basis (subject to adjustment under certain
circumstances), has a per annum dividend rate of $0.80 per share through March
31, 2001 and $1.20 per share thereafter, and is subject to redemption under
certain circumstances. The balance of the purchase price (approximately $0.5
million to redeem 50 shares of Deltec's 10% Class A preferred stock, plus
accrued but unpaid dividends) will be paid on January 8, 1997. The purchase
price was determined based on an assumption that the net book value of Deltec on
the closing would be approximately $28.7 million. The purchase price will be
adjusted upward or downward to the extent the closing date net book value (as
adjusted for certain excluded assets and liabilities) differs from this amount.
Such determination is expected to be made within 90 days of the closing date, as
provided in the Acquisition Agreement. Based on Deltec's net book value, as
adjusted, at December 31, 1995, the Company would have owed Fiskars additional
cash of $6.2 million. The Company financed the cash portion of the purchase
price paid at closing, excluding the estimated $4.5 million in transaction costs
with (i) the net proceeds of the Offering, which were $121.3 million (before
payment of transaction costs) and (ii) $36.7 million of borrowings under the New
Credit Facility. In addition, under the terms of the Acquisition Agreement, the
Company paid $4.0 million to Fiskars in payment of certain interest carrying
costs associated with Fiskars' agreement to extend the time for closing the
Deltec Acquisition. At the closing, the Company made a prepayment of $3.0
million to Fiskars related to the variable purchase price adjustment, which
would have been $6.2 million based on Deltec's net book value at December 31,
1995. An additional payment of $3.7 million was made to Fiskars, which
represented excess cash that remained in Deltec following the closing.
The Acquisition Agreement contains other provisions customary for
transactions of this size and type, including representations and warranties
with respect to the condition and operations of the business. The Acquisition
Agreement prohibits Fiskars from competing on a worldwide basis in the Company's
business for four years. In addition, subject to certain time and dollar
limitations, Fiskars will indemnify the Company for liabilities arising from
inaccuracies of representations and warranties and breaches of covenants
contained in the Acquisition Agreement. Fiskars' total liability for
indemnification claims is limited under the Acquisition Agreement to 50% of the
purchase price. In addition, under the terms of the Acquisition Agreement,
Fiskars is entitled to two representatives on the Company's Board of Directors.
To accommodate this provision, the Company's Board of Directors has been
enlarged from eight to ten members. See "Description of Capital Stock."
29
<PAGE> 32
USE OF PROCEEDS
There will be no proceeds to the Company from the Exchange Offer. The net
proceeds from the Offering were approximately $121.3 million (after deducting
discounts and commissions to the Initial Purchasers and before deducting
estimated offering expenses). The net proceeds were used to fund a portion of
the cash purchase price of the Deltec Acquisition, the balance of which was
funded with borrowings under the New Credit Facility. See "Description of New
Credit Facility" and "The Deltec Acquisition."
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1995 and pro forma combined to give effect to the Transactions.
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the Unaudited Pro
Forma Combined Financial Statements and the Consolidated Financial Statements of
the Company and the Combined/Consolidated Financial Statements of Deltec and the
related notes thereto included elsewhere in the Prospectus.
Total debt outstanding as of February 29, 1996 was $91.7 million.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
-----------------------------
EXIDE
ELECTRONICS PRO FORMA
HISTORICAL COMBINED(1)
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total debt:
New Credit Facility(2)................................. $ -- $ 133,550
Other senior debt(3)................................... 83,163 8,266
Notes.................................................. -- 121,741
----------- -----------
Total debt.......................................... 83,163 263,557
Series G Preferred Stock (redeemable after Sept. 30,
2006).................................................. -- 18,000
Common shareholders' equity.............................. 92,588 101,907
----------- -----------
Total capitalization................................ $ 175,751 $ 383,464
======== ==========
</TABLE>
- ---------------
(1) Pro forma for the Deltec Acquisition, the New Credit Facility and the
Offering. The issuance of Warrants to purchase 643,750 shares of Common
Stock in connection with the Series A Notes resulted in the Series A Notes
being recorded at a discount of $3.3 million (such amount being equal to the
value of the Warrants) and common shareholders' equity being increased by
the same amount.
(2) The New Credit Facility provides for term and revolving credit in an amount
of up to $175.0 million. Upon completion of the Offering and the Deltec
Acquisition, approximately $133.6 million was expected to be outstanding on
a pro forma basis, $50.0 million of which was expected to be a term loan and
$83.6 million of which was expected to constitute revolving credit debt. See
"Description of New Credit Facility."
(3) At December 31, 1995, the Company's Senior Debt consisted of $76.1 million
outstanding under an existing domestic credit facility, $6.3 million
outstanding under various credit facilities entered into by the Company's
foreign subsidiaries and other amounts totaling $0.8 million. In connection
with closing the Transactions, the Company repaid all amounts outstanding
under the existing domestic credit facility with a portion of the proceeds
of the New Credit Facility. In addition, as part of the Deltec Acquisition,
the Company assumed approximately $1.2 million of indebtedness held by one
of Deltec's foreign subsidiaries, increasing the Company's foreign
subsidiary debt to approximately $7.5 million.
30
<PAGE> 33
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
The following sets forth the Company's Unaudited Pro Forma Combined
Statement of Operations and Other Data, and the Company's Unaudited Pro Forma
Combined Balance Sheet, in each case giving effect to the Transactions described
in Note 1 hereto as if such transactions had been consummated at the beginning
of fiscal 1995 (in the case of the Unaudited Pro Forma Combined Statement of
Operations and Other Data) and on December 31, 1995 (in the case of the Pro
Forma Combined Balance Sheet). The Unaudited Pro Forma Combined Financial
Statements of the Company do not purport to present the financial position or
results of operations of the Company had the Transactions assumed herein
occurred on the dates indicated, nor are they necessarily indicative of the
results of operations which may be expected to occur in the future.
The Exide Electronics operating data for the LTM ended December 31, 1995
was derived from the Exide Electronics Statements of Operations for the last
nine months of the year ended September 30, 1995 and the three months ended
December 31, 1995. The Deltec operating data for the year ended September 30,
1995, was derived from the Deltec Statements of Income for the three months
ended December 31, 1994, and for the nine months ended September 30, 1995.
The Deltec Acquisition will be accounted for by the Company as a purchase
whereby the basis for accounting for Deltec's assets and liabilities will be
based upon their fair market values at the date of the Deltec Acquisition. Pro
forma adjustments, including the preliminary purchase price allocation and
estimated cost savings resulting from the Deltec Acquisition as described in
Notes 1 and 2 of the Notes to the Unaudited Pro Forma Combined Financial
Statements, represent the Company's preliminary determination of these
adjustments and are based upon preliminary information, assumptions and
operating decisions which the Company considers reasonable under the
circumstances. Final amount of cost savings may differ significantly from those
set forth herein.
31
<PAGE> 34
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS AND OTHER DATA
LAST TWELVE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
EXIDE PRO FORMA PRO FORMA
ELECTRONICS DELTEC ADJUSTMENTS(1) COMBINED
----------- -------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Product revenues............................. $ 265,245 $113,031 $ -- $378,276
Service revenues............................. 116,970 19,918 -- 136,888
----------- -------- -------------- ---------
Total revenues........................... 382,215 132,949 -- 515,164
----------- -------- -------------- ---------
Product cost of revenues..................... 198,131 71,921 (4,200)(2)(3) 265,852
Service cost of revenues..................... 81,688 8,969 -- 90,657
----------- -------- -------------- ---------
Total cost of revenues................... 279,819 80,890 (4,200) 356,509
----------- -------- -------------- ---------
Gross profit................................. 102,396 52,059 4,200 158,655
Selling, general and administrative
expense.................................... 70,866 33,647 3,797(2)(3) 108,310
Research and development expense............. 9,891 4,976 (1,000)(2) 13,867
Litigation expense........................... 700 -- -- 700
Merger and acquisition expense............... 7,000 -- -- 7,000
Royalty expense.............................. -- 3,411 (3,411)(4) --
----------- -------- -------------- ---------
Income from operations................... 13,939 10,025 4,814 28,778
Interest expense............................. 5,648 3,177 17,894(5) 26,719
Interest income.............................. (377) (678) -- (1,055 )
Other (income) expense....................... (619) -- -- (619 )
----------- -------- -------------- ---------
Income before income taxes............... 9,287 7,526 (13,080) 3,733
Provision for income taxes................... 3,738 2,237 (3,765)(6) 2,210
----------- -------- -------------- ---------
Net income............................... 5,549 $ 5,289 (9,315) 1,523
=========
Preferred stock dividends.................... 394 977(7) 1,371
----------- -------------- ---------
Net income applicable to common
shareholders............................... $ 5,155 $(10,292) $ 152
========== ============== ==========
Earnings per share(7)........................ $ 0.57 $ 0.01
========== ==========
Weighted average common shares outstanding... 9,677 10,439
========== ==========
OTHER DATA:
EBITDA(8).................................... $ 31,322 $ 17,853 $ 8,000(2) $ 57,175
Depreciation................................. 6,962 2,014 500 9,476
Amortization................................. 2,721 2,403 6,097 11,221
Capital expenditures......................... 14,103 2,402 16,505
Ratio of EBITDA to interest expense.......... 5.5x 5.6x 2.1 x
Ratio of earnings to fixed charges(9)........ 2.1x 2.8x 1.1 x
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements
32
<PAGE> 35
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS AND OTHER DATA
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
EXIDE PRO FORMA PRO FORMA
ELECTRONICS DELTEC ADJUSTMENTS(1) COMBINED
----------- -------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Product revenues........................... $ 271,482 $ 97,285 $ -- $368,767
Service revenues........................... 119,496 19,030 -- 138,526
----------- -------- -------------- ---------
Total revenues......................... 390,978 116,315 -- 507,293
----------- -------- -------------- ---------
Product cost of revenues................... 204,683 61,600 (2,500)(2)(3) 263,783
Service cost of revenues................... 82,430 9,857 -- 92,287
----------- -------- -------------- ---------
Total cost of revenues................. 287,113 71,457 (2,500) 356,070
----------- -------- -------------- ---------
Gross profit........................... 103,865 44,858 2,500 151,223
Selling, general and administrative
expense.................................. 69,966 30,527 5,390(2)(3) 105,883
Research and development expense........... 9,929 4,827 4,000(2)(3) 18,756
Litigation expense......................... 700 -- -- 700
Merger and acquisition expense............. 7,000 -- -- 7,000
Royalty expense............................ -- 2,923 (2,923)(4) --
----------- -------- -------------- ---------
Income from operations................. 16,270 6,581 (3,967) 18,884
Interest expense........................... 5,575 2,982 21,623(5) 30,180
Interest income............................ (485) (701) -- (1,186 )
Other (income) expense..................... (897) -- -- (897 )
----------- -------- -------------- ---------
Income before income taxes............. 12,077 4,300 (25,590) (9,213 )
Provision for (benefit from) income
taxes.................................... 4,692 1,012 (8,644)(6) (2,940 )
----------- -------- -------------- ---------
Net income............................. 7,385 $ 3,288 (16,946) (6,273 )
=========
Preferred stock dividends.................. 592 779(7) 1,371
----------- -------------- ---------
Net income applicable to common
shareholders............................. $ 6,793 $(17,725) $ (7,644 )
========== ============== ==========
Earnings per share(7)...................... $ 0.84 $ (0.73 )
========== ==========
Weighted average common shares
outstanding.............................. 9,673 10,471
========== ==========
OTHER DATA:
EBITDA(8).................................. $ 33,415 $ 14,030 $ 8,000(2) $ 55,445
Depreciation............................... 6,683 2,041 500 9,224
Amortization............................... 2,762 2,485 14,390 19,637
Capital expenditures....................... 12,497 2,233 14,730
Ratio of EBITDA to interest expense........ 6.0x 4.7x 1.8 x
Ratio of earnings to fixed charges......... 2.4x 2.1x 0.7 x(9)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements
33
<PAGE> 36
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS AND OTHER DATA
THREE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
EXIDE PRO FORMA PRO FORMA
ELECTRONICS DELTEC ADJUSTMENTS(1) COMBINED
----------- ------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Product revenues............................ $63,896 $24,620 $ -- $ 88,516
Service revenues............................ 28,170 4,854 -- 33,024
----------- ------- -------------- ---------
Total revenues.......................... 92,066 29,474 -- 121,540
----------- ------- -------------- ---------
Product cost of revenues.................... 49,060 14,997 650(2)(3) 64,707
Service cost of revenues.................... 19,322 2,977 -- 22,299
----------- ------- -------------- ---------
Total cost of revenues.................. 68,382 17,974 650 87,006
----------- ------- -------------- ---------
Gross profit............................ 23,684 11,500 (650) 34,534
Selling, general and administrative
expense................................... 16,557 6,862 2,344(2)(3) 25,763
Research and development expense............ 2,547 1,145 4,750(2)(3) 8,442
Royalty expense............................. -- 714 (714)(4) --
----------- ------- -------------- ---------
Income from operations.................. 4,580 2,779 (7,030) 329
Interest expense............................ 1,424 665 8,426(5) 10,515
Interest income............................. (139) (121) -- (260 )
Other (income) expense...................... (161) -- -- (161 )
----------- ------- -------------- ---------
Income before income taxes.............. 3,456 2,235 (15,456) (9,765 )
Provision for (benefit from) income taxes... 1,207 685 (5,693)(6) (3,801 )
----------- ------- -------------- ---------
Net income.............................. 2,249 $ 1,550 (9,763) (5,964 )
========
Preferred stock dividends................... 198 145(7) 343
----------- -------------- ---------
Net income applicable to common
shareholders.............................. $ 2,051 $ (9,908) $ (6,307 )
========== ============== ==========
Earnings per share(7)....................... $ 0.25 $ (0.61 )
========== ==========
Weighted average common shares
outstanding............................... 9,005 10,349
========== ==========
OTHER DATA:
EBITDA(8)................................... $ 6,795 $ 4,698 $ 2,000(2) $ 13,493
Depreciation................................ 1,562 530 125 2,217
Amortization................................ 653 675 9,619 10,947
Capital expenditures........................ 2,332 570 2,902
Ratio of EBITDA to interest expense......... 4.8x 7.1x 1.3 x
Ratio of earnings to fixed charges(9)....... 2.6x 3.7x 0.1 x(9)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements
34
<PAGE> 37
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS AND OTHER DATA
THREE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
EXIDE PRO FORMA PRO FORMA
ELECTRONICS DELTEC ADJUSTMENTS(1) COMBINED
----------- ------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Product revenues............................ $57,659 $40,366 $ -- $ 98,025
Service revenues............................ 25,644 5,742 -- 31,386
----------- ------- -------------- ---------
Total revenues.......................... 83,303 46,108 -- 129,411
----------- ------- -------------- ---------
Product cost of revenues.................... 42,508 25,318 (1,050)(2)(3) 66,776
Service cost of revenues.................... 18,580 2,089 -- 20,669
----------- ------- -------------- ---------
Total cost of revenues.................. 61,088 27,407 (1,050) 87,445
----------- ------- -------------- ---------
Gross profit............................ 22,215 18,701 1,050 41,966
Selling, general and administrative
expense................................... 17,457 9,982 751(2)(3) 28,190
Research and development expense............ 2,509 1,294 (250)(2) 3,553
Royalty expense............................. -- 1,202 (1,202)(4) --
----------- ------- -------------- ---------
Income from operations.................. 2,249 6,223 1,751 10,223
Interest expense............................ 1,497 860 4,697(5) 7,054
Interest income............................. (31) (98) -- (129 )
Other (income) expense...................... 117 -- -- 117
----------- ------- -------------- ---------
Income before income taxes.............. 666 5,461 (2,946) 3,181
Provision for income taxes.................. 253 1,910 (815)(6) 1,348
----------- ------- -------------- ---------
Net income.............................. 413 $ 3,551 (2,131) 1,833
========
Preferred stock dividends................... -- 343(7) 343
----------- -------------- ---------
Net income applicable to common
shareholders.............................. $ 413 $ (2,474) $ 1,490
========== ============== ==========
Earnings per share(7)....................... $ 0.04 $ 0.14
========== ==========
Weighted average common shares
outstanding............................... 9,500 10,323
========== ==========
OTHER DATA:
EBITDA(8)................................... $ 4,702 $ 8,521 $ 2,000(2) $ 15,223
Depreciation................................ 1,841 503 125 2,469
Amortization................................ 612 593 1,326 2,531
Capital expenditures........................ 3,938 739 4,677
Ratio of EBITDA to interest expense......... 3.1x 9.9x 2.2 x
Ratio of earnings to fixed charges(9)....... 1.3x 6.2x 1.4 x
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements
35
<PAGE> 38
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------------------
EXIDE PRO FORMA PRO FORMA
ELECTRONICS DELTEC ADJUSTMENTS(1) COMBINED
----------- ------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............. $ 2,001 $ 5,603 $ (1,903)(1) $ 5,701
Accounts receivable................... 95,436 34,268 -- 129,704
Inventories........................... 76,753 21,633 1,700(1) 100,086
Other current assets.................. 15,357 4,388 2,500(1) 22,245
----------- ------- -------------- ---------
Total current assets............... 189,547 65,892 2,297 257,736
Property, plant and equipment........... 37,251 7,135 4,000(1) 48,386
Goodwill................................ 18,318 7,384 129,624(10) 155,326
Other assets............................ 8,823 468 29,250(11) 38,541
----------- ------- -------------- ---------
$ 253,939 $80,879 $165,171 $ 499,989
======== ======= =========== ========
LIABILITIES, PREFERRED STOCK AND COMMON SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt....................... $ 6,747 $ 10 $ -- $ 6,757
Accounts payable...................... 43,220 11,845 -- 55,065
Deferred revenues..................... 15,840 4,461 -- 20,301
Other accrued liabilities............. 15,707 19,341 (6,713)(1)(13) 28,335
Payable to Fiskars.................... -- -- 3,657(1) 3,657
----------- ------- -------------- ---------
Total current liabilities.......... 81,514 35,657 (3,056) 114,115
Long-term debt.......................... 76,416 37,836 142,548(12) 256,800
Deferred liabilities.................... 3,421 4,076 1,670(1)(13) 9,167
Series G Preferred Stock (redeemable
after September 30, 2006)............. -- -- 18,000(1) 18,000
Common shareholders' equity............. 92,588 3,310 6,009(13) 101,907
----------- ------- -------------- ---------
$ 253,939 $80,879 $165,171 $ 499,989
======== ======= =========== ========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Financial Statements
36
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. The Company's Unaudited Pro Forma Combined Financial Statements assume the
following transactions occurred (1) at the beginning (October 1, 1994) of
the Company's 1995 fiscal year for purposes of the Unaudited Pro Forma
Combined Statements of Operations and Other Data and (2) on December 31,
1995, for purposes of the Unaudited Pro Forma Combined Balance Sheet:
a. The Deltec Acquisition -- Immediately prior to the closing of the
Deltec Acquisition, under the terms of the Acquisition Agreement,
Fiskars converted all net amounts owed by Deltec to Fiskars or
affiliates to Deltec shareholders' equity and distributed all Deltec
cash to Fiskars. Accordingly, the pro forma adjustments reflect
decreases in cash ($5,603), goodwill and intangible assets ($7,384),
other accrued liabilities ($6,791), deferred liabilities ($1,060) and
long-term debt ($36,643), along with a corresponding increase to Deltec
shareholders' equity ($31,507).
It is assumed that the Deltec Acquisition was financed through
borrowings of $43,450 under the New Credit Facility, $121,250 from the
net proceeds of the Offering, $500 payable to Fiskars on January 8, 1997
and $3,157 additional variable amount payable to Fiskars related to the
assumed purchase price adjustment at December 31, 1995.
The excess of cost over fair value of net assets acquired resulting from
the preliminary purchase price allocation is assumed to be as follows:
<TABLE>
<S> <C>
Pro forma purchase price --
Cash --
Fixed amount stated in Acquisition Agreement...................... $158,500
Variable amount related to assumed purchase price adjustment;
calculated based on Deltec net book value and excluded assets and
liabilities at December 31, 1995, net of prepayment of $3,000.... 3,157
Additional amounts paid at closing:
Prepayment of variable purchase price adjustment................ 3,000
Excess cash which remained in Deltec following the
Acquisition.................................................... 3,700
Series G Preferred Stock (1,000,000 shares at fair value of $18 per
share)............................................................ 18,000
Common Stock (825,000 shares at fair market value of $14 per
share)............................................................ 11,550
Transaction costs.................................................... 4,500
--------
Total pro forma purchase price.................................... 202,407
--------
Pro forma historical net book value of assets acquired --
Book value per historical financial statements....................... 3,310
Net liabilities excluded as described above.......................... 31,507
Excess cash which remained in Deltec following the Acquisition....... 3,700
--------
Total pro forma historical net book value of assets acquired...... (38,517)
--------
Excess of purchase price over net book value of assets acquired........ 163,890
Allocated to:
Inventories....................................................... (1,700)
Other current assets.............................................. (2,500)
Property and equipment............................................ (4,000)
Other long-term assets............................................ (20,000)
In-process research and development............................... (5,000)
Deferred income tax liability --
Current......................................................... 1,638
Long-term....................................................... 4,680
--------
Remaining excess of cost over fair value of net assets acquired
(goodwill)........................................................... $137,008
========
</TABLE>
37
<PAGE> 40
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The preliminary purchase price allocation included allocations to other
long-term assets for the noncompete agreement, prepaid license fees for
use of the Fiskars tradename in Europe, trademarks, patents and product
drawings and specifications.
The foregoing preliminary purchase price allocation is based on
available information and certain assumptions the Company considers
reasonable. The final purchase price allocation will be based upon a
final determination of the fair market value of the net assets acquired
at the date of the Deltec Acquisition as determined by valuations and
other studies which are not yet complete.
b. The conversion on October 23, 1995, of Exide Electronics' 8.375%
convertible subordinated notes (the "Convertible Subordinated Notes")
(balance at September 30, 1995 -- $15,000) into 1,146,789 shares of
Common Stock.
c. The New Credit Facility -- Simultaneously with closing the Offering,
the Company entered into the New Credit Facility to replace its then
existing credit facility. The Deltec Acquisition was partially financed
through borrowings under the New Credit Facility.
d. The issuance of the Notes in the Offering.
2. Because the Deltec Acquisition was only recently consummated, the Company
has begun, but not completed, its strategic and operating plans for the
integration of Deltec's operations into those of the Company. The Company
is in the process of completing its strategic and operating integration
plan, including coordinating its strategic and operating plans and
decisions with the plans and decisions of Deltec's management.
Nevertheless, based on enacted and planned operating decisions, the Company
has begun to eliminate duplicative costs through the combination of the two
companies as described below. However, the actual cost savings may differ
significantly from the preliminary estimates.
The pro forma adjustments to reflect estimated cost savings resulting from
the Deltec Acquisition assumes the following preliminary estimates of
expected cost savings:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, LTM ENDED
SEPTEMBER 30, ----------------- DECEMBER 31,
1995 1994 1995 1995
------------- ------ ------ ------------
<S> <C> <C> <C> <C>
Consolidation of large systems manufacturing
facilities.................................. $ 3,000 $ 750 $ 750 $3,000
Elimination of duplicative selling, general
and administrative and research and
development
costs....................................... 2,700 675 675 2,700
Elimination of certain manufacturing
outsourcing and combination of
procurement................................. 1,200 300 300 1,200
Consolidation of European sales and service
operations.................................. 600 150 150 600
Consolidation of international product
offerings................................... 500 125 125 500
------------- ------ ------ ------------
Pro forma adjustment..................... $ 8,000 $2,000 $2,000 $8,000
========== ====== ====== ==========
</TABLE>
Such pro forma adjustments have reduced costs of revenues, selling, general
and administrative expense and research and development expense by $4,700,
$2,300 and $1,000, respectively, for both the year ended September 30, 1995
and the LTM ended December 31, 1995 and by $1,175, $575 and $250 for both
the three month periods ended December 31, 1994 and 1995, respectively.
In addition to the cost savings initiatives and estimated cost savings
described above, the Company estimates that it can eliminate additional
annual duplicative costs through the combination of the two companies.
However, such amount cannot be quantified at this time and has not been
reflected in the pro forma adjustments.
38
<PAGE> 41
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The estimated non-recurring costs of implementing the above pro forma cost
savings are $3,500 and are excluded from the pro forma adjustments. The
actual non-recurring costs may differ significantly from the preliminary
estimates.
3. The pro forma adjustment to reflect the effect of the preliminary purchase
price allocation on cost of revenues, selling, general and administrative
expense and research and development expense assumes:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, LTM ENDED
SEPTEMBER 30, ---------------- DECEMBER 31,
1995 1994 1995 1995
------------- ------ ------ ------------
<S> <C> <C> <C> <C>
Cost of revenues --
Record amortization of amounts allocated
to inventories........................ $ 1,700 $1,700 $ -- $ --
Record depreciation of amounts allocated
to property and equipment............. 500 125 125 500
------------- ------ ------ ------------
$ 2,200 $1,825 $ 125 $ 500
========== ====== ====== ==========
Selling, general and administrative
expense --
Record amortization of amounts allocated
to other current assets............... $ 2,500 $1,675 $ -- $ 825
Record amortization of goodwill in
connection with the acquisition over
40 years.............................. 3,425 856 856 3,425
Record amortization of amounts allocated
to other long-term assets............. 4,250 1,063 1,063 4,250
Elimination of previously recorded Deltec
amortization of goodwill and
intangible assets..................... (2,485) (675) (593) (2,403)
------------- ------ ------ ------------
$ 7,690 $2,919 $1,326 $ 6,097
========== ====== ====== ==========
Research and development expense --
Record amortization of amounts allocated
to purchased in-process research and
development........................... $ 5,000 $5,000 $ -- $ --
========== ====== ====== ==========
</TABLE>
The amounts allocated to inventories, other current assets and purchased
in-process research and development will be fully amortized during the
twelve months following the Deltec Acquisition date. Amounts allocated to
certain long-term assets will be fully amortized during the four years
following the Deltec Acquisition date, which will reduce the annual
amortization for such amounts from $4,250 as shown above to $750 beginning
in the fifth year following the Deltec Acquisition date.
4. The royalty expense previously charged by Fiskars to Deltec is not being
charged after the Deltec Acquisition due to the license fees paid in the
purchase price for use of the Fiskars tradename in Europe.
39
<PAGE> 42
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
5. The pro forma adjustment to interest expense assumes:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, LTM ENDED
SEPTEMBER 30, ----------------- DECEMBER 31,
1995 1994 1995 1995
------------- ------ ------ ------------
<S> <C> <C> <C> <C>
Elimination of interest related to --
Conversion of Deltec debt to Fiskars to
Deltec equity............................ $(2,888) $ (635) $ (808) $ (3,061)
Conversion of Convertible Subordinated
Notes.................................... (1,256) (314) (80) (1,022)
Additional interest expense related to --
The Notes at 11.5%.......................... 14,375 3,594 3,594 14,375
Amortization of discount related to the
Notes(a)................................. 326 82 82 326
$57,450 of net additional borrowings under
the New Credit Facility.................. 4,869 1,204 1,217 4,882
Replacement of the previously existing
credit facility with the New Credit
Facility................................. 715 125 334 924
Interest payment to Fiskars as part of
amendment to Acquisition Agreement....... 4,000 4,000 -- --
Amortization of deferred financing costs
related to --
The Notes................................... 500 125 125 500
New Credit Facility......................... 982 245 233 970
------------- ------ ------ ------------
Pro forma adjustment..................... $21,623 $8,426 $4,697 $ 17,894
========== ====== ====== ==========
</TABLE>
- ---------------
(a) The issuance of Warrants in connection with Notes resulted in the Notes
being recorded at a discount of $3,259, which discount is amortized
over the life of the Notes resulting in additional interest expense
being recorded.
The additional interest expense related to the replacement of the
previously existing credit facility with the New Credit Facility was
determined based on (i) average borrowings outstanding under the previously
existing credit facility of $40,985 for the year ended September 30, 1995,
$28,550 for the three months ended December 31, 1994, $70,334 for the three
months ended December 31, 1995 and $51,431 for the LTM ended December 31,
1995, and (ii) an increase in the interest rate from the agent bank's base
rate or, at the Company's option, the LIBOR rate plus 0.60% under the
previously existing credit facility to the agent bank's base rate plus
1.5%, or at the Company's option, the LIBOR rate plus 2.5% under the New
Credit Facility.
A 25 basis point increase (or decrease) in such interest rates would
increase (or decrease) annual interest expense with respect to the New
Credit Facility by $334 based on pro forma borrowings of $133,550 at
December 31, 1995.
6. The pro forma adjustments to the provision for income taxes assumes a tax
benefit at a 39% tax rate is applied (1) to the pro forma adjustments which
are assumed to be deductible for tax return purposes and (2) to
non-deductible pro forma adjustments for which deferred income taxes were
established in the preliminary purchase price allocation. While tax
benefits for interest deductions on the Notes have been
40
<PAGE> 43
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
reflected in the pro forma adjustments, such deductions may be subject to
certain limitations under the Code (as defined).
7. The pro forma adjustments to preferred stock dividends assumes:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, LTM ENDED
SEPTEMBER 30, ------------ DECEMBER 31,
1995 1994 1995 1995
------------- ----- ---- ------------
<S> <C> <C> <C> <C>
Dividends related to Series G Preferred
Stock issued to Fiskars --
Cash dividends................................ $ 800 $ 200 $200 $ 800
Accreted dividends............................ 571 143 143 571
Eliminate dividends on Exide Electronics Series
D and E preferred stock which was converted to
Common Stock in 1995.......................... (592) (198) -- (394)
------------- ----- ---- ------------
$ 779 $ 145 $343 $ 977
========== ===== ==== ==========
</TABLE>
The accreted dividends relate to the accretion of the difference between the
assumed fair market value of the Series G Preferred Stock at the Deltec
Acquisition date ($18,000) and the redemption price at the option of holder
($24,000) after September 30, 2006 over the period from the Deltec
Acquisition date to September 30, 2006.
Pro forma primary and fully diluted earnings per share are the same for all
periods presented. The computation of pro forma primary and fully diluted
earnings per share assumes that the Exide Electronics Series D and E
preferred stock were converted to Common Stock on October 1, 1994.
8. EBITDA represents income from operations plus depreciation and amortization
(including depreciation and amortization of purchase accounting
adjustments), non-recurring 1995 Exide Electronics merger, acquisition and
litigation charges of $7,700 and Deltec royalty expense payable to Fiskars
which is not being charged after the Deltec Acquisition. While EBITDA should
not be construed as a substitute for income from operations, net income and
cash flows from operating activities in analyzing operating performance,
financial position and cash flows, the Company has included EBITDA because
it is commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance, leverage and liquidity and
to determine a company's ability to service debt.
9. In the computation of the ratio of earnings to fixed charges, earnings
consist of income before income taxes plus fixed charges minus the
undistributed earnings of Exide Electronics' 50%-owned subsidiary accounted
for by the equity method. Fixed charges consist of interest expense which
includes amortization of deferred financing costs, and one-third of rental
expenses which represents that portion of rental expenses attributable to
interest. On a pro forma basis after giving effect to the Transactions,
earnings were inadequate to cover fixed charges by $9,470 for the year ended
September 30, 1995 and $9,882 for the three months ended December 31, 1994.
Adjusted to eliminate non-cash charges of depreciation and amortization of
$28,861 for the year ended September 30, 1995 and $13,164 for the three
months ended December 31, 1994, pro forma earnings would have exceeded fixed
charges by $19,391 and $3,282, respectively.
10. The pro forma adjustment to goodwill assumes:
<TABLE>
<S> <C>
Record additional goodwill related to the Deltec Acquisition.............. $137,008
Eliminate existing Deltec goodwill........................................ (7,384)
--------
Pro forma adjustment............................................ $129,624
========
</TABLE>
41
<PAGE> 44
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
11. The pro forma adjustment to other long-term assets assumes:
<TABLE>
<S> <C>
Record certain other intangible assets............................................ $ 20,000
Record deferred financing costs related to the Notes.............................. 5,000
Record deferred financing costs related to New Credit Facility.................... 4,250
--------
Pro forma adjustment......................................................... $ 29,250
========
</TABLE>
12. The pro forma adjustment to long-term debt assumes:
<TABLE>
<S> <C>
Record the Notes, less discount of $3,259(a)...................................... $121,741
Record net additional borrowings under New Credit Facility:
Cash purchase price to Fiskars.................................................. 36,750
Additional amounts of purchase price paid at closing............................ 6,700
Acquisition transaction costs................................................... 4,500
Transaction costs related to the Notes.......................................... 1,250
Transaction costs related to New Credit Facility................................ 4,250
Interest paid to Fiskars........................................................ 4,000
Eliminate Deltec long-term debt to Fiskars........................................ (36,643)
--------
Pro forma adjustment......................................................... $142,548
========
</TABLE>
- ---------------
(a) The issuance of Warrants in connection with the Notes resulted in the Notes
being recorded at a discount.
13. The pro forma adjustment to common shareholders' equity assumes:
<TABLE>
<S> <C>
Record common stock issued to Fiskars.............................................. $11,550
Record writeoff of purchased in-process research and development, net of assumed
tax benefit of $1,950............................................................ (3,050)
Record interest of $4,000 paid to Fiskars, net of assumed tax benefit of $1,560.... (2,440)
Record value of Warrants issued in connection with the Notes(a).................... 3,259
Eliminate Deltec shareholders' equity.............................................. (3,310)
-------
Pro forma adjustment.......................................................... $ 6,009
=======
</TABLE>
- ---------------
(a) The issuance of Warrants to purchase 643,750 shares of Common Stock at
$13.475 per share resulted in the value ($3,259) of the Warrants being
recorded as additional common shareholders' equity.
42
<PAGE> 45
[This page intentionally left blank]
43
<PAGE> 46
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected historical financial data were derived from, and
should be read in conjunction with, the historical consolidated financial
statements of the Company and the historical combined/consolidated financial
statements of Deltec. The historical consolidated financial statements of the
Company as of and for each of the years ended September 30, 1991, 1992, 1993,
1994 and 1995 have been audited. The historical financial statements of the
Company as of and for each of the three-month periods ended December 31, 1994
and 1995 are unaudited. The historical financial statements of Deltec as of
December 31, 1994, September 30, 1995 and December 31, 1995 and for each of the
years ended December 31, 1993, 1994 and 1995 and the nine-month period ended
September 30, 1995 have been audited. The historical financial statements of
Deltec as of December 31, 1993 and for the three-month periods ended December
31, 1994 and 1995 are unaudited. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements and
related notes thereto included elsewhere in this Prospectus.
EXIDE ELECTRONICS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Product revenues.................... $175,487 $186,579 $220,143 $259,403 $271,482 $ 63,896 $ 57,659
Service revenues.................... 45,912 60,524 97,799 104,580 119,496 28,170 25,644
-------- -------- -------- -------- -------- -------- --------
Total revenues.................. 221,399 247,103 317,942 363,983 390,978 92,066 83,303
-------- -------- -------- -------- -------- -------- --------
Gross profit........................ 51,465 68,695 85,495 98,695 103,865 23,684 22,215
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations....... (2,899) 12,844 20,397 18,462(1) 16,270(2) 4,580 2,249
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes
and the cumulative effect of
accounting change................. (7,596) 9,159 16,046 13,459(1) 12,077(2) 3,456 666
-------- -------- -------- -------- -------- -------- --------
Income (loss) before the cumulative
effect of accounting change....... (6,698) 6,056 9,832 9,175(1) 7,385(2) 2,249 413
Cumulative effect of accounting
change............................ 1,014 -- 1,000 -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)................... (5,684) 6,056 10,832 9,175(1) 7,385(2) 2,249 413
-------- -------- -------- -------- -------- -------- --------
Preferred stock dividends........... 301 484 1,071 790 592 198 --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) applicable to
common shareholders............... $ (5,985) $ 5,572 $ 9,761 $ 8,385 $ 6,793 $ 2,051 $ 413
========= ========= ========= ========= ========= ========= =========
Primary earnings per share.......... $ (0.82) $ 0.79 $ 1.34 $ 1.07 $ 0.84 $ 0.26 $ 0.04
========= ========= ========= ========= ========= ========= =========
Fully diluted earnings per share.... $ (0.82) $ 0.79 $ 1.21 $ 1.03 $ 0.84 $ 0.25 $ 0.04
========= ========= ========= ========= ========= ========= =========
OTHER DATA:
EBITDA(3)........................... $ 1,601 $ 19,642 $ 27,347 $ 31,889 $ 33,415 $ 6,795 $ 4,702
Depreciation........................ 3,628 4,633 5,304 6,105 6,683 1,562 1,841
Amortization........................ 872 2,165 1,646 2,325 2,762 653 612
Capital expenditures................ 6,156 5,828 8,255 8,735 12,497 2,332 3,938
Ratio of earnings to fixed
charges(4)........................ (0.1)x 2.2x 3.4x 2.7x 2.4x 2.6x 1.3x
BALANCE SHEET DATA (END OF PERIOD):
Working capital..................... $ 49,073 $ 61,714 $ 87,029 $ 93,337 $105,543 $ 75,550 $108,033
Total assets........................ 137,918 151,178 203,233 224,676 256,451 209,971 253,939
Long-term debt...................... 34,995 40,299 56,805 58,400 80,258 39,700 76,416
Redeemable preferred stock.......... 5,000 10,100 10,000 10,000 -- 10,000 --
Common shareholders' equity......... 39,745 44,501 58,017 67,462 83,767 69,216 92,588
</TABLE>
44
<PAGE> 47
DELTEC
<TABLE>
<CAPTION>
NINE THREE MONTHS ENDED
YEAR ENDED MONTHS
DECEMBER 31, ENDED DECEMBER 31, YEAR ENDED
------------------ SEPT. 30, ------------------ DECEMBER 31,
1993 1994 1995 1994 1995 1995
------- ------- --------- ------- ------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Product revenues.......................... $60,446 $80,236 $72,665 $24,620 $40,366 $113,031
Service revenues.......................... 14,982 16,960 14,176 4,854 5,742 19,918
------- ------- --------- ------- ------- ------------
Total revenues.......................... 75,428 97,196 86,841 29,474 46,108 132,949
------- ------- --------- ------- ------- ------------
Gross profit.............................. 28,749 38,518 33,358 11,500 18,701 52,059
------- ------- --------- ------- ------- ------------
Income from operations.................... 4,189 6,049 3,802 2,779 6,223 10,025
------- ------- --------- ------- ------- ------------
Income before income taxes and cumulative
effect of change in accounting principle
for income taxes........................ 3,790 5,041 2,065 2,235 5,461 7,526
------- ------- --------- ------- ------- ------------
Income before cumulative effect of change
in accounting principle for income
taxes................................... 2,975 3,156 1,738 1,550 3,551 5,289
Cumulative effect of change in accounting
principle for income taxes.............. 1,509 -- -- -- -- --
------- ------- --------- ------- ------- ------------
Net income................................ $ 4,484 $ 3,156 $ 1,738 $ 1,550 $ 3,551 $ 5,289
======== ======== ======== ======== ======== ===========
OTHER DATA:
EBITDA(3)................................. $ 9,016 $12,332 $ 9,332 $ 4,698 $ 8,521 $ 17,853
Depreciation.............................. 1,358 1,690 1,511 530 503 2,014
Amortization.............................. 1,991 2,295 1,810 675 593 2,403
Capital expenditures...................... 1,456 1,634 1,663 570 739 2,402
Ratio of earnings to fixed charges(4)..... 3.4x 3.3x 1.7x 3.7x 6.2x 2.8x
BALANCE SHEET DATA (END OF PERIOD):
Working capital........................... $21,563 $26,336 $ 26,694 $ 30,235
Total assets.............................. 51,380 63,502 71,601 80,879
Long-term debt:
Fiskars or affiliates................... 7,506 32,572 30,704 36,643
Other................................... 475 685 1,237 1,193
Shareholders' equity(5)................... 25,031 5,042 6,240 3,310
</TABLE>
- ---------------
(1) Includes a one-time litigation charge of $4,997 ($2,936 after tax). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Litigation Expense,"
(2) Includes one-time merger, acquisition and litigation charges for Exide
Electronics of $7,700 ($5,597 after tax). See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations-- Litigation Expense" and "--Merger and Acquisition Expense."
(3) EBITDA represents income from operations plus depreciation and amortization,
and a non-recurring 1994 Exide Electronics litigation charge of $4,997 and
non-recurring 1995 Exide Electronics merger, acquisition and litigation
charges of $7,700 and Deltec royalty expense payable to Fiskars which is not
being charged after the Deltec Acquisition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Results of
Operations--Litigation Expenses" and "--Merger and Acquisition Expenses."
While EBITDA should not be construed as a substitute for income from
operations, net income and cash flows from operating activities in analyzing
operating performance, financial position and cash flows, EBITDA has been
included because it is commonly used by certain investors and analysts to
analyze and compare companies on the basis of operating performance,
leverage and liquidity and to determine a company's ability to service debt.
(4) In the computation of the ratio of earnings to fixed charges, earnings
consist of income before income taxes plus fixed charges minus the
undistributed earnings of Exide Electronics' 50%-owned subsidiary accounted
for by the equity method. Fixed charges consist of interest expense, which
includes amortization of deferred financing costs and one-third of rental
expenses, representing that portion of rental expenses attributable to
interest.
(5) Capitalization of Deltec Power Systems, Inc. on September 27, 1994
significantly impacted shareholders' equity. See Combined/Consolidated
Statements of Shareholders' Equity and Note 12 to the financial statements.
45
<PAGE> 48
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides an assessment of the consolidated results
of operations and liquidity and capital resources of the Company and Deltec and
should be read in conjunction with "Selected Historical Consolidated Financial
Data," with the Consolidated Financial Statements of the Company and the related
notes thereto and with the Combined and Consolidated Financial Statements of
Deltec and the related notes thereto included elsewhere in this Prospectus.
OVERVIEW
Over the past five years, the Company's product mix has shifted toward its
lower kVA product lines, which support personal computers, workstations,
client/server platforms, and networks and away from its traditional large
systems products. Sales of small systems products have increased significantly
for the past two fiscal years, while commercial sales of the Company's large
systems products have generally remained flat. This reflects the general
downsizing trend in the computer industry, which has resulted in declines in the
commercial mainframe computer and data center market segments.
Small UPS products are characterized generally by higher unit volumes,
lower average prices and higher unit margins than large UPS products, and are
sold through different distribution channels. The majority of the Company's UPS
products are sold to customers to support computers or similar electronics
products. The electronics market, and particularly the networking,
client/server, workstation, and personal computer markets supported by small UPS
products, is increasingly characterized by intense competition, rapidly changing
technology, and evolving industry standards, frequently resulting in shorter
product life cycles and declines in selling prices. The Company has responded
with reductions in manufacturing costs and purchased components, and has
aggressively introduced new hardware and software products with lower costs and
higher performance levels. The Company believes that its ability to compete
depends on both internal and external factors, including the success and timing
of new product introductions by the Company and its competitors, product
performance and price, distribution, and customer service.
International sales accounted for approximately 22%, 25%, and 31% of the
Company's total revenues for fiscal 1993, 1994, and 1995, respectively. The
Company has focused on these expanding markets by developing versions of its
products to meet international voltage and frequency requirements; by
establishing subsidiaries in selected European countries and in Hong Kong; by
adding distributors and making small acquisitions in other international
regions; and by creating joint ventures with strategic partners for distribution
in Japan, Brazil, and India.
Sales to the federal government accounted for approximately 35%, 33%, and
27% of total revenues for fiscal 1993, 1994, and 1995, respectively. Despite the
large proportion of sales to the federal government, these sales actually
declined by about 12% in fiscal 1995 versus fiscal 1994, reflecting the
scheduled decline in large systems sales due to the completion of most product
shipments under the multi-year FAA Program. While the work yet to be performed
under the FAA Program is scheduled through fiscal 1997, sales to the federal
government in fiscal 1996 are expected to decline by approximately 40-50%. The
Company's contracts with the federal government have no significant minimum
purchase commitments, and the government may cease purchases under these
contracts at any time for any reason. These contracts are subject to termination
at the convenience of the government pursuant to the terms of the contracts.
In June 1995, the Company was awarded a three-year follow-on contract to
the ALC Contract, with up to two additional one-year extensions at the option of
the government. Actual revenues under the follow-on ALC Contract will depend on
the specific purchases, if any, by the Air Force and other governmental agencies
that may use the contract during the contract period. Following the award of the
follow-on ALC Contract, certain competitors filed protests with the General
Accounting Office ("GAO"). In December 1995, the GAO notified the Company that
all of the protests had been dismissed, except the protest of the Air Force's
evaluation of certain discounts offered by the Company in the contract. The GAO
has recommended that the Air Force amend a portion of the request for proposal
that led to the contract award. The GAO further recommended that the Air Force
allow the protesting companies and the Company to submit new proposals
46
<PAGE> 49
regarding such portion, and that the Air Force re-evaluate the award to the
Company based upon these new proposals. In response to the notification, the
Company has filed a motion for reconsideration of the GAO's ruling. In response
to the GAO's ruling, the Air Force has notified the Company that it is in the
process of re-evaluating the follow-on ALC Contract and that it will not issue
orders under the contract pending its re-evaluation process. The Company is
unable to predict at this time what the resolution of the contract protest will
be and no assurances can be given that the Company ultimately will retain the
follow-on ALC Contract.
The Company completed the IPM Acquisition in February 1995. IPM is a
manufacturer of UPS products headquartered in Dallas, Texas with a similar
business in terms of products, services and channels of distribution. The
Company acquired all of the capital stock of IPM for approximately 1,510,000
newly registered shares of Common Stock. The IPM Acquisition was accounted for
as a pooling-of-interests. Accordingly, the Company's Consolidated Financial
Statements and the related notes thereto included in this Offering Memorandum
have been restated to reflect the IPM Acquisition for all periods presented.
In August 1995, the Company completed the Lectro Acquisition. Lectro
specializes in power protection and other transmission enhancement devices for
the cable television and telecommunications markets. While the results of Lectro
did not have a material effect on the Company's results of operations for fiscal
1995, the Company believes that the Lectro Acquisition gives the Company a
significant position in the broadband communications market, which the Company
intends to use as a platform to expand into other newly emerging high-growth
technology markets.
The Company acquired Deltec from Fiskars for a purchase price of
approximately $188.1 million, subject to post-closing adjustment. Under the
agreement, Fiskars received approximately $158.5 million in cash, 825,000 shares
of Common Stock, valued at $14.00 per share, and 1,000,000 shares of the Series
G Preferred Stock, valued at $18.00 per share, in exchange for all of the issued
and outstanding common stock of Deltec. At closing, the Company made a
prepayment of $3.0 million to Fiskars related to the variable purchase price
adjustment, which would have been $6.2 million based on Deltec's net book value
at December 31, 1995. An additional payment of $3.7 million was made to Fiskars,
which represented excess cash that remained in Deltec following the closing. The
Company expects the combination to strengthen the product line offerings of the
Company and enhance its global manufacturing, distribution and service
capabilities. See Note 16 of the Notes to consolidated financial statements.
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<PAGE> 50
RESULTS OF OPERATIONS
The Company's products and services and its product marketing,
manufacturing, and research and development functions are organized into three
business units: the Small Systems Group ("SSG") for all products below 50 kVA;
the Large Systems Group ("LSG") for products of 50 kVA and above; and the
Worldwide Services Group ("WSG") for all services provided by the Company. In
the fourth quarter of fiscal 1995, the Company announced the formation of the
Emerging Technologies Group ("ETG"). The Company formed this group to more
aggressively position itself in newly emerging high-growth technology markets.
Initially, ETG will focus primarily on the converging interactive communications
markets, such as cable television. ETG results have been included in SSG results
for fiscal 1995.
The following table presents, for the periods shown, statement of
operations data:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED QUARTER ENDED
SEPTEMBER 30, DECEMBER 31,
---------------------------- ---------------
1993 1994 1995 1994 1995
------ ------ ------ ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Revenues
Small Systems Products........................ $ 89.1 $115.2 $148.1 $33.1 $37.9
Large Systems Products........................ 131.0 144.2 123.4 30.8 19.7
------ ------ ------ ----- -----
Total Products............................. 220.1 259.4 271.5 63.9 57.6
Services...................................... 97.8 104.6 119.5 28.2 25.7
------ ------ ------ ----- -----
Total Revenues............................. 317.9 364.0 391.0 92.1 83.3
Gross Profit
Products...................................... 54.4 65.8 66.8 14.8 15.2
Services...................................... 31.1 32.9 37.1 8.9 7.0
------ ------ ------ ----- -----
Total Gross Profit......................... 85.5 98.7 103.9 23.7 22.2
Selling, general and administrative expense..... 55.5 65.1 70.0 16.6 17.5
Research and development expense................ 9.6 10.1 9.9 2.5 2.5
Litigation expense.............................. -- 5.0 0.7 -- --
Merger and acquisition expense.................. -- -- 7.0 -- --
------ ------ ------ ----- -----
Income from operations..................... 20.4 18.5 16.3 4.6 2.2
Interest/Other.................................. 4.4 5.0 4.2 1.1 1.6
Provision for income taxes...................... 6.2 4.3 4.7 1.2 0.2
------ ------ ------ ----- -----
Income before the cumulative effect of
accounting change........................ $ 9.8 $ 9.2 $ 7.4 $ 2.3 $ 0.4
====== ====== ====== ===== =====
REVENUE GROWTH:
Small Systems Products.......................... -- 29.3% 28.6% -- 14.5%
Large Systems Products.......................... -- 10.1 (14.4) -- (36.0)
Total Products............................. -- 17.8 4.7 -- (9.8)
Services........................................ -- 6.9 14.3 -- (9.0)
Total Revenues............................. -- 14.5 7.4 -- (9.5)
MARGIN DATA:
Gross Profit
Products...................................... 24.7% 25.4% 24.6% 23.2% 26.3%
Services...................................... 31.8 31.4 31.0 31.4 27.5
Total Gross Profit......................... 26.9 27.1 26.6 25.7 26.7
Selling, general and administrative expense..... 17.5 17.9 17.9 18.0 21.0
Research and development expense................ 3.0 2.8 2.5 2.8 3.0
Income from operations..................... 6.4 5.1 4.2 5.0 2.7
Income before the cumulative effect of
accounting change........................ 3.1 2.5 1.9 2.4 0.5
</TABLE>
48
<PAGE> 51
FIRST QUARTER FISCAL 1996 VERSUS FIRST QUARTER 1995
Several factors had an impact on the Company's results of operations during
the first quarter of fiscal 1996 compared to the first quarter of fiscal 1995,
including the growth in revenues of small UPS products; the overall strong
growth in international sales; the effect of scheduled declines in federal
government product and service revenues; and the Lectro Acquisition.
Revenues
Total revenues decreased by 9.5% to $83.3 million in the first quarter of
fiscal 1996 from $92.1 million in the first quarter of fiscal 1995, due to a
9.8% decrease in product sales and a 9.0% decrease in service revenues.
SSG revenues for the quarter ended December 31, 1995 increased by $4.8
million or 14.5% over the same period of the prior year. The majority of this
increase was in domestic sales channels, which experienced growth of about 36%,
a portion of which was attributable to the Lectro Acquisition. Excluding sales
related to this acquisition, domestic sales increased by approximately 15% over
the prior year. International sales for the quarter were down by about 2% over
the same period of the prior year, reflecting a decline in sales in the Latin
America sales channel of about 41% versus the prior year, offset by strong sales
by the Company's affiliates in Europe. Sales to Latin America were affected by
the devaluation of the Mexican peso in 1995, as well as general economic
instability in that region. Excluding sales to Latin America, international
sales increased by approximately 17% in the first quarter of fiscal 1996 versus
the same quarter in fiscal 1995. Average selling prices for SSG products were
higher than in the prior year, as sales of the larger kVA models, which are
generally higher priced than the small UPS models, represented a larger share of
total SSG revenues.
LSG revenues for the first quarter of fiscal 1996 were 36% lower than in
the same period of fiscal 1995, due primarily to the scheduled decline in sales
under the FAA Program. Product revenues under the FAA Program have been
declining because the Company has completed the shipment of most of the systems
and related ancillary products to the various FAA sites. The Company expects LSG
revenues to decline in fiscal 1996 from fiscal 1995 levels in the range of
15-20% due to the completion of the FAA shipments. Excluding the effect of this
scheduled decline, LSG revenues decreased approximately 7% for the first three
months of fiscal 1996 versus the same period a year ago. The number of LSG UPS
systems sold increased by about 4% compared to the same period in the prior
quarter. The average sales price per system decreased, as sales of the smaller
kVA models continue to represent a larger percentage of total LSG revenues.
International revenues were down by 3%, primarily due to a decline in sales in
the Far East sales channels and the IPM international channels, partially offset
by an increase in sales by the Company's European subsidiaries. The increase in
sales in the European subsidiaries is partially attributable to the success of
the Powerware Plus 80, which is suitable for international use because of its
voltage range.
WSG revenues for the first quarter of fiscal 1996 decreased by $2.5 million
or 9.0% over the same period of the prior fiscal year. WSG's commercial domestic
revenues fell by about 4%, attributable in part to reduced productivity within
the International Parts and Repair Center due to its relocation to a new
facility. International revenues were up about 6%, with growth occurring in most
categories. Federal service revenues decreased over the prior year by
approximately 19%, mainly attributable to a decline in FAA site service
revenues. Federal service revenues were further impacted by government budget
problems and inclement weather that affected the timing of installation
services. The Company expects WSG revenues to decline in the range of 10-15% for
fiscal 1996, due to an anticipated decrease in FAA site service revenues. At
December 31, 1995, the Company was installing systems at eight FAA sites, versus
ten sites in the prior year, and was providing design services at an additional
four sites at December 31, 1995 versus 12 sites at December 31, 1994. As
described below under "--Contingencies--Government Contract Matters," delivery
on the remainder of the FAA orders is currently scheduled through fiscal 1997.
The level of FAA site service revenues will vary depending on site construction
schedules and the types of services required.
Gross Profit
Gross profit decreased by $1.5 million over the first quarter of fiscal
1995 to $22.2 million. Gross profit as a percentage of total revenues increased
to 26.7% in the first three months of fiscal 1996 from 25.7% in the
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<PAGE> 52
same period of fiscal 1995. Product gross profit margins rose to 26.3% in the
first quarter of fiscal 1996 from 23.2% in the same period of fiscal 1995, while
service margins declined to 27.5% from 31.4% during that same period. Product
gross profit margins rose due to a higher proportion of sales in the newer,
higher margin Powerware Prestige product line and Powerware Plus 80-225 kVA
product. A higher proportion of SSG sales in higher kVA models, which generally
have better margins than the lower kVA models, also contributed to the increase
in product gross profit margins. Service margins decreased for the quarter
primarily due to a decrease in federal margins as higher-margin federal services
relating to training, documentation and start-up services represented a lower
proportion of total federal revenues. Commercial service margins declined
slightly, primarily due to a change in the mix of services provided.
Selling, General and Administrative Expense
Selling, general and administrative expense increased $0.9 million to $17.5
million in the first quarter of fiscal 1996 (21.0% of revenues) from $16.6
million in the same period of fiscal 1995 (18.0% of revenues). Selling and
marketing expenses increased due to investment in the Company's Emerging
Technology Group, which was established after the Lectro Acquisition, in the
fourth quarter of fiscal 1995, the launching of a new international advertising
campaign, and higher commissions and incentives. Total commissions and
incentives spending, and such costs as a percentage of sales, rose in the first
quarter of fiscal 1996 versus 1995 due to a higher mix of commercial revenues to
total revenues in the first quarter of 1996 over the same period in 1995.
General and administrative expenses rose from the prior year due primarily to
the amortization of goodwill generated by the Lectro Acquisition and to
increased spending for improved financial systems as the Company continues to
invest in infrastructure improvements. These expenses are expected to continue
at this higher level (as a percent of revenues) in 1996 due to the newly-formed
Emerging Technology Group and continued sales and marketing initiatives.
Research and Development Expense
Research and development expense decreased slightly in the first quarter of
fiscal 1996 compared to the same period of fiscal 1995, but increased slightly
as a percentage of revenue to 3.0% in fiscal 1996 from 2.8% in fiscal 1995. The
increase in research and development expense as a percentage of sales occurred
as the Company invested in its newly-formed Emerging Technologies Group. In
addition, the level of LSG research and development expenditures increased
slightly while the level of sales declined for the first quarter of fiscal 1996
as compared to the same period of the prior year. Research and development
expenses are incurred to support projected annual sales and do not necessarily
vary proportionately with revenues on a quarterly basis. The Company expects
research and development expenditures for the remainder of the year to decline
slightly as a percentage of sales.
Income from Operations
For the reasons discussed above, income from operations declined $2.4
million to $2.2 million for the first quarter of fiscal 1996 from $4.6 in the
same period of fiscal 1995. As a percentage of revenues, income from operations
declined to 2.7% in the first three months of fiscal 1996 from 5.0% in the same
period of fiscal 1995.
Interest/Other Expense
Interest expense increased slightly to $1.5 million in the first quarter of
fiscal 1996 from $1.4 million in the same period of fiscal 1995. This was
primarily attributable to an increase in debt levels used to fund inventory
levels.
Provision for Income Taxes
The fiscal 1996 provision for first quarter income taxes reflects a
consolidated effective rate of approximately 38% as compared to approximately
35% for the same period of fiscal 1995. The fiscal 1995 rate for the first
quarter was lower due to a lower effective tax rate for the Company's IPM
subsidiary. The Company anticipates that its effective tax rate for the fiscal
year 1996 will be in the range of 38-40%.
50
<PAGE> 53
Net Income
Net income for the first quarter of fiscal 1996 was $0.4 million, or $0.04
per fully diluted share, as compared to net income of $2.2 million, or $0.25 per
fully diluted share, for the same period of fiscal 1995.
Quarterly Operating Results
The Company's quarterly operating results have fluctuated significantly.
Quarterly results depend upon the timing of product shipments and major systems
implementation services, which can be influenced by a number of factors. Some of
these factors are beyond the Company's control, particularly for large,
customized systems. The first quarter has typically produced the smallest
portion of the Company's revenues and income, producing a historical reduction
in the Company's first quarter results as compared to the previous fiscal year's
fourth quarter. During fiscal years 1995, 1994 and 1993, revenues generally
increased for each quarter within the applicable year, but revenues for the
first quarter were lower than revenues for the fourth quarter of the prior year.
Selling, general and administrative, and research and development
expenditures are incurred to support projected annual sales. These expenses do
not necessarily vary proportionately with revenues on a quarterly basis. As a
result, variations in quarterly revenues may not be accompanied by an equivalent
change in expenses. Operating margins therefore may vary significantly between
quarters.
FISCAL 1995 VERSUS 1994
Revenues
Total revenues increased by 7.4% to $391.0 million in fiscal 1995 from
$364.0 million in fiscal 1994 due to a 4.7% increase in product sales and a
14.3% increase in service revenues.
SSG revenues for fiscal 1995 increased by $32.9 million or 28.6% over the
prior fiscal year. The majority of this increase was in international sales
channels, which experienced growth in excess of 40%. This growth was primarily
the result of strong sales by the Company's affiliates in Europe and Canada and
increased product sales to the Company's joint venture in Japan. Domestic
revenues were approximately 13% higher than in the prior year. Excluding SSG
sales generated by Lectro, domestic revenues increased by about 7% over fiscal
1994. Growth in SSG product revenues resulted primarily from continued strong
sales of Powerware Prestige products. Prestige sales were approximately $42.1
million higher than in the prior year, while products being phased out declined
by about $24.2 million, for a net increase of $17.9 million. In fiscal 1995, the
Prestige product line was expanded with the addition of new models, introduction
of additional accessories, and incorporation of new versions of software and
network communications products. The number of SSG units sold increased by
approximately 30% as compared to fiscal 1994. Average selling prices were
slightly lower than in the prior year, reflecting the industry trend of
declining UPS prices.
LSG revenues for fiscal 1995 were $20.8 million or 14.4% lower than in
fiscal 1994, due primarily to the scheduled decline in sales under the FAA
Program. Product revenues under the FAA Program have been declining because the
Company has completed the shipment of most of the systems and related ancillary
products to the various FAA sites. Excluding the effect of this predicted
decline, LSG revenues decreased 3.7% year over year, due primarily to the
nonrecurrence of one significant custom job in excess of $6.0 million for a
major data center in fiscal 1994. International revenues were flat, primarily
due to an increase in sales by the Company's European subsidiaries, offset by a
decline in sales by the Company's Canadian subsidiary. The number of LSG UPS
systems sold increased by about 6% compared to the same period in the prior
year. The average sales price per system decreased, as sales of the smaller kVA
models, which are generally lower-priced than the larger kVA models, represented
a larger percentage of total LSG revenues than in the prior year.
WSG revenues for fiscal 1995 increased by $14.9 million or 14.3% over the
prior fiscal year. WSG's commercial domestic revenues grew by about 9%, with
strong growth occurring in most service categories. International revenues were
up approximately 47%, which was primarily attributable to the three sales and
service acquisitions in the fourth quarter of fiscal 1994 in Canada and Europe.
Federal service revenues increased over the prior year by approximately 13%,
mainly attributable to growth in the Company's federal
51
<PAGE> 54
site implementation business. During fiscal 1995, the Company installed systems
at an average of 11 FAA sites throughout the year versus an average of ten FAA
sites in fiscal 1994. At September 30, 1995, the Company was installing systems
at nine FAA sites and was providing design services at an additional four sites.
Delivery on the remainder of the FAA orders is currently scheduled through
fiscal 1997. See "--Contingencies--Government Contract Matters." WSG revenue
increases in fiscal 1995 resulted principally from a higher quantity of services
provided as opposed to increased prices.
The Company expects that the declines in LSG and WSG revenues in fiscal
1996 versus fiscal 1995 resulting from the scheduled decline in federal revenues
will be offset by a corresponding increase in SSG sales and commercial LSG sales
and service. However, annual revenues depend upon the state of the overall
economy, industry conditions, the competitive environment, the timing of product
shipments, the success and timing of new product introductions, and a variety of
other factors which are beyond the Company's control. See "Risk
Factors--Competition."
Gross Profit
Gross profit increased to $103.9 million in fiscal 1995 from $98.7 in
fiscal 1994. Gross profit as a percentage of total revenues decreased slightly
to 26.6% in fiscal 1995 from 27.1% in fiscal 1994. Product gross profit margins
declined from 25.4% in fiscal 1994 to 24.6% in fiscal 1995, while service
margins declined from 31.4% to 31.0% during that same period. Product gross
profit margins declined from the prior year mainly as a result of sales of
certain discontinued SSG product lines at lower than normal margins, and a
higher proportion of sales in channels with lower margins. The Company also
incurred higher than normal costs related to increased production volumes for
its new Powerware Prestige product lines, and varying sales price reductions
depending upon model and distribution channel. The Company continues its efforts
toward cost reductions and operational efficiencies to maintain competitiveness
and improve margins in response to the industry trend of declining UPS prices.
Service margins decreased slightly as compared to the prior fiscal year,
reflecting a higher proportion of lower margin government service revenues and
the costs of integrating IPM's service business into the Company's service
organization.
Selling, General and Administrative Expense
Selling, general and administrative expense increased to $70.0 million in
fiscal 1995 from $65.1 million in fiscal 1994, but remained at about 18% percent
of revenues. Selling and marketing expenses rose to support the Company's higher
commercial sales level and the continued expansion of its worldwide marketing,
distribution, and support capabilities, especially in international markets. New
selling and marketing programs for fiscal 1995 included the realignment of the
North American sales and support operation along customer groups, the launching
of an integrated marketing campaign introducing the concept of Strategic Power
Management, and the opening of an area sales office in Miami, Florida to service
high growth markets in Latin America. General and administrative expense
declined from the prior year due primarily to lower legal expenses as a result
of the settlement of certain litigation and synergies achieved between Exide
Electronics and IPM.
Research and Development Expense
Research and development expense decreased to $9.9 million in fiscal 1995
from $10.1 million in fiscal 1994, and decreased as a percentage of revenues to
2.5% in fiscal 1995 from 2.8% in fiscal 1994. The decrease was related to a
variety of factors, including the ability of the Company to charge certain
custom engineering costs to specific job orders in SSG, cost control efforts by
the Company, and lower research and development expenses at IPM, as significant
expenses were incurred in fiscal 1994 in the development of a new product line
that were not incurred in fiscal 1995. The Company expects research and
development expenditures to remain at this level as a percentage of revenues as
the Company takes advantage of synergies with IPM and Lectro in the development
of new products.
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<PAGE> 55
Litigation Expense
The Company recorded a $700,000 charge ($424,000 after tax) for the
settlement of two related lawsuits in fiscal 1995. Although the Company believed
that neither suit had merit, it decided to settle as the suits were consuming
significant corporate resources and would have involved substantial legal costs
to pursue further. In fiscal 1994, the Company recorded a charge of $5.0 million
($2.9 million net of tax) for the settlement of litigation. See "Business--Legal
Proceedings" and Note 15 of the Notes to consolidated financial statements.
Merger and Acquisition Expense
The Company incurred $7.0 million of merger and acquisition charges ($5.2
million after tax) in fiscal 1995. In connection with the IPM Acquisition in the
second quarter of fiscal 1995, the Company recorded a nonrecurring pretax charge
of $5.5 million. This charge included approximately $3.0 million for legal,
accounting, financial advisory, and other costs related to the merger. The
Company also expensed approximately $2.5 million for the estimated costs of
closing a duplicate operating facility and discontinuing certain duplicate
product lines manufactured at that facility. In the fourth quarter of fiscal
1995, the Company recorded a pre-tax charge for acquisition expenses of about
$1.5 million after negotiations and due diligence efforts to acquire the UPS
business of Groupe Schneider S.A. were terminated.
Income from Operations
For the reasons discussed above, income from operations declined $2.2
million to $16.3 million in fiscal 1995 from $18.5 million in fiscal 1994. This
decrease reflects the nonrecurring litigation and merger and acquisition
expenses discussed above. Excluding these charges, income from operations in
fiscal 1995 would have been $24.0 million, an increase of $500,000 from $23.5
million in fiscal 1994, and, as a percentage of revenues, would have been 6.1%
in fiscal 1995 versus 6.4% in fiscal 1994. This decrease was primarily
attributable to the decrease in gross profit margins. See "--Gross Profit."
Interest/Other Expense
Interest expense increased to $5.6 million in fiscal 1995 from $5.4 million
in fiscal 1994. The Company expensed $233,000 of remaining debt issuance costs
and a premium related to the redemption of its Industrial Revenue Bonds ("IRBs")
in the first quarter of fiscal 1995, and incurred $204,000 in incremental
interest expenses related to the increased level of borrowings used to finance
the Lectro Acquisition. Excluding these two items, interest expense would have
been about 5% lower than in fiscal 1994. Other income increased by approximately
$971,000. The increase was primarily due to favorable changes in foreign
exchange rates, improved results for the Company's Japanese joint venture, an
increase in royalty income, and a gain on the sale of certain fixed assets in
fiscal 1995.
Provision for Income Taxes
The fiscal 1995 provision for income taxes reflects a consolidated
effective rate of approximately 39% as compared to approximately 32% in fiscal
1994. The higher rate in fiscal 1995 was due primarily to certain non-deductible
acquisition costs, which were partially offset by increased utilization of net
operating losses in certain of the Company's subsidiaries. The fiscal 1994 rate
was lower than usual due to the higher recognition of tax benefits for net
operating losses as certain of the Company's subsidiaries turned profitable, and
the utilization of certain state tax credits.
Net Income
Net income for fiscal 1995 was $7.4 million, or $0.84 per fully diluted
share, as compared to net income of $9.2 million, or $1.03 per fully diluted
share, for fiscal 1994. Excluding the previously discussed litigation and merger
charges in the second quarter of fiscal 1995 and 1994, and the acquisition
charges in the fourth quarter of fiscal 1995, net income would have been $13.0
million or $1.42 per fully diluted share for fiscal 1995, and $12.1 million or
$1.34 per fully diluted share in fiscal 1994.
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<PAGE> 56
FISCAL 1994 VERSUS 1993
Revenues
Total revenues increased 14.5% to $364.0 million in fiscal 1994 from $317.9
million in fiscal 1993. Product sales grew by 17.8% to $259.4 million in fiscal
1994, including increases of $26.1 million (29.3%) for the Company's SSG
products and $13.2 million (10.1%) for the Company's LSG products. Service
revenues increased by $6.8 million (6.9%) over this period.
The revenue growth in SSG products occurred primarily in the Company's
international distribution channels, with particularly strong growth in export
sales to Latin America. In the United States, most of the sales growth was
experienced through the manufacturer's representatives channel. The majority of
the growth in SSG revenue was attributable to new product introductions and to
increased sales of an existing product line, as new applications and methods of
distribution were established. The growth in international export sales was due
primarily to the success of product models designed for the international
markets and to expanded international marketing efforts. SSG revenue included
approximately $16.0 million in sales of new products, which were partially
offset by declines of $7.8 million in sales of discontinued products. For fiscal
1994, total unit sales for SSG were approximately 50% higher than the prior
fiscal year, resulting mainly from higher unit sales of lower kVA models. Higher
unit sales were partially offset by a decrease in the average selling price per
unit, as lower kVA models are generally lower-priced than larger UPS products,
and also by price reductions in the approximate range of 5-10% from the prior
fiscal year.
LSG revenues increased by $13.2 million to $144.2 million in fiscal 1994
from $131.0 million in fiscal 1993 due to growth in both the commercial and
government markets. Commercial growth occurred primarily in the manufacturer's
representatives channel due primarily to one significant custom job in excess of
$6.0 million for a major data center, and from increased sales of facilities
monitoring software. Federal government sales growth came from an increase in
product engineering for the FAA and sales under the Company's multi-year
contracts with the U.S. Navy. The commercial and government revenue increases
were partially offset by declines in the international channels. The reduction
in international sales was due to the non-recurrence of certain large sales in
the prior year and to increased competition in certain regions. The total number
of LSG modules sold decreased moderately from fiscal 1993, but the average sales
price per system increased in fiscal 1994, primarily due to favorable model mix
and increased sales of custom engineering, ancillary equipment, and spare parts.
The $6.8 million increase in WSG revenues for fiscal 1994 occurred
primarily from increases in maintenance contract and other field service
revenues. This growth resulted from increased marketing of battery services and
from increased product sales with accompanying services. This growth occurred
both domestically and internationally. Federal service revenues remained
relatively constant with fiscal 1993 levels, although fiscal 1993 total service
revenues were 62% higher than in fiscal 1992, primarily because of the
significant increase in fiscal 1993 of FAA site services. As of September 30,
1994, the Company was installing systems at ten FAA sites and had 13 sites in
the engineering design stage, as compared to ten sites in construction and 15
sites in engineering design at September 30, 1993. WSG revenue increases
resulted principally from a higher quantity of services provided as opposed to
increases in pricing.
Gross Profit
Gross profit increased to $98.7 million in fiscal 1994 from $85.5 million
in fiscal 1993. Gross profit as a percentage of total revenues increased
slightly to 27.1% in fiscal 1994 from 26.9% in fiscal 1993. Gross profit from
product sales was higher by $11.4 million, as a result of higher revenues and
improved gross profit margins for product sales, which increased to 25.4% in
fiscal 1994 as compared to 24.7% in fiscal 1993. This improvement occurred
primarily from increased sales of SSG products, which generally have higher
gross profit margins than LSG products, and continued cost reduction efforts.
These increases were partially offset by higher LSG ancillary equipment sales,
which generally have lower margins than UPS equipment, sales of certain
discontinued SSG product lines at lower than normal margins, and start-up costs
for the new Powerware Prestige product line. Prices for all power ranges of UPS
equipment have generally declined from the prior fiscal year in the approximate
range of 5-10%. Service margins decreased slightly to 31.4% in fiscal
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1994 from 31.8% in fiscal 1993, due principally to increased battery services
which have lower gross margins, a decrease in margins on systems implementation
services for the FAA, and a decrease in international service margins due to
changes in the mix of services provided.
Selling, General and Administrative Expense
Selling, general and administrative expense increased to $65.1 million in
fiscal 1994 from $55.5 million in fiscal 1993, and increased as a percentage of
revenue to 17.9% in fiscal 1994 from 17.5% in fiscal 1993. Selling and marketing
expense accounted for most of this increase. The higher level of spending
reflects the Company's growth strategy of investing in its distribution channels
and promotional activities to improve its market position on a worldwide basis.
The increase in selling and marketing expense supports a higher level of
commercial sales volume and the continued investment in market support and
distribution development programs, particularly for the Company's SSG products.
These programs included the launch of new promotional campaigns, primarily in
the United States, Latin America, China and Europe; expanded customer support
capabilities; participation in several major trade shows; and the introduction
of several new products such as the Powerware Prestige. The Company also
improved its distribution capacity worldwide, mainly through the addition of
several leading distributors in various geographic markets.
Research and Development Expense
Research and development expense increased to $10.1 million in fiscal 1994
from $9.6 million in fiscal 1993, and decreased as a percentage of revenue to
2.8% in fiscal 1994 from 3.0% in fiscal 1993. The increase was due primarily to
the ongoing development of facilities monitoring software as a result of the
acquisition of DataTrax Systems Corporation in fiscal 1993, and to the
introduction of several models of the new Powerware Prestige and Balanced Power
II product lines. Consistent with the Company's strategy to expand its worldwide
market position, many of the Prestige products were developed for international
voltages and frequencies prior to their introduction in the United States. Other
research and development activities in fiscal 1994 included the development of
the new Powerware Plus 80 and the Series 3000M for LSG, both of which have
improved performance at a lower cost than previous models, and to the ongoing
development of other products and models, as well as additional product software
and other product enhancements.
Litigation Expense
In March 1994, a trial jury awarded damages payable by the Company in the
amount of $3.75 million to the plaintiff in the retrial of certain litigation.
While the Company continued to believe that it should have no liability in this
matter and announced its intention to appeal, it recorded a one-time charge in
the second quarter of fiscal 1994 of approximately $5.0 million, or $2.9 million
net of tax, for the jury verdict and the costs of the trial. In July 1994, the
Company announced that a settlement agreement had been reached between the
parties. Following agreement among the parties to settle, the court vacated the
jury award of $3.75 million. To avoid further litigation, including anticipated
post-trial motions and appeals, the Company settled the case by making payments
to the plaintiff and his attorneys. Since the total value of the settlement
payments was less than the one-time charge for the jury verdict, no further
charges were necessary in this matter. See "Business--Legal Proceedings" and
Note 15 of the Notes to consolidated financial statements.
Income from Operations
For the reason discussed above, income from operations was $18.5 million in
fiscal 1994, a decrease from $20.4 million in fiscal 1993. This decrease
reflected the litigation charge discussed above. Excluding this nonrecurring
charge, income from operations would have been $23.5 million, an increase of
$3.1 million over 1993, constant at 6.4% of revenues.
Interest/Other Expense
Interest expense increased by $1.0 million to $5.4 million in fiscal 1994
from $4.4 million in the prior year. Approximately $700,000 was due to higher
average debt balances used to finance increased levels of
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working capital. The remainder of the rise in interest expense was related to an
increase in the average interest rate, the write-off of certain deferred
financing costs associated with refinancing the Company's credit facility, and
the partial prepayment of the Company's IRBs. Other expense improved by
approximately $322,000 during fiscal 1994, primarily as a result of favorable
changes in foreign exchange rates and the loss on disposal of certain fixed
assets in fiscal 1993.
Provision for Income Taxes
The fiscal 1994 provision for income taxes reflected a consolidated
effective tax rate of approximately 32% as compared to 39% in fiscal 1993. The
decrease in the effective rate was due primarily to the higher recognition of
tax benefits for net operating losses in fiscal 1994 than in fiscal 1993 as
certain of the Company's subsidiaries became profitable, and the utilization of
certain state tax credits in fiscal 1994.
Net Income
For fiscal 1994, income before the cumulative effect of an accounting
change was $9.2 million, including the one-time charge in the second quarter of
$5.0 million ($2.9 million after tax) for the previously discussed settlement of
litigation, as compared to income before the cumulative effect of an accounting
change of $9.8 million in fiscal 1993. The Company recorded a cumulative effect
adjustment of $1.0 million for a change in its method of accounting for income
taxes in fiscal 1993, which had no impact on operating results or cash flows.
Fully diluted earnings per share before the cumulative effect of the accounting
change were $1.03 for fiscal 1994 versus $1.10 in fiscal 1993. Excluding the
one-time charge for litigation in fiscal 1994 and the cumulative effect of the
accounting change in fiscal 1993, net income for fiscal 1994 would have been
$12.1 million, up $2.3 million or 23.5% from the prior fiscal year. Fully
diluted earnings per share would have been $1.34 versus $1.10 a year ago, up
22%.
DELTEC -- 1995 VERSUS 1994
Revenues
Revenues increased by $35.7 million, or 36.8%, to $132.9 million in 1995
from $97.2 million in 1994. The increase in revenues includes an increase of
$13.8 million, or 33.8%, in international revenues and an increase of $22.0
million, or 38.9%, in domestic revenues.
The increase in international revenues was partially attributable to the
growth in sales of low-kVA rated small systems introduced in Europe as well as
increases in product sales in China and Latin America. The increase in domestic
revenues was primarily attributable to revenues from small systems products
introduced in 1994 as well as a full year of sales from small systems products
introduced in 1993. These new product introductions were primarily off-line
small systems products designed for network systems and sold through the OEM
channel. Revenue increases were partially offset by reduced large system sales
resulting from Deltec's decision not to continue marketing large system products
in the United States.
Deltec's service revenues increased by $3.0 million, or 17.4%, to $19.9
million in 1995 from 1994. International and domestic service revenues each grew
at approximately the same rate of growth. International service revenues
increased primarily as a result of increased sales of service contracts bundled
with sales of large systems products. Domestic service revenues increased due to
an increased number of contracts to service UPS products manufactured by other
vendors.
Gross Profit
Gross profit increased by $13.6 million to $52.1 million in 1995 from $38.5
million in 1994. As a percent of sales, gross profit declined slightly to 39.2%
in 1995 from 39.6% in 1994. This decline in gross profit margin was due to a
decline in product gross margins, partially offset by an increase in service
gross margins. Product gross margins declined to 36.4% in 1995 from 37.2% in
1994 primarily due to an increase in sales of small systems products sold
through the distribution sales channel in Europe, which have lower margins.
Product gross margins were also adversely affected by delays in the introduction
and higher than expected introduction
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costs of, new products for the mid-power range of small system segment. Service
gross margin improved to 55.0% from 50.9% as a result of improved efficiency
within the field service group supporting increased service revenues.
Selling, General and Administrative Expense
Selling, general and administrative expense increased to $33.6 million in
1995 from $26.0 million in 1994 but declined as a percent of sales to 25.3% from
26.8% over that time period. The increase in spending reflects Deltec's strategy
to emphasize small system sales through increased utilization of national
distribution channels. Deltec also increased the size of its direct sales force
and enhanced internal direct sales support services. The decrease as a
percentage of sales was due to increased sales over a relatively fixed cost
base.
Engineering Expense
Engineering expense, which includes research and development expense,
increased $0.8 million to $5.0 million in 1995 from $4.2 million in 1994 while
declining as a percent of sales to 3.7% in 1995 from 4.3% in 1994. This decrease
as a percent of sales was due to higher sales over a relatively fixed cost base.
Royalty Expenses
Royalty expense increased $1.1 million to $3.4 million in 1995 from $2.3
million in 1994. As a percent of sales, royalty expense increased slightly to
2.6% in 1995 from 2.4% in 1994. This increase is the result of increased sales
of products under a royalty agreement under which Deltec paid an affiliate of
Fiskars a royalty for products sold under Fiskars-owned trademarks. Exide has
the royalty-free use of these Fiskars-owned trademarks for two years following
the Deltec Acquisition at which time Exide Electronics will have the option of
continuing to use these trademarks by resuming royalty payments.
Interest Expense
Net interest expense increased $1.5 million to $2.5 million in 1995 from
$1.0 million in 1994 due to borrowings incurred to finance increased levels of
working capital resulting from increased sales. In addition, Deltec paid a
dividend of $5.0 million to Fiskars in the fourth quarter of 1994, which was
paid in the form of a long-term note to Fiskars. The majority of Deltec's
interest expense was related to debt to Fiskars, which was converted to equity
upon the consummation of the Deltec Acquisition.
Provisions for Income Taxes
The effective income tax rate for 1995 was 29.7% for 1995 which was lower
than the effective rate of 37.4% for 1994. The difference in the 1995 effective
rate from the statutory federal rate of 35% was primarily due to lower foreign
effective tax rates. See Note 9 of the Notes to the Deltec Power Systems, Inc.
combined/consolidated financial statements.
DELTEC -- 1994 VERSUS 1993
Revenues
Revenues increased by $21.8 million, or 28.9%, to $97.2 million in 1994
from $75.4 million in 1993. The increase in revenues included increases of $8.7
million, or 21.7%, in international product revenues and $13.1 million, or
30.2%, in domestic product revenues.
The increase in international product revenues was primarily attributable
to increased European sales resulting from improved economic conditions in
certain European countries, the introduction of new low-kVA small systems
products in Europe and Deltec's entry into China. The increase in domestic
revenues was primarily attributable to small system product introductions and to
increased revenues in the OEM channel. The growth in the OEM channel was
primarily attributable to increased penetration of existing accounts and, to a
lesser extent, new OEM accounts.
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Deltec's service revenues increased by $2.0 million, or 13.2%, to $17.0
million in 1994. The increase in service revenues was primarily attributable to
growth in maintenance contracts sold, which are generally bundled with new
product sales and increased contracts to service UPS products manufactured by
other vendors.
Gross Profit
Gross profit increased to $38.5 million in 1994 from $28.7 million in 1993.
Gross profit as a percentage of sales increased to 39.6% in 1994 from 38.1% in
1993. The improvement in gross profit margin was primarily due to the
improvement in product gross margins, which increased to 37.2% in 1994 from
35.1% in 1993, primarily as a result of the increased sales from the
introduction of new, higher margin, small systems products. Additional
improvement resulted from the introduction of new, higher margin large systems
products, which replaced existing large system products in the international
market. Service gross profit increased slightly to 50.9% in 1994 from 50.3% in
1993.
Selling, General and Administrative Expense
Selling, general and administrative expense increased to $26.0 million in
fiscal 1994 from $20.0 million in fiscal 1993, and increased as a percent of
sales to 26.8% in fiscal 1994 from 26.5% in fiscal 1993. This increased spending
reflects Deltec's increased investment in the national direct sales channel,
including the increase in the size of the national direct sales force and its
telemarketing support group as well as increased marketing and promotional
expense for small systems products.
Engineering Expense
Engineering expense, which includes research and development expense,
increased $1.1 million to $4.2 million in 1994 from $3.1 million in 1993. As a
percent of sales, engineering expense increased to 4.3% in 1994 from 4.1% in
1993. This increase was primarily the result of the acquisition and integration
of the software development team of Network Security Systems, Inc. ("NSSI") into
Deltec's research and development group.
Royalty Expenses
Royalty expense increased to $2.3 million in 1994 from $1.5 million in
1993. As a percent of sales, royalty expense increased to 2.4% in 1994 from 2.0%
in 1993. This increase was a result of increased sales of products under a
royalty agreement that paid an affiliate of Fiskars a royalty for product sold
under Fiskars-owned trademarks. Exide Electronics has the royalty-free use of
these Fiskars-owned trademarks for two years following the Deltec Acquisition
after which Exide Electronics will have the option of continuing to use these
trademarks by resuming royalty payments.
Interest Expense
Net interest expense increased to $1.0 million in 1994 from $0.4 million in
1993. This increase was the result of increased levels of debt related to the
acquisition of NSSI in 1994 and to a $5.0 million dividend paid to Fiskars
during the fourth quarter of 1994, which was paid in the form of a long-term
note to Fiskars. The majority of Deltec's interest expense was related to debt
to Fiskars, which was converted to equity upon the consummation of the Deltec
Acquisition.
Provision for Income Taxes
The effective income tax rate for 1994 was 37.4% which was higher than the
1993 rate of 21.5%. The 1994 effective rate differed only slightly from the
statutory federal rate of 35.0%. See Note 9 of the Notes to Deltec Power
Systems, Inc. combined/consolidated financial statements.
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IMPACT OF COMBINATION
Based on preliminary due diligence, the Company believes that some or all
of the following costs savings and revenue enhancement opportunities can be
achieved in the near future: integration of facilities and manufacturing
capacity and comparable product lines; coordination of research and development
activities to leverage product technologies; reduction of selling, general and
administrative expense by consolidation of certain functions; elimination of
purchases of certain sourced low-end products; utilization of Deltec
distribution channels for Exide Electronics products and Exide Electronics
channels for Deltec products; integration of European sales and service
operations.
LIQUIDITY AND FINANCIAL CONDITION
At December 31, 1995, the Company had $108.0 million of working capital, as
compared to $105.5 million at September 30, 1995. The increase of $2.5 million
in working capital from September 30, 1995 was primarily the result of higher
levels of inventory and other current assets, partially offset by lower accounts
receivable balances, due to collections of receivable balances generated by
sales in the fourth quarter of fiscal 1995. The increased levels of working
capital have been financed primarily using the Company's revolving credit
facilities. Cash used in operations was a $0.5 million in the first quarter of
fiscal 1996, as compared to cash provided by operations of $18.3 million in the
first quarter of fiscal 1995.
At September 30, 1995, the Company had $105.5 million of working capital,
as compared to $93.3 million at September 30, 1994. The $12.2 million increase
was primarily the result of higher levels of inventory to support the increased
levels of revenues expected for full fiscal 1996, the introduction of new
product lines and lower than expected revenues for the quarter ended December
31, 1995. Accounts receivable balances, which are typically at their highest
level at year-end due to the higher level of fourth quarter sales, were level
with the prior year. Commercial receivable balances were higher than the prior
year, but were more than offset by a decline in receivables from the United
States government. Accounts payable, short term debt, and other accrued
liability balances were slightly higher than the prior year. The increased
levels of working capital have been financed primarily using the Company's
revolving credit facilities. Cash provided by operations was a positive $1.1
million in fiscal 1995, as compared to $8.5 million in fiscal 1994, and cash
used in operations of $3.3 million in fiscal 1993.
During the first quarter of fiscal 1996, the Company invested approximately
$3.9 million in capital expenditures, as compared to approximately $2.3 million
in the same period of fiscal 1995. Capital expenditures for fiscal 1996 are
expected to approximate $13-14 million, including $2-3 million relating to the
consolidation of the Company's headquarters and for the integration of acquired
companies. During fiscal 1995, the Company invested approximately $12.5 million
in capital expenditures, as compared to approximately $8.7 million in fiscal
1994 and $8.3 million during fiscal 1993. Capital expenditures were higher in
fiscal 1995 due primarily to expansion of SSG's manufacturing facility in
Wilmington, NC, the fit-up of its new Worldwide Logistics Center, new facilities
for ETG, and the relocation of Lectro. The Company also invested approximately
$12.4 million for the acquisition of Lectro in fiscal 1995.
At December 31, 1995, the Company had borrowings of $76.1 million
outstanding under its $145 million package of committed domestic unsecured bank
credit facilities comprised of a $95 million revolving credit facility for
working capital and general corporate purposes, including a sublimit of $30
million which may be used in support of its international subsidiaries, and a
$50 million revolving credit facility to be used for financing certain
acquisitions and refinancing specified existing obligations. The credit
agreement contains certain financial covenants, including a senior debt to cash
flow ratio, a fixed charge ratio, a leverage ratio and a minimum net worth
requirement. At December 31, 1995, the Company was in compliance with all
financial covenants, except that its senior debt to cash flow ratio exceeded the
prescribed ratio; however, the lenders waived the applicability of this covenant
from December 31, 1995 through the date on which the Company refinanced its
previously existing credit facilities with the New Credit Facility. See Note 6
of the Notes to annual consolidated financial statements and Note 3 to interim
consolidated financial statements.
In connection with the Deltec Acquisition, the Company refinanced its
existing bank credit facilities with the New Credit Facility. The New Credit
Facility is a five-year senior bank package of $175.0 million,
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comprised of a $125.0 million revolving credit facility and a $50.0 million term
loan. Amounts outstanding under the New Credit Facility are secured by
substantially all the inventory and accounts receivable of the Company and would
initially bear interest at LIBOR plus 250 basis points, or the bank's base rate
plus 150 basis points, as defined. Under the terms of the New Credit Facility,
the Company is subject to certain customary financial covenants and other
restrictions. See "Description of New Credit Facility."
On July 1, 1995, Japan Storage Battery Co., Ltd. converted its shares of
the Company's Series D and Series E convertible preferred stock into 595,273
shares of the Company's Common Stock. This conversion increased the Company's
common equity by approximately $10 million and will reduce its annual cash
dividend payments by approximately $790,000. See Note 8 of the Notes to
consolidated financial statements.
In September 1995, the Board of Directors reaffirmed the authorized
repurchase program that permits the Company to repurchase up to 5% of the
Company's outstanding Common Stock. As of December 22, 1995, the Company had
repurchased approximately 4.7% of its Common Stock. The Company has no current
plans to repurchase additional shares of its Common Stock.
In October 1995, the holder of the Company's $15.0 million convertible
subordinated notes converted the notes into 1,146,789 shares of the Company's
Common Stock under the terms thereof. Such conversion will save approximately
$1.26 million per year in interest expense. See Note 6 of the Notes to
consolidated financial statements.
Deltec
Working capital at Deltec increased by $3.9 million to $30.2 million in
1995 from $26.3 million in 1994. This increase was primarily the result of
increased sales levels, which resulted in increases in accounts receivable and
inventories of $12.2 million and $4.8 million, respectively, in 1995.
Long-term debt of Deltec, owed primarily to Fiskars, increased to $37.8
million at December 31, 1995 from $33.3 million at December 31, 1994, primarily
as a result of a $6.0 million preferred stock redemption financed with a note to
Fiskars. $36.6 million of the $37.8 million in long-term debt of Deltec
outstanding as of December 31, 1995 is debt to Fiskars, which was converted by
Fiskars into equity upon the consummation of the Deltec Acquisition, leaving
only approximately $1.2 million in long-term debt, which was assumed by the
Company.
Capital expenditures at Deltec increased to $2.4 million in 1995 from $1.6
million in 1994. These investments consisted primarily of manufacturing
equipment and facility improvements. Deltec anticipates its capital expenditures
for fiscal 1996 will be approximately $3 million. Capital financing requirements
have historically been met with cash generated from operations and from
borrowings from Fiskars.
The Company expects to finance the future capital requirements of Exide
Electronics and Deltec through existing cash balances, cash generated from
operations, and borrowings under its credit facilities. Based on the current
level of operations and anticipated growth, management believes that cash flow
from operations, together with available borrowings under its credit facilities
and other sources of liquidity, will be adequate to meet the Company's
anticipated future requirements for working capital, capital expenditures, and
scheduled payments of principal of and interest on its indebtedness, including
the Notes. There can be no assurance, however, that the Company's business will
generate sufficient cash flow from operations or that future working capital
borrowings will be available in an amount sufficient to enable the Company to
service its indebtedness, including the Notes, or make necessary capital
expenditures. See "Risk Factors."
LITIGATION
During fiscal 1994 and 1995, the Company settled certain litigation. See
"--Litigation Expense," "Business--Legal Proceedings" and Note 15 of the Notes
to annual consolidated financial statements.
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CONTINGENCIES
Government Contract Matters
Sales to the United States federal government accounted for approximately
31% and 19% of total revenues for the first three months ended December 31, 1994
and 1995, respectively, and approximately 35%, 33% and 27% of total revenues for
fiscal 1993, 1994 and 1995, respectively. The Company's contracts with the
federal government have no significant minimum purchase commitments, and the
government may cease purchases under these contracts at any time for any reason.
These contracts are subject to termination at the convenience of the government
pursuant to the terms of the contracts. The Company's compliance with government
contract regulations is audited or reviewed from time to time by government
auditors, who have the right to audit the Company's records and the records of
its subcontractors during and after completion of contract performance, and may
recommend that certain charges be treated as unallowable and reimbursement be
made to the government. The Company provides for estimated unallowable charges
and voluntary refunds in its financial statements, and believes that its
provisions are adequate as of December 31, 1995.
Foreign Currency Exposures
International sales accounted for approximately 30% and 33% of total
revenues for the three months ended December 31, 1994 and 1995, respectively,
and approximately 22%, 25%, and 31% of total revenues for fiscal 1993, 1994 and
1995, respectively. A significant portion of the Company's international sales
are denominated in foreign currencies. As of December 31, 1995, approximately
18% of the Company's total assets were located outside the United States,
primarily in Canada and Europe. Significant fluctuations in foreign currency
exchange rates can result in gains or losses on foreign currency transactions,
which are recorded in the consolidated statement of operations. Fluctuations in
the recorded value of the Company's net investment in its international
subsidiaries resulting from changes in foreign exchange rates are recorded in
the cumulative translation adjustments component of common shareholders' equity.
The Company hedges these risks using a combination of natural hedges such as
foreign currency denominated borrowings and, from time to time, foreign currency
financial instruments. European, Canadian, and Japanese currencies have been
especially volatile over the last two years.
As of December 31, 1995, the Company had accounts receivable and accounts
payable totaling approximately $8.2 million that were exposed to fluctuations in
exchange rates. These balances are spread among various currencies, primarily
the French Franc. No foreign currency instruments were outstanding to cover
these balances. As of September 30, 1995, the Company had accounts receivable
and accounts payable totaling approximately $8.8 million that were exposed to
fluctuations in exchange rates, and had one foreign currency financial
instrument, described below, covering approximately 23% of these balances. These
balances were spread among various currencies, primarily the French Franc. As of
September 30, 1995, the Company had one outstanding foreign currency contract
consisting of a foreign currency option which gave the Company the right to sell
approximately 10 million French Francs at predetermined exchange rates. This
contract expired in December 1995, and had no material effect on the Company's
results of operations.
During the first quarter of fiscal 1996, the Company had foreign exchange
transaction losses of approximately $64,000, and the change in the cumulative
translation adjustments account decreased the recorded value of common
shareholders' equity by $52,000 from September 30, 1995 to December 31, 1995.
For fiscal 1995, the Company had foreign exchange transaction losses of
approximately $218,000, and the change in the cumulative translation adjustments
account increased the recorded value of common shareholders' equity by $353,000
from September 30, 1994 to September 30, 1995. For fiscal 1994, the Company had
foreign exchange transaction losses of approximately $257,000, as compared to
losses of approximately $221,000 in fiscal 1993, and the change in the
cumulative translation adjustments account increased the recorded value of
common shareholders' equity by $154,000 from September 30, 1993 to September 30,
1994. See "Risk Factors--Foreign Operations; Risk of Currency Fluctuations."
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Environmental Matters
Exide Electronics' and Deltec's operations are subject to federal, state,
local and foreign environmental laws and regulations relating to the storage,
handling and disposal of hazardous or toxic materials and discharge into the
environment of regulated pollutants. To the best of the Company's knowledge, its
operations and those of Deltec are in material compliance with the terms of all
applicable environmental laws and regulations as currently interpreted. To the
best of the Company's knowledge, there are no existing or potential
environmental claims against Exide Electronics or Deltec that are likely to have
a material adverse effect on the Company's business or financial condition or
its financial statements taken as a whole. However, the Company cannot predict
with any certainty whether future events, such as changes in existing laws and
regulations, will give rise to liability or additional costs that could have a
material adverse effect on the Company's financial condition. Furthermore,
actions by federal, state, local and foreign governments concerning
environmental matters could result in laws or regulations that could increase
the cost of producing the products manufactured by the Company or otherwise
adversely affect the demand for its products. See "Business--Environmental
Regulation."
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BUSINESS
GENERAL
The Company is one of the world's leading manufacturers and marketers of
UPS products and power management software, as well as one of the industry's
largest UPS service providers. UPS products protect microprocessors and other
sensitive electronic equipment against electrical power interruptions by
providing temporary backup power. More sophisticated UPS systems also provide
additional protection against power distortions by continuously cleaning and
conditioning electrical power. The Company believes that it is one of only three
companies providing a full range of UPS products and services on a worldwide
basis. The Company's UPS products include small systems for use with personal
computers, workstations, client/server platforms and local and wide area
networks, and large systems for use with mainframe computers and data centers.
In addition, the Company's UPS products protect other types of sensitive
electronic equipment, including telecommunication systems, medical and
laboratory equipment, automated bank teller machines, industrial process
controls, and air traffic control and other transportation systems. Based on a
recent independent survey that divided domestic UPS product sales into two
segments, one for systems designed for power ratings above 5 kVA and one for
systems at or below 5 kVA , the Company (after giving effect to the Deltec
Acquisition) will have a leading position in each of the two defined segments,
ranking first for products above 5 kVA and second for products at or below 5
kVA. (Source: the VDC Report).
Based on internal research, the Company believes that total worldwide sales
of UPS products and services have grown approximately 20% since 1993 to
approximately $4.2 billion in 1995. The growth in the UPS industry is being
driven by the rapid proliferation of computers and related electronic systems in
a wide range of industries, including manufacturing, financial services,
utilities, telecommunications and transportation. This growth is being
compounded by the on-going transition from single-site mainframe systems to
multi-site network-based systems. To insure continued reliable operations,
computers and other electronic systems require the protection offered by UPS
products. The operations of such systems can be affected by a variety of
distortions in electrical power, including under-voltages (sags), over-voltages
(surges), transients (spikes), temporary power reductions (brownouts) and
complete power interruptions (blackouts). Any of these power distortions can
cause sensitive electronic equipment to malfunction or "crash," increasing the
likelihood of costly system downtime, information loss, and damage to equipment
and software. The need for UPS protection is particularly acute in certain
international markets where the quality of electrical power is poor.
On March 13, 1996, the Company completed the Deltec Acquisition. Deltec is
one of the world's largest manufacturers and marketers of off-line and
line-interactive small UPS systems. Off-line UPS systems provide temporary
back-up power without the power conditioning features of an on-line system,
while line-interactive UPS systems are hybrid systems that provide limited power
conditioning features. The majority of UPS products sold by the Company
historically have been more sophisticated on-line systems, which continuously
condition the power supply in addition to providing a back-up power source.
Off-line and line-interactive products, such as those manufactured by Deltec,
are generally less expensive than on-line systems and are suitable for
applications where system downtime may be less costly, such as personal or small
business uses. With the addition of Deltec's product line and small systems
manufacturing and distribution capabilities, the Company believes that it has
become one of only a few companies that is a leading manufacturer and worldwide
marketer of UPS systems in each of the major product segments of the UPS
industry. On a pro forma basis after giving effect to the Deltec Acquisition,
the Company would have had revenues and EBITDA of $515.2 million and $57.2
million, respectively, for the LTM ended December 31, 1995.
The Company currently manufactures substantially all of its products at its
manufacturing facilities in Raleigh and Wilmington, North Carolina and Dallas,
Texas. Deltec manufactures substantially all of its products at manufacturing
facilities in San Diego, California, Tijuana, Mexico and Espoo, Finland. The
Company also conducts a small amount of manufacturing activity at its European
subsidiaries and through its joint venture in Japan. The Company's large systems
are sold through a direct sales force, while both the Company's and Deltec's
small systems are generally sold through VARs, OEMs and distributors. The
Company currently maintains separate distribution channels for products produced
by IPM to take advantage
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of IPM's historic market acceptance. The Company also intends to maintain
separate distribution channels for Deltec products to leverage Deltec's strong
name recognition. As the Company integrates IPM and Deltec into the Exide brand
name family, the Company will consolidate its distribution groups to cover all
products.
The Company's business began in 1962 as part of Electric Storage Battery,
Inc., which was acquired in 1974 by Inco Limited ("Inco"). In 1982, Inco sold
the business to the Company, which (although incorporated in Delaware in 1979)
commenced operations at that time.
BUSINESS STRATEGY
The Company's business strategy is to continue to expand its sales and
profitability by providing its customers with Strategic Power Management through
a full range of product and service solutions at competitive prices. The Company
believes that its recent strategic acquisitions of Deltec, IPM and Lectro give
the Company one of the broadest product offerings in the global UPS industry,
including a wide range of off-line, line-interactive and on-line products
operating across a broad spectrum of kVA power ratings and applications. These
acquisitions also enable the Company to offer an expanded line of service
options, and provide the Company with one of the industry's largest global
distribution networks. To strengthen its global competitive position and improve
profitability, the Company intends to pursue a business strategy that
incorporates the following elements:
Increase its presence in the small systems segment. As a result of the
trend in the computer industry towards client-server computing and the
proliferation of personal computers, workstations, client/server platforms,
networks, and other microprocessor-based electronic equipment, industry sales of
small UPS systems grew approximately 28% from 1993 to 1995. During the same
period, the Company's sales of small systems products grew approximately 66% and
constituted approximately 38% of the Company's total revenues in fiscal 1995.
According to the VDC Report, sales of small systems in the U.S. are expected to
continue to grow significantly through 1999. The Company believes that the
Deltec Acquisition further improves the Company's competitive position in the
small systems segment because Deltec is particularly strong in sales of off-line
and line-interactive products, segments where the Company has traditionally not
had an extensive product offering. The Company plans to expand Deltec's existing
product line and believes that Deltec's small systems expertise, established
distribution channels and strong OEM relationships provide the Company with a
strategic platform to increase its small systems revenues and profitability.
Expand its international sales. The Company believes that international
markets accounted for approximately two-thirds of the worldwide market for UPS
products and services in 1995. Approximately 31% of the Company's fiscal 1995
sales were derived from products and services sold outside the U.S. The Company
anticipates significant growth in international markets due to the unreliability
of electric power in many foreign countries. Accordingly, the Company plans to
continue to develop products designed specifically to meet the unique power
needs of select international markets and establish joint ventures and other
strategic partnerships to design, manufacture and distribute UPS products to
serve these markets. The Company believes that its global distribution and
service networks, which were expanded through the IPM Acquisition, have been
significantly expanded with the Deltec Acquisition. Deltec's broad line of high
performance products, designed for the international market, enhances the
Company's position as one of the leaders in international UPS sales.
Establish a leading position in emerging technologies. In response to
rapid growth in a number of new technologies that depend upon electrical power,
the Company has created the Emerging Technologies Group. ETG will aggressively
seek out opportunities to develop new small system UPS products utilizing new
technologies or serving new applications. ETG's initial efforts will focus on
low-end rectifiers and power supplies for the broadband cable television and
telecommunications industries, product lines acquired as part of the Lectro
Acquisition. The Company plans to utilize these product lines as a platform to
enter the rapidly expanding wireless and personal communication services
markets.
Redefine its large systems focus. The Company believes that the market for
large UPS products is relatively mature, and that the demand for such systems
will not grow significantly over the next several years. Historically, large UPS
systems were used to support the power requirements of large mainframe
computers.
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With the movement away from mainframe systems to smaller data centers and office
environments, there has been a need for large UPS systems operating at lower kVA
ratings. Accordingly, the Company's future efforts in the large systems segment
will generally be directed at reducing cost and product development time by
incorporating new features and functionality into existing technology rather
than developing entirely new product platforms. The Company is also pursuing new
commercial applications for its large systems products in several markets,
including healthcare and industrial process control.
Expand its service business. WSG is one of the world's leading UPS service
organizations. Due to the scheduled decline in service revenues under one large
contract with the federal government, the Company is projecting a decline in its
total service revenues. Excluding this one contract, however, the Company is
anticipating growth in its commercial service business with the introduction of
new service offerings that complement its Strategic Power Management focus,
including offering support services for non-UPS power equipment such as
generators, switchgear, breakers and power distribution systems, as well as
providing power quality analysis and remote systems monitoring. In addition, the
Company is developing programs to provide service support for OEMs and the
federal government, which have historically provided their own service and
product support, but are increasingly looking to out-source such services. The
Company also plans to target service sales to third party power management
vendors.
Improve financial performance. The Company has implemented several
programs to reduce operating costs and to improve manufacturing productivity,
including programs designed to increase the commonality of parts in product
design in order to reduce inventory levels and the number of suppliers. In
addition, the Company is in the process of consolidating the manufacturing
facilities acquired in the IPM Acquisition and Lectro Acquisition into the
Company's existing manufacturing facilities. The Company also believes that it
can significantly reduce manufacturing costs by manufacturing certain
sub-assemblies and low-end products formerly sourced from Asian contractors at
Deltec's low-cost manufacturing facility in Tijuana, Mexico.
There can be no assurance that the Company will be successful in
implementing its business strategy. See "Risk Factors."
THE UPS INDUSTRY
According to the VDC Report, total U.S. sales of UPS products and services
in 1994 were approximately $1.6 billion. Sales are projected to grow at an
annual compounded rate of 13.1% to approximately $3.1 billion in 1999. (Source:
the VDC Report) Based on internal research, the Company believes that total
worldwide sales of UPS products and services in 1995 were approximately $4.2
billion. The Company expects the market to grow to approximately $6.7 billion in
1999. There can be no assurances, however, that such growth will occur.
Significant geographical growth areas are expected to be Latin America, the
Pacific Rim and Eastern Europe.
Over the last decade, businesses have become more aware not only of the
damage to computer systems and other electronic equipment resulting from
electrical power disruptions, but also the economic losses stemming from downed
computer systems and lost data. UPS products are designed to protect against
electrical power disruptions by providing power protection for personal
computers ("PCs") and workstations, client server platforms, LANs and WANs,
mainframe computers and data centers, and other microprocessor-based systems
present in many industries, including the telecommunications, transportation,
manufacturing, medical and laboratory, financial, and military and aerospace
industries. According to the VDC Report, approximately 78% of the small system
(<5 kVA) products sold in the U.S. in 1994 were used with PC/workstations and
LAN/WAN applications. Computer rooms, centered primarily around a mainframe
computer, and industrial process control applications were the most popular
applications of large system (>5 kVA) UPS products, accounting for approximately
65% of the large system applications. Small systems product sales in the U.S.
are projected to increase at an annual compounded rate of more than 15% through
1999; large systems product sales in the U.S. are projected to grow at an annual
compounded rate of nearly 8% through 1999. (Source: the VDC Report) There can be
no assurances, however, that such growth will occur. Based on internal research,
the Company believes that it is one of only three companies that markets a full
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range of UPS products on a worldwide basis and one of only a few companies in
the industry with leading positions in both the defined small and large system
market segments.
A significant trend driving the growth of the UPS market, and the most
important trend affecting the selection of UPS product type, is the migration
from mainframe, mid-range and minicomputers to client-server computing. This
trend has resulted in the proliferation of PCs, workstations, client/server
platforms, networks and other microprocessor-based equipment, leading to rapid
growth for smaller UPS systems and more modest growth for larger systems. The
shift to UPS products for LAN/WAN file servers and PC/workstations is expected
to generate an increasing demand for lower power UPS products. In addition,
improvements in the design of UPS products have led to declines in manufacturing
costs, which have produced lower sales prices for UPS products and expanded the
market for UPS products to applications where UPS solutions were previously
cost-prohibitive. While computer systems are evolving from mainframes to file
servers, the concept of computer rooms is undergoing a corresponding evolution
to data centers that incorporate large numbers of servers in computer room
settings. Accordingly, the Company is designing its large system UPS products
for use with the new computer technology. The Company believes growth
opportunities still exist in the large systems product segment. Industrial
process control, telecommunications and medical applications are expected to
show particularly strong future growth in both large and small UPS systems.
In addition to large and small systems designations, UPS products are also
classified functionally as utilizing either off-line, line-interactive or
on-line (standby) technology. An off-line UPS product provides a backup power
supply if a power failure occurs. Line-interactive systems, in addition to
providing a backup power source, continuously monitor the power supply and
compensate for any abnormalities such as brownouts, sags, surges or spikes. An
on-line product, in addition to providing a backup power source and compensating
for any abnormalities also conditions the power supply on a continuous basis by
removing voltage fluctuations, frequency variations and electrical noise from
the power supply. The Company believes that on-line technology provides superior
functionality to off-line and line-interactive technology. Off-line and
line-interactive products are adequate for many applications, however, and
generally are available at a lower cost.
PRODUCTS
The Company offers a full range of integrated power protection and
management products for small and large computer systems, telecommunications
systems, medical and laboratory equipment, financial systems, industrial process
control systems and air traffic control and other transportation systems. The
Company's products are used with electronic equipment ranging from small
applications with power requirements of 0.2 kVA to large systems with power
requirements of thousands of kVA. The Company has produced UPS products for more
than 20 years, and has established itself as a leader in the market for on-line
UPS systems, particularly in large UPS systems where on-line technology is more
prevalent. The Company's large system UPS products, all of which currently
incorporate on-line technology, are designed for use with the new client/server
platforms and network-based computer systems. The Company's largest product
line, which can be linked together to support very large power requirements and
provide redundancy, is designed to meet the power protection requirements of
large data centers. Most of the Company's large systems, including almost all
systems for large mainframe computers and data centers, are customized by the
Company's applications and product engineers to meet customers' specific
requirements. The Company offers specialized UPS products designed for medical
imaging applications, such as Magnetic Resonance Imaging and Computer-Assisted
Tomography scanning equipment, transportation applications, including airlines
and subways, and process control applications for manufacturing businesses. In
addition, a significant portion of the Company's sales to the federal government
are customized UPS products with complex manufacturing, system design, delivery
and installation schedules.
In response to the evolution of computer systems from mainframes to
PC/workstations and client/server platforms, the Company introduced its first
small system UPS products in fiscal 1990. The Company's small system products
are used with personal computers, workstations, client/server platforms, LANs
and WANs, minicomputers and other electronic applications, including
telecommunications and medical and laboratory
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equipment. Historically, the Company's strength in small systems has been at the
higher power range of the product market segment, where on-line technology was
in greater demand. With demand for line-interactive products increasing, the
Company initiated development of line-interactive product lines, particularly in
the lower power ranges, and expects to begin marketing its first products during
the second quarter of fiscal 1996. The Company's small system UPS products offer
various options relating to the length of time for which battery power can be
supplied, the level of networking capability and other features. In addition,
the Company has developed small system products specifically to meet the unique
power protection needs of international customers. The Company's sales of small
system products have grown 66% since 1993, and constituted approximately 38% of
the Company's total revenues in fiscal 1995. The Company expects significant
additional growth in small system sales in 1996 with the Deltec Acquisition and
the addition of new small system UPS products, including its new
line-interactive products.
The IPM Acquisition provided the Company with a similar product line. IPM
offers a broad line of on-line UPS products, in power ranges from 600VA to
300kVA. IPM's product line has increased the Company's international presence,
particularly in China. The IPM Acquisition provides the Company with the ability
to increase international sales by utilizing the Company's distribution system
to market IPM's products in geographic areas where IPM did not have a strong
presence, particularly certain areas of Latin America and Europe. IPM also
provides the Company with a stronger presence in the transportation and
telecommunications industries.
The Deltec Acquisition fills an important market niche for the Company.
Deltec is a leader in off-line and line-interactive products at the low power
range of the small system market. Deltec's low-cost manufacturing capabilities
enable the Company to offer a low-cost product sold on a high volume basis
through national distributors, and provide the Company with a manufacturing
source for the Company's low power range small system UPS products, which the
Company has historically sourced from the Far East. The Deltec Acquisition also
provides the Company with a 50 Hertz product to serve the international large
system market, which will complement the Company's 60 Hertz product that is sold
domestically.
Power Management Software. Network monitoring software has become a
significant feature of the Company's small system UPS product line. The
Company's proprietary power management software, OnliNet, and related
connectivity products are designed to monitor power conditions, environmental
events and UPS performance, and initiate automatic shutdown of computers in a
controlled sequence in the event of a prolonged power outage. OnliNet is
compatible with most commercial operating systems software. The Company acquired
DataTrax Systems Corporation ("DataTrax") in September 1993 to expand its
ability to provide fully-integrated power management solutions. DataTrax gave
the Company an innovative software product that monitors critical power,
environmental and security systems for customers with high systems-availability
requirements. DataTrax products are designed to interface with other
manufacturers' UPS products and air conditioners, generators, and other
equipment. In addition, with the Deltec Acquisition, the Company offers a power
management software product that is recognized as having one of the strongest
networking capabilities in the industry. The Company believes that facilities
monitoring products, such as those offered by DataTrax and Deltec, have
significant market growth potential.
Emerging Technologies. In August 1995, the Company formed ETG to
aggressively enter and serve emerging markets for power protection and
management systems, primarily the cable television and telecommunications
industries. The Lectro Acquisition, which served as the catalyst for the
formation of ETG, provided the Company with new technology designed for use in
harsh operating environments. ETG's UPS products are currently sold primarily to
the cable television industry. ETG also sells rectifiers and inverters to the
rapidly expanding wireless and personal communication markets, as well as other
segments of the telecommunications industry.
New Products. The Company continues to develop new products and enhance
existing product lines to remain an innovative leader meeting the needs of the
rapidly evolving power protection and management industry. The Company plans to
introduce new small system products over the next several years, including
enhanced products at the higher end of the power range for small to mid-range
applications, a new generation of off-line products and, in 1996, its first
line-interactive products. The Company also intends to introduce new
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models of existing products containing new features, such as more user-friendly
software and expanded international language capabilities.
The Company devotes significant research and development expenditures to
the development of new small system UPS products that incorporate new
technological developments and offer enhanced performance features. The market
for large UPS products is relatively mature, and the products have relatively
long life cycles. Accordingly, the Company expects to direct its improvement
efforts in the large systems segment at reducing cost and reducing total cycle
time by incorporating new features. The Company also intends to introduce new
combinations of large UPS products, ancillary equipment and services.
SERVICES
WSG offers a wide range of service programs, including preventive,
corrective and contract maintenance services, and emergency services, training
and spare parts. Because a significant portion of the Company's service revenues
come under service contracts, service revenues provide the Company with a
relatively predictable recurring source of revenue. Most of the Company's
service revenues relate to large system UPS products, which often require a
higher level of service, including post-sales applications support, systems
implementation and integration, installation and startup support, and
comprehensive maintenance services. The Company also provides, in connection
with certain significant sales of large UPS products and ancillary equipment to
the federal government, site-specific engineering, construction, installation,
systems implementation and integration, training, documentation and overall
program management services.
The Company recently expanded its UPS product services to include battery
monitoring services. In addition, the Company is developing programs to provide
service support for OEMs and the federal government, which historically have
provided their own service and product support, but are increasingly seeking to
out-source services and support.
Recent acquisitions have contributed significantly to growth in the
Company's service business. The Company is in the process of integrating IPM's
service business, which expanded the Company's North American service revenue
base by nearly 25%. The Company has also experienced high international service
growth as a result of the Company's acquisitions in 1994 of a company in the
United Kingdom and two companies in Canada. The Company also expects to benefit
significantly from its acquisition of Deltec, which has a large service network
in Europe.
Services in the United States are provided from service centers, which are
generally located with sales offices, and are provided by individual field
service engineers strategically located throughout the country. The Company
maintains inventories of spare parts at the service centers and sales offices.
Telephone support is provided 24 hours per day. The Company also provides
various factory and extended warranty services as part of the purchase of UPS
products, and guarantees on-site support within 24 hours in the contiguous
United States and 48 hours anywhere in the world. International services are
provided through the Company's affiliates and distributors. The Company provides
spare parts, training and technical support for its international distributors
to ensure a consistent worldwide customer service ability.
SALES AND DISTRIBUTION
Organizational Approach
The Company's marketing efforts are organized geographically into two
groups: the Americas Group, which covers the United States, Canada, and Latin
America, and the International Group, which covers all other geographic areas.
The Americas Group is further divided into five functional groups: Commercial
Sales; Partner Marketing; the Federal Systems Division; Canada; and Latin
America. The International Group is divided into three geographic areas: Europe,
Middle East, and Africa; Japan; and the Far East. At the present time, the
Company maintains separate distribution channels for Deltec, IPM and Lectro
products. Over time, the Company intends to integrate Deltec and IPM products
into the Company's sales and distribution organization.
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The Americas Group
Commercial Sales. The Company conducts its commercial sales using
manufacturers' representatives, Value-Added Distributors ("VADs") and a
Corporate Accounts sales group. The Company works closely with its
manufacturers' representatives and provides support to their marketing efforts
through ongoing sales and product training programs, advertising and promotional
campaigns, and participation in major trade shows. The Company has approximately
50 manufacturers' representative firms, which offer sales, technical service and
customer support to commercial accounts throughout the U.S. These manufacturers'
representatives are the Company's primary sales channel for large system UPS
products, and have recently begun marketing the Company's small systems product
lines as well. Commercial Sales also includes VADs, which are local or regional
distributors that market both directly to end users and on a resale basis to
Value-Added Resellers ("VARs"). The Company's Corporate Accounts sales group is
responsible for coordinating direct sales efforts for all of its products to
select major customers nationwide. Corporate Accounts may purchase products for
their own use or for resale.
Partner Marketing. The Company's sales effort in Partner Marketing are
conducted through OEMs, resellers, distributors and VARs. The Company has OEM
and reseller relationships with numerous companies, including IBM, AT&T, Digital
Equipment Company, Data General and Unisys, some of which sell the Company's UPS
products on a private-label basis. The Company's OEM/reseller sales relate
primarily to its small system UPS products. OEMs/resellers market the Company's
products separately, as part of a combined product offering with the OEMs'
equipment, or through the OEMs' service organizations. The Company has also
developed a network of distributors and VARs for the sale of small system UPS
products. The Company supports the distributor effort with various VAR marketing
programs, and expects to continue expanding its relationships with distributors
and VARs.
Federal Systems Division. The Federal Systems Division coordinates the
Company's selling efforts to military and civilian agencies of the federal
government. Historically, the majority of sales to the federal government have
consisted of large system UPS products and related services. Sales of small
system UPS products are currently made to the federal government through
distributors, VARs and systems integrators. The Company also offers certain of
its UPS products in the 36 to 375 kVA range through a General Services
Administration ("GSA") schedule. For fiscal 1995, sales to the federal
government declined to 27% of the Company's revenues from 33% for fiscal 1994.
See "-- Federal Government Contracts" for a discussion of sales to the federal
government and certain government contracts.
Canada. The Company's wholly-owned Canadian subsidiary distributes,
services and performs limited modification of the Company's UPS products in
Canada. The subsidiary uses manufacturers' representatives, VARs and direct
sales for distribution. The Company plans to integrate IPM's Canadian
distribution operations into the Company's Canadian distribution organization
during fiscal 1996.
Latin America. The Company maintains a sales office in Miami to support
the Company's sales and marketing efforts in Latin America, which are generally
conducted by distributors and OEMs. The Company's network of distributors in
Latin America are factory-trained to provide service for all products they sell.
In December 1995, the Company announced plans to form a joint venture in Brazil
to better serve that market.
International Group
The International Group is organized into three geographic regions designed
to maximize its participation in certain major international regions using
approaches tailored to each geographic area based upon the market's size, growth
potential and local governmental requirements. The International Group's sales
efforts are focused primarily on small system products and services. The Company
also has introduced several products to meet the specific voltage and frequency
requirements of international customers.
Europe, Middle East and Africa. The Company markets and sells its products
and services in Europe through subsidiaries in France, the United Kingdom and
Germany. In European countries where the Company does not have a local
affiliate, as well as in the Middle East and Africa, the Company markets and
sells its UPS products through local distributors and manufacturers'
representatives. The Company maintains
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a sales office in London to help support those sales. The Company intends to
integrate FPS, Deltec's Espoo, Finland-based subsidiary, into its European
operations. Through FPS, the Company's European operations have expanded to
include Scandinavia and Eastern Europe.
Japan. In Japan, the Company has a joint venture with Japan Storage
Battery Co., Ltd. ("JSB") that sells, markets and distributes UPS products
through a direct sales and service organization, as well as through distributors
and VARs.
Far East. In Pacific Rim countries where the Company does not have a local
affiliate, the Company markets and sells its UPS products through local
distributors. The Company maintains sales offices in Singapore and Beijing,
China to help support those sales. In December 1995, the Company announced plans
to form a joint venture with a strategic partner in India to better serve that
market.
IPM
The Company continues to maintain most of IPM's distribution channels to
market its IPM product lines. In North America, IPM markets its products
primarily through independent manufacturers' representatives, OEM resellers,
national accounts, and direct sales to the federal government. IPM sells its
systems internationally primarily through distributors and manufacturers'
representatives. Additionally, the Company is involved in direct sales
activities from its Hong Kong office, and in China, Germany, and Canada. Over
time, the Company intends to integrate IPM's products into its sales and
distribution organization.
Deltec
Deltec's product marketing is currently divided geographically according to
brand name and sales channel strength. FPS trademarks are well-known in Europe,
including Eastern Europe, the primary market for the FPS brand name UPS
products. Deltec EC, Deltec's San Diego-based subsidiary is strong in North
America, South America and the Far East, areas where the Deltec brand name is
well known. Deltec EC markets its products in North America through a
combination of distributors and VARs, regional and specialty distributors, OEMs
and resellers; and direct sales through in-house personnel and independent sales
representatives. In addition, Deltec EC maintains a national distribution
channel for industrial markets through two large national distributors. FPS
maintains direct sales offices in Stockholm, Oslo, Copenhagen, Baden-Baden,
Berlin, London, Paris, Zurich, Moscow and St. Petersburg. For each country in
which it operates, FPS has a sales force, product program and marketing program
oriented to distribution. Sales channels include Pan European distributors,
local distributors, VARs, OEMs and resellers, and retail computer supermarkets.
FPS and Deltec EC together have over 50 international distributors. In countries
of the former Soviet Bloc where FPS does not have sales offices, it operates
through "franchised" companies. FPS provides training and maintains close
contacts with these franchises and believes that this arrangement gives them a
unique marketing position in the Eastern European market.
RESEARCH AND DEVELOPMENT
The Company believes that it must continue developing new products and
enhancing existing ones to maintain its position as an innovative leader in the
power protection and management industry. Accordingly, the Company conducts
significant research and development activities that employed 131 persons as of
September 30, 1995. The Company's research and development efforts with respect
to small system products relate primarily to the incorporation of new
technological developments, while efforts with respect to large system products
are aimed at reducing cost and total cycle time and improving quality. The
Company has also been expanding its product line to include specialized
offerings for particular applications, such as medical, cable television and
telecommunications equipment, in addition to models that meet international
voltage and frequency requirements. The Company has replaced most of its product
line over the last five years and is currently involved in the development of
additional new products and further advances in its product line. In recent
years, as software has become increasingly important in the operation of the
Company's UPS products, the Company has expanded its software development
capability to produce products that improve customers' ability to manage their
information technology and power networks.
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The Company believes that its relationships with suppliers of
semiconductors, batteries and other primary components give the Company access
to emerging technologies and applications. The Company's relationships with OEMs
also provide it with the opportunity to integrate power and user requirements of
products under development by those OEMs into its research and development
efforts.
During fiscal 1993, 1994 and 1995, the Company spent approximately $9.6
million, $10.1 million and $9.9 million, respectively, on research and
development. The Company's research and development expenditures as a percentage
of revenue were 3.0%, 2.8% and 2.5%, respectively, for fiscal 1993, 1994 and
1995. The Company expects that research and development expenditures will
continue at substantially the same level in relation to revenues for the
foreseeable future as the Company takes advantage of synergies produced by its
recent acquisitions of IPM and Lectro, as well as the synergies expected to be
realized through the Deltec Acquisition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Research and
Development."
MANUFACTURING
The Company currently manufactures substantially all of its UPS products at
three locations: Raleigh and Wilmington, North Carolina and Dallas, Texas. In
the Deltec Acquisition, the Company acquired manufacturing facilities in San
Diego, California, Tijuana, Mexico and Espoo, Finland near Helsinki. In
addition, the Company's international distributors and affiliates can further
customize products for various international markets. The Company also conducts
a small amount of manufacturing activity at its European subsidiaries and
through its joint venture in Japan.
Most of the Company's small system products currently are manufactured at a
facility near Wilmington, North Carolina, and Dallas, Texas. Deltec manufactures
small UPS systems at its facilities in Tijuana and San Diego. The Company's
manufacturing operations for small systems consist primarily of product
assembly, wiring harness fabrication, quality control and product testing. The
small systems manufacturing process involves production of high volumes of
various models of products, which are significantly easier to assemble than
large system products because of standard production runs and fewer discrete
components. The Company has historically out-sourced production of some of its
low-end products in Taiwan. Although the Company does not manufacture these
products directly, they are built to the Company's design specifications. The
Company believes that it can improve margins on such products by moving
production to Deltec's low-cost manufacturing facility in Tijuana.
The Company's large system products are manufactured in Raleigh, North
Carolina, and Dallas, Texas. Deltec manufactures its large system products in
Espoo, Finland and San Diego, California. Manufacturing operations for large
systems consist primarily of transformer fabrication, wiring harness
fabrication, product assembly, painting, quality control and product testing.
Large systems manufacturing involves production of lower volumes of products and
requires a higher level of manufacturing expertise due to a higher number of
components, and in many cases, the need for customization.
As a result of the facilities the Company acquired in the Deltec
Acquisition, the Company is exploring ways to consolidate its manufacturing
operations, including the possibility of relocating manufacturing operations
from Dallas to North Carolina and Deltec's facility in Tijuana.
Although the Company generally uses standard parts and components that are
available from a variety of sources, certain electronic components currently are
available only from single sources. While the Company has generally been able to
obtain adequate supplies of these components, recently UPS manufacturers,
including the Company, have experienced temporary shortages in some components,
such as certain microprocessors, printed circuit boards and capacitors. These
shortages affected the delivery schedule on some products and resulted in lower
margins on some sales as the Company incurred higher costs to procure components
from alternative sources. Generally, any inability to obtain supplies of
sole-source components will temporarily disrupt production as alternatives are
located or developed. In addition, the availability of certain specialized
components used with large UPS products, such as switchgear, batteries and other
ancillary equipment that are not inventoried by the Company, can affect the
timing of delivery of the Company's integrated power protection systems.
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<PAGE> 74
In October 1992, the Company, based upon an audit of its United States
operations, was certified and recognized as a Registered Firm conforming to ISO
9001 quality criteria for the design, manufacture and servicing of its products.
In addition, all of Deltec's manufacturing facilities have been ISO 9000
certified, with the San Diego and Helsinki facilities receiving ISO 9001
certification and the Tijuana facility receiving ISO 9002 certification. ISO
9001 and 9002 certification is becoming increasingly important in the marketing
and selling of products worldwide.
BACKLOG
The Company's backlog as of September 30, 1995 was approximately $107
million as compared with $146 million as of September 30, 1994. Approximately
$20 million of the backlog as of September 30, 1995 is not expected to be
delivered within the next 12 months. Backlog reflects firm customer orders for
products and services scheduled for shipment within 12 months, or firm, funded
government orders. A significant portion of the backlog at September 30, 1995 is
attributable to orders from the federal government, particularly for the FAA
Program.
The level of backlog at any particular time is not necessarily indicative
of future operating performance of the Company. Delivery schedules may be
extended, particularly in the case of large system UPS products, and orders may
be canceled at any time subject to certain cancellation penalties. In addition,
since small systems generally can be shipped shortly after firm customer orders
are received, backlog levels for small system products as of any particular date
may reflect a temporary surge or lull in orders, and may not be indicative of
business trends for subsequent periods.
COMPETITION
The Company believes that it is one of three global companies providing a
full range of UPS products and services worldwide. The Company competes with a
large number of firms with respect to small UPS products, and believes that its
principal competitors in the United States include American Power Conversion
Corporation, the leading manufacturer and seller of small UPS products; a
business unit of General Signal Corp.; a division of Emerson Electric Co.; and
Tripp Manufacturing Company. Since recent growth in the UPS industry has been in
small UPS products and since distribution channels for small UPS products are
rapidly evolving, the Company believes that it is likely to face significant
competition in the sale of small UPS products over the next several years.
The Company believes that its primary competitors in the large UPS product
market include business units of Emerson Electric Co. and Groupe Schneider, S.A.
These companies are much larger than the Company and have greater financial and
other resources. The Company believes that federal government procurements will
be highly competitive, such as the recent procurement process related to the new
ALC Contract discussed under "--Federal Government Contracts."
Many other companies compete successfully in certain countries or
geographic regions and in individual UPS product or application niches. Some of
the Company's competitors have greater financial and other resources than the
Company. The Company believes that product reliability and quality, performance,
service, support and price are the most important factors with respect to sales
of its UPS products. Marketing and brand recognition also play a role in
competing for the sale of UPS products.
FEDERAL GOVERNMENT CONTRACTS
Sales to the federal government accounted for approximately 35%, 33%, and
27% of the Company's revenues for the fiscal years ended September 30, 1993,
1994, and 1995, respectively. A major portion of the Company's sales to the
federal government consists of large, customized UPS products and ancillary
equipment under multi-year programs with complex manufacturing, system design,
delivery and installation schedules. In connection with these programs, the
Company supplies significant services, including site-specific engineering,
integration, systems implementation and startup, training, orientation,
documentation and program management. The Company also sells its products and
services to the federal government through its GSA schedule and frequently
through miscellaneous competitively-awarded and sole-source
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<PAGE> 75
procurement actions. Most of these contracts are subject to termination for the
convenience of the government pursuant to the terms of the contracts. See "Risk
Factors--Government Contract Matters."
A significant portion of the Company's sales to the federal government in
recent years has been under the ALC Contract awarded to the Company in May 1988
following a competitive procurement and, to a much lesser extent, under a
five-year contract with the United States Navy awarded to the Company in June
1991 following a competitive procurement. In April 1992, the Company was awarded
a second five-year contract with the United States Navy for a different range of
UPS products.
A significant portion of orders received by the Company under the ALC
Contract has been for the FAA Program. As of December 31, 1995, the Company has
received approximately $355 million in orders under the FAA Program, which
relate to approximately 25 FAA locations. As of September 30, 1995,
approximately $60 million of the Company's backlog relates to firm, funded
orders received under the FAA Program. The period during which orders could be
placed under the ALC Contract expired in May 1993. Expiration of the ALC
Contract does not affect orders received prior to expiration, and delivery on
the remainder of such orders, which consist primarily of site implementation
services for the FAA, is currently planned through fiscal 1997.
In June 1995, the Company was awarded a three-year follow-on to the ALC
Contract, with up to two additional one-year extensions at the option of the
government. Actual revenues under the follow-on ALC Contract will depend on the
specific purchases, if any, by the Air Force and other governmental agencies
that may use the contract during the contract period. Following the award of the
follow-on ALC Contract, certain competitors filed protests with the GAO. In
December 1995, the GAO notified the Company that all of the protests had been
dismissed, except the protest of the Air Force's evaluation of certain discounts
offered by the Company in the contract. The GAO has recommended that the Air
Force amend a portion of the request for proposal that led to the contract
award. The GAO further recommended that the Air Force allow the protesting
companies and the Company to submit new proposals regarding such portion, and
that the Air Force re-evaluate the award to the Company based upon these new
proposals. In response to the notification, the Company has filed a motion for
reconsideration of the GAO's ruling. In response to the GAO's ruling, the Air
Force has notified the Company that it is in the process of re-evaluating the
follow-on ALC Contract and that it will not issue orders under the contract
pending its re-evaluation process. The Company is unable to predict at this time
what the resolution of the contract protest will be and no assurances can be
given that the Company ultimately will retain the follow-on ALC Contract.
The Company's government contracts require the Company to supply UPS
products and services at the Company's contract prices. A principal benefit of
these types of contracts is that military or civilian agencies may purchase
products from the Company by procuring those products through the contracting
agency. The Company's Federal Systems Division therefore seeks to identify
applications useful to other Department of Defense and civilian agencies within
the federal government.
The Company's federal government business is performed under firm
fixed-price type contracts, time-and-materials type contracts, and at times a
combination of both. Under firm fixed-price contracts, the Company agrees to
deliver products and perform work for a fixed price. Accordingly, the Company
realizes all of the benefit or detriment resulting from decreased or increased
costs of performing under a firm fixed-price contract. Under time-and-materials
contracts, the Company receives an agreed hourly rate for each employee working
under the contract and is reimbursed for the cost of materials and certain
administrative overhead.
The Company's compliance with government contract regulations is audited or
reviewed from time to time by government auditors, who have the right to audit
the Company's records and the records of its subcontractors during and after
completion of contract performance. Under federal government regulations,
certain costs are not costs for which the government will reimburse the Company.
Government auditors may recommend that certain charges be treated as unallowable
and reimbursement be made to the government. In addition, as part of the
Company's internal control practices, the Company performs regular internal
reviews of its charges to the government. In connection with such reviews, the
Company may make voluntary refunds to the government for certain unallowable or
inadvertent charges, that are brought to the government's attention by the
Company. The Company provides for estimated unallowable charges and voluntary
refunds in its financial statements, and believes that its provisions are
adequate as of December 31, 1995.
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<PAGE> 76
The Company recognizes that, in the current federal government contracting
environment, many other contractors are the subject of various investigations
for breach of government contract rules and procedures. The Company is not aware
of any such investigations relating to the Company. However, if the Company were
charged with wrongdoing in connection with its federal government contracts, the
Company could be subject to civil and criminal damages and penalties, and could
be suspended from bidding on or receiving awards of new federal government
contracts pending the completion of legal proceedings. Any federal government
contracts found to be tainted by illegality can be voided by the government and
the contractor can be subject to fine or debarment from new federal government
contracts, and its export licenses could be terminated.
In addition to the right of the federal government to terminate contracts,
federal government contracts are conditioned upon the continuing availability of
budget appropriations. Funds are appropriated on a fiscal-year basis even though
contract performance may take more than one year. Consequently, contracts
usually are partially funded at the outset of multi-year programs; additional
funds normally are committed to contracts by the procuring agency only as
appropriations are made for future fiscal years.
PATENTS, LICENSES AND TRADEMARKS
The Company currently holds various domestic and international patents,
which expire at differing times from 2000 through 2011. In addition, the Company
has various patent applications which are pending. Although the Company believes
that the pending applications relate to patentable devices or concepts, there
can be no assurance that patents will be issued or that any patent issued can be
defended successfully, or that such patent rights, once granted, will provide
competitive advantages to the Company. Although the Company believes that
obtaining patents wherever possible is in its best interests, it also believes
that the legal protections afforded by such patents is of no greater importance
in the UPS industry than such factors as rapid development cycles, technological
expertise, marketing skill and customer support. The Company does not believe
that its patents or its patent applications are essential to the success of the
Company.
The Company has a perpetual, exclusive, royalty-free license for the use of
the name Exide as part of its corporate name and trade name for the manufacture,
sale, and service of UPS products. The Company holds certain licenses required
by federal government agencies for the export from the United States of many of
the Company's products.
The Company has numerous trademarks and service marks effective in the
United States and in several foreign countries. Powerware(R), OnliNet(R),
PowerVision(R), Hot-Tie(R), Strategic Power Management(R) and Cell Saver(R) are
registered trademarks of the Company, and PowerCare(R) is a registered service
mark. Applications for registered trademarks are pending for ONE-UPS(TM) and
DataFrame(TM). Management considers its various trademarks to be valuable assets
but believes that the loss of any one trademark would not have a material
adverse effect on the Company's operations.
Pursuant to a license agreement under the Acquisition Agreement, FPS has
the right to use the Fiskars trademark in certain countries in connection with
the design, manufacture, marketing, sale, distribution and service of UPS
products. FPS has a license to use the trademark for 24 months following the
closing of the Deltec Acquisition, with an option to extend the license for an
additional 12 months.
EMPLOYEES
As of September 30, 1995, the Company employed approximately 1,700 persons.
Approximately 650 are employed in manufacturing and the balance are in customer
support, research and development, sales and marketing, and administration.
Immediately following the Deltec Acquisition, the Company had approximately
2,400 employees, approximately 1,000 of which were in manufacturing. In
addition, the Company uses temporary personnel on an as-needed basis, which it
believes affords operating flexibility. The Company believes that its continued
success depends on its ability to attract and retain highly qualified personnel.
None of the Company's employees is represented by a collective bargaining
agreement. The metal workers, office and technical staff at Deltec's Finland
plant are represented by a collective bargaining
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<PAGE> 77
agreement. Neither the Company nor Deltec has experienced any work stoppages,
and the Company believes that its and Deltec's employee relations are good.
PROPERTIES
The Company's principal facilities are as follows:
<TABLE>
<CAPTION>
SQUARE
LOCATION FEET OPERATIONS
------------------------------------- ------- -------------------------------------
<S> <C> <C>
Raleigh, NC:
Worldwide Headquarters............. 93,000 Corporate offices; sales and
marketing; customer service
LSG Manufacturing Facility......... 170,000 Manufacturing
Advanced Technology Center......... 28,000 Research and development
Federal Systems Division........... 18,000 Federal program management;
engineering
Training and Support Center........ 22,000 Technical training and support
Emerging Technologies Group and
Worldwide Logistics Center...... 185,000 Distribution; manufacturing; repair;
administrative offices
Wilmington, NC....................... 168,000 SSG manufacturing
Louisville, CO....................... 9,000 DataTrax sales; customer support;
administrative offices;
manufacturing; research and
development
Dallas, TX........................... 133,000 IPM manufacturing; sales;
distribution; administrative offices
Toronto, Canada...................... 40,000 Distribution; sales; customer
support; administrative offices
Paris, France........................ 7,000 Distribution; sales; customer
support; administrative offices
London, England...................... 15,000 Distribution; sales; customer
support; administrative offices
-------
Total...................... 888,000
=======
</TABLE>
The Deltec Acquisition added the following facilities:
<TABLE>
<CAPTION>
SQUARE
LOCATION FEET OPERATIONS
------------------------------------- ------- -------------------------------------
<S> <C> <C>
San Diego, CA........................ 89,000 Corporate offices; sales and
marketing; customer service;
manufacturing; distribution
Tijuana, Mexico...................... 64,000 Manufacturing; distribution
Espoo, Finland....................... 78,000 Corporate offices; sales and
marketing; customer service;
manufacturing; distribution
-------
Total...................... 231,000
=======
</TABLE>
All of the Company's principal facilities are occupied under long-term leases,
except for the facility in Wilmington, North Carolina, which is owned. The
Company also leases various sales and service offices worldwide. The Company
believes that its facilities are adequate to meet its current requirements.
LEGAL PROCEEDINGS
In January 1989, a case was filed by a former manufacturer's representative
of the Company, alleging that the Company failed to pay commissions owed to him
on certain sales. In April 1990, a jury awarded the
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<PAGE> 78
plaintiff damages of approximately $14.9 million. The Company appealed the
decision, and in September 1992, the appellate court reversed the judgment
against the Company. In response to various motions filed by the plaintiff, a
new trial was granted, and in March 1994, the jury in the new trial awarded
damages of $3.8 million payable by the Company to the plaintiff. While the
Company continued to believe that it should have no liability in this matter and
announced its intention to appeal, it recorded a one-time charge in the second
quarter of fiscal 1994 of $5.0 million ($2.9 million after tax) for the jury
verdict and for the costs of the trial.
In July 1994, the Company announced that this litigation had been settled.
Following agreement among the parties to settle, the court vacated the jury
award of $3.8 million previously entered and determined that the vacated
judgment cannot be used against the Company in the future. To avoid further
litigation including post-trial motions and appeals, the Company settled the
case by making payments to the plaintiff and his attorneys. The parties
thereafter stipulated that the entire action was dismissed with prejudice. Since
the total value of the settlement payments was less than the one-time charge for
the jury verdict recorded by the Company in the second quarter of fiscal 1994,
no further charges were necessary in this matter. By agreement with the
plaintiff, the terms of the confidential settlement were not disclosed.
In May 1990, the Company was served with a complaint in the Delaware Court
of Chancery and in May 1991, a related case was filed in Federal Court in New
York. These complaints alleged, among other things, that the Company's
description of the case involving the manufacturer's representative in its
prospectus dated December 21, 1989 was false and misleading. In April 1995, the
Company announced that it had settled both the Delaware and New York suits. The
Delaware action had been dismissed once for failure to state a claim, but was
reinstated following an appeal and was in the discovery process prior to the
settlement. The Company recorded a charge of $700,000 ($424,000 after tax) for
the settlement of the two related lawsuits in the quarter ended March 31, 1995.
Court approval of the settlement agreement, after notice to affected
shareholders, was granted in August 1995. While the Company believed that
neither suit had merit, it decided to settle as the suits were taking valuable
corporate time and attention and would have involved significant legal costs to
pursue further.
On August 21, 1995, a case entitled National Broadcasting Company, Inc. and
CNBC, Inc. vs. International Power Machines/LorTec Systems Inc. et al, was filed
against IPM in the Supreme Court of New York, New York County. The plaintiffs
allege that IPM negligently manufactured and installed a UPS product that caused
them property and compensatory damages when the equipment malfunctioned during
the installation of the product by third-party contractors. The plaintiffs have
filed seven causes of action, each of which seeks damages in the amount of $1.1
million. Three of those causes of action also seek $3.0 million in punitive
damages. Claims of this nature are generally covered by the Company's insurance
and its insurer has accepted general defense of the matter. The insurer has
notified the Company that while claims based on IPM's negligent manufacture or
design are covered by the insurance policy, damages, if any, caused by IPM's
intentional or careless decision to install a known defective and dangerous
product would be subject to certain exclusions under the policy. While discovery
is at an early stage, the Company believes at this time, based on the advice of
its defense counsel, that no evidence has yet been presented that supports any
allegation of intentional or careless conduct. IPM also believes that it has
meritorious defenses and counter-claims against the third-party co-defendants
who the Company alleges defectively installed the UPS product. The Company
believes that the final outcome of this matter will not have a material adverse
effect on the business or the financial position of the Company and its
subsidiaries taken as a whole.
The Company is involved in various litigation proceedings incidental to its
business. The defense of most of these matters is handled by the Company's
insurance carriers. The Company believes that the outcome of such other pending
litigation in the aggregate will not have a material adverse effect on its
financial statements.
ENVIRONMENTAL REGULATION
The Company's and Deltec's operations are subject to federal, state, local
and foreign environmental laws and regulations relating to the storage, handling
and disposal of hazardous or toxic materials and
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<PAGE> 79
discharge into the environment of regulated pollutants. To the best of the
Company's knowledge, the Company's and Deltec's operations are in material
compliance with the terms of all applicable environmental laws and regulations
as currently interpreted and there are no existing or potential environmental
claims against the Company or Deltec that are likely to have a material adverse
effect on the Company's business or financial condition or on its financial
statements taken as a whole. However, the Company cannot predict with any
certainty whether future events, such as changes in existing laws and
regulations, will give rise to liability or additional costs that could have a
material adverse effect on the Company's financial condition. Furthermore,
actions by federal, state, local and foreign governments concerning
environmental matters could result in laws or regulations that could increase
the cost of producing the products manufactured by the Company or otherwise
adversely affect the demand for its products.
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<PAGE> 80
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
-------------------------------------- --- --------------------------------------
<S> <C> <C>
Conrad A. Plimpton.................... 52 Chairman of the Board
Lance L. Knox......................... 51 Vice Chairman of the Board
James A. Risher....................... 53 President, Chief Executive Officer and
Director
Mark A. Ascolese...................... 45 Senior Vice President and General
Manager, the Americas Group
Nicholas J. Costanza.................. 40 Vice President, Chief Administrative
Officer, General Counsel and
Secretary
Warren J. Johnson..................... 47 Vice President and General Manager,
IPM and ETG
Marty R. Kittrell..................... 39 Vice President, Chief Financial
Officer, Treasurer and Assistant
Secretary
Hermann G. P. Metzler................. 54 Vice President, International Group
William J. Raddi...................... 56 Senior Vice President, Chief
Technology Officer, General Manager,
Small Systems Group
Alden R. Schnaidt..................... 47 Vice President and General Manager,
Large Systems Group
Wayne L. Clevenger.................... 52 Director
Ron E. Doggett........................ 61 Director
James E. Fowler....................... 63 Director
David J. McLaughlin................... 59 Director
Chiaki Tanaka......................... 60 Director
Stig G. Stendahl...................... 57 Director
Ralf R. Boer.......................... 47 Director
</TABLE>
Conrad A. Plimpton has been Chairman of the Board and a director of the
Company since 1982 and was Secretary from 1982 until 1991. Mr. Plimpton has been
a Managing Director of the private investment firm of Plimpton & Company since
1979.
Lance L. Knox has been Vice Chairman of the Board and a director of the
Company since 1982. Mr. Knox is a principal of The Lethbridge Group, Inc., a
private investment firm, which he founded in 1988.
James A. Risher has been President, Chief Executive Officer and a director
since joining the Company in 1986. From 1984 through 1986, Mr. Risher was Senior
Vice President of Distribution Operations of the Computer System Division of
Motorola, Inc. From 1979 to 1984, Mr. Risher was employed by Wang Laboratories,
serving in his last position as Vice President of Marketing for Domestic
Operations. Previously, Mr. Risher spent 12 years with IBM in various sales and
marketing positions.
Mark A. Ascolese joined the Company in 1985 and assumed his current
position as Senior Vice President and General Manager, the Americas Group in
October 1995. Mr. Ascolese has served in various customer service, sales
management and general manager capacities since becoming a Vice President in
1987. He was Vice President and General Manager, Worldwide Services Group from
1992 to January 1995 and Senior Vice President and General Manager, North
American Field Operations from January to October 1995.
Nicholas J. Costanza joined the Company's predecessor in 1980 and assumed
his current position as Vice President, Chief Administrative Officer, General
Counsel and Secretary in November 1995. As Chief Administrative Officer, Mr.
Costanza has assumed worldwide responsibility for Human Resources. Mr. Costanza
held various legal positions prior to being promoted to Vice President and Chief
Legal Counsel in 1986. He was elected Secretary in 1991.
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<PAGE> 81
Warren J. Johnson joined the Company's predecessor in 1978, serving in
various financial and managerial capacities until he assumed his current
position as Vice President and General Manager, International Power Machines and
Emerging Technologies Group in September 1995. From 1989 to 1992, Mr. Johnson
was Vice President and General Manager, Office Systems Group. From 1992 to 1995,
he was Vice President, Corporate Development, and from February to September
1995, he was Vice President and General Manager, International Power Machines.
Marty R. Kittrell joined the Company in 1989 as Vice President and Chief
Financial Officer and Treasurer. He was elected Assistant Secretary in 1991.
Hermann G. P. Metzler joined the Company in 1984 as Manager of
International Sales and Service. From 1985 until 1989, he served as Director of
International Marketing and Sales, at which time he assumed his current position
of Vice President, International Group.
William J. Raddi has been with the Company and its predecessors since 1962
and has served in various engineering, development and manufacturing capacities.
In 1990, he assumed the title of Senior Vice President and Chief Technology
Officer. In 1992, he assumed the additional position of Senior Vice President
and General Manager, Small Systems Group.
Alden R. Schnaidt joined the Company in 1986 as Director of Manufacturing,
was promoted to Vice President, Manufacturing Operations in 1988, and assumed
his current position as Vice President and General Manager, Large Systems Group
in 1992.
Wayne L. Clevenger has been a director since 1982. Mr. Clevenger has been
Managing Director of MidMark Management, Inc., a private investment firm, since
January 1990. He was President of Lexington Investment Company from 1985 to
1989. Mr. Clevenger is a director of United Wholesale, Inc., and Lionheart
Industries, Inc.
Ron E. Doggett has been a director of the Company since 1991. Mr. Doggett
has been Chief Executive Officer since 1985 and Chairman of the Board since 1987
of GoodMark Foods, Inc., a producer of snack foods.
James E. Fowler has been a director since 1985. Mr. Fowler has been a
financial consultant since July 1994. He previously served as Assistant
Comptroller of Inco Limited and as President of Inco Battery Holdings
Corporation from 1983 until his retirement in 1994.
David J. McLaughlin has been a director since 1990. Mr. McLaughlin has been
President of McLaughlin and Company, Inc., a management consulting firm, since
1984. He has also been Executive Director of the Senior Personnel Executive
Forum, a non profit association, since 1979. Mr. McLaughlin is a director of
Scientific Atlanta, Inc., Smart & Final, Inc., Troy Biosciences, Inc. and
Evolve, Inc.
Chiaki Tanaka was elected as a director by the Board of Directors in 1992.
Mr. Tanaka has been Managing Director, Power Supply Systems Division of JSB
since 1990. He has been a director of GS-EE Co., Ltd., the Company's joint
venture with JSB, since 1989.
Stig G. Stendahl has been President and Chief Executive Officer of Fiskars
OY AB since 1992. He also is a member of the board of directors of several other
European companies. Mr. Stendahl was designated by Fiskars to serve as a
director of the Company pursuant to a stockholder agreement between the Company
and Fiskars.
Ralf R. Boer has been an attorney with Foley and Lardner, an international
law firm, since 1974 and a Managing Partner of that firm since 1992. He is a
member of the board of directors of several European companies and their United
States subsidiaries. Mr. Boer was designated by Fiskars to serve as a director
of the Company pursuant to a stockholder agreement between the Company and
Fiskars.
Mr. Knox was an officer of FGH Corp., which was an inoperative shell
company, when that company filed for protection under Chapter 7 of the
Bankruptcy Code in 1992.
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<PAGE> 82
PRINCIPAL SHAREHOLDERS
The following table sets forth ownership of the Company's voting securities
as of April 9, 1996 by (i) each person who is known to the Company to own
beneficially more than 5% of the outstanding shares of any class of its voting
securities, (ii) each named executive officer, (iii) each director and (iv) all
directors and executive officers as a group. Except as noted below, each person
or entity has sole voting and investment power with respect to the shares shown.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER
- -------------------------------------------
SHARES OF OPTIONS EXERCISABLE PERCENT OF
FIVE PERCENT SHAREHOLDERS COMMON STOCK(1)(2) WITHIN 60 DAYS(1) COMMON STOCK(3)
- ------------------------------------------- ------------------ ------------------- ---------------
<S> <C> <C> <C>
Fiskars OY AB.............................. 1,825,000(4) -0- 16.6%
Massachusetts Mutual Life Insurance
Company.................................. 1,146,789(5) -0- 10.4
Duquesne Enterprises, Inc. ................ 1,043,750 -0- 9.5
Japan Storage Battery Co., Ltd. ........... 645,273 -0- 5.9
<CAPTION>
OFFICERS AND DIRECTORS
- -------------------------------------------
<S> <C> <C> <C>
Conrad A. Plimpton......................... 353,885(6) 15,500 3.4%
James A. Risher............................ 273,090 60,000(10)(11) 3.0
Lance L. Knox.............................. 186,890 15,500 1.8
Wayne L. Clevenger......................... 10,000 15,500 *
Ron E. Doggett............................. 3,000 10,500 *
James E. Fowler............................ 1,250(7) 4,250(7) *
David J. McLaughlin........................ 3,300 13,000 *
Chiaki Tanaka.............................. -0-(8) 10,500 *
Alden R. Schnaidt.......................... 30,000 12,500(10)(12) *
Mark A. Ascolese........................... 37,222 13,500(13) *
Marty R. Kittrell.......................... 36,814 19,500(10)(13) *
William J. Raddi........................... 115,000 22,000(14) 1.2
All Executive Officers and Directors as a
group (16 persons)....................... 1,141,832(6)(9) 242,375(10) 12.6%
</TABLE>
- ---------------
* Less than 1%.
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to the shares
of Common Stock shown as beneficially owned by them.
(2) Does not include an option to purchase shares of Common Stock, which are
listed separately under the column "Options Exercisable Within 60 Days."
(3) Represents the percent of shares of Common Stock held, options exercisable
within 60 days, and the Series G Preferred Stock issued to Fiskars, each
share of which has the same voting rights as a share of Common Stock.
(4) Includes 1,000,000 shares of the Series G Preferred Stock, which may be
converted into Common Stock on a share-for-share basis at any time.
(5) Massachusetts Mutual Life Insurance Company, MassMutual Corporate
Investors, and MassMutual Participation Investors own 802,752, 229,358 and
114,679 shares of Common Stock of the Company, respectively, which were
converted on October 23, 1995 from $10,500,000, $3,000,000 and $1,500,000,
respectively, of Convertible Subordinated Notes.
(6) Includes 2,300 shares held by custodian for the Conrad A. Plimpton SERP
Trust.
(7) Does not include shares of Common Stock that may be owned directly by Inco
Battery Holdings Corporation ("Inco"). Mr. Fowler, as a former officer of
Inco, shared voting and investment power over any such shares acquired or
granted through June 1993 and disclaims beneficial ownership of such
shares. Mr. Fowler claims sole voting and investment power over 1,250
shares and 2,750 stock options exercisable within 60 days, which were
acquired or granted after June 1993.
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<PAGE> 83
(8) Does not include 595,273 shares of Common Stock which were acquired July 1,
1995 upon conversion of the 5,100 shares of Series D preferred stock and
4,900 shares of Series E preferred stock held by JSB. Mr. Tanaka, as an
officer of JSB, has shared voting and investment power over such shares.
Mr. Tanaka disclaims beneficial ownership of such shares.
(9) Does not include shares of Common Stock owned directly or beneficially by
Inco. Mr. Fowler, as a former officer of Inco, shared voting and investment
power over any such shares acquired or granted through June 1993 and
disclaims beneficial ownership of such shares. Does not include 50,000
shares of Common Stock currently owned by JSB or 595,273 shares of Common
Stock that were acquired upon conversion of 5,100 shares of Series D
preferred stock and 4,900 shares of Series E preferred stock held by JSB.
Mr. Tanaka, as an officer of JSB, has shared voting and investment power
over such shares and disclaims beneficial ownership of such shares.
(10) Does not include Warrants to purchase Common Stock that were acquired in
the Offering.
(11) Does not include an option to purchase 30,000 shares of Common Stock, which
is not exercisable within 60 days.
(12) Does not include an option to purchase 7,500 shares of Common Stock, which
is not exercisable within 60 days.
(13) Does not include an option to purchase 22,500 shares of Common Stock, which
is not exercisable within 60 days.
(14) Does not include an option to purchase 15,000 shares of Common Stock, which
is not exercisable within 60 days.
In connection with the Deltec Acquisition, the Company issued to Fiskars
825,000 shares of Common Stock and 1,000,000 shares of Series G Preferred Stock,
which is convertible at any time into 1,000,000 shares of Common Stock (subject
to adjustment). The Series G Preferred Stock votes (subject to the terms of a
stockholder agreement) on a one-for-one basis with the Common Stock. Assuming
all of the Series G Preferred Stock was converted to Common Stock, as of April
9, 1996, Fiskars would have beneficially owned approximately 16.6% of the
Company's Common Stock. See "Description of Capital Stock--Preferred Stock."
In connection with the Offering, the Company issued 125,000 Warrants to
purchase in the aggregate 643,750 shares of the Company's Common Stock (subject
to adjustment), which represents in the aggregate approximately 5.5% of the
Company's Common Stock on a fully diluted basis, on a pro forma basis after
giving effect to the Deltec Acquisition. The Warrants are exercisable at any
time after the Separation Date (as defined herein).
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<PAGE> 84
DESCRIPTION OF NEW CREDIT FACILITY
The Company entered into a credit agreement (the "Credit Agreement"), dated
March 13, 1996, with a syndicate of lenders, including Morgan Guaranty Trust
Company of New York, as Administrative Agent (the "Agent"), First Union National
Bank of North Carolina, Bank of America Illinois, NationsBank, N.A., and ABN
AMRO Bank, N.V. (collectively, the "Lenders") for a senior secured credit
facility of up to $175.0 million (the "New Credit Facility"), comprised of a
$50.0 million term loan and a $125.0 million revolving credit facility. Upon
closing of the Offering and the Deltec Acquisition, $50.0 million of the New
Credit Facility was in the form of a term loan, part of the proceeds of which
were used to finance a portion of the purchase price of the Deltec Acquisition.
The remaining $125.0 million of availability under the New Credit Facility as of
the closing of the Offering and the Deltec Acquisition was in the form of a
revolving credit facility, the proceeds of which were used to refinance the
previously existing unsecured credit facility (the "Existing Facility"), to
provide working capital for general corporate purposes, and the issuance of
letters of credit in an aggregate amount at any one time not to exceed $10.0
million. Advances under the revolving credit facility are limited to an amount
not to exceed the sum of (i) 70% of eligible accounts receivables and (ii) 50%
of eligible inventory of the Company and its subsidiaries.
The New Credit Facility is subject to and governed by the Credit Agreement
by and among the Company, the Lenders and certain other obligors.
Both the term portion and the revolver portion of the New Credit Facility
require periodic (not more than quarterly) payments of accrued and unpaid
interest. The Company is permitted to prepay the principal amount of the New
Credit Facility. The Company is obligated to repay during each fiscal year an
aggregate principal amount of the term loan equal to the amount set forth below
opposite each such fiscal year:
<TABLE>
<CAPTION>
FISCAL
YEAR ANNUAL AMOUNT
- -------- -------------
<S> <C> <C>
1996...................................................................... $ 2,500,000
1997...................................................................... 6,666,667
1998...................................................................... 8,333,333
1999...................................................................... 10,833,333
2000...................................................................... 14,166,667
2001...................................................................... 7,500,000
</TABLE>
Any principal amount of the term loan and any amounts due under the revolver
that remain unpaid on the fifth anniversary of the closing of the New Credit
Facility (the "Maturity Date") are required to be repaid in full on the Maturity
Date.
In addition to the scheduled principal payments under the term loan, the
Company is obligated to first repay the term loan and second permanently reduce
commitments under the revolver upon the occurrence of certain events, including
(i) the sale of certain assets by the Company or any of its subsidiaries, (ii)
the incurrence of certain additional debt by the Company or any of its
subsidiaries, (iii) the issuance of any equity securities by the Company or any
of its subsidiaries, or (iv) the receipt of certain casualty insurance proceeds.
The amount required to be repaid varies upon the type of event as follows: (i)
in respect of certain asset sales, 100% of the net cash proceeds thereof in
excess of $1.0 million in any fiscal year, (ii) in respect of the incurrence of
certain additional debt or the receipt of certain casualty insurance proceeds,
100% of the net cash proceeds thereof, (iii) in respect of excess cash flow, 50%
of the amount thereof, and (iv) in respect of the issuance of equity securities,
50% of the net cash proceeds thereof in excess of $200,000 in any fiscal year.
The outstanding principal of the New Credit Facility accrues interest at a
rate per annum equal to either (i) the Prime Rate of interest publicly announced
by the Agent plus the Base Rate Margin, or (ii) the London Interbank Offered
Rate plus the Euro-Dollar Margin. The loans included in each borrowing under the
New Credit Facility bear interest at the type of rate specified by the Company
in the applicable notice of borrowing.
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<PAGE> 85
The Applicable Leverage Ratio (as that term is defined in the New Credit
Facility) determines the Base Rate Margin and the Euro-Dollar Margin pursuant to
the following pricing schedule:
<TABLE>
<CAPTION>
BASE RATE EURO-DOLLAR COMMITMENT
APPLICABLE LEVERAGE RATIO MARGIN MARGIN FEE RATE
----------------------------------------------------- --------- ----------- ----------
<S> <C> <C> <C>
Less than 2.0........................................ 0.00% 0.75% 0.25 %
Greater than or equal to 2.0 and less than 2.5....... 0.00 1.00 0.375
Greater than or equal to 2.5 and less than 3.0....... 0.50 1.50 0.375
Greater than or equal to 3.0 and less than 3.5....... 1.00 2.00 0.375
Greater than or equal to 3.5 and less than 4.0....... 1.25 2.25 0.5
Greater than or equal to 4.0......................... 1.5 2.5 0.5
</TABLE>
The Company's initial Applicable Leverage Ratio was greater than 4.0.
In addition to the interest charges set forth above, the Company pays to
the Agent (i) for the account of the Lenders a commitment fee on the unused
portion of the revolver at the Commitment Fee Rate set forth in the pricing
schedule to the New Credit Facility, which rate is dependent on the Applicable
Leverage Ratio of the Company, (ii) for the account of the Lenders a letter of
credit fee on the aggregate amount then available for drawing under all letters
of credit at the Letter of Credit Fee Rate set forth in the pricing schedule to
the New Credit Facility, which rate is dependent on the Applicable Leverage
Ratio of the Company, and which rate coincides with the Euro-Dollar Margin, and
(iii) for the account of any issuing Lender a letter of credit fronting fee
accruing on the aggregate amount then available for drawing under all letters of
credit issued by such Lender at a rate per annum equal to 0.25%.
The obligations of the Company under the New Credit Facility are guaranteed
by each domestic subsidiary of the Company. The Company and each such guarantor
are collectively referred to as the Obligors.
The New Credit Facility is secured by a first priority lien in all accounts
receivables and inventory of the Obligors, and the pledge of all of the capital
stock of the Obligors other than the capital stock of certain immaterial
subsidiaries, except that the pledge of the capital stock of each foreign
subsidiary is limited to 66% of the capital stock of such foreign subsidiary. No
foreign subsidiary was required to pledge the capital stock of any foreign
subsidiaries owned by such foreign subsidiary.
The New Credit Agreement contains customary representations, warranties and
events of default and requires the Company to comply with certain affirmative
and negative covenants, including requirements that the Company (i) periodically
deliver certain financial information, (ii) pay and discharge all material
obligations and liabilities, (iii) maintain certain insurance coverages, (iv)
preserve its corporate existence, (v) comply in all material respects with
applicable laws, ordinances, rules and regulations, (vi) not merge or make
certain asset sales, (vii) not permit certain liens to exist on its assets,
(viii) not incur additional debt except as may be permitted under the terms of
the New Credit Facility, (ix) not make capital expenditures in excess of limits
set forth in the New Credit Facility, (x) not declare or make certain dividend
payments and (xi) not make certain investments or consummate certain
acquisitions.
In addition, the Company must comply with a number of financial covenants,
including maintaining specified Minimum Consolidated Net Worth, Fixed Charge
Coverage Ratio, Leverage Ratio and Minimum EBITDA levels (as those terms are
defined in the New Credit Facility) in amounts set forth in the New Credit
Facility. The Company was in compliance with these covenants upon the closing of
the New Credit Facility.
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<PAGE> 86
DESCRIPTION OF NOTES
GENERAL
The Series B Notes will be issued by the Company pursuant to the Indenture
between the Company and American Bank National Association, as trustee (the
"Trustee"). The Series B Notes will evidence the same indebtedness as the Series
A Notes (which they replace) and will be entitled to the benefits of the
Indenture. The form and terms of the Series B Notes are the same as the form and
terms of the Series A Notes except that (i) the Series B Notes will have been
registered under the Securities Act, and, therefore, the Series B Notes will not
bear legends restricting the transfer thereof and (ii) Holders of the Series B
Notes will not be entitled to certain rights of Holders of the Series A Notes
under the Registration Rights Agreement, which rights will terminate upon the
consummation of the Exchange Offer. 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"). The Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the Trust Indenture Act for a statement thereof. The following summary of
certain provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. The definitions of certain
terms used in the following summary are set forth below under "-- Certain
Definitions."
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future Senior Debt, and ranking senior in
right of payment to all future subordinated Indebtedness of the Company. The
Company's obligations under the Indenture and the Notes are guaranteed on a
senior subordinated basis (the "Subsidiary Guarantees") by each of the Company's
existing and future domestic Subsidiaries (the "Guarantors"). The Subsidiary
Guarantees are subordinated to the guarantees by the Guarantors of Senior Debt.
Certain of the Company's Subsidiaries are foreign Subsidiaries and are not,
therefore, Guarantors. See "Subordination"; "Subsidiary Guarantees" and Note 18
of the Notes to the Exide Electronics annual consolidated financial statements,
Note 6 to the Exide Electronics Notes to interim consolidated financial
statements and Note 13 of the Notes to the Deltec combined/consolidated
financial statements.
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 are
effectively subordinated to all indebtedness and other liabilities and
commitments (including trade payables and lease obligations) of the Company's
Subsidiaries that are not Guarantors. Any right of the Company to receive assets
of any of its Subsidiaries upon the latter's liquidation or reorganization (and
the consequent right of the Holders of the Notes to participate in those assets)
is effectively subordinated to the claims of that Subsidiary's creditors, except
to the extent that the Company is itself recognized as a creditor of such
Subsidiary, in which case the claims of the Company would still be subordinate
to any security in the assets of such Subsidiary and any indebtedness of such
Subsidiary senior to that held by the Company. As of the date of the Indenture,
all of the Company's Subsidiaries were Restricted Subsidiaries. Under certain
circumstances, the Company can designate current or future Subsidiaries as
Unrestricted Subsidiaries. Unrestricted Subsidiaries are not subject to many of
the restrictive covenants set forth in the Indenture and are not Guarantors.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $125.0 million and
will mature on March 15, 2006. Interest on the Notes accrues at the rate of
11 1/2% per annum and is payable semi-annually in arrears on March 15 and
September 15, commencing on September 15, 1996, to Holders of record on the
immediately preceding March 1 and September 1. Interest on the Notes accrues
from the most recent date to which interest has been paid or, if no interest has
been paid, from the date of original issuance. Interest is computed on the basis
of a 360-day year comprised of twelve 30-day months. Principal, premium, if any,
and interest and Liquidated Damages on the Notes are payable at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of interest and Liquidated
Damages may be made by check mailed to the Holders at their respective addresses
set forth in
84
<PAGE> 87
the register of Holders; provided that all payments with respect to Notes the
Holders of which have given wire transfer instructions to the Company are
required to be made by wire transfer of immediately available funds to the
accounts specified by the Holders thereof. Until otherwise designated by the
Company, the Company's office or agency in New York is the office of the Trustee
maintained for such purpose. The Notes are issued in denominations of $1,000 and
integral multiples thereof.
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to March 15,
2001. Thereafter, the Notes will be subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on March 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
--------------------------------------------------------------- ----------
<S> <C>
2001........................................................... 105.750%
2002........................................................... 103.833%
2003........................................................... 101.917%
2004 and thereafter............................................ 100.000%
</TABLE>
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon to the date of purchase (the "Change of
Control Payment"). Within ten days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes pursuant
to the procedures required by the Indenture and described in such notice. 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 the Notes as
a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the
85
<PAGE> 88
Paying Agent an amount equal to the Change of Control Payment in respect of all
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Notes or portions thereof being
purchased by the Company. The Paying Agent will promptly mail to each Holder of
Notes so tendered the Change of Control Payment for such Notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new Note equal in principal amount to any unpurchased portion
of the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Indenture
provides that, prior to complying with the provisions of this covenant, but in
any event within 90 days following a Change of Control, the Company will either
repay all outstanding Senior Debt or obtain the requisite consents, if any,
under all agreements governing outstanding Senior Debt to permit the repurchase
of Notes required by this covenant. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
The Change of Control provisions described above are applicable whether or
not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The New Credit Facility prohibits the Company from purchasing any Notes,
and also provides that certain change of control events with respect to the
Company would constitute a default thereunder. Any future credit agreements or
other agreements relating to Senior Debt to which the Company becomes a party
may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing Notes,
the Company could seek the consent of its lenders to the purchase of Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing Notes. In such case, the Company's
failure to purchase tendered Notes would constitute an Event of Default under
the Indenture which would, in turn, constitute a default under the New Credit
Facility. In such circumstances, the subordination provisions in the Indenture
would almost certainly prevent payments to the Holders of Notes.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above) becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly
or indirectly, of more than 50% of the voting stock of the Company, or (iv) the
first day on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
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<PAGE> 89
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, engage in an Asset Sale unless (i) the
Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash; provided that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet), of
the Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to or pari passu with the Notes
or any guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are immediately converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to be
cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or such Restricted Subsidiary, as the case may be, may apply such
Net Proceeds, at its option, (a) to permanently reduce Senior Term Debt, (b) to
permanently reduce Senior Revolving Debt (and to correspondingly reduce
commitments with respect thereto), or (c) to the acquisition of a controlling
interest in another business or a division of another Person, the making of a
capital expenditure or the acquisition of other long-term assets, in each case,
in the same or a similar line of business as the Company was engaged in on the
date of the Indenture. Pending the final application of any such Net Proceeds,
the Company may temporarily reduce Senior Revolving Debt or otherwise invest
such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company
will be required to make an offer to all Holders of Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes that may be purchased
out of the Excess Proceeds, at an offer price in cash in an amount equal to 100%
of the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon to the date of purchase, in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate purposes. If
the aggregate principal amount of Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Notes is
subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full of all Senior Debt, whether outstanding on the date of the
Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt (including
interest accruing after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt, whether or not such interest is allowed
as a claim in any such proceeding) before the Holders will be entitled to
receive any payment with respect to the Notes, and until all Obligations
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<PAGE> 90
with respect to Senior Debt are paid in full, any distribution to which the
Holders would be entitled shall be made to the holders of Senior Debt (except
that Holders may receive securities that are subordinated at least to the same
extent as the Notes to Senior Debt and any securities issued in exchange for
Senior Debt and distributions from the trust described below under "-- Legal
Defeasance and Covenant Defeasance.").
The Company also may not make any payment upon or in respect of the Notes
(except in such subordinated securities or from the trust described below under
"-- Legal Defeasance and Covenant Defeasance") if (i) a default in the payment
of the principal of, premium, if any, or interest on Designated Senior Debt
occurs and is continuing or (ii) any other default occurs and is continuing with
respect to Designated Senior Debt that permits holders of the Designated Senior
Debt as to which such default relates to accelerate its maturity and the Trustee
receives a notice of such default (a "Payment Blockage Notice") from the Company
or the holders of any Designated Senior Debt. Payments on the Notes may and
shall be resumed (a) in the case of a payment default, upon the date on which
such default is cured or waived and (b) in case of a nonpayment default, the
earlier of the date on which such nonpayment default is cured or waived (unless
another Payment Blockage Notice is then in effect) or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the maturity of
any Designated Senior Debt has been accelerated. During any consecutive 365-day
period, the aggregate number of days in which payments due on the Notes may not
be made as a result of nonpayment defaults on Designated Senior Debt shall not
exceed 179 days and there shall be a period of at least 186 consecutive days in
each consecutive 365-day period when such payments are not prohibited. If any
holder of Designated Senior Debt delivers a Payment Blockage Notice to the
Trustee in respect of any nonpayment default on such Designated Senior Debt, no
nonpayment default of which such holders or any representative of such holders
was aware that existed or was continuing on the date of delivery of such notice
shall be, or be made, the basis for a subsequent Payment Blockage Notice unless
such default shall have been waived or cured for a period of not less than 90
days. Notwithstanding the foregoing, no subsequent Payment Blockage Notice may
be delivered unless all scheduled payments of principal, premium, if any,
interest and Liquidated Damages on the Notes that have come due have been paid
in full in cash.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders may recover less ratably than creditors
of the Company who are holders of Senior Debt. See "Risk
Factors -- Subordination." On a pro forma basis, after giving effect to the
Offering and the application of the proceeds therefrom, the principal amount of
Senior Debt outstanding at December 31, 1995 would have been approximately
$135.2 million. The Indenture limits, subject to certain financial tests, the
amount of additional Indebtedness, including Senior Debt, that the Company and
its subsidiaries can incur. See "-- Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock."
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are jointly and severally
guaranteed (the "Subsidiary Guarantees") by the Guarantors. The Subsidiary
Guarantee of each Guarantor is subordinated to the prior payment in full of all
Senior Debt of such Guarantor, which would include approximately $141.8 million
of Senior Debt outstanding at December 31, 1995, and the amounts for which the
Guarantors will be liable under the guarantees issued from time to time with
respect to Senior Debt. The obligations of each Guarantor under its Subsidiary
Guarantee are limited so as not to constitute a fraudulent conveyance under
applicable law. See "Risk Factors -- Fraudulent Conveyance Considerations."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee,
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under the Notes and the Indenture and (ii) immediately after giving effect to
such transaction, no Default or Event of Default exists.
The Indenture provides that in the event of a sale or other disposition of
all or substantially all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the capital
stock of any Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of such a merger, consolidation or otherwise, of all of the
capital stock of such Guarantor) or the corporation acquiring the property (in
the event of a sale or other disposition of all or substantially all of the
assets of such Guarantor) will be released and relieved of any obligations under
its Subsidiary Guarantee; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with the applicable provisions of the
Indenture. See "Redemption or Repurchase at Option of Holders -- Asset Sales."
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay
any dividends or make any other payment or distribution on account of the
Company's Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company) or to the
direct or indirect holders of the Company's Equity Interests in their capacity
as such (other than dividends or distributions payable in Equity Interests
(other than Disqualified Stock) of the Company or dividends or distributions
payable to the Company or any Restricted Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of the Company or any direct or indirect parent of the Company; (iii) make any
principal payment on, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness that is subordinated to or pari passu with the
Notes, except at the stated final maturity thereof or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under caption "-- Incurrence of Indebtedness
and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clauses (ii) and (iii) of the next succeeding paragraph), is less than the
sum of (i) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the date of the Indenture to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) 100% of the aggregate net cash proceeds received
by the Company from the issue or sale since the date of the Indenture of
Equity Interests of the Company or of debt securities of the Company that
have been converted into such Equity Interests (other than Equity Interests
(or convertible debt securities) sold to a Subsidiary of the Company and
other than Disqualified Stock or debt securities that have been converted
into Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was made after the date of the Indenture is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost
of disposition, if any) and (B) the initial amount of such Restricted
Investment.
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If no Default or Event of Default has occurred and is continuing, or would
occur as a consequence thereof, the foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;
(ii) the defeasance, redemption, repurchase, retirement or other
acquisition of any Equity Interests or subordinated Indebtedness of the
Company in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Restricted Subsidiary of the Company) of
other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net proceeds that are utilized for any
such defeasance, redemption, repurchase, retirement or other acquisition
shall be excluded from clause (c) (ii) of the preceding paragraph; and
(iii) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or the substantially concurrent sale (other than
to a Restricted Subsidiary of the Company) of Equity Interests of the
Company (other than Disqualified Stock); provided that the amount of any
such net proceeds that are utilized for any such defeasance, redemption,
repurchase, retirement or other acquisition shall be excluded from clause
(c) (ii) of the preceding paragraph.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
greatest of (x) the net book value of such Investments at the time of such
designation, (y) the fair market value of such Investments at the time of such
designation and (z) the original fair market value of such Investments at the
time they were made. Such designation will only be permitted if such Restricted
Payment would be permitted at such time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
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 "Restricted Payments" were computed, which calculations
may be based upon the Company's latest available financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any
of its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guaranty or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that, so long as no Default or Event of Default has occurred
and is continuing, or would occur as a consequence thereof, the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock, if the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2.25 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The foregoing provisions do not apply to:
(i) the incurrence by the Company of Senior Term Debt (and guarantees
thereof by the Guarantors) in an aggregate principal amount at any time
outstanding not to exceed an amount equal to $50.0 million less the
aggregate amount of all repayments, optional or mandatory, of the principal
of any
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Senior Term Debt (other than repayments that are reborrowed immediately or
substantially contemporaneously therewith) that have been made since the
date of the Indenture;
(ii) the incurrence by the Company of Senior Revolving Debt and
letters of credit (and guarantees thereof by the Guarantors) in an
aggregate principal amount at any time outstanding (with letters of credit
being deemed to have a principal amount equal to the maximum potential
liability of the Company thereunder) not to exceed an amount equal to
$125.0 million, less the aggregate amount of all Net Proceeds of Asset
Sales applied to permanently reduce the commitments with respect to such
Indebtedness pursuant to the covenant described above under the caption
"-- Asset Sales";
(iii) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company;
(iv) the incurrence by the Company and its Subsidiaries of the
Existing Indebtedness;
(v) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes and the Subsidiary Guarantees, respectively;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $5.0 million at any time outstanding;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace,
defease or refund, Indebtedness that was permitted by the Indenture to be
incurred;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Wholly Owned Restricted Subsidiaries; provided, however, that
(i) if the Company is the obligor on such Indebtedness, such Indebtedness
is expressly subordinate to the payment in full of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Wholly Owned Restricted Subsidiary and
(B) any sale or other transfer of any such Indebtedness to a Person that is
not either the Company or a Wholly Owned Restricted Subsidiary shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Restricted Subsidiary, as the case may be;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging currency exchange or interest rate risk with respect to
any floating rate Indebtedness that is permitted by the terms of the
Indenture to be outstanding;
(x) the incurrence by the Company's foreign Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount at any time
outstanding not to exceed an amount equal to $50.0 million, less the
aggregate amount of all Existing Indebtedness outstanding at such time, and
Guarantees by the Company and its other Subsidiaries with respect thereto,
provided that the aggregate principal amount of additional Indebtedness
outstanding at any time pursuant to this clause (x) may not exceed $20.0
million unless the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred would have been at least 2.25 to 1,
determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been
incurred at the beginning of such four-quarter period;
(xi) the incurrence by the Company or any Guarantors of Indebtedness
in the form of guarantees of Indebtedness of the Company and its
Subsidiaries permitted to be incurred pursuant to the terms hereof; and
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(xii) the incurrence by the Company and its Subsidiaries of
Indebtedness and Guarantees thereof (in addition to Indebtedness permitted
by any other clause of this paragraph) in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding not to exceed the
sum of $20.0 million.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that the Company may enter into a sale and leaseback
transaction if (i) the Company could have (a) incurred Indebtedness in an amount
equal to the Attributable Debt relating to such sale and leaseback transaction
pursuant to the covenant described above under the caption "-- Incurrence of
Additional Indebtedness and Issuance of Preferred Stock" and (b) incurred a Lien
to secure such Indebtedness pursuant to the covenant described below under the
caption "--Liens" or (ii) (a) the gross cash proceeds of such sale and leaseback
transaction are at least equal to the fair market value (as determined in good
faith by the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee) of the property that is the subject of such sale and
leaseback transaction and (b) the transfer of assets in such sale and leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, the covenant described above under the caption
"-- Asset Sales."
LIMITATION ON LAYERING
The Indenture provides that the Company and the Guarantors will not incur,
create, issue, assume, guarantee or otherwise become liable for any Indebtedness
that is subordinate or junior in right of payment to any Senior Debt and senior
in any respect in right of payment to the Notes or the Subsidiary Guarantees, as
applicable.
LIENS
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any
of its Restricted 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 Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the New Credit
Facility as in effect as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the New Credit
Facility as in effect on the date of the Indenture, (c) the Indenture and the
Notes, (d) applicable law, (e) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Company or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided, in the case of
Indebtedness, that such Indebtedness was permitted by the terms of the Indenture
to be incurred, (f) customary non-assignment provisions in leases entered into
in
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the ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, or (h) Permitted Refinancing Indebtedness, provided that
the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Wholly Owned Restricted Subsidiary of
the Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth (immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction) and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock."
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any
of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of the
Board of Directors and (b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing with total assets in excess of $1.0
billion; provided that (x) any employment agreement entered into by the Company
or any of its Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of the Company or such Restricted Subsidiary,
(y) transactions between or among the Company and/or its Restricted Subsidiaries
and (z) Restricted Payments and Permitted Investments that are permitted by the
provisions of the Indenture described above under the caption "-- Restricted
Payments," in each case, shall not be deemed Affiliate Transactions.
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ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that if (i) the Company shall acquire or create
another domestic Subsidiary after the date of the Indenture or (ii) any
Subsidiary that is not a Guarantor shall Guarantee any Senior Debt, then such
Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion of
counsel, in accordance with the terms of the Indenture.
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY OWNED
SUBSIDIARIES
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Restricted Subsidiary of the Company to, transfer, convey,
sell, lease or otherwise dispose of any Capital Stock of any Wholly Owned
Restricted Subsidiary of the Company to any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of such
Wholly Owned Restricted Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with the covenant described above under the caption "-- Asset Sales," and (ii)
will not permit any Wholly Owned Restricted Subsidiary of the Company to issue
any of its Equity Interests (other than, if necessary, shares of its Capital
Stock constituting directors' qualifying shares) to any Person other than to the
Company or a Wholly Owned Restricted Subsidiary of the Company.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will, or will cause the Trustee
to, furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, at any time after
the Company files the Exchange Offer Registration Statement, the Company will
file a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, the Company and the Guarantors have agreed that, for so
long as any Notes remain outstanding they will furnish to the Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (iii) failure by the Company to
comply with the provisions described under the captions "-- Change of Control,"
"-- Asset Sales," "-- Restricted Payments," "-- Incurrence of Indebtedness and
Issuance of Preferred Stock," "-- Limitation on Layering" or "-- Merger,
Consolidation or Sale of Assets"; (iv) failure by the Company for 60 days after
notice from the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding to comply with any of its other agreements
in the Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists or is created after the date of the Indenture, if (A) such default
results in the acceleration of such Indebtedness prior to its express maturity
or constitutes a default in the payment of such Indebtedness at final maturity
of such Indebtedness and (B) the
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principal amount of any such Indebtedness that has been accelerated or not paid
at maturity, when added to the aggregate principal amount of all other such
Indebtedness, at such time, that has been accelerated or not paid at maturity
that has not theretofore been paid, exceeds $10.0 million; (vi) failure by the
Company or any of its Significant Subsidiaries to pay final judgments
aggregating in excess of $10.0 million, which judgments are not paid, discharged
or stayed for a period of 60 days; (vii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries;
and (viii) except as permitted by the Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
its Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately provided that if any
Senior Term Debt or Senior Revolving Debt is outstanding upon a declaration or
acceleration of the Notes, the principal and interest on the Notes will not be
payable until the earlier of (1) the day which is five business days after the
notice of acceleration is given to the Company and the Agent under the New
Credit Facility or (2) the date of acceleration of the Senior Term Debt or
Senior Revolving Debt. Notwithstanding the foregoing, in the case of an Event of
Default arising from certain events of bankruptcy or insolvency with respect to
the Company, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to March
15, 2001 by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to March 15, 2001, then the premium specified in
the Indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes, the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of Notes by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding
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Notes to receive payments in respect of the principal of, premium, if any, and
interest and Liquidated Damages on such Notes when such payments are due from
the trust referred to below, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights, powers,
trusts, duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have occurred and be continuing on the date of such deposit
(other than a Default or Event of Default resulting from the borrowing of funds
to be applied to such deposit) or insofar as Events of Default from bankruptcy
or insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance
will not result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound; (vi) the Company must have delivered to the Trustee an
opinion of counsel to the effect that 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; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Notes over the other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and (viii) the Company must deliver to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also,
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the Company is not required to transfer or exchange any Note for a period of 15
days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a purchase of,
or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"-- Repurchase at the Option of Holders"), (iii) reduce the rate of or change
the time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders") or (viii) make any change in
the foregoing amendment and waiver provisions. In addition, any amendment to the
provisions of Article 10 of the Indenture (which relate to subordination) will
require the consent of the Holders of at least 75% in aggregate principal amount
of the Notes then outstanding if such amendment would adversely affect the
rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such
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Holder shall have offered to the Trustee security and indemnity satisfactory to
it against any loss, liability or expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For 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, shall mean
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; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback) other
than in the ordinary course of business consistent with past practices (provided
that the sale, lease, conveyance or other disposition of all or substantially
all of the assets of the Company and its Subsidiaries taken as a whole will be
governed by the provisions of the Indenture described above under the caption
"-- Change of Control" and/or the provisions described above under the caption
"-- Merger, Consolidation or Sale of Assets" and not by the provisions of the
Asset Sale covenant), and (ii) the issue or sale by the Company or any of its
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $1.0
million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the
foregoing: (i) a transfer of assets by the Company to a Restricted Subsidiary or
by a Restricted Subsidiary to the Company or to another Restricted Subsidiary,
(ii) an issuance of Equity Interests by a Wholly Owned Subsidiary to the Company
or to another Wholly Owned Subsidiary, (iii) a Restricted Payment that is
permitted by the covenant described above under the caption "-- Restricted
Payments" and (iv) the sale of accounts receivable for cash will not be deemed
to be Asset Sales.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) securities issued or unconditionally
guaranteed by the United States of America or any agency or instrumentality
thereof, backed by the full faith and credit of the United States of America and
maturing within one year from the date of acquisition, (ii) securities issued by
any state of the
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United States of America or any political subdivision or public instrumentality
thereof, maturing within one year from the date of acquisition and, at the time
of acquisition, having a rating of at least A- by Standard & Poor's Corporation
or the equivalent by Moody's Investors Service, Inc., (iii) commercial paper
issued by any Person organized under the laws of the United States of America,
maturing no more than one year from the date of acquisition and, at the time of
acquisition, having a rating of at least A-1 or the equivalent thereof by
Standard & Poor's Corporation or at least P-1 or the equivalent thereof by
Moody's Investors Service, Inc., (iv) time deposits and certificates of deposit
that are insured by the Federal Deposit Insurance Corporation (the "FDIC") or
any successor instrumentality of the government of the United States of America
up to the applicable limit on insurance granted by the FDIC or such other
instrumentality with respect to such instruments (it being understood that the
amount invested in such instrument may not exceed the limit on such insurance),
maturing within one year from the date of issuance and issued by a bank or trust
company organized under the laws of the United States of America or any state
thereof and having combined capital and surplus of at least $500,000,000, (v)
repurchase obligations with a term not exceeding seven (7) days with respect to
underlying securities of the types described in clause (i) above entered into
with any bank or trust company meeting the qualifications specified in clause
(iv) above and (vi) money market funds substantially all of whose assets are
comprised of securities of the types described in clauses (i) through (v) above.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss (a) realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income) or (b) the disposition of any securities by such Person
or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness
of such Person or any of its Restricted Subsidiaries, plus (ii) provision for
taxes based on income or profits of such Person and its Subsidiaries for such
period, to the extent that such provision for taxes was included in computing
such Consolidated Net Income, plus (iii) consolidated interest expense of such
Person and its Subsidiaries for such period, whether paid or accrued and whether
or not capitalized (including, without limitation, amortization of original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, imputed interest with respect to Attributable
Debt, commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging Obligations), to the extent that any such expense was
deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash charges (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash expense that was paid in a prior
period) of such Person and its Subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash charges were deducted in
computing such Consolidated Net Income, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash charges of, a Subsidiary of the referent Person
shall be added to Consolidated Net Income to compute Consolidated Cash Flow only
to the extent (and in same proportion) that the Net Income of such Subsidiary
was included in calculating the Consolidated Net Income of such Person and only
if a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and other non-cash charges of, a Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in the same proportion) that the Net Income of such Subsidiary was included
in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
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"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) the Net Income of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the Company or one of its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, and
(y) all investments as of such date in unconsolidated Subsidiaries and in
Persons that are not Subsidiaries (except, in each case, Permitted Investments
and Investments made prior to the date of the Indenture).
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Designated Senior Debt" means (i) the Senior Term Debt, (ii) the Senior
Revolving Debt and (iii) any other Senior Debt permitted hereunder the principal
amount of which is $25 million or more and that has been designated by the
Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means up to $10.0 million in aggregate principal
amount of Indebtedness of the Company and its Subsidiaries (other than
Indebtedness under the New Credit Facility) in existence on the date of the
Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum
of (i) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations, imputed
interest with respect to Attributable Debt, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period, and (iii) without duplication, any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Restricted
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Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon)
and (iv) the product of (a) all cash dividend payments (and non-cash dividend
payments in the case of a Person that is a Subsidiary) on any series of
preferred stock of such Person, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the Company or
any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) Exide Electronics Corporation, Exide
Electronics International Corp., International Power Machines Corporation,
Lectro Products, Inc., Deltec Power Systems, Inc., DataTrax Acquisition
Corporation, Exide Electronics USA Holdings Corp., Deltec Electronics Corp. and
Lortec Power Systems, Inc. and (ii) any other Subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) currency exchange or interest rate swap agreements,
currency exchange or interest rate cap agreements and currency exchange or
interest rate collar agreements and (ii) other agreements or arrangements
designed to protect such Person against fluctuations in currency exchange rates
or interest rates.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging
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Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
the Company for consideration consisting of common equity securities of the
Company shall not be deemed to be an Investment. If the Company or any
Subsidiary of the Company sells or otherwise disposes of any Equity Interests 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 Equity Interests 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 Equity
Interests of such Subsidiary not sold or disposed of.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction other
than financial statements filed in respect of arrangements purporting to be true
leases).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain credit facility, dated as of March
13, 1996, by and among the Company, the Guarantors, as guarantors, Bank of
America Illinois, as documentation agent and Morgan Guaranty Trust Company of
New York, as agent bank, in the amount of $175.0 million, which provides for (i)
$50.0 million in term loan borrowings and (ii) up to $125.0 million of revolving
credit borrowings, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders
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thereof may have to take enforcement action against an Unrestricted Subsidiary)
would permit (upon notice, lapse of time or both) any holder of any other
Indebtedness (other than the Notes being offered hereby) of the Company or any
of its Restricted Subsidiaries to declare a default on such other Indebtedness
or cause the payment thereof to be accelerated or payable prior to its stated
maturity; and (iii) as to which the lenders have been notified in writing that
they will not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries.
"Obligations" means any obligation under the documentation governing any
Indebtedness, including without limitation, principal, premium, interest
(including post-petition interest thereon in any proceeding under Bankruptcy
Law), penalties, fees, indemnifications, reimbursements, damages, expenses
(including post-petition expenses in any proceeding under Bankruptcy Law) and
other liabilities payable thereunder (including, without limitation, letter of
credit reimbursement obligations, whether contingent or absolute).
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) Investments by the Company or any Subsidiary of the Company in a Person, if
as a result of such Investment (i) such Person becomes a Wholly Owned Restricted
Subsidiary of the Company or (ii) 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 Restricted
Subsidiary of the Company; (d) any Restricted Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales"; and (e) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (e) that are at the time outstanding, not to exceed $10.0
million.
"Permitted Liens" means (i) Liens on assets of the Company and its
Restricted Subsidiaries securing Senior Debt that is permitted by the terms of
the Indenture to be incurred and outstanding; (ii) Liens in favor of the
Company; (iii) Liens on property of a Person existing at the time such Person is
merged into or consolidated with the Company or any Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company; (iv) Liens on property
existing at the time of acquisition thereof by the Company or any Subsidiary of
the Company, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clauses (vi), (ix), (x) and (xii) of the second paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock" covering
only the assets acquired with such Indebtedness; (vii) Liens existing on the
date of the Indenture; (viii) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor; (ix) Liens
incurred in the ordinary course of business of the Company or any Subsidiary of
the Company with respect to obligations that do not exceed in the aggregate 10%
of the Company's Consolidated Net Worth and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Subsidiary and (x) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries;
provided that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date later than the
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final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded
is subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" means (i) the Senior Term Debt, (ii) the Senior Revolving
Debt, (iii) Hedging Obligations relating to Senior Debt and (iv) any other
Indebtedness permitted to be incurred by the Company under the terms of the
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes. Notwithstanding anything to the contrary in the foregoing,
Senior Debt referred to in clause (iv) above will not include (v) any liability
for federal, state, local or other taxes owed or owing by the Company, (w) any
Indebtedness of the Company to any of its Restricted Subsidiaries or other
Affiliates, (x) any trade payables, (y) any Indebtedness that is incurred in
violation of the Indenture or (z) any Indebtedness that is not fully and
adequately secured; provided that any unexpected diminution of the value of any
collateral securing any Senior Debt shall not cause such Indebtedness to cease
being fully and adequately secured for the purpose of this definition.
"Senior Revolving Debt" means revolving credit borrowings, and
reimbursement obligations (whether contingent or matured) in respect of letters
of credit issued, under the New Credit Facility and/or any successor facility or
facilities.
"Senior Term Debt" means term loans under the New Credit Facility and/or
any successor facility or facilities.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (e) has at least one director
on its board of directors that is not a director or executive officer of the
Company or any of its Restricted Subsidiaries and has at least one
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executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described above under the
caption "Certain Covenants -- Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "Incurrence of Indebtedness
and Issuance of Preferred Stock," the Company shall be in default of such
covenant). The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant described under the caption "Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock," and
(ii) no Default or Event of Default would be in existence following such
designation.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
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BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Notes will initially be issued in the form
of one Global Note (the "Global Note"). The Global Note will be deposited on the
date of the closing of the Exchange Offer (the "Closing Date") with, or on
behalf of, The Depository Trust Company (the "Depositary") and registered in the
name of Cede & Co., as nominee of the Depositary (such nominee being referred to
herein as the "Global Note Holder").
Notes that are issued as described below under "-- Certificated Notes" will
be issued in the form of registered definitive certificates (the "Certificated
Notes"). Upon the transfer of Certificated Notes, such Certificated Notes may,
unless the Global Note has previously been exchanged for Certificated Notes, be
exchanged for an interest in the Global Note representing the principal amount
of Notes being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only thorough the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary ownership of the Notes evidenced by the Global Note will be shown on,
and the transfer of ownership thereof will be effected only through, records
maintained by the Depositary (with respect to the interests of the Depositary's
Participants), the Depositary's Participants and the Depositary's Indirect
Participants. Holders of Notes are advised that the laws of some states require
that certain persons take physical delivery in definitive form of securities
that they own. Consequently, the ability to transfer Securities evidenced by the
Global Securities will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes. The Company believes, however, that it is currently the policy of the
Depositary to immediately credit the accounts of the relevant Participants with
such payments, in amounts proportionate to their respective holdings of
beneficial interests in the relevant security as shown on the records of the
Depositary. Payments by the Depositary's Participants and the Depositary's
Indirect Participants to the beneficial owners of Notes will be governed by
standing instructions and customary practice and will be the responsibility of
the Depositary's Participants or the Depositary's Indirect Participants.
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Certificated Notes
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Notes. Upon any such issuance,
the Trustee is required to register such Certificated Notes in the name of, and
cause the same to be delivered to, such person or persons (or the nominee of any
thereof). If (i) the Company notifies the Trustee in writing that the Depositary
is no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
the form of Certificated Notes under the Indenture, then, upon surrender by the
Global Note Holder of its Global Note, Certificated Notes in such form will be
issued to each person that the Global Note Holder and the Depositary identify as
being the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
Same-Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Note (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Notes, the Company will make all payments of principal, premium, if any,
interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. Secondary trading in long-term notes and debentures of corporate
issuers is generally settled in clearing-house or next-day funds. In contrast,
the Notes represented by the Global Note are expected to be eligible to trade in
the PORTAL Market and to trade in the Depositary's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in such Notes will,
therefore, be required by the Depositary to be settled in immediately available
funds. The Company expects that secondary trading in the Certificated Notes will
also be settled in immediately available funds.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares
of Common Stock, par value $0.01 per share, and 2,000,000 shares of preferred
stock, par value $0.01 per share. As of April 9, 1996, the Company had
approximately 9,975,000 shares of Common Stock outstanding and 1,000,000 shares
of the Series G Preferred Stock outstanding. As of April 9, 1996, the Company
also had outstanding 125,000 Warrants to purchase in the aggregate 643,750
shares of Common Stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders. There is no
cumulative voting for the election of directors, which means that the holders of
a majority of the shares voted in the election of directors can elect all of the
directors they nominate for election. Except as set forth below, generally the
vote of a majority of the shares voted on a matter at a meeting of shareholders
shall be the act of the shareholders on that matter. The Delaware General
Corporation Law provides generally that the approval of a majority of all
outstanding shares is required for certain extraordinary Company actions. The
Company's Certificate of Incorporation provides, however, that the affirmative
vote of shareholders holding at least 80% of the power to vote is required to
approve such transactions if (a) a majority of the members of the Board of
Directors has not served in such positions for at least 24 months at the time
the Company takes such action or (b) 20% or more of the Company's outstanding
voting securities are acquired by any person or group (other than any person or
group that acquired such voting securities prior to October 1989). The
Certificate of Incorporation also provides that no action may be taken by the
holders of Common Stock by written consent in lieu of holding a meeting of
shareholders. The Company also is subject to the provisions of the Delaware
Anti-Takeover Statute described below.
Subject to the preferences that may be applicable to any outstanding
preferred stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. In the event of a liquidation, dissolution or winding up of
the Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preference that may
be applicable to any outstanding preferred stock. Holders of Common Stock have
no preemptive rights and no rights to convert their Common Stock into any other
securities. Except for shares of Common Stock for which employees of the Company
have given promissory notes, all of the outstanding shares of Common Stock are
fully paid and non-assessable.
PREFERRED STOCK
The authorized preferred stock, par value $0.01 per share, is available for
issuance from time to time in the future at the discretion of the Board of
Directors of the Company, without shareholder approval. The Board of Directors
has authority to prescribe for each series of preferred stock it establishes the
number of shares in that series, the dividend rate, and the voting rights,
conversion privileges, redemption and liquidation rights, if any, and any other
rights, preferences and limitations of the particular series. The issuance of
preferred stock could decrease the amount of earnings and assets available for
distribution to the holders of Common Stock or adversely affect the rights and
powers, including voting rights, of the holders of the Common Stock.
Additionally, the issuance of preferred stock could have the effect of delaying,
deferring or preventing a change in control of the Company without further
action by the shareholders.
Series G Preferred Stock. The 1,000,000 shares of Series G Preferred Stock
that were issued to Fiskars in connection with the Deltec Acquisition bear
quarterly dividends at a per annum rate of $0.80 per share through March 31,
2001 and $1.20 per share thereafter. The dividends are cumulative from the date
of issuance. The Company may not make any cash or property dividends with
respect to, or purchase or redeem, any Common Stock or other preferred stock of
the Company, unless cumulative dividends on the Series G Preferred Stock have
been paid or set aside. Holders of the Series G Preferred Stock have preference
over the holders of Common Stock and holders of any other preferred stock of the
Company in the event of liquidation, dissolution or winding up of the Company.
The liquidation preference is equal to $20.00 per share of Series G Preferred
Stock plus accrued, but unpaid dividends.
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The Series G Preferred Stock is convertible at any time by the holders
thereof into shares of Common Stock on a share-for-share basis, subject to
adjustment for stock splits, dividends and combinations, and non-cash dividends,
stock purchase rights, capital reorganizations and dissolutions. In the event
that the market price of the Company's Common Stock exceeds $28.00 per share for
30 consecutive trading days at any time after March 31, 1996, the Company may
redeem any of its Series G Preferred Stock at $20.00 per share from March 31,
1996 through March 30, 1997, $26.00 per share from March 31, 1997 through March
30, 1998 and $24.00 per share after March 30, 1998, plus accrued, but unpaid
dividends in each case. The Company's redemption right is subject to the
conversion rights of the holders of the Series G Preferred Stock. At any time
after September 30, 2006, the holders of the Series G Preferred Stock may
require the Company to repurchase the stock at $24.00 per share plus accrued,
but unpaid dividends.
Under the provisions of the New Credit Facility and the Indenture, the
Company is prohibited from redeeming the Series G Preferred Stock during the
terms of such agreements without the consent of the lenders, or the Holders of
the Notes, as the case may be. Furthermore, the New Credit Facility and the
Indenture restrict the Company's ability to pay cash dividends. In the event a
dividend payment on the Series G Preferred Stock would violate this restriction,
such dividend will accrue. The Company presently believes that it will have
sufficient flexibility under such financing agreements to pay currently the
Series G Preferred Stock dividends.
Shares of the Series G Preferred Stock have the same voting rights as
shares of the Company's Common Stock, with each holder of Series G Preferred
Stock entitled to the number of votes that the holder would have if the stock
were converted into Common Stock. The Series G Preferred Stock must be voted in
accordance with a stockholder agreement between the Company and Fiskars (the
"Stockholder Agreement"), the terms of which include agreements regarding board
membership, voting, transfer restrictions and registration rights. The
Stockholder Agreement permits Fiskars to designate two representatives to the
Company's Board of Directors so long as its beneficial ownership of Common Stock
(including Common Stock that Fiskars would own upon conversion of the Series G
Preferred Stock) exceeds 10% of the outstanding Common Stock, one representative
when Fiskars beneficially owns 5% to 10% of the outstanding Common Stock, and no
representative if its beneficial ownership of Common Stock is less than 5%. The
Stockholder Agreement requires Fiskars to vote all securities of the Company
owned or controlled by it in accordance with the recommendations of the
Company's Board of Directors. The Stockholder Agreement contains restrictions on
Fiskars' ability to transfer any securities of the Company owned or controlled
by Fiskars, and grants to Fiskars rights to register its Common Stock for resale
in the event the Company files a registration statement under the Securities Act
with respect to certain offerings of the Common Stock. Fiskars also has the
right after October 1996 to demand that the Company file a registration
statement with respect to the Common Stock owned by Fiskars, subject to certain
limitations.
WARRANTS
In connection with the Offering of Units, which included the Series A
Notes, the Company issued 125,000 Warrants to purchase in the aggregate 643,750
shares of Common Stock, subject to adjustment under certain circumstances. Each
Warrant, when exercised, entitles the holder thereof to receive 5.15 shares of
Common Stock at an exercise price of $13.475 per share, subject to adjustment
under certain circumstances. The Warrants and Series A Notes are not separately
transferable until the earliest to occur of (i) 90 days from the date of
issuance, (ii) such date as Donaldson, Lufkin & Jenrette Securities Corporation
may, in their discretion, deem appropriate (but in no event earlier than 10 days
from the date of issuance), (iii) in the event a Change of Control occurs, the
date the Company mails notice thereof to the holders of Notes and (iv) the date
on which the registration statement of which this Prospectus is a part is
declared effective (such date, the "Separation Date"). The Warrants are
exercisable on and after the Separation Date and prior to March 15, 2006. The
holders of Warrants have no right to vote on matters submitted to the
stockholders of the Company and no right to receive dividends. Pursuant to a
warrant registration rights agreement and subject to applicable federal and
state securities laws, the Company has agreed to file a shelf registration
statement within 120 days of March 13, 1996 (the date on which the Warrants were
issued) covering (i) resales of Warrants and the
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shares of Common Stock that will be acquired upon exercise of the Warrants and
(ii) the exercise of Warrants (unless such registration is not required).
DELAWARE LAW AND CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BYLAWS
Anti-Takeover Statute. Section 203 of the Delaware General Corporation Law
(the "Delaware Statute") applies to Delaware corporations with a class of voting
stock listed on a national securities exchange, authorized for quotation on an
inter-dealer quotation system, or held of record by 2,000 or more persons, and
restricts transactions that may be entered into by such a corporation and
certain of its shareholders. The Delaware Statute provides, in essence, that a
shareholder acquiring more than 15% of the outstanding voting shares of a
corporation subject to the statute (an "Interested Stockholder") but less than
85% of such shares may not engage in certain "Business Combinations" with the
corporation for a period of three years subsequent to the date on which the
shareholder became an Interested Stockholder unless (i) prior to such date the
corporation's board of directors approved either the Business Combination or the
transaction in which the shareholder became an Interested Stockholder or (ii)
the Business Combination is approved by the corporation's board of directors and
authorized by a vote of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the Interested Stockholder.
The Delaware Statute defines the term "Business Combination" to encompass a
wide variety of transactions with or caused by an Interested Stockholder in
which the Interested Stockholder receives or could receive a benefit on other
than a pro rata basis with other shareholders, including mergers, certain asset
sales, certain issuances of additional shares to the Interested Stockholder,
transactions with the corporation that increase the proportionate interest of
the Interested Stockholder or transactions in which the Interested Stockholder
receives certain other benefits.
Limitation on Directors' Liability. The Delaware General Corporation Law
authorizes corporations to limit or eliminate the personal liability of
directors to corporations and their stockholders for monetary damages for breach
of directors' fiduciary duty of care. The duty of care requires that, when
acting on behalf of the corporation, directors must exercise an informed
business judgment based on all material information reasonably available to
them. Absent the limitations authorized by Delaware law, directors could be
accountable to corporations and their stockholders for monetary damages for
conduct that does not satisfy their duty of care. Although Delaware law does not
change directors' duty of care, it enables corporations to limit available
relief to equitable remedies such as injunction or rescission. The Company's
Certificate of Incorporation limits the liability of the Company's directors to
the Company and its stockholders to the fullest extent permitted by Delaware
law. Specifically, directors of the Company will not be personally liable for
monetary damages for breach of a director's fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) for
unlawful payments of dividends or unlawful stock repurchases or redemptions as
provided in Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal benefit. The
inclusion of this provision in the Certificate of Incorporation may have the
effect of reducing the likelihood of derivative litigation against directors,
and may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an action,
if successful, might otherwise have benefited the Company and its stockholders.
Shareholder Rights Plan. The Company adopted a shareholder rights plan to
deter coercive takeover tactics and to prevent a potential acquirer from gaining
control of the Company without offering a fair price to all of the Company's
shareholders. In connection with the plan, the Board of Directors declared a
dividend distribution of one right for each share of Common Stock outstanding
on, or issued after, December 7, 1992 (the "Right" or "Rights"). Each Right,
when exercisable, entitles the registered holder to purchase from the Company
one one-hundredth of a share of Series F junior participating preferred stock at
a purchase price of $80 per one one-hundredth share, subject to certain
adjustments. The Rights will become exercisable only in the event a person or
group acquires beneficial ownership of 15% or more of the Company's then
outstanding Common Stock, and will expire in December 2002 unless previously
redeemed or exchanged by the Company.
110
<PAGE> 113
In the event that a person becomes the beneficial owner of 15% or more of
the Company's then outstanding shares of Common Stock, except pursuant to an
offer for all outstanding shares of Common Stock that the outside directors
determine to be fair to, and otherwise in the best interests of, the Company and
its shareholders, each holder of a Right, other than the person triggering the
Rights, will have the right to receive Common Stock (or in certain
circumstances, cash, property or other securities of the Company) having a value
equal to two times the exercise price of the Right. If the Company is acquired
in a merger or similar business combination without the consent of the Company's
Board of Directors, each holder of a Right, except the person triggering the
Rights, will have the right to receive Common Stock of the acquiring Company
having a value equal to two times the exercise price of the Right.
Staggered Board of Directors. The bylaws of the Company divide the
directors into three classes, with one class being elected each year. Directors
are elected to serve for three-year terms and may be removed only for cause upon
the affirmative vote of holders of more than 50% of the outstanding Common
Stock. The staggered Board makes it more difficult for a substantial stockholder
to gain control of the Board of Directors without its consent, thus helping to
assure a measure of continuity in the affairs and business strategies of the
Company. In the event of any vacancy on the Board of Directors, a majority of
the remaining directors may elect a successor to serve for the remainder of the
unexpired term.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is First Union
National Bank of North Carolina, Charlotte, North Carolina.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Smith Helms Mulliss & Moore, L.L.P., counsel to the
Company, the following discussion describes the material federal income tax
consequences expected to result to Holders whose Series A Notes are exchanged
for Series B Notes in the Exchange Offer. Such opinion is based upon current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations, judicial authority and administrative rulings
and practice. There can be no assurance that the Internal Revenue Service (the
"Service") will not take a contrary view, and no ruling from the Service has
been or will be sought with respect to the Exchange Offer. Legislative, judicial
or administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to Holders. Certain Holders (including insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the Unites States)
may be subject to special rules not discussed below. EACH HOLDER OF SERIES A
NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES
OF EXCHANGING SERIES A NOTES FOR SERIES B NOTES, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS.
The exchange of Series A Notes for Series B Notes will be treated as a
"non-event" for federal income tax purposes because the Series B Notes will not
be considered to differ materially in kind or extent from the Series A Notes. As
a result, no material federal income tax consequences will result to Holders
exchanging Series A Notes for Series B Notes.
111
<PAGE> 114
PLAN OF DISTRIBUTION
Each broker-dealer that receives Series B 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 Series B Notes. 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 Series B Notes received in
exchange for Series A Notes where such Series A Notes were acquired as a result
of market-making activities or other trading activities. The Company has agreed
that for a period of 365 days from the date on which the Registration Statement
is declared effective, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer that requests such document in the Letter of
Transmittal for use in connection with any such resale.
The Company will not receive any proceeds from any sale of Series B Notes
by broker-dealers or any other persons. Series B 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 Series B Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, prices related to such prevailing market prices or negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such Series B Notes.
Any broker-dealer that resells Series B 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 Series B Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Series B 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.
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 such Holders against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Series B Notes
will be passed upon for the Company by Smith Helms Mulliss & Moore, L.L.P.,
Raleigh, North Carolina.
EXPERTS
The audited financial statements and schedules of Exide Electronics
included in this Prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
The financial statements of Deltec included in this Prospectus, except as
they relate to the unaudited three-month periods ended December 31, 1994 and
1995 and except as they relate to FPS Power Systems Oy Ab, FPS Power Systems
A/S, Fiskars Power Systems A/S and Fiskars Power Systems AB, have been audited
by Price Waterhouse LLP, independent accountants, and insofar as they relate to
FPS Power Systems Oy Ab, FPS Power Systems A/S, Fiskars Power Systems A/S and
Fiskars Power Systems AB, by KPMG, independent accountants, whose reports
thereon appear herein. Such financial statements have been so included in
reliance on the reports of such independent accountants given on the authority
of such firms as experts in auditing and accounting.
112
<PAGE> 115
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Exide Electronics Group, Inc.
Annual Consolidated Financial Statements
Report of Arthur Andersen LLP, Independent Public Accountants.................... F-2
Consolidated Balance Sheet as of September 30, 1994 and 1995..................... F-3
Consolidated Statement of Operations for the years ended September 30, 1993, 1994
and
1995........................................................................... F-4
Consolidated Statement of Changes in Common Shareholders' Equity for the years
ended September 30, 1993, 1994 and 1995......................................... F-5
Consolidated Statement of Cash Flows for the years ended September 30, 1993, 1994
and 1995....................................................................... F-6
Notes to Consolidated Financial Statements....................................... F-7
Interim Consolidated Financial Statements -- unaudited
Consolidated Balance Sheet as of September 30, 1995 and December 31, 1995........ F-30
Consolidated Statement of Operations for the three months ended December 31, 1994
and 1995........................................................................ F-31
Consolidated Statement of Cash Flows for the three months ended December 31, 1994
and 1995........................................................................ F-32
Notes to Consolidated Financial Statements....................................... F-33
Deltec Power Systems, Inc.
Annual Combined and Consolidated Financial Statements
Report of Price Waterhouse LLP, Independent Accountants.......................... F-40
Reports of KPMG Peat Marwick LLP, Independent Accountants, covering FPS Power
Systems Oy Ab (Finland), FPS Power Systems A/S (Norway), Fiskars Power Systems
A/S (Denmark) and Fiskars Power Systems AB (Sweden)............................. F-41
Consolidated Balance Sheets as of December 31, 1994 and 1995 and September 30,
1995............................................................................ F-45
Combined/Consolidated Statements of Operations for the years ended December 31,
1993, 1994, and 1995 and for the nine months ended September 30, 1995........... F-46
Combined/Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1993 and 1994, and for the nine months ended September 30, 1995 and
for the three months ended December 31, 1995.................................... F-47
Combined/Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995 and for the nine months ended September 30, 1995............ F-48
Notes to Financial Statements.................................................... F-49
Interim Consolidated Financial Statements -- unaudited
Consolidated Balance Sheets as of September 30, 1995 and December 31, 1995....... F-69
Consolidated Statements of Operations for the three months ended December 31,
1994 and 1995................................................................... F-70
Consolidated Statements of Cash Flows for the three months ended December 31,
1994 and 1995................................................................... F-71
Notes to the Consolidated Financial Statements................................... F-72
</TABLE>
F-1
<PAGE> 116
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO EXIDE ELECTRONICS GROUP, INC.:
We have audited the accompanying consolidated balance sheet of Exide
Electronics Group, Inc. (a Delaware corporation) and subsidiaries as of
September 30, 1994 and 1995, and the related consolidated statements of
operations, changes in common shareholders' equity and cash flows (restated for
the pooling-of-interest transaction as discussed in Note 2) for each of the
three years in the period ended September 30, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Exide Electronics Group,
Inc. and subsidiaries as of September 30, 1994 and 1995 and the results of their
operations and their cash flows (restated for the pooling-of-interest
transaction as discussed in Note 2) for each of the three years in the period
ended September 30, 1995, in conformity with generally accepted accounting
principles.
As explained in Note 12, in 1993 the Company changed its method of
accounting for income taxes.
ARTHUR ANDERSEN LLP
Raleigh, North Carolina,
October 25, 1995 (except for the matters discussed in Note 16,
as to which the date is December 13, 1995).
F-2
<PAGE> 117
EXIDE ELECTRONICS GROUP, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1994 1995
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.......................................... $ 5,886 $ 2,787
Accounts receivable................................................ 105,712 105,524
Inventories........................................................ 55,529 72,890
Deferred tax assets................................................ 7,532 9,672
Other current assets............................................... 4,549 3,705
-------- --------
Total current assets............................................ 179,208 194,578
-------- --------
Property, plant, and equipment
Land, buildings, and leasehold improvements........................ 8,809 9,931
Machinery and equipment............................................ 51,653 61,519
-------- --------
60,462 71,450
Accumulated depreciation........................................... 32,250 36,393
-------- --------
28,212 35,057
Goodwill............................................................. 8,947 18,738
Other assets......................................................... 8,309 8,078
-------- --------
$224,676 $256,451
======== ========
LIABILITIES, REDEEMABLE PREFERRED STOCK, & COMMON SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt.................................................... $ 5,802 $ 7,655
Accounts payable................................................... 44,958 46,041
Deferred revenues.................................................. 16,577 15,602
Accrued compensation............................................... 8,153 7,945
Other accrued liabilities.......................................... 10,381 11,792
-------- --------
Total current liabilities....................................... 85,871 89,035
-------- --------
Long-term debt....................................................... 43,400 65,258
-------- --------
Convertible subordinated notes....................................... 15,000 15,000
-------- --------
Deferred liabilities................................................. 2,943 3,391
-------- --------
Redeemable preferred stock........................................... 10,000 --
-------- --------
Commitments and contingencies (Notes 6, 7 and 15)
Common shareholders' equity
Common stock, $0.01 par value, 30,000,000 shares authorized;
shares issued: 7,735,165 in 1994 and 8,376,341 in 1995.......... 77 84
Additional paid-in capital......................................... 48,223 58,190
Retained earnings.................................................. 26,870 32,437
Cumulative translation adjustments................................. (1,757) (1,404)
-------- --------
73,413 89,307
Less: Notes receivable from shareholders............................. (5,951) (5,520)
Treasury stock................................................. -- (20)
-------- --------
67,462 83,767
-------- --------
$224,676 $256,451
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements, which
have been restated to
reflect the merger with International Power Machines on a pooling-of-interests
basis.
F-3
<PAGE> 118
EXIDE ELECTRONICS GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
Product revenues......................................... $220,143 $259,403 $271,482
Service revenues......................................... 97,799 104,580 119,496
-------- -------- --------
Total revenues...................................... 317,942 363,983 390,978
-------- -------- --------
Product cost of revenues................................. 165,700 193,572 204,683
Service cost of revenues................................. 66,747 71,716 82,430
-------- -------- --------
Total cost of revenues.............................. 232,447 265,288 287,113
-------- -------- --------
Gross profit........................................... 85,495 98,695 103,865
Selling, general and administrative expense.............. 55,506 65,086 69,966
Research and development expense......................... 9,592 10,150 9,929
Litigation expense....................................... -- 4,997 700
Merger and acquisition expense........................... -- -- 7,000
-------- -------- --------
Income from operations................................. 20,397 18,462 16,270
Interest expense......................................... 4,421 5,417 5,575
Interest income.......................................... (466) (488) (485)
Other (income) expense................................... 396 74 (897)
-------- -------- --------
Income before income taxes and the cumulative effect of
accounting change................................... 16,046 13,459 12,077
Provision for income taxes............................... 6,214 4,284 4,692
-------- -------- --------
Income before the cumulative effect of accounting
change.............................................. 9,832 9,175 7,385
Cumulative effect of accounting change for income
taxes.................................................. 1,000 -- --
-------- -------- --------
Net income............................................... $ 10,832 $ 9,175 $ 7,385
======== ======== ========
Preferred stock dividends................................ 1,071 790 592
-------- -------- --------
Net income applicable to common shareholders............. $ 9,761 $ 8,385 $ 6,793
======== ======== ========
PRIMARY EARNINGS PER SHARE
Income before the cumulative effect of accounting
change.............................................. $ 1.21 $ 1.07 $ 0.84
Cumulative effect of accounting change for income
taxes............................................... 0.13 -- --
-------- -------- --------
Net income............................................. $ 1.34 $ 1.07 $ 0.84
======== ======== ========
Weighted average number of common and equivalent shares
outstanding......................................... 7,270 7,814 8,054
======== ======== ========
FULLY DILUTED EARNINGS PER SHARE
Income before the cumulative effect of accounting
change.............................................. $ 1.10 $ 1.03 $ 0.84
Cumulative effect of accounting change for income
taxes............................................... 0.11 -- --
-------- -------- --------
Net income............................................. $ 1.21 $ 1.03 $ 0.84
======== ======== ========
Weighted average number of common and equivalent shares
outstanding......................................... 9,316 9,393 9,673
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements, which
have been restated to
reflect the merger with International Power Machines on a pooling-of-interests
basis.
F-4
<PAGE> 119
EXIDE ELECTRONICS GROUP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOTES
ADDITIONAL CUMULATIVE RECEIVABLE
COMMON PAID-IN RETAINED TRANSLATION FROM TREASURY
STOCK CAPITAL EARNINGS ADJUSTMENTS SHAREHOLDERS STOCK TOTAL
------ ---------- -------- ----------- ------------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Balance at September 30, 1992,
as restated for merger....... $ 70 $ 40,578 $ 10,215 $ (515) $ (5,847) $ -- $44,501
Issuance of common stock..... 1 597 -- -- -- -- 598
Conversion of Series C
preferred stock........... 5 4,995 -- -- -- -- 5,000
IPM preferred stock
dividends................. -- -- (400) -- -- -- (400)
Exide Electronics preferred
stock dividends........... -- -- (1,071) -- -- -- (1,071)
Accrued interest income on
notes receivable from
shareholders.............. -- -- -- -- (262) -- (262)
Other, net................... -- 55 -- (1,396) 160 -- (1,181)
Net income................... -- -- 10,832 -- -- -- 10,832
------ ---------- -------- ----------- ------------ -------- -------
Balance at September 30,
1993......................... 76 46,225 19,576 (1,911) (5,949) -- 58,017
Adjustment to conform fiscal
year of IPM............... -- -- (591) -- -- -- (591)
Issuance of common stock..... 1 1,998 -- -- -- -- 1,999
IPM preferred stock
dividends................. -- -- (500) -- -- -- (500)
Exide Electronics preferred
stock dividends........... -- -- (790) -- -- -- (790)
Accrued interest income on
notes receivable from
shareholders.............. -- -- -- -- (278) -- (278)
Other, net................... -- -- -- 154 276 -- 430
Net income................... -- -- 9,175 -- -- -- 9,175
------ ---------- -------- ----------- ------------ -------- -------
Balance at September 30,
1994......................... 77 48,223 26,870 (1,757) (5,951) -- 67,462
Issuance of common stock..... 1 (3) -- -- -- 1,288 1,286
Conversion of Series D and
Series E preferred
stock..................... 6 9,994 -- -- -- -- 10,000
Purchases of treasury
stock..................... -- -- -- -- 605 (1,308) (703)
IPM preferred stock
dividends................. -- -- (1,226) -- -- -- (1,226)
Exide Electronics preferred
stock dividends........... -- -- (592) -- -- -- (592)
Accrued interest income on
notes receivable from
shareholders.............. -- -- -- -- (310) -- (310)
Other, net................... -- (24) -- 353 136 -- 465
Net income................... -- -- 7,385 -- -- -- 7,385
------ ---------- -------- ----------- ------------ -------- -------
Balance at September 30,
1995......................... $ 84 $ 58,190 $ 32,437 $(1,404) $ (5,520) $ (20) $83,767
====== ======= ======= ========= ========= ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements, which
have been restated
to reflect the merger with International Power Machines on a
pooling-of-interests basis.
F-5
<PAGE> 120
EXIDE ELECTRONICS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
Cash flows from operating activities
Net income............................................... $ 10,832 $ 9,175 $ 7,385
Adjustment to conform fiscal year of IPM................. -- 49 --
Adjustments to reconcile net income to cash provided by
(used in) operating activities:
Depreciation expense.................................. 5,304 6,105 6,683
Amortization expense.................................. 1,646 2,325 2,762
(Increase) decrease in accounts receivable............ (25,867) (7,351) 2,251
Increase in inventories............................... (14,795) (4,943) (17,131)
(Increase) decrease in other current assets........... 437 (2,549) (360)
Increase (decrease) in accounts payable............... 14,935 2,657 (77)
Increase (decrease) in other current liabilities...... 5,869 1,946 (681)
Cumulative effect of accounting change................ (1,000) -- --
Other, net............................................ (682) 1,064 276
-------- -------- --------
Net cash provided by (used in) operating
activities....................................... (3,321) 8,478 1,108
-------- -------- --------
Cash flows from investing activities
Acquisitions of property, plant, and equipment........... (8,255) (8,735) (12,497)
Acquisitions, net of cash acquired....................... (1,983) (3,580) (13,151)
Other, net............................................... (1,282) (1,576) (50)
-------- -------- --------
Net cash used in investing activities............... (11,520) (13,891) (25,698)
-------- -------- --------
Cash flows from financing activities
Proceeds from bank credit facilities..................... 78,527 91,938 143,713
Payments of bank credit facilities....................... (63,703) (83,629) (116,274)
Payments of industrial revenue bonds..................... (900) (3,500) (4,600)
(Increase) decrease in funds held in trust for future
construction.......................................... (64) 2,600 --
Issuance of common stock................................. 598 1,055 1,342
Purchases of treasury stock.............................. -- -- (703)
Issuance of redeemable preferred stock................... 4,900 -- --
Preferred stock dividends of Exide Electronics........... (1,006) (839) (789)
Preferred stock dividends of IPM......................... (400) (500) (1,226)
Payments of notes receivable from shareholders........... 160 276 136
Other, net............................................... (879) (567) (108)
-------- -------- --------
Net cash provided by financing activities........... 17,233 6,834 21,491
-------- -------- --------
Net increase (decrease) in cash and cash equivalents....... 2,392 1,421 (3,099)
Cash and cash equivalents, beginning of period............. 2,073 4,465 5,886
-------- -------- --------
Cash and cash equivalents, end of period................... $ 4,465 $ 5,886 $ 2,787
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements, which
have been restated
to reflect the merger with International Power Machines on a
pooling-of-interests basis.
F-6
<PAGE> 121
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION The consolidated financial statements include the
accounts of Exide Electronics Group, Inc. (the "Company") and its wholly-owned
subsidiaries. The Company designs, manufactures, markets, and services a broad
line of uninterruptible power systems ("UPS") products that protect computers
and other sensitive electronic equipment against electrical power distortions
and interruptions. The Company's products are used principally for financial,
medical, industrial, telecommunications, military, and aerospace applications
throughout the world. The Company's investment in a joint venture is accounted
for using the equity method. All significant intercompany accounts and
transactions have been eliminated in consolidation. Certain amounts in the prior
years' financial statements have been reclassified to conform to the current
year presentation. These reclassifications are not material.
On February 8, 1995, the Company completed the merger of International
Power Machines Corporation ("IPM") with and into a newly formed subsidiary of
the Company. The merger was structured as a tax-free exchange and was accounted
for as a pooling-of-interests. Accordingly, the accompanying consolidated
financial statements and related notes include the accounts and results of
operations of IPM for all periods presented (see Note 2).
REVENUES Revenues from product sales are recognized at the time of
shipment to customers. Service revenues are recognized as services are
performed. Maintenance contract revenues, net of directly associated costs, are
deferred and recognized on a straight-line basis over the terms of the
contracts. All revenues are shown net of provisions for customer returns and
adjustments.
ADVERTISING COSTS Advertising costs are reported in selling, general and
administrative expenses in the accompanying consolidated statement of operations
and include costs of advertising, public relations, trade shows, direct
mailings, customer seminars, and other activities designed to enhance demand for
the Company's products. Advertising costs were $4,356,000 in 1993, $5,972,000 in
1994, and $7,344,000 in 1995. There are no capitalized advertising costs in the
accompanying consolidated balance sheet.
PER SHARE DATA Primary net income per common and equivalent share is
computed using net income after preferred stock dividends and the weighted
average number of shares of common stock and dilutive common stock equivalents.
Fully diluted net income per share is similarly computed but includes the
effect, when dilutive, of assumed conversion of the Company's convertible
subordinated notes, and prior to its conversion, the Company's redeemable
preferred stock (see Note 8).
INVENTORIES Inventories are stated at the lower of cost or market. Cost is
determined by the last-in, first-out ("LIFO") method for certain domestic
inventories and by the first-in, first-out ("FIFO") method for the remaining
inventories.
PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment is stated at
original cost. Depreciation and amortization is calculated using primarily the
straight-line method for financial reporting purposes and primarily accelerated
methods for tax purposes. For financial reporting purposes, equipment is
depreciated over three to ten years and buildings are depreciated over thirty
years. Leasehold improvements are amortized over the shorter of the useful life
of the asset or the term of the lease.
SOFTWARE DEVELOPMENT COSTS Costs of developing new software products and
enhancements to existing software products are capitalized after technological
feasibility is established. The costs of capitalized software are amortized over
the estimated useful lives of the related products, generally one to five years.
The accompanying consolidated balance sheet at September 30, 1994 and 1995
includes unamortized software development costs of $2,128,000 and $2,072,000,
respectively. Related amortization expense was $277,000 in 1993, $683,000 in
1994, and $1,035,000 in 1995.
GOODWILL Goodwill is amortized over periods ranging from ten to forty
years.
F-7
<PAGE> 122
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
TRANSLATION OF FOREIGN CURRENCIES Certain of the Company's non-U.S.
subsidiaries use their local currency as their functional currency. Their asset
and liability accounts are translated into U.S. dollars at the exchange rates in
effect at the balance sheet date, while revenues and expenses are translated
using average exchange rates during the period. Translation adjustments are
recorded directly to the cumulative translation adjustments component of common
shareholders' equity and do not affect the results of operations. Losses on
foreign currency transactions were $221,000 in 1993, $257,000 in 1994, and
$218,000 in 1995.
USE OF ESTIMATES The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the reported amounts of revenues and expenses. Actual results
may differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board
recently issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This statement requires
long-lived assets to be evaluated for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company will adopt SFAS No. 121 in fiscal 1996 and does not
expect its provisions to have a material effect on the Company's consolidated
results of operations.
The Financial Accounting Standards Board also recently issued SFAS No. 123,
"Accounting for Stock-Based Compensation." This statement introduces a
fair-value based method of accounting for stock-based compensation. It
encourages, but does not require, companies to recognize compensation expense
for grants of stock, stock options and other equity instruments to employees
based on the new fair value accounting rules. However, if the Company chooses
not to recognize compensation expense in accordance with the provisions of this
statement, pro forma disclosures are required in the notes to consolidated
financial statements. The Company will adopt the disclosure provisions of SFAS
No. 123 by fiscal 1997.
NOTE 2: MERGER WITH IPM
On February 8, 1995, the Company completed the merger of IPM with and into
a newly-formed subsidiary of the Company. IPM develops, manufactures, sells, and
services UPS products, and is compatible with Exide Electronics in terms of the
products and services provided and its channels of distribution. Under the terms
of the agreement, the Company issued approximately 1,510,000 newly registered
shares of Exide Electronics' common stock for all of the outstanding shares of
IPM's common and preferred stock. The merger was structured as a tax-free
exchange and was accounted for as a pooling-of-interests. Accordingly, the
accompanying consolidated financial statements and related notes have been
restated to include the accounts and results of operations of IPM for all
periods presented.
Historically, IPM prepared its financial statements using a December 31
fiscal year end. As of September 30, 1994, IPM's fiscal year end has been
changed to conform to Exide Electronics' September 30 year end. The consolidated
statement of operations for the year ended September 30, 1994, combines Exide
Electronics' historical consolidated statement of operations for the fiscal year
ended September 30, 1994, with IPM's consolidated statement of operations for
the year ended September 30, 1994. In accordance with the accounting rules
prescribed or permitted for pooling-of-interests, the restated financial
statements for the fiscal year ended September 30, 1993 combine the historical
consolidated results of operations of Exide Electronics for the year then ended
with IPM's historical consolidated results of operations for the calendar year
ended December 31, 1993. As a result, IPM's operations for the quarter ended
December 31, 1993, are included in the consolidated statements of income,
changes in shareholders' equity, and cash flows for both of the fiscal years
ended September 30, 1994 and 1993. IPM's revenues were $9,486,000 and net income
was $688,000 for the quarter ended December 31, 1993.
F-8
<PAGE> 123
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The restated balance sheet as of September 30, 1994 combines Exide
Electronics' historical consolidated balance sheet as of September 30, 1994 with
IPM's historical consolidated balance sheet as of that date. The restated
balance sheet as of September 30, 1993 combines Exide Electronics' historical
consolidated balance sheet as of September 30, 1993 with IPM's historical
consolidated balance sheet as of December 31, 1993. An adjustment to conform
IPM's fiscal year is shown in the accompanying consolidated statement of changes
in shareholders' equity. An adjustment is also shown in the accompanying
consolidated statement of cash flows for the year ended September 30, 1994 to
account for IPM's change in cash for the quarter ended December 31, 1993.
Combined and separate results of Exide Electronics and IPM during the periods
preceding the merger were as follows (in thousands):
<TABLE>
<CAPTION>
EXIDE
ELECTRONICS IPM ADJUSTMENTS COMBINED
----------- ------- ----------- --------
<S> <C> <C> <C> <C>
Quarter ended December 31, 1994
Revenues.................................... $ 81,264 $10,802 -- $ 92,066
Net income.................................. $ 1,746 $ 538 $ (35) $ 2,249
----------- ------- ----------- --------
Year ended September 30, 1994
Revenues.................................... $ 326,583 $37,400 -- $363,983
Net income.................................. $ 7,731 $ 1,566 $ (122) $ 9,175
----------- ------- ----------- --------
Year ended September 30, 1993
Revenues.................................... $ 281,949 $35,993 -- $317,942
Net income.................................. $ 9,251 $ 1,814 $ (233) $ 10,832
----------- ------- ----------- --------
</TABLE>
The combined financial results presented above and the accompanying
consolidated financial statements include adjustments to conform the accounting
methodology of IPM for reserving for excess and obsolete service inventories to
the accounting methodology used by Exide Electronics. There were no intercompany
transactions during the periods presented.
In connection with the merger, the Company recorded a nonrecurring charge
of $5.5 million ($4.4 million after tax) in the second quarter of fiscal 1995.
This charge included approximately $3.0 million for legal, accounting, financial
advisory, and other costs. The Company also expensed approximately $2.5 million
for the estimated costs of closing a duplicate operating facility and
discontinuing certain duplicate product lines manufactured at that facility. As
of September 30, 1995, all operations at the duplicate facility have ceased, and
the Company has entered into negotiations to sell the remaining fixed assets at
the facility. The Company is also in the process of disposing of excess
inventories related to the duplicate product lines. Other than amounts
sufficient to cover remaining lease payments on the duplicate facilities and
disposal of excess inventory, there are no significant accrued costs related to
the merger included in the consolidated balance sheet at September 30, 1995.
F-9
<PAGE> 124
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3: ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------
1994 1995
-------- --------
<S> <C> <C>
Accounts Receivable:
Commercial......................................................... $ 73,913 $ 86,936
United States government........................................... 33,947 21,105
-------- --------
107,860 108,041
Less: Allowance for doubtful accounts, customer returns and
adjustments.................................................... 2,148 2,517
-------- --------
$105,712 $105,524
======== ========
</TABLE>
Accounts receivable at September 30, 1994 and 1995 included unbilled
receivables of $12,808,000 and $7,371,000, and retainage receivables of $755,500
and $1,452,000, respectively. Unbilled receivables relate primarily to one
United States government contract with multiple installation sites and are
generally billable in the month following contract performance. Retainage
receivables generally relate to larger customer contracts and become payable at
specified dates after installation and customer acceptance.
Commercial accounts receivable are generally not concentrated in any
geographic region or industry. Collateral is usually not required except for
certain international transactions for which the Company requires letters of
credit to secure payment.
NOTE 4: INVENTORIES
Inventories, which include materials, labor and manufacturing overhead,
consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1994 1995
------- -------
<S> <C> <C>
Raw materials and supplies............................................. $20,149 $27,989
Work in process........................................................ 7,288 6,064
Finished goods......................................................... 14,805 24,054
Service parts.......................................................... 13,287 14,783
------- -------
$55,529 $72,890
======= =======
</TABLE>
Domestic inventories of approximately $37,900,000 and $52,167,000 were
valued using the LIFO method at September 30, 1994 and 1995, respectively. The
LIFO value exceeded the FIFO value of these inventories by approximately
$693,000 at September 30, 1994 and $1,941,000 at September 30, 1995. There was
no liquidation of prior years' LIFO layers in 1995, and the effect of such
liquidation in 1994 was not significant.
NOTE 5: SHORT-TERM DEBT
Certain of the Company's subsidiaries maintain various lines of credit.
These lines, which had interest rates ranging from 7.25% to 8.50% at September
30, 1995, are primarily due on demand and are generally secured by guaranties of
payment by the Company. Approximately $4,902,000 and $7,130,000 were outstanding
under these facilities at September 30, 1994 and 1995, respectively. The
remaining availability under these facilities at September 30, 1995, was
approximately $6,900,000.
F-10
<PAGE> 125
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted average interest rate incurred on the Company's short-term
debt was 8.5% in 1995 and 8.1% in 1994. The short-term debt balance outstanding
at September 30, 1995 approximated fair value for loans with similar terms.
NOTE 6: LONG-TERM DEBT AND CONVERTIBLE SUBORDINATED NOTES
Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1994 1995
------- -------
<S> <C> <C>
Domestic bank credit facility.......................................... $39,700 $65,000
Industrial revenue bonds............................................... 4,600 --
Other long-term debt................................................... -- 783
------- -------
44,300 65,783
Less current portion................................................... 900 525
------- -------
$43,400 $65,258
======= =======
Convertible subordinated notes......................................... $15,000 $15,000
======= =======
</TABLE>
At September 30, 1995, the Company had $145 million of committed domestic
unsecured bank credit facilities comprised of a $95 million revolving credit
facility ("Facility A") for working capital and general corporate purposes,
which may include letters of credit, and a $50 million revolving credit facility
("Facility B") for financing certain acquisitions and refinancing specified
existing obligations. Facility A includes a sublimit of $30 million which may be
used in support of the Company's international subsidiaries.
Amounts outstanding at September 30, 1995 under both facilities bear
interest at either the agent bank's base rate or, at the Company's option, the
LIBOR rate plus .60%. For the year ended September 30, 1995, the weighted
average interest rate on these facilities was 6.5%. The average daily unutilized
commitment incurs a commitment fee of .20% per annum, and letters of credit bear
a fee of .60% per annum. These rates and fees may be adjusted based on a senior
debt to cash flow ratio, as defined. Balances outstanding on these facilities at
September 30, 1994 and 1995 approximated their fair value. Amounts outstanding
under Facility A are due and payable on September 30, 1997. Amounts outstanding
under Facility B will convert to a term loan on September 30, 1996, with
quarterly principal payments thereafter of 5% of the amount outstanding on
conversion, with the remaining balance due September 30, 1999.
The credit agreement contains certain financial covenants, including a
senior debt to cash flow ratio, a fixed charge coverage ratio, a leverage ratio,
and a minimum net worth requirement. As of September 30, 1995, the Company was
in compliance with all financial covenants, as amended. The agreement also
imposes certain restrictions on mergers, acquisitions, investments in other
companies and liquidations; additional senior indebtedness; disposition of
assets; related party transactions; and prohibits payments of dividends on
common stock if the Company would be in default before or after such dividend
payment.
In December 1995, the Company received a commitment to refinance these
facilities, concurrent with the closing of the Deltec Acquisition (see Note 16).
In fiscal 1990, Industrial Revenue Bonds ("the IRBs") in the aggregate
amount of $9 million were issued to finance a portion of the cost of
constructing a manufacturing facility near Wilmington, North Carolina. The
average interest rate on the IRBs was 7.24%. On June 1, 1994, the Company
executed a partial redemption in the amount of $2.6 million using the excess
project funds held in trust. On December 1, 1994, the Company exercised its
option to redeem the remaining bonds outstanding at a redemption price of 102%.
F-11
<PAGE> 126
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In September 1992, the Company sold $15 million of convertible subordinated
notes (the "Notes"). The Notes bore interest at 8.375% per annum, payable
semi-annually. The Notes were convertible into common stock of the Company at
any time for an initial conversion price of $13.08 per share, subject to
adjustment for certain events. On October 23, 1995, the holder of the Notes
exercised its option to convert the Notes into 1,146,789 shares of the Company's
common stock. The market value of the Notes if they had been converted into the
Company's common stock was approximately $24.9 million and $21.5 million at
September 30, 1994 and 1995, respectively.
Future maturities of long-term debt at September 30, 1995, giving effect to
the October 1995 conversion of the Notes into the Company's common stock, were
(in thousands):
<TABLE>
<S> <C>
1996............................. $ 525
1997............................. 53,469
1998............................. 2,969
1999............................. 8,769
2000............................. 51
Thereafter....................... --
-------
$65,783
=======
</TABLE>
NOTE 7: LEASE COMMITMENTS
The Company leases buildings, equipment and machinery under various
operating leases. Future minimum payments at September 30, 1995 under
noncancellable operating leases were (in thousands):
<TABLE>
<S> <C>
1996............................. $ 6,410
1997............................. 6,175
1998............................. 5,249
1999............................. 4,815
2000............................. 3,909
Thereafter....................... 19,265
-------
$45,823
=======
</TABLE>
Rental expense related to operating leases was $7,165,000 in 1993,
$7,780,000 in 1994, and $8,109,000 in 1995.
NOTE 8: REDEEMABLE PREFERRED STOCK
Authorized preferred stock consists of 2,000,000 shares of $0.01 par value
preferred stock, of which 6,000 shares have been designated as Series D
Preferred Stock, 6,000 shares as Series E Preferred Stock, and 200,000 shares as
Series F Junior Participating Preferred Stock.
In August 1991, the Company issued 5,000 shares of Series C Preferred Stock
(the "Series C shares") at a purchase price of $1,000 per share. The Series C
shares were convertible at the option of the holder into the Company's common
stock at a conversion price per share of $9.5062. The holder exercised this
option in August 1993 and converted the Series C shares into 525,972 shares of
the Company's common stock. In February 1995, authorization for Series C
Preferred Stock was removed from the Company's Certificate of Incorporation.
In July 1992, the Company issued to Japan Storage Battery Co., Ltd. ("JSB")
5,100 shares of the Company's Series D Preferred Stock (the "Series D shares")
at a purchase price of $1,000 per share. JSB had
F-12
<PAGE> 127
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the right to convert some or all of the Series D shares into the Company's
common stock at a conversion price per share of $13.08, subject to adjustment
upon the occurrence of certain events. In December 1992, JSB exercised an option
to purchase 4,900 shares of Series E Preferred Stock (the "Series E shares") at
a purchase price of $1,000 per share. The Series E shares were convertible at
the option of JSB into the Company's common stock at a conversion price per
share of $23.86, subject to adjustment upon the occurrence of certain events. On
July 1, 1995, JSB exercised these options and converted all of the Series D and
Series E shares into 595,273 shares of the Company's common stock.
The Company owns 50% of a joint venture with JSB for distribution of
products in Japan. The carrying value of the Company's investment in the joint
venture at September 30, 1995 was $399,000. Total sales to the joint venture by
the Company were approximately $3.6 million in 1993, $4.1 million in 1994, and
$9.1 million in 1995. Accounts receivable from the joint venture were
approximately $938,000 and $2,806,000 at September 30, 1994 and 1995,
respectively.
NOTE 9: COMMON SHAREHOLDERS' EQUITY
As of September 30, 1995, the Company had notes receivable of $5,520,000
(including accrued interest of $1,917,000) related to the sale of 537,852 shares
of common stock to certain employees. The notes generally bear simple interest
at prime and are payable ten years from the date of issuance or earlier upon
sales of the shares or upon termination of employment. The market value of these
notes receivable was approximately $5,120,000 and $4,956,000 at September 30,
1994 and 1995, respectively.
In November 1992, the Board of Directors adopted a shareholders' rights
plan to deter coercive takeover tactics and to prevent a potential acquirer from
gaining control of the Company without offering a fair price to all of the
Company's shareholders. The Board declared a dividend distribution of one right
for each share of common stock outstanding on or issued after December 7, 1992
(the "Right" or "Rights"). Each Right, when exercisable, entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series F
Junior Participating Preferred Stock at a purchase price of $80 per one
one-hundredth share, subject to certain adjustments. The Rights will become
exercisable only upon the occurrence of a person or group acquiring beneficial
ownership of 15% or more of the Company's then outstanding common stock, and
will expire in December 2002 unless previously redeemed or exchanged by the
Company.
In the event that a person becomes the beneficial owner of 15% or more of
the Company's then outstanding shares of common stock, except pursuant to an
offer for all outstanding shares of common stock which the outside directors
determine to be fair to and otherwise in the best interests of the Company and
its shareholders, each holder of a Right, other than the person triggering the
Rights, will have the right to receive common stock (or in certain
circumstances, cash, property or other securities of the Company) having a value
equal to two times the exercise price of the Right. Similarly, if the Company is
acquired in a merger or other similar business combination without the consent
of the Company's Board of Directors, each holder of a Right, except the person
triggering the Rights, will have the right to receive common stock of the
acquiring Company having a value equal to two times the exercise price of the
Right.
In November 1994, the Board of Directors authorized the repurchase of up to
5% of the Company's outstanding common stock. Purchases may be made from time to
time as management considers appropriate. In October 1995, the Company
repurchased approximately 131,000 shares of its common stock.
NOTE 10: STOCK AND BENEFIT PLANS
1995 EMPLOYEE STOCK OPTION AND RESTRICTED STOCK PLAN This plan provides
for the grant to selected employees of up to 750,000 shares of the Company's
common stock. The purchase price for stock options under this plan shall be no
less than fair market value of the common stock at the date of grant.
F-13
<PAGE> 128
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1995 DIRECTORS PLAN This plan provides for the grant of up to 150,000
shares of the Company's common stock. Each of the Company's non-employee
directors receives an option to purchase 3,000 shares of common stock on the
date of commencement of service as a director and annually thereafter for as
long as the director remains on the board. The purchase price for stock options
under this plan shall be no less than fair market value of the common stock at
the date of grant.
1989 STOCK OPTION PLAN This plan provides for the grant to selected
employees of options for up to 550,000 shares of the Company's common stock. The
purchase price for stock options under this plan shall be no less than fair
market value of the common stock at the date of grant.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN This plan provided for the grant
of 87,500 shares of the Company's common stock. All options available under this
plan have been granted. The purchase price for stock options granted under this
plan was no less than the fair market value of the common stock at the date of
grant.
The following table summarizes the activity under these plans:
<TABLE>
<CAPTION>
SHARES
AVAILABLE OPTIONS EXERCISE
FOR GRANT OUTSTANDING PRICE RANGE
--------- ----------- ------------
<S> <C> <C> <C>
Balances at September 30, 1992....................... 201,270 434,980 $2.99-$18.00
--------- ----------- ------------
Granted............................................ (48,000) 48,000 15.00-20.13
Exercised.......................................... -- (23,375) 6.50-15.00
Forfeited.......................................... 17,250 (17,250) 6.50-15.00
--------- ----------- ------------
Balances at September 30, 1993....................... 170,520 442,355 2.99-20.13
--------- ----------- ------------
Granted............................................ (64,000) 64,000 16.13-23.50
Exercised.......................................... -- (49,059) 2.99-17.38
Forfeited.......................................... 26,285 (26,285) 6.50-15.00
--------- ----------- ------------
Balances at September 30, 1994....................... 132,805 431,011 6.50-23.50
--------- ----------- ------------
1995 Director and Employee Plans................... 900,000 -- --
Granted............................................ (291,987) 291,987 16.38-16.75
Exercised.......................................... -- (42,590) 6.50-17.38
Forfeited.......................................... 29,250 (29,250) 15.00-23.50
--------- ----------- ------------
Balances at September 30, 1995....................... 770,068 651,158 $6.50-$23.50
======== ========= ===========
</TABLE>
As of September 30, 1995, outstanding options to purchase 342,404 common
shares were exercisable. The majority of these options expire ten years after
the grant date if not exercised.
EMPLOYEE STOCK PURCHASE PLAN This plan provides for the grant to employees
of rights to purchase shares of the Company's common stock. Shares are purchased
at the end of an offering period, with a purchase price for the shares equal to
the lower of 85% of the fair market value of the common stock at the beginning
or the end of the offering period. A maximum of 600,000 shares have been
authorized under this plan, and through September 30, 1995, 234,242 shares have
been issued under this plan. Under the current offering, which expires December
31, 1995, the offering price at the beginning of the offering period was $13.84.
BENEFIT PLANS The Company and its subsidiaries have defined contribution
plans that cover substantially all employees. The plans allow for the matching
of voluntary employee contributions, and the Company may
F-14
<PAGE> 129
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
elect to make additional contributions at the discretion of the Board of
Directors. Total expenses related to these plans were $2,097,000 in 1993,
$2,303,000 in 1994, and $1,917,000 in 1995.
NOTE 11: GEOGRAPHIC OPERATIONS
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
REVENUES
United States --
Unaffiliated customers
United States..................................... $248,452 $273,087 $268,289
Latin America..................................... 19,962 31,392 36,590
Far East.......................................... 11,958 13,138 23,353
Other............................................. 6,986 8,669 452
Intercompany........................................ 18,171 22,030 37,338
Outside the United States --
Unaffiliated customers
Europe............................................ 13,538 19,193 34,975
Canada............................................ 13,768 14,779 18,523
Other............................................. 3,278 3,725 8,796
Intercompany........................................ 2,341 3,360 6,541
Intercompany eliminations.............................. (20,512) (25,390) (43,879)
-------- -------- --------
Total revenues................................. $317,942 $363,983 $390,978
======== ======== ========
INCOME (LOSS) BEFORE INCOME TAXES AND THE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE
United States.......................................... $ 17,560 $ 13,333 $ 9,035
Europe................................................. (2,630) (218) 2,097
Canada................................................. 1,068 120 419
Other.................................................. 48 224 526
-------- -------- --------
Total income before income taxes and the
cumulative effect of accounting change....... $ 16,046 $ 13,459 $ 12,077
======== ======== ========
IDENTIFIABLE ASSETS
United States.......................................... $179,482 $190,515 $213,541
Europe................................................. 11,011 18,842 24,935
Canada................................................. 11,767 14,019 15,179
Other.................................................. 973 1,300 2,796
-------- -------- --------
Total assets................................... $203,233 $224,676 $256,451
======== ======== ========
</TABLE>
Revenues include sales to unaffiliated customers and the Company's joint
venture (see Note 8). Intercompany sales are made at transfer prices intended to
provide a profit for the purchasing entities after coverage of their selling,
general and administrative expenses. Identifiable assets are those assets
identified with operations in each geographic area.
F-15
<PAGE> 130
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12: INCOME TAXES
As of the beginning of fiscal 1993, the Company adopted Financial
Accounting Standards Board Statement No. 109, "Accounting for Income Taxes,"
which superseded Statement No. 96, the method of accounting for income taxes
previously used by the Company. Statement No. 109 requires recognition of future
tax benefits, to the extent that realization of such benefits is more likely
than not, attributable to deductible temporary differences between the financial
statement and income tax basis of assets and liabilities and to tax net
operating loss carryforwards ("NOLs"). The Company elected to adopt Statement
No. 109 using the prospective adoption method. Under this method, the Company
recognized an increase in net income of $1.0 million in fiscal year 1993 for the
cumulative effect of the change in accounting principle. The increase resulted
from recording the net benefit of approximately $850,000 in net deferred tax
assets for temporary differences and state income tax NOLs which could not
previously be recognized under Statement No. 96, and approximately $150,000 for
the net benefit of NOLs for certain of the Company's foreign subsidiaries.
Components of the tax provision are shown below (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Provision for (benefit from) income taxes:
Federal
Current................................................ $ 6,770 $ 4,784 $ 4,691
Deferred............................................... (1,736) (1,020) (731)
------- ------- -------
Total federal........................................ 5,034 3,764 3,960
------- ------- -------
State
Current................................................ 1,328 619 653
Deferred............................................... (363) (275) --
------- ------- -------
Total state.......................................... 965 344 653
------- ------- -------
Foreign
Current................................................ 420 228 269
Deferred............................................... (205) (52) (190)
------- ------- -------
Total foreign........................................ 215 176 79
------- ------- -------
Total................................................ $ 6,214 $ 4,284 $ 4,692
======= ======= =======
</TABLE>
Deferred income tax provision (benefit) has been provided for temporary
differences resulting from the recognition of taxable income for tax and
financial statement purposes. The provision (benefit) of the significant
differences consisted of the following (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Deferred income, net........................................ $ (427) $ (775) $ (352)
Provisions for uncollectible accounts....................... (406) 365 (204)
Inventory provisions........................................ (616) (208) (1,310)
Foreign currency gains and losses........................... (231) 5 (104)
Depreciation................................................ (46) 127 515
------- ------- -------
</TABLE>
F-16
<PAGE> 131
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effective income tax provision differs from the amount computed by
applying the federal statutory rate of 35% to income before income taxes due to
the following (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Income tax expense computed at the federal statutory rate... $ 5,616 $ 4,710 $ 4,227
State taxes, net of federal tax benefit..................... 648 253 424
Effect of permanent differences............................. 132 442 1,413
Operating losses by foreign subsidiaries with no tax
benefit................................................... 692 100 26
Benefit of Foreign Sales Corporation........................ (189) (206) (315)
Change in valuation allowance............................... (603) (534) (995)
Other....................................................... (82) (481) (88)
------- ------- -------
Provision for income taxes................................ $ 6,214 $ 4,284 $ 4,692
------- ------- -------
</TABLE>
The components of the Company's net deferred tax assets (liabilities) were
as follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1994 1995
------- -------
<S> <C> <C>
Current:
Service revenue deferred for financial reporting purposes............ $ 4,189 $ 4,842
Non-deductible accruals.............................................. 4,569 6,491
Accelerated expenses recognized for tax purposes..................... (1,366) (1,548)
Valuation allowance.................................................. (702) (867)
Other................................................................ 842 754
------- -------
7,532 9,672
------- -------
Noncurrent:
NOLs of foreign subsidiaries......................................... 2,215 1,234
Accelerated depreciation for tax purposes............................ (1,464) (1,979)
Accelerated expenses for tax purposes................................ (932) (955)
Valuation allowance.................................................. (1,731) (370)
Other................................................................ 223 212
------- -------
(1,689) (1,858)
------- -------
Net deferred tax assets.............................................. $ 5,843 $ 7,814
======= =======
</TABLE>
The Company's foreign subsidiaries have tax NOLs of approximately $3.4
million, of which $1.3 million expires in fiscal 1998, and $2.1 million has no
expiration date. If the NOLs are fully utilized at current statutory tax rates
of the respective countries, the total asset is estimated to be approximately
$1.2 million. Although the Company anticipates future operating income in these
subsidiaries, because of prior operating losses in these subsidiaries, as well
as general economic conditions, competition, and other factors beyond the
Company's control, there can be no guarantee that these NOLs will be utilized. A
valuation reserve has been established which reduces the net deferred tax asset
of the NOLs to an amount which the Company believes is more likely than not to
be realized.
The Company has not provided for potential U.S. taxes on undistributed
earnings of its foreign subsidiaries of approximately $7.6 million at September
30, 1995, as it does not currently intend to repatriate such earnings.
Calculation of the potential unrecognized deferred tax liability related to
these earnings is not
F-17
<PAGE> 132
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
practicable; however, credits for foreign income taxes already paid may
partially offset potential U.S. income taxes.
NOTE 13: SUPPLEMENTAL CASH FLOW INFORMATION
Cash and cash equivalents consist of cash and short-term investments with
original maturities of three months or less. Cash equivalents are carried at
cost, which approximates market.
Cash flow disclosures, including non-cash investing and financing
activities for the three years ended September 30, 1995, are as follows (in
thousands):
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Income taxes paid........................................... $ 5,048 $ 9,616 $ 4,665
Interest paid............................................... 4,718 4,990 4,775
Liabilities assumed in exchange for certain assets in
acquisitions of subsidiaries (see Note 14)................ 758 2,505 450
Conversion of preferred stock to common stock (see Note
8)........................................................ 5,000 -- 10,000
Issuance of common stock in the acquisition of a subsidiary
(see Note 14)............................................. -- 944 --
Note receivable repaid with proceeds from treasury stock
purchases................................................. -- -- 605
------- ------- -------
</TABLE>
NOTE 14: ACQUISITIONS
During the fourth quarter of fiscal 1995, the Company acquired Lectro
Products, Inc. ("Lectro"), a broadband industry leader specializing in power
protection and other transmission enhancement devices for converging cable
television and telecommunications networks, for approximately $12.4 million plus
the assumption of certain liabilities. The acquisition was accounted for using
the purchase method of accounting. In connection with the acquisition, the
Company recorded goodwill of approximately $10.2 million, which is being
amortized over 20 years. The Company is evaluating the final purchase price
allocation, which may impact currently recorded goodwill. Lectro's results of
operations are included in the Company's results of operations beginning in July
1995. If Lectro had been consolidated at the beginning of the fiscal year, the
effect on the Company's operations or financial condition would not have been
significant.
During the fourth quarter of fiscal 1994, the Company acquired two
companies in Canada and one in the United Kingdom. These companies are involved
in the sales and service of UPS products. The acquisitions were accounted for
using the purchase method of accounting. Goodwill totaling approximately $4.0
million was recorded and is being amortized over periods ranging from ten to
twenty years. The results of operations of these companies were included in the
Company's consolidated financial statements at various dates beginning in the
fourth quarter of fiscal 1994. If these companies had been consolidated at the
beginning of fiscal 1994, the effect on the Company's operations or financial
condition would not have been significant.
During the fiscal year ended September 30, 1993, the Company completed the
acquisition of DataTrax Systems Corporation ("DataTrax"). DataTrax is a
developer of power, environmental, and security monitoring systems for computer
rooms and other mission-critical applications, and is based in Colorado. The
acquisition was accounted for using the purchase method of accounting. Goodwill
of approximately $1.0 million was recorded and is being amortized over 15 years.
The results of operations of DataTrax were included in the Company's
consolidated financial statements beginning in September 1993. If DataTrax had
been consolidated at the beginning of fiscal 1993, the effect on the Company's
operations or financial condition would not have been significant.
F-18
<PAGE> 133
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In September 1995, the Company wrote off approximately $1.5 million
($813,000 after tax) of costs related to a proposed acquisition that was not
consummated. Such costs were incurred during fiscal 1995, and consisted
primarily of legal, accounting, and other financial advisory services.
NOTE 15: CONTINGENCIES
LITIGATION In January 1989, a case was filed by a former manufacturer's
representative of the Company, alleging that the Company failed to pay
commissions owed to him on certain sales. In April 1990, a jury awarded the
plaintiff damages of approximately $14.9 million. The Company appealed the
decision, and in September 1992, the appellate court reversed the judgment
against the Company. In response to various motions filed by the plaintiff, a
new trial was granted, and in March 1994, the jury in the new trial awarded
damages of $3.75 million to the plaintiff. While the Company continued to
believe that it should have no liability in this matter and announced its
intention to appeal, it recorded a one-time charge in the second quarter of
fiscal 1994 of $4,997,000 ($2,936,000 after tax) for the jury verdict and for
the costs of the trial.
In July 1994, the Company announced that this litigation had been settled.
Following agreement among the parties to settle, the court vacated the jury
award of $3.75 million previously entered and determined that the vacated
judgment cannot be used against the Company in the future. To avoid further
litigation including post-trial motions and appeals, the Company settled the
case by making payments to the plaintiff and his attorneys. The parties
thereafter stipulated that the entire action was dismissed with prejudice. Since
the total value of the settlement payments was less than the one-time charge for
the jury verdict recorded by the Company in the second quarter of fiscal 1994,
no further charges were necessary in this matter. By agreement with the
plaintiff, the terms of the confidential settlement were not disclosed.
In May 1990, the Company was served with a complaint in the Delaware Court
of Chancery and in May 1991, a related case was filed in Federal Court in New
York. These complaints alleged, among other things, that the Company's
description of the case involving the manufacturer's representative in its
prospectus dated December 21, 1989, was false and misleading. In April 1995, the
Company announced that it had settled both the Delaware and New York suits. The
Delaware action had been dismissed once for failure to state a claim, but was
reinstated following an appeal and was in the discovery process prior to the
settlement. The Company recorded a charge of $700,000 ($424,000 after tax) for
the settlement of the two related lawsuits in the quarter ended March 31, 1995.
Court approval of the settlement agreement, after notice to affected
shareholders, was granted in August 1995. While the Company believed that
neither suit had merit, it decided to settle as the suits were taking valuable
corporate time and attention and would have involved significant legal costs to
pursue further.
The Company is involved in various litigation proceedings incidental to its
business. The defense of most of these matters is handled by the Company's
insurance carriers. The Company believes that the outcome of such other pending
litigation in the aggregate will not have a material adverse effect on its
financial statements.
GOVERNMENT CONTRACT MATTERS Sales to the United States Federal government
accounted for approximately 35%, 33%, and 27% of total revenues for the years
ended September 30, 1993, 1994, and 1995, respectively. The Company's Federal
government business is currently performed under firm fixed-price type contracts
and time-and-materials type contracts, and at times a combination of both
contract types. The Company's compliance with government contract regulations is
audited or reviewed from time to time by government auditors, who have the right
to audit the Company's records and the records of its subcontractors during and
after completion of contract performance. Under Federal government regulations,
certain costs are not allowable as costs for which the government will reimburse
the Company. Government auditors may recommend that certain charges be treated
as unallowable and reimbursement be made to the government. The Company provides
for estimated unallowable charges and voluntary refunds in its financial
statements, and believes that its provisions are adequate as of September 30,
1995.
F-19
<PAGE> 134
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During fiscal 1993, the Company engaged in discussions with the Federal
government regarding contract interpretation matters relating to certain
time-and-materials charges by the Company under its principal government
contract. In August 1993, the Company reached an agreement with the Federal
government under which these matters were resolved to the satisfaction of the
Company. Under this agreement, there were no adjustments relating to the
Company's past time-and-materials charges, and accordingly there was no effect
on the Company's financial statements for prior periods relating to this matter.
The agreement provided for adjustments to certain hourly labor rates and limited
the recovery of certain general and administrative costs prospectively from
August 1993.
In June 1995, the Company was awarded a follow-on ALC contract. This is a
three-year requirements contract, which permits extension of the ordering period
for up to two additional one-year periods at the option of the Government.
Actual revenues under this contract will depend on the specific purchases, if
any, by the Air Force and other governmental agencies which can use the contract
during the contract period. Following the award of the contract, certain
competitors filed protests with the General Accounting Office ("GAO"). In
December 1995, the GAO notified the Company that all of the protests had been
dismissed, except the protest of the Air Force's evaluation of certain discounts
offered by the Company in the contract. In sustaining this protest on the basis
that it did, the GAO did not recommend termination of the contract or any other
remedy adverse to the interests of the Company at this time. As a result, the
Company retains the contract for the present and the Government can place orders
under the contract. The GAO has, however, recommended that the Air Force amend a
portion of the request for proposal that led to the contract award. The GAO
further recommended that the Air Force allow the protesting companies and the
Company to submit new proposals regarding such portion, and that the Air Force
re-evaluate the award to the Company based upon these new proposals. The Company
has not been advised by the Air Force whether it will contest or accept the
GAO's recommendations. Similarly, the Air Force has not advised the Company of
its plans regarding the issuance of additional orders under the contract, or an
amended request for proposal. No assurances can be given that the Company
ultimately will retain the contract.
NOTE 16: SUBSEQUENT EVENTS
In November 1995, the Company executed a definitive agreement to acquire
Deltec Power Systems, Inc. and its subsidiaries ("Deltec") from Fiskars Oy Ab
("Fiskars") and an affiliated company for a purchase price of approximately $195
million, subject to certain post-closing adjustments. The acquisition will be
accounted for as a purchase. Under the stock purchase agreement, Fiskars will
receive cash of approximately $157.5 million and 1,875,000 shares of the
Company's common stock valued at a fixed price of $20 per share ($37.5 million),
in exchange for all of the issued and outstanding capital stock of Deltec.
Deltec had revenues of $86.8 million and net income of $1.7 million for the nine
months ended September 30, 1995, and revenues of $97.2 million and net income of
$3.2 million for the year ended December 31, 1994. Deltec has two principal
operating subsidiaries: Deltec Electronics Corporation, which is headquartered
in San Diego, California; and FPS Power Systems Oy Ab, which is based in Espoo,
Finland near Helsinki. Deltec is one of the world's largest manufacturers and
marketers of off-line and line-interactive small UPS systems. Off-line and
line-interactive systems are smaller and less expensive than larger on-line
systems, and are suitable for applications where system downtime may be less
costly, such as personal or small business uses. The combination will strengthen
the product line offering of the Company and enhance its global service
capabilities. It is expected that the acquisition will close in the first
calendar quarter of 1996, after completion of due diligence reviews by the
Company and attainment of all required governmental and other regulatory
approvals.
In December 1995, the Company received a commitment from several banks to
establish a five-year senior bank package (the "Facilities") of up to $225
million comprised of a $75 million term loan (the "Term Loan") and a $150
million revolving credit facility (the "Revolver"). The Term Loan would be used
for the Deltec acquisition and to refinance a portion of the Company's existing
debt, while the Revolver would be
F-20
<PAGE> 135
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
used for working capital, letters of credit, and general corporate purposes.
Amounts outstanding under the Facilities would be secured by substantially all
the inventory and accounts receivable of the Company and would initially bear
interest at LIBOR plus 200 basis points, or the bank's base rate plus 100 basis
points, as defined. This commitment is subject to consummation of the Deltec
acquisition by February 28, 1996, and the issuance of at least $75 million of
subordinated debt, or equivalent bridge financing.
NOTE 17: SUMMARIZED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
1994
Total revenues....................... $79,675 $88,013 $91,764 $104,531 $363,983
Gross profit......................... 22,241 25,359 24,804 26,291 98,695
Net income........................... 1,887 522 3,176 3,590 9,175
Per share amounts
Primary............................ $ 0.22 $ 0.04 $ 0.38 $ 0.43 $ 1.07
------- ------- ------- -------- --------
Fully diluted...................... $ 0.21 $ 0.04 $ 0.35 $ 0.40 $ 1.03
======= ======= ======= ======== ========
1995
Total revenues....................... $92,066 $91,268 $98,846 $108,798 $390,978
Gross profit......................... 23,684 23,903 27,418 28,860 103,865
Net income (loss).................... 2,249 (2,574) 4,093 3,617 7,385
Per share amounts
Primary............................ $ 0.26 $ (0.36) $ 0.49 $ 0.42 $ 0.84
------- ------- ------- -------- --------
Fully diluted...................... $ 0.25 $ (0.36) $ 0.44 $ 0.39 $ 0.84
======= ======= ======= ======== ========
</TABLE>
The Company completed its merger with IPM during the second quarter of
1995. This merger has been accounted for as a pooling-of-interests, as discussed
in Note 2. Accordingly, the results for all quarterly periods presented include
the results of IPM. Per share amounts have been recalculated after adding the
shares of Exide Electronics common stock issued to effect the merger to weighted
average share amounts.
In connection with the merger, the Company recorded a non-recurring charge
in the second quarter of $5.5 million ($4.4 million after tax). The one-time
charge included approximately $3.0 million for legal, accounting, financial
advisory, and other costs related to the merger. The Company also expensed
approximately $2.5 million for the estimated costs of closing a duplicate
operating facility and discontinuing certain duplicate product lines
manufactured at that facility.
The Company incurred additional nonrecurring charges in the second quarter
of fiscal 1995 for litigation, and in the fourth quarter of fiscal 1995 for
expenses related to a potential acquisition. The amount of these charges was
$700,000, or $424,000 after tax (see Note 15), and $1,500,000, or $813,000 after
tax (see Note 14), respectively.
The Company recorded a one-time litigation charge in the second quarter of
fiscal 1994 of $5.0 million ($2.9 million after tax), which is described in Note
15.
The sum of quarterly per share amounts does not necessarily equal the
annual net income per share due to the rounding effect of the weighted average
common shares outstanding for the individual periods, and for the fully diluted
calculation, to the inclusion of the dilutive effect of convertible securities.
The effective tax rate for the fourth quarter of fiscal 1995 was lower than
the rate for the previous quarters in fiscal 1995. The lower rate reflected the
use in the fourth quarter of foreign NOL's due to a different mix of foreign
versus domestic taxable earnings for the full year than was anticipated in prior
quarters.
F-21
<PAGE> 136
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 18: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The Company's payment obligations under the Series A Senior Subordinated
Notes (see Note 5 to interim consolidated financial statements) are guaranteed
by certain of the Company's wholly-owned subsidiaries (the "Guarantor
Subsidiaries"). Such guarantees are full, unconditional and joint and several.
Separate financial statements of the Guarantor Subsidiaries are not presented
because Exide management has determined that they would not be material to
investors. Separate audited financial statements of Deltec Power Systems, Inc.
("DPSI") have been included elsewhere herein, including supplemental condensed
consolidating financial information related to DPSI and Deltec Electronics
Corporation which have also guaranteed the Series A Senior Subordinated Notes.
The following supplemental financial information sets forth, on an
unconsolidated basis, balance sheet, statement of operations and cash flow
information for the Company ("Parent Company Only"), for the Guarantor
Subsidiaries and for the Company's other subsidiaries (the "Non-Guarantor
Subsidiaries"). The supplemental financial information reflects the investment
of the Company and the Guarantor Subsidiaries in the Guarantor and Non-Guarantor
subsidiaries using the cost method because the investment in the capital stock
of the significant Non-Guarantor Subsidiaries has been pledged (although such
pledge was limited to 66% of the capital stock of such subsidiaries) as security
for payment of the Company's obligations under the New Credit Facility.
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
PARENT
COMPANY GUARANTOR NON- GUARANTOR
ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................. $ -- $ 593 $ 2,194 $ -- $ 2,787
Accounts receivable....................... -- 85,512 20,012 -- 105,524
Intercompany accounts receivable.......... 206 30,836 791 (31,833) --
Inventories............................... -- 62,923 10,473 (506) 72,890
Other current............................. 57 12,124 1,196 -- 13,377
------- ------------ ------------- ------------ ------------
Total current assets............... 263 191,988 34,666 (32,339) 194,578
Property, plant, and equipment, net......... -- 32,901 2,156 -- 35,057
Goodwill.................................... -- 12,224 6,514 -- 18,738
Noncurrent intercompany receivables......... 26,969 21,972 -- (48,941) --
Investment in affiliates.................... 41,776 23,902 -- (65,280) 398
Other assets................................ 425 6,381 874 -- 7,680
------- ------------ ------------- ------------ ------------
$69,433 $289,368 $44,210 $ (146,560) $256,451
======== =========== ============= =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt........................... $ 456 $ 68 $ 7,131 $ -- $ 7,655
Accounts payable.......................... -- 41,100 4,941 -- 46,041
Intercompany accounts payable............. -- 23,599 8,234 (31,833) --
Deferred revenues......................... -- 13,021 2,581 -- 15,602
Other accrued liabilities................. 355 17,153 2,230 (1) 19,737
------- ------------ ------------- ------------ ------------
Total current liabilities.......... 811 94,941 25,117 (31,834) 89,035
Long-term debt.............................. -- 65,258 -- -- 65,258
Noncurrent intercompany payables............ 4,838 44,103 -- (48,941) --
Convertible subordinated notes.............. 15,000 -- -- -- 15,000
Deferred liabilities........................ -- 3,332 59 -- 3,391
Shareholders' equity........................ 48,784 81,734 19,034 (65,785) 83,767
------- ------------ ------------- ------------ ------------
$69,433 $289,368 $44,210 $ (146,560) $256,451
======== =========== ============= =========== ===========
</TABLE>
F-22
<PAGE> 137
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 18: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
PARENT
COMPANY GUARANTOR NON-GUARANTOR
ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............ $ -- $ 3,754 $ 2,132 $ -- $ 5,886
Accounts receivable.................. -- 91,022 14,690 -- 105,712
Intercompany accounts receivable..... -- 24,888 1,587 (26,475) --
Inventories.......................... -- 47,389 8,294 (154) 55,529
Other current assets................. 5 11,018 1,058 -- 12,081
------- ------------ ------------- ------------ ------------
Total current assets......... 5 178,071 27,761 (26,629) 179,208
Property, plant, and equipment, net.... -- 26,475 1,737 -- 28,212
Goodwill............................... -- 2,259 6,688 -- 8,947
Noncurrent intercompany receivables.... 26,533 2,226 -- (28,759) --
Investment in affiliates............... 41,526 23,797 -- (65,192) 131
Other assets........................... 565 6,566 1,047 -- 8,178
------- ------------ ------------- ------------ ------------
$68,629 $239,394 $37,233 $ (120,580) $224,676
======= ========= =========== ========= =========
LIABILITIES, REDEEMABLE PREFERRED STOCK AND
COMMON SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt...................... $ -- $ 900 $ 4,902 $ -- $ 5,802
Accounts payable..................... -- 39,517 5,441 -- 44,958
Intercompany accounts payable........ -- 18,724 7,751 (26,475) --
Deferred revenues.................... -- 14,199 2,378 -- 16,577
Other accrued liabilities............ 511 16,075 1,948 -- 18,534
------- ------------ ------------- ------------ ------------
Total current liabilities.... 511 89,415 22,420 (26,475) 85,871
Long-term debt......................... -- 43,400 -- -- 43,400
Noncurrent intercompany payables....... -- 28,759 -- (28,759) --
Convertible subordinated notes......... 15,000 -- -- -- 15,000
Deferred liabilities................... -- 2,837 106 -- 2,943
Redeemable preferred stock............. 10,000 -- -- -- 10,000
Common shareholders' equity............ 43,118 74,983 14,707 (65,346) 67,462
------- ------------ ------------- ------------ ------------
$68,629 $239,394 $37,233 $ (120,580) $224,676
======= ========= =========== ========= =========
</TABLE>
F-23
<PAGE> 138
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 18: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
PARENT
COMPANY GUARANTOR NON-GUARANTOR
ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Product revenues....................... $ -- $261,101 $54,415 $(44,034) $271,482
Service revenues....................... -- 105,126 14,370 -- 119,496
------- ------------ ------------- ------------ ------------
Total revenues............... -- 366,227 68,785 (44,034) 390,978
------- ------------ ------------- ------------ ------------
Product cost of revenues............... -- 204,491 43,872 (43,680) 204,683
Service cost of revenues............... -- 73,654 8,776 -- 82,430
------- ------------ ------------- ------------ ------------
Total cost of revenues....... -- 278,145 52,648 (43,680) 287,113
------- ------------ ------------- ------------ ------------
Gross profit...................... -- 88,082 16,137 (354) 103,865
Selling, general and administrative
expense.............................. 365 57,106 12,495 -- 69,966
Research and development expense....... -- 9,929 -- -- 9,929
Litigation expense..................... 700 -- -- -- 700
Merger and acquisition expense......... 4,500 2,500 -- -- 7,000
------- ------------ ------------- ------------ ------------
Income (loss) from operations..... (5,565) 18,547 3,642 (354) 16,270
Interest expense....................... 1,314 3,828 540 (107) 5,575
Interest income........................ (315) (32) (138) -- (485)
Other (income) expense................. (1,312) 217 204 (6) (897)
------- ------------ ------------- ------------ ------------
Income (loss) before income
taxes........................... (5,252) 14,534 3,036 (241) 12,077
Provision for (benefit from) income
taxes................................ (1,118) 5,730 80 -- 4,692
------- ------------ ------------- ------------ ------------
Net income (loss)...................... $(4,134) $ 8,804 $ 2,956 $ (241) $ 7,385
======= ========= =========== ========= =========
</TABLE>
F-24
<PAGE> 139
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 18: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
PARENT
COMPANY GUARANTOR NON-GUARANTOR
ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Product revenues....................... $ -- $252,938 $31,855 $(25,390) $259,403
Service revenues....................... -- 94,931 9,649 -- 104,580
------- ------------ ------------- ------------ ------------
Total revenues............... -- 347,869 41,504 (25,390) 363,983
------- ------------ ------------- ------------ ------------
Product cost of revenues............... -- 193,729 25,131 (25,288) 193,572
Service cost of revenues............... -- 64,893 6,823 -- 71,716
------- ------------ ------------- ------------ ------------
Total cost of revenues....... -- 258,622 31,954 (25,288) 265,288
------- ------------ ------------- ------------ ------------
Gross profit...................... -- 89,247 9,550 (102) 98,695
Selling, general and administrative
expense.............................. 222 55,652 9,212 -- 65,086
Research and development expense....... -- 10,150 -- -- 10,150
Litigation expense..................... -- 4,997 -- -- 4,997
------- ------------ ------------- ------------ ------------
Income (loss) from
operations................. (222) 18,448 338 (102) 18,462
Interest expense....................... 1,300 3,918 199 -- 5,417
Interest income........................ (278) (85) (125) -- (488)
Other (income) expense................. (1,305) 1,137 231 11 74
------- ------------ ------------- ------------ ------------
Income before income taxes............. 61 13,478 33 (113) 13,459
Provision for income taxes............. 25 4,074 185 -- 4,284
------- ------------ ------------- ------------ ------------
Net income (loss)...................... $ 36 $ 9,404 $ (152) $ (113) $ 9,175
======= ========= =========== ========= =========
</TABLE>
F-25
<PAGE> 140
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 18: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1993
<TABLE>
<CAPTION>
PARENT
COMPANY GUARANTOR NON-GUARANTOR
ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Product revenues...................... $ -- $215,040 $25,615 $(20,512) $220,143
Service revenues...................... -- 89,878 7,921 -- 97,799
--------- ------------ ------------- ------------ ------------
Total revenues.............. -- 304,918 33,536 (20,512) 317,942
--------- ------------ ------------- ------------ ------------
Product cost of revenues.............. -- 164,576 21,608 (20,484) 165,700
Service cost of revenues.............. -- 61,758 4,989 -- 66,747
--------- ------------ ------------- ------------ ------------
Total cost of revenues...... -- 226,334 26,597 (20,484) 232,447
--------- ------------ ------------- ------------ ------------
Gross profit..................... -- 78,584 6,939 (28) 85,495
Selling, general and administrative
expense............................. 219 47,048 8,239 -- 55,506
Research and development expense...... -- 9,592 -- -- 9,592
--------- ------------ ------------- ------------ ------------
Income (loss) from
operations................ (219) 21,944 (1,300) (28) 20,397
Interest expense...................... 1,330 2,993 155 (57) 4,421
Interest income....................... (262) (73) (188) 57 (466)
Other (income) expense................ (1,330) 1,382 344 -- 396
--------- ------------ ------------- ------------ ------------
Income (loss) before taxes and
cumulative effect of accounting
change.............................. 43 17,642 (1,611) (28) 16,046
Provision for income taxes............ 9 5,985 220 -- 6,214
--------- ------------ ------------- ------------ ------------
Income (loss) before cumulative
effect.............................. 34 11,657 (1,831) (28) 9,832
Cumulative effect of accounting
change.............................. 9 846 145 -- 1,000
--------- ------------ ------------- ------------ ------------
Net income (loss)..................... $ 43 $ 12,503 $(1,686) $ (28) $ 10,832
======= ========= =========== ========= =========
</TABLE>
F-26
<PAGE> 141
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 18: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
PARENT
COMPANY GUARANTOR NON-GUARANTOR
ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ -------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss)........................ $(4,134) $ 8,804 $2,956 $ (241) $ 7,385
Adjustments to reconcile net income to
cash provided by (used in) operating
activities:
Depreciation expense................... -- 6,182 501 -- 6,683
Amortization expense................... 57 2,132 573 -- 2,762
(Increase) decrease in accounts
receivable........................... (206) 1,625 (4,526) 5,358 2,251
Increase in inventories................ -- (15,304) (2,179) 352 (17,131)
Increase in other current assets....... (52) (170) (138) -- (360)
Increase (decrease) in accounts
payable.............................. -- 5,298 (17) (5,358) (77)
Increase (decrease) in other current
liabilities.......................... (156) (1,011) 485 1 (681)
Other, net............................. 83 289 (96) -- 276
--------- ------------ ------- ------------ ------------
Net cash provided by (used in)
operating activities.............. (4,408) 7,845 (2,441) 112 1,108
--------- ------------ ------- ------------ ------------
Cash flows from investing activities
Acquisitions of property, plant, and
equipment.............................. -- (11,553) (944) -- (12,497)
Acquisitions, net of cash acquired....... (250) (13,151) -- 250 (13,151)
Other, net............................... 752 1,415 (63) (2,154) (50)
--------- ------------ ------- ------------ ------------
Net cash provided by (used in)
investing activities.............. 502 (23,289) (1,007) (1,904) (25,698)
--------- ------------ ------- ------------ ------------
Cash flows from financing activities
Proceeds from bank credit facilities..... -- 139,600 4,113 -- 143,713
Payments of bank credit facilities....... -- (114,329) (1,945) -- (116,274)
Payments of industrial revenue bonds..... -- (4,600) -- -- (4,600)
Issuance of common stock................. 1,342 -- -- -- 1,342
Purchases of treasury stock.............. (703) -- -- -- (703)
Preferred stock dividends of Exide
Electronics............................ (789) -- -- -- (789)
Preferred stock dividends of IPM......... -- (1,226) -- -- (1,226)
Payments of notes receivable from
shareholders........................... 136 -- -- -- 136
Other, net............................... 3,920 (7,162) 1,342 1,792 (108)
--------- ------------ ------- ------------ ------------
Net cash provided by financing
activities........................ 3,906 12,283 3,510 1,792 21,491
--------- ------------ ------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents.............................. -- (3,161) 62 -- (3,099)
Cash and cash equivalents, beginning of
period................................... -- 3,754 2,132 -- 5,886
--------- ------------ ------- ------------ ------------
Cash and cash equivalents, end of period... $ -- $ 593 $2,194 $ -- $ 2,787
========= =========== ============== =========== ===========
</TABLE>
F-27
<PAGE> 142
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 18: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
PARENT
COMPANY GUARANTOR NON-GUARANTOR
ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ -------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss)........................ $ 36 $ 9,404 $ (152) $ (113) $ 9,175
Adjustment to conform fiscal year
of IPM................................. -- 49 -- -- 49
Adjustments to reconcile net income to
cash provided by (used in) operating
activities:
Depreciation expense................... -- 5,701 404 -- 6,105
Amortization expense................... -- 2,110 215 -- 2,325
(Increase) decrease in accounts
receivable........................... -- (3,271) (5,207) 1,127 (7,351)
Increase in inventories................ -- (4,483) (239) (221) (4,943)
(Increase) decrease in other current
assets............................... (4) (2,201) (357) 13 (2,549)
Increase (decrease) in accounts
payable.............................. -- (1,318) 5,102 (1,127) 2,657
Increase (decrease) in other current
liabilities.......................... (57) 2,032 (52) 23 1,946
Other, net............................. -- 1,000 64 -- 1,064
--------- ------------ ------- ------------ ------------
Net cash provided by (used in)
operating activities.............. (25) 9,023 (222) (298) 8,478
--------- ------------ ------- ------------ ------------
Cash flows from investing activities
Acquisitions of property, plant, and
equipment.............................. -- (8,206) (529) -- (8,735)
Acquisitions, net of cash acquired....... -- -- (3,580) -- (3,580)
Other, net............................... 1,232 1,201 (1,567) (2,442) (1,576)
--------- ------------ ------- ------------ ------------
Net cash provided by (used in)
investing activities.............. 1,232 (7,005) (5,676) (2,442) (13,891)
--------- ------------ ------- ------------ ------------
Cash flows from financing activities
Proceeds from bank credit facilities..... -- 88,629 3,309 -- 91,938
Payments of bank credit facilities....... -- (83,430) (199) -- (83,629)
Payments of industrial revenue bonds..... -- (3,500) -- -- (3,500)
(Increase) decrease in funds held in
trust for future construction.......... 2,600 -- -- 2,600
Issuance of common stock................. 1,055 -- -- -- 1,055
Preferred stock dividends of Exide
Electronics............................ (839) -- -- -- (839)
Preferred stock dividends of IPM......... -- (500) -- -- (500)
Payments of notes receivable from
shareholders........................... 276 -- -- -- 276
Other, net............................... (1,699) (2,253) 645 2,740 (567)
--------- ------------ ------- ------------ ------------
Net cash provided by (used in)
financing activities.............. (1,207) 1,546 3,755 2,740 6,834
--------- ------------ ------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents.............................. -- 3,564 (2,143) -- 1,421
Cash and cash equivalents, beginning of
period................................... -- 190 4,275 -- 4,465
--------- ------------ ------- ------------ ------------
Cash and cash equivalents, end of period... $ -- $ 3,754 $2,132 $ -- $ 5,886
========= =========== ============== =========== ===========
</TABLE>
F-28
<PAGE> 143
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 18: SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1993
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ -------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss).................... $ 43 $ 12,503 $ (1,686) $ (28) $ 10,832
Adjustments to reconcile net income
to cash provided by (used in)
operating activities:
Depreciation expense............... -- 4,925 379 -- 5,304
Amortization expense............... -- 1,475 74 97 1,646
(Increase) decrease in accounts
receivable....................... 1 (19,362) 6,156 (12,662) (25,867)
Increase in inventories............ -- (14,171) (404) (220) (14,795)
(Increase) decrease in other
current assets................... (1) 549 (98) (13) 437
Increase (decrease) in accounts
payable.......................... -- 10,830 (8,561) 12,666 14,935
Increase (decrease) in other
current liabilities.............. 284 6,153 (543) (25) 5,869
Cumulative effect of accounting
change........................... (9) (846) (145) -- (1,000)
Other, net......................... (214) (652) 184 -- (682)
------------ ------------ -------------- ------------ ------------
Net cash provided by (used in)
operating activities.......... 104 1,404 (4,644) (185) (3,321)
------------ ------------ -------------- ------------ ------------
Cash flows from investing activities
Acquisitions of property, plant, and
equipment.......................... -- (7,907) (348) -- (8,255)
Acquisitions, net of cash acquired... -- (1,983) -- -- (1,983)
Other, net........................... (11,681) (11,975) 747 21,627 (1,282)
------------ ------------ -------------- ------------ ------------
Net cash provided by (used in)
investing activities.......... (11,681) (21,865) 399 21,627 (11,520)
------------ ------------ -------------- ------------ ------------
Cash flows from financing activities
Proceeds from bank credit
facilities......................... -- 73,813 4,714 -- 78,527
Payments of bank credit facilities... -- (60,101) (3,602) -- (63,703)
Payments of industrial revenue
bonds.............................. -- (900) -- -- (900)
(Increase) decrease in funds held in
trust for future construction...... -- (64) -- -- (64)
Issuance of common stock............. 598 -- -- -- 598
Issuance of redeemable preferred
stock.............................. 4,900 -- -- -- 4,900
Preferred stock dividends of Exide
Electronics........................ (1,006) -- -- -- (1,006)
Preferred stock dividends of IPM..... -- (400) -- -- (400)
Payments of notes receivable from
shareholders....................... 160 -- -- -- 160
Other, net........................... 6,925 8,043 5,595 (21,442) (879)
------------ ------------ -------------- ------------ ------------
Net cash provided by (used in)
financing activities.......... 11,577 20,391 6,707 (21,442) 17,233
------------ ------------ -------------- ------------ ------------
Net increase (decrease) in cash and
cash
equivalents.......................... $ -- (70) 2,462 -- 2,392
Cash and cash equivalents, beginning of
period............................... $ -- 260 1,813 -- 2,073
------------ ------------ -------------- ------------ ------------
Cash and cash equivalents, end of
period............................... -- $ 190 $ 4,275 $ -- $ 4,465
============= =========== ============== =========== ===========
</TABLE>
F-29
<PAGE> 144
EXIDE ELECTRONICS GROUP, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1995
------------- ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents...................................... $ 2,787 $ 2,001
Accounts receivable............................................ 105,524 95,436
Inventories.................................................... 72,890 76,753
Other current assets........................................... 13,377 15,357
------------- ------------
Total current assets................................... 194,578 189,547
------------- ------------
Property, plant, and equipment
Land, buildings, and leasehold improvements.................... 9,931 10,248
Machinery and equipment........................................ 61,519 64,564
------------- ------------
71,450 74,812
Accumulated depreciation....................................... 36,393 37,561
------------- ------------
35,057 37,251
Goodwill......................................................... 18,738 18,318
Other assets..................................................... 8,078 8,823
------------- ------------
$ 256,451 $253,939
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt................................................ $ 7,655 $ 6,747
Accounts payable............................................... 46,041 43,220
Deferred revenues.............................................. 15,602 15,840
Other accrued liabilities...................................... 19,737 15,707
------------- ------------
Total current liabilities.............................. 89,035 81,514
------------- ------------
Long-term debt................................................... 65,258 76,416
------------- ------------
Convertible subordinated notes................................... 15,000 --
------------- ------------
Deferred liabilities............................................. 3,391 3,421
------------- ------------
Common shareholders' equity
Common stock, $0.01 par value, 30,000,000 shares authorized;
shares issued -- 8,376,341 at September 30, 1995 and
9,537,130 at December 31, 1995.............................. 84 95
Additional paid-in capital..................................... 58,190 72,556
Retained earnings.............................................. 32,437 32,850
Cumulative translation adjustments............................. (1,404) (1,456)
------------- ------------
89,307 104,045
Less: Notes receivable from shareholders....................... (5,520) (5,122)
Treasury stock, 926 shares at September 30, 1995 and
385,899 shares at December 31, 1995....................... (20) (6,335)
------------- ------------
83,767 92,588
------------- ------------
$ 256,451 $253,939
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE> 145
EXIDE ELECTRONICS GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
---------------------
1994 1995
------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Product revenues..................................................... $63,896 $57,659
Service revenues..................................................... 28,170 25,644
------- -------
Total revenues............................................. 92,066 83,303
------- -------
Product cost of revenues............................................. 49,060 42,508
Service cost of revenues............................................. 19,322 18,580
------- -------
Total cost of revenues..................................... 68,382 61,088
------- -------
Gross profit....................................................... 23,684 22,215
Selling, general and administrative expense.......................... 16,557 17,457
Research and development expense..................................... 2,547 2,509
------- -------
Income from operations............................................. 4,580 2,249
Interest expense..................................................... 1,424 1,497
Interest income...................................................... (139) (31)
Other (income) expense............................................... (161) 117
------- -------
Income before income taxes......................................... 3,456 666
Provision for income taxes........................................... 1,207 253
------- -------
Net income......................................................... $ 2,249 $ 413
======= =======
Preferred stock dividends............................................ 198 --
Net income applicable to common shareholders......................... $ 2,051 $ 413
======= =======
Per Share amounts
Primary
Net income......................................................... $ 0.26 $ 0.04
======= =======
Weighted average number of common and equivalent shares
outstanding..................................................... 7,782 9,211
======= =======
Fully diluted
Net income......................................................... $ 0.25 $ 0.04
======= =======
Weighted average number of common and equivalent shares
outstanding..................................................... 9,005 9,500
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE> 146
EXIDE ELECTRONICS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------
1994 1995
-------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities
Net income......................................................... $ 2,249 $ 413
Adjustments to reconcile net income to cash provided by (used in)
operating activities:
Depreciation expense............................................ 1,562 1,841
Amortization expense............................................ 653 612
Decrease in accounts receivable................................. 15,940 10,088
Increase in inventories......................................... (4,317) (3,863)
Increase in other current assets................................ -- (1,714)
Increase (decrease) in accounts payable......................... 8,518 (2,821)
Decrease in other current liabilities........................... (6,150) (3,792)
Other, net...................................................... (138) (1,276)
-------- --------
Net cash provided by (used in) operating activities........ 18,317 (512)
-------- --------
Cash flows from investing activities
Acquisitions of property, plant, and equipment..................... (2,332) (3,938)
Other, net......................................................... (783) (165)
-------- --------
Net cash used in investing activities...................... (3,115) (4,103)
-------- --------
Cash flows from financing activities
Proceeds from bank credit facilities............................... 18,130 36,925
Payments of bank credit facilities................................. (32,196) (26,504)
Payment of industrial revenue bonds................................ (4,600) --
Issuances of common stock.......................................... 2 142
Purchases of treasury stock........................................ (625) (6,926)
Preferred stock dividends of Exide Electronics..................... (395) --
Preferred stock dividends of IPM................................... (100) --
Payments of notes receivables from shareholders.................... 104 215
Other, net......................................................... (53) (23)
-------- --------
Net cash provided by (used in) financing activities........ (19,733) 3,829
-------- --------
Net decrease in cash and cash equivalents............................ (4,531) (786)
Cash and cash equivalents, beginning of period....................... 5,886 2,787
-------- --------
Cash and cash equivalents, end of period............................. $ 1,355 $ 2,001
======== ========
Supplemental cash flow disclosures
Interest paid, net of amounts capitalized.......................... $ 1,368 $ 1,920
Income taxes paid.................................................. $ 221 $ 1,548
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE> 147
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and the
rules and regulations of the Securities and Exchange Commission for interim
financial statements. Certain information and footnote disclosures required for
complete financial statements have been condensed or omitted. These financial
statements should be read in conjunction with the annual financial statements
included elsewhere herein.
In the opinion of management, the accompanying consolidated financial
statements include all adjustments (which consist of normal recurring
adjustments) necessary to present fairly the financial position at December 31,
1995, and the results of operations and cash flows for the three months ended
December 31, 1994 and 1995. The results of operations for the three months ended
December 31, 1995 are not necessarily indicative of the results to be expected
for the full year.
NOTE 2 -- INVENTORIES
Inventories, which include materials, labor, and manufacturing overhead,
are stated at the lower of cost or market, and consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1995
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies................................. $27,989 $ 31,153
Work in process............................................ 6,064 7,259
Finished goods............................................. 24,054 23,318
Service parts.............................................. 14,783 15,023
------------- ------------
$72,890 $ 76,753
========== ==========
</TABLE>
NOTE 3 -- LONG-TERM DEBT
At December 31, 1995, the Company had borrowings of $76.1 million
outstanding under its $145 million package of committed domestic unsecured bank
credit facilities comprised of a $95 million revolving credit facility for
working capital and general corporate purposes, including a sublimit of $30
million which may be used in support of its international subsidiaries, and a
$50 million revolving credit facility to be used for financing certain
acquisitions and refinancing specified existing obligations. The credit
agreement contains certain financial covenants, including a senior debt to cash
flow ratio, a fixed charge ratio, a leverage ratio and a minimum net worth
requirement. At December 31, 1995, the Company was in compliance with all
financial covenants, except that its senior debt to cash flow ratio exceeded the
prescribed ratio; however, the lenders have waived the applicability of this
covenant from December 31, 1995 through March 30, 1996.
NOTE 4 -- COMMON SHAREHOLDERS' EQUITY
In September 1992, the Company sold $15 million of convertible subordinated
notes (the "Notes"). The Notes bore interest at 8.375% per annum, payable
semi-annually. The Notes were convertible into common stock of the Company at
any time for an initial conversion price of $13.08 per share, subject to
adjustment for certain events. On October 23, 1995, the holder of the Notes
exercised its option to convert the Notes into 1,146,789 shares of the Company's
common stock.
During the three months ended December 31, 1995, the Company's treasury
stock transactions included: (1) the repurchase of approximately 444,000 shares
of its common stock for approximately $7.4 million under a program to repurchase
up to 5% of the Company's outstanding common stock as originally authorized by
the Board of Directors in November 1994 and reaffirmed in September 1995 and (2)
the issuance of
F-33
<PAGE> 148
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately 59,000 shares of its common stock for approximately $.8 million
under its Employee Stock Purchase Plan, which included $1.1 million credited to
treasury stock and $.3 million charged to additional paid-in capital.
NOTE 5 -- SUBSEQUENT EVENTS
Pursuant to a Stock Purchase Agreement dated November 17, 1995, as amended
on February 9, 1996, the Company acquired Deltec Power Systems, Inc. from
Fiskars Oy Ab and Fiskars Holdings, Inc. simultaneously with the closing of the
Offering of Units consisting of $125.0 million of Series A Senior Subordinated
Notes and Warrants to purchase 643,750 shares of the Company's Common Stock as
described elsewhere herein. The purchase price of approximately $188.1 million
was comprised of approximately $158.5 million in cash, 825,000 shares of the
Company's common stock valued at $14.00 per share, and 1,000,000 shares of the
Company's Series G Convertible Preferred Stock valued at $18.00 per share (the
"Series G Preferred Stock"). The purchase price was determined based on an
assumption that the net book value of Deltec on the closing would be
approximately $28.7 million. The purchase price will be adjusted upward or
downward to the extent the closing date net book value (as adjusted for certain
excluded assets and liabilities) differs from this amount. The Series G
Preferred Stock will be convertible into shares of the Company's Common Stock on
a one-for-one basis (subject to adjustment under certain circumstances), will
have a dividend rate of $0.80 per share through March 31, 2001, and $1.20 per
share thereafter, will be subject to redemption at the option of the holder at
$24 per share at any time after September 30, 2006 and will have a liquidation
preference of $20 per share, plus all accrued and unpaid dividends. The Company
financed the cash portion of the purchase price, excluding transaction costs,
with (i) the net proceeds of the Offering (excluding transaction costs) of
$121.3 million, (ii) $36.7 million of borrowings under a new credit facility
(the "New Credit Facility") and (iii) $500,000 payable to Fiskars on January 8,
1997. The New Credit Facility provides for term and revolving credit facilities
in the aggregate amount of up to $175.0 million upon completion of the Offering.
In addition, the Company made certain interest payments to Fiskars of
approximately $4.0 million. At closing, the Company made a prepayment of $3.0
million to Fiskars related to the variable purchase price adjustment, which
would have been $6.2 million based on Deltec's net book value at December 31,
1995. An additional payment of $3.7 million was made to Fiskars which
represented excess cash which remained in Deltec following the closing.
F-34
<PAGE> 149
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (UNAUDITED)
The Company's payment obligations under the Series A Senior Subordinated
Notes are guaranteed by certain of the Company's subsidiaries (the "Guarantor
Subsidiaries"). The following supplemental financial information sets forth, on
an unconsolidated basis, balance sheet, statement of operations and cash flow
information for the Company ("Parent Company Only"), for the Guarantor
Subsidiaries and for the Company's other subsidiaries (the "Non-Guarantor
Subsidiaries").
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PARENT
COMPANY GUARANTOR NON-GUARANTOR
ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............ $ -- $ 1,160 $ 841 $ -- $ 2,001
Accounts receivable.................. 766 72,177 22,493 -- 95,436
Intercompany accounts receivable..... 209 26,447 1,287 (27,943) --
Inventories.......................... -- 66,749 10,392 (388) 76,753
Other current........................ 57 13,866 1,434 -- 15,357
------- ------------ ------------- ------------ ------------
Total current assets......... 1,032 180,399 36,447 (28,331) 189,547
Property, plant, and equipment, net.... -- 34,940 2,311 -- 37,251
Goodwill............................... -- 12,059 6,259 -- 18,318
Noncurrent intercompany receivables.... 26,944 12,088 -- (39,032) --
Investment in affiliates............... 41,776 24,013 -- (65,281) 508
Other assets........................... 1,071 6,424 820 -- 8,315
------- ------------ ------------- ------------ ------------
$70,823 $269,923 $45,837 $ (132,644) $253,939
======= ========= =========== ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt...................... $ 459 $ -- $ 6,288 $ -- $ 6,747
Accounts payable..................... -- 38,431 4,789 -- 43,220
Intercompany accounts payable........ -- 18,065 9,878 (27,943) --
Deferred revenues.................... -- 13,718 2,122 -- 15,840
Other accrued liabilities............ 85 12,632 2,990 -- 15,707
------- ------------ ------------- ------------ ------------
Total current liabilities.... 544 82,846 26,067 (27,943) 81,514
Long-term debt......................... -- 76,416 -- -- 76,416
Noncurrent intercompany payables....... 13,132 25,900 -- (39,032) --
Deferred liabilities................... -- 3,204 217 -- 3,421
Shareholders' equity................... 57,147 81,557 19,553 (65,669) 92,588
------- ------------ ------------- ------------ ------------
$70,823 $269,923 $45,837 $ (132,644) $253,939
======= ========= =========== ========= =========
</TABLE>
F-35
<PAGE> 150
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PARENT
COMPANY GUARANTOR NON-GUARANTOR
ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Product revenues....................... $ -- $ 58,633 $15,444 $(16,418) $ 57,659
Service revenues....................... -- 22,695 3,154 (205) 25,644
------- ------------ ------------- ------------ ------------
Total revenues............... -- 81,328 18,598 (16,623) 83,303
------- ------------ ------------- ------------ ------------
Product cost of revenues............... -- 47,248 11,762 (16,502) 42,508
Service cost of revenues............... -- 16,617 2,168 (205) 18,580
------- ------------ ------------- ------------ ------------
Total cost of revenues....... -- 63,865 13,930 (16,707) 61,088
------- ------------ ------------- ------------ ------------
Gross profit...................... -- 17,463 4,668 84 22,215
Selling, general and administrative
expense.............................. 121 14,170 3,166 -- 17,457
Research and development expense....... -- 2,509 -- -- 2,509
------- ------------ ------------- ------------ ------------
Income (loss) from
operations................. (121) 784 1,502 84 2,249
Interest expense....................... 34 1,343 120 -- 1,497
Interest income........................ (31) -- -- -- (31)
Other (income) expense................. -- (237) 354 -- 117
------- ------------ ------------- ------------ ------------
Income (loss) before income taxes...... (124) (322) 1,028 84 666
Provision for (benefit from) income
taxes................................ (44) 48 249 -- 253
------- ------------ ------------- ------------ ------------
Net income (loss)...................... $ (80) $ (370) $ 779 $ 84 $ 413
======= ========= =========== ========= =========
</TABLE>
F-36
<PAGE> 151
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
PARENT
COMPANY GUARANTOR NON-GUARANTOR
ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Product revenues....................... $ -- $ 62,315 $11,884 $(10,303) $ 63,896
Service revenues....................... -- 24,812 3,358 -- 28,170
------- ------------ ------------- ------------ ------------
Total revenues............... -- 87,127 15,242 (10,303) 92,066
------- ------------ ------------- ------------ ------------
Product cost of revenues............... -- 49,623 9,507 (10,070) 49,060
Service cost of revenues............... -- 17,225 2,097 -- 19,322
------- ------------ ------------- ------------ ------------
Total cost of revenues....... -- 66,848 11,604 (10,070) 68,382
------- ------------ ------------- ------------ ------------
Gross profit...................... -- 20,279 3,638 (233) 23,684
Selling, general and administrative
expense.............................. 82 13,582 2,893 -- 16,557
Research and development expense....... -- 2,547 -- -- 2,547
------- ------------ ------------- ------------ ------------
Income (loss) from
operations................. (82) 4,150 745 (233) 4,580
Interest expense....................... 328 987 109 -- 1,424
Interest income........................ (77) (27) (35) -- (139)
Other (income) expense................. -- (163) 9 (7) (161)
------- ------------ ------------- ------------ ------------
Income (loss) before income taxes...... (333) 3,353 662 (226) 3,456
Provision for (benefit from) income
taxes................................ (116) 1,131 192 -- 1,207
------- ------------ ------------- ------------ ------------
Net income (loss)...................... $(217) $ 2,222 $ 470 $ (226) $ 2,249
======= ========= =========== ========= =========
</TABLE>
F-37
<PAGE> 152
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PARENT
COMPANY GUARANTOR NON-GUARANTOR
ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ -------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss)........................ $ (80) $ (370) $ 779 $ 84 $ 413
Adjustments to reconcile net income to
cash provided by (used in) operating
activities:
Depreciation expense................... -- 1,723 118 -- 1,841
Amortization expense................... -- 242 370 -- 612
(Increase) decrease in accounts
receivable........................... (769) 17,724 (2,977) (3,890) 10,088
(Increase) decrease in inventories..... -- (3,826) 81 (118) (3,863)
Increase in other current assets....... -- (1,476) (238) -- (1,714)
Increase (decrease) in accounts
payable.............................. -- (8,203) 1,492 3,890 (2,821)
Increase (decrease) in other current
liabilities.......................... (270) (3,824) 301 1 (3,792)
Other, net............................. 3 (1,202) (77) -- (1,276)
--------- ------------ ------- ------------ ------------
Net cash provided by (used in)
operating activities.............. (1,116) 788 (151) (33) (512)
--------- ------------ ------- ------------ ------------
Cash flows from investing activities
Acquisitions of property, plant,
and equipment.......................... -- (3,521) (417) -- (3,938)
Other, net............................... 445 9,086 212 (9,908) (165)
--------- ------------ ------- ------------ ------------
Net cash provided by (used in)
investing activities.............. 445 5,565 (205) (9,908) (4,103)
--------- ------------ ------- ------------ ------------
Cash flows from financing activities
Proceeds from bank credit facilities..... -- 36,558 367 -- 36,925
Payments of bank credit facilities....... -- (25,400) (1,104) -- (26,504)
Issuance of common stock................. 142 -- -- -- 142
Purchases of treasury stock.............. (6,926) -- -- -- (6,926)
Payments of notes receivable from
shareholders........................... 215 -- -- -- 215
Other, net............................... 7,240 (16,944) (260) 9,941 (23)
--------- ------------ ------- ------------ ------------
Net cash provided by (used in)
financing
activities........................ 671 (5,786) (997) 9,941 3,829
--------- ------------ ------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents.............................. -- 567 (1,353) -- (786)
Cash and cash equivalents, beginning of
period................................... -- 593 2,194 -- 2,787
--------- ------------ ------- ------------ ------------
Cash and cash equivalents, end of period... $ -- $ 1,160 $ 841 $ -- $ 2,001
========= =========== ============== =========== ===========
</TABLE>
F-38
<PAGE> 153
EXIDE ELECTRONICS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
PARENT
COMPANY GUARANTOR NON-GUARANTOR
ONLY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ -------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss)........................ $(217) $ 2,222 $ 470 $ (226) $ 2,249
Adjustments to reconcile net income to
cash provided by (used in) operating
activities:
Depreciation expense................... -- 1,430 132 -- 1,562
Amortization expense................... -- 528 125 -- 653
(Increase) decrease in accounts
receivable........................... -- 15,220 (2,723) 3,443 15,940
(Increase) decrease in inventories..... -- (3,021) (1,464) 168 (4,317)
(Increase) decrease in other current
assets............................... 6 (142) 208 (72) --
Increase (decrease) in accounts
payable.............................. -- 10,783 2,315 (4,580) 8,518
Increase (decrease) in other current
liabilities.......................... (549) (4,906) (810) 115 (6,150)
Other, net............................. -- (138) -- -- (138)
--------- ------------ -------------- ------------ ------------
Net cash provided by (used in)
operating activities.............. (760) 21,976 (1,747) (1,152) 18,317
--------- ------------ -------------- ------------ ------------
Cash flows from investing activities
Acquisitions of property, plant, and
equipment.............................. -- (2,181) (151) -- (2,332)
Other, net............................... 893 1,265 663 (3,604) (783)
--------- ------------ -------------- ------------ ------------
Net cash provided by (used in)
investing activities.............. 893 (916) 512 (3,604) (3,115)
--------- ------------ -------------- ------------ ------------
Cash flows from financing activities
Proceeds from bank credit facilities..... -- 17,116 1,014 -- 18,130
Payments of bank credit facilities....... -- (32,100) (96) (32,196)
Payments of industrial revenue bonds..... -- (4,600) -- -- (4,600)
Issuance of common stock................. 2 -- -- -- 2
Purchases of treasury stock.............. (625) -- -- -- (625)
Preferred stock dividends of Exide
Electronics............................ (395) -- -- -- (395)
Preferred stock dividends of IPM......... -- (100) -- -- (100)
Payments of notes receivable from
shareholders........................... 104 -- -- -- 104
Other, net............................... 781 (4,764) (826) 4,756 (53)
--------- ------------ -------------- ------------ ------------
Net cash provided by (used in)
financing
activities........................ (133) (24,448) 92 4,756 (19,733)
--------- ------------ -------------- ------------ ------------
Net decrease in cash and cash
equivalents.............................. -- (3,388) (1,143) -- (4,531)
Cash and cash equivalents, beginning of
period................................... -- 3,754 2,132 -- 5,886
--------- ------------ -------------- ------------ ------------
Cash and cash equivalents, end of period... $ -- $ 366 $ 989 $ -- $ 1,355
========= =========== ============== =========== ===========
</TABLE>
F-39
<PAGE> 154
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Deltec Power Systems, Inc.
In our opinion, based upon our audits and the reports of other auditors,
the accompanying consolidated balance sheets and the related
combined/consolidated statements of operations, of shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Deltec Power Systems, Inc. and its subsidiaries (the "Company") at December 31,
1994, September 30, 1995 and December 31, 1995, and the results of their
operations and their cash flows for the years ended December 31, 1993, 1994 and
1995 and for the nine months ended September 30, 1995 in conformity with
generally accepted accounting principles. 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 did not audit the
financial statements of FPS Power Systems Oy Ab, FPS Power Systems A/S, Fiskars
Power Systems A/S and Fiskars Power Systems AB, wholly-owned subsidiaries, which
statements reflect total assets of $13.0, $23.7 and $23.8 million at December
31, 1994, September 30, 1995 and December 31, 1995, respectively, and total
revenues of $20.8, $26.7, $38.6 and $25.8 million for the years ended December
31, 1993, 1994 and 1995 and for the nine months ended September 30, 1995,
respectively. Those statements were audited by other auditors whose reports
thereon have been furnished to us, and our opinion expressed herein, insofar as
it relates to the amounts included for those companies, is based solely on the
reports of the other auditors. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for the opinion expressed above.
As discussed in Notes 2 and 9 to the financial statements, effective
January 1, 1993, Statement of Financial Accounting Standards No. 109 was
adopted.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
March 15, 1996
F-40
<PAGE> 155
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
FPS Power Systems Oy Ab
We have audited the accompanying balance sheets of FPS Power Systems Oy Ab
(the "Company"), a wholly-owned subsidiary of Deltec Power Systems, Inc., as of
December 31, 1994 and 1995 and September 30, 1995, and the related statements of
income and cash flows for each of the years in the three-year period ended
December 31, 1995 and the nine months ended September 30, 1995. 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 auditing standards generally
accepted in the United States of America. 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.
As more fully described in note 1 to the financial statements, the Company
accounts for its investments in wholly-owned subsidiaries using the cost method.
The subsidiaries should be consolidated in order to conform with generally
accepted accounting principles.
In our opinion, except for the effects of accounting for investments in
subsidiaries on the cost method as discussed in the preceding paragraph, the
financial statements referred to above present fairly, in all material respects,
the financial position of FPS Power Systems Oy Ab, as of December 31, 1994, and
1995 and September 30, 1995, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1995 and
the nine months ended September 30, 1995, in conformity with generally accepted
accounting principles in the United States of America.
KPMG WIDERI OY AB
Helsinki, Finland
March 15, 1996
Sixten Nyman
Authorized Public Accountant
F-41
<PAGE> 156
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Shareholder of
Fiskars Power Systems A/S
We have audited the accompanying balance sheets of Fiskars Power Systems
A/S (the "Company"), a wholly-owned subsidiary of Deltec Power Systems, Inc., as
of December 31, 1994, September 30, 1995 and December 31, 1995 and the related
statements of income and retained earnings and of cash flows for the nine month
period ended September 30, 1995 and for each of the years in the three-year
period ended December 31, 1995. 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 auditing standards generally
accepted in the United States of America. 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 audited by us present fairly, in
all material respects, the financial position of Fiskars Power Systems A/S at
December 31, 1994, September 30, 1995 and December 31, 1995, and the results of
its operations and its cash flows for the nine month period ended September 30,
1995 and for each of the years in the three-year period ended December 31, 1995,
in conformity with generally accepted accounting principles in the United States
of America.
KPMG
Oslo, Norway
March 15, 1996
Tom Myhre
State Authorized Public Accountant (Norway)
F-42
<PAGE> 157
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholder of
Fiskars Power Systems A/S
We have audited the accompanying balance sheets of Fiskars Power Systems
A/S, a wholly-owned subsidiary of Deltec Power Systems, Inc., as of December 31,
1994, September 30, 1995 and December 31, 1995 and the related statements of
income and retained earnings and of cash flows for the nine month period ended
September 30, 1995 and for each of the years in the three-year period ended
December 31, 1995. 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 have conducted our audits in accordance with auditing standards
generally accepted in the United States of America. 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.
As more fully described in summary of significant accounting policies note
to the financial statements, the Company accounts for its wholly owned
subsidiary company, on the equity method. The subsidiary should be consolidated
to conform with generally accepted accounting principles.
In our opinion, except for the effects of accounting for its investment in
subsidiary on the equity method, the financial statements audited by us present
fairly, in all material respects, the financial position of Fiskars Power
Systems A/S at December 31, 1994, September 30, 1995 and December 31, 1995, and
the results of its operations and its cash flows for the nine month period ended
September 30, 1995 and for each of the years in the three-year period ended
December 31, 1995, in conformity with generally accepted accounting principles
in the United States of America.
KPMG C. Jespersen
Copenhagen, Denmark
March 15, 1996
Torben Vonsild
State Authorized
Public Accountant
F-43
<PAGE> 158
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
and Shareholder of
Fiskars Power Systems AB
We have audited the accompanying balance sheets of Fiskars Power Systems AB
(the "Company"), a wholly-owned subsidiary of Deltec Power Systems, Inc., as of
December 31, 1994, September 30, 1995 and December 31, 1995 and the related
statements of income and retained earnings and of cash flows for the nine month
period ended September 30, 1995 and for each of the years in the three-year
period ended December 31, 1995. 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 auditing standards generally
accepted in the United States of America. 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 audited by us present fairly, in
all material respects, the financial position of Fiskars Power Systems AB at
December 31, 1994, September 30, 1995 and December 31, 1995 and the results of
its operations and its cash flows for the nine month period ended September 30,
1995 and for each of the years in the three-year period ended December 31, 1995,
in conformity with generally accepted accounting principles.
As discussed in the income taxes note to the financial statements, in 1993
the Company adopted the method of accounting for income taxes prescribed by
Statements of Financial Accounting Standards No. 109.
KPMG Bohlins AB
Stockholm, Sweden
March 15, 1996
Thomas Thiel
Partner
F-44
<PAGE> 159
DELTEC POWER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1994 1995 1995
------------ ------------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.............................................. $ 6,008,000 $ 8,842,000 $ 5,603,000
Accounts receivable, net.......................... 21,463,000 23,641,000 34,268,000
Inventories, net.................................. 16,379,000 19,923,000 21,633,000
Deferred income taxes............................. 1,681,000 2,007,000 2,518,000
Other current assets.............................. 1,606,000 1,920,000 1,870,000
----------- ----------- ------------
Total current assets...................... 47,137,000 56,333,000 65,892,000
Property and equipment, net......................... 6,611,000 6,927,000 7,135,000
Intangible assets, net.............................. 9,630,000 7,905,000 7,384,000
Other long-term assets.............................. 124,000 436,000 468,000
----------- ----------- ------------
$ 63,502,000 $ 71,601,000 $ 80,879,000
=========== =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 5,843,000 $ 8,135,000 $ 11,845,000
Deferred revenue.................................. 4,374,000 4,678,000 4,461,000
Accrued payroll and employee benefits............. 3,350,000 3,552,000 4,840,000
Income taxes payable.............................. 1,576,000 1,778,000 3,281,000
Intercompany payable, net......................... 2,537,000 5,546,000 6,791,000
Accrued commissions............................... 740,000 814,000 1,125,000
Accrued warranty.................................. 504,000 610,000 836,000
Current maturities of long-term debt.............. -- 2,121,000 10,000
Other current liabilities......................... 1,877,000 2,405,000 2,468,000
----------- ----------- ------------
Total current liabilities................. 20,801,000 29,639,000 35,657,000
----------- ----------- ------------
Deferred income taxes............................... 2,941,000 2,307,000 2,252,000
----------- ----------- ------------
Long-term debt (payable primarily to related
parties).......................................... 33,257,000 31,941,000 37,836,000
----------- ----------- ------------
Other long-term liabilities......................... 1,461,000 1,474,000 1,824,000
----------- ----------- ------------
Commitments (Note 11)
Shareholders' equity:
Class A redeemable preferred stock -- $.01 par
value, 1,500 shares outstanding at December 31,
1994 and September 30, 1995 (liquidation value
of $15,000,000); 900 shares outstanding at
December 31, 1995 (liquidation value of
$9,000,000), at ascribed value................. 9,695,000 9,695,000 5,817,000
Common stock -- $.01 par value, 600 shares
outstanding, at ascribed value................. (4,881,000) (4,881,000) (4,881,000)
Retained earnings................................. 269,000 882,000 1,936,000
Cumulative translation adjustment................. (41,000) 544,000 438,000
----------- ----------- ------------
Total shareholders' equity................ 5,042,000 6,240,000 3,310,000
----------- ----------- ------------
$ 63,502,000 $ 71,601,000 $ 80,879,000
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-45
<PAGE> 160
DELTEC POWER SYSTEMS, INC.
COMBINED/CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
DECEMBER 31, 1994 SEPTEMBER 30, DECEMBER 31,
1993 (COMBINED/ 1995 1995
(COMBINED) CONSOLIDATED) (CONSOLIDATED) (CONSOLIDATED)
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Products........................... $ 60,446,000 $ 80,236,000 $ 72,665,000 $ 113,031,000
Services........................... 14,982,000 16,960,000 14,176,000 19,918,000
------------ ------------ ------------- -------------
Total revenues............. 75,428,000 97,196,000 86,841,000 132,949,000
Cost of revenues:
Products........................... 39,234,000 50,352,000 46,603,000 71,921,000
Services........................... 7,445,000 8,326,000 6,880,000 8,969,000
------------ ------------ ------------- -------------
Total cost of revenues..... 46,679,000 58,678,000 53,483,000 80,890,000
------------ ------------ ------------- -------------
Gross profit......................... 28,749,000 38,518,000 33,358,000 52,059,000
Operating expenses:
Selling and marketing.............. 15,059,000 19,767,000 18,628,000 26,067,000
General and administrative......... 4,904,000 6,236,000 5,037,000 7,580,000
Engineering........................ 3,119,000 4,168,000 3,682,000 4,976,000
Royalty expense (primarily with
related parties)................ 1,478,000 2,298,000 2,209,000 3,411,000
------------ ------------ ------------- -------------
Income from operations............... 4,189,000 6,049,000 3,802,000 10,025,000
Interest income (primarily with
related parties)................... (382,000) (367,000) (580,000) (678,000)
Interest expense (primarily with
related parties)................... 781,000 1,375,000 2,317,000 3,177,000
------------ ------------ ------------- -------------
Income before income taxes and
cumulative effect of change in
accounting principle for income
taxes.............................. 3,790,000 5,041,000 2,065,000 7,526,000
Provision for income taxes........... 815,000 1,885,000 327,000 2,237,000
------------ ------------ ------------- -------------
Income before cumulative effect of
change in accounting principle for
income taxes....................... 2,975,000 3,156,000 1,738,000 5,289,000
Cumulative effect of change in
accounting principle for income
taxes.............................. 1,509,000 -- -- --
------------ ------------ ------------- -------------
Net income........................... 4,484,000 3,156,000 1,738,000 5,289,000
Dividends on preferred stock......... -- 375,000 1,125,000 1,500,000
Premium on redemption of preferred
stock.............................. -- -- -- 2,122,000
------------ ------------ ------------- -------------
Net income allocable to
common shares............ $ 4,484,000 $ 2,781,000 $ 613,000 $ 1,667,000
========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-46
<PAGE> 161
DELTEC POWER SYSTEMS, INC.
COMBINED/CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL IN CUMULATIVE
PREFERRED COMMON EXCESS OF RETAINED TRANSLATION
STOCK STOCK PAR VALUE EARNINGS ADJUSTMENT TOTAL
---------- ------------ ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1992................. $ -- $ 23,164,000 $ 904,000 $(2,370,000) $ -- $21,698,000
Combined net income.... -- -- -- 4,484,000 -- 4,484,000
Group Contribution, net
of tax benefit....... -- -- -- (649,000) -- (649,000)
Translation
adjustments.......... (502,000) (502,000)
---------- ------------ ---------- ----------- ---------- -----------
BALANCE AT DECEMBER 31,
1993................. -- 23,164,000 904,000 1,465,000 (502,000) 25,031,000
Combined/consolidated
net income........... -- -- -- 3,156,000 -- 3,156,000
Group Contribution, net
of tax benefit....... -- -- -- (1,068,000) -- (1,068,000)
Dividends declared:
Common stock......... -- -- -- (5,786,000) -- (5,786,000)
Preferred stock...... -- -- -- (375,000) -- (375,000)
Assumption of Fiskars
Holdings, Inc.
debt................. (6,000,000) -- -- -- (6,000,000)
Capitalization of
DPSI................. 9,695,000 (22,045,000) (904,000) 2,877,000 502,000 (9,875,000)
Translation
adjustments.......... (41,000) (41,000)
---------- ------------ ---------- ----------- ---------- -----------
BALANCE AT DECEMBER 31,
1994................. 9,695,000 (4,881,000) -- 269,000 (41,000) 5,042,000
Consolidated net
income............... -- -- -- 1,738,000 -- 1,738,000
Preferred stock
dividends declared... -- -- -- (1,125,000) -- (1,125,000)
Translation
adjustments.......... 585,000 585,000
---------- ------------ ---------- ----------- ---------- -----------
BALANCE AT SEPTEMBER
30, 1995............. 9,695,000.. (4,881,000) -- 882,000 544,000 6,240,000
Consolidated net
income............... -- -- -- 3,551,000 -- 3,551,000
Preferred stock
dividends declared... -- -- -- (375,000) -- (375,000)
Preferred stock
redemption........... (3,878,000) -- -- (2,122,000) -- (6,000,000)
Translation
adjustments.......... -- -- -- -- (106,000) (106,000)
---------- ------------ ---------- ----------- ---------- -----------
BALANCE AT DECEMBER 31,
1995................. $5,817,000.. $ (4,881,000) $ -- $ 1,936,000 $ 438,000 $ 3,310,000
========= =========== ========= ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-47
<PAGE> 162
DELTEC POWER SYSTEMS, INC.
COMBINED/CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
DECEMBER 31, 1994 SEPTEMBER 30, DECEMBER 31,
1993 (COMBINED/ 1995 1995
(COMBINED) CONSOLIDATED) (CONSOLIDATED) (CONSOLIDATED)
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................ $ 4,484,000 $ 3,156,000 $ 1,738,000 $ 5,289,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation of property and
equipment........................ 1,358,000 1,690,000 1,511,000 2,014,000
Amortization of intangibles........ 1,991,000 2,295,000 1,810,000 2,403,000
Loss on sale of property and
equipment........................ 53,000 47,000 -- --
Deferred income taxes.............. 3,813,000 (1,102,000) (934,000) (1,482,000)
Other.............................. -- 68,000 -- --
Cumulative effect of change in
accounting for income taxes...... (1,509,000) -- -- --
Changes in:
Net accounts receivable.......... (3,031,000) (4,832,000) (1,486,000) (12,199,000)
Net intercompany accounts........ (3,759,000) 6,112,000 1,497,000 2,427,000
Net inventories.................. (77,000) (6,047,000) (2,959,000) (4,822,000)
Other current assets............. (424,000) (70,000) (251,000) (227,000)
Accounts payable................. 803,000 (196,000) 1,858,000 5,773,000
Accrued expenses................. 791,000 1,530,000 1,229,000 4,417,000
Deferred revenue................. 582,000 480,000 239,000 102,000
-------------- ------------- ------------- -------------
Net cash provided by operating
activities............................ 5,075,000 3,131,000 4,252,000 3,695,000
-------------- ------------- ------------- -------------
Cash flows from investing activities:
Purchases of property and equipment... (1,456,000) (1,634,000) (1,663,000) (2,402,000)
Proceeds from sale of property and
equipment.......................... -- 7,000 10,000 10,000
Acquisition of NSSI................... -- (1,751,000) -- --
Other................................. (388,000) (544,000) (378,000) (481,000)
-------------- ------------- ------------- -------------
Net cash used in investing activities... (1,844,000) (3,922,000) (2,031,000) (2,873,000)
-------------- ------------- ------------- -------------
Cash flows from financing activities:
Payments on intercompany note......... (1,500,000) (300,000) (232,000) (1,921,000)
Payments on external debt............. (618,000) -- -- --
Advances on intercompany note......... -- 3,814,000 -- --
Proceeds from external debt........... 211,000 138,000 537,000 537,000
Dividends paid........................ -- (786,000) -- --
Group Contributions, net of tax
benefit............................ (649,000) (1,068,000) -- --
-------------- ------------- ------------- -------------
Net cash provided (used) by financing
activities............................ (2,556,000) 1,798,000 305,000 (1,384,000)
-------------- ------------- ------------- -------------
Effect of exchange rates on cash........ (293,000) 379,000 308,000 157,000
Increase (decrease) in cash............. 382,000 1,386,000 2,834,000 (405,000)
Cash at beginning of period............. 4,240,000 4,622,000 6,008,000 6,008,000
-------------- ------------- ------------- -------------
Cash at end of period................... $ 4,622,000 $ 6,008,000 $ 8,842,000 $ 5,603,000
========== ========== ========== ===========
Supplemental information:
Income taxes paid..................... $ 356,000 $ 795,000 $ 1,441,000 $ 2,128,000
Assumption of Fiskars Holdings, Inc.
debt............................... $ -- $ 6,000,000 $ -- $ --
Dividends to Fiskars Holdings, Inc.
financed by note................... $ -- $ 5,000,000 $ -- $ --
Preferred stock redemption financed by
note............................... $ -- $ -- $ -- $ 6,000,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-48
<PAGE> 163
DELTEC POWER SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY AND DESCRIPTION OF BUSINESS
Deltec Power Systems, Inc. ("DPSI" or the "Company") was organized on
September 27, 1994 by Fiskars Oy Ab ("Fiskars"), a Finnish company, to acquire
the outstanding common shares of FPS Power Systems Oy Ab ("Power Systems") and
Deltec Electronics Corporation ("Deltec"). As discussed in Note 12, DPSI
acquired Power Systems from Fiskars and Deltec was acquired from Fiskars
Holdings, Inc., a wholly-owned subsidiary of Fiskars. This acquisition, between
companies under common control, was treated as a tax-free reorganization. Assets
acquired and liabilities assumed were recorded at approximate historical values.
The accompanying DPSI financial statements include Deltec and Power Systems
on a combined basis prior to the formation of DPSI and on a consolidated basis
thereafter. All significant intercompany transactions and accounts have been
eliminated.
Deltec's financial statements include the accounts of Deltec S.A. de C.V.,
a subsidiary in Mexico. During 1994, Deltec purchased the assets and assumed
certain liabilities of Network Security Systems, Inc. ("NSSI"). The excess of
the purchase price over the market value of the net assets acquired was recorded
as goodwill. NSSI designs, manufactures and markets a line of uninterruptible
power supplies and related software used in computer networking environments.
NSSI's operations are not material. On July 1, 1994, Fiskars Holdings, Inc.
pushed down $6,000,000 of acquisition debt to Deltec; accordingly, an
intercompany note payable was recorded and common stock was reduced by this
amount as a return of capital.
The financial statements of Power Systems include the accounts of the
following wholly-owned subsidiaries:
<TABLE>
<CAPTION>
SUBSIDIARY COUNTRY
-------------------------------------------------------- ---------------
<S> <C>
Fiskars Power Systems GmbH.............................. Germany
Fiskars Power Systems A/S............................... Denmark
FPS Power Systems A/S................................... Norway
Fiskars Power Systems AB................................ Sweden
Fiskars Electronics Limited............................. United Kingdom
</TABLE>
Both Power Systems and Deltec design, manufacture, and distribute
uninterruptible power supply systems and related electronic equipment, and power
management and facilities monitoring software used in computer networking
environments.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
FOREIGN CURRENCY
Assets and liabilities of the Company's foreign operations are translated
at period-end exchange rates; income and expenses are translated at average
exchange rates prevailing during the year. Gains and losses from the translation
of foreign currency financial statements are accumulated as a separate component
of shareholders' equity. Foreign exchange transaction gains and losses were not
significant.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
on a first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated over their
estimated useful lives of three to ten years on a straight-line basis for
financial reporting purposes. Expenditures which substantially increase value or
extend useful lives are capitalized. Maintenance and repairs are expensed as
incurred.
F-49
<PAGE> 164
DELTEC POWER SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INTANGIBLE ASSETS
Intangible assets are amortized using the straight-line method over their
estimated economic lives of three to ten years. The Company reviews the carrying
value of intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Measurement of any
impairment would include a comparison of estimated future operating cash flows
anticipated to be generated during the remaining life to the net carrying value
of the intangible.
REVENUE RECOGNITION
Revenue from product sales is recognized upon shipment. Revenue and the
directly-related costs arising from the sale of maintenance and extended
warranty contracts are recognized ratably over the terms of the individual
contracts.
INCOME TAXES
Deltec was included in the consolidated income tax return of Fiskars
Holdings, Inc. until the formation of DPSI on September 27, 1994; thereafter,
Deltec has been included in the consolidated income tax return of the Company.
Federal and state income tax provisions and related tax balances through
September 27, 1994 were allocated to Deltec on a separate-company basis by its
parent and were settled periodically through the intercompany accounts. The
Company's foreign subsidiaries, both before and after the formation of DPSI,
filed tax returns in their respective countries based on their separate taxable
income.
Domestic income taxes are not provided on undistributed earnings of foreign
subsidiaries which are considered to be permanently invested. If undistributed
earnings were remitted, foreign tax credits would substantially offset any
resulting domestic tax liability.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("FAS 109"), "Accounting for Income Taxes". The
adoption of FAS 109 changes the method of accounting for income taxes from the
deferred method to an asset and liability approach, which requires recognition
of deferred tax liabilities and assets for the expected future tax consequences
of temporary differences between the financial reporting and tax bases of the
assets and liabilities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the 1994 Consolidated Balance Sheet have been
reclassified to conform to the current financial statement presentation.
F-50
<PAGE> 165
DELTEC POWER SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1994 1995 1995
------------ ------------- ------------
<S> <C> <C> <C>
Accounts receivable:
Trade accounts receivable.................. $ 22,249,000 $ 25,219,000 $ 35,990,000
Allowance for doubtful accounts............ (786,000) (1,578,000) (1,722,000)
------------ ------------- ------------
$ 21,463,000 $ 23,641,000 $ 34,268,000
=========== =========== ===========
Inventories:
Raw materials.............................. $ 8,652,000 $ 11,580,000 $ 14,014,000
Work-in-process............................ 1,773,000 304,000 411,000
Finished goods............................. 8,040,000 10,483,000 10,015,000
Allowance for obsolescence................. (2,086,000) (2,444,000) (2,807,000)
------------ ------------- ------------
$ 16,379,000 $ 19,923,000 $ 21,633,000
=========== =========== ===========
Property and equipment:
Machinery and equipment.................... $ 8,766,000 $ 9,307,000 $ 10,228,000
Furniture and fixtures..................... 3,917,000 4,620,000 4,575,000
Leasehold improvements..................... 988,000 1,174,000 1,432,000
Construction in progress................... 395,000 1,103,000 473,000
------------ ------------- ------------
14,066,000 16,204,000 16,708,000
Accumulated depreciation................... (7,455,000) (9,277,000) (9,573,000)
------------ ------------- ------------
$ 6,611,000 $ 6,927,000 $ 7,135,000
=========== =========== ===========
Intangible assets:
Goodwill................................... $ 10,074,000 $ 10,074,000 $ 10,074,000
Other intangible assets.................... 10,773,000 10,256,000 10,299,000
------------ ------------- ------------
20,847,000 20,330,000 20,373,000
Accumulated amortization................... (11,217,000) (12,425,000) (12,989,000)
------------ ------------- ------------
$ 9,630,000 $ 7,905,000 $ 7,384,000
=========== =========== ===========
</TABLE>
NOTE 4 -- TRANSACTIONS WITH RELATED PARTIES
Intercompany balances due to (from) other affiliates within the Fiskars Oy
Ab consolidated group were:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1994 1995 1995
------------ ------------- ------------
<S> <C> <C> <C>
Fiskars Holdings, Inc.................. $2,611,000 $ 2,867,000 $ 7,847,000
Fiskars Oy Ab.......................... (357,000) 791,000 (1,497,000)
Fiskars AB............................. 225,000 (6,000) 3,000
Fiskars Europe BV...................... 146,000 1,532,000 145,000
Fiskars GmbH........................... 99,000 66,000 --
Fiskars Finance AG..................... (224,000) 54,000 11,000
Fiskars Ltd............................ -- 206,000 7,000
Fiskars S.a.r.1........................ -- 55,000 142,000
Other related entities................. 37,000 (19,000) 133,000
------------ ------------- ------------
$2,537,000 $ 5,546,000 $ 6,791,000
========== ========== ==========
</TABLE>
F-51
<PAGE> 166
DELTEC POWER SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Cash included $5,012,000, $7,701,000 and $4,048,000 in pooled accounts with
various related parties at December 31, 1994, September 30, 1995 and December
31, 1995, respectively. The Company recorded interest income from the pooled
account totaling $135,000, $222,000 and $375,000 for the years ended December
31, 1993, 1994 and 1995, respectively, and $247,000 for the nine month period
ended September 30, 1995.
The Company is obligated to pay royalties to affiliates on sales of certain
product lines bearing the Fiskars name. The Company recorded royalty expense of
$1,478,000, $2,298,000 and $3,411,000 for the years ended December 31, 1993,
1994 and 1995, respectively, and $2,209,000 for the nine month period ended
September 30, 1995.
Interest expense of $687,000, $1,330,000 and $3,061,000 was recorded on
long-term intercompany borrowings for the years ended December 31, 1993, 1994
and 1995, respectively, and $2,253,000 for the nine month period ended September
30, 1995.
Intercompany payables to Fiskars Holdings, Inc. include accrued dividends
relating to the Class A redeemable preferred stock of $375,000, $1,500,000 and
$1,875,000 at December 31, 1994, September 30, 1995 and December 31, 1995,
respectively.
On September 23, 1994, Deltec declared a $5,000,000 dividend to Fiskars
Holdings, Inc., which was financed by a note to Fiskars Holdings, Inc.
During 1994, DPSI entities paid $786,000 in dividends to affiliated
companies.
During 1995, the Company paid management fees to Fiskars totaling $391,000.
These expenses are included in income from operations.
NOTE 5 -- LONG-TERM DEBT
<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, 30, DECEMBER 31,
1994 1995 1995
------------- ------------ ------------
<S> <C> <C> <C>
Note Payable to Fiskars Holdings, Inc........... $ 18,401,000 $ 18,401,000 $ 24,401,000
Notes Payable to Fiskars Oy Ab.................. 11,897,000 12,121,000 10,000,000
Note Payable to Fiskars Limited................. 2,274,000 2,303,000 2,242,000
Other........................................... 685,000 1,237,000 1,203,000
------------- ------------ ------------
33,257,000 34,062,000 37,846,000
Less: Current maturities........................ -- (2,121,000) (10,000)
------------- ------------ ------------
$ 33,257,000 $ 31,941,000 $ 37,836,000
========== ========== ==========
</TABLE>
Interest on the Note Payable to Fiskars Holdings, Inc. is payable quarterly
at an annual rate of 8.4%. The principal amount is due in varying amounts
through 2004.
At September 30, 1995, the Notes Payable to Fiskars Oy Ab is comprised of
two separate notes. A $10,000,000 note which is due in varying amounts through
2004, with interest payable annually at a rate of 8.4%. A $2,121,000 note was
due on January 1, 1996, with interest payable quarterly at a rate of HELIBOR
plus 0.70% (6.5% at September 30, 1995). The $2,121,000 note was paid prior to
December 31, 1995.
The Note Payable to Fiskars Limited is due on December 19, 2004, with
interest payable annually at a rate of LIBOR plus 0.60% (8.35% at September 30,
1995 and 6.91% at December 31, 1995).
Total interest paid on long-term debt was $746,000, $969,000 and $1,795,000
for the years ended December 31, 1993, 1994 and 1995, respectively, and
$1,015,000 for the nine month period ended September 30, 1995.
F-52
<PAGE> 167
DELTEC POWER SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Future annual maturities of long-term debt outstanding at December 31, 1995
are as follows:
<TABLE>
<S> <C>
1996........................................................ $ 10,000
1997........................................................ 8,298,000
1998........................................................ 3,298,000
1999........................................................ 3,298,000
2000........................................................ 3,298,000
Thereafter.................................................. 19,644,000
-----------
$37,846,000
==========
</TABLE>
NOTE 6 -- FINANCIAL INSTRUMENTS
The carrying value of cash, accounts receivable, accounts payable and
long-term debt at December 31, 1994, September 30, 1995 and December 31, 1995
approximates fair value.
Power Systems enters into forward foreign exchange contracts with Fiskars
to hedge certain of its foreign currency commitments. These contracts minimize
the risk from fluctuations in exchange rates. Gains and losses on these
contracts are deferred and accounted for in the same period as the underlying
transactions.
The following forward contracts were outstanding at December 31, 1995:
<TABLE>
<CAPTION>
CURRENCY CURRENCY
SOLD PURCHASED
-------- --------------------------
<S> <C> <C>
German DM................. Finnish Markka............ $293,000
Danish Krone.............. Finnish Markka............ 5,000
Swedish Krona............. Finnish Markka............ 4,000
Finnish Markka............ U.S. Dollar............... 265,000
Others................................................ 67,000
------------
$634,000
==========
</TABLE>
NOTE 7 -- RESEARCH AND DEVELOPMENT
Expenditures for research activities relating to product development and
improvement are charged against income as incurred. Such expenditures amounted
to $1,678,000, $2,136,000 and $2,593,000 for the years ended December 31, 1993,
1994 and 1995, respectively, and $2,023,000 for the nine month period ended
September 30, 1995.
NOTE 8 -- SIGNIFICANT CUSTOMERS, EXPORT SALES AND GEOGRAPHIC SEGMENTS
SIGNIFICANT CUSTOMERS
The Company has an agreement with a customer to supply certain product
lines at market prices. The agreement is for an indefinite term and is
cancelable at any time. Sales under this agreement amounted to 6%, 10% and 21%
of net sales for the years ended December 31, 1993, 1994 and 1995, respectively,
and 16% for the nine month period ended September 30, 1995. Receivables
outstanding from these sales were $1,856,000, $5,310,000 and $11,415,000 at
December 31, 1994, September 30, 1995 and December 31, 1995, respectively.
Receivables outstanding from a foreign distributor were $1,473,000,
$1,208,000 and $1,197,000 at December 31, 1994, September 30, 1995 and December
31, 1995, respectively.
F-53
<PAGE> 168
DELTEC POWER SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
EXPORT SALES
The Company's foreign operations primarily serve markets in their
respective countries. Export sales from the Company's domestic operation were
approximately 21%, 23% and 19% of net sales for the years ended December 31,
1993, 1994 and 1995, respectively, and 21% for the nine month period ended
September 30, 1995.
GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1994 1995 1995
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Total Revenues
Domestic.............................. $ 43,335,000 $ 56,405,000 $ 49,385,000 $ 78,364,000
European.............................. 32,093,000 40,791,000 37,456,000 54,585,000
------------ ------------ ------------- ------------
$ 75,428,000 $ 97,196,000 $ 86,841,000 $132,949,000
========== ========== ========== ===========
Income from Operations
Domestic.............................. $ 1,786,000 $ 2,586,000 $ 705,000 $ 4,550,000
European.............................. 2,403,000 3,463,000 3,097,000 5,475,000
------------ ------------ ------------- ------------
$ 4,189,000 $ 6,049,000 $ 3,802,000 $ 10,025,000
========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1994 1995 1995
------------ ------------- ------------
<S> <C> <C> <C> <C>
Total Assets
Domestic............................... $ 46,154,000 $ 45,857,000 $ 56,743,000
European............................... 17,348,000 25,744,000 24,136,000
------------ ------------- ------------
$ 63,502,000 $ 71,601,000 $ 80,879,000
========== ========== ==========
</TABLE>
NOTE 9 -- INCOME TAXES
The components of income before income taxes and cumulative effect of
change in accounting principle for income taxes included the following:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1994 1995 1995
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Domestic................................. $1,387,000 $1,581,000 $ (974,000) $2,093,000
Foreign.................................. 2,403,000 3,460,000 3,039,000 5,433,000
------------ ------------ ------------- ------------
$3,790,000 $5,041,000 $ 2,065,000 $7,526,000
========== ========== ========== ==========
</TABLE>
F-54
<PAGE> 169
DELTEC POWER SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1994 1995 1995
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Current
Federal..................... $ (3,567,000) $ 1,828,000 $ 187,000 $ 1,733,000
State....................... 21,000 87,000 100,000 464,000
Foreign..................... 548,000 1,072,000 974,000 1,522,000
------------ ------------ ------------- ------------
(2,998,000) 2,987,000 1,261,000 3,719,000
------------ ------------ ------------- ------------
Deferred
Federal..................... 3,842,000 (990,000) (572,000) (1,221,000)
State....................... 29,000 (214,000) (113,000) (224,000)
Foreign..................... (58,000) 102,000 (249,000) (37,000)
------------ ------------ ------------- ------------
3,813,000 (1,102,000) (934,000) (1,482,000)
------------ ------------ ------------- ------------
$ 815,000 $ 1,885,000 $ 327,000 $ 2,237,000
========== ========== ========== ==========
</TABLE>
An analysis of the effective income tax rates is as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1993 1994 1995 1995
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Federal statutory rate.......... 35.0% 35.0% 35.0% 35.0%
State income taxes, net of
federal benefit............... .1 (1.6) -- 2.1
Foreign tax differential........ (9.3) (.7) (16.4) (5.5)
Other........................... (4.3) 4.7 (2.8) (1.9)
----- ----- ------ -----
21.5% 37.4% 15.8% 29.7%
========== ========== ========== ==========
</TABLE>
Power Systems made Group Contributions to Fiskars and its related entities
of $868,000 and $1,424,000 for the years ended December 31, 1993 and 1994,
respectively, and consequently realized tax benefits of $219,000 and $356,000
for the respective years. The distributions have been recorded as a reduction of
Shareholders' Equity, net of the related tax benefits.
Deferred income tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1994 1995 1995
------------ ------------- ------------
<S> <C> <C> <C>
Current deferred tax asset:
Nondeductible accruals................... $1,681,000 $ 2,007,000 $2,518,000
------------ ------------- ------------
Non-current deferred tax liability:
Amortization on intangible assets........ $2,834,000 $ 2,199,000 $1,988,000
Depreciation on property and equipment... 611,000 537,000 631,000
Net operating loss carryforwards......... (596,000) (587,000) (523,000)
Other.................................... 92,000 158,000 156,000
------------ ------------- ------------
$2,941,000 $ 2,307,000 $2,252,000
========== ========== ==========
</TABLE>
At December 31, 1995, Fiskars Power Systems AB had an operating loss
carryforward of approximately $1,867,000 available to offset future income tax
liabilities for an unlimited time.
F-55
<PAGE> 170
DELTEC POWER SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 10 -- EMPLOYEE BENEFIT PLANS
Deltec maintains a defined contribution retirement savings plan which
covers substantially all full-time domestic employees. Participants may
contribute a percentage of their salaries subject to statutory annual
limitations. Deltec contributes an amount equal to a designated percentage of
its annual operating profits. The percentage is discretionary and is determined
annually by Deltec's board of directors. Contributions totalled $210,000,
$336,000 and $560,000 for the years ended December 31, 1993, 1994 and 1995,
respectively, and $227,000 for the nine month period ended September 30, 1995.
Power Systems has a defined benefit pension plan covering all employees.
Contributions are made to an independent insurance company, which also holds and
invests the plan's assets. Pension expense was $618,000, $684,000 and $958,000
for the years ended December 31, 1993, 1994 and 1995, respectively, and $674,000
for the nine month period ended September 30, 1995. The projected benefit
obligation as of the most recent actuarial valuation date was $783,000, using an
assumed discount rate of 7.4%. The fair value of plan assets available for
payment of benefits was $1,214,000. The expected long-term rate of return on
plan assets was 7%. At December 31, 1995, other assets includes a prepaid
pension asset of $157,000.
NOTE 11 -- LEASE OBLIGATIONS
Deltec leases its San Diego facility under a non-cancelable operating lease
that expires in 2006 and provides options to renew for three additional five
year terms. Deltec leases its Mexico facility under a non-cancelable operating
lease that expires in 2000 and provides the option to renew for two additional
five year terms.
Power Systems leases its facility under a non-cancelable operating lease
which expires in 1996 with options to renew.
Both Deltec and Power Systems also lease office equipment and automobiles.
Future minimum lease payments under non-cancelable agreements at December
31, 1995 are as follows:
<TABLE>
<S> <C>
1996........................................................ $ 2,340,000
1997........................................................ 2,042,000
1998........................................................ 1,423,000
1999........................................................ 822,000
2000........................................................ 620,000
Thereafter.................................................. 3,006,000
-----------
$10,253,000
==========
</TABLE>
Rent expense was $2,344,000, $2,406,000 and $2,821,000 for the years ended
December 31, 1993, 1994 and 1995, respectively, and $2,261,000 for the nine
month period ended September 30, 1995.
NOTE 12 -- SHAREHOLDERS' EQUITY
The Company has authorized 3,000 shares of Class A redeemable preferred
stock and 6,000 shares of common stock, each with a par value of $.01 per share.
On September 27, 1994, the Company issued 1,500 shares of Class A
redeemable preferred stock to Fiskars Holdings, Inc. in exchange for the
outstanding common shares of Deltec Electronics Corporation, a wholly-owned
subsidiary of Fiskars Holdings, Inc. Annual dividends of $1,000 per share are
cumulative from the date of issuance and payable on a quarterly basis. The
preferred stock is redeemable at the option of the Company at any time at a
redemption price of $15,000,000 ($10,000 per share) plus unpaid dividends. The
liquidation value of this stock is $10,000 per share. The amount ascribed to the
Class A redeemable preferred
F-56
<PAGE> 171
DELTEC POWER SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
stock approximates the historical value of Deltec's net assets at the date of
issuance. On December 29, 1995, DPSI redeemed 600 shares of its Class A
preferred stock for $6,000,000.
On September 27, 1994, the Company also issued 600 shares of common stock
and a $10,000,000 note (discussed in Note 5) to Fiskars in exchange for the
common stock of Fiskars Power Systems Oy Ab. No dividend will be paid or
declared on shares of common stock as long as the Class A redeemable preferred
stock is outstanding. The amount ascribed to the common stock represents the
excess of the $10,000,000 note over the historical value of the net assets of
Power Systems at the date of issuance.
NOTE 13 -- STOCK PURCHASE TRANSACTION
Pursuant to the Stock Purchase Agreement dated November 17, 1995, as
amended February 9, 1996, Fiskars and Fiskars Holdings, Inc. sold 100% of DPSI's
capital stock and certain intangible assets to Exide Electronics Group, Inc.
("Exide") for approximately $195,000,000, subject to certain post closing
adjustments. The purchase price was settled on March 13, 1996 as follows:
(A) 825,000 shares of Exide's common stock (valued at a fixed price of
$20 per share under the agreement).
(B) 1,000,000 shares of Exide's Series G convertible preferred stock
(valued at a fixed price of $20 per share under the agreement).
(C) Redemption of all of DPSI's Class A preferred stock owned by
Fiskars Holdings, Inc. for $10,000 per share plus accrued dividends.
(D) Repayment of certain DPSI notes payable and intercompany amounts
to Fiskars and Fiskars Holdings, Inc.
(E) The balance paid in cash.
In conjunction with the stock purchase transaction discussed above, Exide
issued Senior Subordinated Notes, principal amount of $125,000,000, due 2006.
The Senior Subordinated Notes are guaranteed, jointly and severally, by domestic
subsidiaries of Exide ("guarantor subsidiaries"). The following supplemental
combining/consolidating Balance Sheets, Statements of Operations and Statements
of Cash Flows, present condensed financial information for the guarantor
subsidiaries and the non-guarantor subsidiaries of DPSI. The supplemental
financial information reflects the investment of DPSI in Deltec and the
non-guarantor subsidiaries using the cost method because the investment in the
capital stock of the significant non-guarantor subsidiaries has been pledged
(although such pledge was limited to 66% of the capital stock of such
subsidiaries) as security for payment of Exide's obligations under the new
credit facility of Exide.
F-57
<PAGE> 172
DELTEC POWER SYSTEMS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NON-GUARANTOR
DPSI DELTEC SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash.................... $ -- $ 1,055,000 4,548,000 $ -- $ 5,603,000
Accounts receivable,
net.................. -- 25,519,000 8,749,000 -- 34,268,000
Inventories, net........ -- 13,934,000 7,699,000 -- 21,633,000
Other current assets.... -- 2,951,000 1,437,000 -- 4,388,000
----------- ----------- -------------- ------------- -------------
Total current
assets............. -- 43,459,000 22,433,000 -- 65,892,000
Property and equipment,
net..................... -- 5,424,000 1,711,000 -- 7,135,000
Intangible assets, net.... -- 7,155,000 229,000 -- 7,384,000
Investment in
affiliates.............. 14,814,000 -- -- (14,814,000) --
Other long-term assets.... 81,000 246,000 141,000 -- 468,000
----------- ----------- -------------- ------------- -------------
$14,895,000 $56,284,000 $ 24,514,000 $ (14,814,000) $ 80,879,000
========== ========== =========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable........ $ -- $ 7,502,000 $ 4,343,000 $ -- $ 11,845,000
Deferred revenue........ -- 3,103,000 1,358,000 -- 4,461,000
Intercompany, net....... 3,223,000 3,854,000 (286,000) -- 6,791,000
Other current
liabilities.......... -- 7,181,000 5,379,000 -- 12,560,000
----------- ----------- -------------- ------------- -------------
Total current
liabilities........ 3,223,000 21,640,000 10,794,000 -- 35,657,000
Deferred income taxes..... -- 2,450,000 (198,000) -- 2,252,000
Long-term debt............ 16,000,000 18,401,000 3,435,000 -- 37,836,000
Other long-term
liabilities............. -- 1,741,000 83,000 -- 1,824,000
Shareholders' equity...... (4,328,000) 12,052,000 10,400,000 (14,814,000) 3,310,000
----------- ----------- -------------- ------------- -------------
$14,895,000 $56,284,000 $ 24,514,000 $ (14,814,000) $ 80,879,000
========== ========== =========== =========== ==========
</TABLE>
F-58
<PAGE> 173
DELTEC POWER SYSTEMS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NON-GUARANTOR
DPSI DELTEC SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash.................... $ -- $ 1,517,000 $ 7,325,000 $ -- $ 8,842,000
Accounts receivable,
net.................. -- 15,970,000 7,671,000 -- 23,641,000
Inventories, net........ -- 12,495,000 7,428,000 -- 19,923,000
Other current assets.... -- 2,594,000 1,333,000 -- 3,927,000
----------- ----------- -------------- ------------- -------------
Total current
assets............. -- 32,576,000 23,757,000 -- 56,333,000
Property and equipment,
net..................... -- 5,171,000 1,756,000 -- 6,927,000
Intangible assets, net.... -- 7,739,000 166,000 -- 7,905,000
Investment in
affiliates.............. 14,814,000 -- -- (14,814,000) --
Other long-term assets.... 83,000 288,000 65,000 -- 436,000
----------- ----------- -------------- ------------- -------------
$14,897,000 $45,774,000 $ 25,744,000 $ (14,814,000) $ 71,601,000
========== ========== =========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable........ $ -- $ 4,992,000 $ 3,143,000 $ -- $ 8,135,000
Deferred revenue........ -- 3,093,000 1,585,000 -- 4,678,000
Intercompany, net....... 2,393,000 1,380,000 1,773,000 -- 5,546,000
Other current
liabilities.......... -- 4,110,000 7,170,000 -- 11,280,000
----------- ----------- -------------- ------------- -------------
Total current
liabilities........ 2,393,000 13,575,000 13,671,000 -- 29,639,000
Deferred income taxes..... -- 2,641,000 (334,000) -- 2,307,000
Long-term debt............ 10,000,000 18,401,000 3,540,000 -- 31,941,000
Other long-term
liabilities............. -- 1,389,000 85,000 -- 1,474,000
Shareholders' equity...... 2,504,000 9,768,000 8,782,000 (14,814,000) 6,240,000
----------- ----------- -------------- ------------- -------------
$14,897,000 $45,774,000 $ 25,744,000 $ (14,814,000) $ 71,601,000
========== ========== =========== =========== ==========
</TABLE>
F-59
<PAGE> 174
DELTEC POWER SYSTEMS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NON-GUARANTOR
DPSI DELTEC SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash.................... $ -- $ 3,192,000 $ 2,816,000 $ -- $ 6,008,000
Accounts receivable,
net.................. -- 14,411,000 7,052,000 -- 21,463,000
Inventories, net........ -- 11,345,000 5,034,000 -- 16,379,000
Other current assets.... -- 2,735,000 552,000 -- 3,287,000
----------- ----------- -------------- ------------- -------------
Total current
assets............. -- 31,683,000 15,454,000 -- 47,137,000
Property and equipment,
net..................... -- 4,918,000 1,693,000 -- 6,611,000
Intangible assets, net.... -- 9,490,000 140,000 -- 9,630,000
Investment in
affiliates.............. 14,814,000 -- -- (14,814,000) --
Other long-term assets.... 63,000 -- 61,000 -- 124,000
----------- ----------- -------------- ------------- -------------
$14,877,000 $46,091,000 $ 17,348,000 $ (14,814,000) $ 63,502,000
========== ========== =========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable........ $ -- $ 3,354,000 $ 2,489,000 $ -- $ 5,843,000
Deferred revenue........ -- 3,219,000 1,155,000 -- 4,374,000
Intercompany, net....... 651,000 3,034,000 (1,148,000) -- 2,537,000
Other current
liabilities.......... -- 3,661,000 4,386,000 -- 8,047,000
----------- ----------- -------------- ------------- -------------
Total current
liabilities........ 651,000 13,268,000 6,882,000 -- 20,801,000
Deferred income taxes..... -- 3,265,000 (324,000) -- 2,941,000
Long-term debt............ 10,000,000 18,401,000 4,856,000 -- 33,257,000
Other long-term
liabilities............. -- 1,385,000 76,000 -- 1,461,000
Shareholders' equity...... 4,226,000 9,772,000 5,858,000 (14,814,000) 5,042,000
----------- ----------- -------------- ------------- -------------
$14,877,000 $46,091,000 $ 17,348,000 $ (14,814,000) $ 63,502,000
========== ========== =========== =========== ==========
</TABLE>
F-60
<PAGE> 175
DELTEC POWER SYSTEMS, INC.
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NON-GUARANTOR
DPSI DELTEC SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Products................. $ -- $72,305,000 $ 49,513,000 $ (8,787,000) $ 113,031,000
Services................. -- 11,777,000 8,141,000 -- 19,918,000
----------- ----------- -------------- ------------- -------------
Total revenues........ -- 84,082,000 57,654,000 (8,787,000) 132,949,000
Cost of revenues:
Products................. -- 47,934,000 32,774,000 (8,787,000) 71,921,000
Services................. -- 4,453,000 4,516,000 -- 8,969,000
----------- ----------- -------------- ------------- -------------
Total cost of
revenues............ -- 52,387,000 37,290,000 (8,787,000) 80,890,000
----------- ----------- -------------- ------------- -------------
Gross profit............... -- 31,695,000 20,364,000 -- 52,059,000
Operating expenses:
Selling and marketing.... -- 15,296,000 10,771,000 -- 26,067,000
General and
administrative........ 869,000 4,826,000 1,885,000 -- 7,580,000
Engineering.............. -- 3,330,000 1,646,000 -- 4,976,000
Royalty expense
(primarily with
related parties)...... -- 2,824,000 587,000 -- 3,411,000
----------- ----------- -------------- ------------- -------------
Income from operations..... (869,000) 5,419,000 5,475,000 -- 10,025,000
Interest income (primarily
with related parties).... -- (68,000) (610,000) -- (678,000)
Interest expense (primarily
with related parties).... 887,000 1,638,000 652,000 -- 3,177,000
----------- ----------- -------------- ------------- -------------
Income before income taxes
and cumulative effect of
change in accounting
principle for income
taxes.................... (1,756,000) 3,849,000 5,433,000 -- 7,526,000
Provision for income
taxes.................... (702,000) 1,569,000 1,370,000 -- 2,237,000
----------- ----------- -------------- ------------- -------------
Net income (loss).......... (1,054,000) 2,280,000 4,063,000 -- 5,289,000
Dividends on preferred
stock.................... 1,500,000 -- -- -- 1,500,000
Premiums on redemptions of
preferred stock.......... 2,122,000 -- -- -- 2,122,000
----------- ----------- -------------- ------------- -------------
Net income (loss)
allocable to common
shares................ $(4,676,000) $ 2,280,000 $ 4,063,000 $ -- $ 1,667,000
========== ========== =========== ========== ===========
</TABLE>
F-61
<PAGE> 176
DELTEC POWER SYSTEMS, INC.
SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NON-GUARANTOR
DPSI DELTEC SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Products................. $ -- $45,007,000 $ 33,983,000 $ (6,325,000) $ 72,665,000
Services................. -- 8,570,000 5,606,000 -- 14,176,000
----------- ----------- -------------- ------------- -------------
Total revenues........ -- 53,577,000 39,589,000 (6,325,000) 86,841,000
Cost of revenues:
Products................. -- 30,891,000 22,037,000 (6,325,000) 46,603,000
Services................. -- 3,448,000 3,432,000 -- 6,880,000
----------- ----------- -------------- ------------- -------------
Total cost of
revenues............ -- 34,339,000 25,469,000 (6,325,000) 53,483,000
----------- ----------- -------------- ------------- -------------
Gross profit............... -- 19,238,000 14,120,000 -- 33,358,000
Operating expenses:
Selling and marketing.... -- 10,537,000 8,091,000 -- 18,628,000
General and
administrative........ 334,000 3,706,000 997,000 -- 5,037,000
Engineering.............. -- 2,372,000 1,310,000 -- 3,682,000
Royalty expense
(primarily with
related parties)...... -- 1,584,000 625,000 -- 2,209,000
----------- ----------- -------------- ------------- -------------
Income from operations..... (334,000) 1,039,000 3,097,000 -- 3,802,000
Interest income (primarily
with related parties).... -- (132,000) (448,000) -- (580,000)
Interest expense (primarily
with related parties).... 651,000 1,160,000 506,000 -- 2,317,000
----------- ----------- -------------- ------------- -------------
Income before income taxes
and cumulative effect of
change in accounting
principle for income
taxes.................... (985,000) 11,000 3,039,000 -- 2,065,000
Provision for income
taxes.................... (392,000) 16,000 703,000 -- 327,000
----------- ----------- -------------- ------------- -------------
Net income (loss).......... (593,000) (5,000) 2,336,000 -- 1,738,000
Dividends on preferred
stock.................... 1,125,000 -- -- -- 1,125,000
----------- ----------- -------------- ------------- -------------
Net income (loss)
allocable to common
shares................ $(1,718,000) $ (5,000) $ 2,336,000 $ -- $ 613,000
========== ========== =========== ========== ==========
</TABLE>
F-62
<PAGE> 177
DELTEC POWER SYSTEMS, INC.
SUPPLEMENTAL COMBINING/CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NON-GUARANTOR
DPSI DELTEC SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Products.................. $ -- $49,222,000 $ 37,119,000 $ (6,105,000) $ 80,236,000
Services.................. -- 11,190,000 5,770,000 -- 16,960,000
--------- ----------- -------------- ------------- -------------
Total revenues......... -- 60,412,000 42,889,000 (6,105,000) 97,196,000
Cost of revenues:
Products.................. -- 33,151,000 23,306,000 (6,105,000) 50,352,000
Services.................. -- 4,476,000 3,850,000 -- 8,326,000
--------- ----------- -------------- ------------- -------------
Total cost of
revenues............. -- 37,627,000 27,156,000 (6,105,000) 58,678,000
--------- ----------- -------------- ------------- -------------
Gross profit................ -- 22,785,000 15,733,000 -- 38,518,000
Operating expenses:
Selling and marketing..... -- 11,320,000 8,447,000 -- 19,767,000
General and
administrative......... 3,000 4,636,000 1,597,000 -- 6,236,000
Engineering............... -- 2,728,000 1,440,000 -- 4,168,000
Royalty expense (primarily
with related
parties)............... -- 1,512,000 786,000 -- 2,298,000
--------- ----------- -------------- ------------- -------------
Income from operations...... (3,000) 2,589,000 3,463,000 -- 6,049,000
Interest income (primarily
with related parties)..... -- (141,000) (226,000) -- (367,000)
Interest expense (primarily
with related parties)..... 210,000 936,000 229,000 -- 1,375,000
--------- ----------- -------------- ------------- -------------
Income before income taxes
and cumulative effect of
change in accounting
principle for income
taxes..................... (213,000) 1,794,000 3,460,000 -- 5,041,000
Provision for income
taxes..................... (93,000) 804,000 1,174,000 -- 1,885,000
--------- ----------- -------------- ------------- -------------
Net income (loss)........... (120,000) 990,000 2,286,000 -- 3,156,000
Dividends on preferred
stock..................... 375,000 -- -- -- 375,000
--------- ----------- -------------- ------------- -------------
Net income (loss)
allocable to common
shares................. $(495,000) $ 990,000 $ 2,286,000 $ -- $ 2,781,000
========= ========== =========== ========== ==========
</TABLE>
F-63
<PAGE> 178
DELTEC POWER SYSTEMS, INC.
SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NON-GUARANTOR
DPSI DELTEC SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Products.................. $ -- $34,682,000 $ 27,301,000 $ (1,537,000) $ 60,446,000
Services.................. -- 10,159,000 4,823,000 -- 14,982,000
--------- ----------- -------------- ------------- -------------
Total revenues......... -- 44,841,000 32,124,000 (1,537,000) 75,428,000
Cost of revenues:
Products.................. -- 25,464,000 15,307,000 (1,537,000) 39,234,000
Services.................. -- 4,063,000 3,382,000 -- 7,445,000
--------- ----------- -------------- ------------- -------------
Total cost of
revenues............. -- 29,527,000 18,689,000 (1,537,000) 46,679,000
--------- ----------- -------------- ------------- -------------
Gross profit................ -- 15,314,000 13,435,000 -- 28,749,000
Operating expenses:
Selling and marketing..... -- 7,851,000 7,208,000 -- 15,059,000
General and
administrative......... -- 3,570,000 1,334,000 -- 4,904,000
Engineering............... -- 1,883,000 1,236,000 -- 3,119,000
Royalty expense (primarily
with related
parties)............... -- 224,000 1,254,000 -- 1,478,000
--------- ----------- -------------- ------------- -------------
Income from operations...... -- 1,786,000 2,403,000 -- 4,189,000
Interest income (primarily
with related parties)..... -- (32,000) (350,000) -- (382,000)
Interest expense (primarily
with related parties)..... -- 431,000 350,000 -- 781,000
--------- ----------- -------------- ------------- -------------
Income before income taxes
and cumulative effect of
change in accounting
principle for income
taxes..................... -- 1,387,000 2,403,000 -- 3,790,000
Provision for income
taxes..................... -- 325,000 490,000 -- 815,000
--------- ----------- -------------- ------------- -------------
Income before cumulative
effect of change in
accounting principle for
income taxes.............. -- 1,062,000 1,913,000 -- 2,975,000
Cumulative effect of change
in accounting principle
for income taxes.......... -- 560,000 949,000 -- 1,509,000
--------- ----------- -------------- ------------- -------------
Net income............. $ -- $ 1,622,000 $ 2,862,000 $ -- $ 4,484,000
========= ========== =========== ========== ==========
</TABLE>
F-64
<PAGE> 179
DELTEC POWER SYSTEMS, INC.
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NON-GUARANTOR
DPSI DELTEC SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............ $(1,054,000) $ 2,280,000 $ 4,063,000 $ -- $ 5,289,000
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Depreciation expense...... -- 1,230,000 784,000 -- 2,014,000
Amortization of
intangibles............. 14,000 2,335,000 54,000 -- 2,403,000
Loss on sale of property
and equipment........... -- -- -- -- (1,482,000)
Deferred income taxes..... -- (1,445,000) (37,000) -- --
Other..................... -- -- -- -- --
Changes in:
Net accounts
receivable........... -- (11,108,000) (1,091,000) -- (12,199,000)
Net intercompany
accounts............. 1,072,000 820,000 535,000 -- 2,427,000
Net inventories......... -- (2,589,000) (2,233,000) -- (4,822,000)
Other current assets.... -- 414,000 (641,000) -- (227,000)
Accounts payable........ -- 4,148,000 1,625,000 -- 5,773,000
Accrued expenses........ -- 3,809,000 608,000 -- 4,417,000
Deferred revenue........ -- (48,000) 150,000 -- 102,000
----------- ------------ -------------- ------------- -------------
Net cash provided (used) by
operating activities......... 32,000 (154,000) 3,817,000 -- 3,695,000
----------- ------------ -------------- ------------- -------------
Cash flows from investing
activities:
Purchases of property and
equipment................. -- (1,747,000) (655,000) -- (2,402,000)
Proceeds from sale of
property and equipment.... -- 10,000 -- -- 10,000
Acquisition of NSSI.......... -- -- -- -- --
Other........................ (32,000) (246,000) (203,000) -- (481,000)
----------- ------------ -------------- ------------- -------------
Net cash used in investing
activities................... (32,000) (1,983,000) (858,000) -- (2,873,000)
----------- ------------ -------------- ------------- -------------
Cash flows from financing
activities:
Payments on intercompany
note...................... -- -- (1,921,000) -- (1,921,000)
Payments on external debt.... -- -- -- -- --
Advances on intercompany
note...................... -- -- -- -- --
Proceeds from external
debt...................... -- -- 537,000 -- 537,000
Dividends paid............... -- -- -- -- --
Group contributions, net of
tax....................... -- -- -- -- --
----------- ------------ -------------- ------------- -------------
Net cash provided (used) by
financing activities......... -- -- (1,384,000) -- (1,384,000)
----------- ------------ -------------- ------------- -------------
Effect of exchange rates on
cash......................... -- -- 157,000 -- 157,000
Increase (decrease) in cash.... -- (2,137,000) 1,732,000 -- (405,000)
Cash at beginning of period.... -- 3,192,000 2,816,000 -- 6,008,000
----------- ------------ -------------- ------------- -------------
Cash at end of period.......... $ -- $ 1,055,000 $ 4,548,000 $ -- $ 5,603,000
========== =========== =========== ========== ==========
</TABLE>
F-65
<PAGE> 180
DELTEC POWER SYSTEMS, INC.
SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NON-GUARANTOR
DPSI DELTEC SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............ $(593,000) $ (5,000) $ 2,336,000 $ -- $ 1,738,000
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Depreciation expense...... -- 980,000 531,000 -- 1,511,000
Amortization of
intangibles............. 12,000 1,751,000 47,000 -- 1,810,000
Loss on sale of property
and equipment........... -- -- -- -- --
Deferred income taxes..... -- (685,000) (249,000) -- (934,000)
Other..................... -- -- -- -- --
Changes in:
Net accounts
receivable........... -- (1,559,000) 73,000 -- (1,486,000)
Net intercompany
accounts............. 710,000 (2,299,000) 3,086,000 -- 1,497,000
Net inventories......... -- (1,150,000) (1,809,000) -- (2,959,000)
Other current assets.... -- 202,000 (453,000) -- (251,000)
Accounts payable........ -- 1,638,000 220,000 -- 1,858,000
Accrued expenses........ (97,000) 1,095,000 231,000 -- 1,229,000
Deferred revenue........ -- (122,000) 361,000 -- 239,000
--------- ----------- -------------- ------------- -------------
Net cash provided (used) by
operating activities......... 32,000 (154,000) 4,374,000 -- 4,252,000
--------- ----------- -------------- ------------- -------------
Cash flows from investing
activities:
Purchases of property and
equipment................. -- (1,243,000) (420,000) -- (1,663,000)
Proceeds from sale of
property and equipment.... -- 10,000 -- -- 10,000
Acquisition of NSSI.......... -- -- -- -- --
Other........................ (32,000) (288,000) (58,000) -- (378,000)
--------- ----------- -------------- ------------- -------------
Net cash used in investing
activities................... (32,000) (1,521,000) (478,000) -- (2,031,000)
--------- ----------- -------------- ------------- -------------
Cash flows from financing
activities:
Payments on intercompany
note...................... -- -- (232,000) -- (232,000)
Payments on external debt.... -- -- -- -- --
Advances on intercompany
note...................... -- -- -- -- --
Proceeds from external
debt...................... -- -- 537,000 -- 537,000
Dividends paid............... -- -- -- -- --
Group contributions, net of
tax....................... -- -- -- -- --
--------- ----------- -------------- ------------- -------------
Net cash provided by financing
activities................... -- -- 305,000 -- 305,000
--------- ----------- -------------- ------------- -------------
Effect of exchange rates on
cash......................... -- -- 308,000 -- 308,000
Increase in cash............... -- (1,675,000) 4,509,000 -- 2,834,000
Cash at beginning of period.... -- 3,192,000 2,816,000 -- 6,008,000
--------- ----------- -------------- ------------- -------------
Cash at end of period.......... $ -- $ 1,517,000 $ 7,325,000 $ -- $ 8,842,000
========= ========== =========== ========== ==========
</TABLE>
F-66
<PAGE> 181
DELTEC POWER SYSTEMS, INC.
SUPPLEMENTAL COMBINING/CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NON-GUARANTOR
DPSI DELTEC SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............ $(120,000) $ 990,000 $ 2,286,000 $ -- $ 3,156,000
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Depreciation expense...... -- 1,000,000 690,000 -- 1,690,000
Amortization of
intangibles............. 3,000 2,248,000 44,000 -- 2,295,000
Loss on sale of property
and equipment........... -- 47,000 -- -- 47,000
Deferred income taxes..... -- (1,205,000) 103,000 -- (1,102,000)
Other..................... -- -- 68,000 -- 68,000
Changes in:
Net accounts
receivable........... -- (3,420,000) (1,412,000) -- (4,832,000)
Net intercompany
accounts............. 183,000 7,098,000 (1,169,000) -- 6,112,000
Net inventories......... -- (4,241,000) (1,806,000) -- (6,047,000)
Other current assets.... -- (372,000) 302,000 -- (70,000)
Accounts payable........ -- (562,000) 366,000 -- (196,000)
Accrued expenses........ -- 468,000 1,062,000 -- 1,530,000
Deferred revenue........ -- 237,000 243,000 -- 480,000
--------- ----------- -------------- ------------- -------------
Net cash provided by operating
activities................... 66,000 2,288,000 777,000 -- 3,131,000
--------- ----------- -------------- ------------- -------------
Cash flows from investing
activities:
Purchases of property and
equipment................. -- (1,204,000) (430,000) -- (1,634,000)
Proceeds from sale of
property and equipment.... -- 7,000 -- -- 7,000
Acquisition of NSSI.......... -- (1,751,000) -- -- (1,751,000)
Other........................ (66,000) -- (478,000) -- (544,000)
--------- ----------- -------------- ------------- -------------
Net cash used in investing
activities................... (66,000) (2,948,000) (908,000) -- (3,922,000)
--------- ----------- -------------- ------------- -------------
Cash flows from financing
activities:
Payments on intercompany
note...................... -- (300,000) -- -- (300,000)
Payments on external debt.... -- -- -- -- --
Advances on intercompany
note...................... -- 1,751,000 2,063,000 -- 3,814,000
Proceeds from external
debt...................... -- -- 138,000 -- 138,000
Dividends paid............... -- -- (786,000) -- (786,000)
Group contributions, net of
tax....................... -- -- (1,068,000) -- (1,068,000)
--------- ----------- -------------- ------------- -------------
Net cash provided by financing
activities................... -- 1,451,000 347,000 -- 1,798,000
--------- ----------- -------------- ------------- -------------
Effect of exchange rates on
cash......................... -- -- 379,000 -- 379,000
Increase in cash............... -- 791,000 595,000 -- 1,386,000
Cash at beginning of period.... -- 2,401,000 2,221,000 -- 4,622,000
--------- ----------- -------------- ------------- -------------
Cash at end of period.......... $ -- $ 3,192,000 $ 2,816,000 $ -- $ 6,008,000
========= ========== =========== ========== ==========
</TABLE>
F-67
<PAGE> 182
DELTEC POWER SYSTEMS, INC.
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
GUARANTOR GUARANTOR NON-GUARANTOR
DPSI DELTEC SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ----------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income...................... $ -- $ 1,622,000 $ 2,862,000 $ -- $ 4,484,000
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation expense.......... -- 860,000 498,000 -- 1,358,000
Amortization of intangibles... -- 1,981,000 10,000 -- 1,991,000
Loss on sale of property and
equipment................... -- 53,000 -- -- 53,000
Deferred income taxes......... -- 3,871,000 (58,000) -- 3,813,000
Other......................... -- -- -- -- --
Cumulative effect of change in
accounting for income
taxes....................... -- (560,000) (949,000) -- (1,509,000)
Changes in:
Net accounts receivable..... -- (2,302,000) (729,000) -- (3,031,000)
Net intercompany accounts... -- (3,435,000) (324,000) -- (3,759,000)
Net inventories............. -- 409,000 (486,000) -- (77,000)
Other current assets........ -- (118,000) (306,000) -- (424,000)
Accounts payable............ -- 995,000 (192,000) -- 803,000
Accrued expenses............ -- 366,000 425,000 -- 791,000
Deferred revenue............ -- 432,000 150,000 -- 582,000
--------- ----------- -------------- ------------- -------------
Net cash provided by operating
activities...................... -- 4,174,000 901,000 -- 5,075,000
--------- ----------- -------------- ------------- -------------
Cash flows from investing
activities:
Purchases of property and
equipment..................... -- (1,161,000) (295,000) -- (1,456,000)
Proceeds from sale of property
and equipment................. -- -- -- -- --
Acquisition of NSSI............. -- -- -- -- --
Other........................... -- -- (388,000) -- (388,000)
--------- ----------- -------------- ------------- -------------
Net cash used in investing
activities...................... -- (1,161,000) (683,000) -- (1,844,000)
--------- ----------- -------------- ------------- -------------
Cash flows from financing
activities:
Payments on intercompany note... -- (1,500,000) -- -- (1,500,000)
Payments on external debt....... -- -- (618,000) -- (618,000)
Advances on intercompany note... -- -- -- -- --
Proceeds from external debt..... -- -- 211,000 -- 211,000
Dividends paid.................. -- -- -- -- --
Group contributions, net of
tax........................... -- -- (649,000) -- (649,000)
--------- ----------- -------------- ------------- -------------
Net cash used by financing
activities...................... -- (1,500,000) (1,056,000) -- (2,556,000)
--------- ----------- -------------- ------------- -------------
Effect of exchange rates on
cash............................ -- -- (293,000) -- (293,000)
Increase in cash.................. -- 1,513,000 (1,131,000) -- 382,000
Cash at beginning of period....... -- 888,000 3,352,000 -- 4,240,000
--------- ----------- -------------- ------------- -------------
Cash at end of period............. $ -- $ 2,401,000 $ 2,221,000 $ -- $ 4,622,000
========= ============ ============== ============ ============
</TABLE>
F-68
<PAGE> 183
DELTEC POWER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash.......................................................... $ 8,842,000 $ 5,603,000
Accounts receivable, net...................................... 23,641,000 34,268,000
Inventories, net.............................................. 19,923,000 21,633,000
Deferred income taxes......................................... 2,007,000 2,518,000
Other current assets.......................................... 1,920,000 1,870,000
----------- -----------
Total current assets.................................. 56,333,000 65,892,000
Property and equipment, net..................................... 6,927,000 7,135,000
Intangible assets, net.......................................... 7,905,000 7,384,000
Other long-term assets.......................................... 436,000 468,000
----------- -----------
$ 71,601,000 $ 80,879,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................. $ 8,135,000 $ 11,845,000
Deferred revenue.............................................. 4,678,000 4,461,000
Accrued payroll and employee benefits......................... 3,552,000 4,840,000
Income taxes payable.......................................... 1,778,000 3,281,000
Intercompany payable, net..................................... 5,546,000 6,791,000
Accrued commissions........................................... 814,000 1,125,000
Accrued warranty.............................................. 610,000 836,000
Current maturities of long-term debt.......................... 2,121,000 10,000
Other current liabilities..................................... 2,405,000 2,468,000
----------- -----------
Total current liabilities............................. 29,639,000 35,657,000
----------- -----------
Deferred income taxes........................................... 2,307,000 2,252,000
----------- -----------
Long-term debt.................................................. 31,941,000 37,836,000
----------- -----------
Other long-term liabilities..................................... 1,474,000 1,824,000
----------- -----------
Shareholders' equity:
Class A redeemable preferred stock -- $.01 par value, 1,500
shares outstanding at September 30, 1995 (liquidation value
of $15,000,000); 900 shares outstanding at December 31,
1995 (liquidation value of $9,000,000), at ascribed
value...................................................... 9,695,000 5,817,000
Common stock -- $.01 par value, 600 shares outstanding, at
ascribed value............................................. (4,881,000) (4,881,000)
Retained earnings............................................. 882,000 1,936,000
Cumulative translation adjustment............................. 544,000 438,000
----------- -----------
Total shareholders' equity............................ 6,240,000 3,310,000
----------- -----------
$ 71,601,000 $ 80,879,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-69
<PAGE> 184
DELTEC POWER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER
31,
-----------------------------
1994 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Revenues:
Products.................................................... $24,620,000 $40,366,000
Services.................................................... 4,854,000 5,742,000
----------- -----------
Total revenues...................................... 29,474,000 46,108,000
Cost of revenues:
Products.................................................... 14,997,000 25,318,000
Services.................................................... 2,977,000 2,089,000
----------- -----------
Total cost of revenues.............................. 17,974,000 27,407,000
----------- -----------
Gross profit.................................................. 11,500,000 18,701,000
Operating expenses:
Selling and marketing....................................... 5,255,000 7,439,000
General and administrative.................................. 1,607,000 2,543,000
Engineering................................................. 1,145,000 1,294,000
Royalty expense (primarily with related parties)............ 714,000 1,202,000
----------- -----------
Income from operations........................................ 2,779,000 6,223,000
Interest income (primarily with related parties).............. (121,000) (98,000)
Interest expense (primarily with related parties)............. 665,000 860,000
----------- -----------
Income before income taxes.................................... 2,235,000 5,461,000
Provision for income taxes.................................... 685,000 1,910,000
----------- -----------
Net income.................................................... 1,550,000 3,551,000
Dividends on preferred stock.................................. 375,000 375,000
Premium on redemption of preferred stock...................... -- 2,122,000
----------- -----------
Net income allocable to common shares............... $ 1,175,000 $ 1,054,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-70
<PAGE> 185
DELTEC POWER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
1994 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 1,550,000 $ 3,551,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation of property and equipment................... 530,000 503,000
Amortization of intangibles.............................. 675,000 593,000
Deferred income taxes.................................... (547,000) (548,000)
Changes in:
Net accounts receivable................................ (5,808,000) (10,713,000)
Net intercompany accounts.............................. (914,000) 930,000
Net inventories........................................ 794,000 (1,863,000)
Other current assets................................... (21,000) 24,000
Accounts payable....................................... 293,000 3,915,000
Accrued expenses....................................... 778,000 3,188,000
Deferred revenue....................................... (51,000) (137,000)
------------ ------------
Net cash used by operating activities......................... (2,721,000) (557,000)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment......................... (570,000) (739,000)
Proceeds from sale of property and equipment................ -- --
Other....................................................... (399,000) (103,000)
------------ ------------
Net cash used in investing activities......................... (969,000) (842,000)
------------ ------------
Cash flows from financing activities:
Payments on intercompany note............................... -- (1,689,000)
Payments on external debt................................... -- --
Advances on intercompany note............................... 2,274,000 --
Proceeds from external debt................................. -- --
Dividends paid.............................................. -- --
Group Contributions, net of tax benefit..................... (1,068,000) --
------------ ------------
Net cash provided (used) by financing activities.............. 1,206,000 (1,689,000)
------------ ------------
Effect of exchange rates on cash.............................. 24,000 (151,000)
Increase (decrease) in cash................................... (2,460,000) (3,239,000)
Cash at beginning of period................................... 8,468,000 8,842,000
------------ ------------
Cash at end of period......................................... $ 6,008,000 $ 5,603,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-71
<PAGE> 186
DELTEC POWER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles. Certain
information and footnote disclosures required for complete financial statements
have been condensed or omitted. These financial statements should be read in
conjunction with the audited financial statements presented elsewhere herein.
In the opinion of management, the accompanying consolidated financial
statements include all adjustments (which consist only of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows for the periods presented. The results of operations
for the quarter ended December 31, 1995 are not necessarily indicative of the
results to be expected for the full year.
NOTE 2 -- STOCK PURCHASE TRANSACTION
Pursuant to the Stock Purchase Agreement dated November 17, 1995, as
amended February 9, 1996, Fiskars and Fiskars Holdings, Inc. sold 100% of DPSI's
capital stock and certain intangible assets to Exide Electronics Group, Inc.
("Exide") for approximately $195,000,000, subject to certain post closing
adjustments. The purchase price was settled on March 13, 1996 as follows:
(A) 825,000 shares of Exide's common stock (valued at a fixed price of
$20 per share under the agreement).
(B) 1,000,000 shares of Exide's Series G convertible preferred stock
(valued at a fixed price of $20 per share under the agreement).
(C) Redemption of all of DPSI's Class A preferred stock owned by
Fiskars Holdings, Inc. for $10,000 per share plus accrued dividends.
(D) Repayment of certain DPSI notes payable and intercompany amounts
to Fiskars and Fiskars Holdings, Inc.
(E) The balance paid in cash.
F-72
<PAGE> 187
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 3
Information Incorporated by
Reference........................... 4
Prospectus Summary.................... 5
Risk Factors.......................... 16
The Exchange Offer.................... 21
The Deltec Acquisition................ 29
Use of Proceeds....................... 30
Capitalization........................ 30
Unaudited Pro Forma Combined Financial
Statements.......................... 31
Selected Historical Consolidated
Financial Data...................... 44
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 46
Business.............................. 63
Management............................ 78
Principal Shareholders................ 80
Description of New Credit Facility.... 82
Description of Notes.................. 84
Book-Entry, Delivery and Form......... 106
Description of Capital Stock.......... 108
Certain Federal Income Tax
Considerations...................... 111
Plan of Distribution.................. 112
Legal Matters......................... 112
Experts............................... 112
Index to Financial Statements......... F-1
</TABLE>
---------------------
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE SERIES B
NOTES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[EXIDE ELECTRONICS LOGO]
EXIDE ELECTRONICS
GROUP, INC.
OFFER TO EXCHANGE ITS
11 1/2% SENIOR SUBORDINATED NOTES
DUE 2006, SERIES B,
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL
OF ITS OUTSTANDING
11 1/2% SENIOR SUBORDINATED NOTES
DUE 2006, SERIES A
-------------------------
PROSPECTUS
-------------------------
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 188
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the General Corporation Law of the state of Delaware
("Delaware Law"), a corporation may indemnify its directors, officers, employees
and agents and its former directors, officers, employees and agents and those
who serve, at the corporation's request in such capacities with another
enterprise, against expenses (including attorney's fees), as well as judgments,
fines and settlements in nonderivative lawsuits, actually and reasonably
incurred in connection with the defense of any action, suit or proceeding in
which they or any of them were or are made parties or are threatened to be made
parties by reason of their serving or having served in such capacity. Delaware
Law provides, however, that such person must have acted in good faith and in a
manner he or she reasonably believed to be in (or not opposed to) the best
interests of the corporation and, in the case of a criminal action, such person
must have had no reasonable cause to believe his or her conduct was unlawful. In
addition, Delaware Law does not permit indemnification of any action or suit by
or in the right of the corporation, where such person has been adjudged liable
to the corporation, unless, and only to the extent that, a court determines that
such person fairly and reasonably is entitled to indemnity for costs the court
deems proper in light of liability adjudication. Indemnity is mandatory to the
extent a claim, issue or matter has been successfully defended.
Article 11 of the Company's Certificate of Incorporation and Article 10 of
the Company's Bylaws provide, under certain circumstances, for the
indemnification of the Company's present or former directors, officers,
employees, agents and persons who, at the request of the Company, are or were
serving in a similar capacity for another corporation or entity. These Articles
also allow the Board of Directors to purchase and maintain insurance on behalf
of the Company's present or former directors, officers or persons who are or
were serving at the request of the Company as a director or officer of another
corporation or entity. Copies of Article 11 of the Company's Certificate of
Incorporation and Article 10 of the Company's Bylaws are filed as Exhibits and
, respectively, and are incorporated herein by reference.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <C> <S>
2.1 -- Stock Purchase Agreement by and between Exide Electronics Group, Inc. and Fiskars
Oy Ab, Fiskars Holdings, Inc. and Deltec Power Systems, Inc., dated November 16,
1995 (filed as Exhibit 10 to the Company's Form 8-K, File No. 000-18106, filed on
November 17, 1995 and incorporated herein by reference).
2.2 -- Letter Agreement to Amend Stock Purchase Agreement by and between Exide
Electronics Group, Inc. and Fiskars Oy Ab, Fiskars Holdings, Inc. and Deltec
Power Systems, Inc., dated February 9, 1996 (filed as Exhibit 10.2 to the
Company's Form 8-K, File No. 000-18106, filed on February 21, 1996 and
incorporated herein by reference).
3.1 -- Certificate of Incorporation of the Company, as amended (filed as Exhibit 3 to
the Company's Form 10-Q, File No. 000-18106, for the quarter ended March 31, 1995
and incorporated herein by reference).
3.2 -- Form of Certificate of Designation of the Series G Preferred Stock of the Company
(filed as attachment to Schedule 2.1(d) of Exhibit 10.2 to the Company's Form
8-K/A, File No. 000-18106, filed on March 22, 1996 and incorporated herein by
reference).
3.3 -- Bylaws of the Company, as amended (filed as Exhibit 3b to the Company's Form
10-K, File No. 000-18106, for the fiscal year ended September 30, 1992 and
incorporated herein by reference).
</TABLE>
II-1
<PAGE> 189
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <C> <S>
4.1 -- Indenture, dated as of March 13, 1996, among the Company, the Guarantors and
American Bank National Association, as trustee, relating to $125,000,000
principal amount of 11 1/2% Senior Subordinated Notes due 2006.
4.2 -- Form of 11 1/2% Series A and Series B Senior Subordinated Notes due 2006
(included in Exhibit 4.1 hereof).
4.3 -- Registration Rights Agreement, dated as of March 13, 1996, among the Company, the
Guarantors and the Initial Purchasers.
4.4 -- Warrant Agreement, dated as of March 13, 1996, between the Company and American
Bank National Association, as warrant agent, relating to 125,000 Warrants to
purchase in the aggregate 643,750 shares of Common Stock.
4.5 -- Warrant Registration Rights Agreement, dated March 13, 1996, between the Company
and the Initial Purchasers.
4.6 -- Stockholder Agreement, dated March 13, 1996, between the Company and Fiskars Oy
Ab.
4.7 -- Rights Agreement, dated as of November 25, 1992, by and between Exide Electronics
Group, Inc. and First Union National Bank of North Carolina (filed as Exhibit 1
to the Company's Current Report on Form 8-K, File No. 000-18106, for the event on
November 25, 1992, and incorporated by reference herein).
4.8 -- Stockholder Agreement between Exide Electronics and Duquesne Enterprises, Inc.,
dated August 25, 1994, including amendments by a letter agreement dated December
14, 1994 and a letter agreement dated January 4, 1995 (filed as Exhibit 2.4 to
Exide Electronics' Registration Statement on Form S-4, File No. 33-88324, and
incorporated by reference herein).
4.9 -- Stockholder Agreement between Exide Electronics and Shenkman Capital Management,
Inc., dated August 25, 1994, including an Amendment Agreement dated December 14,
1994 and an Amendment Agreement dated January 4, 1995 (filed as Exhibit 2.5 to
Exide Electronics' Registration Statement on Form S-4, File No. 33-88324, and
incorporated by reference herein).
4.10 -- Registration Rights Agreement between Exide Electronics Group, Inc. and Gilbert
Stuart Goodchild, dated September 29, 1994 (filed as Exhibit 4.1 to Exide
Electronics' Registration Statement on Form S-3, File No. 33-63969, and
incorporated by reference herein).
4.11 -- Registration Rights Agreement between Exide Electronics Group, Inc. and Carol
Elizabeth Amans, dated September 29, 1994 (filed as Exhibit 4.2 to Exide
Electronics' Registration Statement on Form S-3, File No. 33-63969, and
incorporated by reference herein).
4.12 -- Registration Rights Agreement between Exide Electronics Group, Inc. and Tony
Peter Stuart Goodchild, dated September 29, 1994 (filed as Exhibit 4.3 to Exide
Electronics' Registration Statement on Form S-3, File No. 33-63969, and
incorporated by reference herein).
4.13 -- Registration Rights Agreement by and among Exide Electronics, Duquesne and
Shenkman Investment Partners L.P., dated as of January 5, 1995 (filed as Exhibit
4.7 to Exide Electronics' Registration Statement on Form S-3, File No. 33-88466,
and incorporated by reference herein).
4.14 -- Note Agreement by and among Massachusetts Mutual Life Insurance Company,
MassMutual Corporate Investors, MassMutual Participation Investors, and Exide
Electronics Group, Inc., dated September 2, 1992, relating to the 8.375%
Guaranteed Convertible Subordinated Notes due June 30, 2000 (filed as Exhibit 4m
to the Company's Annual Report on Form 10-K, File No. 000-18106, for the fiscal
year ended September 30, 1992, and incorporated by reference herein).
5.1* -- Opinion of Smith Helms Mulliss & Moore, L.L.P., regarding the legality of the
Series B Notes.
</TABLE>
II-2
<PAGE> 190
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <C> <S>
10.1 -- Credit Agreement, dated as of March 13, 1996, among the Company, the Guarantors
and Morgan Guaranty Trust Company of New York, First Union National Bank of North
Carolina, Bank of America Illinois, NationsBank, N.A., ABN AMRO Bank, N.V., as
lenders, and Morgan Guaranty Trust Company of New York, as administrative agent,
and Bank of America Illinois, as documentation agent.
10.2 -- Amendment to Credit Agreement, dated as of March 25, 1996, among the Company and
the Lenders, the Administrative Agent, the Swing Lender (as defined therein), the
Issuing Lender (as defined therein) and the lenders listed on Schedule 2 thereto.
10.3 -- Security Agreement, dated March 13, 1996, among the Company, the Guarantors and
Morgan Guaranty Trust Company of New York, as administrative agent (included in
Exhibit 10.1 hereof).
10.4 -- Pledge Agreement, dated March 13, 1996, among the Company, Exide Electronics
Corporation, Exide Electronics USA Holdings Corp., International Power Machines
Corporation and Deltec Power Systems, Inc., as pledgors, and Morgan Guaranty
Trust Company of New York, as administrative agent (included in Exhibit 10.1
hereof).
10.5 -- Lease Agreement, dated August 15, 1994 between E.L.E. Properties and Exide
Electronics Corporation relating to Registrant's manufacturing facility in
Raleigh, North Carolina (filed as Exhibit 10a to the Company's Annual Report on
Form 10-K, File No. 000-18106, for the fiscal year ended September 30, 1994, and
incorporated by reference herein).
10.6 -- Lease Agreement, dated June 20, 1985, between Corporate Property Associates 5 and
Exide Electronics Corporation and First Amendment thereto, relating to
Registrant's engineering facility in Raleigh, North Carolina (filed as Exhibit
10c to Registration Statement No. 33-31872 on Form S-1 and incorporated by
reference herein).
10.7 -- Lease Agreement, dated May 12, 1994, between Forum Office Partners Three and
Exide Electronics Group, Inc., relating to Registrant's corporate headquarters
(filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q, File No.
000-18106, for the quarter ended March 31, 1994, and incorporated by reference
herein).
10.8 -- Contract, dated May 6, 1988, between the Directorate of Contracting and
Manufacturing, Sacramento Air Logistics Center and Exide Electronics Corporation,
and Amendment/Modification Nos. P00001 through P00008 (filed as Exhibit 10c to
Registration Statement No. 33-31872 on Form S-1 and incorporated by reference
herein).
10.9 -- Amendment/Modification Nos. P00009 through P000012, between the Directorate of
Contracting and Manufacturing, Sacramento Air Logistics Center and Exide
Electronics Corporation (filed as Exhibits 10g-j to the Company's Annual Report
on Form 10-K, File No. 000-18106, for the fiscal year ended September 30, 1990,
and incorporated by reference herein).
10.10 -- Amendment/Modification Nos. P000013 through P000023 between the Directorate of
Contracting and Manufacturing, Sacramento Air Logistics Center and Exide
Electronics Corporation (filed as Exhibit 10h to the Company's Annual Report on
Form 10-K, File No. 000-18106, for the fiscal year ended September 30, 1992, and
incorporated by reference herein).
10.11 -- Amendment/Modification Nos. P000024 through P000028 between the Directorate of
Contracting and Manufacturing, Sacramento Air Logistics Center and Exide
Electronics Corporation (filed as Exhibit 10g to the Company's Annual Report on
Form 10-K, File No. 000-18106, for the fiscal year ended September 30, 1993, and
incorporated by reference herein).
</TABLE>
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<PAGE> 191
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <C> <S>
10.12 -- Amendment/Modification No. P000029 between the Directorate of Contracting and
Manufacturing, Sacramento Air Logistics Center and Exide Electronics Corporation
(filed as Exhibit 10(h) to the Company's Annual Report on Form 10-K, File No.
000-18106, for the fiscal year ended September 30, 1995, and incorporated by
reference herein).
10.13 -- Contract dated June 20, 1991 between the United States Navy and Exide Electronics
Corporation, and Modifications Nos. P00001 through P00003 (filed as Exhibit 10i
to the Company's Annual Report on Form 10-K, File No. 000-18106, for the fiscal
year ended September 30, 1992, and incorporated by reference herein).
10.14 -- Modifications Nos. P00004 through P00005 to the contract dated June 20, 1991
between the United States Navy and Exide Electronics Corporation (filed as
Exhibit 10a to the Company's Quarterly Report on Form 10 -Q, File No. 000-18106,
for the quarter ended June 30, 1994, and incorporated by reference herein).
10.15 -- Modification No. P00006 to the contract dated June 20, 1991 between the United
States Navy and Exide Electronics Corporation (filed as Exhibit 10k to the
Company's Annual Report on Form 10-K, File No. 000-18106, for the fiscal year
ended September 30, 1994, and incorporated by reference herein).
10.16 -- Contract dated April 13, 1992 between the United States Navy and Exide
Electronics Corporation, and Amendments Nos. 0001 through 0006 and Modification
No. P00001 (filed as Exhibit 10j to the Company's Annual Report on Form 10-K,
File No. 000-18106, for the fiscal year ended September 30, 1992, and
incorporated by reference herein).
10.17 -- Modifications Nos. P00002, P00003, P00006 and P00007 to the contract dated April
13, 1992 between the United States Navy and Exide Electronics Corporation (filed
as Exhibit 10m to the Company's Annual Report on Form 10-K, File No. 000-18106,
for the fiscal year ended September 30, 1994, and incorporated by reference
herein).
10.18 -- Modifications Nos. P00004 through P00005 to the contract dated April 13, 1992
between the United States Navy and Exide Electronics Corporation (filed as
Exhibit 10b to the Company's Quarterly Report on Form 10-Q, File No. 000-18106,
for the quarter ended June 30, 1994, and incorporated by reference herein).
10.19 -- Agreement, dated as of July 1, 1982, between Exide Corporation and Exide
Electronics Corporation relating to the use of the name Exide (filed as Exhibit
10f to the Registration Statement No. 33-31872 on Form S-1 and incorporated by
reference herein).
10.20 -- Exide Electronics Group, Inc. 1989 Stock Option Plan (filed as Exhibit 10g to
Registration Statement No. 33-31872 on Form S-1 and incorporated by reference
herein).
10.21 -- Employment Agreement, dated February 3, 1995, with Warren J. Johnson (filed as
Exhibit 10 to the Company's Quarterly Report on Form 10-Q, File No. 000-18106,
for the quarter ended December 31, 1994, and incorporated by reference herein).
10.22 -- Employment Agreement, dated September 30, 1989, with James A. Risher (filed as
Exhibit 10o to the Company's Annual Report on Form 10-K, File No. 000-18106, for
the fiscal year ended September 30, 1990, and incorporated by reference herein).
10.23 -- Employment Agreement, dated March 15, 1990, with William J. Raddi (filed as
Exhibit 10p to the Company's Annual Report on Form 10-K, File No. 000-18106, for
the fiscal year ended September 30, 1990, and incorporated by reference herein).
10.24 -- Severance Compensation Plan After Change of Control (filed as Exhibit 10o to
Amendment No. 1 of Registration Statement No. 33-31872 on Form S-1 and
incorporated by reference herein).
10.25 -- Revised form of Stock Purchase Agreement for fiscal 1989 Common Stock sales to
the Registrant's employees (filed as Exhibit 101 to Amendment No. 3 of
Registration Statement No. 33-31872 on Form S-1 and incorporated by reference
herein).
</TABLE>
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<PAGE> 192
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <C> <S>
10.26 -- 1989 Stock Option Plan, as amended on August 11, 1992 (filed as Exhibit 10t to
the Company's Annual Report on Form 10-K, File No. 000-18106, for the fiscal year
ended September 30, 1992, and incorporated by reference herein).
10.27 -- Non-employee Directors' Stock Option Plan, as amended on August 11, 1992 (filed
as Exhibit 10u to the Company's Annual Report on Form 10-K, File No. 000-18106,
for the fiscal year ended September 30, 1992, and incorporated by reference
herein).
10.28 -- Contract, dated June 5, 1995, between the United States Air Force Sacramento Air
Logistics Command and Exide Electronics Corporation (filed as Exhibit P to the
Company's Quarterly Report on Form 10-Q, File No. 000-18106, for the quarter
ended June 30, 1995, and incorporated by reference herein).
10.29 -- Exide Electronics Group, Inc. 1995 Directors Stock Option Plan (filed as Appendix
B to the Company's Proxy Statement dated January 30, 1995, issued in connection
with the Company's Annual Meeting of Stockholders held on February 28, 1995, and
incorporated by reference herein).
10.30 -- Exide Electronics Group, Inc. 1995 Employee Stock Option and Restricted Stock
Plan (filed as Appendix A to the Company's Proxy Statement dated January 30,
1995, issued in connection with the Company's Annual Meeting of Stockholders held
on February 28, 1995, and incorporated by reference herein).
10.31 -- Exide Electronics Corporation 401 (k) Retirement Benefit Plan Summary Plan
Description (filed as Exhibit 4c to Registration Statement No. 33-64121 on Form
S-8 and incorporated by reference herein).
10.32 -- Commercial Lease Agreement dated June 23, 1987 between Northgate V Business Park
Associates and the registrant, as amended November 11, 1987, and as supplemented
by Supplemental Lease Agreement dated December 9, 1992 (filed as Exhibit 10.1 to
International Power Machines Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, and incorporated by reference herein).
10.33 -- Agreement dated February 20, 1987 between William L. Zang and the registrant
(filed as Exhibit 10.10 to International Power Machines Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated
by reference herein).
10.34 -- Company Employee Capital Accumulation and Savings Plan (filed as Exhibit 10.12 to
International Power Machines Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992, and incorporated by reference herein).
10.35 -- Lease Agreement, dated June 8, 1995, between Banks D. Kerr and Exide Electronics
Corporation relating to the registrant's offices in Raleigh, North Carolina
(filed as Exhibit 10(ff) to the Company's Annual Report on Form 10-K, File No.
000-18106, for the fiscal year ended September 30, 1995, and incorporated by
reference herein).
10.36 -- Summary Description of 1995 Management Incentive Plan (filed as Exhibit 10(gg) to
the Company's Annual Report on Form 10-K, File No. 000-18106, for the fiscal year
ended September 30, 1995, and incorporated by reference herein).
12.1 -- Statement of Computation of Ratios.
21.1 -- Subsidiaries of the Company.
23.1* -- Consent of Smith Helms Mulliss & Moore, L.L.P. (included in their opinion filed
as Exhibit 5.1 hereof).
23.2 -- Consent of Arthur Andersen LLP.
23.3 -- Consent of Price Waterhouse LLP.
23.4(a) -- Consent of KPMG as.
23.4(b) -- Consent of KPMG C. Jespersen.
</TABLE>
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<PAGE> 193
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <C> <S>
23.4(c) -- Consent of KPMG WIDERI OY AB.
23.4(d) -- Consent of KPMG Bohlins AB.
24.1 -- Power of Attorney (included on the signature page of this registration
statement).
25.1 -- Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture
Act of 1939 of American Bank National Association.
99.1 -- Form of Letter of Transmittal and related documents to be used in conjunction
with the Exchange Offer.
</TABLE>
- ---------------
* To be filed by amendment. All other exhibits are filed herewith.
(b) Financial Statement Schedules
The following Financial Statement Schedule is filed as part of the
Registration Statement.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
SCHEDULES OMITTED
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required by
such omitted schedules is set forth in the financial statements or the notes
thereto.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Act"), may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(3) 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;
II-6
<PAGE> 194
(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.
(4) 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.
(5) 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.
(6) 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.
(7) To file an application for the purpose of determining the
eligibility of the trustee to act under subsection (a) of Section 310 of
the Trust Indenture Act in accordance with the rules and regulations
prescribed by the Commission under Section 305(b)(2) of the Act.
II-7
<PAGE> 195
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Raleigh, State of North
Carolina, on April 12, 1996.
EXIDE ELECTRONICS GROUP, INC.
By: /s/ JAMES A. RISHER
------------------------------------
James A. Risher
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of Exide Electronics Group, Inc., hereby severally constitute James A.
Risher and Marty R. Kittrell and each of them singly, our true and lawful
attorneys with full power to them, and each of them singly, to sign for us and
in our names in the capacities indicated below, the Registration Statement filed
herewith and any and all amendments to said Registration Statement, and
generally to do all such things in our names and in our capacities as officers
and directors to enable Exide Electronics Group, Inc. to comply with the
provisions of the Securities Act of 1933, and all requirements of the Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they
may be signed by our said attorneys, or any of them, to said Registration
Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------------- ----------------
<C> <S> <C>
Chairman of the Board of April , 1996
- --------------------------------------------- Directors
Conrad A. Plimpton
/s/ LANCE L. KNOX Vice Chairman of the Board of April 12, 1996
- --------------------------------------------- Directors
Lance L. Knox
/s/ MARTY R. KITTRELL Vice President, Chief April 12, 1996
- --------------------------------------------- Financial Officer, and
Marty R. Kittrell Treasurer (Principal
Accounting Officer)
/s/ JAMES A. RISHER Director April 12, 1996
- ---------------------------------------------
James A. Risher
/s/ WAYNE L. CLEVENGER Director April 12, 1996
- ---------------------------------------------
Wayne L. Clevenger
/s/ RON E. DOGGETT Director April 12, 1996
- ---------------------------------------------
Ron E. Doggett
</TABLE>
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<PAGE> 196
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------------- ----------------
<C> <S> <C>
/s/ JAMES E. FOWLER Director April 12, 1996
- ---------------------------------------------
James E. Fowler
/s/ DAVID J. MCLAUGHLIN Director April 12, 1996
- ---------------------------------------------
David J. McLaughlin
Director April , 1996
- ---------------------------------------------
Chiaki Tanaka
Director April , 1996
- ---------------------------------------------
Stig G. Stendahl
/s/ RALF R. BOER Director April 12, 1996
- ---------------------------------------------
Ralf R. Boer
</TABLE>
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<PAGE> 197
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Exide Electronics Group, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the financial statements of Exide Electronics Group, Inc. included in this
registration statement and have issued our report thereon dated October 25, 1995
(except with respect to the matters discussed in Note 16 to the annual
Consolidated Financial Statements, as to which the date is December 13, 1995).
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The information contained on Schedule II is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Raleigh, North Carolina
October 25, 1995
S-1
<PAGE> 198
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS AND
CUSTOMER RETURNS AND ADJUSTMENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE BALANCE
BEGINNING END
FISCAL YEAR OF PERIOD ADDITIONS DEDUCTIONS OF PERIOD
- -------------------------------------------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C>
1993........................................ $ 1,745 $ 1,714 $ (599) $ 2,860
1994........................................ $ 2,860 $ 1,475 $ (2,187) $ 2,148
1995........................................ $ 2,148 $ 1,495 $ (1,126) $ 2,517
</TABLE>
S-2
<PAGE> 199
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- -------------------------------------------------------------------------- ----
<C> <C> <S> <C>
2.1 -- Stock Purchase Agreement by and between Exide Electronics Group, Inc. and
Fiskars Oy Ab, Fiskars Holdings, Inc. and Deltec Power Systems, Inc.,
dated November 16, 1995 (filed as Exhibit 10 to the Company's Form 8-K,
File No. 000-18106, filed on November 17, 1995 and incorporated herein by
reference).
2.2 -- Letter Agreement to Amend Stock Purchase Agreement by and between Exide
Electronics Group, Inc. and Fiskars Oy Ab, Fiskars Holdings, Inc. and
Deltec Power Systems, Inc., dated February 9, 1996 (filed as Exhibit 10.2
to the Company's Form 8-K, File No. 000-18106, filed on February 21, 1996
and incorporated herein by reference).
3.1 -- Certificate of Incorporation of the Company, as amended (filed as Exhibit
3 to the Company's Form 10-Q, File No. 000-18106, for the quarter ended
March 31, 1995 and incorporated herein by reference).
3.2 -- Form of Certificate of Designation of the Series G Preferred Stock of the
Company (filed as attachment to Schedule 2.1(d) of Exhibit 10.2 to the
Company's Form 8-K/A, File No. 000-18106, filed on March 22, 1996 and
incorporated herein by reference).
3.3 -- Bylaws of the Company, as amended (filed as Exhibit 3b to the Company's
Form 10-K, File No. 000-18106, for the fiscal year ended September 30,
1992 and incorporated herein by reference).
4.1 -- Indenture, dated as of March 13, 1996, among the Company, the Guarantors
and American Bank National Association, as trustee, relating to
$125,000,000 principal amount of 11 1/2% Senior Subordinated Notes due
2006.
4.2 -- Form of 11 1/2% Series A and Series B Senior Subordinated Notes due 2006
(included in Exhibit 4.1 hereof).
4.3 -- Registration Rights Agreement, dated as of March 13, 1996, among the
Company, the Guarantors and the Initial Purchasers.
4.4 -- Warrant Agreement, dated as of March 13, 1996, between the Company and
American Bank National Association, as warrant agent, relating to 125,000
Warrants to purchase in the aggregate 643,750 shares of Common Stock.
4.5 -- Warrant Registration Rights Agreement, dated March 13, 1996, between the
Company and the Initial Purchasers.
4.6 -- Stockholder Agreement, dated March 13, 1996, between the Company and
Fiskars Oy Ab.
4.7 -- Rights Agreement, dated as of November 25, 1992, by and between Exide
Electronics Group, Inc. and First Union National Bank of North Carolina
(filed as Exhibit 1 to the Company's Current Report on Form 8-K, File No.
000-18106, for the event on November 25, 1992, and incorporated by
reference herein).
4.8 -- Stockholder Agreement between Exide Electronics and Duquesne Enterprises,
Inc., dated August 25, 1994, including amendments by a letter agreement
dated December 14, 1994 and a letter agreement dated January 4, 1995
(filed as Exhibit 2.4 to Exide Electronics' Registration Statement on Form
S-4, File No. 33-88324, and incorporated by reference herein).
4.9 -- Stockholder Agreement between Exide Electronics and Shenkman Capital
Management, Inc., dated August 25, 1994, including an Amendment Agreement
dated December 14, 1994 and an Amendment Agreement dated January 4, 1995
(filed as Exhibit 2.5 to Exide Electronics' Registration Statement on Form
S-4, File No. 33-88324, and incorporated by reference herein).
</TABLE>
<PAGE> 200
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- -------------------------------------------------------------------------- ----
<C> <C> <S> <C>
4.10 -- Registration Rights Agreement between Exide Electronics Group, Inc. and
Gilbert Stuart Goodchild, dated September 29, 1994 (filed as Exhibit 4.1
to Exide Electronics' Registration Statement on Form S-3, File No.
33-63969, and incorporated by reference herein).
4.11 -- Registration Rights Agreement between Exide Electronics Group, Inc. and
Carol Elizabeth Amans, dated September 29, 1994 (filed as Exhibit 4.2 to
Exide Electronics' Registration Statement on Form S-3, File No. 33-63969,
and incorporated by reference herein).
4.12 -- Registration Rights Agreement between Exide Electronics Group, Inc. and
Tony Peter Stuart Goodchild, dated September 29, 1994 (filed as Exhibit
4.3 to Exide Electronics' Registration Statement on Form S-3, File No.
33-63969, and incorporated by reference herein).
4.13 -- Registration Rights Agreement by and among Exide Electronics, Duquesne and
Shenkman Investment Partners L.P., dated as of January 5, 1995 (filed as
Exhibit 4.7 to Exide Electronics' Registration Statement on Form S-3, File
No. 33-88466, and incorporated by reference herein).
4.14 -- Note Agreement by and among Massachusetts Mutual Life Insurance Company,
MassMutual Corporate Investors, MassMutual Participation Investors, and
Exide Electronics Group, Inc., dated September 2, 1992, relating to the
8.375% Guaranteed Convertible Subordinated Notes due June 30, 2000 (filed
as Exhibit 4m to the Company's Annual Report on Form 10-K, File No.
000-18106, for the fiscal year ended September 30, 1992, and incorporated
by reference herein).
5.1* -- Opinion of Smith Helms Mulliss & Moore, L.L.P., regarding the legality of
the Series B Notes.
10.1 -- Credit Agreement, dated as of March 13, 1996, among the Company, the
Guarantors and Morgan Guaranty Trust Company of New York, First Union
National Bank of North Carolina, Bank of America Illinois, NationsBank,
N.A., ABN AMRO Bank, N.V., as lenders, and Morgan Guaranty Trust Company
of New York, as administrative agent, and Bank of America Illinois, as
documentation agent.
10.2 -- Amendment to Credit Agreement, dated as of March 25, 1996, among the
Company and the Lenders, the Administrative Agent, the Swing Lender (as
defined therein), the Issuing Lender (as defined therein) and the lenders
listed on Schedule 2 thereto.
10.3 -- Security Agreement, dated March 13, 1996, among the Company, the
Guarantors and Morgan Guaranty Trust Company of New York, as
administrative agent (included in Exhibit 10.1 hereof).
10.4 -- Pledge Agreement, dated March 13, 1996, among the Company, Exide
Electronics Corporation, Exide Electronics USA Holdings Corp.,
International Power Machines Corporation and Deltec Power Systems, Inc.,
as pledgors, and Morgan Guaranty Trust Company of New York, as
administrative agent (included in Exhibit 10.1 hereof).
10.5 -- Lease Agreement, dated August 15, 1994 between E.L.E. Properties and Exide
Electronics Corporation relating to Registrant's manufacturing facility in
Raleigh, North Carolina (filed as Exhibit 10a to the Company's Annual
Report on Form 10-K, File No. 000-18106, for the fiscal year ended
September 30, 1994, and incorporated by reference herein).
10.6 -- Lease Agreement, dated June 20, 1985, between Corporate Property
Associates 5 and Exide Electronics Corporation and First Amendment
thereto, relating to Registrant's engineering facility in Raleigh, North
Carolina (filed as Exhibit 10c to Registration Statement No. 33-31872 on
Form S-1 and incorporated by reference herein).
</TABLE>
<PAGE> 201
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- -------------------------------------------------------------------------- ----
<C> <C> <S> <C>
10.7 -- Lease Agreement, dated May 12, 1994, between Forum Office Partners Three
and Exide Electronics Group, Inc., relating to Registrant's corporate
headquarters (filed as Exhibit 10 to the Company's Quarterly Report on
Form 10-Q, File No. 000-18106, for the quarter ended March 31, 1994, and
incorporated by reference herein).
10.8 -- Contract, dated May 6, 1988, between the Directorate of Contracting and
Manufacturing, Sacramento Air Logistics Center and Exide Electronics
Corporation, and Amendment/Modification Nos. P00001 through P00008 (filed
as Exhibit 10c to Registration Statement No. 33-31872 on Form S-1 and
incorporated by reference herein).
10.9 -- Amendment/Modification Nos. P00009 through P000012, between the
Directorate of Contracting and Manufacturing, Sacramento Air Logistics
Center and Exide Electronics Corporation (filed as Exhibits 10g-j to the
Company's Annual Report on Form 10-K, File No. 000-18106, for the fiscal
year ended September 30, 1990, and incorporated by reference herein).
10.10 -- Amendment/Modification Nos. P000013 through P000023 between the
Directorate of Contracting and Manufacturing, Sacramento Air Logistics
Center and Exide Electronics Corporation (filed as Exhibit 10h to the
Company's Annual Report on Form 10-K, File No. 000-18106, for the fiscal
year ended September 30, 1992, and incorporated by reference herein).
10.11 -- Amendment/Modification Nos. P000024 through P000028 between the
Directorate of Contracting and Manufacturing, Sacramento Air Logistics
Center and Exide Electronics Corporation (filed as Exhibit 10g to the
Company's Annual Report on Form 10-K, File No. 000-18106, for the fiscal
year ended September 30, 1993, and incorporated by reference herein).
10.12 -- Amendment/Modification No. P000029 between the Directorate of Contracting
and Manufacturing, Sacramento Air Logistics Center and Exide Electronics
Corporation (filed as Exhibit 10(h) to the Company's Annual Report on Form
10-K, File No. 000-18106, for the fiscal year ended September 30, 1995,
and incorporated by reference herein).
10.13 -- Contract dated June 20, 1991 between the United States Navy and Exide
Electronics Corporation, and Modifications Nos. P00001 through P00003
(filed as Exhibit 10i to the Company's Annual Report on Form 10-K, File
No. 000-18106, for the fiscal year ended September 30, 1992, and
incorporated by reference herein).
10.14 -- Modifications Nos. P00004 through P00005 to the contract dated June 20,
1991 between the United States Navy and Exide Electronics Corporation
(filed as Exhibit 10a to the Company's Quarterly Report on Form 10-Q, File
No. 000-18106, for the quarter ended June 30, 1994, and incorporated by
reference herein).
10.15 -- Modification No. P00006 to the contract dated June 20, 1991 between the
United States Navy and Exide Electronics Corporation (filed as Exhibit 10k
to the Company's Annual Report on Form 10-K, File No. 000-18106, for the
fiscal year ended September 30, 1994, and incorporated by reference
herein).
10.16 -- Contract dated April 13, 1992 between the United States Navy and Exide
Electronics Corporation, and Amendments Nos. 0001 through 0006 and
Modification No. P00001 (filed as Exhibit 10j to the Company's Annual
Report on Form 10-K, File No. 000-18106, for the fiscal year ended
September 30, 1992, and incorporated by reference herein).
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10.17 -- Modifications Nos. P00002, P00003, P00006 and P00007 to the contract dated
April 13, 1992 between the United States Navy and Exide Electronics
Corporation (filed as Exhibit 10m to the Company's Annual Report on Form
10-K, File No. 000-18106, for the fiscal year ended September 30, 1994,
and incorporated by reference herein).
10.18 -- Modifications Nos. P00004 through P00005 to the contract dated April 13,
1992 between the United States Navy and Exide Electronics Corporation
(filed as Exhibit 10b to the Company's Quarterly Report on Form 10-Q, File
No. 000-18106, for the quarter ended June 30, 1994, and incorporated by
reference herein).
10.19 -- Agreement, dated as of July 1, 1982, between Exide Corporation and Exide
Electronics Corporation relating to the use of the name Exide (filed as
Exhibit 10f to the Registration Statement No. 33-31872 on Form S-1 and
incorporated by reference herein).
10.20 -- Exide Electronics Group, Inc. 1989 Stock Option Plan (filed as Exhibit 10g
to Registration Statement No. 33-31872 on Form S-1 and incorporated by
reference herein).
10.21 -- Employment Agreement, dated February 3, 1995, with Warren J. Johnson
(filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q, File
No. 000-18106, for the quarter ended December 31, 1994, and incorporated
by reference herein).
10.22 -- Employment Agreement, dated September 30, 1989, with James A. Risher
(filed as Exhibit 10o to the Company's Annual Report on Form 10-K, File
No. 000-18106, for the fiscal year ended September 30, 1990, and
incorporated by reference herein).
10.23 -- Employment Agreement, dated March 15, 1990, with William J. Raddi (filed
as Exhibit 10p to the Company's Annual Report on Form 10-K, File No.
000-18106, for the fiscal year ended September 30, 1990, and incorporated
by reference herein).
10.24 -- Severance Compensation Plan After Change of Control (filed as Exhibit 10o
to Amendment No. 1 of Registration Statement No. 33-31872 on Form S-1 and
incorporated by reference herein).
10.25 -- Revised form of Stock Purchase Agreement for fiscal 1989 Common Stock
sales to the Registrant's employees (filed as Exhibit 101 to Amendment No.
3 of Registration Statement No. 33-31872 on Form S-1 and incorporated by
reference herein).
10.26 -- 1989 Stock Option Plan, as amended on August 11, 1992 (filed as Exhibit
10t to the Company's Annual Report on Form 10-K, File No. 000-18106, for
the fiscal year ended September 30, 1992, and incorporated by reference
herein).
10.27 -- Non-employee Directors' Stock Option Plan, as amended on August 11, 1992
(filed as Exhibit 10u to the Company's Annual Report on Form 10-K, File
No. 000-18106, for the fiscal year ended September 30, 1992, and
incorporated by reference herein).
10.28 -- Contract, dated June 5, 1995, between the United States Air Force
Sacramento Air Logistics Command and Exide Electronics Corporation (filed
as Exhibit P to the Company's Quarterly Report on Form 10-Q, File No.
000-18106, for the quarter ended June 30, 1995, and incorporated by
reference herein).
10.29 -- Exide Electronics Group, Inc. 1995 Directors Stock Option Plan (filed as
Appendix B to the Company's Proxy Statement dated January 30, 1995, issued
in connection with the Company's Annual Meeting of Stockholders held on
February 28, 1995, and incorporated by reference herein).
10.30 -- Exide Electronics Group, Inc. 1995 Employee Stock Option and Restricted
Stock Plan (filed as Appendix A to the Company's Proxy Statement dated
January 30, 1995, issued in connection with the Company's Annual Meeting
of Stockholders held on February 28, 1995, and incorporated by reference
herein).
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10.31 -- Exide Electronics Corporation 401 (k) Retirement Benefit Plan Summary Plan
Description (filed as Exhibit 4c to Registration Statement No. 33-64121 on
Form S-8 and incorporated by reference herein).
10.32 -- Commercial Lease Agreement dated June 23, 1987 between Northgate V
Business Park Associates and the registrant, as amended November 11, 1987,
and as supplemented by Supplemental Lease Agreement dated December 9, 1992
(filed as Exhibit 10.1 to International Power Machines Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992,
and incorporated by reference herein).
10.33 -- Agreement dated February 20, 1987 between William L. Zang and the
registrant (filed as Exhibit 10.10 to International Power Machines
Corporation's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, and incorporated by reference herein).
10.34 -- Company Employee Capital Accumulation and Savings Plan (filed as Exhibit
10.12 to International Power Machines Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 1992, and incorporated by
reference herein).
10.35 -- Lease Agreement, dated June 8, 1995, between Banks D. Kerr and Exide
Electronics Corporation relating to the registrant's offices in Raleigh,
North Carolina (filed as Exhibit 10(ff) to the Company's Annual Report on
Form 10-K, File No. 000-18106, for the fiscal year ended September 30,
1995, and incorporated by reference herein).
10.36 -- Summary Description of 1995 Management Incentive Plan (filed as Exhibit
10(gg) to the Company's Annual Report on Form 10-K, File No. 000-18106,
for the fiscal year ended September 30, 1995, and incorporated by
reference herein).
12.1 -- Statement of Computation of Ratios.
21.1 -- Subsidiaries of the Company.
23.1* -- Consent of Smith Helms Mulliss & Moore, L.L.P. (included in their opinion
filed as Exhibit 5.1 hereof).
23.2 -- Consent of Arthur Andersen LLP.
23.3 -- Consent of Price Waterhouse LLP.
23.4(a) -- Consent of KPMG as.
23.4(b) -- Consent of KPMG C. Jespersen.
23.4(c) -- Consent of KPMG WIDERI OY AB.
23.4(d) -- Consent of KPMG Bohlins AB.
24.1 -- Power of Attorney (included on the signature page of this registration
statement).
25.1 -- Statement of Eligibility and Qualification (Form T-1) under the Trust
Indenture Act of 1939 of American Bank National Association.
99.1 -- Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer.
</TABLE>
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* To be filed by amendment. All other exhibits are filed herewith.
<PAGE> 1
EXHIBIT 4.1
================================================================================
EXIDE ELECTRONICS GROUP, INC.
EXIDE ELECTRONICS CORPORATION,
EXIDE ELECTRONICS INTERNATIONAL CORP.,
INTERNATIONAL POWER MACHINES CORPORATION,
LECTRO PRODUCTS, INC.,
DELTEC POWER SYSTEMS, INC.,
DATATRAX ACQUISITION CORP.,
EXIDE ELECTRONICS USA HOLDINGS CORP.,
DELTEC ELECTRONICS CORP. AND
LORTEC POWER SYSTEMS, INC.
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
---------------------
INDENTURE
Dated as of March 13, 1996
---------------------
---------------------
American Bank National Association
---------------------
Trustee
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1.03. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . 13
Section 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.04. Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.05. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.07. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.08. Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.09. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.10. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 2.13. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.14. CUSIP Number. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.02. Selection of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.06. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.07. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.08. Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.09. Offer to Purchase by Application of Excess Proceeds . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.02. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.03. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.04. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.05. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.06. Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.07. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries . . . . . . . . . . . . . . 31
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock . . . . . . . . . . . . . . . . 32
Section 4.10. Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.11. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 4.12. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.13. Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.14. Offer to Repurchase Upon Change of Control . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.15. Limitation on Layering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.16. Sale and Leaseback Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.17. Additional Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 4.18. Limitation on Issuances and Sales of Capital Stock of Wholly Owned Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.02. Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.07. Rights of Holders of Notes to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.06. Reports by Trustee to Holders of the Notes . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.09. Successor Trustee by Merger, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . 47
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ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . 47
Section 8.02. Legal Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.03. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.04. Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous
Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.06. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.07. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 9.02. With Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 9.03. Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.04. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.05. Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.06. Trustee to Sign Amendments, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.02. Liquidation; Dissolution; Bankruptcy. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.03. Default on Designated Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.04. Acceleration of Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.05. When Distribution Must Be Paid Over. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.06. Notice by Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 10.07. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.08. Relative Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.09. Subordination May Not Be Impaired by Company. . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.10. Notice to Representative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.11. Rights of Trustee and Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.12. Authorization to Effect Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.13. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE 11
SUBSIDIARY GUARANTEES
Section 11.01. Subsidiary Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 11.02. Execution and Delivery of Subsidiary Guarantee. . . . . . . . . . . . . . . . . . . . . . . 58
Section 11.03. Guarantors May Consolidate, etc., on Certain Terms. . . . . . . . . . . . . . . . . . . . . 59
Section 11.04. Releases Following Sale of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 11.05. "Trustee" to Include Paying Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 11.06. Subordination of Subsidiary Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 12.03. Communication by Holders of Notes with Other Holders of Notes . . . . . . . . . . . . . . . 61
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Section 12.04. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . 62
Section 12.05.Statements Required in Certificate or Opinion 62
Section 12.06. Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders . . . . . . . . . 62
Section 12.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 12.09. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . 63
Section 12.10. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 12.11. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 12.12. Counterpart Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 12.13. Table of Contents, Headings, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B CERTIFICATE OF TRANSFEROR
Exhibit C FORM OF SUBSIDIARY GUARANTEE
</TABLE>
iv
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CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06;11.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.03;11.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.02
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03, 10.04
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05,11.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316 (a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.12
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 7
INDENTURE dated as of March 13, 1996 between Exide Electronics
Group, Inc., a Delaware corporation (the "Company"), Exide Electronics
Corporation, Exide Electronics International Corp., International Power
Machines Corporation, Lectro Products, Inc., Deltec Power Systems, Inc.,
DataTrax Acquisition Corporation, Exide Electronics USA Holdings Corp., Deltec
Electronics Corp. and Lortec Power Systems, Inc., as Guarantors, and American
Bank National Association, as trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows
for the benefit of each other and for the equal and ratable benefit of the
Holders of the Company's 11 1/2% Series A Senior Subordinated Notes due 2006
(the "Series A Notes") and the 11 1/2% Series B Senior Subordinated Notes due
2006 (the "Series B Notes" and, together with the Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person:
(i) Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For 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, shall mean 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;
provided that beneficial ownership of 10% or more of the voting securities of a
Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means: (i) the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of a sale and
leaseback) other than in the ordinary course of business consistent with past
practices (provided that the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company and its Subsidiaries
taken as a whole will be governed by Section 4.14 hereof and/or the provisions
described under Section 5.01 hereof and not by the provisions of Section 4.10
hereof), and (ii) the issue or sale by the Company or any of its Subsidiaries
of Equity Interests of any of the Company's Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $1.0 million or (b)
for net proceeds in excess of $1.0 million. Notwithstanding the foregoing: (i)
a transfer of assets by the Company to a Restricted Subsidiary or by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary, (ii)
an issuance of Equity Interests by a Wholly Owned Subsidiary to the Company or
to another Wholly Owned Subsidiary, (iii) a Restricted Payment that is
permitted by the covenant described under Section 4.07 and (iv) the sale of
accounts receivable for cash will not be deemed to be Asset Sales.
"Attributable Debt" means, in respect of a sale and leaseback
transaction, at the time of determination, the present value (discounted at the
rate of interest implicit in such transaction, determined in accordance with
GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or may, at the
option of the lessor, be extended).
<PAGE> 8
"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 authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of
a capital lease that would at such time be required to be capitalized on a
balance sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) securities issued or
unconditionally guaranteed by the United States of America or any agency or
instrumentality thereof, backed by full faith and credit of the United States
of America and maturing within one year from the date of acquisition, (ii)
securities issued by any state of the United States of America or any political
subdivision or public instrumentality thereof, maturing within one year from
the date of acquisition and, at the time of acquisition, having a rating of at
least A- by Standard & Poor's Corporation or the equivalent by Moody's
Investors Service, Inc., (iii) commercial paper issued by any Person organized
under the laws of the United States of America, maturing no more than one year
from the date of acquisition and, at the time of acquisition, having a rating
of at least A-1 or the equivalent thereof by Standard & Poor's Corporation or
at least P-1 or the equivalent thereof by Moody's Investors Service Inc., (iv)
time deposits and certificates of deposit that are insured by the Federal
Deposit Insurance Corporation (the "FDIC") or any successor instrumentality of
the government of the United States of America up to the applicable limit on
insurance granted by the FDIC or such other instrumentality with respect to
such instruments (it being understood that the amount invested in such
instrument may not exceed the limit on such insurance), maturing within one
year from the date of issuance and issued by a bank or trust company organized
under the laws of the United States of America or any state thereof and having
combined capital and surplus of at least $500,000,000, (v) repurchase
obligations with a term not exceeding seven (7) days with respect to underlying
securities of the types described in clause (i) above entered into with any
bank or trust company meeting the qualifications specified in clause (iv) above
and (vi) money market funds substantially all of whose assets are comprised of
securities of the types described in clauses (i) through (v) above.
"Certificated Securities" means Notes that are in the form of
the Notes attached hereto as Exhibit A, that do not include the information
called for by footnotes 1 and 2 thereof.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Restricted Subsidiaries taken as a whole to any "person" (as such term is used
in Section 13(d)(3) of the Exchange Act), (ii) the adoption of a plan relating
to the liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above) becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and
2
<PAGE> 9
Rule 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of
the voting stock of the Company, or (iv) the first day on which a majority of
the members of the Board of Directors of the Company are not Continuing
Directors.
"Company" means Exide Electronics Group, Inc., a Delaware
corporation.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss (a) realized in
connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income) or (b) the disposition of any
securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries, plus (ii) provision for taxes based on income or profits of such
Person and its Subsidiaries for such period, to the extent that such provision
for taxes was included in computing such Consolidated Net Income, plus (iii)
consolidated interest expense of such Person and its Subsidiaries for such
period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing
such Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
charges (excluding any such non-cash charge to the extent that it represents an
accrual of or reserve for cash charges in any future period or amortization of
a prepaid cash expense that was paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash charges were deducted in computing such Consolidated Net
Income, in each case, on a consolidated basis and determined in accordance with
GAAP. Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization and other non-cash charges
of, a Subsidiary of the referent Person shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent (and in same
proportion) that the Net Income of such Subsidiary was included in calculating
the Consolidated Net Income of such Person and only if a corresponding amount
would be permitted at the date of determination to be dividended to the Company
by such Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders. Notwithstanding the foregoing, the provision for taxes based
on the income or profits of, and the depreciation and amortization and other
non-cash charges of, a Subsidiary of a Person shall be added to Consolidated
Net Income to compute Consolidated Cash Flow only to the extent (and in the
same proportion) that the Net Income of such Subsidiary was included in
calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that (i) the Net Income (but not loss) of any
Person that is not a Restricted Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid in cash to the referent Person or a
3
<PAGE> 10
Wholly Owned Restricted Subsidiary thereof, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Restricted Subsidiary of
that Net Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded, (iv) the cumulative effect of a
change in accounting principles shall be excluded and (v) the Net Income of any
Unrestricted Subsidiary shall be excluded, whether or not distributed to the
Company or one of its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (i) the consolidated equity of the common stockholders
of such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that
by its terms is not entitled to the payment of dividends unless such dividends
may be declared and paid only out of net earnings in respect of the year of
such declaration and payment, but only to the extent of any cash received by
such Person upon issuance of such preferred stock, less (x) all write-ups
(other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date hereof in the
book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, and (y) all investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries (except, in each case,
Permitted Investments and Investments made prior to the date of the Indenture).
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors of the Company who (i) was a member of
such Board of Directors on the date hereof or (ii) was nominated for election
or elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 12.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, until a successor shall
have been appointed and become such pursuant to Section 2.06 of this Indenture,
and, thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Debt" means (i) the Senior Term Debt, (ii)
the Senior Revolving Debt and (iii) any other Senior Debt permitted hereunder
the principal amount of which is $25 million or more and that has been
designated by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in part, on or
prior to March 15, 2006.
4
<PAGE> 11
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means the exchange offer to be filed with the
SEC pursuant to the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange
Offer Registration Statement as defined in the Registration Rights Agreement.
"Existing Indebtedness" means up to $10.0 million in aggregate
principal amount of Indebtedness of the Company and its Subsidiaries (other
than Indebtedness under the New Credit Facility) in existence on the date
hereof, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii)
without duplication, any interest expense on Indebtedness of another Person
that is Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv)
the product of (a) all cash dividend payments (and non-cash dividend payments
in the case of a Person that is a Subsidiary) on any series of preferred stock
of such Person, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any person
for any period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the Company or
any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall
be excluded, and (iii) the Fixed Charges
5
<PAGE> 12
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall
be excluded, but only to the extent that the obligations giving rise to such
Fixed Charges will not be obligations of the referent Person or any of its
Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date hereof.
"Global Note" means a Note that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote 2
to the form of the Note attached hereto as Exhibit A.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of
which guarantee or obligations the full faith and credit of the United States
is pledged.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantors" means each of (i) Exide Electronics Corporation,
Exide Electronics International Corp., International Power Machines
Corporation, Lectro Products, Inc., Deltec Power Systems, Inc., DataTrax
Acquisition Corporation, Exide Electronics USA Holdings Corp., Deltec
Electronics Corp. and Lortec Power Systems, Inc. and (ii) any other Subsidiary
that executes a Subsidiary Guarantee pursuant to Section 4.17 hereof, and their
respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) currency exchange or interest rate swap
agreements, currency exchange or interest rate cap agreements and currency
exchange or interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in currency
exchange rates or interest rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability
upon a balance sheet of such Person prepared in accordance with GAAP, as well
as all indebtedness of others secured by a Lien on any asset of such Person
(whether or not such Indebtedness is assumed by such Person), and, to the
extent not otherwise included, the Guarantee by such Person of any indebtedness
of any other Person.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
6
<PAGE> 13
"Initial Purchasers" means Donaldson, Lufkin & Jenrette
Securities Corporation, J.P. Morgan Securities Inc. and NationsBanc Capital
Markets, Inc.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP; provided that an acquisition of assets, Equity Interests or other
securities by the Company for consideration consisting of common equity
securities of the Company shall not be deemed to be an Investment. If the
Company or any Subsidiary of the Company sells or otherwise disposes of any
Equity Interests 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 Equity
Interests 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 Equity Interests of such Subsidiary not sold or disposed of.
"Issue Date" means March 13, 1996.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. 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.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction other than financial statements filed in respect of arrangements
purporting to be true leases).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain (but not loss), together with any related provision for taxes on such gain
(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions)
or (b) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries, and (ii) any extraordinary or
nonrecurring gain (but not loss), together with any related provision for taxes
on such extraordinary or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking
7
<PAGE> 14
fees, and sales commissions) and any relocation expenses incurred as a result
thereof, taxes paid or payable as a result thereof (after taking into account
any available tax credits or deductions and any tax sharing arrangements), and
any reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"New Credit Facility" means that certain credit facility,
dated as of March 13, 1996 by and among the Company, the Guarantors, as
guarantors, Bank of America Illinois, as documentation agent and Morgan
Guaranty Trust Company of New York, as agent bank, in the commitment amount of
$175.0 million, which on the date hereof, will provide for (i) $50.0 million in
term loan borrowings and (ii) up to $125.0 million of revolving credit
borrowings, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case
as amended, modified, renewed, refunded, replaced or refinanced from time to
time.
"Non-Recourse Debt" means Indebtedness (i) as to which neither
the Company nor any of its Restricted Subsidiaries (a) provides credit support
of any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
"Note Custodian" means the Trustee, as custodian with respect
to the Notes in global form, or any successor entity thereto.
"Notes" means the Series A Notes and the Series B Notes.
"Obligations" means any obligation under the documentation
governing any Indebtedness, including without limitation, principal, premium,
interest (including post-petition interest thereon in any proceeding under
Bankruptcy Law), penalties, fees, indemnifications, reimbursements, damages,
expenses (including post-petition expenses in any proceeding under Bankruptcy
Law) and other liabilities payable thereunder (including, without limitation,
letter of credit reimbursement obligations, whether contingent or absolute.)
"Offering" means the Offering of the Units by the Company
pursuant to the Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum of the
Company dated March 7, 1996 relating to the Offering.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the
principal executive officer, the principal financial officer, the
8
<PAGE> 15
treasurer or the principal accounting officer of the Company, that meets the
requirements of Section 12.04 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Permitted Investments" means (a) any Investment in the
Company or in a Restricted Subsidiary of the Company; (b) any Investment in
Cash Equivalents; (c) Investments by the Company or any Subsidiary of the
Company in a Person, if as a result of such Investment (i) such Person becomes
a Wholly Owned Restricted Subsidiary of the Company or (ii) 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 Restricted Subsidiary of the Company; (d) any Restricted
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant
described in Section 4.10; and (e) other Investments in any Person having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (e) that are at the
time outstanding, not to exceed $10.0 million.
"Permitted Liens" means (i) Liens on assets of the Company and
its Restricted Subsidiaries securing Senior Debt that is permitted by Section
4.09 hereof to be incurred and outstanding; (ii) Liens in favor of the Company;
(iii) Liens on property of a Person existing at the time such Person is merged
into or consolidated with the Company or any Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
merger or consolidation and do not extend to any assets other than those of the
Person merged into or consolidated with the Company; (iv) Liens on property
existing at the time of acquisition thereof by the Company or any Subsidiary of
the Company, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clauses (vi), (ix), (x) and (xii) of the second paragraph of Section 4.09
hereof covering only the assets acquired with such Indebtedness; (vii) Liens
existing on the date hereof; (viii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(ix) Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not exceed in the
aggregate 10% of the Company's Consolidated Net Worth and that (a) are not
incurred in connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary course of business) and (b)
do not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Company
or such Subsidiary and (x) Liens on assets of Unrestricted Subsidiaries that
secure Non-Recourse Debt of Unrestricted Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Restricted Subsidiaries issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of the Company or any of its Restricted
Subsidiaries; provided that: (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount (or accreted value, if applicable) of the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date
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<PAGE> 16
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Notes, such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of payment to,
the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Restricted Subsidiary who is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or agency or political subdivision thereof (including any
subdivision or ongoing business of any such entity or substantially all of the
assets of any such entity, subdivision or business).
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 13, 1996, by and among the Company, the Guarantors
and the Initial Purchasers.
"Representative" means the Trustee or other trustee, agent or
representative for an issue of Senior Debt.
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or 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 Investment" means an Investment other than a
Permitted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of
the referent Person that is not an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior A Notes" means the Company's 11 1/2% Series A Senior
Subordinated Notes due 2006 issued pursuant to this Indenture.
"Senior B Notes" means the Company's 11 1/2% Series B Senior
Subordinated Notes due 2006 issued pursuant to this Indenture.
"Senior Debt" means (i) the Senior Term Debt, (ii) the Senior
Revolving Debt, (iii) Hedging Obligations relating to Senior Debt and (iv) any
other Indebtedness permitted to be incurred by the Company under Section 4.09
hereof, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes. Notwithstanding anything to the contrary in the
foregoing, Senior Debt referred to in clause (iv) above will not include (v)
any liability for federal, state, local or other taxes owed or owing by the
Company, (w) any
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<PAGE> 17
Indebtedness of the Company to any of its Restricted Subsidiaries or other
Affiliates, (x) any trade payables, (y) any Indebtedness that is incurred in
violation of Section 4.09 hereof or (z) any Indebtedness that is not fully and
adequately secured; provided that any unexpected diminution of the value of any
collateral securing any Senior Debt shall not cause such Indebtedness to cease
being fully and adequately secured for the purpose of this definition.
"Senior Revolving Debt" means revolving credit borrowings, and
reimbursement obligations (whether contingent or matured) in respect of letters
of credit issued, under the New Credit Facility and/or any successor facility
or facilities.
"Senior Term Debt" means term loans under the New Credit
Facility and/or any successor facility or facilities.
"Separation Date" means the earliest to occur of (i) 90 days
after the date hereof, (ii) such date as Donaldson, Lufkin & Jenrette
Securities Corporation may, in its discretion, deem appropriate (but in no
event earlier than 10 days from the date hereof), (iii) in the event a Change
of Control occurs, the date the Company mails notice thereof to holders of
Notes and (iv) the date on which the Exchange Offer Registration Statement is
declared effective.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantees" means the Guarantees of the Notes by
the Guarantors in accordance with Article 11 hereof, including for such
Guarantors as of the date hereof a notation on the Notes substantially in the
form attached hereto as Exhibit C.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
Section 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
"Transfer Restricted Securities" means securities that bear or
are required to bear the legend set forth in Section 2.06 hereof.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions contained in
Article 7 of this Indenture and thereafter means the successor serving
hereunder.
"Units" means units, each consisting of $1,000 principal
amount of Series A Notes and one Warrant to purchase 5.15 shares of common
stock of the Company, to be issued by the Company on the Issue Date.
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<PAGE> 18
"Unrestricted Subsidiary" means (i) any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to
a Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (x) to subscribe for additional Equity Interests or (y)
to maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results; (d) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has
at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described in Section
4.07. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described in
Section 4.09, the Company shall be in default of such covenant). The Board of
Directors may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under the
covenant described in Section 4.09, and (ii) no Default or Event of Default
would be in existence following such designation.
"Warrant" means any Warrant (as defined in the Warrant
Agreement) from time to time outstanding pursuant to the Warrant Agreement.
"Warrant Agreement" means the warrant agreement, dated as of
March 13, 1996, between the Company and American Bank National Association, as
warrant agent.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
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<PAGE> 19
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . . . . 4.11
"Asset Sale Offer" . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Change of Control Offer" . . . . . . . . . . . . . . . . . . . . . 4.14
"Change of Control Payment" . . . . . . . . . . . . . . . . . . . . 4.14
"Change of Control Payment Date" . . . . . . . . . . . . . . . . . . 4.14
"Covenant Defeasance" . . . . . . . . . . . . . . . . . . . . . . . 8.03
"Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Debt" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.02
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Excess Proceeds" . . . . . . . . . . . . . . . . . . . . . . . . . 4.10
"Global Note Holder" . . . . . . . . . . . . . . . . . . . . . . . . 2.01
"incur" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09
"Legal Defeasance" . . . . . . . . . . . . . . . . . . . . . . . . 8.02
"Offer Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Offer Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Payment Blockage Notice" . . . . . . . . . . . . . . . . . . . . . 10.03
"Purchase Date" . . . . . . . . . . . . . . . . . . . . . . . . . . 3.09
"Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Restricted Payments" . . . . . . . . . . . . . . . . . . . . . . . 4.07
"Senior Guaranties" . . . . . . . . . . . . . . . . . . . . . . . . 11.06
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee;
"obligor" on the Notes means the Company and any successor
obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
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<PAGE> 20
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes and the
Subsidiary Guarantees shall constitute, and are hereby expressly made, a part
of this Indenture and the Company, the Guarantors and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
Notes issued in global form shall be substantially in the form
of Exhibit A attached hereto (including the text referred to in footnotes 1 and
2 thereto). Notes issued in definitive form shall be substantially in the form
of Exhibit A attached hereto (but without including the text referred to in
footnotes 1 and 2 thereto). Each Global Note shall represent such of the
outstanding Notes as shall be specified therein and each shall provide that it
shall represent the aggregate amount of outstanding Notes from time to time
endorsed thereon and that the aggregate amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the amount of outstanding Notes
represented thereby shall be made by the Trustee or the Note Custodian, at the
direction of the Trustee, in accordance with instructions given by the Holder
thereof as required by Section 2.06 hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and
may be in facsimile form.
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<PAGE> 21
If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by two Officers, authenticate Notes for original issue up to the aggregate
principal amount stated in paragraph 4 of the Notes. The aggregate principal
amount of Notes outstanding at any time may not exceed such amount except as
provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company 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 authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company
or an Affiliate of the Company.
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") and an
office or agency where Notes may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar and
the term "Paying Agent" includes any additional paying agent. The Company may
change any Paying Agent or Registrar without notice to any Holder. The Company
shall notify the Trustee in writing of the name and address of any Agent not a
party to this Indenture. If the Company fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes. Except as otherwise specifically provided herein, (i) all
references in the Indenture to the Trustee shall be deemed to refer to the
Trustee in its capacity as Trustee and in its capacities as Registrar, Paying
Agent and Note Custodian and (ii) every provision of this Indenture relating to
the conduct of or affecting the liability of or offering protection, immunity
or indemnity to the Trustee shall be deemed to apply with the same force and
effect to the Trustee acting in its capacities as Paying Agent, Registrar and
Note Custodian.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and will notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee, the Paying Agent (if other than the Company
or a Subsidiary) shall have no further liability for the money. If the Company
or a Subsidiary acts as Paying Agent, it shall segregate and
15
<PAGE> 22
hold in a separate trust fund for the benefit of the Holders all money held by
it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating
to the Company, the Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER 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
all Holders and shall otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the Trustee at least
seven Business Days before each interest payment date and at such other times
as the Trustee may request in writing, a list in such form and as of such date
as the Trustee may reasonably require of the names and addresses of the Holders
of Notes and the Company shall otherwise comply with TIA Section 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Certificated Notes. When
Certificated Notes are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Certificated
Notes; or
(y) to exchange such Certificated Notes for an
equal principal amount of Certificated Notes
of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Certificated Notes presented or surrendered for register of transfer or
exchange:
(i) shall be duly endorsed or
accompanied by a written instruction
of transfer in form satisfactory to
the Registrar duly executed by such
Holder or by his attorney, duly
authorized in writing; and
(ii) in the case of a Certificated Note
that is a Transfer Restricted
Security, such request shall be
accompanied by the following
additional information and
documents, as applicable:
(A) if such Transfer Restricted
Security is being delivered
to the Registrar by a Holder
for registration in the name
of such Holder, without
transfer, a certification to
that effect from such Holder
(in substantially the form of
Exhibit B hereto); or
(B) if such Transfer Restricted
Security is being transferred
to a "qualified institutional
buyer" (as defined in Rule
144A under the Securities
Act) in accordance with Rule
144A under the Securities Act
or pursuant to an exemption
from registration in
accordance with Rule 144 or
Rule 904 under the Securities
Act or pursuant to an
effective registration
statement under the
Securities Act, a
certification to that effect
from such Holder (in
substantially the form of
Exhibit B hereto).
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<PAGE> 23
(b) Transfer of a Certificated Note for a Beneficial
Interest in a Global Note. A Certificated Note may not be exchanged for a
beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Certificated
Note, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Trustee, together with:
(i) if such Certificated Note is a Transfer Restricted
Security, a certification from the Holder thereof (in
substantially the form of Exhibit B hereto) to the
effect that such Certificated Note is being
transferred by such Holder to a "qualified
institutional buyer" (as defined in Rule 144A under
the Securities Act) in accordance with Rule 144A
under the Securities Act; and
(ii) whether or not such Certificated Note is a Transfer
Restricted Security, written instructions from the
Holder thereof directing the Trustee to make, or to
direct the Note Custodian to make, an endorsement on
the Global Note to reflect an increase in the
aggregate principal amount of the Notes represented
by the Global Note,
in which case the Trustee shall cancel such Certificated Note in accordance
with Section 2.11 hereof and cause, or direct the Note Custodian to cause, in
accordance with the standing instructions and procedures existing between the
Depositary and the Note Custodian, the aggregate principal amount of Notes
represented by the Global Note to be increased accordingly. If no Global Notes
are then outstanding, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the Trustee shall
authenticate a new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Global Notes. The transfer
and exchange of Global Notes or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture and the procedures of
the Depositary therefor, which shall include restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act.
(d) Transfer of a Beneficial Interest in a Global Note
for a Certificated Note.
(i) Any Person having a beneficial interest in a
Global Note may upon request exchange such
beneficial interest for a Certificated Note.
Upon receipt by the Trustee of written
instructions or such other form of
instructions as is customary for the
Depositary, from the Depositary or its
nominee on behalf of any Person having a
beneficial interest in a Global Note, and, in
the case of a Transfer Restricted Security,
the following additional information and
documents (all of which may be submitted by
facsimile):
(A) if such beneficial interest is
being transferred to the
Person designated by the
Depositary as being the
beneficial owner, a
certification to that effect
from such Person (in
substantially the form of
Exhibit B hereto); or
(B) if such beneficial interest is
being transferred to a
"qualified institutional
buyer" (as defined in Rule
144A under the Securities
Act) in accordance with Rule
144A under the Securities Act
or pursuant to an exemption
from registration in
accordance with Rule 144 or
Rule 904 under the Securities
Act or pursuant to an
effective registration
statement under the
Securities Act, a
certification to that effect
from the transferor (in
substantially the form of
Exhibit B hereto),
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<PAGE> 24
in which case the Trustee or the Note
Custodian, at the direction of the Trustee,
shall, in accordance with the standing
instructions and procedures existing between
the Depositary and the Note Custodian, cause
the aggregate principal amount of Global
Notes to be reduced accordingly and,
following such reduction, the Company shall
execute and, upon receipt of an
authentication order in accordance with
Section 2.02 hereof, the Trustee shall
authenticate and deliver to the transferee a
Certificated Note in the appropriate
principal amount.
(ii) Certificated Notes issued in exchange for a
beneficial interest in a Global Note pursuant
to this Section 2.06(d) shall be registered
in such names and in such authorized
denominations as the Depositary, pursuant to
instructions from its direct or indirect
participants or otherwise, shall instruct the
Trustee. The Trustee shall deliver such
Certificated Notes to the Persons in whose
names such Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global
Notes. Notwithstanding any other provision of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.06), a Global Note may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Certificated Notes in Absence of
Depositary. If at any time:
(i) the Depositary for the Notes notifies the
Company that the Depositary is unwilling or
unable to continue as Depositary for the
Global Notes and a successor Depositary for
the Global Notes is not appointed by the
Company within 90 days after delivery of such
notice; or
(ii) the Company, at its sole discretion, notifies
the Trustee in writing that it elects to
cause the issuance of Certificated Notes
under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Certificated Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) Legends.
(i) Except as permitted by the following
paragraphs (ii) and (iii), each Note
certificate evidencing Global Notes and
Certificated Notes (and all Notes issued in
exchange therefor or substitution thereof)
shall bear a legend in substantially the
following form:
"THE NOTES (OR ITS PREDECESSOR) EVIDENCED
HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"), AND THE NOTE EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE NOTES
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED
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<PAGE> 25
BY RULE 144A THEREUNDER. THE HOLDER OF THE
NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT
OF THE COMPANY THAT (A) SUCH NOTE MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1)(a) 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, (b) IN
A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (c)
OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT OR (d) 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), (2) TO THE COMPANY
OR (3) 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 AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER FROM IT OF THE NOTE
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE.
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer
Restricted Security represented by a Global
Note) pursuant to Rule 144 under the
Securities Act or pursuant to an effective
registration statement under the Securities
Act:
(A) in the case of any Transfer
Restricted Security that is a
Certificated Note, the Registrar
shall permit the Holder thereof to
exchange such Transfer Restricted
Security for a Certificated Note
that does not bear the legend set
forth in (i) above and rescind any
restriction on the transfer of such
Transfer Restricted Security; and
(B) in the case of any Transfer
Restricted Security represented by a
Global Note, such Transfer
Restricted Security shall not be
required to bear the legend set
forth in (i) above, but shall
continue to be subject to the
provisions of Section 2.06(c)
hereof; provided, however, that with
respect to any request for an
exchange of a Transfer Restricted
Security that is represented by a
Global Note for a Certificated Note
that does not bear the legend set
forth in (i) above, which request is
made in reliance upon Rule 144, the
Holder thereof shall certify in
writing to the Registrar that such
request is being made pursuant to
Rule 144 (such certification to be
substantially in the form of Exhibit
B hereto).
(iii) Notwithstanding the foregoing, upon
consummation of the Exchange Offer, the
Company shall issue and, upon receipt of an
authentication order in accordance with
Section 2.02 hereof, the Trustee shall
authenticate Series B Notes in exchange for
Series A Notes accepted for exchange in the
Exchange Offer, which Series B Notes shall
not bear the legend set forth in (i) above,
and the Registrar shall rescind any
restriction on the transfer of such Series B
Notes, in each case unless the Holder of such
Series A Notes is either (A) a broker-dealer,
(B) a Person participating in the
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<PAGE> 26
distribution of the Series A Notes or (C) a
Person who is an affiliate (as defined in
Rule 144A) of the Company.
(h) Cancellation and/or Adjustment of Global Notes. At
such time as all beneficial interests in Global Notes have been exchanged for
Certificated Notes, redeemed, repurchased or cancelled, all Global Notes shall
be returned to or retained and cancelled by the Trustee in accordance with
Section 2.11 hereof. At any time prior to such cancellation, if any beneficial
interest in a Global Note is exchanged for Certificated Notes, redeemed,
repurchased or cancelled, the principal amount of Notes represented by such
Global Note shall be reduced accordingly and an endorsement shall be made on
such Global Note, by the Trustee or the Note Custodian, at the direction of the
Trustee, to reflect such reduction.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the
Trustee shall authenticate Certificated Notes
and Global Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder
for any registration of transfer or exchange,
but the Company may require payment of a sum
sufficient to cover any transfer tax or
similar governmental charge payable in
connection therewith (other than any such
transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to
Sections 3.07, 4.10, 4.13 and 9.05 hereof).
(iii) The Registrar shall not be required to
register the transfer of or exchange any Note
selected for redemption in whole or in part,
except the unredeemed portion of any Note
being redeemed in part.
(iv) All Certificated Notes and Global Notes
issued upon any registration of transfer or
exchange of Certificated Notes or Global
Notes shall be the valid obligations of the
Company, evidencing the same debt, and
entitled to the same benefits under this
Indenture, as the Certificated Notes or
Global Notes surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required:
(A) to issue, to register the transfer
of or to exchange Notes during a
period beginning at the opening of
business 15 days before the day of
any selection of Notes for
redemption under Section 3.02 hereof
and ending at the close of business
on the day of selection; or
(B) to register the transfer of or to
exchange any Note so selected for
redemption in whole or in part,
except the unredeemed portion of any
Note being redeemed in part; or
(C) to register the transfer of or to
exchange a Note between a record
date and the next succeeding
interest payment date.
(vi) Prior to due presentment for the registration
of a transfer of any Note, the Trustee, any
Agent and the Company may deem and treat the
Person in whose name any Note is
20
<PAGE> 27
registered as the absolute owner of such Note
for the purpose of receiving payment of
principal of and interest on such Notes, and
neither the Trustee, any Agent nor the
Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Certificated
Notes and Global Notes in accordance with the
provisions of Section 2.02 hereof.
(j) The Notes and the Warrants will not be separately
exchangeable or transferable prior to the Separation Date, at which time the
Notes shall become separately exchangeable and transferable. Prior to the
Separation Date, Notes will be exchangeable and transferable only together with
the Warrants related thereto as set forth herein and in the Warrant Agreement.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the
Trustee, upon the written order of the Company signed by two Officers of the
Company, shall authenticate a replacement Note if the Trustee's requirements
are met. If required by the Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and
the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date,
money sufficient to pay all principal, interest, premium and liquidated
damages, if any, payable on that date with respect to the Notes or portion
thereof to be redeemed or maturing, as the case may be) then on and after that
date such Notes (or portion thereof) shall be deemed to be no longer
outstanding and shall cease to accrue interest.
21
<PAGE> 28
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company,
shall be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that a Trustee knows are so owned
shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon a written order
of the Company signed by two Officers of the Company. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall
prepare and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be
delivered to the Company. The Company may not issue new Notes to replace Notes
that it has paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Company shall fix or cause to be
fixed each such special record date and payment date, provided that no such
special record date shall be less than 10 days prior to the related payment
date for such defaulted interest. At least 15 days before the special record
date, the Company (or, upon the written request of the Company, the Trustee in
the name and at the expense of the Company) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of
Holders of the Notes entitled to vote or consent to any action by vote or
consent authorized or permitted under this Indenture shall be determined as
provided for in TIA Section 316(c).
22
<PAGE> 29
SECTION 2.14. CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number and,
if it does so, the Trustee shall use the CUSIP number in notices of redemption
or exchange as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness or accuracy of the
CUSIP number printed in the notice or on the Notes and that reliance may be
placed only on the other identification numbers printed on the Notes. The
Company will promptly notify the Trustee of any change in the CUSIP number.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 35 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant
to which the redemption shall occur, (ii) the redemption date, (iii) the
principal amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time,
the Trustee shall select the Notes to be redeemed among the Holders of the
Notes in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not so
listed, on a pro rata basis, by lot or in accordance with any other method the
Trustee considers fair and appropriate. In the event of partial redemption by
lot, the particular Notes to be redeemed shall be selected, unless otherwise
provided herein, not less than 30 nor more than 60 days prior to the redemption
date by the Trustee from the outstanding Notes not previously called for
redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
23
<PAGE> 30
(b) the redemption price, separately stating the amount
of Liquidated Damages to be paid in connection with the redemption;
(c) 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 upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice or
printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that
the Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as
provided in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest on all Notes to be redeemed on
that date. The Trustee or the Paying Agent shall promptly return to the
Company any money deposited with the Trustee or the Paying Agent by the Company
in excess of the amounts necessary to pay the redemption price of, and accrued
interest on and Liquidated Damages, if any, all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is
redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest and Liquidated
Damages, if any, shall be paid to the Person in whose name such Note was
registered at the close of business on such record date. If any Note called
for redemption shall not be so paid upon surrender for redemption because of
the failure of the Company to comply with the preceding paragraph, interest
shall be paid on the unpaid principal, from the redemption
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<PAGE> 31
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) The Company shall not have the option to redeem the Notes
pursuant to this Section 3.07 prior to March 15, 2001. Thereafter, the Company
shall have the option to redeem the Notes, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on March 15 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . 105.750%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . 103.833%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 101.917%
2004 and thereafter . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
(b) Any redemption pursuant to this Section 3.07 shall be
made pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.14 hereof, the
Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an offer to all Holders to purchase Notes
(an "Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
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<PAGE> 32
The Company shall comply with any tender offer rules under the
Exchange Act which may then be applicable, including Rule 14e-1, in connection
with any offer required to be made by the Company to repurchase the Notes as a
result of an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this Section 3.09,
the Company shall comply with the applicable securities laws or regulations and
shall not be deemed to have breached its obligations hereunder by virtue
thereof.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The
notice, which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made
pursuant to this Section 3.09 and Section 4.10 hereof and the length
of time the Asset Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the
Purchase Date;
(c) that any Note not tendered or accepted for
payment shall continue to accrue interest;
(d) that, unless the Company defaults in making
such payment, any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Note
purchased pursuant to an Asset Sale Offer may only elect to have all
of such Note purchased and may not elect to have only a portion of
such Note purchased;
(f) that Holders electing to have a Note
purchased pursuant to any Asset Sale Offer shall be required to
surrender the Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, or transfer by
book-entry transfer, to the Company, a depositary, if appointed by the
Company, or a Paying Agent at the address specified in the notice at
least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw
their election if the Company, the Depositary or the Paying Agent, as
the case may be, receives, not later than the expiration of the Offer
Period, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Note the
Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of
Notes surrendered by Holders exceeds the Offer Amount, the Company
shall select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000, or integral multiples thereof, shall
be purchased); and
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(i) that Holders whose Notes were purchased only
in part shall be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered (or transferred by
book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating
that such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering
Holder an amount equal to the purchase price of the Notes tendered by such
Holder and accepted by the Company for purchase, and the Company shall promptly
issue a new Note, and the Trustee, upon written request from the Company shall
authenticate and mail or deliver such new Note to such Holder, in a principal
amount equal to any unpurchased portion of the Note surrendered. Any Note not
so accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale
Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof. No repurchase of Notes under this
Section 3.09 shall be deemed to be a redemption of Notes.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money ed by the Company in immediately available funds and designated for and
sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement. If
any Liquidated Damages become payable, the Company shall not later than three
Business Days prior to the date that any payment of Liquidated Damages is due
(i) deliver an Officers' Certificate to the Trustee setting forth the amount of
Liquidated Damages payable to Holders and (ii) instruct the Paying Agent to pay
such amount of Liquidated Damages to Holders entitled to receive such
Liquidated Damages.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at
the rate equal to 1% per annum in excess of the then applicable interest rate
on the Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the same rate to the extent lawful.
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SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange 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 Corporate Trust
Office of the Trustee.
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;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.03. REPORTS.
Whether or not required by the rules and regulations of the
SEC, so long as any Notes are outstanding, the Company shall, or shall cause
the Trustee to, furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the SEC on Forms 10-Q and 10-K if the Company were required to file such forms,
including a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the SEC on Form 8-K if
the Company were required to file such reports. In addition, whether or not
required by the rules and regulations of the SEC, at any time after the Company
files the Exchange Offer Registration Statement, the Company shall file a copy
of all such information and reports with the SEC for public availability
(unless the SEC will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, for so long as any Notes remain outstanding, the Company and the
Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90
days after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company 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 the Company 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 of
this Indenture (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may have
knowledge and what action the Company 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,
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if any, on the Notes is prohibited or if such event has occurred, a description
of the event and what action the Company 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 4.03(a) 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 that would lead them to believe
that the Company has violated any provisions of Article Four or Article Five
hereof or, if any such violation has occurred, specifying the nature and period
of existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(c) The Company shall, 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 pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividends or make any other payment or distribution on account of the Company's
Equity Interests (including, without limitation, any payment in connection with
any merger or consolidation involving the Company) or to the direct or indirect
holders of the Company's Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or dividends or distributions payable to the Company or
any Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of the Company or any direct
or indirect parent of the Company; (iii) make any principal payment on, or
purchase, redeem, defease or otherwise acquire or return for value any
Indebtedness that is subordinated to or pari passu with the Notes, except at
the stated final maturity thereof or (iv) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time
of and after giving effect to such Restricted Payment:
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(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable four-quarter
period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted
Payments permitted by clauses (ii) and (iii) of the next succeeding
paragraph), is less than the sum of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period)
from the beginning of the first fiscal quarter commencing after the
date of this Indenture to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Company
from the issue or sale since the date of this Indenture of Equity
Interests of the Company or of debt securities of the Company that
have been converted into such Equity Interests (other than Equity
Interests (or convertible debt securities) sold to a Subsidiary of the
Company and other than Disqualified Stock or debt securities that have
been converted into Disqualified Stock), plus (iii) to the extent that
any Restricted Investment that was made after the date of this
Indenture is sold for cash or otherwise liquidated or repaid for case,
the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B)
the initial amount of such Restricted Investment.
If no Default or Event of Default has occurred and is
continuing, or would occur as a consequence thereof, the foregoing provisions
will not prohibit (i) the payment of any dividend within 60 days after the date
of declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture; (ii) the defeasance,
redemption, repurchase, retirement or other acquisition of any Equity Interests
or subordinated Indebtedness of the Company in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of other Equity Interests of the Company (other than
any Disqualified Stock); provided that the amount of any such net proceeds that
are utilized for any such defeasance, redemption, repurchase, retirement or
other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph; and (iii) the defeasance, redemption or repurchase of subordinated
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness or the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of Equity Interests of the Company (other
than Disqualified Stock); provided that the amount of any such net proceeds
that are utilized for any such defeasance, redemption, repurchase, retirement
or other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph.
The Board of Directors may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if such designation would not cause a Default.
For purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
greatest of (x) the net book value of such Investments at the time of such
designation, (y) the fair market value of such Investments at the time of such
designation and (z) the original fair market value of such Investments at the
time they were made. Such designation will only be permitted if such
Restricted Payment would be
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permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
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 this Section were computed, which calculations may be
based upon the Company's latest available financial statements.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company shall not, and shall not permit any of its
Restricted 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 Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits or (b) pay any Indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reasons of (a) Existing
Indebtedness as in effect on the date of this Indenture, (b) the New Credit
Facility as in effect as of the date of this Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in the New Credit
Facility as in effect on the date of this Indenture, (c) this Indenture and the
Notes, (d) applicable law, (e) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Company or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in anticipation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided, in the case of
Indebtedness, that such Indebtedness was permitted by the terms hereof, (f)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (g) purchase money
obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, or (h) Permitted Refinancing Indebtedness, provided that
the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED
STOCK.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and the Company shall not issue any Disqualified Stock and shall not
permit any of its Subsidiaries to issue any shares of preferred stock;
provided, however, that so long as no Default or Event of Default has occurred
and is continuing, or would occur as a consequence thereof, the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock, if the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock is issued would have been at least 2.25 to
1, determined on a pro forma basis (including
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a pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by the Company of Senior Term Debt
(and guarantees thereof by the Guarantors) in an aggregate principal amount at
any time outstanding not to exceed an amount equal to $50.0 million less the
aggregate amount of all repayments, optional or mandatory, of the principal of
any Senior Term Debt (other than repayments that are reborrowed immediately or
substantially contemporaneously therewith) that have been made since the date
of this Indenture;
(ii) the incurrence by the Company of Senior
Revolving Debt and letters of credit (and guarantees thereof by the Guarantors)
in an aggregate principal amount at any time outstanding (with letters of
credit being deemed to have a principal amount equal to the maximum potential
liability of the Company thereunder) not to exceed an amount equal to $125.0
million, less the aggregate amount of all Net Proceeds of Asset Sales applied
to permanently reduce the commitments with respect to such Indebtedness
pursuant to Section 4.10 hereof;
(iii) the incurrence by the Company's Unrestricted
Subsidiaries of Non-Recourse Debt, provided, however, that if any such
Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such
event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of the Company;
(iv) the incurrence by the Company and its
Subsidiaries of the Existing Indebtedness;
(v) the incurrence by the Company and the Guarantors
of Indebtedness represented by the Notes and the Subsidiary Guarantees,
respectively;
(vi) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations, in each case
incurred for the purpose of financing all or any part of the purchase price or
cost of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $5.0 million at any time outstanding;
(vii) the incurrence by the Company or any of its
Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for,
or the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund, Indebtedness that was permitted by this Indenture to be
incurred;
(viii) the incurrence by the Company or any of its
Restricted Subsidiaries of intercompany Indebtedness between or among the
Company and any of its Wholly Owned Restricted Subsidiaries; provided, however,
that (i) if the Company is the obligor on such Indebtedness, such Indebtedness
is expressly subordinate to the payment in full of all Obligations with respect
to the Notes and (ii)(A) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person other
than the Company or a Wholly Owned Restricted Subsidiary and (B) any sale or
other transfer of any such Indebtedness to a Person that is not either the
Company or a Wholly Owned Restricted Subsidiary shall be deemed, in each case,
to constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
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(ix) the incurrence by the Company or any of its
Restricted Subsidiaries of Hedging Obligations that are incurred for the
purpose of fixing or hedging currency exchange or interest rate risk with
respect to any floating rate Indebtedness that is permitted by the terms hereof
to be outstanding;
(x) the incurrence by the Company's foreign
Restricted Subsidiaries of additional Indebtedness in an aggregate principal
amount at any time outstanding not to exceed an amount equal to $50.0 million,
less the aggregate amount of all Existing Indebtedness outstanding at such
time, and Guarantees by the Company and its other Subsidiaries with respect
thereto, provided that the aggregate principal amount of additional
Indebtedness outstanding at any time pursuant to this clause (x) may not exceed
$20.0 million unless the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such
additional Indebtedness is incurred would have been at least 2.25 to 1,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred at the
beginning of such four-quarter period;
(xi) the incurrence by the Company or any Guarantors
of Indebtedness in the form of guarantees of Indebtedness of the Company and
its Subsidiaries permitted to be incurred pursuant to the terms hereof; and
(xii) the incurrence by the Company and its
Subsidiaries of Indebtedness and Guarantees thereof (in addition to
Indebtedness permitted by any other clause of this paragraph) in aggregate
principal amount (or accreted value, as applicable) at any time outstanding not
to exceed the sum of $20.0 million.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, engage in an Asset Sale unless (i) the Company (or
the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash;
provided that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to or pari passu with the Notes or any
guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are immediately converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received), shall be deemed to
be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company or such Restricted Subsidiary, as the case may be, may
apply such Net Proceeds, at its option, either (a) to permanently reduce Senior
Term Debt, (b) to permanently reduce Senior Revolving Debt (and to
correspondingly reduce commitments with respect thereto), or (c) to the
acquisition of a controlling interest in another business or a division of
another Person, the making of a capital expenditure or the acquisition of other
long-term assets, in each case, in the same or a similar line of business as
the Company was engaged in on the date of this Indenture. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce Senior
Revolving Debt or otherwise invest such Net Proceeds in any manner that is not
prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not
applied
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or invested as provided in the first sentence of this paragraph will be deemed
to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $5.0 million, the Company shall be required to make an offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon to the date of
purchase, in accordance with the procedures set forth in Section 3.09 hereof.
To the extent that the aggregate amount of Notes tendered pursuant to an Asset
Sale Offer is less than the Excess Proceeds, the Company may use any remaining
Excess Proceeds for general corporate purposes. If the aggregate principal
amount of Notes surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes to be purchased on a pro rata
basis. Holders of Notes that are the subject of an offer to purchase will
receive an Asset Sale Offer from the Company prior to any related purchase and
may elect to have such Notes purchased by completing a form entitled "Option of
the Holder to Elect Purchase" as shown in Exhibit A of this Indenture. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the
Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of
the disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view issued by an accounting, appraisal or investment banking firm of national
standing with total assets in excess of $1.0 billion; provided, that (x) any
employment agreement entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of the Company or such Restricted Subsidiary, (y) transactions between
or among the Company and/or its Restricted Subsidiaries and (z) Restricted
Payments and Permitted Investments that are permitted under Section 4.07
hereof, in each case, shall not be deemed Affiliate Transactions.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
SECTION 4.13. 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
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existence of each of its Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of the
Company or any such Subsidiary and (ii) 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 of the Notes.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder
of Notes will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon to the date of
purchase (the "Change of Control Payment"). Within ten days following any
Change of Control, the Company shall mail a notice to each Holder describing
the transaction or transactions that constitute the Change of Control and
offering to repurchase Notes pursuant to the procedures described in this
Section and described in such notice. The notice will state: (1) that the
Change of Control Offer is being made pursuant to this Section 4.15 and that
all Notes tendered will be accepted for payment; (2) the purchase price and the
purchase date, which shall be no later than 30 business 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 Payment, all 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 electing to
have any Notes purchased pursuant to a Change of Control Offer will be required
to surrender the Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the third
Business Day preceding the Change of Control Payment Date; (6) that Holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the second 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 Notes
delivered for purchase, and a statement that such Holder is withdrawing his
election to have the Notes purchased; and (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, which unpurchased portion
must be equal to $1,000 in principal amount or an integral multiple thereof.
The Company shall 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 the
Notes as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall,
to the extent lawful, (1) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer, (2) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee the Notes so accepted together with an Officers' Certificate
stating the aggregate principal amount of Notes or portions thereof being
purchased by the Company. The Paying Agent will promptly mail to each Holder
of Notes so tendered the Change of Control Payment for such Notes, and the
Trustee will promptly authenticate and mail (or cause to be transferred by book
entry) to each Holder a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered, if any; provided that each such new Note will
be in a
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principal amount of $1,000 or an integral multiple thereof. Prior to complying
with the provisions of this Section 4.14, but in any event within 90 days
following a Change of Control, the Company shall either repay all outstanding
Senior Debt or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Debt to permit the repurchase of Notes required by
this Section 4.14. The Company shall publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
(c) The Company shall not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in Sections 4.14(a) and 4.14(b) hereof and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
SECTION 4.15. LIMITATION ON LAYERING
Notwithstanding the provisions of Section 4.09 hereof, the
Company and the Guarantors shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt and senior in any respect in right of
payment to the Notes or the Subsidiary Guarantees, as applicable.
SECTION 4.16. SALE AND LEASEBACK TRANSACTIONS
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company may enter into a sale and leaseback transaction if
(i) the Company could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
Section 4.09 hereof and (b) incurred a Lien to secure such Indebtedness
pursuant to the covenant described in Section 4.12 hereof or (ii) (a) the gross
cash proceeds of such sale and leaseback transaction are at least equal to the
fair market value (as determined in good faith by the Board of Directors and
set forth in an Officers' Certificate delivered to the Trustee) of the property
that is the subject of such sale and leaseback transaction and (b) the transfer
of assets in such sale and leaseback transaction is permitted by, and the
Company applies the proceeds to such transaction in compliance with, Section
4.10 hereof.
SECTION 4.17. ADDITIONAL SUBSIDIARY GUARANTEES
If (i) the Company shall acquire or create another domestic
Subsidiary after the date hereof or (ii) any Subsidiary that is not a Guarantor
shall Guarantee any Senior Debt, then such Subsidiary shall execute a
Subsidiary Guarantee and deliver an opinion of counsel, in accordance with the
terms of Article 11 hereof.
SECTION 4.18. LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF
WHOLLY OWNED RESTRICTED SUBSIDIARIES
The Company (i) will not, and will not permit any Wholly Owned
Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly Owned Restricted
Subsidiary of the Company to any Person (other than the Company or a Wholly
Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Capital Stock of
such Wholly Owned Restricted Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.10 hereof and (ii) will not permit any Wholly Owned
Restricted Subsidiary of the Company to
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issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to the Company or a Wholly Owned Restricted Subsidiary of the Company.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into
(whether or not the Company is the surviving corporation) or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia, (ii) the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Notes and this Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee, (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) except in the case of a merger of the Company with or into a Wholly Owned
Restricted Subsidiary of the Company, the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
(immediately after the transaction equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the transaction) and (B) will,
at the time of such transaction and after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.09 hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.01 hereof.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on,
or Liquidated Damages with respect to, any Note when the same becomes
due and payable and the Default continues for a period of 30 days,
whether or not such payment is prohibited by the provisions of Article
10 hereof;
(2) the Company defaults in the payment of the principal
of or premium, if any, on any Note when the same becomes due and
payable, whether or not such payment is prohibited by the provisions
of Article 10 hereof;
(3) the Company fails to observe or perform any covenant,
condition or agreement on the part of the Company to be observed or
performed pursuant to Sections 4.07, 4.09, 4.10, 4.14, 4.15 and 5.01
hereof;
(4) the Company fails to comply for 60 days after notice
from the Trustee or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding to comply with any of its other
agreements or covenants in, or provisions of, the Notes or this
Indenture;
(5) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which
is guaranteed by the Company or any of its Restricted Subsidiaries),
whether such Indebtedness or guarantee now exists or is created
hereafter, which default results in (a) the acceleration of such
Indebtedness prior to its express maturity or constitutes a default in
the payment of such Indebtedness at final maturity of such
Indebtedness and (b) the principal amount of any such Indebtedness
that has been accelerated or not paid at maturity, when added to the
aggregate principal amount of all other such Indebtedness, at such
time, that has been accelerated or not paid at maturity that has not
theretofore been paid, exceeds $10.0 million;
(6) a final judgment or final judgments for the payment
of money are entered by a court or courts of competent jurisdiction
against the Company or any of its Significant Subsidiaries and such
judgment or judgments remain undischarged for a period (during which
execution shall not be effectively stayed) of 60 days, provided that
the aggregate of all such undischarged judgments exceeds $10.0
million;
(7) the Company or any of its Significant Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief
against it in an involuntary case,
(c) consents to the appointment of a Custodian of
it or for all or substantially all of its property,
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(d) makes a general assignment for the benefit of
its creditors, or
(e) generally is not paying its debts as they
become due;
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(a) is for relief against the Company or any
Significant Subsidiary in an involuntary case,
(b) appoints a Custodian of the Company or any
Significant Subsidiary or for all or substantially all of the
property of the Company or any Significant Subsidiary, or
(c) orders the liquidation of the Company or any
Significant Subsidiary, and the order or decree remains
unstayed and in effect for 60 consecutive days; and
(9) except as permitted by this Indenture, any Subsidiary
Guarantee shall be held in any judicial proceeding to be unenforceable
or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any
Guarantor, shall deny or disaffirm its obligations under its
Subsidiary Guarantee.
The term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
In the case of any Event of Default pursuant to the provisions
of this Section 6.01 occurring by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding payment of the premium that the Company would have had to pay if the
Company then had elected to redeem the Notes pursuant to Section 3.07 hereof,
an equivalent premium shall also become and be immediately due and payable to
the extent permitted by law upon the acceleration of the Notes, anything in
this Indenture or in the Notes to the contrary notwithstanding. If an Event of
Default occurs prior to March 15, 2001 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding the prohibition on redemption of the Notes prior to March
15, 2001 pursuant to Section 3.07 hereof, then the premium, as discussed below,
will become immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. The premium payable for purposes of this paragraph
for each of the years beginning on March 15 of the years set forth below shall
be as set forth in the following table expressed as a percentage of the amount
that would otherwise be due but for the provisions of this sentence, plus
accrued interest, if any, to the date of payment:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1996. . . . . . . . . . . . . . . . . . . . . 115.333%
1997. . . . . . . . . . . . . . . . . . . . . 113.417%
1998. . . . . . . . . . . . . . . . . . . . . 111.500%
1999. . . . . . . . . . . . . . . . . . . . . 109.583%
2000. . . . . . . . . . . . . . . . . . . . . 107.667%
</TABLE>
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SECTION 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default
specified in clauses (7) and (8) of Section 6.01 hereof with respect to the
Company, any Significant Subsidiary or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary) occurs and is continuing,
the Trustee by notice to the Company, or the Holders of at least 25% in
aggregate principal amount of the then outstanding Notes by written notice to
the Company and the Trustee may declare the unpaid principal of and any accrued
interest on all the Notes to be due and payable immediately. Upon such
declaration the principal of, premium, if any, accrued and unpaid interest and
Liquidated Damages, if any, shall be due and payable immediately; provided,
however, that so long as any Senior Term Debt or Senior Revolving Debt is
outstanding, such declaration shall not become effective until the earlier of
(1) the day which is five Business Days after the receipt by the Company and
the Agent under the New Credit Facility of such written notice of acceleration
or (2) the date of acceleration of the Senior Term Debt or Senior Revolving
Debt. Notwithstanding the foregoing, if an Event of Default specified in
clause (7) or (8) of Section 6.01 hereof occurs with respect to the Company,
such an amount shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
The Holders of a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may on behalf of all Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal or interest that has become due solely because of the acceleration)
have been cured or waived.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium,
if any, and interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
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 Holder of a Note 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. All
remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, or interest on, 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 impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
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SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written
notice of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of
the then outstanding Notes make a written request to the Trustee to
pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and,
if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within
60 days after receipt of the request and the offer and, if requested,
the provision of indemnity; and
(e) during such 60-day period the Holders of a majority
in principal amount of the then outstanding Notes do not give the
Trustee a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the
respective due dates expressed in the Note (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to 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 Holders of the Notes 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, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder
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 Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances
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of the Trustee, its agents and counsel, and any other amounts due the Trustee
under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof
out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of,
any and all distributions, dividends, money, securities and other properties
that the Holders may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any and interest, respectively; and
Third: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes 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 a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
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 its
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
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<PAGE> 49
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely
by the express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur any liability. The Trustee
shall be under no obligation to exercise any of its rights and powers under
this Indenture at the request of any Holders, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
(g) Except with respect to Section 4.01 hereof, the
Trustee shall have no duty to inquire as to the performance of the Company's
covenants in Article Four hereof. In addition, the Trustee shall not be deemed
to have knowledge of any Default or Event of Default except (i) any Event of
Default occurring pursuant to clause (i) or (ii) set forth in paragraph (a) of
Section 6.01 hereof or (ii) any Default of Event of Default of which the
Trustee shall have received written notification or obtained actual knowledge.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.
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<PAGE> 50
(b) Before the Trustee acts or refrains from acting, it
may require an Officers' Certificate or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Trustee may consult with counsel and the written advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes to be authorized or
within the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
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 otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes,
it shall not be accountable for the Company's use of the proceeds from the
Notes or any money paid to the Company or upon the Company's direction under
any provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after it occurs.
Except in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice
if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of the Holders of
the Notes.
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if
no event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by
mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA Section
313(d). 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 acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture,
including the costs and expenses of enforcing this Indenture against the
Company (including this Section 7.07) and defending itself against any claim
(whether asserted by the Company or any Holder or any other person) or
liability in connection with the exercise or performance of any of its powers
or duties hereunder, except to the extent any such loss, liability or expense
may be attributable to its negligence or bad faith. The Trustee shall notify
the Company promptly of any claim for which it may seek indemnity. Failure by
the Trustee to so notify the Company shall not relieve the Company of its
obligations hereunder. The Company shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The
Company need not pay for any settlement made without its consent, which consent
shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.
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The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the Company in
writing. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
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 Notes of at least 10% in principal amount of the
then outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. 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 MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
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SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $50 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated
therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article
Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by
the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Notes to receive solely from the trust fund described in
Section 8.04 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest and Liquidated
Damages on such Notes when such payments are due, (b) the Company's obligations
with respect to such Notes under Article 2 and Section 4.02 hereof, (c) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Company's obligations in connection therewith and (d) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this Section 8.02 notwithstanding the prior exercise of its option
under Section 8.03 hereof.
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SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.07, 4.08,
4.09, 4.10, 4.11, 4.12 and 4.14 hereof with respect to the outstanding Notes on
and after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, Covenant Defeasance means that,
with respect to the outstanding Notes, 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 covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference
in any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of
this Indenture and such Notes shall be unaffected thereby. In addition, upon
the Company's exercise under Section 8.01 hereof of the option applicable to
this Section 8.03 hereof, subject to the satisfaction of the conditions set
forth in Section 8.04 hereof, Sections 6.01(4) through 6.01(6) hereof shall not
constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with
the Trustee, in trust, for the benefit of the Holders, cash in
United States dollars, non-callable Government Securities, or
a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any,
and interest and Liquidated Damages on the outstanding Notes
on the stated date for payment thereof or on the applicable
redemption date, as the case may be; and the Company must
specify whether the Notes are being defeased to maturity or to
a particular redemption date;
(b) in the case of an election under Section
8.02 hereof, the Company shall have delivered to the Trustee
an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this
Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the
Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had
not occurred;
(c) in the case of an election under Section
8.03 hereof, the Company shall have delivered to the Trustee
an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant
Defeasance and will be subject
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to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such
Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have
occurred and be continuing on the date of such (other than a
Default or Event of Default resulting from the incurrence of
Indebtedness all or a portion of the proceeds of which will be
used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections
6.01(g) or 6.01(8) hereof is concerned, at any time in the
period ending on the 91st day after the date of ;
(e) such Legal Defeasance or Covenant
Defeasance shall not result in a breach or violation of, or
constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or
any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries is bound;
(f) the Company shall have delivered to the
Trustee an Opinion of Counsel to the effect that on 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;
(g) 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 Notes over the other creditors of the Company with
the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(h) 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 Legal Defeasance or the Covenant Defeasance
have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD
IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 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 (including the Company
acting as 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 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 cash or
non-callable Government Securities ed pursuant to Section 8.04 hereof or the
principal 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 Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the request of the Company any money or non-callable Government
Securities held by it as provided in Section 8.04 hereof which, in the opinion
of a nationally recognized firm of independent public accountants expressed in
a written certification thereof delivered to
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the Trustee (which may be the opinion delivered under Section 8.04(a) hereof),
are in excess of the amount thereof that would then be required to be deposited
to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of,
premium, if any, or interest on any Note and remaining unclaimed for two years
after such principal, and premium, if any, or interest has become due and
payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as a secured creditor, look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall Street
Journal (national edition), 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 notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit
had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if
the Company makes any payment of principal of, premium, if any, or interest on
any Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 hereof, the Company and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
(c) to provide for the assumption of the Company's
obligations to the Holders of the Notes in the case of a merger or
consolidation pursuant to Article Five hereof;
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(d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights hereunder of any Holder of the Note;
or
(e) to comply with requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company in
the execution of any amended or supplemental Indenture authorized or permitted
by the terms of this Indenture and to make any further appropriate agreements
and stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and
the Trustee may amend or supplement this Indenture and the Notes may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the Notes then outstanding (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for the Notes), and, subject to Sections 6.04 and 6.07 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest on the Notes,
except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture or the Notes may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
purchase offer, or tender offer or exchange offer for the Notes).
Without the consent of at least 75% in aggregate principal
amount of the Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for such Notes), no waiver or amendment to this Indenture may make any change
in the provisions of Article 10 hereof that adversely affects the rights of any
Holder of Notes.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Company in the execution
of such amended or supplemental Indenture unless such amended or supplemental
Indenture affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject
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to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate
principal amount of the Notes then outstanding may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes. However, without the consent of each Holder affected, an amendment or
waiver may not (with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose
Holders must consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed
maturity of any Note or alter or waive any of the provisions
with respect to the redemption of the Notes except as provided
above with respect to Sections 3.09, 4.10 and 4.14 hereof;
(c) reduce the rate of or change the time for payment
of interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the
payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the
Holders of at least a majority in aggregate principal amount
of the then outstanding Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than that
stated in the Notes;
(f) make any change in the provisions of this
Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or
interest on the Notes;
(g) waive a redemption payment with respect to any
Note (other than a payment required under Sections 3.09, 4.10
and 4.14 hereof); or
(h) make any change in Section 6.04 or 6.07 hereof or
in the foregoing amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with
the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent
Holder of a Note may revoke the consent as to its Note if the Trustee receives
written notice of revocation before the date the waiver, supplement or
amendment becomes effective. An amendment, supplement or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
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SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall authenticate
new Notes that reflect the amendment, supplement or waiver.
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 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. The Company may not sign an amendment or supplemental Indenture until
the Board of Directors approves it. In executing any amended or supplemental
indenture, the Trustee shall be entitled to receive and (subject to Section
7.01) shall be fully protected in relying upon, an Officer's Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture is authorized or permitted by this Indenture.
ARTICLE 10
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder of Notes by accepting a
Note agrees, that the indebtedness evidenced by the Notes is subordinated in
right of payment, to the extent and in the manner provided in this Article, to
the prior payment in full of all Senior Debt (whether outstanding on the date
hereof or hereafter created, incurred, assumed or guaranteed), and that the
subordination is for the benefit of the holders of Senior Debt.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, an assignment for the benefit of creditors or any marshalling of the
Company's assets and liabilities:
(1) holders of Senior Debt shall be entitled to receive
payment in full of all Obligations due in respect of such
Senior Debt (including interest accruing after the
commencement of any such proceeding at the rate specified in
the applicable Senior Debt, whether or not such interest is
allowed as a claim in any such proceeding) before Holders
shall be entitled to receive any payment with respect to the
Notes (except that Holders may receive (i) securities that are
subordinated to at least the same extent as the Notes to (a)
Senior Debt and (b) any securities issued in exchange for
Senior Debt and (ii) payments and other distributions made
from any defeasance trust theretofore created pursuant to
Section 8.01 hereof); and
(2) until all Obligations with respect to Senior Debt (as
provided in subsection (1) above) are paid in full, any
distribution to which Holders would be entitled but for this
Article shall be made to holders of Senior Debt (except that
Holders may receive securities that are subordinated to at
least the
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same extent as the Notes to (a) Senior Debt and (b) any
securities issued in exchange for Senior Debt), as their
interests may appear.
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT.
The Company may not make any payment or distribution to the
Trustee or any Holder in respect of Obligations with respect to the Notes and
may not acquire from the Trustee or any Holder any Notes for cash or property
(other than (i) securities that are subordinated to at least the same extent as
the Notes to (a) Senior Debt and (b) any securities issued in exchange for
Senior Debt and (ii) payments and other distributions made from any defeasance
trust theretofore created pursuant to Section 8.01 hereof) until all principal
and other Obligations with respect to the Senior Debt have been paid in full if:
(i) a default in the payment of the principal of,
premium, if any, or interest on Designated Senior Debt occurs and is
continuing; or
(ii) a default, other than a payment default, on
Designated Senior Debt occurs and is continuing that permits holders
of the Designated Senior Debt as to which such default relates to
accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from a Person who may give it
pursuant to Section 10.11 hereof. During any consecutive 365-day
period, the aggregate number of days in which payments due on the
Notes may not be made as a result of nonpayment defaults on Designated
Senior Debt shall not exceed 179 days and there shall be a period of
at least 186 consecutive days in each consecutive 365-day period when
such payments are not prohibited. If any holder of Designated Senior
Debt delivers a Payment Blockage Notice to the Trustee in respect of
any nonpayment default on such Designated Senior Debt, no nonpayment
default of which such holders or any representative of such holders
was aware that existed or was continuing on the date of delivery of
such notice shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default shall have been waived or cured
for a period of not less than 90 days. Notwithstanding the foregoing,
no subsequent Payment Blockage Notice may be delivered unless all
scheduled payments of principal, premium, if any, interest and
Liquidated Damages on the Notes that have come due have been paid in
full in cash.
The Company may and shall resume payments on and distributions
in respect of the Notes and may acquire them upon the earlier of:
(1) in the case of a default referred to in Section
10.03(i) hereof, the date on which such default is cured or waived,
and
(2) in the case of a default referred to in Section
10.03(ii) hereof, the earlier of the date on which such default is
cured or waived (unless another Payment Blockage Notice is then in
effect) or 179 days after the date on which the applicable Payment
Blockage Notice is received, unless the maturity of any Designated
Senior Debt has been accelerated,
if this Article otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 10.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
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SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any
payment of any Obligations with respect to the Notes at a time when the Trustee
or such Holder, as applicable, has actual knowledge that such payment is
prohibited by Section 10.03 hereof, such payment shall be held by the Trustee
or such Holder, in trust for the benefit of, and shall be paid forthwith over
and delivered, upon written request, to, the holders of Senior Debt as their
interests may appear or their Representative under the indenture or other
agreement (if any) pursuant to which Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent
necessary to pay such Obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders
of Senior Debt.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt 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 Debt, and shall not be liable to any
such holders if the Trustee shall pay over or distribute to or on behalf of
Holders or the Company or any other Person money or assets to which any holders
of Senior Debt shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or gross negligence of
the Trustee.
SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Notes to violate this Article, but failure to
give such notice shall not affect the subordination of the Notes to the Senior
Debt as provided in this Article.
SECTION 10.07. SUBROGATION.
After all Senior Debt is paid in full and until the Notes are
paid in full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt. A distribution made under this Article to holders of Senior
Debt that otherwise would have been made to Holders is not, as between the
Company and Holders, a payment by the Company on the Notes.
SECTION 10.08. RELATIVE RIGHTS.
This Article defines the relative rights of Holders and
holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors
of the Company other than their rights in relation to holders of
Senior Debt; or
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(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Debt to receive distributions
and payments otherwise payable to Holders.
If the Company fails because of this Article to pay principal
of or interest on a Note on the due date, the failure is still a Default or
Event of Default.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
SECTION 10.10. NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to
holders of Senior Debt, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee and the Holders shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt 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.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
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 that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair
the claims of, or payments to, the Trustee under or pursuant to Section 7.07
hereof.
The Trustee in its individual or any other capacity may hold
Senior Debt with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof
authorizes and directs the Trustee on the Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination as provided
in this Article 10, and appoints the Trustee to act as the Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of
the time to file such claim, the Representative are hereby authorized to file
an appropriate claim for and on behalf of the Holders of the Notes.
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SECTION 10.13. AMENDMENTS.
The provisions of this Article 10 shall not be amended or
modified without the written consent of the holders of all Senior Debt.
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.01. SUBSIDIARY GUARANTEE.
Each of the Guarantors hereby, jointly and severally,
unconditionally guaranty to each Holder of a Note authenticated and delivered
by the Trustee and to the Trustee and its successors and assigns, irrespective
of the validity and enforceability of this Indenture, the Notes or the
obligations of the Company hereunder or thereunder, that: (a) the principal of
and interest on the Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or
thereunder will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that same
will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise. Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors will be jointly
and severally obligated to pay the same immediately. The Guarantors hereby
agree that their obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any Holder
of the Notes with respect to any provisions hereof or thereof, the recovery of
any judgment against the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor. Each Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenant that this
Subsidiary Guarantee will not be discharged except by complete performance of
the obligations contained in the Notes and this Indenture. If any Holder of
Notes or the Trustee is required by any court or otherwise to return to the
Company or Guarantors, or any Custodian, Trustee, liquidator or other similar
official acting in relation to either the Company or Guarantors, any amount
paid by either to the Trustee or such Holder of Notes, this Subsidiary
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor agrees that they shall not be entitled to any
right of subrogation in relation to the Holders of Notes in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby. Each Guarantor further agrees that, as between the
Guarantors, on the one hand, and the Holders and the Trustee, on the other
hand, (x) the maturity of the obligations guaranteed hereby may be accelerated
as provided in Article 6 for the purposes of this Subsidiary Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such obligations as provided in
Article 6, such obligations (whether or not due and payable) shall forthwith
become due and payable by the Guarantors for the purpose of this Subsidiary
Guarantee. The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does not impair the
rights of the holders of Notes under the Subsidiary Guarantee.
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The Subsidiary Guarantee of each Guarantor will be
subordinated to the prior payment in full of all Senior Debt of such Guarantor
and the amounts for which the Guarantors will be liable under the guarantees
issued from time to time with respect to Senior Debt. The Subsidiary
Guarantees are general unsecured obligations of the Guarantors and are
subordinated in right of payment to all senior indebtedness of the Guarantors,
including the Guarantors' guarantees of indebtedness under the New Credit
Facility.
SECTION 11.02. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section
11.01, each Guarantor hereby agrees that a notation of such Subsidiary
Guarantee substantially in the form of Exhibit C shall be endorsed by an
officer of such Guarantor on each Security authenticated and delivered by the
Trustee and that this Indenture shall be executed on behalf of such Guarantor
by its President or one of its Vice Presidents.
Each Guarantor hereby agrees that its Subsidiary Guarantee set
forth in Section 11.01 shall remain in full force and effect notwithstanding
any failure to endorse on each Security a notation of such Subsidiary
Guarantee.
If an officer or Officer whose signature is on this Indenture
or on the Subsidiary Guarantee no longer holds that office at the time the
Trustee authenticates the Security on which a Subsidiary Guarantee is endorsed,
the Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors.
SECTION 11.03. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) Except as set forth in Articles 4 and 5, nothing
contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or shall
prevent any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety, to the Company, unless immediately after giving
effect to such transaction, a Default or Event of Default exists.
(b) Except as set forth in Articles 4 and 5, nothing
contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into a corporation or
corporations other than the Company (whether or not affiliated with the
Guarantor), or successive consolidations or mergers in which a Guarantor or its
successor or successors shall be a party or parties, or shall prevent any sale
or conveyance of the property of a Guarantor as an entirety or substantially as
an entirety, to a corporation other than the Company (whether or not affiliated
with the Guarantor) authorized to acquire and operate the same; provided,
however, (i) that each Guarantor hereby covenants and agrees that, upon any
such consolidation, merger, sale or conveyance, the Subsidiary Guarantee
endorsed on the Notes, and the due and punctual performance and observance of
all of the covenants and conditions of this Indenture to be performed by such
Guarantor, shall be expressly assumed (in the event that the Guarantor is not
the surviving corporation in the merger), by supplemental indenture
satisfactory in form and substance to the Trustee, executed and delivered to
the Trustee, by the corporation formed by such consolidation, or into which the
Guarantor shall have been merged, or by the corporation which shall have
acquired such property and (ii) that immediately after giving effect to such
transaction, no Default or Event of Default exists. In case of any such
consolidation, merger, sale or conveyance and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form and substance to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the
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Guarantor, such successor corporation shall succeed to and be substituted for
the Guarantor with the same effect as if it had been named herein as a
Guarantor. Such successor corporation thereupon may cause to be signed any or
all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable
hereunder which theretofore shall not have been signed by the Company and
delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all
respects have the same legal rank and benefit under this Indenture as the
Subsidiary Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
SECTION 11.04. RELEASES FOLLOWING SALE OF ASSETS.
Concurrently with any Asset Sale (including, if applicable,
all of the capital stock of any Guarantor), any Liens in favor of the Trustee
in the assets sold thereby shall be released; provided that in the event of an
Asset Sale, the Net Proceeds of such sale or other disposition are applied in
accordance with the provisions of Section 4.11 hereof. If the assets sold in
such sale or other disposition include all or substantially all of the assets
of any Guarantor or all of the capital stock of any Guarantor, then such
Guarantor (in the event of a sale or other disposition of all of the capital
stock of such Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all or substantially all of the assets
of a Guarantor) shall be released and relieved of its obligations under its
Subsidiary Guarantee or Section 11.03 hereof, as the case may be; provided that
in the event of an Asset Sale, the Net Proceeds from such sale or other
disposition are treated in accordance with the provisions of Section 4.11
hereof. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of this
Indenture, including without limitation Section 4.11 hereof, the Trustee shall
execute any documents reasonably required in order to evidence the release of
any Guarantor from its obligations under its Subsidiary Guarantee. Any
Guarantor not released from its obligations under its Subsidiary Guarantee
shall remain liable for the full amount of principal of and interest on the
Notes and for the other obligations of any Guarantor under this Indenture as
provided in Article 11.
SECTION 11.05. "TRUSTEE" TO INCLUDE PAYING AGENT.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article 11 shall in such case (unless the context
shall otherwise require) be construed as extending to and including such Paying
Agent within its meaning as fully and for all intents and purposes as if such
Paying Agent were named in this Article 11 in place of the Trustee.
SECTION 11.06. SUBORDINATION OF SUBSIDIARY GUARANTEE.
The obligations of each Guarantor under its Subsidiary
Guarantee pursuant to this Article 11 shall be junior and subordinated to the
Senior Guaranties of such Guarantor on the same basis as the Notes are junior
and subordinated to Senior Debt. For the purposes of the foregoing sentence,
the Trustee and the Holders shall have the right to receive and/or retain
payments by any of the Guarantors only at such times as they may receive and/or
retain payments in respect of the Notes pursuant to this Indenture, including
Article 10 hereof. "Senior Guaranties" shall mean the guaranties of all senior
indebtedness of the Guarantors, including the Guarantors' guarantees of
indebtedness under the New Credit Facility.
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ARTICLE 12
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company:
Exide Electronics Group, Inc.
8609 Six Forks Road
Raleigh, North Carolina 27615
Telecopier No.: 919-870-3100
Attention: Chief Financial Officer
With a copy to:
Smith Helms Mulliss & Moore, L.L.P.
316 West Edenton Street (27603)
P.O. Box 27525
Raleigh, North Carolina 27525
Telecopier No.: (919) 828-7938
Attention: Brad S. Markoff
If to the Trustee:
American Bank National Association
101 East Fifth Street
St. Paul, Minnesota 55101
Telecopier No.: (612) 229-6415
Attention: Corporate Trust Department
The Company or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being ed in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
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Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice or communication shall also be
so mailed to any Person described in TIA Section 313(c), to the extent required
by the TIA. Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS
OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 12.04. 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:
(a) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 11.04 hereof) stating that, in the
opinion of the signers, all conditions precedent and covenants, if
any, provided for in this Indenture relating to the proposed action
have been satisfied; and
(b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 11.04 hereof) stating that, in the
opinion of such counsel, all such conditions precedent and covenants
have been satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of
TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(b) 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;
(c) a statement that, in the opinion of such Person, he
or she has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been satisfied; and
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(d) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been satisfied.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for its functions.
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND STOCKHOLDERS.
No past, present or future director, officer, employee,
incorporator or stockholder of the Company or the Guarantors, as such, shall
have any liability for any obligations of the Company under the Notes, this
Indenture or the Subsidiary Guarantees or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder of Notes
by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver
may not be effective to waive liabilities under the federal securities laws and
it is the view of the SEC that such a waiver is against public policy.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 12.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
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SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table 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 of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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SIGNATURES
Dated as of March 13, 1996 EXIDE ELECTRONICS GROUP, INC.
By: /s/ Marty R. Kittrell
-------------------------------------
Name: Marty R. Kittrell
Title: Chief Financial Officer, Vice
President, Treasurer and
Assistant Secretary
Attest:
/s/ Brad S. Markoff (SEAL)
- ---------------------------------
Dated as of March 13, 1996 AMERICAN BANK NATIONAL ASSOCIATION
Trustee
By: /s/ Frank P. Leslie III
-------------------------------------
Name: Frank P. Leslie III
Title: Vice President
By: /s/ Thomas M. Korsman
-------------------------------------
Name: Thomas M. Korsman
Title: Vice President
(SEAL)
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================================================================================
EXHIBIT A
(Face of Note)
11 1/2% Series A/B Senior Subordinated Notes due 2006
No. $125,000,000
EXIDE ELECTRONICS GROUP, INC.
promises to pay to Cede & Co.
or registered assigns,
the principal sum of ONE HUNDRED TWENTY FIVE MILLION DOLLARS
($125,000,000) on March 15, 2006.
Interest Payment Dates: March 15 and September 15
Record Dates: March 1 and September 1
Dated: March 13, 1996
EXIDE ELECTRONICS GROUP, INC.
By:
--------------------------------------------
Marty R. Kittrell
Chief Financial Officer, Vice President,
Treasurer and Assistant Secretary
By:
--------------------------------------------
Nicholas J. Costanza
Vice President, Chief Administrative Officer,
Chief Legal Counsel and Secretary
(SEAL)
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
AMERICAN BANK NATIONAL ASSOCIATION,
as Trustee
By:
---------------------------------
================================================================================
A-1
<PAGE> 72
11 1/2% Series A/B Senior Subordinated Notes due 2006
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.](1)
THE NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE NOTE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE NOTE EVIDENCED
HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE NOTE EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH NOTE MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (A) TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN OF RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (B) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (C) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (D) 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), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE NOTE
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (1) ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Exide Electronics Group, Inc., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 11 1/2% per annum from March 13, 1996 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages semi-annually on
- ----------------------------------
(1) This paragraph should be included only if the Note is issued in global
form.
A-2
<PAGE> 73
March 15 and September 15 of each year, or if any such day is not a Business
Day, on the next succeeding Business Day (each an "Interest Payment Date").
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of issuance;
provided that if there is no existing Default in the payment of interest, and
if this Note is authenticated between a record date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue
from such next succeeding Interest Payment Date; provided, further, that the
first Interest Payment Date shall be September 15, 1996. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under
any Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of
a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on March 1 or September 1
next preceding the Interest Payment Date, even if such Notes are cancelled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes will be payable as to principal, premium, interest and Liquidated
Damages at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall
have provided wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT AND REGISTRAR. Initially, American Bank National
Association, the Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of March 13, 1996 ("Indenture") among the Company, the Guarantors and 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 (15 U.S. Code Section Section 77aaa-77bbbb) as in effect on
the date of the Indenture. The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. The Notes are obligations of the Company limited to $125.0 million in
aggregate principal amount, plus amounts, if any, issued to pay Liquidated
Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Company shall not have the option to redeem the Notes prior to March 15, 2001.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid
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<PAGE> 74
interest and Liquidated Damages, if any, thereon, to the applicable redemption
date, if redeemed during the twelve-month period beginning on March 15 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.750%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.833%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.917%
2004 and thereafter . . . . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
(b) Any redemption pursuant to this Paragraph 5 shall be
made pursuant to Sections 3.01 to 3.06 of the Indenture.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDERS.
(a) If there is a Change of Control, the Company shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a
purchase price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase (the "Change of Control Payment"). Within ten days following any
Change of Control, the Company shall mail a notice to each Holder setting forth
the procedures governing the Change of Control Offer as required by the
Indenture and Holders of Notes that are subject to an offer to purchase may
elect to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" on the reverse side of the Notes.
(b) If the Company or a Subsidiary consummates any Asset Sale, within
five days of each date on which the aggregate amount of Excess Proceeds exceeds
$5 million, the Company shall commence an offer to all Holders of Notes (as
"Asset Sale Offer") to purchase the maximum principal amount of Notes that may
be purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principle amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon to the date of purchase, in accordance with the
procedures set forth in Section 3.09 of the Indenture. To the extent that the
aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less than
the Excess Proceeds, the Company may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Holders of
Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
A-4
<PAGE> 75
9. SUBORDINATION. The Notes are subordinated in right of payment, to
the extent and in the manner provided in the Indenture, to the prior payment in
full of all Senior Debt (as defined in the Indenture), which includes (i) the
Senior Term Debt, (ii) the Senior Revolving Debt, (iii) Hedging Obligations
relating to Senior Debt and (iv) any other Indebtedness permitted to be
incurred by the Company under the terms of the Indenture, unless the instrument
under which such Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the Notes. Notwithstanding
anything to the contrary in the foregoing, Senior Debt referred to in clause
(iv) above will not include (v) any liability for federal, state, local or
other taxes owed or owing by the Company, (w) any Indebtedness of the Company
to any of its Restricted Subsidiaries or other Affiliates, (x) any trade
payables, (y) any Indebtedness that is incurred in violation of Section 4.09 of
the Indenture or (z) any Indebtedness that is not fully and adequately secured;
provided that any unexpected diminution of the value of any collateral securing
any Senior Debt shall not cause such Indebtedness to cease being fully and
adequately secured for the purpose of this definition. The Company agrees, and
each Holder by accepting a Note consents and agrees, to the subordination
provided in the Indenture and authorizes the Trustee to give it effect.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date
and the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the
consent of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of Notes in
case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default
for 30 days in the payment when due of interest or Liquidated Damages on the
Notes; (ii) default in payment when due of principal of or premium, if any, on
the Notes when the same becomes due and payable; (iii) failure by the Company
to comply with Section 4.07, 4.09, 4.10, 4.14, 4.15 or 5.01 of the Indenture;
(iv) failure by the Company for 60 days after notice to the Company by the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding to comply with any of its other agreements or covenants
in, or provisions of, the Notes or the Indenture; (v) default under certain
other agreements relating to Indebtedness of the Company which default results
in the acceleration of such Indebtedness prior to its express maturity; (vi)
certain final judgments for the payment of money that remain undischarged for a
period of 60 days; (vii) certain events of bankruptcy or insolvency with
respect to the Company or any of its Significant Subsidiaries; and (viii) any
Subsidiary Guarantee shall be held in any judicial proceeding to
A-5
<PAGE> 76
be unenforceable or invalid or shall cease for any reason to be in full force
and effect or any Guarantor, or any Person acting on behalf of any Guarantor,
shall deny or disaffirm its obligations under its Subsidiary Guarantee. If any
Event of Default occurs and is continuing, the Trustee or the Holders of at
least 25% in aggregate principal amount of the then outstanding Notes may
declare all the Notes to be due and payable. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in their interest. The Holders of
a majority in aggregate principal amount of the Notes then outstanding by
notice to the Trustee may on behalf of the Holders of all of the Notes waive
any existing Default or Event of Default and its consequences under the
Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes. The Company is required to
deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept s from, and perform services for
the Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder, of the Company or the
Guarantors, as such, shall have any liability for any obligations of the
Company under the Notes, the Indenture or the Subsidiary Guarantees or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the SEC that such a
waiver is against public policy.
16. SUBSIDIARY GUARANTEES. The Company's payment obligations under
the Notes are jointly and severally unconditionally guaranteed by the
Guarantors. The Subsidiary Guarantees of each Guarantor will be subordinated
to the prior payment in full of all Senior Debt of such Guarantor and the
amounts for which the Guarantors will be liable under the guarantees issued
from time to time with respect to Senior Debt.
17. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder 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).
19. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES.
In addition to the rights provided to Holders of Notes under the Indenture,
Holders of Transferred Restricted Securities shall have all the rights set
forth in the Registration Rights Agreement dated as of March 13, 1996, between
the Company, the Guarantors and the Initial Purchasers (the "Registration
Rights Agreement").
A-6
<PAGE> 77
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 the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. 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.
The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Exide Electronics Group, Inc.
8609 Six Forks Road
Raleigh, North Carolina 27615
Attention: Chief Financial Officer
A-7
<PAGE> 78
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
---------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:
-----------------------
Your Signature:
-------------------------------
(Sign exactly as your name appears on the face
of this Note)
Signature Guarantee.
A-8
<PAGE> 79
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $
-------------------
Date: Your Signature:
--------------------------------
(Sign exactly as your name appears on the Note)
Tax Identification No.:
--------------------
Signature Guarantee.
A-9
<PAGE> 80
SCHEDULE OF EXCHANGES OF CERTIFICATED SECURITIES(2)
The following exchanges of a part of this Global Note for
Certificated Securities have been made:
<TABLE>
<CAPTION>
Principal Amount of
this Global Note Signature of
Amount of decrease Amount of increase following such authorized officer
in Principal Amount in Principal Amount decrease (or of Trustee or Note
Date of Exchange of this Global Note of this Global Note increase) Custodian
---------------- ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
</TABLE>
- --------------------
(2) This should be included only if the Note is issued in global form.
A-10
<PAGE> 81
================================================================================
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES
Re: 11 1/2% Senior Subordinated Notes due 2006 of Exide Electronics Group, Inc.
This Certificate relates to $_____ principal amount of Notes
held in * ________ book-entry or *_______ definitive form by ________________
(the "Transferor").
The Transferor*:
[ ] has requested the Trustee by written order to deliver in
exchange for its beneficial interest in the Global Note held by the Depositary
a Note or Notes in definitive, registered form of authorized denominations in
an aggregate principal amount equal to its beneficial interest in such Global
Note (or the portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or
register the transfer of a Note or Notes.
In connection with such request and in respect of each such
Note, the Transferor does hereby certify that Transferor is familiar with the
Indenture relating to the above captioned Notes and as provided in Section 2.06
of such Indenture, the transfer of this Note does not require registration
under the Securities Act (as defined below) because:*
[ ] Such Note is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture).
[ ] Such Note is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act")) in reliance on Rule 144A (in satisfaction of Section
2.06(a)(ii)(B), Section 2.06(b)(A) or Section 2.06(d)(i)(B) of the Indenture)
or pursuant to an exemption from registration in accordance with Rule 904 under
the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture.)
- -----------------
*Check applicable box.
B-1
<PAGE> 82
[ ] Such Note is being transferred in accordance with Rule 144
under the Securities Act, or pursuant to an effective registration statement
under the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture).
[ ] Such Note is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the
Securities Act, other than Rule 144A, 144 or Rule 904 under the Securities Act.
An Opinion of Counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate (in
satisfaction of Section 2.06(a)(ii)(C) or Section 2.06(d)(i)(C) of the
Indenture).
------------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
---------------------------------------
Date:
-------------------------------
- -----------------
*Check applicable box.
B-2
<PAGE> 83
EXHIBIT C
FORM OF NOTATION ON NOTE
RELATING TO SUBSIDIARY GUARANTEE
SUBSIDIARY GUARANTEE
Exide Electronics Group, Inc., a Delaware corporation, and
each of the corporations listed on Schedule I hereto (hereinafter referred to
as the "Guarantors", which term includes any successor or additional Guarantor
under the Indenture (the "Indenture") referred to in the Note upon which this
notation is endorsed), (i) has unconditionally guaranteed (a) the due and
punctual payment of the principal of and interest on the Notes, whether at
maturity or interest payment date, by acceleration, call for redemption or
otherwise, (b) the due and punctual payment of interest on the overdue
principal of and (if lawful) interest on the Notes, (c) the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee, all in accordance with the terms set forth in the Indenture, and (d)
in case of any extension of time of payment or renewal of any Notes or any of
such other obligations, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise and (ii) has agreed to pay any
and all costs and expenses (including reasonable attorneys' fees) incurred by
the Trustee or any Holder in enforcing any rights under this Subsidiary
Guarantee. Capitalized terms used herein have the meanings assigned to them in
the Indenture unless otherwise indicated.
No stockholder, officer, director or incorporator, as such,
past, present or future, of the Guarantors shall have any personal liability
under this Subsidiary Guarantee by reason of his or its status as such
stockholder, officer, director or incorporator.
This Subsidiary Guarantee shall be binding upon each Guarantor
and its successors and assigns and shall inure to the benefit of the successors
and assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This Subsidiary Guarantee shall not be valid or obligatory for
any purpose until the certificate of authentication on the Security upon which
this Subsidiary Guarantee is noted shall have been executed by the Trustee
under the Indenture by the manual signature of one of its authorized officers.
The obligations of the Guarantors to the Holders of Notes and
to the Trustee pursuant to the Subsidiary Guarantee and the Indenture are
expressly subordinated to the extent set forth in Article 10 of the Indenture
and reference is hereby made to such Indenture for the precise terms of such
subordination.
[Name of Guarantor]
[On behalf of each of the Guarantors
listed on Schedule I]
By:
-----------------------------------
Name:
Title:
C-1
<PAGE> 84
SCHEDULE I
List of Guarantors
Exide Electronics Corporation
Exide Electronics International Corp.
International Power Machines Corporation
Lectro Products, Inc.
Deltec Power Systems, Inc.
DataTrax Acquisition Corporation
Exide Electronics USA Holdings Corp.
Deltec Electronics Corp.
Lortec Power Systems, Inc.
[any other Subsidiary that executes a Subsidiary Guarantee in accordance with
provisions of this Indenture, and their respective successors and assigns]
C-2
<PAGE> 1
EXHIBIT 4.3
EXECUTION COPY
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of March 13, 1996
by and among
EXIDE ELECTRONICS GROUP, INC.,
EXIDE ELECTRONICS CORPORATION,
EXIDE ELECTRONICS INTERNATIONAL CORP.,
INTERNATIONAL POWER MACHINES CORPORATION,
LECTRO PRODUCTS, INC.,
DELTEC POWER SYSTEMS, INC.,
DATATRAX ACQUISITION CORP.,
EXIDE ELECTRONICS USA HOLDINGS CORP.,
DELTEC ELECTRONICS CORP.,
LORTEC POWER SYSTEMS, INC.,
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
J.P. MORGAN SECURITIES INC. and
NATIONSBANC CAPITAL MARKETS, INC.
================================================================================
<PAGE> 2
This Registration Rights Agreement (this "Agreement") is made
and entered into as of March 13, 1996, by and among Exide Electronics Group,
Inc., a Delaware corporation (the "Company"), Exide Electronics Corporation, a
Delaware corporation, Exide Electronics International Corp., a Delaware
corporation, International Power Machines Corporation, a Delaware corporation,
Lectro Products, Inc., a Delaware corporation, Deltec Power Systems, Inc., a
Wisconsin corporation ("Deltec"), DataTrax Acquisition Corporation, a Delaware
corporation, Exide Electronics USA Holdings Corp., a Delaware corporation,
Deltec Electronics Corp., a California corporation and LorTec Power Systems,
Inc., an Ohio corporation, as guarantors (each, a "Guarantor" and collectively,
the "Guarantors") and Donaldson, Lufkin & Jenrette Securities Corporation, J.P.
Morgan Securities Inc. and NationsBanc Capital Markets, Inc. (each an "Initial
Purchaser" and together, the "Initial Purchasers"), who have agreed to purchase
in the aggregate 125,000 Units (the "Units") consisting of $125,000,000
principal amount of the Company's 11 1/2% Series A Senior Subordinated Notes
due 2006 (the "Series A Notes") and warrants (the "Warrants") to purchase up to
an aggregate of 643,750 shares of Common Stock of the Company pursuant to the
Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement,
dated March 7, 1996 (the "Purchase Agreement"), by and among the Company, the
Guarantors and the Initial Purchasers. In order to induce the Initial
Purchasers to purchase the Series A Notes, the Company and the Guarantors have
agreed to provide the registration rights set forth in this Agreement. The
execution and delivery of this Agreement is a condition to the obligations of
the Initial Purchasers set forth in Section 10 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the
Exchange Act.
Broker-Dealer Transfer Restricted Securities: Series B Notes
that are acquired by a Broker-Dealer in the Exchange Offer in exchange for
Series A Notes that such Broker-Dealer acquired for its own account as a result
of market making activities or other trading activities (other than Series A
Notes acquired directly from the Company or any of its affiliates).
Business Day: Any day except a Saturday, Sunday or other day
in the City of New York, or in the city of the corporate trust office of the
Trustee, on which banks are authorized to close.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer
1
<PAGE> 3
Registration Statement relating to the Series B Notes to be issued in the
Exchange Offer, (b) the maintenance of such Exchange Offer Registration
Statement continuously effective and the keeping of the Exchange Offer open for
a period not less than the minimum period required pursuant to Section 3(b)
hereof and (c) the delivery by the Company to the Registrar under the Indenture
of Series B Notes in the same aggregate principal amount as the aggregate
principal amount of Series A Notes tendered by Holders thereof pursuant to the
Exchange Offer.
Damages Payment Date: With respect to the Series A Notes,
each Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as
amended.
Exchange Offer: The registration by the Company under the Act
of the Series B Notes pursuant to the Exchange Offer Registration Statement
pursuant to which the Company shall offer the Holders of all outstanding
Transfer Restricted Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities for Series B Notes in an aggregate principal
amount equal to the aggregate principal amount of the Transfer Restricted
Securities tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration
Statement relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial
Purchasers propose to sell the Series A Notes to certain "qualified
institutional buyers," as such term is defined in Rule 144A under the Act, and
to certain institutional "accredited investors," as such term is defined in
Rule 501(a)(1), (2), (3) and (7) of Regulation D under the Act.
Holders: As defined in Section 2 hereof.
Indenture: The Indenture, dated the Closing Date, between the
Company, the Guarantors and American Bank National Association, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture is
amended or supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the
Notes.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Offering Memorandum: The final offering memorandum, dated
March 7, 1996, relating to the Company and Units consisting of the Series A
Notes and Warrants to purchase Common Stock of the Company.
Person: An individual, partnership, corporation, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
2
<PAGE> 4
Preliminary Offering Memorandum: The preliminary offering
memorandum, dated February 15, 1996, relating to the Company and Units
consisting of the Series A Notes and Warrants to purchase Common Stock of the
Company.
Prospectus: The prospectus included in a Registration
Statement at the time such Registration Statement is declared effective, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the
Company relating to (a) an offering of Series B Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) which is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including post-
effective amendments) and all exhibits and material incorporated by reference
therein.
Restricted Broker-Dealer: Any Broker-Dealer which holds
Broker-Dealer Transfer Restricted Securities.
Series B Notes: The Company's 11 1/2% Series B Senior
Subordinated Notes due 2006 to be issued pursuant to the Indenture (i) in the
Exchange Offer or (ii) upon the request of any Holder of Series A Notes covered
by a Shelf Registration Statement, in exchange for such Series A Notes.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb), as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note until the earliest
to occur of (i) the date on which such Note is exchanged by a person other than
a Broker-Dealer for a Note in the Exchange Offer, (ii) following the exchange
by a Broker-Dealer in the Exchange Offer of a Note for a Series B Note, the
date on which such Series B Note is sold to a purchaser who receives from such
Broker-Dealer on or prior to the date of such sale a copy of the prospectus
contained in the Exchange Offer Registration Statement, (iii) the date on which
such Note is effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Note is distributed to the public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted
Securities (each, a "Holder") whenever such Person owns Transfer Restricted
Securities.
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SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by
applicable federal law (after the procedures set forth in Section 6(a)(i) below
have been complied with), the Company and the Guarantors shall (i) cause to be
filed with the Commission as soon as practicable after the Closing Date, but in
no event later than 30 days after the Closing Date, the Exchange Offer
Registration Statement, (ii) use its best efforts to cause such Exchange Offer
Registration Statement to become effective at the earliest possible time, but
in no event later than 120 days after the Closing Date, (iii) in connection
with the foregoing, (A) file all pre-effective amendments to such Exchange
Offer Registration Statement as may be necessary in order to cause such
Exchange Offer Registration Statement to become effective, (B) file, if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act and (C) cause all necessary
filings, if any, in connection with the registration and qualification of the
Series B Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting registration of the Series B Notes to be offered in exchange
for the Series A Notes that are Transfer Restricted Securities and to permit
sales of Broker-Dealer Transfer-Restricted Securities by Restricted
Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the
Exchange Offer open, for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; provided, however, that in no event shall such period be less than 20
Business Days. The Company shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the
Notes shall be included in the Exchange Offer Registration Statement. The
Company shall use its best efforts to cause the Exchange Offer to be
Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
Business Days thereafter.
(c) The Company shall include a "Plan of Distribution"
section in the Prospectus contained in the Exchange Offer Registration
Statement and indicate therein that any Restricted Broker-Dealer who holds
Series A Notes that are Transfer Restricted Securities and that were acquired
for the account of such Broker-Dealer as a result of market-making activities
or other trading activities, may exchange such Series A Notes (other than
Transfer Restricted Securities acquired directly from the Company) pursuant to
the Exchange Offer; however, such Broker-Dealer may be deemed to be an
"underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of each Series B Note received by such Broker-Dealer in the Exchange
Offer, which prospectus delivery requirement may be satisfied by the delivery
by such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also contain
all other information with respect to such sales of Broker-Dealer Transfer
Restricted Securities by Restricted Broker-Dealers that the Commission may
require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Notes held by any such Broker-Dealer except to the extent required by the
Commission as a result of a change in policy after the date of this Agreement.
The Company shall use its best efforts to keep the Exchange
Offer Registration Statement continuously effective, supplemented and amended
as required by the provisions of Section 6(c) below to
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the extent necessary to ensure that it is available for sales of Broker-Dealer
Transfer Restricted Securities by Restricted Broker-Dealers, and to ensure that
such Registration Statement conforms with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as announced
from time to time, for a period of 365 days from the date on which the Exchange
Offer Registration Statement is declared effective.
The Company shall promptly provide sufficient copies of the
latest version of such Prospectus to such Restricted Broker-Dealers upon
request at any time during such 365-day period in order to facilitate such
sales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not
required to file the Exchange Offer Registration Statement with respect to the
Series B Notes or permitted to Consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or Commission policy (after
the procedures set forth in Section 6(a)(i) below have been complied with) or
(ii) any Holder of Transfer Restricted Securities notifies the Company within
20 Business Days following the Consummation of the Exchange Offer that (A) such
Holder is prohibited by law or Commission policy from participating in the
Exchange Offer or (B) such Holder may not resell the Series B Notes acquired by
it in the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such Holder is
a Broker-Dealer and holds Series A Notes acquired directly from the Company or
an affiliate of the Company, then the Company and the Guarantors shall:
(x) cause to be filed on or prior to (1) in the
case of a Registration Statement filed pursuant to clause (i) above,
30 days after the date on which the Company determines that it is not
required to file the Exchange Offer Registration Statement and (2) in
the case of a Registration Statement filed pursuant to clause (ii)
above, 30 days after the date on which the Company receives the notice
specified in clause (ii) above (and in any event, within 150 days after
the Closing Date), a shelf registration statement pursuant to Rule 415
under the Act, (which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration
Statement")), relating to all Transfer Restricted Securities the
Holders of which shall have provided the information required pursuant
to Section 4(b) hereof, and
(y) use their best efforts to cause such Shelf
Registration Statement to become effective on or prior to (1) in the
case of a Registration Statement filed pursuant to clause (i) above,
90 days after the date on which the Company becomes obligated to file
such Shelf Registration Statement and (2) in the case of a
Registration Statement filed pursuant to clause (ii) above, 90 days
after the date on which the Company receives the notice specified in
clause (ii) above (and in any event, within 240 days after the Closing
Date). If, after the Company has filed an Exchange Offer Registration
Statement which satisfies the requirements of Section 3(a) above, the
Company is required to file and make effective a Shelf Registration
Statement solely because the Exchange Offer is not permitted under
applicable federal law, then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of
clause (x) above. Such an event shall have no effect on the
requirements of this clause (y), or on the Effectiveness Target Date
as defined in Section 5 below.
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<PAGE> 7
The Company and the Guarantors shall use their best efforts to keep the Shelf
Registration Statement discussed in this Section 4(a) continuously effective,
supplemented and amended as required by the provisions of Sections 6(b) and (c)
hereof to the extent necessary to ensure that it is available for sales of
Transfer Restricted Securities by the Holders thereof entitled to the benefit
of this Section 4(a), and to ensure that it conforms with the requirements of
this Agreement, the Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of at least three years
following the Closing Date.
(b) Provision by Holders of Certain Information in
Connection with the Shelf Registration Statement. No Holder of Transfer
Restricted Securities may include any of its Transfer Restricted Securities in
any Shelf Registration Statement pursuant to this Agreement unless and until
such Holder furnishes to the Company in writing, within 20 Business Days after
receipt of a request therefor, such information specified in item 507 of
Regulation S-K under the Act for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. No Holder
of Transfer Restricted Securities shall be entitled to Liquidated Damages
pursuant to Section 5 hereof unless and until such Holder shall have used its
best efforts to provide all such information. Each Holder as to which any
Shelf Registration Statement is being effected agrees to furnish promptly to
the Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) the Company fails to file any of the Registration
Statements required by this Agreement on or before the date specified for such
filing in this Agreement, (ii) any of such Registration Statements is not
declared effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (iii) the Company fails to
Consummate the Exchange Offer within 30 Business Days of the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement or (iv)
the Shelf Registration Statement or the Exchange Offer Registration Statement
is declared effective but thereafter ceases to be effective or usable in
connection with resales of Transfer Restricted Securities during the periods
specified in this Agreement without being succeeded within five Business Days
by a post effective amendment to such Registration Statement that cures such
failure and that is itself declared effective within such five Business Day
period (each such event referred to in clauses (i) through (iv) above, a
"Registration Default"), then commencing on the day following the date on which
such Registration Default occurs, the Company and the Guarantors hereby jointly
and severally agree to pay to each Holder of Transfer Restricted Securities,
for the first 90-day period immediately following the occurrence of such
Registration Default, liquidated damages in an amount equal to $.05 per week
per $1,000 principal amount of Series A Notes constituting Transfer Restricted
Securities held by such Holder for each week or pro rata for a portion of each
week thereof that the Registration Default continues. The amount of liquidated
damages payable to each Holder shall increase by an additional $.05 per week
per $1,000 principal amount of Series A Notes constituting Transfer Restricted
Securities held by such Holder for each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum of $.50 per week per
$1,000 principal amount of Series A Notes constituting Transfer Restricted
Securities held by such Holder. All accrued liquidated damages shall be paid
to the Global Note Holder by wire transfer of immediately available funds or by
federal funds check and to Holders of Certificated Securities (as defined in
the Indenture) by mailing checks to their registered addresses by the Company
and the
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<PAGE> 8
Guarantors on each Damages Payment Date. All obligations of the Company and
the Guarantors set forth in the preceding paragraph that are outstanding with
respect to any Transfer Restricted Security at the time such security ceases to
be a Transfer Restricted Security shall survive until such time as all such
obligations with respect to such security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection
with the Exchange Offer, the Company and the Guarantors shall comply with all
applicable provisions of Section 6(c) below, shall use their best efforts to
effect such exchange and to permit the sale of Broker-Dealer Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof, and shall comply with all of the following
provisions:
(i) If, following the date hereof there has been
published a change in applicable law or Commission policy with respect
to exchange offers such as the Exchange Offer, such that in the
reasonable opinion of counsel to the Company there is a substantial
question as to whether the Exchange Offer is permitted by applicable
federal law, the Company and the Guarantors hereby agree to seek a
no-action letter or other favorable decision from the Commission
allowing the Company and the Guarantors to Consummate an Exchange
Offer for such Series A Notes. The Company and the Guarantors hereby
agree to pursue the issuance of such a decision to the Commission
staff level. In connection with the foregoing, the Company and the
Guarantors hereby agree to take all such other reasonable actions as
are requested by the Commission or otherwise required in connection
with the issuance of such decision, including without limitation (A)
participating in telephonic conferences with the Commission, (B)
delivering to the Commission staff an analysis prepared by counsel to
the Company setting forth the legal bases, if any, upon which such
counsel has concluded that such an Exchange Offer should be permitted
and (C) diligently pursuing a resolution by the Commission staff of
such submission.
(ii) As a condition to its participation in the
Exchange Offer pursuant to the terms of this Agreement, each Holder of
Transfer Restricted Securities shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement)
to the effect that (A) it is not an affiliate of the Company, (B) it
is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Series B Notes to be issued in the Exchange Offer
and (C) it is acquiring the Series B Notes in its ordinary course of
business. Each Holder hereby acknowledges and agrees that any
Broker-Dealer and any such Holder using the Exchange Offer to
participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on
the date of this Agreement rely on the position of the Commission
enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991)
and Exxon Capital Holdings Corporation (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling dated
July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i)
above), and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary 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
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<PAGE> 9
508, as applicable, of Regulation S-K if the resales are of Series B
Notes obtained by such Holder in exchange for Series A Notes acquired
by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company and the Guarantors shall provide a
supplemental letter to the Commission (A) stating that the Company and
the Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) and, if applicable, any no-action letter
obtained pursuant to clause (i) above, (B) including a representation
that neither the Company nor any of the Guarantors has entered into any
arrangement or understanding with any Person to distribute the Series B
Notes to be received in the Exchange Offer and that, to the best of the
Company's and the Guarantors' information and belief, each Holder
participating in the Exchange Offer is acquiring the Series B Notes in
its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Series B
Notes received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above.
(b) Shelf Registration Statement. In connection with the
Shelf Registration Statement the Company and the Guarantors shall comply with
all the provisions of Section 6(c) below and shall use their best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 4(b) hereof), and pursuant thereto the Company will prepare
and file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution thereof within the time periods
and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any
Registration Statement and any related Prospectus required by this Agreement to
permit the sale or resale of Transfer Restricted Securities (including, without
limitation, any Exchange Offer Registration Statement and the related
Prospectus, to the extent that the same are required to be available to permit
sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers), the Company shall:
(i) use its best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements (including, if required by the Act or any regulation
thereunder, financial statements of the Guarantors) for the period
specified in Section 3 or 4 of this Agreement, as applicable. Upon
the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and
usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the Company shall file promptly an
appropriate amendment to such Registration Statement, (1) in the case
of clause (A), correcting any such misstatement or omission, and (2)
in the case of either clause (A) or (B), use its best efforts to cause
such amendment to be declared effective and such Registration
Statement and the related Prospectus to become usable for their
intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such
amendments and post-effective amendments to the Registration Statement
as may be necessary to keep the Registration Statement
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<PAGE> 10
effective for the applicable period set forth in Section 3 or 4
hereof, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been
sold; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act, and to comply fully with Rules 424 and 430A,
as applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling
Holders promptly and, if requested by such Persons, confirm such
advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to any Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments
or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement under
the Act or of the suspension by any state securities commission of the
qualification of the Transfer Restricted Securities for offering or
sale in any jurisdiction, or the initiation of any proceeding for any
of the preceding purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact
made in the Registration Statement, the Prospectus, any amendment or
supplement thereto or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an
order suspending the qualification or exemption from qualification of
the Transfer Restricted Securities under state securities or Blue Sky
laws, the Company shall use its best efforts to obtain the withdrawal
or lifting of such order at the earliest possible time;
(iv) furnish to each selling Holder named in any
Registration Statement or Prospectus and each of the underwriter(s) in
connection with such sale, if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included
therein or any amendments or supplements to any such Registration
Statement or Prospectus (including all documents incorporated by
reference after the initial filing of such Registration Statement),
which documents will be subject to the review and comment of such
Holders and underwriter(s) in connection with such sale, if any, for a
period of at least five Business Days, and the Company will not file
any such Registration Statement or Prospectus or any amendment or
supplement to any such Registration Statement or Prospectus (including
all such documents incorporated by reference) to which the selling
Holders of the Transfer Restricted Securities covered by such
Registration Statement or the underwriter(s) in connection with such
sale, if any, shall reasonably object within five Business Days after
the receipt thereof. A selling Holder or underwriter, if any, shall
be deemed to have reasonably objected to such filing if such
Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement
or omission or fails to comply with the applicable requirements of the
Act;
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(v) promptly prior to the filing of any document
that is to be incorporated by reference into a Registration Statement
or Prospectus, provide copies of such document to the selling Holders
and to the underwriter(s) in connection with such sale, if any, make
the Company's representatives (and representatives of the Guarantors)
available for discussion of such document and other customary due
diligence matters, and include such information in such document prior
to the filing thereof as such selling Holders or underwriter(s), if
any, reasonably may request;
(vi) make available at reasonable times for
inspection by the selling Holders, any underwriter participating in
any disposition pursuant to such Registration Statement and any
attorney or accountant retained by such selling Holders or any of such
underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and the Guarantors and cause
the Company's and the Guarantors' officers, directors and employees to
supply all information reasonably requested by any such Holder,
underwriter, attorney or accountant in connection with such
Registration Statement or any post-effective amendment thereto
subsequent to the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the
underwriter(s) in connection with such sale, if any, promptly include
in any Registration Statement or Prospectus, pursuant to a supplement
or post-effective amendment if necessary, such information as such
selling Holders and underwriter(s), if any, may reasonably request to
have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to such underwriter(s), the
purchase price being paid therefor and any other terms of the offering
of the Transfer Restricted Securities to be sold in such offering; and
make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement
or post-effective amendment;
(viii) cause the Transfer Restricted Securities
covered by the Registration Statement to be rated with the appropriate
rating agencies, if so requested by the Holders of a majority in
aggregate principal amount of Notes covered thereby or the
underwriter(s), if any;
(ix) furnish to each selling Holder and each of the
underwriter(s) in connection with such sale, if any, without charge,
at least one copy of the Registration Statement, as first filed with
the Commission, and of each amendment thereto, including all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as such Persons reasonably may request; the
Company and the Guarantors hereby consent to the use of the Prospectus
and any amendment or supplement thereto by each of the selling Holders
and each of the underwriter(s), if any, in connection with the
offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;
(xi) enter into, and cause the Guarantors to enter
into, such agreements (including, unless not required pursuant to
Section 10 hereof, an underwriting agreement) and make, and cause the
Guarantors to make, such representations and warranties and take all
such other actions
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<PAGE> 12
in connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder of Transfer Restricted Securities
or underwriter in connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement, and in such
connection, whether or not an underwriting agreement is entered into
and whether or not the registration is an Underwritten Registration,
the Company and the Guarantors shall:
(A) furnish to each Initial Purchaser, each selling
Holder and each underwriter, if any, in such substance and
scope as they may request and as are customarily made by
issuers to underwriters in primary underwritten offerings,
upon the date of Consummation of the Exchange Offer and, if
applicable, the effectiveness of the Shelf Registration
Statement and to each Restricted Broker-Dealer upon
Consummation of the Exchange Offer:
(1) a certificate, dated the date of
effectiveness of the Shelf Registration Statement or
the date of Consummation of the Exchange Offer, as
the case may be, signed by (x) the President or any
Vice President and (y) a principal financial or
accounting officer of each of the Company and the
Guarantors, confirming, as of the date thereof, the
matters set forth in paragraphs (a), (c) and (d) of
Section 10 of the Purchase Agreement and such other
matters as the Holders and/or underwriter(s) may
reasonably request;
(2) an opinion, dated the date of
effectiveness of the Shelf Registration Statement or
the date of Consummation of the Exchange Offer, as
the case may be, of counsel for the Company and the
Guarantors, covering (i) due authorization and
enforceability of the Notes, (ii) a statement to the
effect that such counsel has participated in
conferences with officers and other representatives
of the Company and the Guarantors and representatives
of the independent public accountants for the Company
and the Guarantors and have considered the matters
required to be stated therein and the statements
contained therein, although such counsel has not
independently verified the accuracy, completeness or
fairness of such statements; and that such counsel
advises that, on the basis of the foregoing (relying
as to materiality to a large extent upon facts
provided to such counsel by officers and other
representatives of the Company and the Guarantors and
without independent check or verification), no facts
came to such counsel's attention that caused such
counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or
any post-effective amendment thereto became
effective, and, in the case of the Exchange Offer
Registration Statement, as of the date of
Consummation, contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading, or that the
Prospectus contained in such Registration Statement
as of its date and, in the case of the opinion dated
the date of Consummation of the Exchange Offer, as of
the date of Consummation, contained an untrue
statement of a material fact or omitted to state a
material fact necessary in order to make the
statements therein, in light of the circumstances
under which they were made, not misleading and (iii)
such other matters of the type customarily covered in
opinions of counsel for an issuer in connection with
similar
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securities offerings, as may reasonably be requested
by such parties. Without limiting the foregoing,
such counsel may state further that such counsel
assumes no responsibility for, and has not
independently verified, the accuracy, completeness or
fairness of the financial statements, notes and
schedules and other financial, statistical and
accounting data included in any Registration
Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated as of
the date of effectiveness of the Shelf Registration
Statement or the date of Consummation of the Exchange
Offer, as the case may be, from the Company's and the
Guarantors' independent accountants, in the customary
form and covering matters of the type customarily
covered in comfort letters to underwriters in
connection with primary underwritten offerings, and
affirming the matters set forth in the comfort
letters delivered pursuant to Section 10(h) of the
Purchase Agreement, without exception;
(B) set forth in full or incorporate by reference in
the underwriting agreement, if any, in connection with any
sale or resale pursuant to any Shelf Registration Statement
the indemnification provisions and procedures of Section 8
hereof with respect to all parties to be indemnified pursuant
to said Section 8; and
(C) deliver such other documents and certificates as
may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Company or any of the Guarantors
pursuant to this clause (xi), if any.
The above shall be done at each closing under such
underwriting or similar agreement, as and to the extent required
thereunder, and if at any time the representations and warranties of
the Company and the Guarantors contemplated in (A)(1) above cease to
be true and correct, the Company and the Guarantors shall so advise
the underwriter(s), if any, and selling Holders promptly and if
requested by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer
Restricted Securities, cooperate with, and cause the Guarantors to
cooperate with, the selling Holders, the underwriter(s), if any, and
their respective counsel in connection with the registration and
qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the selling
Holders or underwriter(s), if any, may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided, however, that neither
the Company nor any of the Guarantors shall be required to register or
qualify as a foreign corporation where they are not now so qualified
or to take any action that would subject them to the service of
process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any
jurisdiction where they are not now so subject;
(xiii) issue, upon the request of any Holder of
Series A Notes covered by any Shelf Registration Statement
contemplated by this Agreement, Series B Notes, having an aggregate
principal amount equal to the aggregate principal amount of Series A
Notes surrendered to the Company by such Holder in exchange therefor
or being sold by such Holder; such Series B Notes
12
<PAGE> 14
to be registered in the name of such Holder or in the name of the
purchaser(s) of such Notes, as the case may be; in return, the Series
A Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiv) in connection with any sale of Transfer
Restricted Securities that will result in such securities no longer
being Transfer Restricted Securities, cooperate with, and cause the
Guarantors to cooperate with, the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities
to be sold and not bearing any restrictive legends; and to register
such Transfer Restricted Securities in such denominations and such
names as the Holders or the underwriter(s), if any, may request at
least two Business Days prior to such sale of Transfer Restricted
Securities;
(xv) use its best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers
thereof or the underwriter(s), if any, to consummate the disposition
of such Transfer Restricted Securities, subject to the proviso
contained in clause (xii) above;
(xvi) if any fact or event contemplated by Section
6(c)(iii)(D) above shall exist or have occurred, prepare a supplement
or post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(xvii) provide a CUSIP number for all Transfer
Restricted Securities not later than the effective date of a
Registration Statement covering such Transfer Restricted Securities
and provide the Trustee under the Indenture with printed certificates
for the Transfer Restricted Securities which are in a form eligible
for deposit with the Depository Trust Company;
(xviii) cooperate and assist in any filings required
to be made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the
rules and regulations of the NASD, and use its best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary
to enable the Holders selling Transfer Restricted Securities to
consummate the disposition of such Transfer Restricted Securities;
(xix) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term
is defined in paragraph (c) of Rule 158 under the Act);
13
<PAGE> 15
(xx) cause the Indenture to be qualified under the
TIA not later than the effective date of the first Registration
Statement required by this Agreement, and, in connection therewith,
cooperate, and cause the Guarantors to cooperate, with the Trustee and
the Holders of Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the
terms of the TIA; and execute, and cause the Guarantors to execute,
and use its best efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner;
(xxi) cause all Transfer Restricted Securities
covered by the Registration Statement to be listed on each securities
exchange on which similar securities issued by the Company are then
listed if requested by the Holders of a majority in aggregate
principal amount of Series A Notes or the managing underwriter(s), if
any; and
(xxii) provide promptly to each Holder upon request
each document filed with the Commission pursuant to the requirements
of Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by
acquisition of a Transfer Restricted Security that, upon receipt of any notice
from the Company of the existence of any fact of the kind described in Section
6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is
advised in writing (the "Advice") by the Company that the use of the Prospectus
may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus. If so directed
by the Company, each Holder will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of such notice. In the event the Company
shall give any such notice, the time period regarding the effectiveness of such
Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall
be extended by the number of days during the period from and including the date
of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and
including the date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the
Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's or the
Guarantors' performance of or compliance with this Agreement will be borne by
the Company or the Guarantors, regardless of whether a Registration Statement
becomes effective, including without limitation: (i) all registration and
filing fees and expenses (including filings made with the NASD (including, if
applicable, the fees and expenses of any "qualified independent underwriter"
and its counsel, as may be required by the rules and regulations of the NASD));
(ii) all fees and expenses of compliance with federal securities and state Blue
Sky or securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Notes and printing of Prospectuses), messenger
and delivery services and telephone; (iv) all fees and disbursements of counsel
for the Company, the Guarantors and, in accordance with Section 7(b) below, the
Holders of Transfer Restricted Securities; (v) all application and filing fees
in connection with listing the Notes on a national
14
<PAGE> 16
exchange or automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants of
the Company and the Guarantors (including the expenses of any special audit and
comfort letters required by or incident to such performance).
The Company will, in any event, bear its and the Guarantors'
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company.
(b) In connection with any Registration Statement
required by this Agreement, the Company will reimburse the Holders of Transfer
Restricted Securities being tendered in the Exchange Offer and/or resold
pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel chosen by the Holders of a majority in principal amount of the
Transfer Restricted Securities for whose benefit such Registration Statement is
being prepared.
SECTION 8. INDEMNIFICATION
The Company and the Guarantors, jointly and severally, agree
to indemnify and hold harmless the Holders and each person, if any, who
controls the Holders within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and judgments caused by any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendment or supplement thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except (i) insofar as
such losses, claims, damages, liabilities or judgments arise out of or are
based upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company or the Guarantors by or on behalf of such
Holder expressly for use therein and (ii) the right of any Holder to be
indemnified and held harmless under this Section 8 with respect to a
preliminary Prospectus shall not inure to the benefit of any Holder from whom
the person asserting any such loss, claim, damage or liability purchased
Transfer Restricted Securities (or any person who controls such Holder within
the meaning of the Act) if (A) the Prospectus (as then amended or supplemented
if the Company or any of the Guarantors shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Holder to
such person (if required by law so to have been delivered) at or prior to the
written confirmation of the sale of Transfer Restricted Securities to such
person and (B) the Prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, claim, damage or liability, provided that
the application of this clause (ii) shall be conditioned upon proof, sustained
by the Company or any of the Guarantors, that the Prospectus (as so amended or
supplemented) was not so sent or given by or on behalf of such Holder.
(a) In case any action shall be brought against the
Holders or any person controlling the Holders, based upon the Registration
Statement or the Prospectus or any amendment or supplement thereto and with
respect to which indemnity may be sought against the Company or any Guarantor,
the Holders shall promptly notify the Company or such Guarantor in writing and
the Company or such Guarantor shall assume the defense thereof, including the
employment of counsel reasonably satisfactory
15
<PAGE> 17
to such indemnified party and payment of all fees and expenses. The Holders or
any such controlling person shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the Holders or such
controlling person unless (i) the employment of such counsel shall have been
specifically authorized in writing by the Company or such Guarantor, (ii) the
Company or such Guarantor shall have failed to assume the defense and employ
counsel or (iii) the named parties to any such action (including any impleaded
parties) include both the Holders or such controlling person and the Company or
such Guarantor and the Holders or such controlling person shall have been
advised in writing by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to
the Company or such Guarantor (in which case the Company or such Guarantor
shall not have the right to assume the defense of such action on behalf of the
Holders or such controlling person, it being understood, however, that the
Company or such Guarantor shall not, in connection with such action or similar
or related actions arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for the Holders and all
such controlling persons and that all such fees and expenses shall be
reimbursed as they are incurred). Neither the Company nor any Guarantor shall
be liable for any settlement of any such action effected without its written
consent but if settled with its written consent, the Company or such Guarantor
agrees to indemnify and hold harmless the Holders and any such controlling
person from and against any loss or liability by reason of such settlement.
Notwithstanding the immediately preceding sentence, if in any case where the
fees and expenses of counsel are at the expense of the indemnifying party and
an indemnified party shall have requested the indemnifying party to reimburse
the indemnified party for such fees and expenses of counsel as incurred, such
indemnifying party agrees that it shall be liable for any settlement of any
action effected without its written consent if (i) such settlement is entered
into more than ten business days after the receipt by such indemnifying party
of the aforesaid request and (ii) such indemnifying party shall have failed to
reimburse the indemnified party in accordance with such request for
reimbursement prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(b) The Holders agree, severally and not jointly, to
indemnify and hold harmless the Company, the Guarantors, their directors, their
officers and any person controlling the Company or the Guarantors, 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 and the
Guarantors to the Holders, but only with respect to information relating to the
Holders furnished in writing to the Company by the Holders expressly for use in
the Registration Statement or the Prospectus. In case any action shall be
brought against the Company, the Guarantors, any of their directors, any such
officer or any person controlling the Company or the Guarantors based on the
Registration Statement and the Prospectus and in respect of which indemnity may
be sought against the Holders, the Holders shall have the rights and duties
given to the Company and the Guarantors (except that the Holders may but shall
not be required to assume the defense thereof), and the Company, the
Guarantors, any of their directors, any such officers and any person
controlling the Company or the Guarantors shall have the rights and duties
given to the Holders, by Section 8(a) hereof.
(c) If the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each
16
<PAGE> 18
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors on the one hand from the offering of the Series A
Notes and any such Holder from its sale of the Series A Notes on the other hand
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Guarantors and the Holders in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Guarantors and the Holders shall be deemed to be in the same proportion as the
total proceeds from the offering of the Series A Notes (before deducting
expenses) received by the Company and the Guarantors, and the total proceeds
received by such Holder upon its sale of the Series A Notes, respectively. The
relative fault of the Company, the Guarantors and the Holders shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company, the Guarantors or the Holders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Guarantors, and the Holders agree that it
would not be just and equitable if contribution pursuant to this Section 8(c)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, the Holders shall not be required to contribute any amount in excess
of the amount received by such Holder with respect to the sale of its Notes
which exceeds the sum of (A) the amount paid by such Holder for such Notes plus
(B) the amount of any damages which such Holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Holders' obligations to contribute pursuant to this Section 8(c) are several in
proportion to the respective amount of Series A Notes purchased by each of the
Holders hereunder and not joint.
(d) Each of the Company and the Guarantors hereby
designates CT Corporation Systems, New York, New York, a Delaware corporation,
as its authorized agent, upon which process maybe served in any action, suit or
proceeding which may be instituted in any state or federal court in the State
of New York by the Holders or person controlling the Holders asserting a claim
for indemnification or contribution under or pursuant to this Section 8, and
each of the Company and the Guarantors will accept the jurisdiction of such
court in such action, and waive, to the fullest extent permitted by applicable
law, any defense based upon lack of personal jurisdiction or venue. A copy of
any such process shall be sent or given to the Company or any Guarantor at the
address for notices specified in Section 12(e) hereof.
(e) The indemnity and contribution agreements contained
in this Section 8 are in addition to any liability which the indemnifying
persons may otherwise have to the indemnified persons referred to above.
17
<PAGE> 19
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available, upon
request of any Holder of Transfer Restricted Securities, to any Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
The Holders of Transfer Restricted Securities may elect to
sell their Transfer Restricted Securities pursuant to one or more Underwritten
Registrations; provided, however, that in no event shall any Holder commence
any such Underwritten Registration if a period of less than 180 days has
elapsed since the Consummation of the most recent Underwritten Registration
hereunder; and provided further that in no event shall the Holders effect more
than three such Underwritten Registrations hereunder. No Holder may
participate in any Underwritten Registration hereunder unless such Holder (a)
agrees to sell such Holder's Transfer Restricted Securities on the basis
provided in customary underwriting arrangements entered into in connection
therewith and (b) completes and executes all reasonable questionnaires, powers
of attorney, indemnities, underwriting agreements, lock-up letters and other
documents required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
In any Underwritten Offering, the investment banker or
investment bankers and manager or managers that will administer the offering
will be selected by the Holders of a majority in aggregate principal amount of
the Transfer Restricted Securities included in such offering; provided, that
such investment bankers and managers must be reasonably satisfactory to the
Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled
to exercise all rights provided herein, in the Indenture, the Purchase
Agreement or granted by law, including recovery of liquidated or other damages,
will be entitled to specific performance of its rights under this Agreement.
The Company and the Guarantors agree that monetary damages (including the
liquidated damages contemplated hereby) would not be adequate compensation for
any loss incurred by reason of a breach by them of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not,
and will cause the Guarantors not to, on or after the date of this Agreement
enter into any agreement with respect to its securities that is inconsistent
with the rights granted to the Holders in this Agreement or otherwise conflicts
with the provisions hereof. Neither the Company nor the Guarantors have
previously entered into any agreement
18
<PAGE> 20
granting any registration rights with respect to its securities to any Person
that is inconsistent with the rights granted to the Holders in this Agreement
or otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's securities under any
agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. The Company will
not take any action, or permit any change to occur, with respect to the Notes
that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to or departures from the provisions hereof may not be given unless the Company
has obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose securities are being
tendered pursuant to the Exchange Offer and that does not affect directly or
indirectly the rights of other Holders whose securities are not being tendered
pursuant to such Exchange Offer may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(e) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the Registrar under the Indenture, with a copy to the
Registrar under the Indenture; and
(ii) if to the Company or the Guarantors:
Exide Electronics Group, Inc. 8609 Six Forks
Road Raleigh, NC 27615 Telecopier No.: (919)
870-3100 Attention: General Counsel
With a copy to:
Smith Helms Mulliss & Moore, L.L.P. 316 West
Edenton Street P.O. Box 27525 Raleigh, NC
27611-7525 Telecopier No.: (919) 828-7938
Attention: Brad S. Markoff, Esq.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and
on the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
19
<PAGE> 21
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities directly from such Holder.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(k) Entire Agreement. This Agreement together with the
other Operative Documents (as defined in the Purchase Agreement) is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the Transfer Restricted Securities. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
[Signature Page Follows]
20
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
EXIDE ELECTRONICS GROUP, INC.
By: /s/ Marty R. Kittrell
------------------------------
Name: Marty R. Kittrell
Title: Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
EXIDE ELECTRONICS CORPORATION
By: /s/ Marty R. Kittrell
------------------------------
Name: Marty R. Kittrell
Title: Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
EXIDE ELECTRONICS INTERNATIONAL CORP.
By: /s/ Marty R. Kittrell
------------------------------
Name: Marty R. Kittrell
Title: Vice President, Treasurer and
Assistant Secretary
INTERNATIONAL POWER MACHINES CORPORATION
By: /s/ Marty R. Kittrell
------------------------------
Name: Marty R. Kittrell
Title: Vice President - Finance
LECTRO PRODUCTS, INC.
By: /s/ Marty R. Kittrell
------------------------------
Name: Marty R. Kittrell
Title: Vice President and Chief Financial Officer
DELTEC POWER SYSTEMS, INC.
By: /s/ Marty R. Kittrell
------------------------------
Name: Marty R. Kittrell
Title: Senior Vice President, Chief Financial Officer
and Assistant Secretary
DATATRAX ACQUISITION CORPORATION
By: /s/ Marty R. Kittrell
------------------------------
Name: Marty R. Kittrell
Title: Vice President and Chief Financial
Officer
EXIDE ELECTRONICS USA HOLDINGS CORP.
By: /s/ Marty R. Kittrell
------------------------------
Name: Marty R. Kittrell
Title: Vice President and Chief Financial
Officer
<PAGE> 23
DELTEC ELECTRONICS CORP.
By: /s/ Marty R. Kittrell
------------------------------
Name: Marty R. Kittrell
Title: Senior Vice President, Chief Financial
Officer and Assistant Secretary
LORTEC POWER SYSTEMS, INC.
By: /s/ Marty R. Kittrell
------------------------------
Name: Marty R. Kittrell
Title: Senior Vice President, Chief Financial
Officer and Assistant Secretary
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.,
NATIONSBANC CAPITAL MARKETS, INC.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Robert B. Moon
------------------------------
Name: Robert B. Moon
Title: Vice President
<PAGE> 1
EXHIBIT 4.4
EXECUTION COPY
================================================================================
WARRANT AGREEMENT
Dated as of March 13, 1996
by and between
EXIDE ELECTRONICS GROUP, INC.
and
AMERICAN BANK NATIONAL ASSOCIATION,
as Warrant Agent
================================================================================
<PAGE> 2
WARRANT AGREEMENT
TABLE OF CONTENTS***
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Appointment of Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. Issuance of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 4. Execution of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 5. Transfers of Warrants Prior to the Separation of Warrants and Notes; Separation of Warrants and Notes . . 3
SECTION 6. Registration and Countersignature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 7. Registration of Transfers and Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Transfer and Exchange of Definitive Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Restrictions on Exchange or Transfer of a Definitive Warrant for a Beneficial Interest in a
Global Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Transfer and Exchange of Global Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Exchange of a Beneficial Interest in a Global Warrant for a Definitive Warrant . . . . . . . . . . . 6
(e) Restrictions on Transfer and Exchange of Global Warrants . . . . . . . . . . . . . . . . . . . . . . 7
(f) Countersigning of Definitive Warrants in Absence of Depositary . . . . . . . . . . . . . . . . . . . 7
(g) Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(h) Cancellation of Global Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(i) Obligations with Respect to Transfers and Exchanges of Warrants. . . . . . . . . . . . . . . . . . . 9
SECTION 8. Terms of Warrants; Exercise of Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 9. Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 10. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 11. Mutilated or Missing Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 12. Reservation of Warrant Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
- ----------------------------------
*** This Table of Contents does not constitute a part of this Agreement or
have any bearing upon the interpretation of any of its terms or provisions.
(i)
<PAGE> 3
<TABLE>
<S> <C>
SECTION 13. Obtaining Stock Exchange Listings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 14. Adjustment of Exercise Price and Number of Warrant Shares Issuable . . . . . . . . . . . . . . . . . . . 12
(a) Adjustment for Change in Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) Adjustment for Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Adjustment for Other Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(d) Adjustment for Common Stock Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(e) Adjustment for Convertible Securities Issue . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(f) Current Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(g) Consideration Received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(h) When De Minimis Adjustment May Be Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(i) When No Adjustment Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(j) Notice of Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(k) Voluntary Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(l) Notice of Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(m) Reorganization of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(n) The Company Determination Final . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(o) Warrant Agent's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(p) When Issuance or Payment May Be Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(q) Adjustment in Number of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(r) Form of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 15. No Dilution or Impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 17. Notices to Warrant Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 18. Merger, Consolidation or Change of Name of Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 19. Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 20. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 21. Change of Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 22. Notices to the Company and Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 23. Rule 144A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 24. Supplements and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 25. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 26. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 27. Governing Law; Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 28. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 29. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 30. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
(iii)
<PAGE> 5
WARRANT AGREEMENT dated as of March 13, 1996 between Exide
Electronics Group, Inc., a Delaware corporation (the "Company") and American
Bank National Association, as warrant agent (the "Warrant Agent").
WHEREAS, the Company has entered into a purchase agreement,
dated March 7, 1996 with Donaldson, Lufkin & Jenrette Securities Corporation,
J.P. Morgan Securities Inc. and NationsBanc Capital Markets, Inc. (the "Initial
Purchasers") in which the Company has agreed to sell to the Initial Purchasers
125,000 Units consisting of $125,000,000 principal amount of 11 1/2% Senior
Subordinated Notes due 2006 (the "Notes") and warrants, as hereinafter
described (the "Warrants"), to purchase up to an aggregate of 643,750 shares of
common stock, par value $0.01 per share (the "Common Stock"), of the Company
(the Common Stock issuable upon exercise of the Warrants being referred to
herein as the "Warrant Shares"). The Notes will be issued under an indenture
to be dated as of March 13, 1996 (the "Indenture"), between the Company and
American Bank National Association, as trustee (the "Trustee"). Each Warrant
entitles the holder of the Warrant upon exercise to receive from the Company,
as adjusted as provided herein, 5.15 fully paid and nonassessable shares of
Common Stock of the Company at the Exercise Price (as defined herein); and
WHEREAS, the Warrants and the Notes shall not be separately
transferable until the earliest to occur of (i) June 11, 1996 (ii) such date as
Donaldson, Lufkin & Jenrette Securities Corporation may in their discretion,
deem appropriate (but in no event earlier than 10 days after the Issue Date (as
defined in the Indenture)), (iii) in the event a Change of Control (as defined
in the Indenture) occurs, the date the Company mails notice thereof to holders
of Notes and (iv) the date on which the Exchange Offer Registration Statement
(as defined in the Indenture) is declared effective (the "Separation Date");
and
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing so to act, in
connection with the issuance of Warrant Certificates and other matters as
provided herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
the instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment.
SECTION 2. Issuance of Warrants. Warrants shall be
originally issued in connection with the issuance of the Units and shall not be
separately transferable from the Notes until on or after the Separation Date as
provided in Section 5 hereof.
SECTION 3. Warrant Certificates. The Warrants will be issued
in global form (the "Global Warrants"), substantially in the form of Exhibit A
(including footnotes 1 and 2 thereto) and in definitive form (the "Definitive
Warrants"), substantially in the form of Exhibit A (not including footnotes 1
and 2 thereto). Each Global Warrant shall represent such of the outstanding
Warrants as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Warrants from time to time
endorsed thereon and that the aggregate amount of outstanding Warrants
represented thereby may from time to time be reduced or increased, as
appropriate. Any endorsement of a Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants represented thereby
shall be made by the Warrant Agent and the depositary with respect to the
Global Warrants (the "Depositary") in accordance with instructions given by the
holder thereof. The Depository Trust Company shall act as the Depositary until
a successor shall be appointed by the Company and the
<PAGE> 6
Warrant Agent. Upon request, a holder may receive from the Depositary and the
Warrant Agent separate Definitive Warrants as set forth in Section 5 below.
Any certificates (the "Warrant Certificates") evidencing the Global Warrants or
the Definitive Warrants to be delivered pursuant to this Agreement shall be
substantially in the form set forth in Exhibit A attached hereto.
SECTION 4. Execution of Warrant Certificates. Warrant
Certificates shall be signed on behalf of the Company by its Chairman of the
Board, Chief Executive Officer, Chief Financial Officer, President or Vice
President and Secretary or an Assistant Secretary. Each such signature upon
the Warrant Certificates may be in the form of a facsimile signature of the
present or any future Chairman of the Board, Chief Executive Officer, Chief
Financial Officer, President or Vice President and Secretary or Assistant
Secretary and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, Chief
Executive Officer, Chief Financial Officer, President or Vice President and
Secretary or Assistant Secretary, notwithstanding the fact that at the time the
Warrant Certificates shall be countersigned and delivered or disposed of he or
she shall have ceased to hold such office. The seal of the Company may be in
the form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not ceased
to be such officer of the Company; and any Warrant Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this Warrant
Agreement any such person was not such officer.
Warrant Certificates shall be dated the date of
countersignature by the Warrant Agent.
SECTION 5. Transfers of Warrants Prior to the Separation of
Warrants and Notes; Separation of Warrants and Notes. Notwithstanding the
provisions of Section 7 hereof, on or after the Separation Date, the registered
holder of a Warrant certificate containing a Warrant Legend may surrender such
Warrant certificate accompanied by a written instrument or instruments of
transfer in form satisfactory to the Warrant Agent, duly executed by the
registered holder or holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney to the Warrant Agent,
at its corporate trust office in City of St. Paul, State of Minnesota (the
"Warrant Agent Office") for the exchange of such Warrant containing a Warrant
Legend, in whole or in part, for a new Warrant certificate or certificates not
containing the first paragraph of the Warrant Legend (such surrender and
exchange being referred to herein as a "Separation" and the related Warrants
being referred to as "Separated").
Until the Separation Date, no Warrant may be sold, assigned or
otherwise transferred to any person unless simultaneously with such transfer,
the Warrant Agent receives confirmation from the Trustee for the Notes that the
holder thereof has requested a transfer to the same transferee of one Warrant
(subject to an adjustment under Section 14 hereof) for each $1,000 principal
amount of Notes so transferred. In connection with the foregoing, upon
original issuance (if prior to the Separation Date) and, thereafter until
Separation, the Warrant certificates will bear the following legend:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE NOT
TRANSFERABLE SEPARATELY FROM THE NOTES ORIGINALLY SOLD AS A UNIT WITH
SUCH WARRANTS UNTIL THE EARLIEST TO OCCUR OF (I) 90 DAYS AFTER THE
2
<PAGE> 7
ISSUANCE OF THE UNITS, (II) SUCH DATE AS DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION MAY IN ITS DISCRETION, DEEM APPROPRIATE (BUT IN
NO EVENT EARLIER THAN 10 DAYS AFTER THE ISSUE DATE (AS DEFINED IN THE
INDENTURE RELATING TO THE NOTES)), (III) IN THE EVENT A CHANGE OF
CONTROL (AS DEFINED IN THE INDENTURE RELATING TO THE NOTES) OCCURS,
THE DATE THE COMPANY MAILS NOTICE THEREOF TO HOLDERS OF NOTES AND (IV)
THE DATE ON WHICH THE EXCHANGE OFFER REGISTRATION STATEMENT (AS
DEFINED IN THE INDENTURE RELATING TO THE NOTES) IS DECLARED EFFECTIVE
(THE "SEPARATION DATE").
THE COMMON STOCK, PAR VALUE $0.01, OF THE COMPANY (THE "COMMON
STOCK") FOR WHICH THIS WARRANT IS EXERCISABLE MAY NOT BE OFFERED OR
SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES AND
EXCHANGE ACT OF 1933, AS AMENDED (THE "EXCHANGE ACT") AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION FROM
REGISTRATION REQUIREMENTS. ACCORDINGLY, NO WARRANT HOLDER SHALL BE
ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME UNLESS, AT THE
TIME OF EXERCISE, (i) A REGISTRATION STATEMENT UNDER THE EXCHANGE ACT
RELATING TO THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF
THIS WARRANT (THE "WARRANT SHARES") HAS BEEN FILED WITH, AND DECLARED
EFFECTIVE BY, THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), AND
NO STOP ORDER SUSPENDING THE EFFECTIVENESS OF SUCH REGISTRATION
STATEMENT HAS BEEN ISSUED BY THE SEC OR (ii) THE ISSUANCE OF THE
WARRANT SHARES IS PERMITTED PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE EXCHANGE ACT.
SECTION 6. Registration and Countersignature. The Warrant
Agent, on behalf of the Company, shall number and register the Warrant
Certificates in a register as they are issued by the Company.
Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
The Warrant Agent shall, upon written instructions of the Chairman of the
Board, Chief Executive Officer, President, Vice President or the Chief
Financial Officer of the Company, initially countersign and deliver Warrants
entitling the holders thereof to purchase not more than the number of Warrant
Shares referred to above in the first recital hereof and shall countersign and
deliver Warrants as otherwise provided in this Agreement.
The Company and the Warrant Agent may deem and treat the
registered holder(s) of the Warrant Certificates as the absolute owner(s)
thereof (notwithstanding any notation of ownership or other writing thereon
made by anyone), for all purposes, and neither the Company nor the Warrant
Agent shall be affected by any notice to the contrary.
SECTION 7. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Definitive Warrants. When
Definitive Warrants are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of
Definitive Warrants of other authorized denominations,
3
<PAGE> 8
the Warrant Agent shall register the transfer or make the exchange as requested
if its requirements for such transactions are met; provided, however, that the
Definitive Warrants presented or surrendered for registration of transfer or
exchange:
(x) shall be duly endorsed or accompanied by a written instruction
of transfer in form satisfactory to the Warrant Agent, duly
executed by the holder thereof or by his attorney, duly
authorized in writing; and
(y) in the case of Registrable Securities (as defined below), such
request shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Registrable Security is being delivered to
the Warrant Agent by a holder for registration in the
name of such holder, without transfer, a
certification from such holder to that effect (in
substantially the form of Exhibit B hereto);
(B) if such Registrable Security is being transferred (1)
to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act of 1933, as
amended (the "Securities Act")) in accordance with
Rule 144A under the Securities Act or (2) pursuant to
an exemption from registration in accordance with
Rule 144 under the Securities Act (and based on an
opinion of counsel if the Company so requests) or (3)
pursuant to an effective registration statement under
the Securities Act, a certification to that effect
(in substantially the form of Exhibit B hereto);
(C) if such Registrable Security is being transferred to
an institutional "accredited investor," within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act pursuant to a private placement
exemption from the registration requirements of the
Securities Act, a certification to that effect (in
substantially the form of Exhibit B hereto) and a
certification from the applicable transferee;
(D) if such Registrable Security is being transferred
pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act
(and based on an opinion of counsel if the Company so
requests), a certification to that effect (in
substantially the form of Exhibit B hereto); or
(E) if such Registrable Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act (and based on an
opinion of counsel if the Company so requests), a
certification to that effect (in substantially the
form of Exhibit B hereto).
The term "Registrable Securities" means the Warrants,
Warrant Shares and any other securities issued or issuable with
respect to the Warrants or the Warrant Shares by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise until such date as such security (i) is effectively
registered under the Securities Act and disposed of in accordance with
a registration statement or (ii) is distributed to the public pursuant
to Rule 144 under the Securities Act.
(b) Restrictions on Exchange or Transfer of a Definitive
Warrant for a Beneficial Interest in a Global Warrant. A Definitive Warrant
may not be exchanged for a beneficial interest in a Global Warrant except upon
satisfaction of the requirements set forth below. Upon receipt by the Warrant
4
<PAGE> 9
Agent of a Definitive Warrant, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Warrant Agent, together
with:
(A) if such Definitive Warrant is a Registrable Security,
certification from the holder thereof (in
substantially the form of Exhibit B hereto) to the
effect that such Definitive Warrant is being
transferred by such holder to a "qualified
institutional buyer" (as defined in Rule 144A under
the Securities Act) in accordance with Rule 144A
under the Securities Act who wishes to take delivery
thereof in the form of a beneficial interest in a
Global Warrant; and
(B) whether or not such Definitive Warrant is a
Registrable Security, written instructions directing
the Warrant Agent to make, or to direct the
Depositary to make, an endorsement on the Global
Warrant to reflect an increase in the number of
Warrants and Warrant Shares represented by the Global
Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or
direct the Depositary to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Warrant Agent, the
number of Warrants and Warrant Shares represented by the Global Warrant to be
increased accordingly. If no Global Warrants are then outstanding, the Company
shall issue and the Warrant Agent shall countersign a new Global Warrant
representing the appropriate number of Warrants and Warrant Shares.
(c) Transfer and Exchange of Global Warrants. The
transfer and exchange of Global Warrants or beneficial interests therein shall
be effected through the Depositary, in accordance with this Warrant Agreement
and the procedures of the Depositary therefor.
(d) Exchange of a Beneficial Interest in a Global Warrant
for a Definitive Warrant.
(i) Any person having a beneficial interest in a Global Warrant
may upon request exchange such beneficial interest for a
Definitive Warrant. Upon receipt by the Warrant Agent of
written instructions or such other form of instructions as is
customary for the Depositary from the Depositary or its
nominee on behalf of any person having a beneficial interest
in a Global Warrant and, in the case of a Registrable
Security, the following additional information and documents
(all of which may be submitted by facsimile):
(A) if such beneficial interest is being delivered to the
person designated by the Depositary as being the
beneficial owner, a certification to that effect (in
substantially the form of Exhibit B hereto);
(B) if such beneficial interest is being transferred (1)
to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) in accordance
with Rule 144A under the Securities Act or (2)
pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act
(and based on an opinion of counsel if the Company so
requests) or (3) pursuant to an effective
registration statement under the Securities Act, a
certification to that effect (in substantially the
form of Exhibit B hereto);
(C) if such beneficial interest is being transferred to
any institutional "accredited investor," within the
meaning of Rule 501(a)(1), (2), (3) and (7) under the
Securities Act pursuant to a private placement
exemption from the registration
5
<PAGE> 10
requirements of the Securities Act, a certification
to that effect (in substantially the form of Exhibit
B hereto) and a certification from the applicable
transferee;
(D) if such beneficial interest is being transferred
pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act
(and based on an opinion of counsel if the Company so
requests), a certification to that effect (in
substantially the form of Exhibit B); or
(E) if such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act (and based on an
opinion of counsel if the Company so requests), a
certification to that effect (in substantially the
form of Exhibit B hereto),
then the Warrant Agent shall cause, in accordance with the
standing instructions and procedures existing between the
Depositary and Warrant Agent, the number of Warrants and
Warrant Shares represented by the Global Warrant to be reduced
and, following such reduction, the Company shall execute and
the Warrant Agent shall countersign and deliver to the
transferee a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial
interest in a Global Warrant pursuant to this Section 7(d)
shall be registered in such names as the Depositary, pursuant
to instructions from its direct or indirect participants or
otherwise, shall instruct the Warrant Agent. The Warrant
Agent shall deliver such Definitive Warrants to the persons in
whose names such Warrants are so registered.
(e) Restrictions on Transfer and Exchange of Global
Warrants. Notwithstanding any other provisions of this Warrant Agreement
(other than the provisions set forth in subsection (f) of this Section 7), a
Global Warrant may not be transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary
or another nominee of the Depositary or by the Depositary or any such nominee
to a successor Depositary or a nominee of such successor Depositary.
(f) Countersigning of Definitive Warrants in Absence of
Depositary. If at any time:
(i) the Depositary for the Global Warrants notifies the Company
that the Depositary is unwilling or unable to continue as
Depositary for the Global Warrants and a successor Depositary
for the Global Warrants is not appointed by the Company within
90 days after delivery of such notice; or
(ii) the Company, in its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of
Definitive Warrants under this Warrant Agreement,
then the Company shall execute, and the Warrant Agent, upon written
instructions signed by two officers of the Company, shall countersign and
deliver Definitive Warrants, in an aggregate number equal to the number of
Warrants represented by Global Warrants, in exchange for such Global Warrants.
(g) Legends.
6
<PAGE> 11
(i) Except for any Registrable Security sold or transferred
(including any Registrable Security represented by a Global
Warrant) as discussed in clause (ii) below, each Warrant
Certificate evidencing the Global Warrants and the Definitive
Warrants (and all Warrants issued in exchange therefor or
substitution thereof) and each certificate representing the
Warrant Shares shall bear a legend in substantially the
following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY
WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED
HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
SUCH NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) (a) TO A PERSON WHO 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, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904
UNDER THE SECURITIES ACT OR (d) 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), (2) TO THE
COMPANY OR (3) 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 AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Registrable Security (including
any Registrable Security represented by a Global Warrant)
pursuant to an effective registration statement under the
Securities Act, pursuant to Rule 144 under the Securities Act
or pursuant to an opinion of counsel reasonably satisfactory
to the Company that no legend is required:
(A) in the case of any Registrable Security that is a
Definitive Warrant, the Warrant Agent shall permit
the holder thereof to exchange such Registrable
Security for a Definitive Warrant that does not bear
the legend set forth in clause (i) above and rescind
any restriction on the transfer of such Registrable
Security; and
(B) in the case of any Registrable Security represented
by a Global Warrant, such Registrable Security shall
not be required to bear the legend set forth in
clause (i)
7
<PAGE> 12
above but shall continue to be subject to the
provisions of Section 7(c) hereof; provided, however,
that with respect to any request for an exchange of a
Registrable Security that is represented by a Global
Warrant for a Definitive Warrant that does not bear
the legend set forth in clause (i) above, which
request is made in reliance upon Rule 144 (and based
upon an opinion of counsel if the Company so
requests), the holder thereof shall certify in
writing to the Warrant Agent that such request is
being made pursuant to Rule 144 (such certification
to be substantially in the form of Exhibit B hereto).
(h) Cancellation of Global Warrant. At such time as all
beneficial interests in Global Warrants have either been exchanged for
Definitive Warrants, redeemed, repurchased or cancelled, all Global Warrants
shall be returned to or retained and cancelled by the Warrant Agent.
(i) Obligations with Respect to Transfers and Exchanges
of Warrants.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Warrant Agent is hereby
authorized to countersign, in accordance with the provisions
of Section 6 and this Section 7, Definitive Warrants and
Global Warrants as required pursuant to the provisions of this
Section 7.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration of transfer or exchange of Definitive Warrants or
Global Warrants shall be the valid obligations of the Company,
entitled to the same benefits under this Warrant Agreement, as
the Definitive Warrants or Global Warrants surrendered upon
such registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Warrant Agent and the Company may deem and treat
the person in whose name any Warrant is registered as the
absolute owner of such Warrant and neither the Warrant Agent,
nor the Company shall be affected by notice to the contrary.
(iv) No service charge shall be made to a holder for any
registration, transfer or exchange.
SECTION 8. Terms of Warrants; Exercise of Warrants. Subject
to the terms of this Agreement, each Warrant holder shall have the right, which
may be exercised on or after the Separation Date until 5:00 p.m., New York, New
York time on March 15, 2006 (the "Expiration Date"), to exercise each Warrant
and receive from the Company the number of fully paid and nonassessable Warrant
Shares which the holder may at the time be entitled to receive on exercise of
such Warrants and payment of the Exercise Price (as herein defined) then in
effect for such Warrant Shares; provided, however, that no Warrant holder shall
be entitled to exercise such holder's Warrants at any time unless, at the time
of exercise, (i) a registration statement under the Securities Act, relating to
the Warrant Shares has been filed with, and declared effective by, the
Securities and Exchange Commission (the "SEC"), and no stop order suspending
the effectiveness of such registration statement has been issued by the SEC or
(ii) the issuance of the Warrant Shares is permitted pursuant to an exemption
from the registration requirements of the Securities Act; and provided,
further, that if the Company or a holder of Warrants reasonably believes that
the exercise of any Warrant requires prior compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations thereunder, any such exercise shall be contingent upon such prior
compliance. Each Warrant, when exercised will entitle the holder thereof to
purchase 5.15 fully paid and nonassessable shares of Common Stock at the
Exercise Price. Each Warrant not exercised prior to the Expiration Date shall
become void and all rights thereunder and all rights in respect thereof under
this
8
<PAGE> 13
Agreement shall cease as of such time. No adjustments as to dividends will be
made upon exercise of the Warrants.
The Warrants may be exercised by surrendering to the Company
the Warrant Certificates evidencing the Warrants to be exercised with the
accompanying form of election to purchase properly completed and executed,
together with payment of the Exercise Price. Payment of the Exercise Price may
be made (i) on or after the Separation Date (A) by tendering Notes having a
principal amount at the time of tender equal to the Exercise Price, (B) by
tendering Warrants having a fair market value equal to the Exercise Price or
(C) by any combination of Notes or Warrants or (ii) after March 16, 1997, in
addition to the methods described above in clause (i), (A) in the form of cash
or by certified or official bank check payable to the order of the Company or
(B) by any combination of cash, Notes or Warrants. For purposes of clause
(i)(B) above, the fair market value of the Warrants shall be determined as
follows: (A) to the extent the Common Stock is publicly traded and listed on
the Nasdaq National Market or a national securities exchange, the fair market
value shall be equal to the greater of (1) the difference between (a) the
average closing price as quoted on the Nasdaq National Market of the Common
Stock for each of the ten trading days immediately prior to the exercise date
(or, if the Common Stock is listed on a national securities exchange, the
average closing price as reported on such national securities exchange during
such ten trading day period) and (b) the Exercise Price, and (2) zero; or (B)
to the extent the Common Stock is not publicly traded, or otherwise is not
listed on a national securities exchange, the fair market value shall be equal
to the value per share as determined in good faith by the Board of Directors of
the Company.
If Notes are surrendered in payment of the Exercise Price, the
Warrant Agent shall deliver such Notes to the Company and the Company shall
deliver such Notes to the Trustee (as defined in the Indenture) for
cancellation and the Trustee shall notify the Company in writing whether such
Notes were in good form and, if such Notes were in good form the Company shall
notify the Warrant Agent in writing that the Company has received full and
proper payment of the Exercise Price.
Subject to the provisions of Section 10 hereof, upon such
surrender of Warrants and payment of the Exercise Price, the Company shall
issue and cause to be delivered with all reasonable dispatch to or upon the
written order of the holder and in such name or names as the Warrant holder may
designate, a certificate or certificates for the number of full Warrant Shares
issuable upon the exercise of such Warrants together with cash as provided in
Section 16 hereof; provided, however, that if any consolidation, merger or
lease or sale of assets is proposed to be effected by the Company as described
in subsection (m) of Section 14 hereof, or a tender offer or an exchange offer
for shares of Common Stock of the Company shall be made, upon such surrender of
Warrants and payment of the Exercise Price as aforesaid, the Company shall, as
soon as possible, but in any event not later than two business days thereafter,
issue and cause to be delivered the full number of Warrant Shares issuable upon
the exercise of such Warrants in the manner described in this sentence together
with cash as provided in Section 16 hereof. Such certificate or certificates
shall be deemed to have been issued and any person so designated to be named
therein shall be deemed to have become a holder of record of such Warrant
Shares as of the date of the surrender of such Warrants and payment of the
Exercise Price. No fractional shares shall be issued upon exercise of any
Warrants in accordance with Section 16 hereof. The Company will pay to the
holder of the Warrant at the time of exercise an amount in cash equal to the
current market value of any such fractional share of Common Stock less a
corresponding fraction of the Exercise Price.
The Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part (in whole shares)
and, in the event that a certificate evidencing Warrants is exercised in
respect of fewer than all of the Warrant Shares issuable on such exercise at
any time prior to the date of expiration of the Warrants, a new certificate
evidencing the remaining Warrant or Warrants will
9
<PAGE> 14
be issued, and the Warrant Agent is hereby irrevocably authorized to
countersign and to deliver the required new Warrant Certificate or Certificates
pursuant to the provisions of this Section and of Section 4 hereof, and the
Company, whenever required by the Warrant Agent, will supply the Warrant Agent
with Warrant Certificates duly executed on behalf of the Company for such
purpose.
All Warrant Certificates surrendered upon exercise of Warrants
shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates
shall then be disposed of by the Company in accordance with applicable law.
The Warrant Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently pay to the Company all monies or surrender
to the Company all Notes received by the Warrant Agent for the purchase of the
Warrant Shares through the exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder available for inspection by the holders
during normal business hours at its office. The Company shall supply the
Warrant Agent from time to time with such numbers of copies of this Agreement
as the Warrant Agent may request.
SECTION 9. Reports. So long as any of the Warrants remain
outstanding, the Company shall cause copies of all quarterly and annual
financial 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) that the Company is required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act ("SEC Reports") to be filed
with the Warrant Agent and mailed to the holders of Warrants, in each case,
within 15 days after filing with the SEC. If the Company is not subject to the
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall
nevertheless continue to cause SEC Reports, comparable to those that it would
be required to file pursuant to Section 13 or 15(d) of the Exchange Act if it
were then subject to the requirements of either such Section, to be so filed
with the SEC for public availability (unless the SEC will not accept such a
filing) and with the Warrant Agent and mailed to the holders of Warrants, in
each case, within the same time periods as would have applied (including under
the preceding sentence) had the Company then been subject to the requirements
of Section 13 or 15(d) of the Exchange Act. The Company shall make all such
information available to investors, securities analysts and broker-dealers who
request it in writing.
SECTION 10. Payment of Taxes. No service charge shall be
made to any holder of a Warrant for any exercise, exchange or registration of
transfer of Warrant Certificates, and the Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants or to any separation; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect
of any transfer involved in the issue of any Warrant Certificates or any
certificates for Warrant Shares in a name other than that of the registered
holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and
the Company shall not be required to issue or deliver such Warrant Certificates
unless or until the person or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
SECTION 11. Mutilated or Missing Warrant Certificates. If
any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed,
the Company may in its discretion issue and the Warrant Agent may countersign,
in exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and in substitution for the Warrant Certificate
lost, stolen or destroyed, a new Warrant Certificate of like tenor and
representing an equivalent number of Warrants, but only upon receipt of
evidence satisfactory to the Company and the Warrant Agent of such loss, theft
or destruction of such Warrant Certificate and indemnity and security therefor,
if requested, also satisfactory to them.
10
<PAGE> 15
Applicants for such substitute Warrant Certificates shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company or the Warrant Agent may prescribe.
SECTION 12. Reservation of Warrant Shares. The Company will
at all times reserve and keep available, free from preemptive rights, out of
the aggregate of its authorized but unissued Common Stock or authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company or the transfer agent for the Common Stock (the
"Transfer Agent") and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrants. The Warrant Agent is hereby irrevocably authorized to
requisition from time to time from such Transfer Agent the stock certificates
required to honor outstanding Warrants upon exercise thereof in accordance with
the terms of this Agreement. The Company will supply such Transfer Agent with
duly executed certificates for such purposes and will provide or otherwise make
available any cash which may be payable as provided in Section 16 hereof. The
Company will furnish such Transfer Agent a copy of all notices of adjustments
and certificates related thereto, transmitted to each holder pursuant to
Section 17 hereof.
Before taking any action which would cause an adjustment
pursuant to Section 14 hereof to reduce the Exercise Price below the then par
value (if any) of the Warrant Shares, the Company will take all corporate
action necessary, in the opinion of its counsel (which may be counsel employed
by the Company), in order that the Company may validly and legally issue fully
paid and nonassessable Warrant Shares at the Exercise Price as so adjusted.
The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants will be, upon payment of the Exercise Price
and issuance thereof, fully paid, nonassessable, free of preemptive rights and
free from all taxes, liens, charges and security interests with respect to the
issue thereof.
SECTION 13. Obtaining Stock Exchange Listings. The Company
shall also from time to time take all action necessary so that the Warrant
Shares, immediately upon their issuance upon the exercise of Warrants, will be
listed on the Nasdaq National Market or such other principal securities
exchanges, interdealer quotation systems and markets within the United States
of America, if any, on which other shares of Common Stock are then listed or
quoted.
SECTION 14. Adjustment of Exercise Price and Number of
Warrant Shares Issuable. The Exercise Price and the number of Warrant Shares
issuable upon the exercise of each Warrant are subject to adjustment from time
to time upon the occurrence of the events enumerated in this Section 14. For
purposes of this Section 14, "Common Stock" means the Common Stock and any
other stock of the Company, however designated, for which the Warrants may be
exercisable.
11
<PAGE> 16
(a) Adjustment for Change in Capital Stock.
If the Company:
(1) pays a dividend or makes a distribution on
its Common Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common
Stock into a greater number of shares;
(3) combines its outstanding shares of Common
Stock into a smaller number of shares;
(4) makes a distribution on its Common Stock in
shares of its capital stock other than Common Stock; or
(5) issues by reclassification of its Common
Stock any shares of its capital stock,
then the Exercise Price and the number and kind of shares of
capital stock of the Company issuable upon the exercise of a Warrant (as in
effect immediately prior to such action) shall be proportionately adjusted so
that the holder of any Warrant thereafter exercised may receive the aggregate
number and kind of shares of capital stock of the Company which he would have
owned immediately following such action if such Warrant had been exercised
immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If after an adjustment a holder of a Warrant upon exercise may
receive shares of two or more classes or series of capital stock of the
Company, the Company shall determine the allocation of the adjusted Exercise
Price between the classes or series of capital stock. After such allocation,
the exercise privilege and the Exercise Price of each class or series of
capital stock shall thereafter be subject to adjustment on terms comparable to
those applicable to Common Stock in this Section 14.
Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to
all holders of its Common Stock entitling them for a period expiring within 60
days after the record date mentioned below to purchase shares of Common Stock
or securities convertible into, or exchangeable or exercisable for, Common
Stock at a price per share (or with an initial conversion, exchange or exercise
price) less than the current market price per share on that record date, the
Exercise Price shall be adjusted in accordance with the following formula:
12
<PAGE> 17
O + N x P
-----
E' = E x M
---------
O + N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the record
date.
The adjustment shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or
warrants shall have been exercised, the Exercise Price shall be immediately
readjusted to what it would have been if "N" in the above formula had been the
number of shares actually issued.
(c) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Stock
any of its assets (including cash), debt securities, preferred stock or any
rights or warrants to purchase debt securities, assets or other securities of
the Company, the Exercise Price shall be adjusted in accordance with the
following formula:
E' = E x M - F
-----
M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the current market price per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of Common
Stock. The Board of Directors shall determine the fair market
value.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the
distribution.
13
<PAGE> 18
This subsection (c) does not apply to rights, options or
warrants referred to in subsection (b) of this Section 14.
(d) Adjustment for Common Stock Issue.
If the Company issues shares of Common Stock for a
consideration per share less than the current market price per share of Common
Stock on the date the Company fixes the offering price of such additional
shares, the Exercise Price shall be adjusted in accordance with the formula:
P
-
E' = E x O + M
---------
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares.
P = the aggregate consideration received for the issuance of such
additional shares.
M = the current market price per share of Common Stock on the date
of issuance of such additional shares.
A = the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such
issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections
(a), (b) and (c) of this Section 14,
(2) the exercise of Warrants or other warrants
outstanding on the date of this Agreement, or the conversion or
exchange of other securities convertible or exchangeable for Common
Stock,
(3) Common Stock issued to the Company's employees,
consultants or directors under bona fide benefit plans adopted by the
Board of Directors and approved by the holders of Common Stock when
required by law, if such Common Stock would otherwise be covered by
this subsection (d) (but only to the extent that the aggregate number
of shares excluded hereby and issued after the date of this Agreement
shall not exceed 10% of the Common Stock outstanding at the time of
issuance),
14
<PAGE> 19
(4) Common Stock issuable upon the exercise of
rights or warrants issued to the holders of Common Stock,
(5) Common Stock issued to shareholders of any
person which merges into the Company in proportion to their stock
holdings of such person immediately prior to such merger, upon such
merger,
(6) Common Stock issued in a bona fide public
offering pursuant to a firm commitment underwriting,
(7) Common Stock issued in a bona fide private
placement through a placement agent which is a member firm of the
National Association of Securities Dealers, Inc. to Person that are
not Affiliates (as defined in the Indenture) of the Company (except to
the extent that any discount from the current market price
attributable to restrictions on transferability of the Common Stock,
as determined in good faith by the Board of Directors and described in
a Board resolution which shall be filed with the Warrant Agent, shall
exceed 20%), or
(8) Common Stock issued to Affiliates of the Company
simultaneous with, and resulting in at least the same net proceeds per
share of Common Stock to the Company as, an issuance referred to in
paragraphs (6) or (7) of this Section 14(d).
(e) Adjustment for Convertible Securities Issue.
If the Company issues any securities convertible into or
exchangeable for Common Stock (other than securities issued in transactions
described in subsections (a), (b) and (c) of this Section 14) for a
consideration per share of Common Stock initially deliverable upon conversion
or exchange of such securities less than the current market price per share on
the date of issuance of such securities, the Exercise Price shall be adjusted
in accordance with this formula:
P
-
E' = E x O + M
----------
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such securities.
P = the aggregate consideration received for the issuance of such
securities.
M = the current market price per share on the date of issuance of
such securities.
D = the maximum number of shares of Common Stock deliverable upon
conversion of or in exchange for such securities at the
initial conversion or exchange rate.
15
<PAGE> 20
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or
exchange of such securities has not been issued when such securities are no
longer outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion or exchange of such securities.
This subsection (e) does not apply to:
(1) convertible securities issued to shareholders
of any person which merges into the Company, or with a subsidiary of
the Company, in proportion to their stock holdings of such person
immediately prior to such merger, upon such merger,
(2) convertible securities issued in a bona fide
public offering pursuant to a firm commitment underwriting,
(3) convertible securities issued in a bona fide
private placement through a placement agent which is a member firm of
the National Association of Securities Dealers, Inc. (except to the
extent that any discount from the current market price attributable to
restrictions on transferability of Common Stock issuable upon
conversion, as determined in good faith by the Board of Directors and
described in a Board resolution which shall be filed with the Warrant
Agent, shall exceed 20% of the then current market price),
(4) convertible securities issued to Affiliates
of the Company simultaneous with, and resulting in at least the same
net proceeds per share of Common Stock to the Company as, an issuance
referred to in paragraphs (2) or (3) of this Section 14(e), or
(5) stock options issued to the Company's
employees, consultants or directors.
(f) Current Market Price.
In subsections (b), (c), (d) and (e) of this Section 14 the
current market price per share of Common Stock on any date is the average of
the Quoted Prices of the Common Stock for 30 consecutive trading days
commencing 45 trading days before the date in question. The "Quoted Price" of
the Common Stock is the last reported sales price of the Common Stock as
reported by the Nasdaq National Market or if the Common Stock is listed on a
securities exchange, the last reported sales price of the Common Stock on such
exchange which shall be for consolidated trading if applicable to such
exchange, or if not so reported or listed, the last reported bid price of the
Common Stock. In the absence of one or more such quotations, the Board of
Directors of the Company shall determine the current market price on such basis
as it in good faith considers appropriate.
(g) Consideration Received.
For purposes of any computation respecting consideration
received pursuant to subsections (d) and (e) of this Section 14, the following
shall apply:
(1) in the case of the issuance of shares of
Common Stock for cash, the consideration shall be the amount of such
cash, provided that in no case shall any deduction be
16
<PAGE> 21
made for any commissions, discounts or other expenses incurred by the
Company for any underwriting of the issue or otherwise in connection
therewith;
(2) in the case of the issuance of shares of
Common Stock for a consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors (irrespective of the accounting treatment thereof), whose
determination shall be conclusive, and described in a Board resolution
which shall be filed with the Warrant Agent; and
(3) in the case of the issuance of securities
convertible into or exchangeable for shares, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be
received by the Company upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as
provided in clauses (1) and (2) of this subsection).
(h) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least 1% in the Exercise
Price. Any adjustments that are not made shall be carried forward and taken
into account in any subsequent adjustment.
All calculations under this Section 14 shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.
(i) When No Adjustment Required.
No adjustment need be made for a transaction referred to in
subsections (a), (b), (c), (d) or (e) of this Section 14 if Warrant holders are
to participate in the transaction on a basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and
notice on which holders of Common Stock participate in the transaction.
No adjustment need be made for rights to purchase Common Stock
pursuant to any of the Company's plan for reinvestment of dividends or
interest.
No adjustment need be made for a change in the par value, or
from par value to no par value, or from no par value to par value, of the
Common Stock.
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(j) Notice of Adjustment.
Whenever the Exercise Price is adjusted, the Company shall
provide the notices required by Section 17 hereof.
17
<PAGE> 22
(k) Voluntary Reduction.
The Company from time to time may, as the Board of Directors
deems appropriate, reduce the Exercise Price by any amount for any period of
time if the period is at least 20 days and if the reduction is irrevocable
during the period; provided, however, that in no event may the Exercise Price
be less than the par value of a share of Common Stock.
Whenever the Exercise Price is reduced, the Company shall mail
to Warrant holders a notice of the reduction. The Company shall mail the
notice at least 15 days before the date the reduced Exercise Price takes
effect. The notice shall state the reduced Exercise Price and the period it
will be in effect.
A reduction of the Exercise Price pursuant to this Section
14(k), other than a reduction which the Company has irrevocably committed will
be in effect for so long as any Warrants are outstanding, does not change or
adjust the Exercise Price otherwise in effect for purposes of subsections (a),
(b), (c), (d) and (e) of this Section 14.
(l) Notice of Certain Transactions.
If:
(1) The Company takes any action that would
require an adjustment in the Exercise Price pursuant to subsections
(a), (b), (c), (d) or (e) of this Section 14 and if the Company does
not arrange for Warrant holders to participate pursuant to subsection
(i) of this Section 14;
(2) The Company takes any action that would
require a supplemental Warrant Agreement pursuant to subsection (m) of
this Section 14; or
(3) there is a liquidation or dissolution of the
Company,
the Company shall mail to Warrant holders a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. The Company shall mail the notice at least
15 days before such date. Failure to mail the notice or any defect in it shall
not affect the validity of the transaction.
(m) Reorganization of the Company.
(1) If the Company consolidates or merges with or
into, or transfers or leases all or substantially all its assets to,
any person, upon consummation of such transaction the Warrants shall
automatically become exercisable for the kind and amount of
securities, cash or other assets which the holder of a Warrant would
have owned immediately after the consolidation, merger, transfer or
lease if the holder had exercised the Warrant immediately before the
effective date of the transaction. Concurrently with the consummation
of such transaction, the corporation formed by or surviving any such
consolidation or merger if other than the Company, or the person to
which such sale or conveyance shall have been made (any such person,
the "Successor Guarantor"), shall enter into a supplemental Warrant
Agreement so providing and further providing for adjustments which
shall be as nearly equivalent as may be practical to the adjustments
provided for in this Section 14. The Successor Guarantor shall mail
to Warrant holders a notice describing the supplemental Warrant
Agreement. If the issuer of securities
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<PAGE> 23
deliverable upon exercise of Warrants under the supplemental Warrant
Agreement is an affiliate of the formed, surviving, transferee or
lessee corporation, that issuer shall join in the supplemental Warrant
Agreement.
(2) Notwithstanding paragraph (1) of this Section
14(m), in the case of any merger, reverse stock split, or other
transaction in which the publicly held Common Stock shall be converted
into the right to receive a consideration consisting solely of cash,
(A) this Warrant Agreement and each Warrant shall terminate and (B)
each holder of a Warrant, without having to take any other action than
the surrendering of such Warrant to the Company, shall receive an
amount equal to the amount (if any) by which the price per share
payable to, or which would be received by, any public holder of Common
Stock in connection with such transaction exceeds the Exercise Price
effective at that time.
(3) If this subsection (m) applies, subsections
(a), (b), (c), (d) and (e) of this Section 14 do not apply.
(n) The Company Determination Final.
Any determination that the Company or the Board of Directors
must make pursuant to subsection (a), (c), (d), (e), (f), (g) or (i) of this
Section 14 is conclusive.
(o) Warrant Agent's Disclaimer.
The Warrant Agent has no duty to determine when an adjustment
under this Section 14 should be made, how it should be made or what it should
be. The Warrant Agent has no duty to determine whether any provisions of a
supplemental Warrant Agreement under subsection (m) of this Section 14 are
correct. The Warrant Agent makes no representation as to the validity or value
of any securities or assets issued upon exercise of Warrants. The Warrant
Agent shall not be responsible for the Company's failure to comply with this
Section 14.
(p) When Issuance or Payment May Be Deferred.
In any case in which this Section 14 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the holder of any Warrant exercised after such record date
the Warrant Shares and other capital stock of the Company, if any, issuable
upon such exercise over and above the Warrant Shares and other capital stock of
the Company, if any, issuable upon such exercise on the basis of the Exercise
Price and (ii) paying to such holder any amount in cash in lieu of a fractional
share pursuant to Section 16 hereof; provided, however, that the Company shall
deliver to such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional Warrant Shares, other capital
stock and cash upon the occurrence of the event requiring such adjustment.
(q) Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price pursuant to this
Section 14, each Warrant outstanding prior to the making of the adjustment in
the Exercise Price shall thereafter evidence the right to receive upon payment
of the adjusted Exercise Price that number of shares of Common Stock
(calculated to the nearest hundredth) obtained from the following formula:
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<PAGE> 24
N'= N x E
---
E'
where:
N' = the adjusted number of Warrant Shares issuable upon exercise
of a Warrant by payment of the adjusted Exercise Price.
N = the number of Warrant Shares previously issuable upon exercise
of a Warrant by payment of the Exercise Price prior to
adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(r) Form of Warrants.
Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon the exercise of the Warrants,
Warrants theretofore or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the Warrants initially
issuable pursuant to this Agreement.
SECTION 15. No Dilution or Impairment. (a) If any event
shall occur as to which the provisions of Section 14 are not strictly
applicable but the failure to make any adjustment would adversely affect the
purchase rights represented by the Warrants in accordance with the essential
intent and principles of such Section 14, then, in each such case, the Company
shall appoint an investment banking firm of recognized national standing, or
any other financial expert that does not (or whose directors, officers,
employees, affiliates or stockholders do not) have a direct or material
indirect financial interest in the Company or any of its subsidiaries, who has
not been, and, at the time it is called upon to give independent financial
advice to the Company, is not (and none of its directors, officers, employees,
affiliates or stockholders are) a promoter, director or officer of the Company
or any of its subsidiaries, which shall give their opinion upon the adjustment,
if any, on a basis consistent with the essential intent and principles
established in Section 14, necessary to preserve, without dilution, the
purchase rights, represented by the Warrants. Upon receipt of such opinion,
the Company will promptly mail a copy thereof to the holders of the Warrants
and shall make the adjustments described therein.
(b) The Company will not, by amendment of its certificate
of incorporation or through any consolidation, merger, reorganization, transfer
of assets, dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms of the Warrants, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the holder of the
Warrants against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (1) will take all such action as may be necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock on the exercise of the Warrants
from time to time outstanding and (2) will not take any action which results in
any adjustment of the Exercise Price if the total number of Warrant Shares
issuable after the action upon the exercise of all of the Warrants would exceed
the total number of shares of Common Stock then authorized by the Company's
certificate of incorporation and available for the purposes of issue upon such
exercise. A consolidation, merger, reorganization or transfer of assets
involving the Company covered by Section 14(m) shall not be prohibited by or
require any adjustment under this Section 15.
20
<PAGE> 25
SECTION 16. Fractional Interests. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be presented for exercise in full at the same time
by the same holder, the number of full Warrant Shares which shall be issuable
upon the exercise thereof shall be computed on the basis of the aggregate
number of Warrant Shares purchasable on exercise of the Warrants so presented.
If any fraction of a Warrant Share would, except for the provisions of this
Section 16, be issuable on the exercise of any Warrants (or specified portion
thereof), the Company shall notify the Warrant Agent in writing of the amount
to be paid in lieu of the fraction of a Warrant Share and concurrently pay or
provide to the Warrant Agent for payment to the Warrant holder an amount in
cash equal to the product of (i) such fraction of a Warrant Share and (ii) the
difference of the current market price of a share of Common Stock over the
Exercise Price.
SECTION 17. Notices to Warrant Holders. Upon any adjustment
of the Exercise Price pursuant to Section 14 hereof, the Company shall within
15 days thereafter (i) cause to be filed with the Warrant Agent a certificate
of a firm of independent public accountants of recognized standing selected by
the Board of Directors of the Company (who may be the regular auditors of the
Company) setting forth the Exercise Price after such adjustment and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculations are based and setting forth the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, upon
exercise of a Warrant and payment of the adjusted Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein, and (ii) cause to be given to each of the registered holders of
the Warrant Certificates at such registered holder's address appearing on the
Warrant register written notice of such adjustments by first-class mail,
postage prepaid. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this Section 17.
In case:
(a) the Company shall authorize the issuance to all
holders of shares of Common Stock of rights, options or warrants to subscribe
for or purchase shares of Common Stock or of any other subscription rights or
warrants; or
(b) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in shares of Common Stock or
distributions referred to in subsection (a) of Section 14 hereof); or
(c) of any consolidation or merger to which the Company
is a party and for which approval of any shareholders of the Company is
required, or of the conveyance or transfer of the properties and assets of the
Company substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) a Change of Control (as defined in the Indenture)
occurs; or
(f) the Company proposes to take any action (other than
actions of the character described in Section 14(a)) which would require an
adjustment of the Exercise Price pursuant to Section 14; then the Company shall
cause to be filed with the Warrant Agent and shall cause to be given to each
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<PAGE> 26
of the registered holders of the Warrant Certificates at his address appearing
on the Warrant register, at least 15 days (or 10 days in any case specified in
clauses (a) or (b) above) prior to the applicable record date hereinafter
specified, or promptly in the case of events for which there is no record date,
by first-class mail, postage prepaid, a written notice stating (i) the date as
of which the holders of record of shares of Common Stock to be entitled to
receive any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender offer
or exchange offer for shares of Common Stock, or (iii) the date on which any
such consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up. The failure to give the
notice required by this Section 17 or any defect therein shall not affect the
legality or validity of any distribution, right, option, warrant,
consolidation, merger, conveyance, transfer, lease, dissolution, liquidation or
winding up, or the vote upon any action.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the
right to vote or to consent or to receive notice as shareholders in respect of
the meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company.
SECTION 18. Merger, Consolidation or Change of Name of
Warrant Agent. Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party, or any
corporation succeeding to the business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided
that such corporation would be eligible for appointment as a successor warrant
agent under the provisions of Section 21 hereof. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, and in case at that time any of the Warrant Certificates shall have
been countersigned but not delivered, any such successor to the Warrant Agent
may adopt the countersignature of the original Warrant Agent; and in case at
that time any of the Warrant Certificates shall not have been countersigned,
any successor to the Warrant Agent may countersign such Warrant Certificates
either in the name of the predecessor Warrant Agent or in the name of the
successor to the Warrant Agent; and in all such cases such Warrant Certificates
shall have the full force and effect provided in the Warrant Certificates and
in this Agreement.
In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent whose name has been changed
may adopt the countersignature under its prior name, and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name, and in all such cases such Warrant Certificates shall have
the full force and effect provided in the Warrant Certificates and in this
Agreement.
SECTION 19. Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:
(a) The statements contained herein and in the
Warrant Certificates shall be taken as statements of the Company. The
Warrant Agent assumes no responsibility for the correctness of any of
the same except such as describe the Warrant Agent or action taken or
to be
22
<PAGE> 27
taken by it. The Warrant Agent assumes no responsibility with respect
to the distribution of the Warrant Certificates except as herein
otherwise provided.
(b) The Warrant Agent shall not be responsible
for any failure of the Company to comply with any of the covenants
contained in this Agreement or in the Warrant Certificates to be
complied with by the Company.
(c) The Warrant Agent may consult at any time
with counsel satisfactory to it (who may be counsel for the Company)
and the Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant Certificate in respect of
any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant
Certificate for any action taken in reliance on any Warrant
Certificate, certificate of shares, notice, resolution, waiver,
consent, order, certificate, or other paper, document or instrument
believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties. The Warrant Agent shall not
be bound by any notice or demand, or any waiver, modification,
termination or revision of this Agreement or any of the terms hereof,
unless evidenced by a writing between the Company and the Warrant
Agent.
(e) The Company agrees to pay to the Warrant
Agent reasonable compensation for all services rendered by the Warrant
Agent in the execution of this Agreement, to reimburse the Warrant
Agent for all expenses, taxes (including withholding taxes) and
governmental charges and other charges of any kind and nature incurred
by the Warrant Agent in the execution, delivery and performance of its
responsibilities under this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including
judgments, costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution, delivery and performance of its
responsibilities under this Agreement except as a result of its
negligence or bad faith.
(f) The Warrant Agent shall be under no
obligation to institute any action, suit or legal proceeding or to
take any other action likely to involve expense unless the Company or
one or more registered holders of Warrant Certificates shall furnish
the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not
affect the power of the Warrant Agent to take such action as it may
consider proper, whether with or without any such security or
indemnity. All rights of action under this Agreement or under any of
the Warrants may be enforced by the Warrant Agent without the
possession of any of the Warrant Certificates or the production
thereof at any trial or other proceeding relative thereto, and any
such action, suit or proceeding instituted by the Warrant Agent shall
be brought in its name as Warrant Agent and any recovery of judgment
shall be for the ratable benefit of the registered holders of the
Warrants, as their respective rights or interests may appear.
(g) Except as required by law, the Warrant Agent,
and any stockholder, director, officer or employee of the Warrant
Agent, may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with
or lend money to the Company or otherwise act as fully and freely as
though it were not Warrant Agent under this Agreement. Nothing herein
shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
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<PAGE> 28
(h) The Warrant Agent shall act hereunder solely
as agent for the Company, and its duties shall be determined solely by
the provisions hereof. The Warrant Agent shall not be liable for
anything which it may do or refrain from doing in connection with this
Agreement except for its own negligence or bad faith.
(i) The Warrant Agent shall not at any time be
under any duty or responsibility to any holder of any Warrant
Certificate to make or cause to be made any adjustment of the Exercise
Price or number of the Warrant Shares or other securities or property
deliverable as provided in this Agreement, or to determine whether any
facts exist which may require any of such adjustments, or with respect
to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. The Warrant Agent
shall not be accountable with respect to the validity or value or the
kind or amount of any Warrant Shares or of any securities or property
which may at any time be issued or delivered upon the exercise of any
Warrant or with respect to whether any such Warrant Shares or other
securities will when issued be validly issued and fully paid and
nonassessable, and makes no representation with respect thereto.
SECTION 20. Registration Rights
The Company and Warrant Agent acknowledge that the holders
shall have the registration rights set forth in the Warrant Registration Rights
Agreement, dated as of even date herewith, by and among the Company and the
Initial Purchasers relating to the Warrants and Warrant Shares (the "Warrant
Registration Rights Agreement").
SECTION 21. Change of Warrant Agent. If the Warrant Agent
shall become incapable of acting as Warrant Agent or shall resign as provided
below, the Company shall appoint a successor to such Warrant Agent. If the
Company shall fail to make such appointment within a period of 30 days after it
has been notified in writing of such incapacity by the Warrant Agent or by the
registered holders of a majority of Warrant Certificates, then the registered
holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to such Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company. After appointment the successor to the Warrant Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Warrant Agent without further act or deed; but the former
Warrant Agent shall deliver and transfer to the successor to the Warrant Agent
any property at the time held by it hereunder and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure
to give any notice provided for in this Section 21, however, or any defect
therein, shall not affect the legality or validity of the appointment of a
successor to the Warrant Agent.
The Warrant Agent may resign at any time and be discharged
from the obligations hereby created by so notifying the Company in writing at
least 30 days in advance of the proposed effective date of its resignation. If
no successor Warrant Agent accepts the engagement hereunder by such time, the
Company shall act as Warrant Agent.
SECTION 22. Notices to the Company and Warrant Agent. Any
notice or demand authorized by this Agreement to be given or made by the
Warrant Agent or by the registered holder of any Warrant Certificate to or on
the Company shall be sufficiently given or made when and if deposited in the
mail, first class or registered, postage prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent), as follows:
24
<PAGE> 29
Exide Electronics Group, Inc.
8609 Six Forks Road
Raleigh, NC 27615
Attention: General Counsel
with a copy to:
Smith Helms Mulliss & Moore, L.L.P.
316 West Edenton Street (27603)
P.O. Box 27525
Raleigh, NC 27611-7525
Attention: Brad S. Markoff, Esq.
Any notice pursuant to this Agreement to be given by the
Company or by the registered holder(s) of any Warrant Certificate to the
Warrant Agent shall be sufficiently given when and if deposited in the mail,
first-class or registered, postage prepaid, addressed (until another address is
filed in writing by the Warrant Agent with the Company) to the Warrant Agent at
the Warrant Agent Office as follows:
American Bank National Association
101 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Department
Notice may also be given by facsimile transmission (effective
when receipt is acknowledged) or by overnight delivery service (effective the
next business day).
SECTION 23. Rule 144A. The Company hereby agrees with each
holder, for so long as any Registrable Securities remain outstanding, to make
available, upon request of any holder of Registrable Securities, to any holder
or beneficial owner of Registrable Securities in connection with any sale
thereof and any prospective purchaser of such Registrable Securities designated
by such holder or beneficial owner, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Registrable
Securities pursuant to Rule 144A.
SECTION 24. Supplements and Amendments. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement without
the consent of any holders of Warrant Certificates in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not in any way materially adversely affect the interests of the holders of
Warrant Certificates. Any amendment or supplement to this Agreement that has a
material adverse effect on the interests of holders of the Warrants shall
require the written consent of registered holders of a majority of the then
outstanding Warrants (excluding Warrants held by the Company or any of its
Affiliates). The consent of each holder of a Warrant affected shall be
required for any amendment pursuant to which the Exercise Price would be
increased or the number of Warrant Shares purchasable upon exercise of Warrants
would be decreased (other than in accordance with Section 14 or 16 hereof).
25
<PAGE> 30
SECTION 25. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Warrant Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 26. Termination. This Agreement shall terminate at
5:00 p.m., New York, New York time on March 15, 2006. Notwithstanding the
foregoing, this Agreement will terminate on such earlier date on which all
outstanding Warrants have been exercised.
SECTION 27. Governing Law; Jurisdiction. This Agreement and
each Warrant Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all purposes shall be governed
by and construed in accordance with the internal laws of said State. The
parties hereto irrevocably consent to the jurisdiction of the courts of the
State of New York and any federal court located in such state in connection
with any action, suit or proceeding arising out of or relating to this
Agreement.
SECTION 28. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than
the Company, the Warrant Agent and the registered holders of the Warrant
Certificates any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
the Company, the Warrant Agent and the registered holders of the Warrant
Certificates.
SECTION 29. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
SECTION 30. Further Assurances. From time to time on and
after the date hereof, the Company shall deliver or cause to be delivered to
the Warrant Agent such further documents and instruments and shall do and cause
to be done such further acts as the Warrant Agent shall reasonably request (it
being understood that the Warrant Agent shall have no obligation to make such
request) to carry out more effectively the provisions and purposes of this
Agreement, to evidence compliance herewith or to assure itself that it is
protected hereunder.
[Signature Page Follows]
26
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
EXIDE ELECTRONICS GROUP, INC.
By: /s/ Marty R. Kittrell
--------------------------------
Name: Marty R. Kittrell
Title: Vice President, Chief Financial
Officer, Treasurer and Assistant
Secretary
AMERICAN BANK NATIONAL ASSOCIATION
By: /s/ Frank P. Leslie III
--------------------------------------
Authorized Signatory
By: /s/ Thomas M. Korsman
--------------------------------------
Authorized Signatory
<PAGE> 32
EXHIBIT A
EXERCISABLE ON OR AFTER THE SEPARATION DATE (AS DEFINED HEREIN). THE
WARRANTS EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE SEPARATELY FROM THE
NOTES ORIGINALLY SOLD AS A UNIT WITH SUCH WARRANTS UNTIL THE EARLIEST TO OCCUR
OF (I) 90 DAYS AFTER THE ISSUANCE OF THE UNITS, (II) SUCH DATE AS DONALDSON,
LUFKIN & JENRETTE SECURITIES CORPORATION MAY IN THEIR DISCRETION, DEEM
APPROPRIATE (BUT IN NO EVENT EARLIER THAN 10 DAYS AFTER THE ISSUE DATE (AS
DEFINED IN THE INDENTURE RELATING TO THE NOTES)), (III) IN THE EVENT A CHANGE
OF CONTROL (AS DEFINED IN THE INDENTURE RELATING TO THE NOTES) OCCURS, THE DATE
THE COMPANY MAILS NOTICE THEREOF TO HOLDERS OF NOTES AND (IV) THE DATE ON WHICH
THE EXCHANGE OFFER REGISTRATION STATEMENT (AS DEFINED IN THE INDENTURE RELATING
TO THE NOTES) IS DECLARED EFFECTIVE (THE "SEPARATION DATE").
THE COMMON STOCK, PAR VALUE $0.01, OF THE COMPANY (THE "COMMON STOCK")
FOR WHICH THIS WARRANT IS EXERCISABLE MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES ABSENT REGISTRATION UNDER THE SECURITIES AND EXCHANGE ACT OF 1933, AS
AMENDED (THE "EXCHANGE ACT") AND ANY APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION FROM REGISTRATION REQUIREMENTS. ACCORDINGLY, NO WARRANT
HOLDER SHALL BE ENTITLED TO EXERCISE SUCH HOLDER'S WARRANTS AT ANY TIME UNLESS,
AT THE TIME OF EXERCISE, (i) A REGISTRATION STATEMENT UNDER THE EXCHANGE ACT
RELATING TO THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS
WARRANT (THE "WARRANT SHARES") HAS BEEN FILED WITH, AND DECLARED EFFECTIVE BY,
THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), AND NO STOP ORDER
SUSPENDING THE EFFECTIVENESS OF SUCH REGISTRATION STATEMENT HAS BEEN ISSUED BY
THE SEC OR (ii) THE ISSUANCE OF THE WARRANT SHARES IS PERMITTED PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE EXCHANGE ACT.
Form of Initial Warrant Certificate
[Face]
No. _____ 125,000 Warrants
Warrant Certificate
Exide Electronics Group, Inc.
This Warrant Certificate certifies that Cede & Co., or its
registered assigns, is the registered holder of Warrants expiring March 15,
2006 (the "Warrants"), to purchase shares of the Common Stock, par value $.01
(the "Common Stock"), of Exide Electronics Group, Inc., a Delaware corporation
("the Company"). Each Warrant entitles the registered holder upon exercise at
any time from 9:00 a.m. on the Separation Date referred to below until 5:00
p.m. New York City Time on March 15, 2006, to receive from the Company 5.15
fully paid and nonassessable shares of Common Stock (the "Warrant Shares") at
the initial exercise price (the "Exercise Price") of $13.475 per share payable
in lawful money of the United States of America upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office or agency of the
Warrant Agent, but only subject to the conditions set forth herein and in the
Warrant Agreement referred to on the reverse hereof. The Exercise Price and
number of Warrant Shares issuable upon exercise of the Warrants are subject to
adjustment upon the occurrence of certain events set forth in the Warrant
Agreement. All capitalized terms not defined herein shall have the meanings
assigned to such terms in the Warrant Agreement.
A-1
<PAGE> 33
No Warrant may be exercised before the Separation Date. No
Warrant may be exercised after 5:00 p.m., New York, New York Time on March 15,
2006 and to the extent not exercised by such time such Warrants shall become
void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the Warrant
Agreement.
This Warrant Certificate shall be governed and construed in
accordance with the internal laws of the State of New York.
A-2
<PAGE> 34
IN WITNESS WHEREOF, Exide Electronics Group, Inc. has caused
this Warrant Certificate to be signed by its Chief Financial Officer and by its
Secretary, each by a facsimile of his signature, and has caused a facsimile of
its corporate seal to be affixed hereunto or imprinted hereon.
Dated:
Exide Electronics Group, Inc.
By:
------------------------------------
Marty R. Kittrell
Chief Financial Officer,
Vice President, Treasurer and
Assistant Secretary
By:
------------------------------------
Nicholas J. Costanza
Vice President,
Chief Administrative Officer,
Chief Legal Counsel and Secretary
(seal)
Countersigned:
American Bank National Association,
as Warrant Agent
By:
--------------------------------------
Authorized Signatory
A-3
<PAGE> 35
Form of Warrant Certificate
[Reverse]
[Unless and until it is exchanged in whole or in part for
Warrants in definitive form, this Warrant may not be transferred except as a
whole by the depositary to a nominee of the depositary or by a nominee of the
depositary to the depositary or another nominee of the depositary or by the
depositary or any such nominee to a successor depositary or a nominee of such
successor depositary. The Depository Trust Company ("DTC"), (55 Water Street,
New York, New York) shall act as the depositary until a successor shall be
appointed by the Company and the Warrant Agent. Unless this certificate is
presented by an authorized representative of DTC to the issuer or its agent for
registration of transfer, exchange or payment, and any certificate issued is
registered in the name of Cede & Co. or such other name as requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or such
other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.](1)
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH
NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO
A PERSON WHO 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, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT OR (d) 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), (2) TO THE COMPANY OR (3)
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 AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE.
--------------------
(1) This paragraph is to be included only if the Warrant is in
global form.
A-4
<PAGE> 36
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants expiring March 15, 2006 entitling the
holder upon exercise to receive shares of common stock, par value $0.01, of the
Company (the "Common Stock"), and are issued or to be issued pursuant to a
Warrant Agreement dated as of March 13, 1996 (the "Warrant Agreement"), duly
executed and delivered by the Company to American Bank National Association, as
warrant agent (the "Warrant Agent"), which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
Warrants may be exercised at any time from 9:00 a.m. on or
after the earliest to occur of (i) June 11, 1996, (ii) such date as Donaldson,
Lufkin & Jenrette Securities Corporation may in their discretion, deem
appropriate (but in no event earlier than 10 days after the Issue Date (as
defined in the Indenture relating to the Notes)), (iii) in the event a Change
of Control (as defined in the Indenture relating to the Notes) occurs, the date
the Company mails notice thereof to holders of Notes and (iv) the date on which
the Exchange Offer Registration Statement (as defined in the Indenture relating
to the Notes) is declared effective (the "Separation Date") and until 5:00
p.m., New York City Time on March 15, 2006. The holder of Warrants evidenced
by this Warrant Certificate may exercise them by surrendering this Warrant
Certificate, with the form of election to purchase set forth hereon properly
completed and executed, together with payment of the Exercise Price in lawful
money of the United States of America at the office of the Warrant Agent. In
the event that upon any exercise of Warrants evidenced hereby the number of
Warrants exercised shall be less than the total number of Warrants evidenced
hereby, there shall be issued to the holder hereof or his assignee a new
Warrant Certificate evidencing the number of Warrants not exercised. No
adjustment shall be made for any dividends on any Common Stock issuable upon
exercise of this Warrant.
The Warrant Agreement provides that upon the occurrence of
certain events the Exercise Price set forth on the face hereof may, subject to
certain conditions, be adjusted. If the Exercise Price is adjusted, the
Warrant Agreement provides that the number of shares of Common Stock issuable
upon the exercise of each Warrant shall be adjusted. No fractions of a share
of Common Stock will be issued upon the exercise of any Warrant, but the
Company will pay the cash value thereof determined as provided in the Warrant
Agreement.
The Warrant Agreement provides that the Company shall be bound
by certain registration obligations with respect to the Common Stock issuable
upon exercise of the Warrants, as set forth in the Warrant Registration Rights
Agreement (as defined in the Warrant Agreement).
Warrant Certificates, when surrendered at the office of the
Warrant Agent by the registered holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged, in the
manner and subject to the limitations provided in the Warrant Agreement, but
without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this
Warrant Certificate at the office of the Warrant Agent a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge except for any tax or other governmental
charge imposed in connection therewith.
A-5
<PAGE> 37
The Company and the Warrant Agent may deem and treat the
registered holder(s) thereof as the absolute owner(s) of this Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone), for the purpose of any exercise hereof, of any distribution to
the holder(s) hereof, and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-6
<PAGE> 38
Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive __________ shares of
Common Stock and herewith (check item) tenders payment for such shares to the
order of Exide Electronics Group, Inc. in the amount of $_____ in accordance
with the terms hereof. The undersigned requests that a certificate for such
shares be registered in the name of _______________________________, whose
address is ______________________________________ and that such shares be
delivered to ________________________________ whose address is
________________________________.
If said number of shares is less than all of the shares of
Common Stock purchasable hereunder, the undersigned requests that a new Warrant
Certificate representing the remaining balance of such shares be registered in
the name of _____________________, whose address is __________________, and
that such Warrant Certificate be delivered to ________________, whose address
is _____________________.
Date:
--------------------
Your Signature:
------------------------
(Sign exactly as your name appears on
the face of this Warrant)
Signature Guarantee:
A-7
<PAGE> 39
SCHEDULE OF EXCHANGES OF DEFINITIVE WARRANTS(2)
The following exchanges of a part of this Global Warrant for definitive
Warrants have been made:
<TABLE>
<CAPTION>
Number of Warrants
Amount of decrease Amount of increase in this Global
in Number of in Number of Warrant following Signature of
Warrants in this Warrants in this such decrease or authorized officer
Date of Exchange Global Warrant Global Warrant increase of Warrant Agent
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
- -------------------
(2) This is to be included only if the Warrant is in global
form.
A-8
<PAGE> 40
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
WARRANTS
Re: _____ Warrants to Purchase Common Stock (the "Warrants") of EXIDE
ELECTRONICS GROUP, INC.
This Certificate relates to _____ Warrants held in * ________
book-entry or * ________ definitive form by _________ (the "Transferor").
The Transferor*:
/ / has requested the Warrant Agent by written order to deliver in
exchange for its beneficial interest in the Global Warrants held by the
depositary a Warrant or Warrants in definitive, registered form equal to its
beneficial interest in such Global Warrant (or the portion thereof indicated
above); or
/ / has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants
/ / In connection with such request and in respect of each such
Warrant, the Transferor does hereby certify that the Transferor is familiar
with the Warrant Agreement relating to the above captioned Warrants and that
the transfer of this Warrant does not require registration under the Securities
Act of 1933, as amended (the "Securities Act") because:
/ / Such Warrant is being acquired for the Transferor's own account
without transfer (in satisfaction of Section 5 of the Warrant Agreement).
/ / Such Warrant is being transferred (i) to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act), in
reliance on Rule 144A or (ii) pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act (and, in the case of clause
(ii), based on an opinion of counsel if the Company so requests).
/ / Such Warrant is being transferred (i) in accordance with Rule
144 under the Securities Act (and based on an opinion of counsel if the Company
so requests) or (ii) pursuant to an effective registration statement under the
Securities Act.
/ / Such Warrant is being transferred to an institutional accredited
investor within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act pursuant to a private placement exemption from the registration
requirements of the Securities Act (together with a certification).
- ------------------
* Check applicable box.
B-1
<PAGE> 41
/ / Such Warrant is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests).
[INSERT NAME OF TRANSFEROR]
By:
-------------------------
Date:
- ------------------
* Check applicable box.
B-2
<PAGE> 1
EXHIBIT 4.5
EXECUTION COPY
================================================================================
WARRANT
REGISTRATION RIGHTS AGREEMENT
Dated as of March 13, 1996
by and among
EXIDE ELECTRONICS GROUP, INC.,
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION,
J.P. MORGAN SECURITIES INC.,
and
NATIONSBANC CAPITAL MARKETS, INC.
================================================================================
<PAGE> 2
This Warrant Registration Rights Agreement (the "Agreement")
is made and entered into as of March 13, 1996 by and among Exide Electronics
Group, Inc., a Delaware corporation (the "Company") and Donaldson, Lufkin &
Jenrette Securities Corporation, J.P. Morgan Securities Inc. and NationsBanc
Capital Markets, Inc. (each an "Initial Purchaser" and together, "Initial
Purchasers"), who have agreed to purchase in the aggregate 125,000 Units (the
"Units") consisting of $125,000,000 principal amount of the Company's 11 1/2%
Senior Subordinated Notes due 2006 and warrants (the "Warrants") to purchase up
to an aggregate of 643,750 shares of Common Stock of the Company pursuant to
the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement (the
"Purchase Agreement"), dated as of March 7, 1996, by and among the Company and
the Initial Purchasers. In order to induce the Initial Purchasers to purchase
the Units, the Company has agree to provide the registration rights set forth
in this Agreement. The execution and delivery of this Agreement is a condition
to the obligations of the Initial Purchasers set forth in Section 8 of the
Purchase Agreement. All defined terms used but not defined herein shall have
the meanings ascribed to them in the Indenture (as defined below).
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Business Day: Any day except a Saturday, Sunday or other day
in the City of New York, or in the city of the corporate trust office of the
Trustee, on which banks are authorized to close.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Common Stock: The common stock, $0.01 par value, of the
Company.
Exchange Act: The Securities Exchange Act of 1934, as amended
from time to time.
Holders: As defined in Section 2 hereof.
Indenture: The Indenture, dated the Closing Date, between the
Company and American Bank National Association, as trustee (the "Trustee"),
pursuant to which the Units are to be issued, as such Indenture is amended or
supplemented from time to time in accordance with the terms thereof.
NASD: National Association of Securities Dealers, Inc.
Notes: The 11 1/2% Senior Subordinated Notes due 2006 of the
Company, being sold and issued pursuant to the Purchase Agreement and the
Indenture, or any notes exchanged therefor as contemplated by the Indenture.
<PAGE> 3
Person: An individual, partnership, corporation, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration
Statement at the time such Registration Statement is declared effective, as
amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Registrable Securities: The Warrants, Warrant Shares and any
other securities issued or issuable with respect to the Warrants or the Warrant
Shares by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization; provided that a security ceases to be a Registrable Security
when it is no longer a Transfer Restricted Security.
Registration Expenses: See Section 6 hereof.
Registration Statement: Any registration statement of the
Company which covers Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, and all exhibits
and all material incorporated by reference in such Registration Statement.
Transfer Restricted Securities: A Warrant or Warrant Share,
until such Warrant or Warrant Share (i) has been effectively registered under
the Act and disposed of in accordance with the Registration Statement covering
it, (ii) is distributed to the public pursuant to Rule 144 or (iii) may be sold
or transferred pursuant to Rule 144(k) (or any similar provisions then in
force) under the Act or otherwise.
Warrants: The warrants of the Company issued and sold
pursuant to the Purchase Agreement and the Warrant Agreement, together with any
warrants issued in substitution or replacement therefor.
Warrant Agreement: The Warrant Agreement dated the Closing
Date by and among the Company and American Bank National Association, as
Warrant Agent.
Warrant Shares: The Common Stock or other securities which
any Holder may acquire upon exercise of a Warrant, together with any other
securities which such Holder may acquire on account of any such securities,
including, without limitation, as the result of any dividend or other
distribution on Common Stock or any split-up of such Common Stock as provided
for in the Warrant Agreement.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Registrable Securities. The securities entitled to
the benefits of this Agreement are the Registrable Securities.
(b) Holders of Registrable Securities. A Person is
deemed to be a Holder of Registrable Securities whenever such Person owns
Registrable Securities or has the right to acquire such Registrable Securities,
whether or not such acquisition has actually been effected and disregarding any
legal restrictions upon the exercise of such right.
2
<PAGE> 4
SECTION 3. SHELF REGISTRATION
(a) The Company shall file a "shelf" registration with
respect to all Registrable Securities on any appropriate form pursuant to Rule
415 (or similar rule that may be adopted by the Commission) under the Act (the
"Shelf Registration") (i) covering resales by the Holders of the Warrants and
resales of the Warrant Shares and (ii) covering the exercise of Warrants
(unless, in the opinion of counsel to the Company, registration of such
exercise is not required) on or prior to 120 days after the Closing Date, and
shall use its best efforts to have such Shelf Registration declared effective
by the Commission on or prior to 150 days after the Closing Date.
(b) If the Holders of a majority in aggregate principal
amount of the Registrable Securities to be registered in the Shelf Registration
so elect, an offering of Registrable Securities pursuant to the Shelf
Registration may be effected in the form of an underwritten offering. In such
event, and if the managing underwriters advise the Company and the Holders of
such Registrable Securities in writing that in their opinion the amount of
Registrable Securities proposed to be sold in such offering exceeds the amount
of Registrable Securities which can be sold in such offering, there shall be
included in such underwritten offering the amount of such Registrable
Securities which in the opinion of such underwriters can be sold, and such
amount shall be allocated pro rata among the Holders of such Registrable
Securities on the basis of the principal amount of Registrable Securities
requested to be included by such Holders. The Holders of the Registrable
Securities to be registered shall pay all underwriting discounts and
commissions of such underwriters.
(c) If any of the Registrable Securities covered by the Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will administer the offering
will be selected by the Holders of a majority in aggregate principal amount of
such Registrable Securities included in such offering; provided that such
investment bank or manager shall be reasonably satisfactory to the Company.
(d) The Company shall use its best efforts to keep the Shelf
Registration continuously effective until March 15, 2006.
The Company further agrees to use its best efforts to prevent
the happening of any event that would cause the Registration Statement pursuant
to this Section 3 to contain a material misstatement or omission or to be not
effective and usable for resale of the Registrable Securities during the period
that such Registration Statement is required to be effective and usable.
(e) Each Holder of Registrable Securities whose Registrable
Securities are covered by a Registration Statement filed pursuant to this
Section 3 agrees, if requested by the managing underwriters in an underwritten
offering, not to effect any public sale or distribution of securities of the
Company of the same class as any Securities included in such Registration
Statement, including a sale pursuant to Rule 144 under the Act (except as part
of such underwritten registration), during the 10-day period prior to, and
during the 45-day period beginning on, the closing date of each underwritten
offering made pursuant to such Registration Statement, to the extent timely
notified in writing by the Company or the managing underwriters; provided,
however, that each Holder of Registrable Securities shall be subject to the
hold-back restrictions of this Section 3(e) only once during the term of this
Agreement.
The foregoing provisions shall not apply to any Holder of
Registrable Securities if such Holder is prevented by applicable statute or
regulation from entering into any such agreement; provided, however, that any
such Holder shall undertake, in its request to participate in any such
underwritten offering,
3
<PAGE> 5
not to effect any public sale or distribution of any applicable class of
Registrable Securities commencing on the date of sale of such applicable class
of Registrable Securities unless it has provided 45 days prior written notice
of such sale or distribution to the underwriter or underwriters.
SECTION 4. LIQUIDATED DAMAGES
If the Registration Statement: (i) is not filed with the
Commission on or prior to the date specified for such filing in Section 3(a)
hereof; (ii) has not been declared effective by the Commission pursuant to
Section 3(a) hereof; or (iii) following the date such Registration Statement is
declared effective by the Commission, shall cease to be effective without being
restored to effectiveness by amendment or otherwise within 30 business days,
(each such event referred to in clauses (i) through (iii), a "Shelf
Registration Default") to the extent permitted by applicable law, the Company
shall pay as liquidated damages and not as a penalty to each Holder during the
first 90-day period immediately following the occurrence, and during the
continuance of such Shelf Registration Default, an amount equal to $.0025 per
week per Warrant (or per such number of Warrant Shares then issuable upon
exercise of or in respect of a Warrant) held by such Holder for each week or
pro rata for a portion of each week thereof that the Shelf Registration Default
continues. To the extent permitted by applicable law, the amount of the
liquidated damages will increase by an additional $.0025 per week per Warrant
(or per such number of Warrant Shares then issuable upon exercise of or in
respect of a Warrant) with respect to each subsequent 90-day period until all
Shelf Registration Defaults have been cured, up to a maximum amount of
liquidated damages of $.0125 per week per Warrant (or per such number of
Warrant Shares then issuable upon exercise of or in respect of a Warrant).
All accrued liquidated damages shall be paid to record Holders
by the Company by wire transfer of immediately available funds, or by mailing a
federal funds check, on each Interest Payment Date (as defined in the
Indenture). All obligations of the Company set forth in the preceding
paragraph that are outstanding with respect to any Registrable Security at the
time such security has been effectively registered under the Act shall survive
until such time as all such obligations with respect to such security have been
satisfied in full.
SECTION 5. REGISTRATION PROCEDURES
(a) General Provisions. In connection with the Company's
registration obligations pursuant to Section 3 hereof, the Company will use its
best efforts to effect such registration to permit the sale of such Registrable
Securities in accordance with the intended method or methods of disposition
thereof, and pursuant thereto the Company will as expeditiously as possible:
(1) use its best efforts to keep such Registration
Statement continuously effective and provide or incorporate by
reference all requisite financial statements for the period specified
in Section 3 of this Agreement. Upon the occurrence of any event that
would cause any such Registration Statement or the Prospectus
contained therein (A) to contain a material misstatement or omission
or (B) not to be effective and usable for resale of Registrable
Securities during the period required by this Agreement, the Company
shall file promptly an appropriate amendment to such Registration
Statement or file appropriate documents that will be so incorporated
by reference, (1) in the case of clause (A), correcting any such
misstatement or omission, and (2) in the case of either clause (A) or
(B), use its best efforts to cause such amendment to be declared
effective and
4
<PAGE> 6
such Registration Statement and the related Prospectus to become
usable for their intended purpose(s) as soon as practicable
thereafter;
(2) prepare and file with the Commission such
amendments and post-effective amendments to the Registration Statement
as may be necessary to keep the Registration Statement effective for
the period set forth in Section 3(d) hereof; cause the Prospectus to
be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act; and
comply in all material respects with the provisions of the Act with
respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Registration Statement or supplement to the
Prospectus; the Company shall not be deemed to have used its best
efforts to keep a Registration Statement effective during the
applicable period if it voluntarily takes any action that would result
in selling Holders of the Registrable Securities covered thereby not
being able to sell such Registrable Securities during that period
unless such action is required under applicable law, provided that the
foregoing shall not apply to actions taken by the Company in good
faith and for valid business reasons, including without limitation the
acquisition or divestiture of assets, so long as the Company promptly
thereafter complies with the requirements of clause (14) below, if
applicable;
(3) advise the underwriter(s), if any, and selling
Holders promptly and, if requested by such Persons, confirm such
advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to any Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments
or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement under
the Act or of the suspension by any state securities commission of the
qualification of the Registrable Securities for offering or sale in
any jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any fact or the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in the
Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an
order suspending the qualification or exemption from qualification of
the Registrable Securities under state securities or Blue Sky laws,
the Company shall use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
(4) make available to each selling Holder named in
any Registration Statement or Prospectus and each of the
underwriter(s) in connection with such sale, if any, before filing
with the Commission, copies of any Registration Statement or any
Prospectus included therein or any amendments or supplements to any
such Registration Statement or Prospectus and the Company will not
file or will correct any such Registration Statement or Prospectus or
any amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which the selling Holders of the Registrable Securities covered by
such Registration Statement or the underwriter(s) in connection with
such sale, if any, shall reasonably object within five Business Days
after the receipt thereof. A selling Holder or underwriter, if any,
5
<PAGE> 7
shall be deemed to have reasonably objected to such filing if such
Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement
or omission or fails to comply with the applicable requirements of the
Act;
(5) promptly upon the filing of any document that is
to be incorporated by reference into a Registration Statement or
Prospectus, make available copies of such document to the selling
Holders and to the underwriter(s) in connection with such sale, if
any, make the Company's representatives available for discussion of
such document and other customary due diligence matters, and include
such information in such document prior to the filing thereof as such
selling Holders or underwriter(s), if any, reasonably may request;
(6) make available at reasonable times for
inspection by the selling Holders, any underwriter participating in
any disposition pursuant to such Registration Statement and any
attorney or accountant retained by such selling Holders or any of such
underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney or accountant in
connection with such Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior to its
effectiveness; provided that any person to whom information is
provided under this clause (6) agrees in writing to maintain the
confidentiality of such information to the extent such information is
not in the public domain;
(7) if requested by any selling Holders or the
underwriter(s) in connection with such sale, if any, promptly include
in any Registration Statement or Prospectus, pursuant to a supplement
or post-effective amendment if necessary, such information as such
selling Holders and underwriter(s), if any, may reasonably request to
have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Registrable Securities,
information with respect to the principal amount of Registrable
Securities being sold to such underwriter(s), the purchase price being
paid therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering; and make all required filings
of such Prospectus supplement or post-effective amendment as soon as
practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(8) furnish to each selling Holder and each of the
underwriter(s) in connection with such sale, if any, without charge,
at least one copy of the Registration Statement, as first filed with
the Commission, and of each amendment thereto, and make available all
documents incorporated by reference therein and all exhibits
(including exhibits incorporated therein by reference);
(9) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as such Persons reasonably may request; the
Company hereby consents to the use of the Prospectus and any amendment
or supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale
of the Registrable Securities covered by the Prospectus or any
amendment or supplement thereto;
(10) enter into such agreements (including, unless
not required pursuant to Section 3 hereof, an underwriting agreement)
and make such representations and warranties and take all such other
actions in connection therewith in order to expedite or facilitate the
disposition of the Registrable Securities pursuant to any Registration
Statement contemplated by this Agreement as may be reasonably
requested by any Holder of Registrable Securities or underwriter in
connection
6
<PAGE> 8
with any sale or resale pursuant to any Registration Statement
contemplated by this Agreement, and in such connection, whether or not
an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, the Company shall:
(A) furnish to each selling Holder and each
underwriter, if any, upon the effectiveness of the
Registration Statement:
(1) a certificate, dated the date of
effectiveness of the Registration Statement, signed
by (x) the President or any Vice President and (y) a
principal financial or accounting officer of the
Company, confirming, as of the date thereof, the
matters set forth in paragraphs (a), (c) and (d) of
Section 10 of the Purchase Agreement and such other
matters as the Holders and/or underwriter(s) may
reasonably request;
(2) an opinion, dated the date of
effectiveness of the Registration Statement, of
counsel for the Company, covering (i) due
authorization and enforceability of the Warrants,
(ii) a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company and representatives of
the independent public accountants for the Company
and have considered the matters required to be stated
therein and the statements contained therein,
although such counsel has not independently verified
the accuracy, completeness or fairness of such
statements; and that such counsel advises that, on
the basis of the foregoing (relying as to materiality
to a large extent upon facts provided to such counsel
by officers and other representatives of the Company
and without independent check or verification), no
facts came to such counsel's attention that caused
such counsel to believe that the applicable
Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto
became effective, and contained an untrue statement
of a material fact or omitted to state a material
fact required to be stated therein or necessary to
make the statements therein not misleading, or that
the Prospectus contained in such Registration
Statement as of its date contained an untrue
statement of a material fact or omitted to state a
material fact necessary in order to make the
statements therein, in the light of the circumstances
under which they were made, not misleading and (iii)
such other matters of the type customarily covered in
opinions of counsel for an issuer in connection with
similar securities offerings, as may reasonably be
requested by such parties. Without limiting the
foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not
independently verified, the accuracy, completeness or
fairness of the financial statements, notes and
schedules and other financial, statistical and
accounting data included in any Registration
Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated as of
the date of effectiveness of the Registration
Statement, from the Company's independent
accountants, in the customary form and covering
matters of the type customarily covered in comfort
letters to underwriters in connection with primary
underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to
Section 10(h) of the Purchase Agreement, without
exception;
7
<PAGE> 9
(B) set forth in full or incorporate by reference in
the underwriting agreement, if any, in connection with any
sale or resale pursuant to any Registration Statement the
indemnification provisions and procedures of Section 7 hereof
with respect to all parties to be indemnified pursuant to said
Section 7; and
(C) deliver such other documents and certificates as
may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Company pursuant to this clause
(10), if any.
The above shall be done at each closing under such
underwriting or similar agreement, as and to the extent required
thereunder, and if at any time the representations and warranties of
the Company contemplated in (A)(1) above cease to be true and correct,
the Company shall so advise the underwriter(s), if any, and selling
Holders promptly and if requested by such Persons, shall confirm such
advice in writing;
(11) prior to any public offering of Registrable
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration
and qualification of the Registrable Securities under the securities
or Blue Sky laws of such jurisdictions as the selling Holders or
underwriter(s), if any, may request and do any and all other acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided, however, that the Company shall not
be required to register or qualify as a foreign corporation where it
is not now so qualified or to take any action that would subject it to
the service of process in suits or to taxation, other than as to
matters and transactions relating to the Registration Statement, in
any jurisdiction where it is not now so subject;
(12) in connection with any sale of Registrable
Securities that will result in such securities no longer being
Transfer Restricted Securities, cooperate with the selling Holders and
the underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be
sold and not bearing any restrictive legends; and to register such
Registrable Securities in such denominations and such names as the
Holders or the underwriter(s), if any, may request at least two
Business Days prior to such sale of Registrable Securities;
(13) use its best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may
be necessary to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate the disposition of such
Registrable Securities, subject to the proviso contained in clause
(11) above;
(14) if any fact or event contemplated by clause (2)
above shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of Registrable Securities, the Prospectus will not contain
an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
8
<PAGE> 10
(15) provide a CUSIP number for all Registrable
Securities not later than the effective date of a Registration
Statement covering such Registrable Securities and provide the Trustee
under the Indenture with printed certificates for the Registrable
Securities which are in a form eligible for deposit with the
Depository Trust Company;
(16) cooperate and assist in any filings required to
be made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the
rules and regulations of the NASD, and use its best efforts to cause
such Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Registrable Securities to consummate the disposition
of such Registrable Securities;
(17) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term
is defined in paragraph (c) of Rule 158 under the Act);
(18) cause all Registrable Securities covered by the
Registration Statement to be listed on each securities exchange on
which similar securities issued by the Company are then listed if
requested by the Holders of a majority in aggregate principal amount
of Registrable Securities or the managing underwriter(s), if any;
(19) provide promptly to each Holder upon written
request each document filed with the Commission pursuant to the
requirements of Section 13 or Section 15(d) of the Exchange Act; and
(20) if the registration is a registration in which
securities of the Company are sold to an underwriter for reoffering to
the public, obtain a customary comfort letter, dated as of the date of
effectiveness of each Registration Statement, addressed to the Board
of Directors of the Company from the Company's independent
accountants, in the customary form and covering matters of the type
customarily covered in comfort letters to boards of directors in
underwritten offerings.
(b) Restrictions on Holders. Each Holder agrees by
acquisition of a Registrable Security that, upon receipt of any notice from the
Company of the existence of any fact of the kind described in Section
5(a)(3)(D) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the applicable Registration Statement until
such Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(a)(14) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus. If so directed by the Company, each Holder
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities that was current at the time of receipt of
such notice. In the event the Company shall give any such notice, the time
period regarding the effectiveness of such Registration Statement set forth in
Section 3 hereof, as applicable, shall be extended by the number of days during
the period from and including the date of the giving of such notice pursuant to
Section 5(a)(3)(D) hereof to and including the date when each selling Holder
covered by such Registration Statement shall have received the copies of the
9
<PAGE> 11
supplemented or amended Prospectus contemplated by Section 5(a)(14) hereof or
shall have received the Advice.
SECTION 6. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of
or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses (including
filings made with the NASD (including, if applicable, the fees and expenses of
any "qualified independent underwriter" and its counsel, as may be required by
the rules and regulations of the NASD)); (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including, without limitation, expenses of printing
or engraving certificates for the Registrable Securities in a form eligible for
deposit with the Depositary Trust Company and printing of Prospectuses),
messenger and delivery services and telephone; (iv) all fees and disbursements
of counsel for the Company and, in accordance with Section 6(b) below, the
Holders of Transfer Restricted Securities; (v) all application and filing fees
in connection with listing the Registrable Securities on a national exchange or
automated quotation system if required hereunder; and (vi) all fees and
disbursements of independent certified public accountants of the Company
(including the expenses of any special audit and comfort letters required by or
incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit and the fees and expenses of any Person, including special experts,
retained by the Company.
(b) In connection with each Registration Statement
required hereunder, the Company will reimburse the Holders of Registrable
Securities being registered pursuant to such Registration Statement for the
fees and disbursements of not more than one counsel chosen by the Holders of a
majority of the principal amount of such Registrable Securities, or more than
one, if, in the reasonable judgment of counsel for the Holders and counsel for
the Company, a conflict exists among such Holders. Notwithstanding the
provisions of this Section 6, each Holder of Registrable Securities shall pay
all registration expenses to the extent required by applicable law.
SECTION 7. INDEMNIFICATION
The Company agrees to indemnify and hold harmless the Holders
and each person, if any, who controls the Holders within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, from and against
any and all losses, claims, damages, liabilities and judgments caused by any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendment or supplement thereto), or caused by
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments arise
out of or are based upon any such untrue statement or alleged untrue statement
or omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
Holder expressly for use therein.
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<PAGE> 12
(a) In case any action shall be brought against the
Holders or any person controlling the Holders, based upon the Registration
Statement or the Prospectus or any amendment or supplement thereto and with
respect to which indemnity may be sought against the Company, the Holders shall
promptly notify the Company in writing and the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
indemnified party and payment of all fees and expenses. The Holders or any
such controlling person shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of the Holders or such controlling
person unless (i) the employment of such counsel shall have been specifically
authorized in writing by the Company, (ii) the Company shall have failed to
assume the defense and employ counsel or (iii) the named parties to any such
action (including any impleaded parties) include both the Holders or such
controlling person and the Company and the Holders or such controlling person
shall have been advised in writing by such counsel that there may be one or
more legal defenses available to it which are different from or additional to
those available to the Company (in which case the Company shall not have the
right to assume the defense of such action on behalf of the Holders or such
controlling person, it being understood, however, that the Company shall not,
in connection with such action or similar or related actions arising out of the
same general allegations or circumstances, be liable for the fees and expenses
of more than one separate firm of attorneys (in addition to any local counsel)
for the Holders and all such controlling persons and that all such fees and
expenses shall be reimbursed as they are incurred). The Company shall not be
liable for any settlement of any such action effected without its written
consent but if settled with its written consent, the Company agrees to
indemnify and hold harmless the Holders and any such controlling person from
and against any loss or liability by reason of such settlement.
Notwithstanding the immediately preceding sentence, if in any case where the
fees and expenses of counsel are at the expense of the indemnifying party and
an indemnified party shall have requested the indemnifying party to reimburse
the indemnified party for such fees and expenses of counsel as incurred, such
indemnifying party agrees that it shall be liable for any settlement of any
action effected without its written consent if (i) such settlement is entered
into more than ten business days after the receipt by such indemnifying party
of the aforesaid request and (ii) such indemnifying party shall have failed to
reimburse the indemnified party in accordance with such request for
reimbursement prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(b) The Holders agree, severally and not jointly, to
indemnify and hold harmless the Company, its directors, officers and any person
controlling 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 the Holders, but only with respect to information
relating to the Holders furnished in writing to the Company by the Holders
expressly for use in the Registration Statement or the Prospectus. In case any
action shall be brought against the Company, any of its directors, any such
officer or any person controlling the Company based on the Registration
Statement and the Prospectus and in respect of which indemnity may be sought
against the Holders, the Holders shall have the rights and duties given to the
Company (except that the Holders may but shall not be required to assume the
defense thereof), and the Company, any of its directors, any such officers and
any person controlling the Company shall have the rights and duties given to
the Holders, by Section 7(a) hereof.
(c) If the indemnification provided for in this Section 7
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities and judgments (i)
11
<PAGE> 13
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand from the offering of the Registrable Securities
and any such Holder from its sale of the Registrable Securities on the other
hand or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Holders in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or judgments, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Holders shall be deemed to be in the same
proportion as the total proceeds from the offering of the Registrable
Securities (before deducting expenses) received by the Company, and the total
proceeds received by such Holder upon its sale of the Registrable Securities,
respectively. The relative fault of the Company and the Holders shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or the Holders and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 7(c) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, the Holders
shall not be required to contribute any amount in excess of the amount received
by such Holder with respect to the sale of its Registrable Securities which
exceeds the sum of (A) the amount paid by such Holder for such Registrable
Securities plus (B) the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 7(c) are several in proportion to the respective amount of Registrable
Securities purchased by each of the Holders hereunder and not joint.
(d) The Company hereby designates CT Corporation Systems,
New York, New York, a Delaware corporation, as its authorized agent, upon which
process maybe served in any action, suit or proceeding which may be instituted
in any state or federal court in the State of New York by the Holders or person
controlling the Holders asserting a claim for indemnification or contribution
under or pursuant to this Section 7, and the Company will accept the
jurisdiction of such court in such action, and waive, to the fullest extent
permitted by applicable law, any defense based upon lack of personal
jurisdiction or venue. A copy of any such process shall be sent or given to
the Company at the address for notices specified in Section 9(e) hereof.
(e) The indemnity and contribution agreements contained
in this Section 7 are in addition to any liability which the indemnifying
persons may otherwise have to the indemnified persons referred to above.
12
<PAGE> 14
SECTION 8. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Registrable Securities remain outstanding, to make available, upon request of
any Holder of Registrable Securities, to any Holder or beneficial owner of
Registrable Securities in connection with any sale thereof and any prospective
purchaser of such Registrable Securities designated by such Holder or
beneficial owner, the information required by Rule 144A(d)(4) under the Act in
order to permit resales of such Registrable Securities pursuant to Rule 144A.
SECTION 9. MISCELLANEOUS
(a) Remedies. Each Holder of Registrable Securities, in
addition to being entitled to exercise all rights provided herein, and as
provided in the Purchase Agreement and the Warrant Agreement and 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 the provisions of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Company will not on
or after the date of this Agreement enter into any agreement with respect to
its securities that conflicts with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company has not previously entered into any agreement
granting any registration rights of its securities to any Person that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders of Registrable Securities hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
securities under any other agreement in effect on the date hereof, except where
a waiver with respect thereto has been obtained prior to the date of
effectiveness of any Registration Statement required under this Agreement.
(c) Adjustments Affecting the Registrable Securities.
The Company will not take any action, or permit any change to occur, with
respect to the Registrable Securities which would (i) adversely affect the
ability of any of the Holders of Registrable Securities to include such
Registrable Securities in a registration undertaken pursuant to this Agreement
or (ii) materially adversely affect the marketability of the Registrable
Securities in any such registration.
(d) 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 a majority of the outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders of Registrable Securities may be given by the Holders
of at least a majority of the Registrable Securities being sold.
13
<PAGE> 15
(e) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the Registrar under the Indenture, with a copy to the
Registrar under the Indenture; and
(ii) if to the Company:
Exide Electronics Group, Inc.
8609 Six Forks Road
Raleigh, NC 27615
Telecopier No.: (919) 870-3100
Attention: General Counsel
With a copy to:
Smith Helms Mulliss & Moore, L.L.P.
316 West Edenton Street (27603)
P.O. Box 27525
Raleigh, NC 27611-7525
Telecopier No.: (919) 828-7938
Attention: Brad S. Markoff, Esq.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and
on the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure
to the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Securities.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
*
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity, legality
14
<PAGE> 16
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(k) Entire Agreement. This Agreement together with the
other Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the securities sold pursuant to the Purchase Agreement.
This Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
[Signature Page Follows]
15
<PAGE> 17
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
EXIDE ELECTRONICS GROUP, INC.
By: /s/ Marty R. Kittrell
---------------------------------------
Name: Marty R. Kittrell
Title: Vice President, Chief Financial
Officer, Treasurer and Assistant
Secretary
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.,
NATIONSBANC CAPITAL MARKETS, INC.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Robert B. Moon
-----------------------------------
Name: Robert B. Moon
Title: Vice President
<PAGE> 1
EXHIBIT 4.6
STOCKHOLDER AGREEMENT
DATED
MARCH , 1996
BY AND BETWEEN
EXIDE ELECTRONICS GROUP, INC. ("COMPANY")
AND
FISKARS OY AB ("STOCKHOLDER")
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C> <C>
1. CONTROL..............................................................................
1.1. Board Membership.............................................................
1.2. Voting of Company Securities.................................................
1.3. Restrictions on Other Actions of Stockholder.................................
2. RESTRICTIONS ON ACQUISITIONS AND OWNERSHIP OF COMPANY SECURITIES.....................
2.1. First Tier Limitations.......................................................
2.2. Second Tier Limitations......................................................
3. RESALE OF COMPANY SECURITIES.........................................................
3.1. Open Market Sales............................................................
3.2. Private Sales................................................................
3.3. Right of First Refusal.......................................................
3.4. Tender Offers................................................................
3.5. Restrictions Following Offerings.............................................
3.6. Registration Rights..........................................................
3.7. Indemnification in Connection with Registration Statements...................
3.8. Filings with the Securities and Exchange Commission..........................
4. REPRESENTATIONS, WARRANTIES AND INDEMNITIES..........................................
4.1. Representations and Warranties...............................................
4.2. Indemnification..............................................................
5. MISCELLANEOUS........................................................................
5.1. Press Releases...............................................................
5.2. Confidentiality..............................................................
5.3. Specific Performance.........................................................
5.4. Notices......................................................................
5.5. Invalid or Unenforceable Provisions..........................................
5.6. Benefit and Burden...........................................................
5.7. Gender.......................................................................
5.8. Changes; Waiver..............................................................
5.9. Entire Agreement.............................................................
5.10. Governing Law; Forum for Disputes............................................
5.11. Headings.....................................................................
5.12. Term of Agreement............................................................
5.13. Obligations in the Event of Certain Breaches.................................
</TABLE>
i
<PAGE> 3
STOCKHOLDER AGREEMENT
This Stockholder Agreement (the "Agreement") is dated the 13th day of
March, 1996, by and between EXIDE ELECTRONICS GROUP, INC. (the "Company"), a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware with its principal place of business at 8521 Six Forks
Road, Raleigh, North Carolina, and FISKARS OY AB, a Finnish corporation, having
its principal place of business at Mannerheimintie 14 A, 00101 Helsinki 10
Finland (the "Stockholder").
WHEREAS, the Company has sold to the Stockholder 1,875,000 shares of its
Common Stock (such shares together with any shares received by the Stockholder
with respect to such shares are collectively referred to herein as the "Shares")
pursuant to a Stock Purchase Agreement entered into as of November 16, 1995 (the
"Purchase Agreement"); and
WHEREAS, the Company agreed to sell the Shares to the Stockholder, and to
amend its Shareholder Rights Plan, dated as of November 25, 1992, by and between
the Company and First Union National Bank of North Carolina (the "Shareholder
Rights Plan"), to permit the Stockholder's purchase of the Shares, on the
express condition that the Stockholder agree to certain restrictions on its
control, voting, transfer and acquisition rights.
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound, hereby agree as follows:
1. CONTROL
1.1. Board Membership
(a) Election of Directors. The Stockholder shall designate two (2) persons
(the "Stockholder Representatives") to be elected as members of the Company's
Board of Directors (the "Board"), and the Company shall nominate each
Stockholder Representative for election as a director of the Company, and use
its best efforts to cause each Stockholder Representative to be so elected. In
the event a Stockholder Representative's position as a director is terminated
for any reason (a "Terminated Stockholder Director"), such Terminated
Stockholder Director's position on the Board, and any committees thereof, shall
be filled promptly by a successor Stockholder Representative nominated by
Stockholder and approved in accordance with the Company's Bylaws and Certificate
of Incorporation. The rights of Stockholder set forth herein will be limited to
one Stockholder Representative at any time that the number of shares of Company
Common Stock beneficially owned by the Stockholder, when combined with the
number of shares of Company Common Stock that could be obtained upon conversion
of the Company Series G Convertible Preferred Stock beneficially owned by
Stockholder (such combined number defined as the "Imputed Common Stock
Ownership"), equals less than ten percent (10%) of the Company Common Stock that
would be outstanding upon such conversion without taking into consideration any
warrants, options, stock or other equity issued in connection with the
Anticipated Financing (as defined in Article 9 of the Purchase Agreement, as
amended) except for Company Common Stock issued pursuant to warrants, options or
other rights exercisable at a price at least equal to the market value of such
Common Stock on the date of exercise (the "Financing Equity"), and the
Stockholder shall have no right to a Stockholder Representative at any time that
its Imputed Common Stock Ownership is less than five percent (5%) of the Company
Common Stock that would be outstanding upon conversion of the Series G
Convertible Preferred Stock beneficially owned by Stockholder without taking
into consideration the Financing Equity; provided, however, that the ownership
of the Company's Common Stock or Preferred Stock by an entity controlling,
controlled by or under common control with the Stockholder with the prior
consent of the Company (which consent shall not be unreasonably withheld), and
which has agreed in a writing delivered to the Company to be obligated as the
Stockholder hereunder (in the case of ownership of Common Stock), shall be
attributed to the Stockholder for purposes of this 1.1.(a). The initial
Stockholder Representatives shall be Stig Stendahl and Ralf Boer. Upon the
Company's request following an event resulting in the limitation or loss of
Stockholder's rights to Stockholder Representative(s), the Stockholder will
cause one or both of the Stockholder Representatives, as the case may be, to
resign as a director. The Board, other than the Stockholder Representatives,
will have the right to
<PAGE> 4
approve any Stockholder Representative nominated by the Stockholder, provided
that such approval will not be unreasonably withheld, and provided further that
in the event any Stockholder Representative is not so approved, Stockholder
shall continue to nominate Stockholder Representatives until such approval is
granted.
(b) Special Meetings of Board of Directors. The Stockholder shall cause
the Stockholder Representative not to call, and not to participate in calling a
special meeting of the Board, but once a Special Meeting is called, the
Stockholder Representative may participate in such meeting subject to the terms
of this Agreement.
1.2. Voting of Company Securities
(a) Election of Directors. The Stockholder shall vote the Shares and all
other securities of the Company owned or controlled by it (whether acquired by
open market purchase or otherwise) (the Shares and all such other securities so
owned or controlled being referred to hereinafter collectively as "Company
Securities") in favor of the election of directors nominated by the Board.
(b) Stockholder Matters. On all matters on which a stockholder vote or
stockholder action is requested, the Stockholder shall vote (or otherwise
consent with respect to) all Company Securities in accordance with the
recommendations of the Board.
(c) Representation of Shares. The Stockholder will cause all Company
Securities to be present in person or by proxy and represented at all meetings
of the Company's stockholders called by the Board, and will cause the Company
Securities to be voted in accordance with the provisions of this Agreement at
all meetings of stockholders and on all matters acted upon by stockholders of
the Company by written consent.
1.3. Restrictions on Other Actions of Stockholder
(a) Special Meeting of Stockholders. The Stockholder will not call or
participate, directly or indirectly, in calling any special meeting of
stockholders which has not been called or approved by the Board.
(b) Stockholder Proposals. The Stockholder will not submit, directly or
indirectly, any stockholder proposal for approval at any meeting of stockholders
or by consent of stockholders.
(c) Proxy Solicitation. The Stockholder will not initiate, encourage or
cooperate or participate, directly or indirectly, in any proxy solicitation on
behalf of any person other than the Company, the Board or a person whose
solicitation is supported by the Board.
(d) Corporate Transactions. Except as permitted by Article 2 of this
Agreement, the Stockholder will not initiate, encourage or cooperate or
participate in, directly or indirectly, any proposal (i) to acquire the Company;
(ii) to acquire a substantial portion of the Company assets; or (iii) to merge,
restructure, combine or recapitalize the Company, unless such proposal is
supported by the Board.
(e) Formation of Exchange Act "Group". Except by reason of a transfer or
transfers to an entity controlling, controlled by or under common control with
the Stockholder as contemplated in Section 1.1(a) hereof, the Stockholder will
not form, join, or in any way participate, directly or indirectly (other than
with a wholly-owned subsidiary of the Stockholder) in a "Group" within the
meaning of Section 13(e)(3) of the Securities Exchange Act of 1934, or any other
similar or successor provision with respect to any securities of the Company.
(f) Acquisition Financings. The Stockholder will not arrange, or in any
way participate in, the financing of any third party, the proceeds of which will
be used for the purchase of any voting securities or securities convertible or
exchangeable into or exercisable for any voting securities or assets of the
Company.
(g) Exercise of Control. The Stockholder will not otherwise seek or
propose to influence or control the Company's management or policies (other than
through the Stockholder Representatives or the voting of Company Securities, in
each case as contemplated by this Agreement).
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<PAGE> 5
(h) Communications with Employees. Other than through the Stockholder
Representatives' service on the Board, the Stockholder will not seek to retain,
hire or negotiate or influence the terms and conditions of employment of,
employees of the Company.
(i) Efforts to Amend Agreement. The Stockholder will not (i) request the
Company directly or indirectly to amend or waive any provision of Articles 1, 2
or 3 of this Agreement or (ii) take any action designed to or which can
reasonably be expected to require the Company to make a public announcement
regarding its discussions with the Stockholder or its position regarding a
possible merger or other extraordinary transaction involving the Company.
(j) Actions by Third Parties. The Stockholder will not enter into any
discussions, negotiations, arrangements or understandings with or advise,
assist, encourage or cooperate with any third party with respect to any of the
acts specified in Article 1 of this Agreement or take, assist, encourage or
cooperate in any other action that is inconsistent with the terms of this
Agreement.
(k) Actions Regarding Shareholder Rights Plan. After the date hereof, the
Stockholder will not make any request to the Company, or take any other action
with the intent and for the purpose of causing the Company to amend the
Shareholder Rights Plan (other than through the Stockholder Representatives or
the voting of Company Securities, in each case as contemplated by this
Agreement).
(l) Actions by Stockholder Representatives. Stockholder shall cause the
Stockholder Representatives not to vote or take any other action that would
approve, ratify or otherwise further any transaction or action which the
Stockholder is prohibited or restricted from taking under this Agreement.
2. RESTRICTIONS ON ACQUISITIONS AND OWNERSHIP OF COMPANY SECURITIES
2.1. First Tier Limitations
For a period of five (5) years from the date of this Agreement, neither the
Stockholder nor any of its affiliates shall directly or indirectly, through one
or more transactions or acting in concert with other persons, companies or other
entities, offer to acquire or acquire any securities of the Company, except for
such securities the acquisition of which is contemplated by this Agreement or
results solely from action by the Board (with the Stockholder Representatives
abstaining), or results solely from the provisions of the Company's Certificate
of Incorporation or Bylaws.
2.2. Second Tier Limitations
For a period commencing on the date the restrictions in Section 2.1 of this
Agreement expire, and for as long as the Stockholder or any of its affiliates
owns or holds any Company Securities, in addition to the circumstances under
which the Stockholder may acquire securities under Section 2.1, the Stockholder
will be permitted to offer to acquire or acquire additional securities of the
Company only with the prior approval of the Board (with the Shareholder
Representatives abstaining), and only if the following conditions are met: (i)
such acquisition is made pursuant to an offer to acquire all of the Company's
equity securities; (ii) the purchase price therefor is supported by a written
fairness opinion, addressed to the Board, from a recognized investment banking
firm selected by the Company; and (iii) the acquisition is conditioned upon the
acceptance of the offer by not less than eighty percent (80%) of the outstanding
shares of Common Stock not held by the Stockholder and its affiliates.
3. RESALE OF COMPANY SECURITIES
3.1. Open Market Sales
For a period of five (5) years from the date of this Agreement, the
Stockholder will make open market sales of Company Securities only (i) pursuant
to a registration statement filed by the Company in accordance with the rules
and regulations of the Securities Act of 1933 (the "Securities Act") or (ii) in
volumes not exceeding the limitations set forth in Rule 144(e)(1) under the
Securities Act (whether or not the Stockholder's sales of Company Securities are
then subject to Rule 144) and, in the case of this clause (ii), otherwise in
accordance with Rule 144 under the Securities Act to the extent applicable.
3
<PAGE> 6
3.2. Private Sales
For a period of five (5) years from the date of this Agreement, and subject
to Section 3.4 of this Agreement, the Stockholder may Transfer (as defined
below) Company Securities in transactions other than in the open market only
upon receipt of a bona fide written offer (a "Third Party Offer") from someone
who is not affiliated with the Stockholder ("Offeror"), and only after first
offering such Company Securities to the Company in accordance with the
provisions of Section 3.3 of this Agreement.
3.3. Right of First Refusal
(a) Offer to Company. If the Stockholder receives from an Offeror a Third
Party Offer for any or all of the Company Securities, then before accepting such
Third Party Offer, the Stockholder shall first offer to the Company the Company
Securities proposed to be Transferred at an offering price that shall be the
same as, and on the same terms and conditions as, those contained in the Third
Party Offer, or if the Third Party Offer provides for non-cash consideration or
other terms and conditions not practically obtainable by the Company, then for
consideration and upon terms and conditions substantially equivalent to those
contained in the Third Party Offer. The offer shall be made by a written offer
notice to the Company, which offer notice shall be accompanied by a copy of the
Third Party Offer and shall describe the identity and background of the Offeror.
The Company shall have thirty (30) days after the date of receipt of such offer
notice (the "Election Period") within which to elect to purchase all of the
Company Securities proposed to be Transferred. Such election shall be made by a
written notice of election given to the Stockholder by or on behalf of the
Company. In such notice of election, the Company shall set a closing date not
more than thirty (30) days after expiration of the Election Period.
(b) Acceptance by Company. At the closing of such purchase by the Company,
the Stockholder shall deliver to the Company certificates evidencing the number
of Company Securities being purchased, in valid form for transfer with
appropriate duly executed assignments, stock powers or endorsements, bearing any
necessary documentary stamps and accompanied by such certificate of authority,
tax releases, consents to transfer or other instruments or evidences of the good
title of Stockholder to such Company Securities as may reasonably be requested
by Company, and the Company shall pay to the Stockholder the purchase price
therefor in immediately available funds or by certified check. Nothing in this
Agreement shall be deemed to create any obligation for the Company to elect to
purchase Company Securities under this Agreement.
(c) Non-Acceptance by Company. If the Company shall not elect, pursuant to
the terms of this Agreement, to purchase all of the Company Securities proposed
to be Transferred, or shall elect to purchase such Company Securities but fail
to close the purchase on the closing date, then the Stockholder shall be free to
a period of sixty (60) days after expiration of the Election Period (or the
failure to purchase on the closing date, if applicable) to sell such Company
Securities to the Offeror under terms and conditions and at a price no less
favorable to the Stockholder than those contained in the Third Party Offer. If
such Company Securities are not so sold by the Stockholder within such 60-day
period, all rights of Stockholder to Transfer such Company Securities free of
the restriction in this Agreement shall thereupon terminate, and such
restrictions shall again apply to such Company Securities.
(d) Definition of "Transfer". For purposes of this Agreement, the term
"Transfer" shall include a sale, gift, assignment or other disposition, whether
direct or indirect (including without limitation transfer of direct or indirect
control over an entity holding Company Securities), including a disposition
under judicial order, legal process, execution or attachment or enforcement of a
pledge trust or other encumbrance; provided that the term "Transfer" shall not
include a transfer or transfers to an entity controlling, controlled by or in
common control with the Stockholder as contemplated in Section 1.1(a) hereof.
4
<PAGE> 7
3.4. Tender Offers
(a) For so long as the Stockholder shall own or hold any of the Shares, the
Stockholder will not tender any Company Securities in any tender or exchange
offer by a person or entity other than the Company or any affiliate of the
Company (the "Bidder") except under the following circumstances:
(i) The Board (with Stockholder Representatives abstaining) recommends
that shareholders accept such tender or exchange offer;
(ii) In connection with such tender or exchange offer, the Board (with
Stockholder Representatives abstaining) redeems the outstanding rights
under the Shareholder Rights Plan; or
(iii) During, prior to or in anticipation of, a tender or exchange
offer, the Board (with Stockholder Representatives abstaining) exempts the
Bidder from the operation of the Shareholder Rights Plan.
(b) In the event (i) Stockholder is prohibited by Section 3.4(a) hereof
from tendering or exchanging Company Securities into a tender or exchange offer
which is consummated without the favorable recommendation of the Board
("Consummated Offer") and, as a result of the Consummated Offer, the Bidder
beneficially owns more than 50 percent (50%) of the outstanding voting
securities of the Company, and (ii) Stockholder within ninety (90) days of the
Consummated Offer sells or otherwise disposes of Company Securities in a merger
or other transaction in which the Company or a successor or affiliate is a party
for a per share or per unit price which is less than the highest per share or
other per unit price offered by the Bidder in the tender or exchange offer, then
within thirty (30) days following such sale or other disposition, Company shall
pay to Stockholder an amount equal to (i) the difference between the highest
price per share or other per unit price offered by the Bidder in the tender or
exchange offer and the per share or per unit price for which the Stockholder
sold its Company Securities, multiplied by (ii) the number of shares or other
units of Company Securities sold or disposed of by Stockholder within such
ninety (90) day period.
(c) In the event (i) Stockholder is prohibited by Section 3.4(a) hereof
from tendering or exchanging any Company Securities into a tender or exchange
offer which results in a Consummated Offer and, as a result of the Consummated
Offer, the Bidder beneficially owns more than fifty percent (50%) of the
outstanding voting securities of the Company and (ii) the Stockholder has not
sold all of its Company Securities within ninety (90) days following the
consummation of the Consummated Offer, then within one hundred twenty (120) days
following the consummation of the Consummated Offer, Company shall pay to
Stockholder in cash an amount equal to (i) the sum of the highest per share or
other per unit price paid by the Bidder in the Consummated Offer, less the
average of the last reported sales price per share of Common Stock and/or other
Company Security if listed on The Nasdaq Stock Market or the average closing
price per share of Common Stock and/or other Company Security if listed on a
national securities exchange for the thirty (30) consecutive trading days
immediately preceding the fifth business day prior to the commencement of the
tender or exchange offer (or if such Shares or other Company Securities subject
to the tender or exchange offer are not listed on The Nasdaq Stock Market or on
a national securities exchange, the fair market value of a share of Common Stock
and/or unit of other Company Security subject to the tender or exchange offer,
calculated as of the fifth business day immediately prior to the commencement of
such tender or exchange offer, as determined by an independent appraiser with an
established national reputation for appraising businesses selected by mutual
agreement of Company and Stockholder, or in the absence of such mutual
agreement, selected by Price Waterhouse LLP), multiplied by (ii) the number of
Shares and/or other Company Securities subject to the tender or exchange offer
held by Stockholder on the one hundred and twentieth (120th) day following
consummation of the Consummated Offer.
(d) In the event of an exchange offer or a tender offer other than an all
cash tender offer, the "highest per share or other per unit price paid by the
Bidder" as such phrase applies to non-cash consideration paid by the Bidder,
shall mean the fair market value of such non-cash consideration calculated on a
per share or per unit basis, as the case may be, as of the time of the
applicable payment, as determined by an independent appraiser with an
established national reputation for appraising businesses selected by mutual
agreement of the Company and Stockholder, or in the absence of such mutual
agreement, selected by Price Waterhouse LLP.
5
<PAGE> 8
3.5. Restrictions Following Offerings
For so long as the Stockholder shall own or hold any of the Shares, the
Stockholder will agree to reasonable and customary "lock-up" restrictions on the
resale of Company Securities during or following a registered public offering of
any securities of the Company, provided that such restrictions do not apply for
more than one hundred fifty (150) days following the completion of such
registered public offering and that such restrictions are also agreed to by the
Company and all of its affiliates, directors and executive officers whose
agreement is deemed necessary by the underwriters of such offering.
3.6. Registration Rights
(a) Piggyback Registration. If at any time that the Stockholder owns or
holds Shares, the Company proposes to file a registration statement under the
Securities Act with respect to an offering of Common Stock solely for cash
(other than a registration statement (i) on Form S-8 or any successor form to
such form or in connection with any employee or director welfare, benefit or
compensation plan; (ii) on Form S-4 or any successor form to such form or in
connection with an exchange offer; (iii) in connection with a rights offering
exclusively to existing holders of Common Stock; (iv) in connection with an
offering solely to employees of the Company or its Subsidiaries; or (v) relating
to a transaction pursuant to Rule 145 under the Securities Act), whether or not
for its own account, the Company shall give prompt written notice of such
proposed filing to the Stockholder. The notice referred to in the preceding
sentence shall constitute an offer by Company to the Stockholder of the
opportunity to register such number of Shares as the Stockholder may request (a
"Piggyback Registration"). The Company shall include in the Piggyback
Registration and in any underwriting in connection therewith all Shares for
which the request is received by the Company within fifteen (15) calendar days
after the notice referred to above has been given by the Company. The
Stockholder shall be permitted to withdraw all or part of the Shares from a
Piggyback Registration at any time prior to the effective date of such Piggyback
Registration or, if the Piggyback Registration is for an underwritten offering
prior to the execution of an underwriting agreement by Stockholder and Company.
If a Piggyback Registration is an underwritten primary registration on behalf of
the Company and the managing underwriter advises the Company that the total
number of Shares requested to be included in such registration, when combined
with the shares of Common Stock that the Company otherwise proposes to register,
would create a substantial risk of materially reducing the proceeds of the
offering or price per share of the Common Stock to be offered, the number of
Shares requested to be included by Stockholder in any such Piggyback
Registration shall be reduced on a pro rata basis among Stockholder and any
other stockholder also requesting participation in such Piggyback Registration.
(b) Demand Registration. Upon a written request of the Stockholder, the
Company shall file a registration statement with the Securities and Exchange
Commission within sixty (60) days of receipt of such written request for
registration under the Securities Act of all or part of its Shares; provided,
however, that the Company shall not be obligated to file a registration
statement hereunder until October , 1996. Any such request by the Stockholder
shall specify the aggregate number of Shares proposed to be sold and shall also
specify the intended method of disposition thereof; provided, however, that the
Stockholder's demand shall be for registration of at least twenty-five percent
(25%) of the Shares owned by Stockholder as of the date hereof or three percent
(3%) of the Company's then outstanding shares of Common Stock, whichever is
less. The Company shall use its best efforts to keep the registration statement
effective until the earlier of six (6) months after the date of effectiveness of
the registration statement or until the Stockholder has sold the number of
Shares for which it requested registration. The Stockholder shall not be
entitled to make a demand pursuant to this Section 3.6 more than two (2) times;
provided, however, that if no registration statement is declared effective with
respect to a demand which the Stockholder has made (other than because the
Stockholder has requested that the registration statement not be declared
effective) that demand shall not be counted for purposes of this limit. The
Company may defer filing a registration statement pursuant to this Section 3.6
for up to ninety (90) days if in the good faith reasonable judgment of the Board
the filing of such registration statement would create a material adverse effect
on any material Company financing planned or contemplated or, pursuant to a
written opinion of Company's legal counsel, require the Company to disclose
6
<PAGE> 9
non-public information, the disclosure of which would, in the good faith
reasonable judgment of the Board, have a material adverse effect on the Company.
(c) Registration Procedures.
(i) The Company shall have no obligation to include Shares in a
registration statement pursuant to this Section 3.6 unless and until the
Stockholder has furnished the Company with all information and statements
about or pertaining to the Stockholder in such reasonable detail and on
such timely basis as is reasonably deemed by the Company to be necessary or
appropriate for the preparation of the registration statement.
(ii) The Company shall take such action to list the Shares to be
registered hereunder on any securities exchange on which the Common Stock
is registered.
(iii) In connection with any registration hereunder, Company shall use
its best efforts to register and qualify the Shares to be registered under
such other securities or blue sky laws of such jurisdictions as Stockholder
shall request, provided, however, that the Company will not be required to
do any of the following: (i) qualify generally to do business in any
jurisdiction where it would not be required but for this Section 3.6(c);
(ii) subject itself to taxation in any such jurisdiction; or (iii) file any
general consent to service of process in any such jurisdiction.
(iv) Company shall immediately notify Stockholder of the happening of
any event of which it has knowledge as a result of which the prospectus
included in a registration statement filed pursuant to a Demand
Registration or Piggyback Registration, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
(v) Company shall take such other actions required to register the
Shares hereunder as Stockholder may reasonably request.
(d) Registration Expenses. If Shares are included in a registration
statement filed by the Company, the Stockholder shall pay all transfer taxes, if
any, relating to the sale of the Shares, the fees and expenses of its own
counsel, and its pro-rata share of any underwriting discounts or commissions or
the equivalent thereof. Company shall pay all other costs and expenses
associated with any Demand Registration or Piggyback Registration, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with Blue Sky laws, printing expenses, messenger and delivery
expenses, and fees and expenses of counsel for the Company and all independent
certified public accountants and other persons retained by the Company.
3.7. Indemnification in Connection with Registration Statements
(a) In connection with any Demand Registration or any Piggyback
Registration pursuant to this Agreement, Stockholder shall indemnify and hold
harmless Company and any underwriters (as defined in the Securities Act) of such
offering and their respective officers, directors and controlling persons
(within the meaning of either the Securities Act or the Securities Exchange Act
of 1934, as amended) from any and all loss, liability, claims, damages and
expenses (including reasonable attorneys fees and disbursements) incurred by
them insofar as such losses, liabilities, claims, damages and expenses arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the registration statement or prospectus covering the
Shares to be sold or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that Stockholder shall
only be liable in any such case to the extent that any such loss arises out of
or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with information relating to such Stockholder as furnished in writing to Company
or any underwriter by or on behalf of Stockholder expressly for use in the
registration statement or prospectus covering the Shares to be sold. Except to
the extent set forth in the foregoing sentence, Company shall indemnify and hold
harmless Stockholder, its respective officers, directors, partners and
controlling persons (within the meaning of either the Securities Act or the
Securities Exchange Act of 1934, as amended)
7
<PAGE> 10
participating in the Demand Registration or any Piggyback Registration from any
and all loss, liability, claims, damages and expenses (including reasonable
attorneys' fees and disbursements) incurred by them insofar as such losses,
liabilities, claims, damages and expenses arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact furnished by
Company for use in such registration statement or prospectus related thereto or
arise out of or are based upon the omission or alleged omission to state therein
a material fact pertaining to Company and required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading. The indemnification provided by this
Section 3.7 shall be a continuing right to indemnification and shall survive the
registration and sale of any securities by Stockholder or any other person
entitled to indemnification hereunder.
(b) If the indemnification provided for in Section 3.7 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect
to any loss, liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage or expense in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other hand in connection with the
statements or omissions which resulted in such loss, liability, claims, damage
or expenses as well as any other relevant equitable considerations. The relevant
fault of the indemnifying party and the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. Notwithstanding the foregoing,
the amount Stockholder shall be obligated to contribute pursuant to this Section
3.7 shall be limited to an amount equal to the proceeds to such Stockholder from
the sale of Shares sold pursuant to the registration statement which gives rise
to such obligation to contribute (less the aggregate amount of any damages which
Stockholder has otherwise been required to pay in respect of such loss, claim,
damage, liability or action or any substantially similar loss, claim, damage,
liability or action arising from the sale of such Shares).
3.8. Filings with the Securities and Exchange Commission
With a view to making available the benefits of certain rules and
regulations of the Securities and Exchange Commission that may permit the sale
of the Shares to the public without registration, the Company agrees to use its
best efforts to: (a) remain subject to the reporting requirements of Section 13
of the Securities Exchange Act of 1934, as amended, and file with the Securities
and Exchange Commission in a timely manner all reports required of the Company
thereunder; and (b) furnish to the Stockholder upon written request a written
statement by the Company as to its compliance with the reporting requirements of
Section 13 of the Securities Exchange Act of 1934, as amended.
4. REPRESENTATIONS, WARRANTIES AND INDEMNITIES
4.1. Representations and Warranties
(a) As a material inducement to the Company to enter in the Purchase
Agreement and sell the Shares to the Stockholder, the Stockholder hereby
represents and warrants to Company and agrees that neither Stockholder nor any
of its affiliates (i) intends to, directly or indirectly, manage or control the
affairs of or acquire a controlling interest in the Company or any of its
subsidiaries or affiliates (whether through acquisition of stock, assets or
otherwise) at this time or in the future; (ii) will in the future seek to
directly or indirectly, manage or control the affairs of, or acquire a
controlling interest in, the Company or any of its subsidiaries or affiliates
(whether through acquisition of stock, assets or otherwise), except as expressly
provided for in this Agreement; and (iii) will, directly or indirectly, attempt
to influence or encourage any other person, company, other entity or group to
seek to manage or control the affairs of, or acquire a controlling interest in,
the Company or any of its subsidiaries or affiliates (whether through
acquisition of stock, assets or otherwise), except as expressly provided for in
this Agreement. The Stockholder hereby expressly acknowledges its understanding
that the Company would not have entered in the Purchase
8
<PAGE> 11
Agreement or consummated the transactions contemplated thereby without
Stockholder's assurances and agreements set forth in this Article 4 relating to
its present and future role in the Company's affairs.
(b) The Stockholder hereby represents and warrants to the Company that the
Stockholder's execution, delivery and performance of this Agreement do not
conflict with any provisions of its charter and organizational instruments or
its other governing corporate documents.
(c) Company hereby represents and warrants to the Stockholder that the
execution, delivery and performance of this Agreement do not conflict with any
provisions of the Company's Certificate of Incorporation, By-laws or other
governing corporate documents.
4.2. Indemnification
Each party hereto shall indemnify, defend and hold the other and each of
its directors, officers, affiliates and advisors harmless against any and all
liabilities, claims, damages or losses, together with all reasonable costs and
expenses related thereto (including legal fees and expenses) arising from,
relating to, or connected with such party's breach of any of the foregoing
representations and warranties or any other provision of this Agreement. The
indemnification obligations under this Section 4.2 shall be limited to actual
damages and shall not apply to exemplary, special, consequential or incidental
damages. This Section 4.2 shall operate in addition to, and not in lieu of, the
indemnification provisions of Section 3.7 hereof.
5. MISCELLANEOUS
5.1. Press Releases
All press releases relating to the investment pursuant to the Purchase
Agreement or this Agreement will be issued or approved in advance by the Company
and jointly agreed upon by the Company and the Stockholder, subject to their
respective obligations under foreign, federal and state securities laws.
5.2. Confidentiality
The Stockholder shall, and will cause each of the Stockholder
Representatives to keep confidential and not disclose or divulge any
confidential, proprietary or secret information which any Stockholder
Representative may obtain from the Company pursuant to financial statements,
reports and other materials submitted by the Company to the Stockholder or any
Stockholder Representative or learned by the Stockholder or any Stockholder
Representative from the Board.
5.3. Specific Performance
Strict compliance shall be required with each and every provision of this
Agreement. The Stockholder agrees that money damages would not be a sufficient
remedy for any breach of this Agreement by the Stockholder or its affiliates
(including the Stockholder Representatives), that such a breach would result in
irreparable harm to the Company and its stockholders, and that, in addition to
all other remedies, the Company shall be entitled to specific performance and
injunctive or other equitable relief for any such breach, and the Stockholder
further agrees to waive any requirement for the securing or posting of any bend
in connection with such remedy.
5.4. Notices
All notices, requests, consents and other communications under this
Agreement shall be in writing and shall be delivered by hand or airmailed by
first class certified or registered airmail, return receipt, postage prepaid or
sent by express or overnight courier or by telecopier (with acknowledgment of
receipt):
If to the Company, at The Forum II, 8521 Six Forks Road, Suite 300,
Raleigh, North Carolina 27615 USA, Attention: Nicholas J. Costanza, Vice
President, Chief Legal Counsel and Secretary, or at such other address or
addresses as may have been furnished in writing by the Company to the
Stockholder; or
9
<PAGE> 12
If to the Stockholder, at Mannerheimintie 14 A, 00101 Helsinki 10 Finland,
Attention: Stig Stendahl, or at such other address or addresses as may have been
furnished to the Company in writing by the Stockholder. A copy of such notice
shall be sent simultaneously to Foley & Lardner, 777 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202, Attention: Ralf R. Boer.
Notices provided in accordance with this paragraph shall be deemed
delivered upon personal delivery or five (5) days after delivery to a recognized
overnight courier.
5.5. Invalid or Unenforceable Provisions
The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were
omitted.
5.6. Benefit and Burden
This Agreement shall inure to the benefit of, and shall be binding upon,
the parties hereto and their successors and assigns and other legal
representatives.
5.7. Gender
The use of any gender herein shall be deemed to be or include the other
genders and the use of the singular herein shall be deemed to be or include the
plural, and vice versa, wherever appropriate.
5.8. Changes; Waiver
No change or modification of this Agreement shall be valid unless the same
is in writing and signed by all the parties hereto. No waiver of any provisions
of this Agreement shall be valid unless in writing and signed by the person
against whom it is sought to be enforced. The failure of any party at any time
to insist upon strict performance of any condition, promise, agreement or
understanding set forth herein shall not be construed as a waiver or
relinquishment of the right to insist upon strict performance of the same or any
other condition, promise, agreement or understanding at a future time.
5.9. Entire Agreement
This Agreement and the Purchase Agreement (including all exhibits thereto)
set forth all of the promises, agreements, conditions, understandings,
warranties and representations among the parties hereto with respect to the
Shares and any other matters set forth herein, and there are no promises,
agreements, conditions, understandings, warranties or representations, oral or
written, express or implied, among them with respect to the Shares or such other
matters except as set forth herein or therein. Any and all prior agreements
among the parties hereto with respect to the Shares are hereby revoked. This
Agreement and the Purchase Agreement (including all exhibits thereto) are, and
are intended by the parties to be, an integration of any and all prior
agreements or understandings, oral or written, with respect to the Shares.
5.10. Governing Law; Forum for Disputes
This Agreement shall be construed and enforced in accordance with the laws
of the State of Delaware (without giving effect to conflict of laws principles).
No party may initiate litigation in a dispute arising under or relating to this
Agreement other than in a state or federal court of competent jurisdiction in
the United States of America. Each of the Company and the Stockholder shall
appoint and maintain its own agent for service of summons or other legal process
in the United States of America, and shall provide the other party with evidence
of such appointment.
5.11. Headings
The headings, subheadings and other captions in this Agreement are for
convenience and reference only and shall not be used in interpreting, construing
or enforcing any of the provisions of this Agreement.
10
<PAGE> 13
5.12. Term of Agreement
This Agreement shall be effective as of the date first hereinabove set
forth and, unless otherwise provided elsewhere herein, shall terminate upon the
earlier of: (a) two (2) years after the first date on which the Stockholder no
longer owns or holds any Company Securities, provided that such level of
ownership or control shall not have resulted from Transfers in violation of this
Agreement; (b) such time as (i) Company makes a general assignment for the
benefit of creditors; (ii) shall have been adjudicated bankrupt; (iii) shall
have filed a voluntary petition for bankruptcy or for reorganization or
effectuated a plan or other similar arrangement with creditors; (iv) shall have
filed an answer to a creditor's petition; (v) or if a petition is filed against
Company for an adjudication in bankruptcy or reorganization, the Company shall
have applied for or permitted the employment of a receiver or trustee or
custodian for any of its property or assets; or (c) mutual written agreement of
the parties hereto.
5.13. Obligations in the Event of Certain Breaches
In the event of a breach by the Company of its obligations under Section
3.6 hereof (except for any breach by the Company of the last sentence of each of
Section 3.6(a) or (b)), which breach continues for a period of thirty (30) days
following delivery of notice thereof by the Stockholder to the Company, then
this Agreement shall terminate thirty (30) days thereafter or, at the Company's
option exercised by written notice delivered to the Stockholder within such
thirty-day period, the Stockholder shall, for a period of thirty (30) days after
such notice of exercise, have the right to "put" all but not less than all of
the Shares owned by the Stockholder and/or its affiliates to the Company and the
Company shall have the right to "call" all but not less than all of the Shares
owned by the Stockholder and/or its affiliates, in either case at a price
payable to the Stockholder equal to the Fair Market Value of the Shares to be
acquired by the Company. For purposes of this Section 5.13, "Fair Market Value"
of the Shares to be acquired by the Company shall be an amount equal to (i) if
such Shares are listed on The Nasdaq Stock Market, the average of the last
reported sales price per share or, if the Shares are then listed on a national
securities exchange, the average closing price per share, in either case for the
thirty (30) consecutive trading days immediately preceding the date that the
Stockholder provides notice to the Company of a breach as contemplated in this
Section 5.13, multiplied by (ii) the number of Shares to be acquired by the
Company; provided, however, that in the event the Shares are not then traded on
The Nasdaq Stock Market or a national securities exchange, the Fair Market Value
of the Shares to be acquired by the Company shall be determined by an
independent appraiser with an established national reputation for appraising
businesses selected by mutual agreement of the Company and the Stockholder, or
in the absence of such mutual agreement, selected by Price Waterhouse LLP. The
closing of the acquisition of Shares pursuant to this Section 5.13 shall occur
within thirty (30) days following the determination of Fair Market Value.
Payments made to the Stockholder by the Company pursuant to this Section 5.13
shall be made in immediately available funds or by certified check.
11
<PAGE> 14
IN WITNESS WHEREOF, each of the Company and the Stockholder has caused this
Agreement to be executed and delivered by its duly authorized officer, all as of
the day and year first above written.
<TABLE>
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EXIDE ELECTRONICS GROUP, INC.
Attest:
By: By:
- --------------------------------------------- ---------------------------------------------
Title: Title:
- --------------------------------------------- ---------------------------------------------
[Corporate Seal]
FISKARS OY AB
By:
---------------------------------------------
Title:
---------------------------------------------
And:
---------------------------------------------
Title:
---------------------------------------------
</TABLE>
12
<PAGE> 1
EXHIBIT 10.1
CONFORMED COPY
$175,000,000
CREDIT AGREEMENT
dated as of March 13, 1996
among
EXIDE ELECTRONICS GROUP, INC.,
as Borrower
The GUARANTORS Party Hereto,
The LENDERS Listed Herein
The ISSUING LENDERS Party Hereto
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Administrative Agent
and
BANK OF AMERICA ILLINOIS,
as Documentation Agent
--------------------
NATIONSBANK, N.A.
and
ABN AMRO BANK, N.V.,
Co-Agents
<PAGE> 2
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
Syndication Agent
J.P. MORGAN SECURITIES INC.,
Arranger
2
<PAGE> 3
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
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1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 2
THE CREDITS
2.1. Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2. Method of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.3. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.4. Scheduled Termination of Commitments and Maturity of Loans . . . . . . . . . . . . . . . . . . . . . . 28
2.5. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.6. Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.7. Optional Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.8. Mandatory Incremental Repayments, and Reduction of Commitments . . . . . . . . . . . . . . . . . . . . 32
2.9. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.10. Method of Electing Interest Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.11. General Provisions as to Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.12. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.13. Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.14. Regulation D Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.15. Letters of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 3
CONDITIONS
3.1. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.2. Borrowings and Issuances of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
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4.1. Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.2. Corporate and Governmental Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . 46
4.3. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.4. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.5. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.6. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.7. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.8. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.9. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.10. Regulatory Restrictions on Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.11. Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.12. Representations of Guarantors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.13. Deltec Acquisition Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE 5
COVENANTS
5.1. Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.2. Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.3. Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.4. Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.5. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.6. Inspection of Property, Books and Records; Annual Lender Meeting . . . . . . . . . . . . . . . . . . . 57
5.7. Mergers and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.8. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.9. Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.10. Limitation on Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.11. Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.12. Investments and Other Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
5.13. Consolidated Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.14. Sale-Leaseback Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
5.15. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.16. Hedging Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
ii
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5.17. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.18. Minimum Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
5.19. Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
5.20. Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
5.21. Minimum EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.22. Amendments of Related Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
5.23. Limitation on Restrictions Affecting Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.24. Designated Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE 6
DEFAULTS
6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.2. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.3. Cash Cover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE 7
THE AGENT
7.1. Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.2. Agents and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.3. Action by Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
7.4. Consultation with Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
7.5. Liability of Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
7.6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
7.7. Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
7.8. Successor Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.9. Agents' Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
7.10. Co-Agents, Documentation Agent and Syndication Agent. . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE 8
CHANGE IN CIRCUMSTANCES
8.1. Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . . . . . . . . . . . . . 76
</TABLE>
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8.2. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
8.3. Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
8.4. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
8.5. Base Rate Loans Substituted for Affected Euro-Dollar Loans . . . . . . . . . . . . . . . . . . . . . 81
8.6. Substitution of Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE 9
GUARANTY
9.1. The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
9.2. Guaranty Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
9.3. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances . . . . . . . . . . . . 83
9.4. Waiver by each Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
9.5. Subrogation and Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
9.6. Stay of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
9.7. Limit of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE 10
MISCELLANEOUS
10.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
10.2. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.3. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.4. Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
10.5. Amendments and Waivers; Release of Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
10.6. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
10.7. Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
10.8. Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
10.9. Counterparts; Integration; Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
10.10. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
PRICING SCHEDULE
SCHEDULE 1 - Existing Letters of Credit
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<S> <C>
SCHEDULE 4.5 - Material Litigation
SCHEDULE 5.10 - Outstanding Indebtedness
EXHIBIT A - Note
EXHIBIT B - Security Agreement
EXHIBIT C - Pledge Agreement
EXHIBIT D - Opinion of Special North Carolina
Counsel for the Obligors
EXHIBIT E-1 - Opinion of Davis Polk & Wardwell,
Special New York Counsel to the Agents
EXHIBIT E-2 - Form of Opinion of Special Foreign
Counsel to the Agents
EXHIBIT F - Assignment and Assumption
Agreement
EXHIBIT G - Borrowing Base Certificate
EXHIBIT H - Guarantor Addendum
</TABLE>
v
<PAGE> 8
CREDIT AGREEMENT
AGREEMENT dated as of March 13, 1996 among EXIDE ELECTRONICS
GROUP, INC., the GUARANTORS party hereto, the LENDERS listed on the signature
pages hereof, the ISSUING LENDERS parties hereto, MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent and BANK OF AMERICA ILLINOIS, as
Documentation Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used
herein, have the following meanings:
"Acquisition" shall mean any acquisition (other than the
Deltec Acquisition), whether in a single transaction or series of related
transactions, by the Borrower or any one or more Subsidiaries, or any
combination thereof, of (i) all or a substantial part of the assets, or a going
business or division, of any Person, whether through purchase of assets or
securities, by merger or otherwise, (ii) control of at least a majority of
securities of an existing corporation or other Person ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors or (iii) control of a greater than 50% ownership
interest in any existing partnership, joint venture or other Person.
"Additional Debt Incurrence" means the incurrence of any Debt
by the Borrower or any of its Subsidiaries after the date hereof of the type
referred to in clauses (i), (ii) or (vii) of the definition of "Debt" herein,
other than Debt (i) under the Loan Documents, or the Subordinated Notes, (ii)
which constitutes a permitted refinancing of Debt hereunder, (iii) which is
secured by a Lien permitted by
<PAGE> 9
Section 5.9(c) or (iv) expressly permitted by Sections 5.10(f) or (g).
"Administrative Agent" means Morgan Guaranty Trust Company of
New York in its capacity as administrative agent for the Lenders hereunder, and
its successors in such capacity.
"Administrative Questionnaire" means, with respect to each
Lender, an administrative questionnaire in the form prepared by the
Administrative Agent and submitted to the Administrative Agent (with a copy to
the Borrower) duly completed by such Lender.
"Affiliate" means, with respect to any Person, (i) any Person
that directly, or indirectly through one or more intermediaries, controls the
Borrower (a "Controlling Person") or (ii) any Person (other than the Borrower
or a Subsidiary) which is controlled by or is under common control with a
Controlling Person. As used herein, the term "control" means possession,
directly or indirectly, of the power to vote 10% or more of any class of voting
securities of a Person or to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agents" means the Administrative Agent and the Documentation
Agent, and "Agent" means either one of the foregoing.
"Applicable Lending Office" means, with respect to any Lender,
(i) in the case of its Base Rate Loans, its Domestic Lending Office and (ii) in
the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Asset Sale" means any sale, lease or other disposition
(including any such transaction effected by way of merger or consolidation) by
the Borrower or any of its Subsidiaries of any asset, including without
limitation any sale-leaseback transaction, whether or not involving a capital
lease, but excluding (i) dispositions of inventory, cash, cash equivalents and
other cash management investments
2
<PAGE> 10
and obsolete, unused or unnecessary equipment and undeveloped real estate, in
each case in the ordinary course of business, (ii) dispositions to the Borrower
or a Subsidiary of the Borrower and (iii) Permitted Receivables Dispositions.
"Assignee" has the meaning set forth in Section 10.6(c).
"Available Cash Flow" means, for any fiscal period, the sum of
(i) Consolidated Net Income for such period plus (ii) to the extent deducted in
determining Consolidated Net Income for such period, depreciation, amortization
and other similar noncash charges plus (iii) any increase (or minus any
decrease) during such period in deferred tax liabilities of the Borrower and
its Consolidated Subsidiaries, taken as a whole, minus (iv) any gain (or plus
any loss) from Asset Sales to the extent included (or deducted) in determining
Consolidated Net Income for such period.
"Available LC Amount" means at any time an amount equal to the
lesser of (i) $10,000,000, and (ii) the excess, if any, of the aggregate amount
of the Revolving Commitments (or if less, the Borrowing Base) over the
aggregate outstanding amount of Revolving Loans and Swing Loans at such time.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus
the Federal Funds Rate for such day.
"Base Rate Loan" means (i) a Loan which bears interest by
reference to the Base Rate pursuant to the applicable Notice of Borrowing or
Notice of Interest Rate Election or the provisions of Article VIII or (ii) an
overdue amount which was a Base Rate Loan immediately before it became overdue.
"Base Rate Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
3
<PAGE> 11
"Benefit Arrangement" means at any time an employee benefit
plan within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means Exide Electronics Group, Inc., a Delaware
corporation, and its successors.
"Borrower's 1995 Form 10-K" means the Borrower's annual report
on Form 10-K for the Fiscal Year ended September 30, 1995, as filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934.
"Borrowing" means a borrowing hereunder consisting of Loans
made to the Borrower at the same time by the Lenders pursuant to Article 2 (or
a Swing Loan made solely by the Swing Lender), all of which (except for Base
Rate Loans) have the same initial Interest Period. A Borrowing is a "Base Rate
Borrowing" if such Loans are Base Rate Loans, a "Euro-Dollar Borrowing" if such
Loans are Euro-Dollar Loans and a "Swing Borrowing" if such Loan is a Swing
Loan.
"Borrowing Base" means, at any date of determination, the sum
of (i) 70% of Eligible Accounts Receivable and (ii) 50% of Eligible
Inventories, in each case determined pursuant to the most recent Borrowing Base
Certificate prepared in accordance with Section 5.1(i).
"Borrowing Base Certificate" means a certificate, duly
executed by the chief financial officer, treasurer, assistant treasurer or
controller of the Borrower, appropriately completed and substantially in the
form of Exhibit G hereto.
"Closing Date" means the date on or after the Effective Date
on which the Administrative Agent shall have received the documents specified
in or pursuant to Section 3.1.
4
<PAGE> 12
"Collateral" means collateral subject to the Collateral
Documents.
"Collateral Documents" means, collectively, the Pledge
Agreement, the Security Agreement and any other agreement pursuant to which an
Obligor or any Subsidiary of an Obligor provides a Lien on its assets in favor
of the Administrative Agent for the benefit of the Lenders, and all
supplementary assignments, security agreements, pledge agreements,
acknowledgments or other documents delivered or to be delivered pursuant to the
terms hereof (including without limitation pursuant to Section 5.17) or of any
other Security Document.
"Commitment" means a Term Commitment or a Revolving
Commitment, and "Commitments" means any combination of the foregoing.
"Commitment Fee Rate" means a rate per annum determined in
accordance with the Pricing Schedule.
"Consolidated Capital Expenditures" means, for any period, the
additions to property, plant and equipment and other capital expenditures of
the Borrower and its Consolidated Subsidiaries for such period, as the same are
or would be set forth in a consolidated statement of cash flows of the Borrower
and its Consolidated Subsidiaries for such period.
"Consolidated Debt" means at any date the Debt of the Borrower
and its Consolidated Subsidiaries, determined on a consolidated basis as of
such date.
"Consolidated EBITDA" means, for any fiscal period,
Consolidated Net Income for such period plus, to the extent deducted in
determining Consolidated Net Income for such period, the aggregate amount of
(i) Consolidated Interest Expense, (ii) income tax expense, (iii) the aggregate
amount of depreciation, amortization and other similar non-cash charges and
(iv) minority interest expenses deducted in determining the Borrower's direct
or indirect share of net income of Consolidated Subsidiaries.
5
<PAGE> 13
"Consolidated Interest Expense" means, for any period, the
interest expense of the Borrower and its Consolidated Subsidiaries determined
on a consolidated basis for such period excluding, for the Fiscal Quarter ended
on or about March 31, 1996, $4,100,000 of interest expense incurred pursuant to
the Deltec Purchase Agreement.
"Consolidated Net Income" means, for any fiscal period, the
net income of the Borrower and its Consolidated Subsidiaries, determined on a
consolidated basis for such period, exclusive of the effect of any
extraordinary or other non-recurring gain (but not loss) and before the effect
of any dividends paid during such period on the Borrower's capital stock.
"Consolidated Net Working Investment" means at any date (i)
consolidated current assets of the Borrower and its Consolidated Subsidiaries
(exclusive of cash and cash equivalents) minus (ii) the sum (without
duplication) of (x) the consolidated current liabilities of the Borrower and
its Consolidated Subsidiaries and (y) the current liabilities of any Person
(other than the Borrower or any of its Consolidated Subsidiaries) which are
Guaranteed by the Borrower or a Consolidated Subsidiary, in each case exclusive
of Debt, all determined as of such date.
"Consolidated Net Worth" means at any date the sum of the
consolidated stockholders' equity of the Borrower and its Consolidated
Subsidiaries determined as of such date (other than any amount attributable to
stock which is required to be redeemed or is redeemable at the option of the
holder, if certain events or conditions occur or exist or otherwise).
"Consolidated Rental Expense" means, for any period, the
aggregate rental expense of the Borrower and its Consolidated Subsidiaries
determined on a consolidated basis for such period.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which would be consolidated with those of the
Borrower in its consolidated
6
<PAGE> 14
financial statements if such statements were prepared as of such date.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles, (v)
all non-contingent obligations (and, for purposes of Section 5.9 and the
definitions of Material Debt and Material Financial Obligations, all contingent
obligations) of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (vi) all Debt
secured by a Lien on any asset of such Person, whether or not such Debt is
otherwise an obligation of such Person, (vii) any Receivables Financing and
(viii) all Debt of others Guaranteed by such Person.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Deltec" means Deltec Power Systems, Inc., a Wisconsin
corporation, and its successors.
"Deltec Acquisition" means the acquisition by the Borrower of
Deltec and all other transactions contemplated by the Deltec Purchase Agreement
to be consummated on or before the Closing Date.
"Deltec Acquisition Documents" means the Deltec Purchase
Agreement and all agreements, documents and instruments executed and delivered
pursuant thereto or in connection with the foregoing, each as amended from time
to time in accordance with the terms hereof and thereof.
7
<PAGE> 15
"Deltec Purchase Agreement" means the Stock Purchase Agreement
dated as of November 16, 1995 among the Borrower, Deltec, Fiskars Holdings,
Inc. and Fiskars Holdings, Inc., including the exhibits and schedules thereto,
as amended by Amendment No. 1 thereto dated as of February 9, 1996 and as the
same may further be amended in accordance with the terms hereof and thereof.
"Deltec Seller Stock" means the 50 shares of Class A Preferred
Stock held by Fiskars Oy Ab, issued in connection with the closing of the
Deltec Acquisition and redeemable on January 8, 1997.
"Derivatives Obligations" of any Person means all obligations
of such Person in respect of any rate swap transaction, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions.
"Documentation Agent" means Bank of America Illinois in its
capacity as documentation agent for the Lenders hereunder, and its successors
in such capacity.
"Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in New York City are authorized
by law to close.
"Domestic Lending Office" means, as to each Lender, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Lender may hereafter designate as its Domestic
Lending Office by notice to the Borrower and the Administrative Agent.
8
<PAGE> 16
"EEIC" means Exide Electronics International Corp., a Delaware
corporation.
"Effective Date" means the date this Agreement becomes
effective in accordance with Section 10.9.
"Eligible Accounts Receivable" means, at any date of
determination thereof, the aggregate amount of "Accounts Receivable" of the
Borrower and its Consolidated Subsidiaries, as such amount is shown on the
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries on
such date on a basis consistent with that used in the preparation of the
financial statements referred to in Section 4.4(a) (other than any such amounts
that are subject to a Lien pursuant to a Permitted Receivables Financing), all
net of reserves and any "contra" accounts taken or maintained in respect
thereof, or such net amount that would be so shown on such balance sheet on
such date if it were so prepared on such date.
"Eligible Inventories" means, at any date of determination
thereof, the value (determined on a basis consistent with that used on the date
hereof) at such date of all inventory of the Borrower and its Consolidated
Subsidiaries, to the extent comprised of readily marketable materials of a type
manufactured, consumed or held for resale, as such amount is shown on the
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries on
such date on a basis consistent with that used in the preparation of the
financial statements referred to in Section 4.4(a), other than any such amounts
that are subject to a Lien (other than Liens under the Loan Documents), all net
of reserves and any "contra" accounts taken or maintained in respect thereof,
or such net amount that would be so shown on such balance sheet on such date if
it were so prepared on such date.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental
9
<PAGE> 17
restrictions relating to the environment, the effect of the environment on
human health or to emissions, discharges or releases of pollutants,
contaminants, Hazardous Substances or wastes into the environment including,
without limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower or any Subsidiary, are treated as a single employer under Section 414
of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including dealings
in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Lender, its
office, branch or affiliate located at its address set forth in its
Administrative Questionnaire (or identified in its Administrative Questionnaire
as its Euro-Dollar Lending Office) or such other office, branch or affiliate of
such Lender as it may hereafter designate as its Euro-Dollar Lending Office by
notice to the Borrower and the Administrative Agent.
"Euro-Dollar Loan" means (i) a Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Borrowing or Notice of
Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan
immediately before it became overdue.
10
<PAGE> 18
"Euro-Dollar Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
"Euro-Dollar Rate" means a rate of interest determined
pursuant to Section 2.5(b) on the basis of a London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank of
the Federal Reserve System in New York City with deposits exceeding five
billion dollars in respect of "Eurocurrency liabilities" (or in respect of any
other category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
any Lender to United States residents).
"Event of Default" has the meaning set forth in Section 6.1.
"Excess Cash Flow" means, for any period the excess (if any)
of:
(A) the sum of (i) Available Cash Flow for such fiscal period,
and (ii) any decrease in Consolidated Net Working Investment between
the beginning and the end of such period;
over
(B) the sum of (i) Consolidated Capital Expenditures for such
period, (ii) any increase in Consolidated Net Working Investment
between the beginning and the end of such period, (iii) cash dividends
paid on capital stock during such period, (iv) mandatory reductions of
long-term Debt of the Borrower and its Consolidated Subsidiaries
during such period (adjusted to eliminate the effect of prepayments
11
<PAGE> 19
on account of Excess Cash Flow for a prior period) and (v) optional
prepayments of Term Loans during such period pursuant to Section 2.9.
"Existing Credit Agreement" means the Credit Agreement dated
as of September 30, 1994 among the Borrower, as guarantor, the "Borrowers"
referred to therein, First Union National Bank of North Carolina, as
co-arranger and administrative agent, BA Securities, Inc., as co-arranger, Bank
of America Illinois, as documentation agent and the lenders referred to
therein, as amended.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate
on such transactions on the next preceding Domestic Business Day as so
published on the next succeeding Domestic Business Day, and (ii) if no such
rate is so published on such next succeeding Domestic Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to the Administrative
Agent on such day on such transactions as determined by the Administrative
Agent.
"Fiscal Quarter" means a fiscal quarter in a Fiscal Year of
the Borrower. "First Fiscal Quarter 1996", "Second Fiscal Quarter 1996" and
"Third Fiscal Quarter 1996", e.g., mean, respectively, the fiscal quarters of
the Borrower ending most nearly on December 31, 1995, March 31, 1996 and June
30, 1996.
"Fiscal Year" means a fiscal year of the Borrower, and "Fiscal
Year" for any particular year means the fiscal year of the Borrower ended or
ending during the specified calendar year. "Fiscal Year 1996", e.g., means the
fiscal year of the Borrower ending approximately September 30, 1996.
12
<PAGE> 20
"Fixed Charge Coverage Ratio" means, at any date, the ratio of
(i) the sum of (A) Consolidated EBITDA plus (B) Consolidated Rental Expense
minus (C) Consolidated Capital Expenditures, in each case for the four
consecutive Fiscal Quarters of the Borrower and its Consolidated Subsidiaries
ending on such date (or, in the case of any Fiscal Quarter ending prior to
March 31, 1997, for the period commencing on April 1, 1996 and ending on the
last day of such Fiscal Quarter) to (ii) the sum of (x) Consolidated Interest
Expense for such period plus (y) Consolidated Rental Expense for such period
plus (z) the aggregate amount of dividends or distributions paid by the
Borrower on or with respect to its capital stock (or by any Subsidiary on or
with respect to capital stock owned by a Person other than the Borrower or
another Subsidiary) during such period, but excluding in any event the
redemption of the Deltec Seller Stock in accordance with the terms thereof.
"Group of Loans" or "Group" means at any time a group of Loans
consisting of (i) all Base Rate Loans at such time or (ii) all Euro-Dollar
Loans having the same Interest Period at such time; provided that, if Loans of
any particular Lender are converted to or made as Base Rate Loans pursuant to
Article 8, such Loans shall be included in the same Group or Groups of Loans
from time to time as they would have been in if they had not been so converted
or made.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in
any other manner the holder of such Debt or other obligation of the payment
thereof or to protect such holder against loss in
13
<PAGE> 21
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Guarantor" means each Person listed on the signature pages
hereof as a "Guarantor", together with any Person who shall become a Guarantor
in accordance with Section 5.17(d), and their respective successors.
"Hazardous Substances" means any toxic, radioactive, caustic
or otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"Immaterial Subsidiary" means a Subsidiary of the Borrower,
other than any Obligor, that at the relevant time of determination (i) does
not, together with any of its Subsidiaries, have assets (including capital
stock) with an aggregate fair market value exceeding $1,000,000 and (ii) is not
performing any activity significant to the business of the Borrower and its
Subsidiaries, taken as a whole, if the Borrower shall have notified the
Administrative Agent prior to the date hereof or any relevant event that such
Subsidiary is an "Immaterial Subsidiary". As of the Closing Date, Lortec Power
Systems, Inc., International Power Machines GmbH, International Power Machines
de Mexico, S.A. de C.V., International Power Machines Canada Ltd. and Exide
Electronics, B.V. are Immaterial Subsidiaries.
"Indemnitee" has the meaning set forth in Section 10.3(b).
"Interest Period" means, with respect to each Euro-Dollar
Loan, a period commencing on the date of Borrowing specified in the applicable
Notice of Borrowing or on the date specified in the applicable Notice of
Interest Rate Election and ending one, two, three or six months thereafter, as
the Borrower may elect in the applicable Notice; provided that:
14
<PAGE> 22
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) if any Interest Period includes a date on which a payment
of principal of any Loan is required to be made under Section 2.4 or
Section 2.8 but does not end on such date, then (i) the principal
amount (if any) of each Euro-Dollar Loan required to be repaid on such
date shall have an Interest Period ending on such date and (ii) the
remainder (if any) of each such Euro-Dollar Loan shall have an
Interest Period determined as set forth above.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, or any successor statute.
"International Subsidiary" means any Subsidiary of the
Borrower organized under the laws of a jurisdiction, and conducting
substantially all of its operations outside of, the United States of America.
"Investment" means any investment in any Person, whether by
means of share purchase, capital contribution, loan, Guarantee, time deposit or
otherwise (but not including any demand deposit).
"Issuing Lender" means Morgan Guaranty Trust Company of New
York and First Union National Bank of North Carolina and any other Lender that
may agree to issue
15
<PAGE> 23
letters of credit hereunder, in each case as issuer of a letter of credit
hereunder.
"Lender" means each bank listed on the signature pages hereof,
each Assignee which becomes a Lender pursuant to Section 10.6(c), and their
respective successors, and shall include, as the context may require, the
Issuing Lender in such capacity.
"Letter of Credit" means a letter of credit to be issued
hereunder by an Issuing Lender.
"Letter of Credit Fee Rate" means a rate per annum determined
in accordance with the Pricing Schedule.
"Letter of Credit Liabilities" means, for any Lender and at
any time, the sum of (i) the amounts then owing to such Lender (including in
its capacity as an Issuing Lender) by the Borrower to reimburse it in respect
of amounts drawn under Letters of Credit and (ii) such Lender's Revolving
Percentage of the aggregate amount then available for drawing under all Letters
of Credit.
"Leverage Ratio" means, for any day, the ratio of (i)
Consolidated Debt on such day to (ii) Consolidated EBITDA for the four
consecutive Fiscal Quarters ending on or most recently prior to such day;
provided that in determining the Leverage Ratio as of any day prior to the end
of the Fiscal Quarter ending approximately on December 31, 1996, Consolidated
EBITDA for the Fiscal Quarters ending September 30, 1995 and December 31, 1995
shall be deemed to be $14,683,000 and $15,223,000, respectively.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any other type
of preferential arrangement that has the practical effect of creating a
security interest, in respect of such asset. For the purposes of this
Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or
16
<PAGE> 24
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Loan" means a Base Rate Loan, a Euro-Dollar Loan or a Swing
Loan, and "Loans" means Base Rate Loans, Swing Loans or Euro-Dollar Loans or
any combination of the foregoing.
"Loan Documents" means this Agreement, the Notes and the
Collateral Documents.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.5(b).
"Major Casualty Proceeds" means (i) the aggregate insurance
proceeds received in connection with one or more related events by the Borrower
or any of its Subsidiaries under any insurance policy maintained by the
Borrower or any of its Subsidiaries covering losses with respect to tangible
real or personal property or improvements or losses from business interruption
or (ii) any award or other compensation with respect to any condemnation of
property (or any transfer or disposition of property in lieu of condemnation)
received by the Borrower or any of its Subsidiaries, if the amount of such
aggregate proceeds or award or other compensation exceeds $1,000,000.
"Material Debt" means Debt (other than the Notes) of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, in an aggregate principal or face amount exceeding
$5,000,000.
"Material Financial Obligations" means a principal or face
amount of Debt and/or payment or collateralization obligations in respect of
Derivatives Obligations of the Borrower and/or one or more of its Subsidiaries,
arising in one or more related or unrelated transactions, exceeding in the
aggregate $5,000,000.
"Material Plan" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $1,000,000.
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"Maturity Date" means March 13, 2001, or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in which case
the Maturity Date shall be the next preceding Euro-Dollar Business Day.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the
ERISA Group during such five year period.
"Net Cash Proceeds" means, with respect to any Reduction
Event, an amount equal to the cash proceeds received by the Borrower or any or
its Subsidiaries from or in respect of such Reduction Event (including any cash
proceeds received as income or other proceeds of any noncash proceeds of any
Asset Sale) or, in the case of any Permitted Receivables Financing, the
Receivables Investment Amount with respect thereto (including any increases in
the initial amount thereof from time to time, but not with respect to
reinvestments out of collections or proceeds by the purchasers or lenders
thereunder that do not result in an increase in the Receivables Investment
Amount with respect thereto), (i) less any expenses reasonably incurred by such
Person in respect of such Reduction Event and (ii) if such Reduction Event is
an Asset Sale, less (x) the amount of any Debt secured by a Lien on any asset
disposed of in such Asset Sale and discharged from the proceeds thereof and (y)
any taxes actually paid or to be payable by such Person (as estimated by a
senior financial or accounting officer of the Borrower, giving effect to the
overall tax position of the Borrower) in respect of such Asset Sale.
"Notes" means promissory notes of the Borrower, substantially
in the form of Exhibit A hereto, evidencing
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the obligation of the Borrower to repay the Loans, and "Note" means any one of
such promissory notes issued hereunder.
"Notice of Borrowing" has the meaning set forth in Section
2.2.
"Notice of Interest Rate Election" has the meaning set forth
in Section 2.10.
"Notice of Issuance" has the meaning set forth in Section
2.15(b).
"Obligor" means the Borrower and each Guarantor.
"Parent" means, with respect to any Lender, any Person
controlling such Lender.
"Participant" has the meaning set forth in Section 10.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Receivables Disposition" means any transfer (by way
of sale, pledge or otherwise) by the Borrower or any Subsidiary to any other
Person of accounts receivable and other rights to payment (whether constituting
accounts, chattel paper, instruments, general intangibles or otherwise and
including the right to payment of interest or finance charges) and related
contract and other rights and property (including all general intangibles,
collections and other proceeds relating thereto, all security therefor (and the
property subject thereto), all guarantees and other agreements or arrangements
of whatsoever character from time to time supporting such right to payment, and
all other rights, title and interest in goods relating to a sale which gave
rise to such right of payment) in connection with a Permitted Receivables
Financing.
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"Permitted Receivables Financing" means any Receivables
Financing by the Borrower or any of its Subsidiaries which has been approved by
the Required Lenders (which Receivables Financing shall provide for recourse
against the transferor of such receivables only for limited indemnities and
breach of warranty concerning the eligibility of the receivables transferred,
and no such recourse for uncollectability of such receivables solely for the
failure of the related obligors to pay such receivables), which such approval
for any such transaction shall be considered in good faith. No Receivables
Financing or other transaction involving the sale, pledge or other disposition
by the Borrower or any of its Subsidiaries of any account receivable shall
constitute a "Permitted Receivables Financing" unless the Required Lenders
(determined, for this purpose, without the participation of any Lender acting
as a participant, sponsor or credit support provider in any such Permitted
Receivable Financing) have approved in writing (which such approval shall be
considered in good faith) the final form of all documentation relating to such
transaction (including, without limitation, the face amount of the accounts
receivable subject thereto and the economic terms) and shall have agreed to
such amendments to the Loan Documents, including, without limitation,
provisions for an "Event of Default" or similar event hereunder in the event of
a wind down or early amortization of such financing, and all amendments and
waivers relating to such documentation.
"Person" means an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity
or organization, including a government or political subdivision or an agency
or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Internal
Revenue Code and either (i) is maintained, or contributed to, by any member of
the ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding
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five years been maintained, or contributed to, by any Person which was at such
time a member of the ERISA Group for employees of any Person which was at such
time a member of the ERISA Group.
"Pledge Agreements" means each Pledge Agreement, the Share
Mortgage or similar document dated as of the date hereof between each Pledgor
and the Administrative Agent, each substantially in the form of Exhibit C, in
each case with such modifications and additions as shall be necessary to comply
with applicable law.
"Pledgors" means the Borrower, International Power Machines
Corporation, EEIC, Exide Electronics USA Holdings Corp., Exide Electronics
Corporation, Deltec Electronics Corp. and Deltec.
"Pricing Schedule" means the Schedule attached hereto
identified as such.
"Prime Rate" means the rate of interest publicly announced by
the Administrative Agent in New York City from time to time as its Prime Rate.
"Quarterly Date" means the last Euro-Dollar Business Day of
each March, June, September and December.
"Receivables Financing" means any receivables securitization
program or other type of accounts receivable financing transaction by the
Borrower or any of its Subsidiaries.
"Receivables Investment Amount" means at any time, with
respect to any Permitted Receivables Financing, the financing amount with
respect thereto at such time, equal to the amount advanced by the purchasers or
lenders with respect thereto for the purchase or financing of assets
transferred pursuant thereto, net of repayments or recoveries through
liquidation of such assets.
"Reduction Amount" means, (i) in respect of an Asset Sale,
100% of the Net Cash Proceeds thereof in excess
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of $1,000,000 in any Fiscal Year, (ii) in respect of an Additional Debt
Incurrence or receipt of Major Casualty Proceeds, 100% of the Net Cash Proceeds
thereof, (iii) in respect of Excess Cash Flow, 50% of the amount thereof, and
(iv) in respect of the issuance of equity securities not constituting Debt, 50%
of the Net Cash Proceeds thereof in excess of $200,000 in any Fiscal Year.
"Reduction Event" means (i) any Asset Sale, (ii) any
Additional Debt Incurrence, (iii) the issuance of any equity securities by the
Borrower or any of its Subsidiaries (other than equity securities issued to the
Borrower or any of its Subsidiaries) or (iv) receipt of Major Casualty
Proceeds. The description of any transaction as falling within the above
definition does not affect any limitation on such transaction imposed by
Article 5 of this Agreement.
"Reference Lenders" means the principal London offices of Bank
of America, NT & SA, First Union National Bank of North Carolina and Morgan
Guaranty Trust Company of New York, and "Reference Lender" means any one of
such Reference Lenders.
"Refunded Swing Loans" has the meaning set forth in Section
2.1(d).
"Refunding Date" has the meaning set forth in Section 2.1(e).
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Required Lenders" means at any time Lenders having, in the
aggregate, at least 51% of the sum of (x) the Revolving Commitments at such
time or, if the Revolving Commitments shall have been terminated, the sum of
the aggregate outstanding principal amount of the Revolving Loans and Letter of
Credit Liabilities plus (y) the aggregate outstanding principal amount of the
Term Loans at such time or, if no Term Loans are then outstanding, the Term
Commitments at such time.
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"Restricted Investment" means any Investment by the Borrower
and its Subsidiaries in any Person, other than (i) Investments in Guarantors,
(ii) Temporary Cash Investments, (iii) Investments by Deltec, Borrower, EEIC
and Exide Electronic Corporation in FPS Power Systems Oy Ab with a book value
at any time in the aggregate not to exceed $5,000,000 collectively, (v)
Guarantees permitted under clause (i) of Section 5.10(h) and (v) Investments in
Subsidiaries other than Guarantors and in the Japanese Joint Venture, each of
which Investments under this clause (v) is in existence on the date hereof, and
in the respective amounts thereof on the date hereof, and renewals and
extensions by the obligor with respect to any of the foregoing, provided that
any such renewal or extension does not increase the amount of such Investment.
"Restricted Payment" means (i) any dividend or other
distribution on any shares of the Borrower's capital stock (except dividends
payable solely in shares of its capital stock) or (ii) any payment on account
of the purchase, redemption, retirement or acquisition of (a) any shares of the
Borrower's capital stock or (b) any option, warrant or other right to acquire
shares of the Borrower's capital stock and (iii) any payment of principal on,
or on account of, the purchase, redemption, retirement or other acquisition, in
each case prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment of, the Subordinated Notes and any other Debt (except for
repayments in the ordinary course of business of Debt of International
Subsidiaries permitted under Section 5.10(g) hereof).
"Revolving Commitment" means, with respect to each Lender, the
amount set forth opposite the name of such Lender on the signature pages hereof
under the heading "Revolving Commitments", as such amount may be reduced from
time to time pursuant to Section 2.7 or 2.8.
"Revolving Credit Available Amount" means with respect to each
Lender, at any time, the lesser of (i) the amount of such Lender's Revolving
Commitment at such time
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and (ii) the Borrowing Base at such time multiplied by such Lender's Revolving
Percentage.
"Revolving Credit Period" means the period from and including
the Effective Date to but not including the Maturity Date.
"Revolving Loan" means a loan made by a Lender pursuant to
Section 2.1(b).
"Revolving Percentage" means, with respect to each Lender, the
percentage that such Lender's Revolving Commitment constitutes of the aggregate
amount of the Revolving Commitments.
"S&P" means Standard & Poor's Rating Group.
"Sale-Leaseback Transaction" means any arrangement with any
Person providing for the leasing by the Borrower or any Subsidiary of any
property that, or of any property similar to and used for substantially the
same purposes as any other property that, has been or is to be sold, assigned,
transferred or otherwise disposed of by the Borrower or any of its Subsidiaries
to such Person with the intention of entering into such a lease.
"Security Agreement" means the security agreement
substantially in the form of Exhibit B hereto between each Obligor party
thereto and the Administrative Agent entered into as of the Closing Date and
any security agreement entered into pursuant hereto after the Closing Date, in
each case as amended from time to time.
"Series G Preferred Stock" means the 1,000,000 shares of
Series G Convertible Preferred Stock held by Fiskars Oy Ab, issued in
connection with the closing of the Deltec Acquisition and convertible at any
time at the option of the holder, as in effect on the date hereof and as
amended from time to time in accordance with the terms hereof and thereof.
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"Subordinated Notes" means, at any time, the subordinated
notes, in an aggregate principal amount of not less than $75,000,000 and not
more than $150,000,000, issued pursuant to the Subordinated Note Agreement on
or prior to the Closing Date, having a scheduled maturity not earlier than, and
not requiring any payment of principal prior to, the date that is 10 years from
the Closing Date.
"Subordinated Note Agreement" means the Subordinated Note
Indenture dated as of March 13, 1996 between the Borrower, the guarantors
referred to therein, and the purchasers referred to therein, with regard to the
issuance of at least $75,000,000 in aggregate principal amount of subordinated
notes of the Borrower, substantially in the form delivered to the Lenders prior
to the date hereof, and as amended from time to time in accordance with the
terms thereof and hereof.
"Subsidiary" means, as to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person;
unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower.
"Swing Lender" means Morgan Guaranty Trust Company of New
York, in its capacity as the Swing Lender under the swing loan facility
described in Section 2.1(c), and its successors in such capacity.
"Swing Loan" means a Loan made by the Swing Lender pursuant to
Section 2.1(c).
"Swing Loan Commitment" means $5,000,000 or, if less, the
aggregate amount of the Revolving Commitments.
"Swing Loan Refund Amount" has the meaning set forth in
Section 2.1(d).
"Syndication Date" means the earlier of (i) the 45th day after
the Closing Date and (ii) the date on which
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the Administrative Agent determines, in its sole discretion but after
consultation with the Co-Agents, and the other initial Lenders (and so notifies
the Borrower), that the primary syndication and resulting addition of
institutions as "Lenders" pursuant to Section 10.6 shall have been completed.
"Temporary Cash Investment" means any Investment in (i)
securities issued or unconditionally guaranteed by the United States of America
or any agency or instrumentality thereof, backed by the full faith and credit
of the United States of America and maturing within one year from the date of
acquisition, (ii) securities issued by any state of the United States of
America or any political subdivision or public instrumentality thereof,
maturing within one year from the date of acquisition and, at the time of
acquisition, having a rating of at least A- by S&P or the equivalent by
Moody's, (iii) commercial paper issued by any Person organized under the laws
of the United States of America, maturing no more than one year from the date
of acquisition and, at the time of acquisition, having a rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, (iv) time deposits and certificates of deposit that are insured by the
Federal Deposit Insurance Corporation (the "FDIC") or any successor
instrumentality of the government of the United States of America up to the
applicable limit on insurance granted by the FDIC or such other instrumentality
with respect to such instruments (it being understood that the amount invested
in such instrument may not exceed the limit on such insurance), maturing within
one year from the date of issuance and issued by a bank or trust company
organized under the laws of the United States of America or any state thereof
and having combined capital and surplus of at least $500,000,000, (v)
repurchase obligations with a term not exceeding seven (7) days with respect to
underlying securities of the types described in clause (i) above entered into
with any bank or trust company meeting the qualifications specified in clause
(iv) above and (vi) money market funds substantially all of whose assets are
comprised of securities of the types described in clauses (i) through (v)
above.
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"Term Commitment" means, with respect to each Lender, the
amount set forth opposite the name of such Lender on the signature pages hereof
under the heading "Term Commitments", as such amount may be reduced from time
to time pursuant to Section 2.7.
"Term Loan" means a loan made by a Lender pursuant to Section
2.1(a).
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including
the States and the District of Columbia, but excluding its territories and
possessions.
SECTION 1.2. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent (except for changes concurred in by the
Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Lenders; provided that, if the Borrower notifies
the Administrative Agent that the Borrower wishes to amend any covenant in
Article 5 to eliminate the effect of any change in generally accepted
accounting principles on the operation of such covenant (or if the
Administrative Agent notifies the Borrower that the
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<PAGE> 35
Required Lenders wish to amend Article 5 for such purpose), then the Borrower's
compliance with such covenant shall be determined on the basis of generally
accepted accounting principles in effect immediately before the relevant change
in generally accepted accounting principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory to the
Borrower and the Required Lenders.
ARTICLE 2
THE CREDITS
SECTION 2.1. Commitments to Lend.
(a) Term Loans. Each Lender severally agrees, on the terms
and conditions set forth in this Agreement, to make a single loan to the
Borrower on the Closing Date in an aggregate amount not to exceed such Lender's
Term Commitment. The Borrowing pursuant to this Section 2.1(a) shall be made
from the several Lenders ratably in proportion to their respective Term
Commitments. Loans made pursuant to this Section 2.1(a) are not revolving in
nature and amounts of such loans repaid or prepaid may not be reborrowed.
(b) Revolving Loans. Each Lender severally agrees, on the
terms and conditions set forth in this Agreement, to make loans to the Borrower
pursuant to this Section 2.1(b) from time to time during the Revolving Credit
Period in amounts such that the aggregate principal amount of Revolving Loans
by such Lender at any one time outstanding shall not exceed the amount by which
(i) such Lender's Revolving Credit Available Amount exceeds (ii) an amount
equal to such Lender's Revolving Percentage of the sum at such time of (x)
aggregate amount of all Letter of Credit Liabilities plus (y) the aggregate
outstanding principal amount of Swing Loans. Each Borrowing under this Section
shall be in an aggregate principal amount of $5,000,000 or any larger multiple
of $1,000,000 (except that any such Borrowing may be in the aggregate amount of
the
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unused Commitments) and shall be made from the several Lenders ratably in
proportion to their respective Revolving Commitments. Within the foregoing
limits, the Borrower may borrow under this Section, repay, or to the extent
permitted by Section 2.9, prepay Revolving Loans and reborrow at any time
during the Revolving Credit Period under this Section.
(c) Swing Loans. During the Revolving Credit Period, the
Swing Lender agrees, on the terms and conditions set forth in this Agreement,
to make loans to the Borrower pursuant to this Section 2.1(c) from time to time
in amounts such that (i) the aggregate principal amount of Swing Loans does not
at any time exceed the Swing Loan Commitment and (ii) the sum of the aggregate
outstanding principal amount of the Revolving Loans and Swing Loans plus the
aggregate amount of all Letter of Credit Liabilities at such time does not
exceed the aggregate Revolving Commitments or, if less, the Borrowing Base.
Each Borrowing under this Section 2.1(c) shall be in an aggregate principal
amount of $1,000,000 or any larger multiple thereof (except that any such
Borrowing may be in the aggregate available amount of Swing Loans determined in
accordance with the immediately preceding sentence). Within the foregoing
limits, the Borrower may borrow under this Section 2.1(c), repay or, to the
extent permitted by Section 2.9, prepay Swing Loans and reborrow at any time
prior to the Maturity Date under this Section 2.1(c).
(d) Conversion of Swing Loans to Revolving Loans. The Swing
Lender, at any time and from time to time in its sole and absolute discretion
may, on behalf of the Borrower (which hereby irrevocably directs the Swing
Lender to act on its behalf), on notice given by the Swing Lender no later than
11:00 A.M., New York City time, on the proposed date of Borrowing for the
Revolving Loans referred to below, request each Lender to make, and each Lender
hereby agrees to make, a Revolving Loan, in an amount (with respect to each
Lender, its "Swing Loan Refund Amount") equal to such Lender's Revolving
Percentage of the aggregate principal amount of the Swing Loans (the "Refunded
Swing Loans") outstanding on the date of such notice, to repay the Swing
Lender. Unless any of the events described in clause (g) or (h) of Section
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6.1 with respect to the Borrower shall have occurred and be continuing (in
which case the procedures of Section 2.1(e) shall apply), each Lender shall
make such Revolving Loan available to the Administrative Agent at its address
specified in or pursuant to Section 10.1 in immediately available funds, not
later than 12:00 Noon (New York City time), on the date of such notice. Each
such Revolving Loan shall initially be made as a Base Rate Loan. The
Administrative Agent shall pay the proceeds of such Revolving Loans to the
Swing Lender, which shall immediately apply such proceeds to repay Refunded
Swing Loans. Effective on the day such Revolving Loans are made, the portion
of the Swing Loans so paid shall no longer be outstanding as Swing Loans, shall
no longer be due as Swing Loans under the Note held by the Swing Lender, and
shall be due as Revolving Loans under the respective Notes issued to the
Lenders (including the Swing Lender) in accordance with their respective
Revolving Percentages (calculated as set forth above). The Borrower authorizes
the Swing Lender to charge the Borrower's accounts with the Administrative
Agent (up to the amount available in each such account) in order to immediately
pay the amount of such Refunded Swing Loans to the extent amounts received from
the Lenders are not sufficient to repay in full such Refunded Swing Loans.
(e) Purchase of Participations in Swing Loans. If prior
to the time Revolving Loans would have otherwise been made pursuant to Section
2.1(d), one of the events described in clause (g) or (h) of Section 6.1 with
respect to the Borrower shall have occurred and be continuing, each Lender
shall, on the date such Revolving Loans were to have been made pursuant to the
notice referred to in Section 2.1(d) (the "Refunding Date"), purchase an
undivided participating interest in the Swing Loans in an amount equal to such
Lender's Swing Loan Refund Amount. On the Refunding Date, each Lender shall
transfer to the Swing Lender, in immediately available funds, such Lender's
Swing Loan Refund Amount, and upon receipt thereof the Swing Lender shall
deliver to such Lender a Swing Loan participation certificate dated the date of
the Swing Lender's receipt of such funds and in the Swing Loan Refund Amount of
such Lender.
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(f) Payments on Participated Swing Loans. Whenever, at
any time after the Swing Lender has received from any Lender such Lender's
Swing Loan Refund Amount pursuant to Section 2.1(e), the Swing Lender receives
any payment on account of the Swing Loans in which the Lenders have purchased
participations pursuant to Section 2.1(e), the Swing Lender will promptly
distribute to each such Lender its ratable share (determined on the basis of
the Swing Loan Refund Amounts of all of the Lenders) of such payment
(appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Lender's participating interest was
outstanding and funded); provided, however, that in the event that such payment
received by the Swing Lender is required to be returned, such Lender will
return to the Swing Lender any portion thereof previously distributed to it by
the Swing Lender.
(g) Obligations to Refund or Purchase Participations in Swing
Loans Absolute. Each Lender's obligation to transfer the amount of a Revolving
Loan to the Swing Lender as provided in Section 2.1(d) or to purchase a
participating interest pursuant to Section 2.1(e) shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which such Lender, the Borrower or any other Person may have against the Swing
Lender or any other Person, (ii) the occurrence or continuance of a Default or
an Event of Default or the termination or reduction of the Commitments, (iii)
any adverse change in the condition (financial or otherwise) of the Borrower or
any other Person, (iv) any breach of this Agreement by the Borrower, any other
Lender or any other Person or (v) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.
SECTION 2.2. Method of Borrowing. (a) The Borrower shall
give the Administrative Agent notice (a "Notice of Borrowing") not later than
11:00 A.M. (New York City time) on (x) the date of each Base Rate Borrowing and
(y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, and
not later than 12:00 Noon (New York
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City time) on the date of each Borrowing of a Swing Loan, specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Base Rate Borrowing or Swing Borrowing,
or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are to bear
interest initially at the Base Rate or a Euro-Dollar Rate,
provided that (i) no Loans shall be specified to bear
interest at the Euro-Dollar Rate prior to the Syndication Date and
(ii) all Swing Loans and, initially, Revolving Loans made
pursuant to Section 2.1(d) shall bear interest based on the Base Rate;
(iv) whether the Loans comprising such Borrowing are to be
Term Loans, Revolving Loans or Swing Loans, and
(v) in the case of a Euro-Dollar Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
No more than three Swing Loans may be borrowed during any calendar week.
(b) Upon receipt of a Notice of Borrowing, the Administrative
Agent shall promptly notify each Lender of the contents thereof and of such
Lender's ratable share of such Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
(c) Not later than 12:00 Noon (New York City time) on the
date of each Borrowing (or 1:00 P.M. (New York City time) on the date of each
Swing Borrowing), each Lender (or, in the case of a Swing Loan, the Swing
Lender) shall make available its share of such Borrowing, in Federal or
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other funds immediately available in New York City, to the Administrative Agent
at its address referred to in Section 10.1. Unless the Administrative Agent
determines that any applicable condition specified in Article 3 has not been
satisfied, the Administrative Agent will make the funds so received from the
Lenders available promptly on the date of such Borrowing to the Borrower at the
Administrative Agent's aforesaid address.
(d) Unless the Administrative Agent shall have received
notice from a Lender prior to the date of any Borrowing that such Lender will
not make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (c) of this Section and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made such share available to the Administrative Agent, such Lender and
the Borrower severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, a rate per annum equal to the higher of the Federal Funds Rate and
the interest rate applicable thereto pursuant to Section 2.5 and (ii) in the
case of such Lender, the Federal Funds Rate. If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Loan included in such Borrowing for purposes of this
Agreement.
SECTION 2.3. Notes. (a) The Loans of each Lender shall be
evidenced by a single Note payable to the order of such Lender for the account
of its Applicable Lending Office, in an amount equal to the aggregate unpaid
principal amount of such Lender's Loans.
(b) Each Lender may, by notice to the Borrower and the
Administrative Agent, request that its Loans of a
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<PAGE> 41
particular type, or its Term Loans, on the one hand, and its Revolving Loans
and Swing Loans, on the other, be evidenced by a separate Note in an amount
equal to the aggregate unpaid principal amount of such Loans. Each such Note
shall be in substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely Loans of the
relevant type. Each reference in this Agreement to the "Note" of such Lender
shall be deemed to refer to and include any or all of such Notes, as the
context may require.
(c) Upon receipt of each Lender's Note pursuant to Section
3.1(a), the Administrative Agent shall forward such Note to such Lender. Each
Lender shall record the date, amount and type of each Loan made by it and the
date and amount of each payment of principal made by the Borrower with respect
thereto, and may, if such Lender so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding; provided that the failure of any Lender to
make any such recordation or endorsement shall not affect the obligations of
the Borrower hereunder or under the Notes. Each Lender is hereby irrevocably
authorized by the Borrower so to endorse its Note and to attach to and make a
part of its Note a continuation of any such schedule as and when required.
SECTION 2.4. Scheduled Termination of Commitments and
Maturity of Loans. (a) The Term Commitments shall terminate at the close of
business on the Closing Date. The Revolving Commitments and the Swing
Commitment shall terminate on the Maturity Date, and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such date.
(b) The Borrower shall be obligated to repay, and there shall
become due and payable on each Quarterly Date occurring in the months set forth
below an aggregate principal amount of the Term Loans equal to the amount set
forth below opposite such Quarterly Date; provided that in
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<PAGE> 42
any event the outstanding Term Loans shall be repaid in full not later than the
Maturity Date:
<TABLE>
<CAPTION>
Quarterly Date Amount Quarterly Date Amount
- -------------- ------ -------------- ------
<S> <C> <C> <C>
June 1996 $1,250,000 December 1998 $2,083,333
September 1996 1,250,000 March 1999 2,083,333
December 1996 1,250,000 June 1999 3,333,334
March 1997 1,250,000 September 1999 3,333,334
June 1997 2,083,333 December 1999 3,333,334
September 1997 2,083,333 March 2000 3,333,334
December 1997 2,083,333 June 2000 3,750,000
March 1998 2,083,333 September 2000 3,750,000
June 1998 2,083,333 December 2000 3,750,000
September 1998 2,083,333 March 2001 3,750,000
</TABLE>
(c) Each repayment pursuant to this Section 2.4 shall be made
together with accrued interest to the date of payment, and shall be applied
ratably to payment of the Term Loans of the several Lenders in proportion to
the aggregate outstanding principal amounts of their Term Loans. Within the
foregoing limits of this Section 2.4, each required payment or prepayment shall
be made with respect to such outstanding Group or Groups of Loans as the
Borrower may designate to the Administrative Agent not less than three
Euro-Dollar Business Days prior to the date required for such payment or
prepayment or, failing such designation by the Borrower, as the Administrative
Agent may specify by notice to the Borrower and the Lenders.
SECTION 2.5. Interest Rates. (a) Each Base Rate Loan shall
bear interest on the outstanding principal amount thereof, for each day from
the date such Loan is made until it becomes due, at a rate per annum equal to
the sum of (x) the Base Rate Margin plus (y) the Base Rate for such day. Such
interest shall be payable in arrears on the last Domestic Business Day of each
month while such Base Rate Loan is outstanding, beginning with the month in
which such Base Rate Loan is made and, with respect to the principal amount of
any Base Rate Loan converted to a Euro-Dollar Loan, on each date a Base Rate
Loan is so converted. Any
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<PAGE> 43
overdue principal of or interest on any Base Rate Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the sum
of 2% plus the rate otherwise applicable to Base Rate Loans for such day.
(b) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for each day during each Interest Period
applicable thereto, at a rate per annum equal to the sum of (x) the Euro-Dollar
Margin for such day plus (y) the London Interbank Offered Rate applicable to
such Interest Period. Such interest shall be payable for each Interest Period
on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof.
The "London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Reference Lenders in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Reference Lender to which such
Interest Period is to apply and for a period of time comparable to such
Interest Period.
(c) Any overdue principal of or interest on any Euro-Dollar
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin
for such day plus the London Interbank Offered Rate applicable to such Loan at
the time it became overdue and (ii) the sum of 2% plus the Euro-Dollar Margin
for such day plus the average (rounded upward, if necessary, to the next higher
1/16 of 1%) of the respective rates per annum at which one day (or, if such
amount due remains unpaid more than three Euro-Dollar Business Days, then for
such other period of time not longer than three months as the Administrative
Agent may select) deposits in dollars in an amount approximately equal to such
overdue payment due to each of the Reference Lenders are offered to such
Reference Lender
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<PAGE> 44
in the London interbank market for the applicable period determined as provided
above (or, if the circumstances described in clause (a) or (b) of Section 8.1
shall exist, at a rate per annum equal to the sum of 2% plus the rate
applicable to Base Rate Loans for such day).
(d) Each Swing Loan shall bear interest on the outstanding
principal amount thereof (and, in the case of any amount of overdue Swing Loan,
overdue interest thereon) at a rate for each day equal to the rate that would
be applicable to a Revolving Loan that is a Base Rate Loan on such day.
(e) The Administrative Agent shall determine each interest
rate applicable to the Loans hereunder. The Administrative Agent shall give
prompt notice to the Borrower and the participating Lenders of each rate of
interest so determined, and its determination thereof shall be conclusive in
the absence of manifest error.
(f) Each Reference Lender agrees to use its best efforts to
furnish quotations to the Administrative Agent as contemplated by this Section.
If any Reference Lender does not furnish a timely quotation, the Administrative
Agent shall determine the relevant interest rate on the basis of the quotation
or quotations furnished by the remaining Reference Lender or Lenders or, if
none of such quotations is available on a timely basis, the provisions of
Section 8.1 shall apply.
SECTION 2.6. Fees. (a) During the Revolving Credit Period,
the Borrower shall pay to the Administrative Agent for the account of each
Lender a commitment fee at the Commitment Fee Rate (determined daily in
accordance with the Pricing Schedule) on the daily amount by which such
Lender's Revolving Commitment exceeds the sum of (i) the aggregate outstanding
principal amount of the Revolving Loans and Swing Loans, if any, made by such
Lender and (ii) any Letter of Credit Liabilities of such Lender. Such
commitment fee shall accrue from and including the Effective Date to but
excluding the date of termination of the Revolving Commitments in their
entirety.
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(b) The Borrower shall pay to the Administrative Agent (i)
for the account of the Lenders ratably a letter of credit fee accruing daily on
the aggregate amount then available for drawing under all Letters of Credit at
the Letter of Credit Fee Rate (determined daily in accordance with the Pricing
Schedule) and (ii) for the account of each Issuing Lender a letter of credit
fronting fee accruing daily on the aggregate amount then available for drawing
under all Letters of Credit issued by such Issuing Lender at a rate per annum
equal to 0.25%.
(c) Accrued fees under this Section shall be payable
quarterly in arrears on each Quarterly Date and on the date of termination of
the Commitments in their entirety (and, if later, the date the amount of Letter
of Credit Liabilities shall be reduced to zero).
SECTION 2.7. Optional Termination or Reduction of
Commitments. During the Revolving Credit Period, the Borrower may, upon at
least three Domestic Business Days' notice to the Administrative Agent, (i)
terminate the Revolving Commitments at any time, if no Revolving Loans or Swing
Loans are outstanding at such time and no Letter of Credit Liabilities exist or
(ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or
a larger multiple of $1,000,000, the aggregate amount of the Revolving
Commitments in excess of the sum of the aggregate outstanding principal amount
of the Revolving Loans and the Swing Loans, plus the aggregate amount of Letter
of Credit Liabilities.
SECTION 2.8. Mandatory Incremental Repayments, and Reduction
of Commitments. (a) Term Loans shall be repaid and Revolving Commitments
shall be reduced in the following amounts:
(i) in the event that the Borrower or any of its Subsidiaries
shall at any time, or from time to time, after the date hereof receive
any Net Cash Proceeds of any Reduction Event, an amount equal to the
Reduction Amount thereof; and
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<PAGE> 46
(ii) an amount, for each Fiscal Year ending after the date
hereof, equal to the Reduction Amount of Excess Cash Flow for such
Fiscal Year.
provided that no repayment or reduction with respect to the receipt of any
Major Casualty Proceeds shall be required if (i) promptly after the loss giving
rise to such Major Casualty Proceeds, the Borrower delivers notice to the
Lenders setting forth in reasonable detail the Borrower's plans to restore,
repair or replace the property affected thereby, and the Required Lenders
consent to such use of such proceeds (such consent not to be unreasonably
withheld, but which shall be deemed to be withheld if not obtained within 30
days after the receipt of such proceeds) and (ii) to the extent that such
proceeds are actually so used within one year after such loss. Such reductions
and repayments shall be applied, first, to repay an aggregate principal amount
of the Term Loans until the Term Loans have been repaid in full and,
thereafter, to reduce the Revolving Commitments. Any repayment of Term Loans
required pursuant to this Section 2.8(a) shall be applied to reduce the amount
of subsequent scheduled repayments of Term Loans required pursuant to Section
2.4(b) ratably to all such subsequent scheduled repayments.
(b) The repayments and reductions required by clauses (a)(i)
and (a)(ii) of this Section shall be required or effective, in the case of
clause (a)(i), forthwith upon receipt by the Borrower or any of its
Subsidiaries, as the case may be, of such Net Cash Proceeds (or in the case of
Net Cash Proceeds of any Major Casualty Event as to which the Borrower has
requested the consent of the Required Lenders referred to in clause (a) above,
upon the failure of the Required Lenders to grant such consent or, if earlier,
30 days after the receipt thereof) and, in the case of clause (a)(ii), on the
90th day after the end of the related Fiscal Year; provided that if any such
repayment or reduction in the Commitments pursuant to either clause (a)(i) or
(a)(ii) of this section would otherwise require prepayment of Euro-Dollar Loans
or portions thereof prior to the last day of the then current Interest Period,
such amount may (unless the Required Lenders otherwise direct)
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<PAGE> 47
instead be pledged with the Administrative Agent on terms satisfactory to the
Administrative Agent (and invested in such Temporary Cash Investments as the
Administrative Agent shall select, with interest or income thereon for the
account of the Borrower), and such prepayment may be deferred to the last day
of the Interest Period next ending after the date of such receipt.
(c) If at any time (including, without limitation on the date
of each reduction of Revolving Commitments or as a result of a change in the
Borrowing Base), the aggregate amount of Revolving Credit Available Amounts is
less than the sum of (i) the aggregate outstanding principal amount of
Revolving Loans and Swing Loans plus (ii) the aggregate amount of Letter of
Credit Liabilities, the Borrower shall be obligated to prepay or repay
Revolving Loans and Swing Loans, and collateralize outstanding Letters of
Credit, in such amounts as shall be necessary so that immediately after such
payment the sum of (i) the aggregate outstanding principal amount of Revolving
Loans and Swing Loans plus (ii) the aggregate amount of Letter of Credit
Liabilities does not exceed the aggregate amount of the Revolving Credit
Available Amounts (after giving effect to any reductions on such day).
(d) Each repayment or prepayment pursuant to this Section 2.8
shall be made together with accrued interest to the date of payment, and shall
be applied ratably to payment of the Loans of the several Lenders in proportion
to their Commitments (or, if the Commitments have been terminated, to the
aggregate outstanding principal amounts of their Loans). Within the foregoing
limits of this Section 2.8, each required payment or prepayment shall be made
with respect to such outstanding Group or Groups of Loans (or any Swing Loans)
as the Borrower may designate to the Administrative Agent not less than three
Euro-Dollar Business Days prior to the date required for such payment or
prepayment or, failing such designation by the Borrower, as the Administrative
Agent may specify by notice to the Borrower and the Lenders.
SECTION 2.9. Optional Prepayments. (a) Subject in the case
of any Euro-Dollar Borrowing to Section 2.12,
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<PAGE> 48
the Borrower may, upon at least one Domestic Business Day's notice to the
Administrative Agent, prepay any Group of Base Rate Loans or Swing Loans or
upon at least three Euro-Dollar Business Days' notice to the Administrative
Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any
time, or from time to time in part in amounts aggregating $5,000,000 (or, in
the case of any Swing Loan, $1,000,000) or any larger multiple of $1,000,000,
by paying the principal amount to be prepaid together with accrued interest
thereon to the date of prepayment. Each such optional prepayment shall be
applied to prepay ratably the Loans of the several Lenders included in such
Group.
(b) Upon receipt of a notice of prepayment pursuant to this
Section, the Administrative Agent shall promptly notify each Lender of the
contents thereof and of such Lender's ratable share of such prepayment and such
notice shall not thereafter be revocable by the Borrower.
(c) Any prepayment of Term Loans pursuant to this Section
shall be applied to reduce the amount of subsequent scheduled repayments of
Term Loans required by Section 2.4 ratably to all the remaining such
repayments.
SECTION 2.10. Method of Electing Interest Rates. (a) The
Loans included in each Borrowing shall bear interest initially at the type of
rate specified by the Borrower in the applicable Notice of Borrowing.
Thereafter, the Borrower may from time to time elect to change or continue the
type of interest rate borne by each Group of Loans (subject in each case to the
provisions of Article 8, and except for any Swing Loan), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect
to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar
Business Day, provided that no Loans shall be specified to bear
interest at the Euro-Dollar Rate prior to the Syndication Date; and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may
elect to convert such Loans to Base Rate Loans or elect to continue
such Loans as Euro-Dollar
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Loans for an additional Interest Period, subject to Section 2.12 in
the case of any such conversion or continuation effective on any day
other than the last day of the then current Interest Period applicable
to such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Administrative Agent not later than 10:00 A.M. (New York
City time) on the third Euro-Dollar Business Day before the conversion or
continuation selected in such notice is to be effective. A Notice of Interest
Rate Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
is allocated ratably among the Loans comprising such Group and (ii) the portion
to which such Notice applies, and the remaining portion to which it does not
apply, are each $5,000,000 or any larger multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation
selected in such notice is to be effective, which shall comply with
the applicable clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted,
the new type of Loans and, if the Loans being converted are to be
Euro-Dollar Loans, the duration of the next succeeding Interest Period
applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans
for an additional Interest Period, the duration of such additional
Interest Period.
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<PAGE> 50
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from
the Borrower pursuant to subsection (a) above, the Administrative Agent shall
promptly notify each Lender of the contents thereof and such notice shall not
thereafter be revocable by the Borrower. If the Borrower fails to deliver a
timely Notice of Interest Rate Election to the Administrative Agent for any
Group of Euro-Dollar Loans, such Loans shall be converted into Base Rate Loans
on the last day of the then current Interest Period applicable thereto.
(d) An election by the Borrower to change or continue the
rate of interest applicable to any Group of Loans pursuant to this Section
shall not constitute a "Borrowing" subject to the provisions of Section 3.2.
SECTION 2.11. General Provisions as to Payments. (a) The
Borrower shall make each payment of principal of, and interest on, the Loans
and of Letter of Credit Liabilities and interest thereon and of fees hereunder
(other than fees payable directly to the Issuing Lenders), not later than 12:00
Noon (New York City time) on the date when due, in Federal or other funds
immediately available in New York City, to the Administrative Agent at its
address referred to in Section 10.1. The Administrative Agent will promptly
distribute to each Lender its ratable share of each such payment received by
the Administrative Agent for the account of the Lenders. Whenever any payment
of principal of, or interest on, the Base Rate Loans, or of Letter of Credit
Liabilities or interest thereon or of fees shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day. Whenever any payment of principal of,
or interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date
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<PAGE> 51
for payment thereof shall be the next preceding Euro-Dollar Business Day. If
the date for any payment of principal is extended by operation of law or
otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have received
notice from the Borrower prior to the date on which any payment is due to the
Lenders hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent that the Borrower shall not have so made such payment, each Lender shall
repay to the Administrative Agent forthwith on demand such amount distributed
to such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.12. Funding Losses. If the Borrower makes any
payment of principal with respect to any Euro-Dollar Loan or any Euro-Dollar
Loan is converted to a Base Rate Loan (pursuant to Article 2, 6 or 8 or
otherwise) on any day other than the last day of an Interest Period applicable
thereto, or the last day of an applicable period fixed pursuant to Section
2.5(c), or if the Borrower fails to borrow, prepay, convert or continue any
Euro-Dollar Loans after notice has been given to any Lender in accordance with
Section 2.2(b), 2.9(c) or 2.10(a), the Borrower shall reimburse each Lender
within 15 days after demand for any resulting loss or expense incurred by it
(or by an existing or prospective Participant in the related Loan), 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 or conversion or failure to borrow, prepay, convert or
continue, provided that such Lender shall have delivered to the Borrower a
certificate as to the amount of such loss
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<PAGE> 52
or expense, which certificate shall be conclusive in the absence of manifest
error.
SECTION 2.13. Computation of Interest and Fees. Interest
based on the Prime Rate hereunder shall be computed on the basis of a year of
365 days (or 366 days in a leap year) and paid for the actual number of days
elapsed (including the first day but excluding the last day). All other
interest and fees shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding
the last day).
SECTION 2.14. Regulation D Compensation. For so long as any
Lender maintains reserves against "Eurocurrency liabilities" (or any other
category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of extensions
of credit or other assets which includes loans by a non-United States office of
such Lender to United States residents), and as a result the cost to such
Lender (or its Euro-Dollar Lending Office) of making or maintaining its
Euro-Dollar Loans is increased, then such Lender may require the Borrower to
pay, contemporaneously with each payment of interest on the Euro-Dollar Loans,
additional interest on the related Euro-Dollar Loan of such Lender at a rate
per annum up to but not exceeding the excess of (i) (A) the applicable London
Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve
Percentage over (ii) the applicable London Interbank Offered Rate. Any Lender
wishing to require payment of such additional interest (x) shall so notify the
Borrower and the Administrative Agent, in which case such additional interest
on the Euro-Dollar Loans of such Lender shall be payable to such Lender at the
place indicated in such notice with respect to each Interest Period commencing
at least three Euro-Dollar Business Days after the giving of such notice and
(y) shall furnish to the Borrower at least five Euro-Dollar Business Days prior
to each date on which interest is payable on the Euro-Dollar Loans an Officer's
certificate setting forth the amount to which such Lender is then entitled
under this Section (which shall be consistent with such Lender's good faith
estimate
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<PAGE> 53
of the level at which the related reserves are maintained by it). Each such
certificate shall be accompanied by such information as the Borrower may
reasonably request as to the computation set forth therein.
SECTION 2.15. Letters of Credit. (a) On the Closing Date,
each letter of credit listed on Schedule 1 hereto shall be deemed to be issued
under this Section 2.15(a) and shall be deemed to be a Letter of Credit for all
purposes hereof. Subject to the terms and conditions hereof, each Issuing
Lender agrees to issue letters of credit hereunder from time to time before the
tenth day before the Maturity Date upon the request of the Borrower (the
"Letters of Credit"); provided that, immediately after each Letter of Credit is
issued, the aggregate amount of the Letter of Credit Liabilities shall not
exceed the Available LC Amount. Upon the date of issuance by an Issuing Lender
of a Letter of Credit, the Issuing Lender shall be deemed, without further
action by any party hereto, to have sold to each Lender, and each Lender shall
be deemed, without further action by any party hereto, to have purchased from
the Issuing Lender, a participation in such Letter of Credit and the related
Letter of Credit Liabilities in proportion to their respective Revolving
Percentages.
(b) The Borrower shall give the Issuing Lender notice at
least five days prior to the requested issuance of a Letter of Credit
specifying the date such Letter of Credit is to be issued, and describing the
terms of such Letter of Credit and the nature of the transactions to be
supported thereby (such notice, including any such notice given in connection
with the extension of a Letter of Credit, a "Notice of Issuance"). Upon
receipt of a Notice of Issuance, the Issuing Lender shall promptly notify the
Administrative Agent, and the Administrative Agent shall promptly notify each
Lender of the contents thereof and of the amount of such Lender's participation
in such Letter of Credit. The issuance by the Issuing Lender of each Letter of
Credit shall, in addition to the conditions precedent set forth in Article 3,
be subject to the conditions precedent that such Letter of Credit shall be in
such form and contain such terms as shall be satisfactory to the Issuing Lender
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<PAGE> 54
and that the Borrower shall have executed and delivered such other instruments
and agreements relating to such Letter of Credit as the Issuing Lender shall
have reasonably requested. The Borrower shall also pay to the Issuing Lender
for its own account issuance, drawing, amendment and extension charges in the
amounts and at the times as agreed between the Borrower and the Issuing Lender.
The extension or renewal of any Letter of Credit shall be deemed to be an
issuance of such Letter of Credit, and if any Letter of Credit contains a
provision pursuant to which it is deemed to be extended unless notice of
termination is given by the Issuing Lender, the Issuing Lender shall timely
give such notice of termination unless it has theretofore timely received a
Notice of Issuance and the other conditions to issuance of a Letter of Credit
have also theretofore been met with respect to such extension. Except as set
forth on Schedule 1 hereto, no Letter of Credit shall have a term of more than
one year; provided that a Letter of Credit may contain a provision pursuant to
which it is deemed to be extended on an annual basis unless notice of
termination is given by the Issuing Lender; provided further that no Letter of
Credit shall have a term extending or be so extendible beyond the Maturity
Date.
(c) Upon receipt from the beneficiary of any Letter of Credit
of any notice of a drawing under such Letter of Credit, the Issuing Lender
shall notify the Administrative Agent and the Administrative Agent shall
promptly notify the Borrower and each other Lender as to the amount to be paid
as a result of such demand or drawing and the payment date. The Borrower shall
be irrevocably and unconditionally obligated forthwith to reimburse the Issuing
Lender for any amounts paid by the Issuing Lender upon any drawing under any
Letter of Credit, without presentment, demand, protest or other formalities of
any kind. All such amounts paid by the Issuing Lender and remaining unpaid by
the Borrower shall bear interest, payable on demand, for each day until paid at
a rate per annum equal to the sum of 2% plus the rate applicable to Base Rate
Loans for such day. In addition, each Lender will pay to the Administrative
Agent, for the account of the Issuing Lender, immediately upon the Issuing
Lender's demand at any time during the
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period commencing after such drawing until reimbursement therefor in full by
the Borrower, an amount equal to such Lender's ratable share of such drawing
(in proportion to its participation therein), together with interest on such
amount for each day from the date of the Issuing Lender's demand for such
payment (or, if such demand is made after 12:00 Noon (New York City time) on
such date, from the next succeeding Domestic Business Day) to the date of
payment by such Lender of such amount at a rate of interest per annum equal to
the rate applicable to Base Rate Loans for such period. The Issuing Lender
will pay to each Lender ratably all amounts received from the Borrower for
application in payment of its reimbursement obligations in respect of any
Letter of Credit, but only to the extent such Lender has made payment to the
Issuing Lender in respect of such Letter of Credit pursuant hereto.
(d) The obligations of the Borrower and each Lender under
subsection (c) above shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement,
under all circumstances whatsoever, including without limitation the following
circumstances:
(i) any lack of validity or enforceability of this Agreement
or any Letter of Credit or any document related hereto or thereto;
(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of this Agreement or any Letter of
Credit or any document related hereto or thereto;
(iii) the use which may be made of the Letter of Credit by,
or any acts or omission of, a beneficiary of a Letter of Credit (or
any Person for whom the beneficiary may be acting);
(iv) the existence of any claim, set-off, defense or other
rights that the Borrower may have at any time against a beneficiary
of a Letter of Credit (or any Person for whom the beneficiary may be
acting), the
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Lenders (including the Issuing Lender) or any other Person, whether in
connection with this Agreement or the Letter of Credit or any document
related hereto or thereto or any unrelated transaction;
(v) any statement or any other document presented under a Letter
of Credit proving to be forged, fraudulent or invalid in any respect
or any statement therein being untrue or inaccurate in any respect
whatsoever;
(vi) payment under a Letter of Credit against presentation to the
Issuing Lender of a draft or certificate that does not comply with the
terms of the Letter of Credit, provided that the Issuing Lender's
determination that documents presented under the Letter of Credit
comply with the terms thereof shall not have constituted gross
negligence or willful misconduct of the Issuing Lender; or
(vii) any other act or omission to act or delay of any kind by any
Lender (including the Issuing Lender), the Administrative Agent or any
other Person or any other event or circumstance whatsoever that might,
but for the provisions of this subsection (vii), constitute a legal or
equitable discharge of the Borrower's or the Lender's obligations
hereunder.
(e) The Borrower hereby indemnifies and holds harmless each
Lender (including each Issuing Lender) and the Administrative Agent from and
against any and all claims, damages, losses, liabilities, costs or expenses
which such Lender or the Administrative Agent may incur (including, without
limitation, any claims, damages, losses, liabilities, costs or expenses which
the Issuing Lender may incur by reason of or in connection with the failure of
any other Lender to fulfill or comply with its obligations to such Issuing
Lender hereunder (but nothing herein contained shall affect any rights the
Borrower may have against such defaulting Lender)), and none of the Lenders
(including an Issuing Lender) nor the Administrative Agent nor any of their
officers or directors or employees or agents shall be
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liable or responsible, by reason of or in connection with the execution and
delivery or transfer of or payment or failure to pay under any Letter of
Credit, including without limitation any of the circumstances enumerated in
subsection (d) above, as well as (i) any error, omission, interruption or delay
in transmission or delivery of any messages, by mail, cable, telegraph, telex
or otherwise, (ii) any error in interpretation of technical terms, (iii) any
loss or delay in the transmission of any document required in order to make a
drawing under a Letter of Credit, (iv) any consequences arising from causes
beyond the control of the Issuing Lender, including without limitation any
government acts, or any other circumstances whatsoever in making or failing to
make payment under such Letter of Credit; provided that the Borrower shall not
be required to indemnify the Issuing Lender for any claims, damages, losses,
liabilities, costs or expenses, and the Borrower shall have a claim for direct
(but not consequential) damage suffered by it, to the extent caused by (x) the
willful misconduct or gross negligence of the Issuing Lender in determining
whether a request presented under any Letter of Credit complied with the terms
of such Letter of Credit or (y) the Issuing Lender's failure to pay under any
Letter of Credit after the presentation to it of a request strictly complying
with the terms and conditions of the Letter of Credit. Nothing in this
subsection (e) is intended to limit the obligations of the Borrower under any
other provision of this Agreement. To the extent the Borrower does not
indemnify an Issuing Lender as required by this subsection, the Lenders agree
to do so ratably in accordance with their Revolving Commitments.
ARTICLE 3
CONDITIONS
SECTION 3.1. Closing. The closing hereunder shall occur upon
the satisfaction of the following events (in the case of each document to be
received, each dated the Closing Date unless otherwise indicated):
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(a) receipt by the Administrative Agent of a duly executed
original Note for the account of each Lender dated on or before the
Closing Date complying with the provisions of Section 2.3;
(b) receipt by the Administrative Agent of an opinion of
Smith Helms Mulliss & Moore, L.L.P., counsel for the Obligors,
substantially in the form of Exhibit D hereto and covering such
additional matters relating to the transactions contemplated hereby as
the Required Lenders may reasonably request;
(c) receipt by the Administrative Agent of an opinion of (i)
Davis Polk & Wardwell, special New York counsel for the Administrative
Agent, substantially in the form of Exhibit E-1 hereto and (ii)
special counsel for the Agents in each of the United Kingdom, Hong
Kong, Finland, Germany, the U.S. Virgin Islands, France, Canada and
Mexico, in the forms attached as Exhibit E-2, and each covering such
additional matters relating to the transactions contemplated hereby as
the Agents may reasonably request;
(d) receipt by the Administrative Agent of duly executed
counterparts of each of the Collateral Documents, together with
evidence satisfactory to the Administrative Agent of the effectiveness
and perfection (to the extent required thereby) of the Liens
contemplated thereby, including the filing of UCC-1's and the delivery
of any promissory notes and stock certificates comprising the
Collateral;
(e) receipt by the Administrative Agent of evidence
satisfactory to it that the commitments under the Existing Credit
Agreement have terminated, all loans thereunder have been repaid in
full (all Lenders hereunder which are also banks under the Existing
Credit Agreement hereby agreeing that such repayment may be made,
whether or not at the end of interest periods under the Existing
Credit Agreement, but subject in any event to payment by the Borrower
of all funding losses, if any due with respect thereto under
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such Credit Agreement) and all accrued fees and other amounts payable
thereunder have been paid in full;
(f) satisfaction of the Required Lenders with the form and
substance of the Deltec Acquisition Documents (which the
Administrative Agent may conclude exists unless it shall have received
notice from the Required Lenders to the contrary), and receipt by the
Administrative Agent of (x) each opinion, report, and other document
required to be delivered pursuant to the Deltec Acquisition Documents
in connection with the Deltec Acquisition and (y) evidence
satisfactory to it of the satisfaction (without waiver) of all other
conditions to the closing of the Deltec Acquisition on the Closing
Date, and that all transactions contemplated by the Deltec Acquisition
Documents to be consummated on the closing date of the Deltec
Acquisition will take place prior to or simultaneously with the
transactions hereunder contemplated to take place on the Closing Date;
and satisfaction of the Required Lenders with (i) the terms and
conditions of the Deltec Acquisition Documents, (ii) the tax treatment
of the Deltec Acquisition and (iii) the corporate structure and the
capitalization of the Borrower and its Subsidiaries;
(g) satisfaction of the Required Lenders with the form and
substance (including without limitation interest rate) of the
Subordinated Note Agreement and Subordinated Notes (which the
Administrative Agent may conclude exists unless it shall have received
notice from the Required Lenders to the contrary), and receipt by the
Administrative Agent of evidence satisfactory to it that the Borrower
shall have issued, not later than the time of the Closing Date and
first Borrowing hereunder, the Subordinated Notes for an aggregate
gross proceeds to the Borrower of not less than $75,000,000 having a
scheduled maturity not earlier than, and not requiring any payment of
principal prior to, the date that is 10 years from the Closing Date;
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(h) receipt by the Borrower of the Net Cash Proceeds of the
Subordinated Notes;
(i) the Administrative Agent shall not have received notice
from the Lenders that, in their reasonable determination, any material
adverse change shall have occurred or be threatened in the financial
condition, results of operations, business, properties or prospects,
or any event or condition which is reasonably likely to result in such
a material adverse change, with respect to (x) the Borrower and its
Subsidiaries, taken as a whole, since the date of the most recent
audited balance sheet heretofore received by the Lenders or (y) Deltec
and its Subsidiaries, taken as a whole, since the date of the year-end
management report heretofore received by the Lenders;
(j) completion of, and satisfaction by the Lenders in their
sole good faith discretion with the scope and results of, their due
diligence review of financial, legal, tax and other matters concerning
the Borrower and its Subsidiaries and Deltec and its Subsidiaries,
which review may include but not be limited to review of financial
performance, consultation with customers of the Borrower and its
Subsidiaries and Deltec and its Subsidiaries, and review of material
contracts;
(k) receipt by the Lenders, not less than three days before
the Closing Date, of any information they may have theretofore
requested concerning the financial condition, results of operations,
liabilities (contingent and otherwise, including with respect to
environmental liabilities and employee and retiree benefits) and
prospects of, and the financial reporting and accounting systems and
the management information systems of, the Borrower and its
Subsidiaries (including after giving effect to the Deltec
Acquisition); and confirmation satisfactory to the Lenders, after
consultation with management of the Borrower, Arthur Anderson L.L.P,
as independent public accountants for the Borrower, and any
independent
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environmental consultant or independent accountant retained by the
Lenders, of all such information; and satisfaction of the Lenders in
their sole good faith discretion with all such information;
(l) receipt by the Administrative Agent, for its own account
and for the accounts of the Lenders, of all fees payable on or before
the Closing Date;
(m) receipt by the Administrative Agent of the documents
referred to in Section 5.3(c) required to be delivered on or before
the Closing Date; and
(n) receipt by the Administrative Agent of all documents the
Administrative Agent may reasonably request relating to the existence
of the Obligors, the corporate authority for and the validity of the
Loan Documents and the Deltec Acquisition, and any other matters
relevant hereto, all in form and substance satisfactory to the
Administrative Agent.
The Administrative Agent shall promptly notify the Borrower and the Lenders of
the Closing Date, and such notice shall be conclusive and binding on all
parties hereto.
SECTION 3.2. Borrowings and Issuances of Letters of Credit.
The obligation of any Lender to make a Loan on the occasion of any Borrowing
other than a Refunding Swing Loan, and of an Issuing Lender to issue (which
shall be deemed to include any renewal or extension of the term of) a Letter of
Credit on the occasion of a request therefor (including, without limitation,
any of the foregoing to occur on the Closing Date) is subject to the
satisfaction of the following conditions:
(a) the fact that the Closing Date shall have occurred on or
prior to March 31, 1996;
(b) receipt by the Administrative Agent of a Notice of
Borrowing as required by Section 2.2 or receipt by the Issuing Lender
of a Notice of Issuance as required by Section 2.15(b);
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(c) receipt by the Administrative Agent of the most recent
Borrowing Base Certificate required to be delivered pursuant to
Section 5.1(i) hereof;
(d) the fact that, immediately after such Borrowing or
issuance of a Letter of Credit, the sum of the aggregate outstanding
principal amount of the Revolving Loans and Swing Loans and the
aggregate amount of Letter of Credit Liabilities will not exceed the
aggregate Revolving Credit Available Amounts;
(e) the fact that, immediately before and after such
Borrowing or issuance of a Letter of Credit, no Default shall have
occurred and be continuing; and
(f) the fact that the representations and warranties of the
Obligors contained in this Agreement shall be true on and as of the
date of such Borrowing or issuance of a Letter of Credit.
Each Borrowing and issuance of a Letter of Credit hereunder shall be deemed to
be a representation and warranty by the Borrower on the date of such Borrowing
as to the facts specified in clauses (d), (e) and (f) of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants, and each Guarantor
represents and warrants, with respect to itself only, as to the matters set
forth in Section 4.12, (including, in the case of any such representation and
warranty made or deemed made before the consummation of the Deltec Acquisition,
at the time such representation and warranty is made or deemed made and
immediately after giving effect to the consummation of the Deltec Acquisition),
that:
SECTION 4.1. Corporate Existence and Power. The Borrower is
a corporation duly incorporated, validly existing and in good standing under
the laws of the
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jurisdiction of its incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
SECTION 4.2. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of the
Loan Documents to which it is a party are within the corporate powers of the
Borrower, have been duly authorized by all necessary corporate action, require
no action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or by-laws
of the Borrower or of any agreement, judgment, injunction, order, decree or
other instrument binding upon the Borrower or any of its Subsidiaries or result
in the creation or imposition of any Lien (other than Liens under the Loan
Documents) on any asset of the Borrower or any of its Subsidiaries.
SECTION 4.3. Binding Effect. The Loan Documents (other than
the Notes) to which the Borrower is a party constitute valid and binding
agreements of the Borrower and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Borrower, in each case enforceable in accordance with its terms except
(i) as may be limited by bankruptcy, insolvency or similar laws affecting
creditors ' rights generally and (ii) as rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.
SECTION 4.4. Financial Information. (a) The (i)
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
of September 30, 1995 and the related consolidated statements of income and
cash flows for the Fiscal Year then ended, reported on by Arthur Andersen & Co.
and set forth in the Borrower's 1995 Form 10-K, a copy of which has been
delivered to each of the Lenders, and (ii) consolidating balance sheet of the
Borrower and its Consolidated Subsidiaries as of September 30, 1995 and the
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related consolidating statements of income for the Fiscal Year then ended, each
fairly present, in conformity with generally accepted accounting principles,
the consolidated or consolidating (as applicable) financial position of the
Borrower and its Consolidated Subsidiaries as of such date and their
consolidated or consolidated (as applicable) results of operations and
consolidated cash flows for such Fiscal Year.
(b) Since September 30, 1995, there has been no material
adverse change in the business, financial position, results of operations or
prospects of the Borrower and its Consolidated Subsidiaries, considered as a
whole (both before and after giving effect to the Deltec Acquisition, and
including Deltec and its Subsidiaries after the Deltec Acquisition).
(c) The consolidated balance sheet of Deltec and its
consolidated Subsidiaries as of September 30, 1995 and the related consolidated
statements of income and cash flows for the nine months then ended, copies of
which have been delivered to each of the Lenders, fairly present, in conformity
with generally accepted accounting principles, the consolidated financial
position of Deltec and its consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such period.
(d) From September 30, 1995 to the Closing Date, there has
been no material adverse change in the business, financial position, results of
operations or prospects of Deltec and its Subsidiaries, considered as a whole.
(e) The pro forma balance sheet of the Borrower and its
Consolidated Subsidiaries as of December 31, 1995 with respect to the Borrower
and its Consolidated Subsidiaries, copies of which have been delivered to each
of the Lenders, fairly presents, in conformity with generally accepted
accounting principles applied on a basis consistent with the financial
statements referred to in Section 4.4(a), the consolidated financial position
of the Borrower and its Consolidated Subsidiaries as of such date, adjusted to
give
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effect (as if such events had occurred on such date) to (A) the Deltec
Acquisition and other transactions contemplated by the Deltec Acquisition
Documents, (B) the making of the Loans and the issuance of the Letters of
Credit to be made or issued on the Closing Date, (C) the issuance of the
Subordinated Notes on or before the Closing Date, (D) the application of the
proceeds from the foregoing as contemplated by the Deltec Acquisition
Documents, this Agreement and the Subordinated Note Agreement and (E) the
payment of all legal, accounting and other fees related thereto to the extent
known at the time of the preparation of such balance sheet. As of the date of
such balance sheet and the date hereof, the Borrower and its Consolidated
Subsidiaries (on a pro forma basis as aforesaid) had and (except as incurred
since the date of such balance sheet in the ordinary course of business) have
no material liabilities, contingent or o properly reflected on such balance
sheet.
SECTION 4.5. Litigation. Except as set forth on Schedule
4.5, there is no action, suit or proceeding pending against, or to the
knowledge of the Borrower threatened against or affecting, the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental body,
agency or official in which there is a reasonable possibility of an adverse
decision which could materially adversely affect the business, consolidated
financial position or consolidated results of operations of the Borrower and
its Consolidated Subsidiaries, considered as a whole, or which in any manner
draws into question the validity or enforceability of the Loan Documents or
challenges the Deltec Acquisition.
SECTION 4.6. Compliance with ERISA. Each member of the ERISA
Group has fulfilled its obligations under the minimum funding standards of
ERISA and the Internal Revenue Code with respect to each Plan and is in
compliance in all material respects with the presently applicable provisions of
ERISA and the Internal Revenue Code with respect to each Plan. No member of
the ERISA Group has (i) sought a waiver
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of the minimum funding standard under Section 412 of the Internal Revenue Code
in respect of any Plan, (ii) failed to make any contribution or payment to any
Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made
any amendment to any Plan or Benefit Arrangement, which has resulted or could
result in the imposition of a Lien or the posting of a bond or other security
under ERISA or the Internal Revenue Code or (iii) incurred any liability under
Title IV of ERISA other than a liability to the PBGC for premiums under Section
4007 of ERISA.
SECTION 4.7. Environmental Matters. In the ordinary course
of its business, the Borrower conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the Borrower
and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure of properties presently
or previously owned, any capital or operating expenditures required to achieve
or maintain compliance with environmental protection standards imposed by law
or as a condition of any license, permit or contract, any related constraints
on operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off-site
disposal of wastes or Hazardous Substances, and any actual or potential
liabilities to third parties, including employees, and any related costs and
expenses). On the basis of this review, the Borrower has reasonably concluded
that such associated liabilities and costs, including the costs of compliance
with Environmental Laws, are unlikely to have a material adverse effect on the
business, financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.8. Taxes. The Borrower and its Subsidiaries have
filed all United States Federal income tax returns and all other material tax
returns which are required to be filed by them and have paid all taxes due
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pursuant to such returns or pursuant to any assessment received by the Borrower
or any Subsidiary. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of taxes or other governmental charges
are, in the opinion of the Borrower, adequate.
SECTION 4.9. Subsidiaries. Each of the Borrower's corporate
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted,
except for any of the foregoing the failure of which to have could not in the
aggregate have a material adverse effect on the business, financial position,
results of operations or prospects of the Borrower and its Consolidated
Subsidiaries, considered as a whole, or the rights and remedies of the Lenders
under the Loan Documents. On the Closing Date and after giving effect to the
Deltec Acquisition, (i) each of the Subsidiaries of the Borrower, other than
International Subsidiaries, is a Guarantor and (ii) the Borrower and its
Subsidiaries (other than International Subsidiaries) have pledged, pursuant to
the Pledge Agreements, all of the capital stock of the Borrower's Subsidiaries
other than (x) the Deltec Seller Stock, (y) up to 35% of the capital stock of
each International Subsidiary owned by the Borrower or a Subsidiary other than
an International Subsidiary and (z) capital stock of each International
Subsidiary owned by an International Subsidiary.
SECTION 4.10. Regulatory Restrictions on Borrowing. The
Borrower is not an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended, or otherwise subject to
any regulatory scheme which restricts its ability to incur debt.
SECTION 4.11. Full Disclosure. All information heretofore
furnished by the Borrower to any Agent or any Lender for purposes of or in
connection with this Agreement
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or any transaction contemplated hereby is, and all such information hereafter
furnished by the Borrower to the Agent or any Lender will be, true and accurate
in all material respects on the date as of which such information is stated or
certified. The Borrower has disclosed to the Lenders in writing any and all
facts which materially and adversely affect or may affect (to the extent the
Borrower can now reasonably foresee), the business, operations or financial
condition of the Borrower and its Consolidated Subsidiaries, taken as a whole,
or the ability of the Obligors to perform their obligations under the Loan
Documents.
SECTION 4.12. Representations of Guarantors. Each Guarantor
is a corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, and has all corporate powers
and all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted. The execution, delivery
and performance by each Guarantor of the Loan Documents to which it is a party
are within such Guarantor's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of such Guarantor or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
such Guarantor or result in the creation or imposition of any Lien on any asset
of such Guarantor. The Loan Documents to which each Guarantor is a party
constitute valid and binding agreements of such Guarantor, in each case
enforceable against such Guarantor in accordance with their respective terms
except (i) as may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) as rights of acceleration and
the availability of equitable remedies may be limited by equitable principles
of general applicability. Each of the representations and warranties of the
Obligors contained in the Collateral Documents is true and correct.
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SECTION 4.13. Deltec Acquisition Documents. The
representations and warranties contained in the Deltec Acquisition Documents of
the Borrower and, to the best knowledge of the Borrower, each other party
thereto are, and shall be, true in all material respects on the date hereof and
the Closing Date.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Lender has any
Commitment hereunder or any amount payable under any Note or any Letter of
Credit Liability remains unpaid:
SECTION 5.1. Information. The Borrower will deliver to each
of the Lenders:
(a) as soon as available and in any event within 90 days
after the end of each Fiscal Year, a consolidated and consolidating
balance sheet of the Borrower and its Consolidated Subsidiaries as of
the end of such Fiscal Year and the related consolidated and
consolidating statements of income and consolidated statement of cash
flows for such Fiscal Year, setting forth in the case of such
consolidated financial statements in comparative form the figures for
the previous Fiscal Year, all certified by the chief financial officer
or chief accounting officer of the Borrower as to fairness of
presentation, generally accepted accounting principles and consistency
and, in the case of such consolidated financial statements, reported
on in a manner acceptable to the Securities and Exchange Commission by
Arthur Andersen & Co. or other independent public accountants of
nationally recognized standing;
(b) as soon as available and in any event within 45 days
after the end of each of the first three quarters of each Fiscal Year
of the Borrower, an unaudited consolidated and consolidating balance
sheet
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of the Borrower and its Consolidated Subsidiaries as of the end of
such quarter and the related consolidated and consolidating statements
of income and consolidated cash flows for such quarter and for the
portion of the Borrower's Fiscal Year ended at the end of such
quarter, setting forth in the case of such consolidated statements of
income and cash flows, in comparative form the figures for the
corresponding quarter and the corresponding portion of the Borrower's
previous Fiscal Year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, generally accepted
accounting principles and consistency by the chief financial officer
or the chief accounting officer of the Borrower;
(c) as soon as available and in any event within 30 days
after the end of each month of the Borrower (or, in the case of the
months ending March 31, 1996, April 30, 1996 and May 31, 1996, 45 days
after the end of each such month), an unaudited summary consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of
the end of such month and the related summary consolidated statements
of income and cash flows for such month and for the portion of the
Borrower's Fiscal Year ended at the end of such month, setting forth
in comparative form the figures for the corresponding month and the
corresponding portion of the Borrower's previous Fiscal Year, all
certified (subject to normal quarterly and year-end adjustments) as to
fairness of presentation, generally accepted accounting principles (as
applicable) and consistency by the chief financial officer or the
chief accounting officer of the Borrower;
(d) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of
the chief financial officer or the chief accounting officer of the
Borrower (i) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compliance with the
requirements of Sections 5.7, 5.9 through 5.14, inclusive, and 5.18
through 5.21,
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inclusive, on the date of such financial statements, (ii) if such
certificate is delivered with financial statements referred to in
clause (a), setting forth in reasonable detail the computation of
Excess Cash Flow for the Fiscal Year to which such financial
statements relate, certified as having been prepared from such
financial statements in accordance with this Agreement, (iii) stating
whether any Subsidiary has been created or acquired, and whether any
Immaterial Subsidiary has ceased to be an Immaterial Subsidiary, since
the delivery of the last such certificate (or in the case of the first
such certificate, since the date hereof) and describing in reasonable
detail any such Subsidiary and (iv) stating whether any Default exists
on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(e) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe
that any Default existed on the date of such statements and (ii)
confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith pursuant to clause (d) above;
(f) within five days after any officer of the Borrower
obtains knowledge of any Default, if such Default is then continuing,
a certificate of the chief financial officer or the chief accounting
officer of the Borrower setting forth the details thereof and the
action which the Borrower is taking or proposes to take with respect
thereto;
(g) promptly upon the mailing thereof to the shareholders of
the Borrower generally, copies of all financial statements, reports
and proxy statements so mailed;
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(h) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and reports on
Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower
shall have filed with the Securities and Exchange Commission, and
copies of (i) all financial statements, reports, notices and proxy
statements that any Obligor shall send or make available generally to
its stockholders, (ii) all registration statements and prospectuses
that any Obligor shall render to or file with the Securities and
Exchange Commission, the National Association of Securities Dealers or
any national securities exchange, (iii) all material reports and other
statement (other than routine reports prepared in the ordinary course
of business that would not result in any adverse action) that any
Obligor may render to or file with any other governmental authority,
including, without limitation, the Environmental Protection Agency and
state and federal environmental and health authorities and agencies
and (iv) all press releases and other statements that any Obligor
shall make available generally to the public concerning developments
in the business of the Borrower or any of its Subsidiaries, other than
press releases or statements issued in the ordinary course of
business;
(i) at each of the following dates, determined as of the
following dates specified: a Borrowing Base Certificate (x) as
soon as available (and in any event within fifteen days) after the
last day of each calendar month of the Borrower, determined as of the
last business day of such calendar month, (y) as soon as available
(and in any event within five days) after each of the fifteenth day
and the last day of each calendar month of the Borrower, determined as
of such fifteenth day and last day, and (z) within five days after
receipt of a request therefor (which may be given from time to time)
from the Required Lenders, determined as of the date of such request;
provided that in the case of clauses (y) and (z) above, the
determination of the Borrowing Base shall be an
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<PAGE> 73
estimate by the Borrower, subject to normal month-end adjustments and
determined in good faith using reasonable methods consistent with the
accounting methods used in the financial statements most recently
delivered pursuant to Section 4.4(a) or 5.1(a);
(j) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of
ERISA, or knows that the plan administrator of any Plan has given or
is required to give notice of any such reportable event, a copy of the
notice of such reportable event given or required to be given to the
PBGC; (ii) receives notice of complete or partial withdrawal liability
under Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of
an intent to terminate, impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver
of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent
to terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of
such notice; or (vii) fails to make any payment or contribution to any
Plan or Multiemployer Plan or in respect of any Benefit Arrangement or
makes any amendment to any Plan or Benefit Arrangement which has
resulted or could result in the imposition of a Lien or the posting of
a bond or other security, a certificate of the chief financial officer
or the chief accounting officer of the Borrower setting forth details
as to such occurrence and action, if any, which the Borrower or
applicable member of the ERISA Group is required or proposes to take;
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<PAGE> 74
(k) as soon as practicable and in any event within 60 days
after the close of each Fiscal Year, an annual budget prepared on a
quarterly basis for the Borrower and its Subsidiaries and projections
for the Borrower for the Fiscal Year then beginning, all prepared (in
the case of projections) on a basis consistent with the financial
statements described in subsection (a) and (b) above, accompanied by a
statement of the chief financial officer or chief accounting officer
of the Borrower to the effect that, to the best of his knowledge, the
budget and projections are a reasonable estimates thereof for the
periods covered thereby; and
(l) from time to time such additional information regarding
the financial position or business of the Borrower and its
Subsidiaries or any Guarantor as the Agent, at the request of any
Lender, may reasonably request.
SECTION 5.2. Payment of Obligations. The Borrower will pay
and discharge, and will cause each Subsidiary to pay and discharge, at or
before maturity, all their respective material obligations and liabilities
(including, without limitation, tax liabilities and claims of materialmen,
warehousemen and the like which if unpaid might by law give rise to a Lien),
except where the same may be contested in good faith by appropriate
proceedings, and will maintain, and will cause each Subsidiary to maintain, in
accordance with generally accepted accounting principles, appropriate reserves
for the accrual of any of the same.
SECTION 5.3. Maintenance of Property; Insurance. (a) The
Borrower will keep, and will cause each Subsidiary to keep, all property useful
and necessary in its business in good working order and condition, ordinary
wear and tear excepted.
(b) The Borrower will maintain, and will cause each
Subsidiary to maintain, (i) physical damage insurance on all real and personal
property on an all risks basis (including the perils of flood and quake),
covering the
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repair and replacement cost of all such property and consequential loss
coverage for business interruption and extra expense, (ii) public liability
insurance (including products/completed operations liability coverage) in an
amount not less than $22,000,000 and (iii) such other insurance coverage in
such amounts and with respect to such risks as the Required Lenders may
reasonably request. All such insurance shall be provided by insurers having an
A.M. Best policyholders rating of not less than B+ or such other insurers as
the Required Lenders may approve in writing.
(c) The Borrower will deliver to the Lenders (i) on the date
of the first Borrowing hereunder, a certificate from the Borrower's insurance
broker dated such date showing the amount of coverage as of such date, and
certifying that such policies will include effective waivers (whether under the
terms of any such policy or otherwise) by the insurer of all claims for
insurance premiums against all loss payees and additional insureds and all
rights of subrogation against all loss payees and additional insureds, and that
if all or any part of such policy is cancelled, terminated or expires, the
insurer will forthwith give notice thereof to each additional insured and loss
payee and that no cancellation, reduction in amount or material change in
coverage thereof shall be effective until at least 10 days after receipt by
each additional insured and loss payee of written notice thereof, (ii) upon
request of any Lender through the Administrative Agent from time to time, full
information as to the insurance carried, (iii) within five days of receipt of
notice from any insurer a copy of any notice of cancellation or material change
in coverage from that existing on the date of this Agreement and (iv)
forthwith, notice of any cancellation or nonrenewal of coverage by the
Borrower. Not later than the Closing Date, the Borrower shall cause the
Administrative Agent to be named as an additional insured and loss payee on
each insurance policy required to be maintained pursuant to this Section 5.3.
SECTION 5.4. Conduct of Business and Maintenance of
Existence. The Borrower will preserve, renew and keep in full force and
effect, and will cause each Subsidiary to
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preserve, renew and keep in full force and effect their respective corporate
existence and their respective rights, privileges and franchises necessary or
desirable in the normal conduct of business; provided that nothing in this
Section 5.4 shall prohibit (i) the merger of a Subsidiary into the Borrower,
the merger of a Guarantor with another Person if the Person surviving such
merger is a Guarantor or the merger or consolidation of any Subsidiary that is
not a Guarantor with or into another Person if the corporation surviving such
consolidation or merger is a Subsidiary and if, in each case, after giving
effect thereto, no Default shall have occurred and be continuing or (ii) the
failure to maintain any of the foregoing rights, privileges or franchises that
could not in the aggregate have a material adverse affect on the business,
financial position, results of operations or prospects of the Borrower and its
Consolidated Subsidiaries, taken as a whole, or on the rights of the Lenders
under the Loan Documents, or (iii) the termination of the corporate existence
of any Subsidiary other than a Guarantor if the Borrower in good faith
determines that such termination is in the best interest of the Borrower and is
not materially disadvantageous to the Lenders.
SECTION 5.5. Compliance with Laws. The Borrower will comply,
and cause each Subsidiary to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws and
ERISA and the rules and regulations thereunder) except where the necessity of
compliance therewith is contested in good faith by appropriate proceedings.
SECTION 5.6. Inspection of Property, Books and Records;
Annual Lender Meeting. (a) The Borrower will keep, and will cause each
Subsidiary to keep, proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in relation to
its business and activities; and will permit, and will cause each Subsidiary to
permit, representatives of any Lender at such Lender's expense to visit and
inspect any of their respective properties, to examine and make
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abstracts from any of their respective books and records and to discuss their
respective affairs, finances and accounts with their respective officers,
employees and independent public accountants, all at such reasonable times and
as often as may reasonably be desired.
(b) Unless otherwise instructed by the Administrative Agent
in its discretion, within 120 days after the end of each Fiscal Year, the
Borrower will conduct a meeting of the Lenders to discuss such fiscal year's
results and the financial condition of the Borrower at which shall be present
the chief executive officer and the chief financial officer of the Borrower and
such other officers of the Borrower as the Borrower's chief executive officer
shall designate. Such meetings shall be held at a time and place convenient to
the Lenders and the Borrower, and shall be in person unless the Administrative
Agent in its discretion notifies the Borrower that any such meeting shall be by
telephone conference.
SECTION 5.7. Mergers and Sales of Assets. (a) The Borrower
will not, and will not permit any Subsidiary to, consolidate or merge with or
into any other Person, provided that (i) the Borrower or any Guarantor may each
merge with another Person if it is the corporation surviving such merger and
immediately after giving effect to such merger, no Default shall have occurred
and be continuing, and (ii) any Subsidiary other than a Guarantor may merge
with any other Person if the corporation surviving the merger is the Borrower
or a Subsidiary of the Borrower and immediately after giving effect to such
merger, no Default shall have occurred and be continuing.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, make any Asset Sale, other than (i) Asset Sales the fair
market value of which, when combined with all other such Asset Sales previously
made during each Fiscal Year, does not exceed $1,000,000, and (ii) any Asset
Sale in which (x) the consideration therefor is not less than the fair market
value of the related asset (as determined in good faith by the chief financial
officer of the Borrower), (y) the consideration received therefor
70
<PAGE> 78
consists solely of cash payable at the closing thereof and (z) after giving
effect to such Asset Sale, the aggregate fair market value of the assets
disposed of in all Asset Sales in such Fiscal Year does not exceed $2,500,000.
(c) Without limitation of the foregoing, the Borrower will
not, and will not permit its Subsidiaries to, sell, lease or otherwise
transfer, directly or indirectly, all or substantially all of the assets of the
Borrower and its Subsidiaries, taken as a whole, to any other Person.
SECTION 5.8. Use of Proceeds. The proceeds of the Term Loans
will be used by the Borrower to finance a portion of the purchase price of the
Deltec Acquisition and to refinance a portion of the approximately $80,000,000
aggregate principal amount of existing Debt under the Existing Credit
Agreement. The proceeds of the Revolving Loans will be used by the Borrower to
refinance the balance of the aggregate principal amount of existing Debt under
the Existing Credit Agreement, and to provide working capital and for general
corporate purposes. The Letters of Credit issued under this Agreement will be
issued in the ordinary course for general corporate purposes, but not to
support Debt for borrowed money. None of the proceeds of any of the foregoing
will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any "margin stock" within the
meaning of Regulation U.
SECTION 5.9. Negative Pledge. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing
Debt outstanding on the date of this Agreement in an aggregate
principal or face amount not exceeding $5,000,000;
(b) any Lien existing on any asset of any Person at the time
such Person becomes a Subsidiary and not created in contemplation of
such event;
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(c) any Lien on any fixed asset securing Debt incurred or
assumed for the purpose of financing all or any part of the cost of
acquiring such fixed asset (including through capital leases), in an
aggregate principal amount of such Debt at any time outstanding not
greater than $5,000,000, provided that such Lien attaches to such
fixed asset concurrently with or within 90 days after the acquisition
thereof;
(d) any Lien on any asset of any Person existing at the time
such Person is merged or consolidated with or into the Borrower or a
Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition
thereof by the Borrower or a Subsidiary and not created in
contemplation of such acquisition;
(f) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by any
of the foregoing clauses of this Section, provided that such Debt is
not increased and is not secured by any additional assets;
(g) Liens arising in the ordinary course of its business
which (i) do not secure Debt or Derivatives Obligations, (ii) do not
secure any obligation in an amount exceeding $5,000,000 and (iii) do
not in the aggregate materially detract from the value of its assets
or materially impair the use thereof in the operation of its business;
(h) Liens created in connection with Permitted
Receivables Financings, including, without limitation, Liens on
proceeds in any form and bank accounts in which any such proceeds are
deposited; provided that, except for the assets transferred pursuant
to Permitted Receivables Dispositions made in connection with such
Permitted Receivables Financings, no such Lien may extend to any
assets of the Borrower or any Subsidiary;
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(i) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash
equivalents subject to such Liens may at no time exceed $5,000,000;
(j) Liens created by the Loan Documents;
(k) Liens securing Debt of International Subsidiaries
incurred in compliance with Section 5.10(g); and
(l) any Lien on any inventory securing obligations (whether
contingent or matured) under trade or documentary letters of credit
incurred or assumed for the purpose of financing all or any part of
the cost of acquiring such inventory, which such obligations do not
exceed in the aggregate at any time $2,000,000.
Notwithstanding the foregoing, no Obligor will create, assume or suffer to
exist any Lien on any Collateral other than Liens described in clause (b), (c),
(d), (e) or (g) above, or Liens described in clause (f) above relating to a
Lien described in clause (b), (c), (d), (e) or (g) above, which do not in the
aggregate materially detract from the value of the Collateral.
SECTION 5.10. Limitation on Debt. The Borrower will not, and
will not permit any of its Subsidiaries to, incur or at any time be liable with
respect to any Debt except:
(a) Debt under the Loan Documents;
(b) the Subordinated Notes and Guarantees thereof provided by
Guarantors, each such Guarantee thereof subordinated to the
obligations of the respective Guarantor under the Loan Documents on
substantially the same basis as the obligations of the Borrower under
the Subordinated Notes are subordinated to the obligations of the
Borrower under the Loan Documents;
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(c) Debt of the Borrower and the Guarantors (other than
Debt referred to in clauses (a) and (b) above) outstanding on the date
hereof not in excess of $8,300,000 in aggregate principal amount and
identified on Schedule 5.10, including the Guarantees referred to on
such Schedule, and any refinancing by the obligor with respect thereto
of such Debt (and, without limitation, renewals or extensions of such
Guarantees), provided that any such refinancing does not increase the
principal amount or shorten the maturity of any payment of principal
of such Debt;
(d) Debt secured by Liens permitted by Section 5.9(c) or
5.9(l), in an aggregate principal or obligation amount at any time
outstanding not exceeding the amount permitted pursuant to such
Section 5.9(c) or 5.9(l), as the case may be;
(e) Debt of the Guarantors owing to the Borrower or another
Guarantor;
(f) Debt of the Borrower and the Guarantors not otherwise
permitted by this Section incurred after the Closing Date in an
aggregate principal amount at any time outstanding not to exceed
$5,000,000;
(g) Debt of International Subsidiaries incurred for working
capital purposes in an aggregate principal amount at any time
outstanding not to exceed $25,000,000;
(h) Guarantees by (i) the Borrower of Debt referred to in
clause (g) above and (ii) Deltec of Debt of FPS Power Systems Oy Ab at
any time outstanding otherwise permitted by this Section 5.10 in an
aggregate principal amount not to exceed $8,000,000; and
(i) Debt pursuant to a Permitted Receivables Financing.
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SECTION 5.11. Restricted Payments. Neither the Borrower nor
any Subsidiary will declare or make any Restricted Payment other than:
(a) any Restricted Payments required to be made by the
Borrower pursuant to the terms of employee benefit plans and stock
options, in each case as in effect on the Closing Date and as modified
thereafter, provided that the aggregate amount of Restricted Payments
permitted by this clause (a) shall not exceed $1,000,000 in any Fiscal
Year or $3,000,000 in the aggregate for all periods after the Closing
Date;
(b) any regularly scheduled dividends payable on the Series G
Preferred Stock in accordance with the terms thereof; provided that
both before and after giving effect thereto no Default shall have
occurred and be continuing;
(c) Restricted Payments of the type referred to in clause (i)
or (ii) of the definition of Restricted Payments (other than those
referred to in clauses (a) and (b) above), to the extent that (x) both
before and after giving effect thereto no Default shall have occurred
and be continuing and (y) the aggregate amount of all such Restricted
Payments declared or made in any Fiscal Year does not exceed the sum
of (A) $500,000 plus (B) the amount of Net Cash Proceeds received by
the Borrower from the issuance of stock options and other equity in
such Fiscal Year in an amount not to exceed $500,000 in Fiscal Year
1996, $750,000 in each of Fiscal Years 1997 and 1998 and $1,000,000 in
each of Fiscal Years 1999 and 2000 (but in no event, in any Fiscal
Year, greater than the amount of such Net Cash Proceeds
minus any payments thereof required under Section 2.8); and
(d) Restricted Payments of the type referred to in clause
(iii) of the definition of Restricted Payments, solely to the extent
that Subordinated Notes are tendered as payment of the exercise price
of warrants issued pursuant to the Subordinated Note
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<PAGE> 83
Agreement and no consideration other than shares of common stock of
the Borrower are issued or paid therefor.
SECTION 5.12. Investments and Other Acquisitions. Neither
the Borrower nor any Subsidiary will (a) hold, make or acquire any Restricted
Investment in any Person or (b) consummate or agree to consummate any
Acquisition, unless:
(i) immediately after any such Restricted Investment is made
or acquired or any such Acquisition is consummated or agreed to, the
sum of (A) the aggregate amount expended by the Borrower and its
Subsidiaries with respect to Acquisitions (including the value of
capital stock of the Borrower used to make Acquisitions) after the
date hereof plus (B) the aggregate net book value of all Restricted
Investments does not in the aggregate exceed the sum of (x) an amount
equal to 50% of the aggregate amount of Excess Cash Flow for each
Fiscal Year ending after the date hereof (any such incremental amount
pursuant to this clause (x) to be added on the date of receipt of the
financial statements referred to in Section 5.1 for such Fiscal Year),
but in no event more than $5,000,000 in any Fiscal Year and (y) an
additional amount equal to $3,000,000 in any Fiscal Year or
$10,000,000 for all periods after the Closing Date;
(ii) both before and immediately after giving effect to such
Acquisition or Restricted Investment, no Default shall have occurred
and be continuing; and
(iii) in the case of any Acquisition, the Borrower would be in
compliance with Sections 5.19, 5.20 and 5.21 after the Fixed Charge
Coverage Ratio, Leverage Ratio and Consolidated EBITDA are each
adjusted with respect to such Acquisition on the date of consummation
or proposed consummation thereof (the "Transaction Date") as follows:
in calculating Consolidated EBITDA, Consolidated Interest Expense,
Consolidated Rental Expense and Consolidated Capital Expenditures, (1)
the incurrence of any Debt incurred in connection with such
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Acquisition and the application of the proceeds therefrom shall be
assumed to have occurred on the first day of the period of four
consecutive Fiscal Quarters (or other period) for which such amounts
are required to be determined in accordance with the definitions of
Fixed Charge Coverage Ratio and Leverage Ratio (the "Reference
Period"), (2) pro forma effect shall be given to the Acquisition
(including adjustments to operating results permitted to be made in
accordance with generally accepted accounting principles) which occur
during the Reference Period or subsequent to the Reference Period and
prior to the Transaction Date as if such Acquisition had occurred on
the first day of the Reference Period, (3) the incurrence of any Debt
during the Reference Period or subsequent to the Reference Period and
prior to the Transaction Date and the application of the proceeds
therefrom shall be assumed to have occurred on the first day of such
Reference Period and (4) Consolidated Interest Expense attributable to
any Debt (whether existing or being incurred) computed on a pro forma
basis and bearing a floating interest rate shall be computed as if the
rate in effect on the date of computation had been the applicable rate
for the entire period unless such Person or any of its Subsidiaries is
a party to a interest party swap or cap or similar agreement (which
shall remain in effect for the twelve month period after the
Transaction Date) which has the effect of fixing the interest rate on
the date of computation, in which case such rate (whether higher or
lower) shall be used.
SECTION 5.13. Consolidated Capital Expenditures.
Consolidated Capital Expenditures will not, for any of the fiscal periods set
forth below, exceed the amount indicated opposite such period:
<TABLE>
<CAPTION>
Fiscal Period Amount
------------- -----------
<S> <C>
Fiscal Year 1996 $16,000,000
Fiscal Year 1997 16,000,000
Fiscal Year 1998 17,500,000
</TABLE>
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<PAGE> 85
<TABLE>
<S> <C>
Fiscal Year 1999 18,000,000
Fiscal Year 2000 18,500,000
First Fiscal Quarter 2001 5,000,000
</TABLE>
SECTION 5.14. Sale-Leaseback Transactions. Neither the
Borrower nor any of its Subsidiaries will engage in any Sale-Leaseback
Transactions unless the Borrower or such Subsidiary would be entitled, pursuant
to the other provisions of Article 5, to incur Debt with a principal amount
equal to or exceeding the Value of such Sale- Leaseback Transaction secured by
a Lien on the property to be leased (after giving similar effect to all other
Sale-Leaseback Transactions in effect at such time). For purposes of this
Section, "Value" means, with respect to a Sale-Leaseback Transaction, at any
time, the amount equal to the greater of (i) the net proceeds of the sale or
transfer of the property leased pursuant to such Sale-Leaseback Transaction and
(ii) the fair value in the opinion of the Board of Directors of the Borrower of
such property at the time of entering into such Sale-Leaseback Transaction, in
either case divided first by the number of full years of the term of the lease
and then multiplied by the number of full years of such term remaining at the
time of determination, without regard to any renewal or extension options
contained in the lease.
SECTION 5.15. Transactions with Affiliates. The Borrower
will not, and will not permit any Subsidiary to, directly or indirectly, pay
any funds to or for the account of, make any investment (whether by acquisition
of stock or indebtedness, by loan, advance, transfer of property, guarantee or
other agreement to pay, purchase or service, directly or indirectly, any Debt,
or otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction with,
any Affiliate except on an arms-length basis on terms at least as favorable to
the Borrower or such Subsidiary Affiliate than could have been obtained from a
third party who was not an Affiliate; provided that the foregoing provisions of
this Section shall not prohibit any such Person from declaring or paying any
lawful dividend or
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<PAGE> 86
other payment ratably in respect of all of its capital stock of the relevant
class so long as, after giving effect thereto, no Default shall have occurred
and be continuing.
SECTION 5.16. Hedging Facilities. Not later than 30 days
after the Closing Date the Borrower will have entered into and thereafter
maintain in full force and effect interest rate agreements in such amounts and
on such terms as shall result in effectively limiting to a rate acceptable to
the Administrative Agent the interest cost to the Borrower of the London
Interbank Offered Rate on the Loans in an aggregate principal amount not less
than $65,000,000 for a period of two years beginning on such date, all on terms
and conditions satisfactory to the Required Lenders. The Borrower will not,
and will not permit any of its Subsidiaries to, incur any Derivatives
Obligations except for purposes of hedging and not for speculative purposes.
SECTION 5.17. Further Assurances. (a) The Borrower will,
and will cause each of the other Obligors to, at the Borrower's sole cost and
expense, do, execute, acknowledge and deliver all such further acts, deeds,
conveyances, mortgages, assignments, notices of assignment and transfers as the
Administrative Agent shall from time to time request, which may be necessary in
the reasonable judgment of the Administrative Agent from time to time to
assure, perfect, convey, assign and transfer to the Administrative Agent the
property and rights conveyed or assigned pursuant to the Collateral Documents,
or which may facilitate the performance of the terms of the Collateral
Documents, or the filing, registering or recording of the Collateral Documents.
(b) All costs and expenses in connection with the grant of
any security interests under the Collateral Documents, including without
limitation reasonable legal fees and other reasonable costs and expenses in
connection with the granting, perfecting and maintenance of any security
interests under the Collateral Documents or the preparation, execution,
delivery, recordation or filing of documents and any other acts as the
Administrative Agent may
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reasonably request in connection with the grant of such security interests
shall be paid by the Borrower promptly upon demand.
(c) The Borrower will not, and will not permit any of its
Subsidiaries to, enter into or become subject to any agreement which would
impair their ability to comply, or which would purport to prohibit them from
complying, with the provisions of this Section.
(d) Substantially simultaneously with acquiring or forming
any Subsidiary or Subsidiaries, Borrower will cause such Subsidiary or
Subsidiaries (but excluding any Subsidiary which is an International
Subsidiary) to become a party hereto as a "Guarantor" and/or a party to the
Security Agreement by executing and delivering to the Administrative Agent an
agreement substantially in the form of Exhibit H hereto appropriately completed
with respect to such new Guarantor (a "Guarantor Addendum") and to cause each
such Subsidiary (other than any International Subsidiary) to become a party to
one or more pledge agreements in substance consistent with the Pledge
Agreements to secure its obligations hereunder. Within 30 days after acquiring
or forming such Subsidiary or Subsidiaries (other than any International
Subsidiary), the Borrower will cause such Subsidiary or Subsidiaries to (i)
execute and deliver such other supplements and documents creating security
interests as the Administrative Agent may specify, (ii) do all other things
which may be necessary or which the Administrative Agent may reasonably request
in order to confer upon and confirm to the Lenders the benefits of such
security required to be granted and (iii) deliver such legal opinions,
certificates, evidences of corporate action or other documents as the
Administrative Agent may reasonably request, all in form and substance
satisfactory to the Administrative Agent, relating to the satisfaction of the
Borrower's obligations under this Section.
SECTION 5.18. Minimum Consolidated Net Worth. Consolidated
Net Worth will at no time be less than the sum of (i) $82,000,000 and (ii) an
amount equal to 75% of Consolidated Net Income for each Fiscal Quarter of the
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Borrower ending after December 31, 1995 (provided that for the Fiscal Quarter
ended most nearly on March 31, 1996, Consolidated Net Income of the Borrower
shall be adjusted to give effect to the Deltec Acquisition based on pro forma
financial statements of Deltec prepared in a manner consistent with Section
4.4(e)) and on or prior to the date of determination, in each case, for which
Consolidated Net Income is positive (but with no deduction on account of
negative Consolidated Net Income for any Fiscal Quarter of the Borrower) plus
(iii) 90% of the aggregate net proceeds, including the fair market value of
property other than cash (as determined in good faith by the Board of Directors
of the Borrower), received by the Borrower from the issuance and sale after the
date hereof of any capital stock of the Borrower (other than the proceeds of
any issuance and sale of any capital stock (x) to a Subsidiary of the Borrower
or (y) which is required to be redeemed, or is redeemable at the option of the
holder, at any time) or in connection with the conversion or exchange of any
Debt of the Borrower into capital stock of the Borrower after December 31,
1995.
SECTION 5.19. Fixed Charge Coverage Ratio. As of the last
day of each Fiscal Quarter of the Borrower set forth below, the Fixed Charge
Ratio will not be less than the ratio set forth below opposite such Fiscal
Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ratio
-------------- ------
<S> <C>
Third Fiscal Quarter 1996 1.20:1
Fourth Fiscal Quarter 1996 1.50:1
First Fiscal Quarter 1997 1.30:1
Second Fiscal Quarter 1997 1.35:1
Third Fiscal Quarter 1997 1.60:1
Fourth Fiscal Quarter 1997 1.85:1
First Fiscal Quarter 1998 2.00:1
Second Fiscal Quarter 1998 2.10:1
Third Fiscal Quarter 1998 2.25:1
Fourth Fiscal Quarter 1998 2.45:1
First Fiscal Quarter 1999 2.55:1
Second Fiscal Quarter 1999 2.70:1
Third Fiscal Quarter 1999 2.90:1
Fourth Fiscal Quarter 1999
</TABLE>
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<TABLE>
<S> <C>
and thereafter 3.00:1
</TABLE>
SECTION 5.20. Leverage Ratio. As of the last day of each
Fiscal Quarter of the Borrower set forth below and at all times thereafter
until the last day of the next such Fiscal Quarter, the Leverage Ratio shall
not exceed the ratio set forth below opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ratio
-------------- ------
<S> <C>
Third Fiscal Quarter 1996 4.30:1
Fourth Fiscal Quarter 1996 3.90:1
First Fiscal Quarter 1997 3.80:1
Second Fiscal Quarter 1997 3.60:1
Third Fiscal Quarter 1997 3.25:1
Fourth Fiscal Quarter 1997 2.75:1
First Fiscal Quarter 1998 2.70:1
Second Fiscal Quarter 1998 2.50:1
Third Fiscal Quarter 1998 2.25:1
Fourth Fiscal Quarter 1998
and thereafter 2.00:1
</TABLE>
SECTION 5.21. Minimum EBITDA. At no time during any period
specified below shall Consolidated EBITDA for the four consecutive Fiscal
Quarters then most recently ended (or, in the case of any Fiscal Quarter ending
prior to March 31, 1997, for the period commencing on April 1, 1996 and ending
on the last day of such Fiscal Quarter), be less than the corresponding amount
set forth below:
<TABLE>
<CAPTION>
Period Amount
------ ------------
<S> <C>
Third Fiscal Quarter 1996 $ 14,800,000
Fourth Fiscal Quarter 1996 35,000,000
First Fiscal Quarter 1997 43,000,000
Second Fiscal Quarter 1997 60,000,000
Third Fiscal Quarter 1997 66,000,000
Fourth Fiscal Quarter 1997 76,000,000
First Fiscal Quarter 1998 78,000,000
Second Fiscal Quarter 1998 82,000,000
Third Fiscal Quarter 1998 88,000,000
</TABLE>
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<PAGE> 90
<TABLE>
<S> <C>
Fourth Fiscal Quarter 1998 98,000,000
First Fiscal Quarter 1999 100,000,000
Second Fiscal Quarter 1999 103,000,000
Third Fiscal Quarter 1999 108,000,000
Fourth Fiscal Quarter 1999 118,000,000
First Fiscal Quarter 2000 120,000,000
Second Fiscal Quarter 2000 122,000,000
Third Fiscal Quarter 2000 125,000,000
Fourth Fiscal Quarter 2000 128,000,000
First Fiscal Quarter 2001
and thereafter 130,000,000
</TABLE>
SECTION 5.22. Amendments of Related Documents. The Borrower
shall not and shall not permit its Subsidiaries to, without the prior written
consent of the Required Lenders, modify or amend, or waive any provision or
condition contained in, any of the Deltec Acquisition Documents, the
Subordinated Note Agreement, the Subordinated Notes or the Series G Preferred
Stock from the forms of each of the foregoing heretofore delivered to the
Lenders and the Agents in any manner that could reasonably be expected to be
adverse to the Lenders.
SECTION 5.23. Limitation on Restrictions Affecting
Subsidiaries. Neither the Borrower nor any of its Subsidiaries will enter
into, or suffer to exist, any agreement with any Person, other than the Loan
Documents and the Subordinated Note Indenture and guarantees with respect
thereto, which prohibits or limits the ability of any Subsidiary to (a) pay
dividends or make other distributions or pay any Debt owed to the Borrower or
any other Subsidiary, (b) make loans or advances to the Borrower or any other
Subsidiary or (c) transfer any of its properties or assets to the Borrower or
any other Subsidiary, provided that the foregoing shall not prohibit (i) such
restrictions as exist today and set forth in the agreements identified on
Schedule 5.23 and (ii) customary net worth and financial leverage tests in
agreements governing Debt in effect on the date of this Agreement of
International Subsidiaries incurred and outstanding in compliance with this
Agreement.
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<PAGE> 91
SECTION 5.24. Designated Senior Debt. Without the consent of
the Required Lenders, the Borrower shall not designate any Debt, other than
Debt under the Loan Documents, as "Designated Senior Debt", as such term is
defined in the Subordinated Note Indenture as in effect on the date hereof, or
any comparable designation that confers upon the holders of such Debt (or any
Person acting on their behalf) the right to initiate blockage periods under the
Subordinated Note Indenture.
ARTICLE 6
DEFAULTS
SECTION 6.1. Events of Default. If one or more of the
following events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay (i) when due any principal
of any Loan or any reimbursement obligation under any Letter of Credit
or (ii) within two Domestic Business Days after the same shall become
due, any interest on any Loan or any fees or any other amount payable
hereunder;
(b) the Borrower shall fail to observe or perform any
covenant contained in Article 5, other than those contained in
Sections 5.1 through 5.6;
(c) any Obligor shall fail to observe or perform any covenant
or agreement contained in the Loan Documents (other than those covered
by clause (a) or (b) above) for 30 days after notice thereof has been
given to the Borrower by the Administrative Agent at the request of
any Lender;
(d) any representation, warranty, certification or statement
made by any Obligor in any Loan Document or in any certificate,
financial statement or other document delivered pursuant to any Loan
Document shall
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<PAGE> 92
prove to have been incorrect in any material respect when made (or
deemed made);
(e) the Borrower or any Subsidiary shall fail to make any
payment in respect of any Material Financial Obligations when due or
within any applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with
the giving of notice or lapse of time or both, would enable) the
holder of such Debt or any Person acting on such holder's behalf to
accelerate the maturity thereof;
(g) the Borrower or any Subsidiary (other than an Immaterial
Subsidiary) shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors,
or shall fail generally to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be
commenced against the Borrower or any Subsidiary (other than an
Immaterial Subsidiary) seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall
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<PAGE> 93
remain undismissed and unstayed for a period of 60 days; or an order
for relief shall be entered against the Borrower or any Subsidiary
under the federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due
an amount or amounts aggregating in excess of $1,000,000 which it
shall have become liable to pay under Title IV of ERISA; or notice of
intent to terminate a Material Plan shall be filed under Title IV of
ERISA by any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material Plan; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal
from, or a default, within the meaning of Section 4219(c)(5) of ERISA,
with respect to, one or more Multiemployer Plans which could cause one
or more members of the ERISA Group to incur a current payment
obligation in excess of $1,000,000;
(j) judgments or orders for the payment of money in excess of
$3,000,000 shall be rendered against the Borrower or any Subsidiary
and such judgments or orders shall continue unsatisfied and unstayed
for a period of 10 days;
(k) the Guarantee of any Guarantor under Article 9 shall for
any reason be revoked or invalidated, or otherwise cease to be in full
force and effect, or any Guarantor, or any Person on behalf of any
Guarantor, shall deny or disaffirm its obligations under such
Guarantee, or any Lien created by any of the Collateral Documents
shall at any time fail to constitute a valid and (to the extent
required by the Collateral Documents) perfected Lien on any
substantial part of the Collateral purported to be subject thereto,
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securing the obligations purported to be secured thereby, with the
priority required by the Loan Documents, or any Obligor shall assert
any of the foregoing in writing;
(l) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said
Act) of 33-1/3% or more of the outstanding shares of common stock of
the Borrower; or, during any period of 12 consecutive calendar months,
individuals who were directors of the Borrower on the first day of
such period shall cease to constitute a majority of the board of
directors of the Borrower; or there shall occur any "Change of
Control", as such term is defined in the Subordinated Note Indenture
as in effect on the date hereof, or any similar event that permits the
holders of the Subordinated Notes (or any Person acting on their
behalf) the right to accelerate the maturity of the Subordinated Notes
or demand any payment or redemption thereof or with respect thereto;
then, and in every such event, the Administrative Agent shall (i) if requested
by Lenders having more than 50% in aggregate amount of the Commitments, by
notice to the Borrower terminate the Commitments and they shall thereupon
terminate, and (ii) if requested by Lenders holding more than 50% of the sum of
the aggregate principal amount of the Loans and the Letter of Credit
Liabilities, by notice to the Borrower declare the Loans and the Letter of
Credit Liabilities (together with accrued interest thereon) to be, and the
Loans and the Letter of Credit Liabilities shall thereupon become, immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower; provided that in the case
of any of the Events of Default specified in clause 6.1(g) or 6.1(h) above with
respect to the Borrower, without any notice to the Borrower or any other act by
the Administrative Agent or the Lenders, the Commitments shall thereupon
terminate and the Loans and the
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Letter of Credit Liabilities (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
SECTION 6.2. Notice of Default. The Administrative Agent
shall give notice to the Borrower under Section 6.1(c) promptly upon being
requested to do so by any Lender and shall thereupon notify all the Lenders
thereof. Upon receipt by the Administrative Agent of any notice of
acceleration under the Subordinated Note Agreement, the Administrative Agent
shall promptly notify the Lenders thereof.
SECTION 6.3. Cash Cover. The Borrower agrees, in addition to
the provisions of Section 6.1 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by the
Administrative Agent upon the instruction of the Lenders having more than 50%
in aggregate amount of the Revolving Commitments (or, if the Revolving
Commitments shall have been terminated, holding more than 50% of the aggregate
Letter of Credit Liabilities), pay to the Administrative Agent an amount in
immediately available funds (which funds shall be held as collateral pursuant
to arrangements satisfactory to the Administrative Agent) equal to the
aggregate amount available for drawing under all Letters of Credit then
outstanding at such time, provided that, upon the occurrence of any Event of
Default specified in Section 6.1(g) or 6.1(h) with respect to the Borrower,
the Borrower shall pay such amount forthwith without any notice or demand or
any other act by any Agent or the Lenders.
ARTICLE 7
THE AGENT
SECTION 7.1. Appointment and Authorization. Each Lender
irrevocably appoints and authorizes the Administrative Agent and the
Documentation Agent to enter into and act as its agent in connection with the
Collateral
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Documents and to take such action as agent on its behalf and to exercise such
powers under the Loan Documents as are delegated to the Agents by the terms
hereof or thereof, together with all such powers as are reasonably incidental
thereto. Each Lender hereby agrees to be bound by the provisions of the
Collateral Documents and, without limitation of the foregoing or of any other
provision hereof, agrees to the provisions set forth in Section 10 of the Share
Mortgage dated as of the date hereof entered into between EEIC and the
Administrative Agent whereby EEIC pledges 66% of the stock of MPL Powerware
Systems, Ltd., as though such provisions were set forth fully herein.
SECTION 7.2. Agents and Affiliates. Each of the Agents shall
have the same rights and powers under the Loan Documents as any other Lender
and may exercise or refrain from exercising the same as though it were not the
Agent, and each Agent and its affiliates may accept deposits from, lend money
to, and generally engage in any kind of business with the Borrower or any
Subsidiary or affiliate of the Borrower as if it were not an Agent.
SECTION 7.3. Action by Agents. The obligations of the Agents
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Administrative Agent shall not be required to
take any action with respect to any Default, except as expressly provided in
Article 6.
SECTION 7.4. Consultation with Experts. Each of the Agents
may consult with legal counsel (who may be counsel for any Obligor),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
SECTION 7.5. Liability of Agents. Neither of the Agents nor
any of their affiliates nor any of their respective directors, officers, agents
or employees shall be liable for any action taken or not taken by it in
connection herewith (i) with the consent or at the request of the
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<PAGE> 97
Required Lenders or (ii) in the absence of its own gross negligence or willful
misconduct. Neither Agent nor any of their affiliates nor any of their
respective directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into or verify (i) any statement, warranty
or representation made in connection with the Loan Documents or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any Obligor; (iii) the satisfaction of any condition specified in
Article 3, except receipt of items required to be delivered to the
Documentation Agent or the Administrative Agent; or (iv) the validity,
effectiveness or genuineness of the Loan Documents or any other instrument or
writing furnished in connection herewith. No Agent shall incur any liability
by acting in reliance upon any notice, consent, certificate, statement, or
other writing (which may be a bank wire, telex, facsimile transmission or
similar writing) believed by it to be genuine or to be signed by the proper
party or parties.
SECTION 7.6. Indemnification. Each Lender shall, ratably in
accordance with its Commitment, indemnify each Agent, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrower) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from such indemnities' gross negligence or willful misconduct) that such
indemnities may suffer or incur in connection with the Loan Documents or any
action taken or omitted by such indemnities thereunder.
SECTION 7.7. Credit Decision. Each Lender acknowledges that
it has, independently and without reliance upon any Agent or any other Lender,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each Lender
also acknowledges that it will, independently and without reliance upon any
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its
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<PAGE> 98
own credit decisions in taking or not taking any action under the Loan
Documents.
SECTION 7.8. Successor Administrative Agent. The
Administrative Agent may resign at any time by giving notice thereof to the
Lenders and the Borrower. Upon any such resignation, the Required Lenders
shall have the right to appoint a successor Administrative Agent. If no
successor Administrative Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within 30 days after the
retiring Administrative Agent gives notice of resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be a commercial bank organized or licensed
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of its appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After any retiring Administrative
Agent's resignation hereunder as Administrative Agent, the provisions of this
Article shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent.
SECTION 7.9. Agents' Fee. The Borrower shall pay to each
Agent for its own account fees in the amounts and at the times previously
agreed upon between the Borrower and such Agent.
SECTION 7.10. Co-Agents, Documentation Agent and Syndication
Agent. The Co-Agents referred to on the signature pages hereof, the
Documentation Agent, and the Syndication Agent referred to on the cover page
hereof, in their respective capacities as such, shall have no duties or
obligations of any kind under the Loan Documents.
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ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.1. Basis for Determining Interest Rate Inadequate
or Unfair. If on or prior to the first day of any Interest Period for any
Euro-Dollar Loan:
(a) the Administrative Agent is advised by the Reference
Lenders that deposits in dollars (in the applicable amounts) are not
being offered to the Reference Lenders in the London interbank market
for such Interest Period, or
(b) Lenders having 50% or more of the aggregate principal
amount of the affected Loans advise the Administrative Agent that the
London Interbank Offered Rate as determined by the Administrative
Agent will not adequately and fairly reflect the cost to such Lenders
of funding their Euro-Dollar Loans for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower
and the Lenders, whereupon until the Administrative Agent notifies the Borrower
that the circumstances giving rise to such suspension no longer exist, (i) the
obligations of the Lenders to make Euro-Dollar Loans shall be suspended and
(ii) each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan
on the last day of the then current Interest Period applicable thereto. Unless
the Borrower notifies the Administrative Agent at least two Domestic Business
Days before the date of any Euro-Dollar Borrowing for which a Notice of
Borrowing has previously been given that it elects not to borrow on such date,
such Borrowing shall instead be made as a Base Rate Borrowing.
SECTION 8.2. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
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central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Euro-Dollar Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it unlawful
or impossible for any Lender (or its Euro-Dollar Lending Office) to make,
maintain or fund its Euro-Dollar Loans and such Lender shall so notify the
Administrative Agent, the Administrative Agent shall forthwith give notice
thereof to the other Lenders and the Borrower, whereupon until such Lender
notifies the Borrower and the Administrative Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Lender
to make Euro-Dollar Loans, or to continue or convert outstanding Loans as or
into Euro-Dollar Loans, shall be suspended. Before giving any notice to the
Administrative Agent pursuant to this Section, such Lender shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need
for giving such notice and will not, in the judgment of such Lender, be
otherwise disadvantageous to such Lender. If such notice is given, each
Euro-Dollar Loan of such Lender then outstanding shall be converted to a Base
Rate Loan either (a) on the last day of the then current Interest Period
applicable to such Euro-Dollar Loan if such Lender may lawfully continue to
maintain and fund such Loan to such day or (b) immediately if such Lender shall
determine that it may not lawfully continue to maintain and fund such Loan to
such day.
SECTION 8.3. Increased Cost and Reduced Return. (a) If on
or after the date hereof, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall impose, modify
or deem applicable any reserve (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System,
but
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excluding any such requirement with respect to which such Lender is entitled to
compensation during the relevant interest period under Section 2.14), special
deposit, insurance assessment or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Lender (or its
Applicable Lending Office) or shall impose on any Lender (or its Applicable
Lending Office) or the London interbank market any other condition affecting
its Euro-Dollar Loans or its obligations hereunder in respect of Letters of
Credit, its Note or its obligation to make Euro- Dollar Loans or issue or
participate in any Letter of Credit, and the result of any of the foregoing is
to increase the cost to such Lender (or its Applicable Lending Office) of
making or maintaining any Euro-Dollar Loan or of issuing or participating in
any Letter of Credit, or to reduce the amount of any sum received or receivable
by such Lender (or its Applicable Lending Office) under this Agreement or under
its Note with respect thereto, by an amount deemed by such Lender to be
material, then, within 15 days after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender for such increased cost or
reduction.
(b) If any Lender shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change in any such law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Lender (or its Parent) as a consequence of such Lender's
obligations hereunder to a level below that which such Lender (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, within 15 days
after demand by such Lender (with a copy to the
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Administrative Agent), the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender (or its Parent) for such
reduction.
(c) Each Lender will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Lender to compensation pursuant to
this Section and will designate a different Lending Office if such designation
will avoid the need for, or reduce the amount of, such compensation and will
not, in the judgment of such Lender, be otherwise disadvantageous to such
Lender. A certificate of any Lender claiming compensation under this Section
and setting forth in reasonable detail its calculation of the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Lender may use any reasonable
averaging and attribution methods. Notwithstanding the foregoing subsections
(a) and (b) of this Section 8.3, the Borrower shall only be obligated to
compensate any Lender for any amount arising or accruing during (i) any time or
period commencing not more than (x) in the case of subsection (a), six months
and (y) in the case of subsection (b), three months, prior to the date on which
such Lender notifies the Administrative Agent and the Borrower that it proposes
to demand such compensation and identifies to the Administrative Agent and the
Borrower the statute, regulation or other basis upon which the claimed
compensation is or will be based and (ii) any time or period during which,
because of the retroactive application of such statute, regulation or other
basis, such Lender did not know that such amount would arise or accrue.
SECTION 8.4. Taxes. (a) For the purposes of this Section
8.4, the following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings with respect to any
payment by the Borrower or any Guarantor, as the case may be, pursuant to this
Agreement or under any Note, and all liabilities with respect thereto,
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excluding (i) in the case of each Lender and each Agent, taxes imposed on its
income, and franchise or similar taxes imposed on it, by a jurisdiction under
the laws of which such Lender or such Agent (as the case may be) is organized
or in which its principal executive office is located or, in the case of each
Lender, in which its Applicable Lending Office is located and (ii) in the case
of each Lender, any United States withholding tax imposed on such payments but
only to the extent that such Lender is subject to United States withholding tax
at the time such Lender first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary
taxes and any other excise or property taxes, or similar charges or levies,
which arise from any payment made pursuant to this Agreement or under any Note
or from the execution or delivery of, or otherwise with respect to, any Loan
Document.
(b) Any and all payments by the Borrower or any Guarantor to
or for the account of any Lender or any Agent hereunder or under any Note shall
be made without deduction for any Taxes or Other Taxes; provided that, if the
Borrower or any Guarantor shall be required by law to deduct any Taxes or Other
Taxes from any such payments, (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) such Lender or the
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower or any Guarantor,
as the case may be, shall make such deductions, (iii) the Borrower or such
Guarantor, as the case may be, shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law and (iv) the Borrower shall furnish to the Documentation Agent, at its
address referred to in Section 10.1, the original or a certified copy of a
receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Lender and each
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes
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imposed or asserted by any jurisdiction on amounts payable under this Section)
paid by such Lender or such Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be paid within 15 days after such Lender
or such Agent (as the case may be) makes demand therefor.
(d) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and
delivery of this Agreement in the case of each Lender listed on the signature
pages hereof and on or prior to the date on which it becomes a Lender in the
case of each other Lender, and from time to time thereafter if requested in
writing by the Borrower (but only so long as such Lender remains lawfully able
to do so), shall provide the Borrower and the Administrative Agent with
Internal Revenue Service form 1001 or 4224, as appropriate, or any successor
form prescribed by the Internal Revenue Service, certifying that such Lender is
entitled to benefits under an income tax treaty to which the United States is a
party which exempts the Lender from United States withholding tax or reduces
the rate of withholding tax on payments of interest for the account of such
Lender or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States.
(e) For any period with respect to which a Lender has failed
to provide the Borrower or the Administrative Agent with the appropriate form
pursuant to Section 8.4(d) (unless such failure is due to a change in treaty,
law or regulation occurring subsequent to the date on which such form
originally was required to be provided), such Lender shall not be entitled to
indemnification under Section 8.4(b) or (c) with respect to Taxes imposed by
the United States; provided that if a Lender, which is otherwise exempt from or
subject to a reduced rate of withholding tax, becomes subject to Taxes because
of its failure to deliver a form required hereunder, the Borrower shall take
such steps as such Lender shall reasonably request to assist such Lender to
recover such Taxes.
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<PAGE> 105
(f) If the Borrower or any Guarantor is required to pay
additional amounts to or for the account of any Lender pursuant to this
Section, then such Lender will change the jurisdiction of its Applicable
Lending Office if, in the judgment of such Lender, such change (i) will
eliminate or reduce any such additional payment which may thereafter accrue and
(ii) is not otherwise disadvantageous to such Lender.
SECTION 8.5. Base Rate Loans Substituted for Affected
Euro-Dollar Loans. If (i) the obligation of any Lender to make Euro-Dollar
Loans, or to convert or continue outstanding Loans into or as Euro-Dollar
Loans, has been suspended pursuant to Section 8.2 or (ii) any Lender has
demanded compensation under Section 8.3 or 8.4 with respect to its Euro-Dollar
Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior
notice to such Lender through the Administrative Agent, have elected that the
provisions of this Section shall apply to such Lender, then, unless and until
such Lender notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Lender as
(or continued as or converted into) Euro-Dollar Loans shall instead be
Base Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other
Lenders); and
(b) after each of its Euro-Dollar Loans has been repaid (or
converted to a Base Rate Loan), all payments of principal which would
otherwise be applied to repay such Euro-Dollar Loans shall be applied
to repay its Base Rate Loans instead.
If such Lender notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a Euro-Dollar Loan on the first day of the next succeeding
Interest Period applicable to the related Euro-Dollar Loans of the other
Lenders.
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<PAGE> 106
SECTION 8.6. Substitution of Lender. If (i) the obligation
of any Lender to make Euro-Dollar Loans has been suspended pursuant to Section
8.2 or (ii) any Lender has demanded compensation under Section 8.3 or 8.4, the
Borrower shall have the right, with the assistance of the Administrative Agent,
to seek one or more mutually satisfactory substitute financial institutions
(which may be one or more of the Lenders) to purchase the Note and assume the
Commitments of such Lender.
ARTICLE 9
GUARANTY
SECTION 9.1. The Guaranty. Each Guarantor hereby
unconditionally guarantees, jointly and severally with each other Guarantor,
the full and punctual payment (whether at stated maturity, upon acceleration or
otherwise) of the principal of and interest on each Note and the full amount of
all Letter of Credit Liabilities under this Agreement, and the full and
punctual payment of all other amounts payable by the Borrower or any other
Obligor under the Loan Documents, and all Hedging Obligations (as defined in
the Security Agreement of even date herewith). Upon failure by the Borrower or
any other Obligor to pay punctually any such amount, each Guarantor shall
forthwith on demand pay the amount not so paid at the place and in the manner
specified in this Agreement or the other Loan Documents.
SECTION 9.2. Guaranty Unconditional. The obligations of each
Guarantor hereunder shall be unconditional and absolute and, without limiting
the generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Borrower or any other
Obligor under the Loan Documents, by operation of law or otherwise;
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<PAGE> 107
(ii) any modification or amendment of or supplement to the
Loan Documents;
(iii) any release, impairment, non-perfection or invalidity
of any direct or indirect security for any obligation of the Borrower
or any other Obligor under the Loan Documents;
(iv) any change in the corporate existence, structure or
ownership of the Borrower or any other Obligor, or any insolvency,
bankruptcy, reorganization or other similar proceeding affecting the
Borrower, any other Obligor or their respective assets or any
resulting release or discharge of any obligation of the Borrower or
any other Obligor contained in the Loan Documents;
(v) the existence of any claim, set-off or other rights which
such Guarantor may have at any time against the Borrower, any other
Obligor, any Agent, any Lender or any other Person, whether in
connection herewith or any unrelated transactions, provided that
nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or
against the Borrower or any other Obligor for any reason of the Loan
Documents, or any provision of applicable law or regulation purporting
to prohibit the payment by the Borrower or any other Obligor of the
principal of or interest on any Note or any other amount payable by
the Borrower or any other Obligor under the Loan Documents; or
(vii) any other act or omission to act or delay of any kind
by the Borrower, any other Obligor, any Agent, any Lender or any other
Person or any other circumstance whatsoever which might, but for the
provisions of this paragraph, constitute a legal or equitable
discharge of the Guarantor's obligations hereunder.
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<PAGE> 108
SECTION 9.3. Discharge Only Upon Payment In Full;
Reinstatement In Certain Circumstances. Each Guarantor's obligations hereunder
shall remain in full force and effect until the Commitments shall have
terminated and the principal of and interest on the Notes and all other amounts
payable by the Obligors under the Loan Documents shall have been paid in full.
If at any time any payment of the principal of or interest on any Note or any
other amount payable by the Obligors under the Loan Documents is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of any Obligor or otherwise, each Guarantor's obligations
hereunder with respect to such payment shall be reinstated at such time as
though such payment had been due but not made at such time.
SECTION 9.4. Waiver by each Guarantor. Each Guarantor
irrevocably waives acceptance hereof, presentment, demand, protest and any
notice not provided for herein, as well as any requirement that at any time any
action be taken by any Person against the Borrower or any other Guarantor or
any other Person.
SECTION 9.5. Subrogation and Contribution. Each Guarantor
irrevocably waives any and all rights to which it may be entitled, by operation
of law or otherwise, upon making any payment hereunder (i) to be subrogated to
the rights of the payee against the Borrower with respect to such payment or
against any direct or indirect security therefor, or otherwise to be
reimbursed, indemnified or exonerated by or for the account of the Borrower in
respect thereof or (ii) to receive any payment, in the nature of contribution
or for any other reason, from any other Guarantor with respect to such payment.
SECTION 9.6. Stay of Acceleration. If acceleration of the
time for payment of any amount payable by any Obligor under the Loan Documents
is stayed upon insolvency, bankruptcy or reorganization of the Borrower, all
such amounts otherwise subject to acceleration under the terms of this
Agreement shall nonetheless be payable by each Guarantor hereunder forthwith on
demand by the Agent made at
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<PAGE> 109
the request of the requisite proportion of the Lenders specified in Article 6
of the Agreement.
SECTION 9.7. Limit of Liability. The obligations of each
Guarantor shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions
of any applicable state law.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (a) in the case of the Borrower or the Administrative Agent, at its
address, facsimile number or telex number set forth on the signature pages
hereof, (b) in the case of any Guarantor, in care of the Borrower, (c) in the
case of any Lender, at its address, facsimile number or telex number set forth
in its Administrative Questionnaire or (d) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Administrative Agent and the Borrower. Each
such notice, request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified in this
Section and the appropriate answerback is received, (ii) if given by facsimile
transmission, when transmitted to the facsimile number specified in this
Section and confirmation of receipt is received, (iii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iv) if given by any other means,
when delivered at the address specified in this Section; provided that notices
to the Administrative Agent or any Issuing Lender under Article 2 or Article 8
shall not be effective until received.
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<PAGE> 110
SECTION 10.2. No Waivers. No failure or delay by any Agent
or any Lender in exercising any right, power or privilege hereunder or under
any Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.3. Expenses; Indemnification. (a) The Borrower
shall pay (i) all out-of-pocket expenses of the Agents (including the
Syndication Agent referred to on the cover page hereof), including fees and
disbursements of special counsel for the Administrative Agent, in connection
with the preparation and administration of the Loan Documents, any waiver or
consent thereunder or any amendment thereof or any Default or alleged Default
thereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses
incurred by the Agents and each Lender, including (without duplication) the
fees and disbursements of outside counsel and the allocated cost of inside
counsel, in connection with such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agents and each
Lender, their respective affiliates and the respective directors, officers,
agents and employees of the foregoing (each an "Indemnitee") and hold each
Indemnitee harmless from and against any and all liabilities, losses, damages,
costs and expenses of any kind, including, without limitation, the reasonable
fees and disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of the Loan Documents or any actual or
proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall
have the right to be indemnified hereunder for such Indemnitee's own gross
negligence or willful misconduct.
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<PAGE> 111
SECTION 10.4. Sharing of Set-Offs. Each Lender agrees that
if it shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest due with respect to any Note held by it and any Letter of Credit
Liabilities which is greater than the proportion received by any other Lender
in respect of the aggregate amount of principal and interest due with respect
to any Note and Letter of Credit Liabilities held by such other Lender, the
Lender receiving such proportionately greater payment shall purchase such
participations in the Notes and Letter of Credit Liabilities held by the other
Lenders, and such other adjustments shall be made, as may be required so that
all such payments of principal and interest with respect to the Notes and
Letter of Credit Liabilities held by the Lenders shall be shared by the Lenders
pro rata; provided that nothing in this Section shall impair the right of any
Lender to exercise any right of set-off or counterclaim it may have and to
apply the amount subject to such exercise to the payment of indebtedness of any
Obligor other than its indebtedness hereunder. Each Obligor agrees, to the
fullest extent it may effectively do so under applicable law, that any holder
of a participation in a Note or Letter of Credit Liabilities, whether or not
acquired pursuant to the foregoing arrangements, may exercise rights of set-off
or counterclaim and other rights with respect to such participation as fully as
if such holder of a participation were a direct creditor of such Obligor in the
amount of such participation.
SECTION 10.5. Amendments and Waivers; Release of Collateral.
(a) Any provision of this Agreement or the Notes may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the
Borrower and the Required Lenders (and, if the rights or duties of the
Documentation Agent, the Administrative Agent or an Issuing Lender are affected
thereby, by such affected Agent or Issuing Lender, as relevant); provided that
no such amendment or waiver shall:
(i) unless signed by all the Lenders with a Term Commitment,
increase or decrease the Term Commitments
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<PAGE> 112
(except for a ratable decrease in all the Term Commitments), subject
any such Lender to any additional obligation, or postpone the date
fixed for the scheduled termination of any Term Commitment;
(ii) unless signed by all Lenders holding Term Loans, reduce
the principal of or rate of interest on any Term Loans, postpone the
date fixed for any scheduled payment of principal of or interest on
any Term Loans, or decrease the aggregate amount by which Term Loans
are required to be repaid on any date scheduled pursuant to Section
2.4(b) or postpone any date for such repayment;
(iii) unless signed by all Lenders with a Revolving
Commitment, increase or decrease any Revolving Commitment (except for
a ratable decrease in all the Revolving Commitments), subject any such
Lender to any additional obligation, postpone the date fixed for any
scheduled reduction or termination of any Revolving Commitment, reduce
the principal of or rate of interest on any Revolving Loan or the
amount to be reimbursed in respect of any Letter of Credit or any
interest thereon, extend any Letter of Credit expiry date beyond the
Maturity Date, or postpone the date fixed for scheduled payment of
principal of, and dates fixed for payment of interest on, any
Revolving Loan;
(iv) unless signed by all the Lenders, postpone the date fixed for
any payment of any fees hereunder or release any Guarantor from its
obligations hereunder;
(v) unless signed by the Swing Lender and each other Lender
affected thereby, increase the Swing Loan Commitment, postpone the
date fixed for the termination of the Swing Loan Commitment or
otherwise affect any of its rights or obligations hereunder; and
(vi) unless signed by all the Lenders, change the percentage
of the Commitments or of the aggregate unpaid principal amount of the
Notes and the Letter of Credit Liabilities, or the number of Lenders,
which
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<PAGE> 113
shall be required for the Lenders or any of them to take any action
under this Section or any other provision of this Agreement.
Any provision of the Collateral Documents may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by the relevant
Obligor or Obligors and the Administrative Agent with the consent of the
Required Lenders; provided that no such amendment or waiver shall, unless
signed by all the Lenders, effect or permit a release of all or substantially
all of the Collateral.
(b) Notwithstanding anything to the contrary in the
Collateral Documents, Collateral shall be released from the Lien of the
Collateral Documents from time to time as necessary to effect any sale or
pledge of assets permitted by the Loan Documents. The Administrative Agent
shall, at the sole expense of the Borrower, execute and deliver all release
documents reasonably requested to evidence any release pursuant to this
subsection (b).
SECTION 10.6. Successors and Assigns. (a) The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Borrower
may not assign or otherwise transfer any of its rights under this Agreement
without the prior written consent of all Lenders.
(b) Any Lender may at any time grant to one or more banks or
other institutions (each a "Participant") participating interests in its
Commitment or any or all of its Loans and Letter of Credit Liabilities. In the
event of any such grant by a Lender of a participating interest to a
Participant, whether or not upon notice to the Borrower and the Agents, such
Lender shall remain responsible for the performance of its obligations
hereunder, and the Borrower, the Issuing Lenders and the Agents shall continue
to deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement. Any agreement pursuant to which
any Lender may grant such a participating interest shall provide that such
Lender shall retain the sole right and responsibility to enforce the
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<PAGE> 114
obligations of the Borrower hereunder including, without limitation, the right
to approve any amendment, modification or waiver of any provision of this
Agreement; provided that such participation agreement may provide that such
Lender will not agree to any modification, amendment or waiver of this
Agreement described in clause (i), (ii), (iii) or (iv) of, or in the proviso in
the last sentence of, Section 10.5(a) without the consent of the Participant.
The Borrower agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Section 2.14 or Article
8 with respect to its participating interest. An assignment or other transfer
which is not permitted by subsection (c) or (d) below shall be given effect for
purposes of this Agreement only to the extent of a participating interest
granted in accordance with this subsection (b).
(c) Any Lender may at any time assign to one or more banks or
other institutions (each an "Assignee") all, or a pro rata part of all, of its
rights and obligations under this Agreement with respect to either:
(i) its outstanding Term Loans, or
(ii) its Revolving Commitment and outstanding Revolving Loans
and Letter of Credit Liabilities,
and such Assignee shall assume such rights and obligations, pursuant to an
Assignment and Assumption Agreement in substantially the form of Exhibit F
hereto executed by such Assignee and such transferor Lender, with (and subject
to) the subscribed consent of the Borrower and the Administrative Agent and, if
such assignment includes amounts pursuant to clause (ii) above, the Issuing
Lenders and Swing Lender, none of which consents shall be unreasonably withheld;
provided that:
(A) if an Assignee is an affiliate of such transferor Lender
or was a Lender immediately prior to such assignment, no such consent
of the Borrower shall be required; and
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<PAGE> 115
(B) if such transferor Lender (i) assigns a pro rata part
(but not all) of its Term Loans or (ii) assigns a pro rata part (but
not all) of its Revolving Commitment and outstanding Revolving Loans,
then (x) the aggregate outstanding principal amount of Term Loans (if
any) assigned to an Assignee shall be at least $5,000,000 and (y) the
portion of the transferor Lender's Revolving Commitment and
outstanding Revolving Loans (if any) assigned to an Assignee shall be
at least $5,000,000 (or if such Assignee was a Lender immediately
prior to such Assignment, the above amounts determined with reference
to the respective Term Loans, Revolving Commitment and Revolving
Loans, as applicable, of such Assignee after giving effect to such
assignment), and, after giving effect to such partial assignment, the
aggregate outstanding amount of Term Loans retained by the assigning
Lender shall be at least $5,000,000 and the portion of the Revolving
Commitment and outstanding Revolving Loans retained by the assigning
Lender shall be at least $5,000,000.
Upon execution and delivery of such instrument and payment by such Assignee to
such transferor Lender of an amount equal to the purchase price agreed between
such transferor Lender and such Assignee, such Assignee shall be a Lender party
to this Agreement and shall have all the rights and obligations of a Lender
with a Commitment as set forth in such instrument of assumption, and the
transferor Lender shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this subsection
(c), the transferor Lender, the Administrative Agent and the Borrower shall
make appropriate arrangements so that, if required, a new Note is issued to the
Assignee. In connection with any such assignment, the transferor Lender shall
pay to the Administrative Agent an administrative fee for processing such
assignment in the amount of $3,500. If the Assignee is not incorporated under
the laws of the United States of America or a state thereof, it shall deliver
to the Borrower and the Administrative Agent certification as to exemption
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<PAGE> 116
from deduction or withholding of any United States federal income taxes in
accordance with Section 8.4.
(d) Any Lender may at any time assign all or any portion of
its rights under this Agreement and its Note to a Federal Reserve Bank. No
such assignment shall release the transferor Lender from its obligations
hereunder.
(e) No Assignee, Participant or other transferee of any
Lender's rights shall be entitled to receive any greater payment under Section
8.3 or 8.4 than such Lender would have been entitled to receive with respect to
the rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.2, 8.3 or 8.4
requiring such Lender to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 10.7. Collateral. Each of the Lenders represents to
the Agents and each of the other Lenders that it in good faith is not relying
upon any "margin stock" (as defined in Regulation U) as collateral in the
extension or maintenance of the credit provided for in this Agreement.
SECTION 10.8. Governing Law; Submission to Jurisdiction.
This Agreement and each Note shall be governed by and construed in accordance
with the laws of the State of New York. Each Obligor hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each Obligor irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
SECTION 10.9. Counterparts; Integration; Effectiveness. This
Agreement may be signed in any number
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of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument. This
Agreement constitutes the entire agreement and understanding among the parties
hereto and supersedes any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof. This Agreement shall become
effective upon receipt by the Administrative Agent of counterparts hereof
signed by each of the parties hereto (or, in the case of any party as to which
an executed counterpart shall not have been received, receipt by the
Administrative Agent in form satisfactory to it of telegraphic, telex,
facsimile or other written confirmation from such party of execution of a
counterpart hereof by such party).
SECTION 10.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER,
THE AGENTS AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
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<PAGE> 118
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
EXIDE ELECTRONICS GROUP, INC.
By /s/ Marty R. Kittrell
----------------------------------
Name: Marty R. Kittrell
Title: Vice President
Address: 8609 Six Forks Road
Raleigh, NC 27615
Telex:
Facsimile: 919/870-3100
GUARANTORS
----------
EXIDE ELECTRONICS CORPORATION
By /s/ Marty R. Kittrell
----------------------------------
Name: Marty R. Kittrell
Title: Vice President
Address: 8609 Six Forks Road
Raleigh, NC 27615
Telex:
Facsimile: 919/870-3100
EXIDE ELECTRONICS INTERNATIONAL CORP.
By /s/ Marty R. Kittrell
----------------------------------
Name: Marty R. Kittrell
111
<PAGE> 119
Title: Vice President
Address: 8609 Six Forks Road
Raleigh, NC 27615
Telex:
Facsimile: 919/870-3100
INTERNATIONAL POWER MACHINES
CORPORATION
By /s/ Marty R. Kittrell
-----------------------------------
Name: Marty R. Kittrell
Title: Vice President - Finance
Address: 8609 Six Forks Road
Raleigh, NC 27615
Telex:
Facsimile: 919/870-3100
112
<PAGE> 120
DELTEC POWER SYSTEMS, INC.
By /s/ Marty R. Kittrell
----------------------------------
Name: Marty R. Kittrell
Title: Senior Vice President
Address: 8609 Six Forks Road
Raleigh, NC 27615
Telex:
Facsimile: 919/870-3100
LECTRO PRODUCTS, INC.
By /s/ Marty R. Kittrell
----------------------------------
Name: Marty R. Kittrell
Title: Vice President
Address: 8609 Six Forks Road
Raleigh, NC 27615
Telex:
Facsimile: 919/870-3100
113
<PAGE> 121
DATATRAX ACQUISITION CORPORATION
By /s/ Marty R. Kittrell
----------------------------------
Name: Marty R. Kittrell
Title: Vice President
Address: 8609 Six Forks Road
Raleigh, NC 27615
Telex:
Facsimile: 919/870-3100
EXIDE ELECTRONICS USA HOLDINGS CORP.
By /s/ Marty R. Kittrell
----------------------------------
Name: Marty R. Kittrell
Title: Vice President
Address: 8609 Six Forks Road
Raleigh, NC 27615
Telex:
Facsimile: 919/870-3100
DELTEC ELECTRONICS CORP.
By /s/ Marty R. Kittrell
----------------------------------
Name: Marty R. Kittrell
Title: Senior Vice President
Address: 8609 Six Forks Road
Raleigh, NC 27615
Telex:
Facsimile: 919/870-3100
114
<PAGE> 122
LORTEC POWER SYSTEMS, INC.
By /s/ Marty R. Kittrell
----------------------------------
Name: Marty R. Kittrell
Title: Senior Vice President
Address: 8609 Six Forks Road
Raleigh, NC 27615
Telex:
Facsimile: 919/870-3100
115
<PAGE> 123
<TABLE>
<CAPTION>
TERM REVOLVING
COMMITMENTS COMMITMENTS LENDERS
- ----------- ----------- -------
<S> <C> <C>
$13,333,333 $33,333,334 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Douglas A. Cruikshank
-----------------------------
Name: Douglas A. Cruikshank
Title: Vice President
$12,222,222 $30,555,556 FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By /s/ T.M. Molitor
-----------------------------
Name: T.M. Molitor
Title: Vice President
$11,111,111 $27,777,778 BANK OF AMERICA ILLINOIS
By /s/ Michael J. McKenney
-----------------------------
Name: Michael J. McKenney
Title: Vice President
$ 6,666,667 $16,666,666 NATIONSBANK, N.A.
By /s/ Richard G. Parkhurst
-----------------------------
Name: Richard G. Parkhurst
Title: Vice President
</TABLE>
116
<PAGE> 124
<TABLE>
<S> <C> <C>
$ 6,666,667 $16,666,666 ABN AMRO BANK, N.V.
By /s/ Larry Kelley
-------------------------------
Name: Larry Kelley
Title: Group Vice President
By /s/ Steven Hipsman
-------------------------------
Name: Steven Hipsman
Title: Vice President
TOTAL TERM TOTAL REVOLVING
COMMITMENTS COMMITMENTS
- ----------- ---------------
$50,000,000 $125,000,000
============================
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as
Administrative Agent
By /s/ Douglas A. Cruikshank
-------------------------------
Name: Douglas A. Cruikshank
Title: Vice President
Address: 60 Wall Street
New York, NY 10260
Telex: TRT 177615
Answerback 177615 MGT UT
Facsimile: 212/648-5536
BANK OF AMERICA ILLINOIS,
as Documentation Agent
</TABLE>
117
<PAGE> 125
By /s/ Michael J. McKenney
---------------------------------
Name: Michael J. McKenney
Title: Vice President
Address: 231 South LaSalle Street
Chicago, Illinois 60697
Telex: 25-34-12 CONTL-BK-CGO
Facsimile: 312/974-9626
118
<PAGE> 126
PRICING SCHEDULE
Each of "Euro-Dollar Margin", "Base Rate Margin", "Letter of
Credit Fee Rate" and "Commitment Fee Rate" means, for any date, the rates set
forth below in the row opposite such term and in the column corresponding to
the "Pricing Level" that applies at such date:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Level I Level II Level III Level IV Level V Level VI
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Euro-Dollar
Margin 0.75% 1.00% 1.50% 2.00% 2.25% 2.50%
- -----------------------------------------------------------------------------------------------------------------
Letter of Credit Fee
Rate 0.75% 1.00% 1.50% 2.00% 2.25% 2.50%
- -----------------------------------------------------------------------------------------------------------------
Base Rate
Margin 0% 0% 0.50% 1.00% 1.25% 1.50%
- -----------------------------------------------------------------------------------------------------------------
Commitment Fee
Rate 0.25% 0.375% 0.375% 0.375% 0.50% 0.50%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes of this Schedule, the following terms have the
following meanings:
"Applicable Leverage Ratio" means, for any day, the Leverage Ratio
as at the last day of the Fiscal Quarter of the Borrower most recently ended
prior to such date for which the Borrower has delivered financial statements
pursuant to Section 5.1(a) or 5.1(b), as the case may be; provided that if the
Borrower shall fail to timely deliver the financial statements required to be
delivered by it pursuant to Section 5.1(a) or 5.1(b), as the case may be, the
Applicable Leverage Ratio for each date from and including the date on which
such statements are required to be delivered to but excluding the date on which
such statements are delivered shall be deemed to be greater than 4.0.
"Level I Pricing" applies at any date if the Applicable Leverage
Ratio for such date is less than 2.0.
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"Level II Pricing" applies at any date if the Applicable Leverage
Ratio for such date is greater than or equal to 2.0 and less than 2.5.
"Level III Pricing" applies at any date if the Applicable Leverage
Ratio for such date is greater than or equal to 2.5 and less than 3.0.
"Level IV Pricing" applies at any date if the Applicable Leverage
Ratio for such date is greater or equal to 3.0 and less than 3.5.
"Level V Pricing" applies at any date if the Applicable Leverage
Ratio for such date is greater than or equal to 3.5 and less than 4.0.
"Level VI Pricing" applies at any date if the Applicable Leverage
Ratio for such date is greater than or equal to 4.0.
"Pricing Level" refers to the determination of which of Level I,
Level II, Level III, Level IV, Level V or Level VI Pricing applies at any date.
120
<PAGE> 128
SCHEDULE 1:
EXISTING LETTERS OF CREDIT
<TABLE>
<CAPTION>
====================================================================================
ISSUING LENDER ORIGINAL MATURITY AMOUNT
ISSUE DATE DATE
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
First Union National Bank 5/25/95 6/1/96 $230,999
of North Carolina
("FUNB")
- ------------------------------------------------------------------------------------
FUNB 5/25/95 6/1/96 $ 69,001
- ------------------------------------------------------------------------------------
FUNB 5/24/93 9/1/97 $ 49,652
- ------------------------------------------------------------------------------------
FUNB 7/8/92 6/26/96 $ 32,400
====================================================================================
</TABLE>
121
<PAGE> 129
SCHEDULE 4.5:
LITIGATION
On August 21, 1995, a case entitled National Broadcasting Company, Inc. and
CNBC, Inc. vs. International Power Machine/LorTec Systems, Inc. et al, as filed
in the Supreme Court of New York, New York County. The plaintiffs allege that
International Power Machines Corporation ("IPM") negligently manufactured and
installed an uninterruptible power supply product that caused them property and
compensatory damages when the equipment malfunctioned during the installation
of the product by third-party contractors. The plaintiffs included seven
causes of action, each of which seeks damages in the amount of $1.1 million.
Three of those causes of action also seek $3.0 million in punitive damages.
Claims of this nature are generally covered by the Borrower's insurance and its
insurer has accepted general defense of the matter. The insurer has notified
the Borrower that while claims based on IPM's negligent manufacture or design
are covered by the insurance policy, damages, if any, caused by IPM's
intentional or careless decision to install a known defective and dangerous
product would be subject to certain exclusions under the policy. While
discovery is at an early stage, the Borrower believes at this time, based on
the advise of its defense counsel, that no evidence has yet been presented that
supports any allegation of intentional or careless conduct. IPM also believes
that is has meritorious defenses and counter-claims against the third-party
co-defendants who IPM alleges defectively installed the product. The Borrower
believes that the final outcome of this matter will not have a material adverse
effect on the business or the financial position of the Borrower and its
subsidiaries taken as a whole.
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<PAGE> 130
SCHEDULE 5.10:
EXISTING DEBT OF THE BORROWER AND THE GUARANTORS
1. Revolving Credit Facility for up to FF 25,000,000 made to Exide Electronics
S.A. by ABN-AMRO Bank N.V., guaranteed by Exide Electronics Corporation.
2. Working Capital Loan for DEM 2,000,000, made to Exide Electronics
International G.m.b.H. by NBD Bank, guaranteed by Exide Electronics
Corporation.
3. Revolving Credit Facility for up to BP 3,350,000, made to MPL Powerware
Systems Limited by NationsBank, N.A., guaranteed by Exide Electronics Group,
Inc., Exide Electronics Corporation and Exide Electronics International Corp.
4. Revolving Credit Facility made to Exide Electronics Canada Inc. by Bank of
Montreal for $2,500,000, guaranteed by Exide Electronics Group, Inc.
5. Promissory Note from Exide Electronics Group, Inc., to MasTec, Inc. in the
original principal amount of $450,000.
6. Equipment Loan from Associates Commercial Corporation to Lectro Products,
Inc. in the original principal amount of $393,448.86.
7. Tekes government loan to FPS Power Systems Oy Ab granted as support for
research and development projects in the original principal amount of 5,500,000
Finnish Marks.
123
<PAGE> 131
EXHIBITS
124
<PAGE> 132
EXHIBIT A
NOTE
New York, New York
___________ __, 199_
For value received, EXIDE ELECTRONICS GROUP, INC., a Delaware
corporation (the "Borrower"), promises to pay to the order of
______________________ (the "Lender"), for the account of its Applicable
Lending Office, the unpaid principal amount of each Loan made by the Lender to
the Borrower pursuant to the Credit Agreement referred to below on the maturity
date and from time to time on earlier repayment dates referred to in the Credit
Agreement. The Borrower promises to pay interest on the unpaid principal
amount of each such Loan on the dates and at the rate or rates provided for in
the Credit Agreement. All such payments of principal and interest shall be
made in lawful money of the United States in Federal or other immediately
available funds at the office of Morgan Guaranty Trust Company of New York, 60
Wall Street, New York, New York.
All Loans made by the Lender, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Lender and, if the Lender so elects in connection with any transfer or
enforcement hereof, appropriate notations to evidence the foregoing information
with respect to each such Loan then outstanding may be endorsed by the Lender
on the schedule attached hereto, or on a continuation of such schedule attached
to and made a part hereof; provided that the failure of the Lender to make any
such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
<PAGE> 133
This note is one of the Notes referred to in the Credit Agreement
dated as of March 13, 1996 among the Borrower, the Guarantors party thereto,
the lenders listed on the signature pages thereof, the issuing lenders party
thereto, Morgan Guaranty Trust Company of New York, as Administrative Agent and
Bank of America Illinois, as Documentation Agent (as the same may be amended
from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the acceleration
of the maturity hereof.
The payment in full of the principal and interest on this note has,
pursuant to the provisions of the Credit Agreement, been unconditionally
guaranteed by the Guarantors referred to therein.
EXIDE ELECTRONICS GROUP,
INC.
By
----------------------
Name:
Title:
2
<PAGE> 134
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------
Amount Type Amount of
of of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
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3
<PAGE> 135
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
4
<PAGE> 136
EXHIBIT B
SECURITY AGREEMENT
<PAGE> 137
EXECUTION COPY
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of March 13, 1996 between EXIDE
ELECTRONICS GROUP, INC., a Delaware corporation (together with its successors,
"Borrower"), each of the "Guarantors" listed on the signature pages hereof and
each Person that shall, at any time after the date hereof, become a "Guarantor"
and a party hereto pursuant to Section 5.17 of the Credit Agreement referred to
below (together with their respective successors, the "Guarantors", and
together with the Borrower, the "Obligors"), and MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent for the Lenders referred to below.
W I T N E S S E T H :
WHEREAS, (i) the Borrower, the other Obligors, certain lenders
(including any such Lender in its capacity as Issuing Lender, as defined
therein, the "Lenders"), Bank of America Illinois, as documentation agent for
such Lenders and Morgan Guaranty Trust Company of New York, as administrative
agent for such Lenders (the "Agents"), are parties to a Credit Agreement of
even date herewith (as the same may be amended from time to time, the "Credit
Agreement"); and
WHEREAS, in order to induce the Lenders, and the Agents to
enter into the Credit Agreement, each Obligor has agreed to grant a continuing
security interest in and to the Collateral (as hereafter defined) to secure its
obligations under the Loan Documents referred to in the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions
Terms defined in the Credit Agreement and not otherwise
defined herein have, as used herein, the respective meanings provided for
therein. The following
<PAGE> 138
additional terms, as used herein, have the following respective meanings:
"Accounts" means all "accounts" (as defined in the UCC) now
owned or hereafter acquired by any Obligor, and shall also mean and include all
accounts receivable, contract rights, book debts, notes, drafts and other
obligations or indebtedness owing to any Obligor arising from the sale, lease
or exchange of goods or other property by it and/or the performance of services
by it (including any such obligation which might be characterized as an
account, contract right or general intangible under the Uniform Commercial Code
in effect in any jurisdiction) and all rights of any Obligor in, to and under
all purchase orders for goods, services or other property, and all rights of
any Obligor to any goods, services or other property represented by any of the
foregoing (including returned or repossessed goods and unpaid sellers' rights
of rescission, replevin, reclamation and rights to stoppage in transit) and all
monies due to or to become due to any Obligor under all contracts for the sale,
lease or exchange of goods or other property and/or the performance of services
by it (whether or not yet earned by performance on the part of such Obligor),
in each case whether now in existence or hereafter arising or acquired
including, without limitation, the right to receive the proceeds of said
purchase orders and contracts and all collateral security and guarantees of any
kind given by any Person with respect to any of the foregoing.
"Collateral" has the meaning set forth in Section 3.
"Collateral Accounts" has the meaning set forth in Section
5(A).
"Collateral Account Period" has the meaning set forth in
Section 5(A).
"Documents" means all "documents" (as defined in the UCC) or
other receipts covering, evidencing or representing goods, now owned or
hereafter acquired by any Obligor, only to the extent such documents relate to
Accounts, Inventory and General Intangibles.
"General Intangibles" means all "general intangibles" (as
defined in the UCC) now owned or hereafter acquired by any Obligor, including
(i) all obligations or indebtedness owing to such Obligor (other than Accounts)
from whatever source arising, (ii) all rights or claims in respect of refunds
for taxes paid and (iii) all rights in
2
<PAGE> 139
respect of any pension plan or similar arrangement maintained for employees of
any member of the ERISA Group; provided, however, that General Intangibles
shall not include any patents or copyrights.
"Hedging Obligations" means all obligations of the Borrower to
any Lender or any Affiliate of a Lender under (i) any interest rate swap
agreement, interest rate cap agreement or interest rate collar agreement, (ii)
any foreign exchange contract or currency swap agreement or (iii) any similar
agreement or arrangement of a type designed to protect the Borrower against
fluctuations in interest rates or currency exchange rates.
"Instruments" means all "instruments", "chattel paper" or
"letters of credit" (each as defined in the UCC), including those evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts, including (but not
limited to) promissory notes, drafts, bills of exchange and trade acceptances,
now owned or hereafter acquired by any Obligor.
"Inventory" means all "inventory" (as defined in the UCC), now
owned or hereafter acquired by any Obligor, wherever located, and shall also
mean and include all raw materials and other materials and supplies,
work-in-process and finished goods and any products made or processed therefrom
and all substances, if any, commingled therewith or added thereto.
"Liquid Investments" has the meaning set forth in Section
5(D).
"Perfection Certificate" means, with respect to any Obligor, a
certificate substantially in the form of Exhibit A, completed and supplemented
with the schedules and attachments contemplated thereby to the satisfaction of
the Administrative Agent, and duly executed by the chief executive officer and
the chief legal officer of such Obligor.
"Permitted Liens" means the Security Interests and the Liens
on the Collateral permitted to be created, to be assumed or to exist pursuant
to Section 5.9 of the Credit Agreement.
"Proceeds" means all proceeds of, and all other profits,
products, rents or receipts, in whatever form, arising from the collection,
sale, lease, exchange, assignment, licensing or other disposition of, or other
3
<PAGE> 140
realization upon, collateral, including all claims of any Obligor against third
parties for loss of, damage to or destruction of, or for proceeds payable
under, or unearned premiums with respect to, policies of insurance in respect
of, any collateral, and any condemnation or requisition payments with respect
to any collateral, in each case whether now existing or hereafter arising.
"Secured Obligations" means the obligations secured under this
Agreement which include: (a) with respect to the Borrower, (i) all principal
of and interest (including any interest which accrues after the commencement of
any case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Borrower whether or not allowed or allowable as a claim
in any such proceeding) on any loan under, or any note issued pursuant to, the
Credit Agreement, (ii) all other amounts payable by the Borrower hereunder or
under any other Loan Document, (iii) all other obligations of the Borrower
hereunder and the other Loan Documents, (iv) any Hedging Obligations and (v)
any amendments, restatements, renewals, extensions or modifications of any of
the foregoing; and (b) with respect to each other Obligor, (i) all obligations
of such Obligor under the Credit Agreement (including without limitation,
Article 9 thereof) and under any other Loan Document and (ii) any amendments,
restatements, renewals, extensions or modifications of any of the foregoing.
"Secured Parties" means the Agents, the Lenders (including
without limitation with respect to any Hedging Obligations owed to such
Lenders), and any Affiliate of any Lender to which Hedging Obligations are
owed.
"Security Interests" means the security interests in the
Collateral granted hereunder securing the Secured Obligations.
"UCC" means the Uniform Commercial Code as in effect on the
date hereof in the State of New York; provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the Security Interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York, "UCC" means
the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection.
4
<PAGE> 141
SECTION 2. Representations and Warranties
Each Obligor represents and warrants as follows:
(A) Such Obligor has good and marketable title to all of its
Collateral, free and clear of any Liens other than the Permitted Liens. Such
Obligor has taken all actions necessary under the UCC to perfect its interest
in any Accounts purchased or otherwise acquired by it, as against its assignors
and creditors of its assignors.
(B) Such Obligor has not performed any acts which might
prevent the Administrative Agent from enforcing any of the terms of this
Agreement or which would limit the Administrative Agent in any such
enforcement. Other than financing statements or other similar or equivalent
documents or instruments with respect to the Security Interests and Permitted
Liens, no financing statement, mortgage, security agreement or similar or
equivalent document or instrument covering all or any part of its Collateral is
on file or of record in any jurisdiction in which such filing or recording
would be effective to perfect a Lien on such Collateral. No Collateral is in
the possession of any Person (other than an Obligor) asserting any claim
thereto or security interest therein, except that the Administrative Agent or
its designee may have possession of Collateral as contemplated hereby.
(C) The information set forth in the Perfection Certificate
delivered to the Administrative Agent prior to the Closing Date is correct and
complete after giving effect to the consummation of the Acquisition. Not later
than 30 days following the Closing Date, such Obligor shall furnish to the
Administrative Agent file search reports from each UCC filing office set forth
in Schedule 7 to the Perfection Certificate confirming the filing information
set forth in such Schedule.
(D) The Security Interests constitute valid security
interests under the UCC securing the Secured Obligations. When UCC financing
statements in the form specified in Exhibit A shall have been filed in the
offices specified in the Perfection Certificate, the Security Interests shall
constitute perfected security interests in the Collateral (except Inventory in
transit) to the extent that a security interest therein may be perfected by
filing pursuant to the UCC, prior to all other Liens and rights of others
therein except for the Permitted Liens existing on and as of the Closing Date.
5
<PAGE> 142
(E) The Inventory is insured in accordance with the
requirements of the Credit Agreement.
(F) All Inventory has or will have been produced in
compliance with the applicable requirements of the Fair Labor Standards Act, as
amended.
SECTION 3. The Security Interests
(A) In order to secure the full and punctual payment and
performance of the Secured Obligations in accordance with the terms thereof,
each Obligor hereby grants to the Administrative Agent for the ratable benefit
of the Secured Parties a continuing security interest in and to all of the
following property of such Obligor, whether now owned or existing or hereafter
acquired or arising and regardless of where located (all being collectively
referred to as the "Collateral"):
(1) Accounts;
(2) Inventory;
(3) General Intangibles;
(4) Documents;
(5) Instruments;
(6) The Collateral Account of such Obligor, all cash deposited
therein from time to time, the Liquid Investments made pursuant to
Section 5(D) and other monies and property of any kind of such Obligor
in the possession or under the control of the Administrative Agent;
(7) All books and records (including customer lists, credit
files, computer programs, printouts and other computer materials and
records) of such Obligor pertaining to any of the Collateral; and
(8) All Proceeds of all or any of the Collateral described in
Clauses 1 through 7 hereof.
(B) The Security Interests are granted as security only and
shall not subject any Secured Party to, or transfer or in any way affect or
modify, any obligation or liability of any Obligor with respect to any of the
Collateral or any transaction in connection therewith.
6
<PAGE> 143
SECTION 4. Further Assurances; Covenants
(A) None of the Obligors will change its name, identity or
structure in any manner unless it shall have given the Administrative Agent
prior notice thereof and delivered an opinion of counsel with respect thereto
in accordance with Section 4(L). None of the Obligors will change the location
of (i) its chief executive office or chief place of business or (ii) the
locations where it keeps or holds any Collateral or any records relating
thereto from the applicable location described in the Perfection Certificate
unless it shall have given the Administrative Agent prior notice thereof and
delivered an opinion of counsel with respect thereto in accordance with Section
4(L). None of the Obligors shall in any event change the location of any
Collateral if such change would cause the Security Interests in such Collateral
to lapse or cease to be perfected.
(B) Each Obligor will, from time to time, at its expense,
execute, deliver, file and record any statement, assignment, instrument,
document, agreement or other paper and take any other action (including any
filings of financing or continuation statements under the UCC) that from time
to time may be necessary or desirable, or that the Administrative Agent may
request, in order to create, preserve, perfect, confirm or validate the
Security Interests or to enable the Secured Parties to obtain the full benefits
of this Agreement, or to enable the Administrative Agent to exercise and
enforce any of its rights, powers and remedies hereunder with respect to any of
the Collateral. To the extent permitted by applicable law, each Obligor hereby
authorizes the Administrative Agent, and appoints the Administrative Agent as
its true and lawful attorney (with full power of substitution, in the name of
such Obligor, the Secured Parties or otherwise, for the sole use and benefit of
the Secured Parties), to execute and file financing statements or continuation
statements without such Obligor's signature appearing thereon. Each Obligor
agrees that a carbon, photographic, photostatic or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement.
Each Obligor shall pay the costs of, or incidental to, any recording or filing
of any financing or continuation statements concerning the Collateral.
(C) If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any agents or processors of any Obligor,
such Obligor shall notify such warehouseman, bailee, agent or processor of the
Security Interests created hereby and to hold all such
7
<PAGE> 144
Collateral for the Administrative Agent's account subject to the Administrative
Agent's instructions.
(D) Each Obligor shall keep full and accurate books and
records relating to the Collateral, and stamp or otherwise mark such books and
records in such manner as the Required Lenders may reasonably require in order
to reflect the Security Interests.
(E) Each Obligor will immediately deliver and pledge each
Instrument to the Administrative Agent, appropriately endorsed to the
Administrative Agent, provided that so long as no Event of Default shall have
occurred and be continuing, such Obligor may retain for collection in the
ordinary course any Instruments (other than checks and drafts constituting
payments in respect of Accounts, as to which the provisions of Section 5(B)
shall apply) received by it in the ordinary course of business and the
Administrative Agent shall, promptly upon request of such Obligor, make
appropriate arrangements for making any other Instrument pledged by such
Obligor available to it for purposes of presentation, collection or renewal
(any such arrangement to be effected, to the extent deemed appropriate to the
Administrative Agent, against trust receipt or like document).
(F) Each Obligor shall use its best efforts to cause to be
collected from its account debtors, as and when due, any and all amounts owing
under or on account of each Account (including Accounts which are delinquent,
such Accounts to be collected in accordance with lawful collection procedures)
and shall apply forthwith upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Account. Subject to the rights of
the Secured Parties hereunder upon the occurrence and during the continuance of
an Event of Default, each Obligor may allow in the ordinary course of business
as adjustments to amounts owing under its Accounts (i) an extension or renewal
of the time or times of payment, or settlement for less than the total unpaid
balance, which such Obligor finds appropriate in accordance with sound business
judgment and (ii) a refund or credit due as a result of returned or damaged
merchandise or as a discount for prompt payment or as an allowance for
cooperative advertising or other promotion, all in accordance with such
Obligor's ordinary course of business consistent with its historical collection
practices. The costs and expenses (including attorney's fees) of collection,
whether incurred by such Obligor or the Administrative Agent, shall be borne by
such Obligor.
8
<PAGE> 145
(G) Upon the occurrence and during the continuance of any
Event of Default, upon request of the Required Lenders through the
Administrative Agent, each Obligor will promptly notify (and such Obligor
hereby authorizes the Administrative Agent so to notify) each account debtor in
respect of any Account or Instrument that such Collateral has been assigned to
the Administrative Agent hereunder, and that any payments due or to become due
in respect of such Collateral are to be made directly to the Administrative
Agent or its designee.
(H) Except as permitted under the Credit Agreement, no
Obligor will sell, lease, exchange, assign or otherwise dispose of, or grant
any option with respect to, any Collateral.
(I) Each Obligor will, promptly upon request, provide to the
Administrative Agent all information and evidence it may reasonably request
concerning the Collateral to enable the Administrative Agent to enforce the
provisions of this Agreement.
(J) Not more than six months nor less than 30 days prior to
each date on which any Obligor proposes to take any action contemplated by
Section 4(A), such Obligor shall give notice to the Administrative Agent of
such proposed action, and, at such Obligor's cost and expense, cause to be
delivered to the Secured Parties with such notice, an opinion of counsel,
satisfactory to the Administrative Agent and substantially in the form of
Exhibit B to the effect that all financing statements and amendments or
supplements thereto, continuation statements and other documents required to be
recorded or filed in order to perfect and protect the Security Interests for a
period (and after giving effect to the proposed action that is the subject of
such notice), specified in such opinion, continuing until a date not earlier
than eighteen months from the date of such opinion, against all creditors of
and purchasers from such Obligor have been filed in each filing office
necessary for such purpose and that all filing fees and taxes, if any, payable
in connection with such filings have been paid in full.
(K) From time to time upon request by the Administrative
Agent, each Obligor shall, at its cost and expense, cause to be delivered to
the Secured Parties an opinion of counsel satisfactory to the Administrative
Agent as to such matters relating to the transactions contemplated hereby as
the Required Lenders may reasonably request.
9
<PAGE> 146
SECTION 5. Collateral Account
(A) Upon an Event of Default and upon notice of the
Administrative Agent, given at the direction of the Required Lenders, and at
all times thereafter until such notice may be revoked at the direction of the
Required Lenders (any such period, a "Collateral Account Period"), the Obligors
will establish with the Administrative Agent a cash collateral account (the
"Collateral Account") in the name and under the control of the Administrative
Agent into which there shall be deposited from time to time the cash proceeds
of the Collateral required to be delivered to the Administrative Agent pursuant
to subsection (B) of this Section 5 or any other provision of this Agreement.
Any income received by the Administrative Agent with respect to the balance
from time to time standing to the credit of the Collateral Account, including
any interest or capital gains on Liquid Investments, shall remain, or be
deposited, in the Collateral Account. All right, title and interest in and to
the cash amounts on deposit from time to time in the Collateral Account
together with any Liquid Investments from time to time made pursuant to
subsection (D) of this Section shall vest in the Administrative Agent, shall
constitute part of the Collateral hereunder and shall not constitute payment of
the Secured Obligations until applied thereto as hereinafter provided.
(B) At the time the Collateral Account is established and
during any Collateral Account Period, the Borrower or such other Obligor as
appropriate shall instruct all account debtors and other Persons obligated in
respect of all Accounts to make all payments in respect of the Accounts either
(i) directly to the Administrative Agent (by instructing that such payments be
remitted to a post office box which shall be in the name and under the control
of the Administrative Agent) or (ii) to one or more other banks in any state
(other than Louisiana) in the United States (by instructing that such payments
be remitted to a post office box which shall be in the name and under the
control of such bank) under a Lockbox Letter substantially in the form of
Exhibit C hereto duly executed by the Borrower and such bank or under other
arrangements, in form and substance satisfactory to the Administrative Agent,
pursuant to which the Borrower shall have irrevocably instructed such other
bank (and such other bank shall have agreed) to remit all proceeds of such
payments directly to the Administrative Agent for deposit into the Collateral
Account or as the Administrative Agent may otherwise instruct such bank. All
such payments made to the Administrative Agent shall be deposited in the
Collateral Account. In addition to the foregoing, the Borrower agrees that if,
during any
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<PAGE> 147
Collateral Account Period, the proceeds of any Collateral hereunder (including
the payments made in respect of Accounts) shall be received by it, the Borrower
shall as promptly as possible deposit such proceeds into the Collateral
Account. Until so deposited, all such proceeds received during any Collateral
Account Period shall be held in trust by the Borrower for and as the property
of the Administrative Agent and the Lenders and shall not be commingled with
any other funds or property of the Borrower.
(C) Upon the occurrence and continuation of an Event of
Default, the Administrative Agent shall, if so instructed by the Required
Lenders, apply or cause to be applied (subject to collection) any or all of the
balance from time to time standing to the credit of the Collateral Account in
the manner specified in Section 9.
(D) Amounts on deposit in the Collateral Accounts shall be
invested and re-invested from time to time in such Liquid Investments as
Borrower shall determine, which Liquid Investments shall be held in the name
and be under the control of the Administrative Agent; provided that, if an
Event of Default has occurred and is continuing, the Administrative Agent
shall, if instructed by the Required Lenders, cause such Liquid Investments to
be liquidated and apply or cause to be applied the proceeds thereof to the
payment of the Secured Obligations in the manner specified in Section 9. For
this purpose, "Liquid Investments" means Temporary Cash Investments; provided
that (i) each Liquid Investment shall mature within 30 days after it is
acquired by the Administrative Agent and (ii) in order to provide the
Administrative Agent, for the benefit of the Secured Parties, with a perfected
security interest therein, each Liquid Investment shall be either:
(i) evidenced by negotiable certificates or instruments, or
if non-negotiable then issued in the name of the Administrative Agent,
which (together with any appropriate instruments of transfer) are
delivered to, and held by, the Administrative Agent or an agent
thereof (which shall not be any Obligor or any of its Affiliates) in
the State of New York; or
(ii) in book-entry form and issued by the United States and
subject to pledge under applicable state law and Treasury regulations
and as to which (in the opinion of counsel to the Administrative
Agent) appropriate measures shall have been taken for perfection of
the Security Interests.
11
<PAGE> 148
SECTION 6. General Authority
Each Obligor hereby irrevocably appoints the Administrative
Agent its true and lawful attorney, with full power of substitution, in the
name of such Obligor, the Secured Parties or otherwise, for the sole use and
benefit of the Secured Parties, but at such Obligor's expense, to the extent
permitted by law to exercise, at any time and from time to time while an Event
of Default has occurred and is continuing, all or any of the following powers
with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due thereon or by virtue
thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof, as fully and effectually
as if the Administrative Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and
to make any allowance and other adjustments with reference thereto;
provided that the Administrative Agent shall give the relevant Obligor not less
than ten days' prior notice of the time and place of any sale or other intended
disposition of any of the Collateral, except any Collateral which is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market. Each Obligor agrees that such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 7. Remedies upon Event of Default
(A) If any Event of Default has occurred and is continuing,
the Administrative Agent may exercise on behalf of the Secured Parties all
rights of a secured party under the UCC (whether or not in effect in the
jurisdiction where such rights are exercised) and, in addition, the
Administrative Agent may, without being required to give any notice, except as
herein provided or as may be required by mandatory provisions of law, (i)
withdraw all cash and Liquid Investments in the Collateral Accounts and apply
such cash and Liquid Investments and other cash, if any, then
12
<PAGE> 149
held by it as Collateral as specified in Section 9 and (ii) if there shall be
no such cash or Liquid Investments or if such cash and Liquid Investments shall
be insufficient to pay all the Secured Obligations in full, sell the Collateral
or any part thereof at public or private sale, for cash, upon credit or for
future delivery, and at such price or prices as the Administrative Agent may
deem satisfactory. The Administrative Agent or any other Secured Party may be
the purchaser of any or all of the Collateral so sold at any public sale (or,
if the Collateral is of a type customarily sold in a recognized market or is of
a type which is the subject of widely distributed standard price quotations, at
any private sale). Each Obligor will execute and deliver such documents and
take such other action as the Administrative Agent deems necessary or advisable
in order that any such sale may be made in compliance with law. Upon any such
sale the Administrative Agent shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral so sold. Each purchaser at
any such sale shall hold the Collateral so sold to it absolutely and free from
any claim or right of whatsoever kind, including any equity or right of
redemption of any Obligor which may be waived, and each Obligor, to the extent
permitted by law, hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now existing or hereafter
adopted. The notice (if any) of such sale required by Section 6 shall (1) in
case of a public sale, state the time and place fixed for such sale, and (2) in
the case of a private sale, state the day after which such sale may be
consummated. Any such public sale shall be held at such time or times within
ordinary business hours and at such place or places as the Administrative Agent
may fix in the notice of such sale. At any such sale the Collateral may be
sold in one lot as an entirety or in separate parcels, as the Administrative
Agent may determine. The Administrative Agent shall not be obligated to make
any such sale pursuant to any such notice. The Administrative Agent may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Administrative Agent until the selling price is paid by the
purchaser thereof, but the Administrative Agent shall not incur any liability
in case of the failure of such purchaser to take up and pay for the Collateral
so sold and, in case of any such failure, such Collateral may again be sold
upon like notice. The Administrative Agent, instead of exercising the power of
sale herein conferred upon it, may
13
<PAGE> 150
proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
(B) For the purpose of enforcing any and all rights and
remedies under this Agreement the Administrative Agent may (i) require any
Obligor to, and each Obligor agrees that it will, at its expense and upon the
request of the Administrative Agent, forthwith assemble all or any part of the
Collateral as directed by the Administrative Agent and make it available at a
place designated by the Administrative Agent which is, in its opinion,
reasonably convenient to the Administrative Agent and such Obligor, whether at
the premises of such Obligor or otherwise, (ii) to the extent permitted by
applicable law, enter, with or without process of law and without breach of the
peace, any premise where any of the Collateral is or may be located, and
without charge or liability to it seize and remove such Collateral from such
premises, (iii) have access to and use such Obligor's books and records
relating to the Collateral and (iv) prior to the disposition of the Collateral,
store or transfer it without charge in or by means of any storage or
transportation facility owned or leased by such Obligor, process, repair or
recondition it or otherwise prepare it for disposition in any manner and to the
extent the Administrative Agent deems appropriate and, in connection with such
preparation and disposition, use without charge any trademark, trade name,
copyright, patent or technical process used by such Obligor. The
Administrative Agent may also render any or all of the Collateral unusable at
such Obligor's premises and may dispose of Collateral on such premises without
liability for rent or costs.
SECTION 8. Limitation on Duty of Administrative Agent
in Respect of Collateral
Beyond the exercise of reasonable care in the custody thereof,
the Administrative Agent shall have no duty as to any Collateral in its
possession or control or in the possession or control of any agent or bailee or
any income thereon or as to the preservation of rights against prior parties or
any other rights pertaining thereto. The Administrative Agent shall be deemed
to have exercised reasonable care in the custody of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which it accords its own property, and shall not be liable or responsible for
any loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or
14
<PAGE> 151
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by the Administrative Agent in good faith.
SECTION 9. Application of Proceeds
Upon the occurrence and during the continuance of an Event of
Default, the proceeds of any sale of, or other realization upon, all or any
part of the Collateral and any cash held in the Collateral Accounts of any
Obligor shall be applied by the Administrative Agent in the following order of
priorities:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel
for the Administrative Agent, and all expenses, liabilities and
advances incurred or made by the Administrative Agent in connection
therewith, and any other unreimbursed expenses for which the
Administrative Agent or any other Secured Party is to be reimbursed
pursuant to Section 10.3 of the Credit Agreement or Section 12 hereof
and unpaid fees owing to the Administrative Agent under the Credit
Agreement;
second, to the ratable payment of unpaid principal of the
Secured Obligations and of reimbursement obligations constituting
Secured Obligations;
third, to the ratable payment of all other Secured
Obligations, until all Secured Obligations shall have been paid in
full; and
finally, to payment to such Obligor or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
The Administrative Agent may make distributions hereunder in cash or in kind
or, on a ratable basis, in any combination thereof. In determining allocations
under this section, the amount of any Hedging Obligations shall be equal to the
amount of the unrealized net loss position owed to such Secured Party.
SECTION 10. Hedging Obligations
As a condition to accepting the benefits of this Agreement,
each Lender and each Affiliate thereof that is owed Hedging Obligations agrees
with each of the other
15
<PAGE> 152
Lenders, each Affiliate of a Lender that is owed Hedging Obligations and the
Administrative Agent that it will from time to time (i) provide such
information to the Administrative Agent to make any determination of the amount
of Secured Obligations held by such Lender or Affiliate thereof or otherwise as
requested by the Administrative Agent for any other purpose of the Loan
Documents and (ii) otherwise cooperate in taking action or enforcing rights
with respect to such Hedging Obligations and rights hereunder as may be
reasonably requested by the Administrative Agent at the direction of the
Required Lenders.
SECTION 11. Concerning the Administrative Agent
The provisions of Article 7 of the Credit Agreement shall
inure to the benefit of the Administrative Agent in respect of this Agreement
and shall be binding upon the parties to the Credit Agreement and to the
Subsidiary Guarantors in such respect, and are expressly incorporated herein as
though set forth in full. In furtherance and not in derogation of the rights,
privileges and immunities of the Administrative Agent therein set forth:
(A) The Administrative Agent is authorized to take all such
action as is provided to be taken by it as Administrative Agent hereunder and
all other action reasonably incidental thereto. As to any matters not
expressly provided for herein (including the timing and methods of realization
upon the Collateral) the Administrative Agent shall act or refrain from acting
in accordance with written instructions from the Required Lenders or, in the
absence of such instructions, in accordance with its discretion.
(B) The Administrative Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the validity,
perfection, priority or enforceability of the Security Interests in any of the
Collateral, whether impaired by operation of law or by reason of any action or
omission to act on its part hereunder. The Administrative Agent shall have no
duty to ascertain or inquire as to the performance or observance of any of the
terms of this Agreement by any Obligor
16
<PAGE> 153
SECTION 12. Appointment of Administrative Co-Agents
At any time or times, in order to comply with any legal
requirement in any jurisdiction, the Administrative Agent may appoint another
bank or trust company or one or more other persons, either to act as co-agent
or co-agents, jointly with the Administrative Agent, or to act as separate
agent or agents on behalf of the Secured Parties with such power and authority
as may be necessary for the effectual operation of the provisions hereof and
may be specified in the instrument of appointment (which may, in the discretion
of the Administrative Agent, include provisions for the protection of such
co-agent or separate agent similar to the provisions of Section 11).
SECTION 13. Expenses
In the event that any Obligor fails to comply with the
provisions of this Agreement or any other Loan Document, such that the value of
any Collateral or the validity, perfection, rank or value of any Security
Interest is thereby diminished or potentially diminished or put at risk, the
Administrative Agent if requested by the Required Lenders may, but shall not be
required to, effect such compliance on behalf of such Obligor, and such Obligor
shall reimburse the Administrative Agent for the costs thereof on demand. All
insurance expenses and all expenses of protecting, storing, warehousing,
appraising, insuring, handling, maintaining, and shipping the Collateral, any
and all excise, property, sales, and use taxes imposed by any state, federal,
or local authority on any of the Collateral, or in respect of periodic
appraisals and inspections of the Collateral to the extent the same may be
requested by the Required Lenders from time to time, or in respect of the sale
or other disposition thereof shall be borne and paid by such Obligor; and if
such Obligor fails to promptly pay any portion thereof when due, the
Administrative Agent or any other Secured Party may, at its option, but shall
not be required to, pay the same and charge such Obligor's account therefor,
and the Obligor agrees to reimburse the Administrative Agent or such other
Secured Party therefor on demand. All sums so paid or incurred by the
Administrative Agent or any other Secured Party for any of the foregoing and
any and all other sums for which such Obligor may become liable hereunder and
all costs and expenses (including attorneys' fees, legal expenses and court
costs (including the reasonable allocation of the compensation, costs and
expenses of in-house counsel, based upon time spent)) reasonably incurred by
the Administrative Agent or any other Secured Party in enforcing or protecting
the Security
17
<PAGE> 154
Interests or any of their rights or remedies under this Agreement, shall,
together with interest thereon until paid at the rate applicable to Base Rate
Loans on such day plus 2%, be additional Secured Obligations hereunder.
SECTION 14. Termination of Security
Interests; Release of Collateral
Upon the repayment in full of all Secured Obligations and the
termination of the Commitments under the Credit Agreement and provided that no
Letters of Credit or Hedging Obligations are outstanding, the Security
Interests shall terminate and all rights of each Obligor to the Collateral
shall revert to such Obligor. At any time and from time to time prior to such
termination of the Security Interests, the Administrative Agent may release any
or all of the Collateral, but only with the requisite consents specified
therefore in Section 10.5 of the Credit Agreement. Upon any such termination
of the Security Interests or release of Collateral, the Administrative Agent
will, at the expense of the Obligors, execute and deliver to the relevant
Obligor such documents as such Obligor shall reasonably request to evidence the
termination of the Security Interests or the release of such Collateral, as the
case may be.
SECTION 15. Notices
All notices, communications and distributions hereunder shall
be given in accordance with Section 10.1 of the Credit Agreement.
SECTION 16. Waivers, Non-Exclusive Remedies
No failure on the part of the Administrative Agent to
exercise, and no delay in exercising and no course of dealing with respect to,
any right under this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise by the Administrative Agent or any Secured Party of
any right under the Credit Agreement, any of the other Loan Documents or this
Agreement preclude any other or further exercise thereof or the exercise of any
other right. The rights in this Agreement, the Credit Agreement and the other
Loan Documents are cumulative and are not exclusive of any other remedies
provided by law.
18
<PAGE> 155
SECTION 17. Successors and Assigns
This Agreement is for the benefit of the Administrative Agent
and the Secured Parties and their successors and assigns, and in the event of
an assignment of all or any of the Secured Obligations, the rights hereunder,
to the extent applicable to the indebtedness so assigned, shall be transferred
with such indebtedness. This Agreement shall be binding on each Obligor and
its successors and assigns.
SECTION 18. Changes in Writing
Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only in writing signed by
the Obligors and the Administrative Agent with the consent of the Required
Lenders.
SECTION 19. NEW YORK LAW
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO PRINCIPLES
OR CONFLICTS OF LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF
LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY
JURISDICTION OTHER THAN NEW YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 20. Severability
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction
and shall be liberally construed in favor of the Administrative Agent and the
other Secured Parties in order to carry out the intentions of the parties
hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
19
<PAGE> 156
SECTION 21. Counterparts
This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
20
<PAGE> 157
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
EXIDE ELECTRONICS GROUP,
INC.
By
---------------------------
Title:
GUARANTORS
----------
EXIDE ELECTRONICS
INTERNATIONAL CORP.
By
---------------------------
Title:
DELTEC POWER SYSTEMS, INC.
By
---------------------------
Title:
EXIDE ELECTRONICS CORPORATION
By
--------------------------
Title:
LECTRO PRODUCTS, INC.
By
---------------------------
Title:
DATATRAX ACQUISITION
CORPORATION
By
--------------------------
Title:
21
<PAGE> 158
EXIDE ELECTRONICS USA HOLDINGS
CORP.
By
-----------------------------
Title:
DELTEC ELECTRONICS CORP.
By
-------------------------------
Title:
INTERNATIONAL POWER MACHINES CORPORATION
By
-------------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as
Administrative Agent
By
-------------------------------
Title:
22
<PAGE> 159
EXHIBIT A
PERFECTION CERTIFICATE*
The undersigned, [Chief executive officer] and [Chief legal
officer], of [OBLIGOR], a _________ ________ (the "Obligor") hereby certify,
with reference to the Security Agreement dated as of March 13, 1996 between the
Obligors, and Morgan Guaranty Trust Company of New York, as Administrative
Agent (terms defined therein being used herein as therein defined), to the
Agents and each Lender as follows:
1. Names. (a) The exact organizational name of the Obligor,
after giving effect to the consummation of the Acquisition, as it appears in
its certificate of formation is as follows:
(b) Set forth below is each other name the Obligor has had
since its organization, together with the date of the relevant change:
(c) The Obligor has not changed its identity or
organizational structure in any way within the past five years except for the
Acquisition.
(d) The following is a list of all other names (including
trade names or similar appellations) used by the Obligor or any of its
divisions or other business units at any time during the past five years:
__________________________________
* To be completed by each Obligor.
<PAGE> 160
2. Current Locations. (a) The chief executive office of the
Obligor is located at the following address:
Mailing Address County State
--------------- ------ -----
(b) The following are all the locations where the Obligor
maintains any books or records relating to any Accounts:
Mailing
Address County State
------- ------ -----
(c) The following are all the places of business of the
Obligor not identified above:
Mailing
Name Address County State
---- ------- ------ -----
(d) The following are all the locations where the Obligor
maintains any Inventory not identified above:
Mailing
Name Address County State
---- ------- ------ -----
(e) The following are the names and addresses of all Persons
other than the Obligor which have possession of any of the Obligor's Inventory:
Mailing
Name Address County State
---- ------- ------ -----
3. Prior Locations. (a) Set forth below is the information
required by subparagraphs (a), (b) and (c) of paragraph 2 with respect to each
location or place of
2
<PAGE> 161
business maintained by the Obligor at any time during the past five years:
(b) Set forth below is the information required by
subparagraphs (d) and (e) of paragraph 2 with respect to each location or
bailee where or with whom Inventory has been lodged at any time during the past
four months:
4. Unusual Transactions. All Accounts have been originated
by the Obligor and all Inventory has been acquired by the Obligor in the
ordinary course of its business.
5. File Search Reports. Attached hereto as Schedule 5(A) is
a true copy of a file search report from the Uniform Commercial Code filing
officer in each jurisdiction identified in paragraph 2 or 3 above with respect
to each name set forth in paragraph 1 above. Attached hereto as Schedule 5(B)
is a true copy of each financing statement or other filing identified in such
file search reports.
6. UCC Filings. A duly signed financing statement on Form
UCC-1 in substantially the form of Schedule 6(A) hereto has been duly filed in
the Uniform Commercial Code filing office in each jurisdiction identified in
paragraph 2 hereof. Attached hereto as Schedule 6(B) is a true copy of each
such filing duly acknowledged by the filing officer.
7. Schedule of Filings. Attached hereto as Schedule 7 is a
schedule setting forth filing information with respect to the filings described
in paragraph 6 above.
8. Filing Fees. All filing fees and taxes payable in
connection with the filings described in paragraph 6 above have been paid.
3
<PAGE> 162
IN WITNESS WHEREOF, we have hereunto set our hands this ____
day of March, 1995.
----------------------------
Title:
----------------------------
Title:
4
<PAGE> 163
SCHEDULE 6(A)
Description of Collateral
All accounts, chattel paper, contract rights, general
intangibles, inventory, and documents, now owned or hereafter acquired,
wherever located, and all proceeds thereof.
<PAGE> 164
SCHEDULE 7
SCHEDULE OF FILINGS
Debtor Filing Officer File Number Date of Filing*
- -----------
* Indicate lapse date, if other than fifth anniversary.
<PAGE> 165
EXHIBIT B
OPINION OF
COUNSEL TO THE OBLIGORS
* * * *
1. The Security Agreement creates valid security interests,
for the benefit of the Secured Parties, in each Obligor's right, title and
interest in its Collateral to the extent the UCC is applicable thereto (the
"Security Interest").
2. UCC financing statements and amendments thereto
(collectively, the "Financing Statements") have been filed in the filing
offices listed in Schedule 7 to the Perfection Certificate (the "Filing
Jurisdictions"), which are all of the offices in which filings are required to
perfect the Security Interest, to the extent the Security Interest may be
perfected by filing under the UCC, and no further filing or recording of any
document or instrument or other action will be required so to perfect the
Security Interest, except that (i) continuation statements with respect to each
Financing Statement must be filed within the respective time periods set forth
on Schedule 7 to the Perfection Certificate; (ii) additional filings may be
necessary if any Obligor changes its name, identity or structure or the
jurisdiction in which its places of business, its chief executive office or the
Collateral are located; and (iii) we express no opinion on the perfection of,
or need for further filing or recording to perfect, the Security Interest in
goods now or hereafter located in any jurisdiction other than the Filing
Jurisdictions.
3. There are
(i) no UCC financing statements which name any Obligor as
debtor or seller and cover any of the Collateral, other than the
Financing Statements, [and the financing statements with respect to
Permitted Liens annexed as Schedule 5(A) to the Perfection
Certificate], listed in the available records in the UCC filing
offices set forth in paragraphs 2 and 3 of the Perfection Certificate,
which include all of the offices prescribed under the UCC as the
offices in which filings should have been made to perfect security
interests in the Collateral; and
(ii) no notices of the filing of any federal tax lien (filed
pursuant to Section 6323 of the Internal Revenue Code) or any lien of
the Pension Benefit Guaranty Corporation (filed pursuant to Section
4068 of ERISA) covering any of the Collateral listed
<PAGE> 166
in the available records in the [UCC filing office in state of each
Obligor's chief executive office], which is the only office having
files which must be searched in order to fully determine the existence
of notices of the filing of federal tax liens (filed pursuant to
Section 6323 of the Internal Revenue Code) and liens of the Pension
Benefit Guaranty Corporation (filed pursuant to Section 4068 of ERISA)
on the Collateral.
4. The Security Interest validly secures the payment of all
future Loans made by the Lenders to the Borrowers, whether or not at the time
such Loans are made an Event of Default or other event not within the control
of the Lenders has relieved or may relieve the Lenders from their obligations
to make such Loans, and is perfected to the extent set forth in paragraph 2
above with respect to such future Loans. Insofar as the priority thereof is
governed by the UCC, the Security Interest has the same priority with respect
to such future Loans as it does with respect to Loans made on the date hereof.
2
<PAGE> 167
EXHIBIT C
[FORM OF LOCKBOX LETTER]
______ __, 19__
[Name and Address of Lockbox Bank]
Re: [Name of Borrower]
Gentlemen:
We hereby notify you that effective ___________, 19__, we have
transferred exclusive ownership and control of our lock-box account[s] No[s].
_________________ (the "Lockbox Account[s]") maintained with you under the
terms of the [Lockbox Agreement] attached hereto as Exhibit A (the "Lockbox
Account[s]") to Morgan Guaranty Trust Company of New York, as Administrative
Agent (the "Agent").
We hereby irrevocably instruct you to make all payments to be
made by you out of or in connection with the Lockbox Account[s] (i) to the
Agent for credit to account no. ___________ maintained by it at its office at
23 Wall Street, New York, New York 10015 or (ii) as you may otherwise be
instructed by the Agent.
We also hereby notify you that the Agent shall be irrevocably
entitled to exercise any and all rights in respect of or in connection with the
Lockbox Account[s], including, without limitation, the right to specify when
payments are to be made out of or in connection with the Lockbox Account[s].
All funds deposited into the Lockbox Account[s] will not be
subject to deductions, set-off, banker's lien or any other right in favor of
any other person than the Agent, except that you may set-off against the
Lockbox Account[s] the face amount of any check deposited in and credited to
such Lockbox Account[s] which is subsequently returned for any reason. Your
compensation for providing the services contemplated herein shall be as
mutually agreed between you and us from time to time and we will continue to
pay such compensation.
<PAGE> 168
Please confirm your acknowledgment of and agreement to the
foregoing instructions by signing in the space provided below.
Very truly yours,
[BORROWER]
By
---------------------------
Title:
Acknowledged and agreed
to as of this ____ day of
______, 19__.
[LOCKBOX BANK]
By
---------------------------
Title:
2
<PAGE> 169
EXHIBIT C
PLEDGE AGREEMENT
<PAGE> 170
EXECUTION COPY
PLEDGE AGREEMENT
AGREEMENT dated as of March 13, 1996 among EXIDE ELECTRONICS GROUP,
INC. ("Borrower"), EXIDE ELECTRONICS CORPORATION, EXIDE ELECTRONICS USA
HOLDINGS CORP., INTERNATIONAL POWER MACHINES CORPORATION, and DELTEC POWER
SYSTEMS, INC. (each together with its successors, a "Pledgor" and collectively
the "Pledgors") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent.
W I T N E S S E T H :
WHEREAS, Borrower, the Pledgors and the other Obligors referred to
therein, certain lenders (including any such Lender in its capacity as Issuing
Lender, as defined therein, the "Lenders"), Bank of America Illinois as
Documentation Agent for such Lenders and Morgan Guaranty Trust Company of New
York, as Administrative Agent for such Lenders (the "Agents") are parties to a
Credit Agreement of even date herewith (as the same may be amended from time to
time, the "Credit Agreement"); and
WHEREAS, in order to induce said Lenders and the Agents, to enter
into the Credit Agreement, each Pledgor has agreed to grant a continuing
security interest in and to the Collateral (as hereafter defined) to secure its
respective obligations under the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions
Terms defined in the Credit Agreement and not otherwise defined
herein have, as used herein, the respective meanings provided for therein. The
following
<PAGE> 171
additional terms, as used herein, have the following respective meanings:
"Collateral" has the meaning assigned to such term in Section 3(A).
"Issuers" means the companies identified on Schedule 1 as the issuers
of the Pledged Stock.
"Pledged Instruments" means (i) the Subsidiary Notes and (ii) any
instrument required to be pledged to the Administrative Agent pursuant to
Section 3(B).
"Pledged Securities" means the Pledged Instruments and the Pledged
Stock.
"Pledged Stock" means (i) the Subsidiary Shares and (ii) any other
capital stock required to be pledged to the Administrative Agent pursuant to
Section 3(B); provided, however, that Pledged Stock shall not include the
Deltec Seller Stock.
"Secured Obligations" means the obligations secured under this
Agreement which include: (a) with respect to the Borrower, (i) all principal
of and interest (including any interest which accrues after the commencement of
any case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Borrower whether or not allowed or allowable as a claim
in any such proceeding) on any loan under, or any note issued pursuant to, the
Credit Agreement, (ii) all other amounts payable by the Borrower hereunder or
under any other Loan Document, (iii) all other obligations of the Borrower
hereunder and the other Loan Documents, (iv) any Hedging Obligations (as
defined in the Security Agreement between Borrower, the Guarantors referred to
therein, and the Administrative Agent dated of even date herewith) and (v) any
amendments, restatements, renewals, extensions or modifications of any of the
foregoing; and (b) with respect to each other Pledgor, (i) all obligations of
such Pledgor under the Credit Agreement (including without limitation, Article
9 thereof) and under any other Loan Document and (ii) any amendments,
restatements, renewals, extensions or modifications of any of the foregoing.
"Secured Parties" means the Agents, the Lenders (including without
limitation with respect to any Hedging Obligations (as defined in the Security
Agreement between Borrower, the Guarantors referred to therein, and the
Administrative Agent, dated of even date herewith) owed to
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<PAGE> 172
such Lenders), and any Affiliate of any Lender to which Hedging Obligations are
owed.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Secured Obligations.
"Subsidiary Notes" means any debt of an Issuer owing to a Pledgor.
"Subsidiary Shares" means as to any Pledgor, the collective reference
to the shares of capital stock of each Issuer listed opposite such Pledgor's
name on Schedule I attached hereto, together with all shares, stocks, stock
certificates, options or rights of any nature whatsoever that currently exist
or which may be issued or granted in respect thereof (or in substitution for
the same) by any Issuer while this Agreement is in effect.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the New York Uniform
Commercial Code as in effect on the date hereof shall have the meanings therein
stated.
SECTION 2. Representations and Warranties
Each Pledgor represents and warrants as follows:
(A) Title to Pledged Securities. Each Pledgor owns all of the
Pledged Securities listed on Schedule I across from its name, free and clear of
any Liens other than the Security Interests. The Pledged Stock includes all of
the issued and outstanding capital stock of each issuer. All of the Pledged
Stock has been duly authorized and validly issued, and is fully paid and
non-assessable, and is subject to no options to purchase or similar rights of
any Person. Each Pledgor is not and will not become a party to or otherwise
bound by any agreement, other than this Agreement, which restricts in any
manner the rights of any present or future holder of any of the Pledged
Securities with respect thereto.
(B) Validity, Perfection and Priority of Security Interests. Upon
the delivery of the Pledged Instruments and certificates representing the
Pledged Stock to the Administrative Agent in accordance with Section 4 hereof,
the Administrative Agent will have valid and perfected security interests in
the Collateral subject to no prior Lien. No registration, recordation or
filing with any governmental body, agency or official is required in
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<PAGE> 173
connection with the execution or delivery of this Agreement or necessary for
the validity or enforceability hereof or for the perfection or enforcement of
the Security Interests. None of the Pledgors nor any of their respective
Subsidiaries has performed or will perform any acts which might prevent the
Administrative Agent from enforcing any of the terms and conditions of this
Agreement or which would limit the Administrative Agent in any such
enforcement.
(C) UCC Filing Locations. The chief executive office of each
Pledgor is located at its address set forth on the signature pages of the
Credit Agreement. Under the Uniform Commercial Code as in effect in the State
in which such office is located, no local filing is required to perfect a
security interest in collateral consisting of general intangibles.
SECTION 3. The Security Interests
In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the performance
of all the respective obligations of each Pledgor hereunder:
(A) Each Pledgor hereby assigns, charges and pledges to and with the
Administrative Agent for the benefit of the Secured Parties and grants to the
Administrative Agent for the benefit of the Secured Parties security interests
in the Pledged Securities, and all of its rights and privileges with respect to
the Pledged Securities, and all income and profits thereon, and all interest,
dividends and other payments and distributions with respect thereto, and all
proceeds of the foregoing (the "Collateral"). Contemporaneously with the
execution and delivery hereof, Pledgor is delivering the Subsidiary Notes and
certificates representing the Subsidiary Shares in pledge hereunder.
(B) In the event that any Issuer at any time issues any additional
or substitute shares of capital stock of any class or any substitute note or
owes any other debt to a Pledgor, such Pledgor will immediately pledge and
deposit with the Administrative Agent certificates representing all of such
shares and such note or any instrument evidencing such other Debt as additional
security for such Pledgor's Secured Obligations. All such shares and
instruments constitute Pledged Securities and are subject to all provisions of
this Agreement.
(C) The Security Interests are granted as security only and shall
not subject any Secured Party to, or
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<PAGE> 174
transfer or in any way affect or modify, any obligation or liability of the
Pledgor or any of its Subsidiaries with respect to any of the Collateral or any
transaction in connection therewith.
SECTION 4. Delivery of Pledged Securities
All Pledged Instruments shall be delivered to the Administrative
Agent by the Pledgors pursuant hereto indorsed to the order of the
Administrative Agent, and accompanied by any required transfer tax stamps, all
in form and substance satisfactory to the Administrative Agent. All
certificates representing Pledged Stock delivered to the Administrative Agent
by such Pledgor pursuant hereto shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, with signatures appropriately guaranteed, and accompanied
by any required transfer tax stamps, all in form and substance satisfactory to
the Administrative Agent.
SECTION 5. Further Assurances
(A) Each Pledgor agrees that it will, at its expense and in such
manner and form as the Administrative Agent may require, execute, deliver, file
and record any financing statement, specific assignment or other paper and take
any other action that may be necessary or desirable, or that the Administrative
Agent may request, in order to create, preserve, perfect or validate any
Security Interest or to enable the Administrative Agent to exercise and enforce
its rights hereunder with respect to any of the Collateral. To the extent
permitted by applicable law, each Pledgor hereby authorizes the Administrative
Agent to execute and file, in the name of such Pledgor or otherwise, Uniform
Commercial Code financing statements (which may be carbon, photographic,
photostatic or other reproductions of this Agreement or of a financing
statement relating to this Agreement) which the Administrative Agent in its
sole discretion may deem necessary or appropriate to further perfect the
Security Interests.
(B) Each Pledgor agrees that it will not change (i) its name,
identity or corporate structure in any manner or (ii) the location of its chief
executive office unless it shall have given the Administrative Agent not less
than 30 days' prior notice thereof.
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<PAGE> 175
SECTION 6. Record Ownership of Pledged Stock.
The Administrative Agent may at any time or from time to time, in its
sole discretion, cause any or all of the Pledged Stock to be transferred of
record into the name of the Administrative Agent or its nominee. Each Pledgor
will promptly give to the Administrative Agent copies of any notices or other
communications received by it with respect to Pledged Stock registered in the
name of such Pledgor and the Administrative Agent will promptly give to Pledgor
copies of any notices and communications received by the Administrative Agent
with respect to Pledged Stock registered in the name of the Administrative
Agent or its nominee.
SECTION 7. Right to Receive Distributions on Collateral.
Unless an Event of Default shall have occurred and be
continuing, each Pledgor shall have the right to receive all dividends,
interest and other payments and distributions made upon or with respect to its
respective Collateral.
If an Event of Default shall have occurred and be continuing,
the Administrative Agent shall have the right to receive and to retain as
Collateral hereunder all dividends, interest and other payments and
distributions made upon or with respect to the Collateral and each Pledgor
shall take all such action as the Administrative Agent may deem necessary or
appropriate to give effect to such right. All such dividends, interest and
other payments and distributions which are received by each Pledgor shall be
received in trust for the benefit of the Secured Parties and, if the
Administrative Agent so directs, shall be segregated from other funds of the
Pledgors, and their Subsidiaries and shall, forthwith upon demand by the
Administrative Agent, be paid over to the Administrative Agent as Collateral in
the same form as received (with any necessary endorsement). After all Events
of Default have been cured, the Administrative Agent's right to retain
dividends, interest and other payments and distributions under this Section 7
shall cease and the Administrative Agent shall pay over to each Pledgor any
such Collateral retained by it during the continuance of an Event of Default.
SECTION 8. Right to Vote Pledged Stock.
Unless an Event of Default shall have occurred and be continuing,
each Pledgor shall have the right, from time
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<PAGE> 176
to time, to vote and to give consents, ratifications and waivers with respect
to its Pledged Stock, and the Administrative Agent shall, upon receiving a
written request from such Pledgor accompanied by a certificate signed by its
principal financial officer stating that no Event of Default has occurred and
is continuing, deliver to such Pledgor or as specified in such request such
proxies, powers of attorney, consents, ratifications and waivers in respect of
any of the Pledged Stock which is registered in the name of the Administrative
Agent or its nominee as shall be specified in such request and be in form and
substance satisfactory to the Administrative Agent.
If an Event of Default shall have occurred and be continuing, the
Administrative Agent shall have the right to the extent permitted by law and
each Pledgor shall take all such action as may be necessary or appropriate to
give effect to such right, to vote and to give consents, ratifications and
waivers, and take any other action with respect to any or all of the Pledged
Stock with the same force and effect as if the Administrative Agent were the
absolute and sole owner thereof.
SECTION 9. General Authority
Each Pledgor hereby irrevocably appoints the Administrative Agent its
true and lawful attorney, with full power of substitution, in the name of such
Pledgor, the Administrative Agent, the Secured Parties or otherwise, for the
sole use and benefit of the Secured Parties, but at the expense of such
Pledgor, to the extent permitted by law to exercise, at any time and from time
to time while an Event of Default has occurred and is continuing, all or any of
the following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the
same or the proceeds or avails thereof, as fully and effectually as if
the Administrative Agent were the absolute owner thereof, and
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<PAGE> 177
(iv) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that the Administrative Agent shall give each Pledgor not less than
ten days' prior notice of the time and place of any sale or other intended
disposition of any of the Collateral except any Collateral which threatens to
decline speedily in value or is of a type customarily sold on a recognized
market. The Administrative Agent and each Pledgor agree that such notice
constitutes "reasonable notification" within the meaning of Section 9-504(3) of
the Uniform Commercial Code.
SECTION 10. Remedies upon Event of Default
If any Event of Default shall have occurred and be continuing, the
Administrative Agent may exercise on behalf of the Secured Parties all the
rights of a secured party under the Uniform Commercial Code (whether or not in
effect in the jurisdiction where such rights are exercised) and, in addition,
the Administrative Agent may, without being required to give any notice, except
as herein provided or as may be required by mandatory provisions of law, (i)
apply the cash, if any, then held by it as Collateral as specified in Section
13 and (ii) if there shall be no such cash or if such cash shall be
insufficient to pay all the Secured Obligations in full, sell the Collateral or
any part thereof at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery, and at such
price or prices as the Administrative Agent may deem satisfactory. Any Secured
Party may be the purchaser of any or all of the Collateral so sold at any
public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations, at any private sale). The Administrative Agent is
authorized, in connection with any such sale, if it deems it advisable so to
do, (i) to restrict the prospective bidders on or purchasers of any of the
Pledged Securities to a limited number of sophisticated investors who will
represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or sale of any of such
Pledged Securities, (ii) to cause to be placed on certificates for any or all
of the Pledged Securities or on any other securities pledged hereunder a legend
to the effect that such security has not been registered under the Securities
Act of 1933 and may not be disposed of in violation of the provision of said
Act, and (iii) to impose such other limitations or conditions in
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<PAGE> 178
connection with any such sale as the Administrative Agent deems necessary or
advisable in order to comply with said Act or any other law. Each Pledgor will
execute and deliver such documents and take such other action as the
Administrative Agent deems necessary or advisable in order that any such sale
may be made in compliance with law. Upon any such sale the Administrative
Agent shall have the right to deliver, assign and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold absolutely and free from any claim or right of whatsoever
kind, including any equity or right of redemption of Pledgor which may be
waived, and Pledgor, to the extent permitted by law, hereby specifically waives
all rights of redemption, stay or appraisal which it has or may have under any
law now existing or hereafter adopted. The notice (if any) of such sale
required by Section 9 shall (1) in the case of a public sale, state the time
and place fixed for such sale, (2) in the case of a sale at a broker's board or
on a securities exchange, state the board or exchange at which such sale is to
be made and the day on which the Collateral, or the portion thereof so being
sold, will first be offered for sale at such board or exchange, and (3) in the
case of a private sale, state the day after which such sale may be consummated.
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Administrative Agent may fix
in the notice of such sale. At any such sale the Collateral may be sold in one
lot as an entirety or in separate parcels, as the Administrative Agent may
determine. The Administrative Agent shall not be obligated to make any such
sale pursuant to any such notice. The Administrative Agent may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be
so adjourned. In the case of any sale of all or any part of the Collateral on
credit or for future delivery, the Collateral so sold may be retained by the
Administrative Agent until the selling price is paid by the purchaser thereof,
but the Agent shall not incur any liability in the case of the failure of such
purchaser to take up and pay for the Collateral so sold and, in the case of any
such failure, such Collateral may again be sold upon like notice. The
Administrative Agent, instead of exercising the power of sale herein conferred
upon it, may proceed by a suit or suits at law or in equity to foreclose the
Security Interests and sell the Collateral, or any portion thereof, under a
judgment or decree of a court or courts of competent jurisdiction.
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SECTION 11. Expenses
Each Pledgor agrees that it will forthwith upon demand pay to the
Administrative Agent:
(i) the amount of any taxes which the Administrative Agent may
have been required to pay by reason of the Security Interests or to
free any of the Collateral from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses, including
the fees and disbursements of counsel and of any other experts, which
the Administrative Agent may incur in connection with (w) the
administration or enforcement of this Agreement, including such
expenses as are incurred to preserve the value of the Collateral and
the validity, perfection, rank and value of any Security Interest, (x)
the collection, sale or other disposition of any of the Collateral,
(y) the exercise by the Administrative Agent of any of the rights
conferred upon it hereunder or (z) any Default or Event of Default.
Any such amount not paid on demand shall bear interest at the rate applicable
to Base Rate Loans on such day plus 2% and shall be an additional Secured
Obligation hereunder.
SECTION 12. Limitation on Duty of Administrative Agent in Respect of
Collateral.
Beyond the exercise of reasonable care in the custody thereof, the
Administrative Agent shall have no duty as to any Collateral in its possession
or control or in the possession or control of any agent or bailee or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. The Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which it accords its own property, and shall not be liable or responsible
for any loss or damage to any of the Collateral, or for any diminution in the
value thereof, by reason of the act or omission of any agent or bailee selected
by the Administrative Agent in good faith.
10
<PAGE> 180
SECTION 13. Application of Proceeds
Upon the occurrence and during the continuance of an Event of
Default, the proceeds of any sale of, or other realization upon, all or any
part of the Collateral and any cash held shall be applied by the Administrative
Agent in the following order of priorities:
first, to payment of the expenses of such sale or other
realization, including reasonable compensation to agents and counsel
for the Administrative Agent, and all expenses, liabilities and
advances incurred or made by the Administrative Agent in connection
therewith, and any other unreimbursed expenses for which the
Administrative Agent or any other Secured Party is to be reimbursed
pursuant to Section 10.3 of the Credit Agreement or Section 11 hereof
and unpaid fees owing to the Administrative Agent under the Credit
Agreement;
second, to the ratable payment of unpaid principal of the Secured
Obligations;
third, to the ratable payment of accrued but unpaid interest on
the Secured Obligations in accordance with the provisions of the
Credit Agreement;
fourth, to the ratable payment of all other Secured Obligations,
until all Secured Obligations shall have been paid in full; and
finally, to payment to the respective Pledgor or its successors
or assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
The Administrative Agent may make distributions hereunder in cash or in kind
or, on a ratable basis, in any combination thereof.
SECTION 14. Concerning the Administrative Agent
The provisions of Article VII of the Credit Agreement shall inure to
the benefit of the Administrative Agent in respect of this Agreement and shall
be binding upon the parties to the Credit Agreement in such respect. In
furtherance and not in derogation of the rights, privileges and immunities of
the Administrative Agent therein set forth:
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<PAGE> 181
(A) The Administrative Agent is authorized to take all such action
as is provided to be taken by it as Administrative Agent hereunder and all
other action reasonably incidental thereto. As to any matters not expressly
provided for herein (including, without limitation, the timing and methods of
realization upon the Collateral) the Administrative Agent shall act or refrain
from acting in accordance with written instructions from the Required Lenders
or, in the absence of such instructions, in accordance with its discretion.
(B) The Administrative Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the validity,
perfection, priority or enforceability of the Security Interests in any of the
Collateral, whether impaired by operation of law or by reason of any action or
omission to act on its part hereunder. The Administrative Agent shall have no
duty to ascertain or inquire as to the performance or observance of any of the
terms of this Agreement by the Pledgors.
SECTION 15. Appointment of Co-Administrative Agents
At any time or times, in order to comply with any legal requirement
in any jurisdiction, the Administrative Agent may appoint another bank or trust
company or one or more other persons, either to act as co-agent or co-agents,
jointly with the Administrative Agent, or to act as separate agent or agents on
behalf of the Secured Parties with such power and authority as may be necessary
for the effectual operation of the provisions hereof and may be specified in
the instrument of appointment (which may, in the discretion of the
Administrative Agent, include provisions for the protection of such co-agent or
separate agent similar to the provisions of Section 14).
SECTION 16. Termination of Security Interests;
Release of Collateral
Upon the repayment in full of all Secured Obligations and the
termination of the Commitments under the Credit Agreement and provided that no
Letters of Credit or Hedging Obligations are outstanding, the Security
Interests shall terminate and all rights of each Pledgor to its respective
Collateral shall revert to such Pledgor. At any time and from time to time
prior to such termination of the Security Interests, the Administrative Agent
may release any of the Collateral upon the terms and at the times set forth in
Section 10.5 of the Credit Agreement. Upon any such
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<PAGE> 182
termination of the Security Interests or release of Collateral, the
Administrative Agent will, at the expense of the respective Pledgor, execute
and deliver to such Pledgor such documents as such Pledgor shall reasonably
request to evidence the termination of the Security Interests or the release of
such Collateral, as the case may be.
SECTION 17. Notices
All notices hereunder shall be given in accordance with Section 10.1
of the Credit Agreement.
SECTION 18. Waivers, Non-Exclusive Remedies
No failure on the part of the Administrative Agent to exercise, and
no delay in exercising and no course of dealing with respect to, any right
under this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise by the Administrative Agent of any right under the Credit
Agreement or this Agreement preclude any other or further exercise thereof or
the exercise of any other right. The rights in this Agreement and the Credit
Agreement are cumulative and are not exclusive of any other remedies provided
by law.
SECTION 19. Successors and Assigns
This Agreement is for the benefit of the Administrative Agent and the
Secured Parties and their successors and assigns, and in the event of an
assignment of all or any of the Secured Obligations, the rights hereunder, to
the extent applicable to the indebtedness so assigned, may be transferred with
such indebtedness. This Agreement shall be binding on Pledgor and its
successors and assigns.
SECTION 20. Changes in Writing
Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only in writing signed by each
Pledgor and the Administrative Agent with the consent of the Required Lenders.
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<PAGE> 183
SECTION 21. New York Law
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS OTHERWISE REQUIRED BY MANDATORY
PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS
OF ANY JURISDICTION OTHER THAN NEW YORK ARE GOVERNED BY THE LAWS OF SUCH
JURISDICTION.
SECTION 22. Severability
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction
and shall be liberally construed in favor of the Administrative Agent and the
Secured Parties in order to carry out the intentions of the parties hereto as
nearly as may be possible; and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
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<PAGE> 184
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
EXIDE ELECTRONICS GROUP, INC.
By _______________________
Title:
EXIDE ELECTRONICS CORPORATION
By _______________________
Title:
EXIDE ELECTRONICS USA HOLDINGS CORP.
By _______________________
Title:
INTERNATIONAL POWER MACHINES
CORPORATION
By _______________________
Title:
DELTEC POWER SYSTEMS, INC.
By _______________________
Title:
15
<PAGE> 185
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as
Administrative Agent
By ______________________
Title:
16
<PAGE> 186
Schedule 1
<TABLE>
<CAPTION>
Stock %/# of
% Cert. Shares
Pledgor Owned Issuer Class No. Pledged
------- ----- ------ ----- ---- -------
<S> <C> <C> <C> <C> <C>
Exide Electronics 100% Exide Electronics USA Common 1 100%
Corporation Holdings Corp.
Exide Electronics 100% Exide Electronics Common 2 100%
Group, Inc. International Corp.
Exide Electronics 100% Exide Electronics Common 4 100%
Group, Inc. Corporation
Exide Electronics 100% International Power Common 1A 100%
Group, Inc. Machines Corporation
Exide Electronics 100% Lectro Products, Inc. Common 5 100%
Group, Inc.
Exide Electronics 100% Deltec Power Systems, Common 1 100%
Group, Inc. Inc.
Exide Electronics USA 100% Datatrax Acquisition Common 1 100%
Holdings Corp. Corporation
International Power 100% Lortec Power Systems, Class A Common 13 10,000
Machines Corporation Inc.
International Power 100% Lortec Power Systems, Class B Common 14 10
Machines Corporation Inc.
Deltec Power Systems, 100% Deltec Electronics Common 4 100%
Inc. Corp.
</TABLE>
27009/163/SA/pledge.domestic
17
<PAGE> 187
EXHIBIT D
OPINION OF
COUNSEL FOR THE OBLIGORS
March __, 1996
To the Lenders and the Administrative Agent
Referred to Below
c/o Morgan Guaranty Trust Company of New York
as Administrative Agent
60 Wall Street
New York, New York 10260
Gentlemen and Ladies:
We have acted as counsel for Exide Electronics Group, Inc., a
Delaware corporation ("Borrower") and Exide Electronics Corporation, a Delaware
corporation, Exide Electronics International Corp., a Delaware corporation,
International Power Machines Corporation, a Delaware corporation, and [other
Guarantors], (collectively, the "Guarantors" and together with Borrower, the
"Obligors"), in connection with (i) the Credit Agreement dated as of March 13,
1996 (the "Credit Agreement") among Borrower, the Guarantors, the lenders
listed on the signature pages thereof (including any such Lender in its
capacity as Issuing Lender, as defined therein, the "Lenders"), Bank of America
Illinois as Documentation Agent for the Lenders and Morgan Guaranty Trust
Company of New York as Administrative Agent for the Lenders (the "Agents"),
(ii) the Notes, (iii) the Security Agreement, and (iv) the Pledge Agreements
(the documents referred to in clauses (i) through (iv) are referred to herein
collectively as the "Loan Documents").
<PAGE> 188
Terms defined in the Credit Agreement and not otherwise defined herein are used
herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. [Each of the] Obligors is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Delaware,
and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
2. The execution, delivery and performance by each Obligor of
the Loan Documents to which it is a party are within the corporate powers of
such Obligor, have been duly authorized by all necessary corporate action,
require no action by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the certificate of
incorporation or by-laws of such Obligor or of any agreement, judgment,
injunction, order, decree or other instrument binding upon such Obligor or any
of its Subsidiaries or result in the creation or imposition of any Lien (other
than Liens under the Loan Documents) on any asset of such Obligor or any of its
Subsidiaries.
3. The Loan Documents (other than the Notes) to which the
Borrower is a party constitute valid and binding agreements of the Borrower and
each Note, when executed and delivered in accordance with this Agreement, will
constitute a valid and binding obligation of the Borrower, in each case
enforceable in accordance with its terms except (i) as may be limited by
bankruptcy, insolvency or similar laws
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<PAGE> 189
affecting creditors' rights generally and (ii) as rights of acceleration and
the availability of equitable remedies may be limited by equitable principles
of general applicability, and except that certain of the remedial provisions in
the Collateral Documents may be limited by applicable law, although such
limitations do not in our opinion make the remedies provided for therein
inadequate for the practical realization of the benefits of the security
intended to be afforded thereby. The Loan Documents to which each Guarantor is
a party constitute valid and binding agreements of such Guarantor, in each case
enforceable against the Borrower in accordance with their respective terms
except (i) as may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) as rights of acceleration and
the availability of equitable remedies may be limited by equitable principles
of general applicability, and except that certain of the remedial provisions in
the Collateral Documents may be limited by applicable law, although such
limitations do not in our opinion make the remedies provided for therein
inadequate for the practical realization of the benefits of the security
intended to be afforded thereby.
4. [Except as set forth on Schedule 4.5,] there is no action,
suit or proceeding pending against, or to the knowledge of the Borrower
threatened against or affecting, the Borrower or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which could materially
adversely affect the business, consolidated financial position or consolidated
results of operations of the Borrower and its Consolidated Subsidiaries,
considered as a whole, or which in any manner draws into question the validity
or enforceability of the Loan Documents.
5. The Security Agreement creates a valid security interest
(the "Article 9 Security Interest"), for the benefit of the secured parties
named therein, in all of each Obligor's right, title and interest in all
Collateral (as defined in the Security Agreement) (after giving effect to the
consummation of the Deltec Acquisition, in the case of
3
<PAGE> 190
__________), in each case, to the extent Article 9 of the Uniform Commercial
Code (the "UCC") is applicable thereto and, to the extent provided in Section
9-306 of the UCC, all proceeds thereof.
6. UCC financing statements and amendments thereto
(collectively, the "Financing Statements") have been filed in the filing
offices listed in Schedule 7 to the Perfection Certificate (the "Filing
Jurisdictions"), which are all of the offices in which filings are required to
perfect the Article 9 Security Interest to the extent the Article 9 Security
Interest may be perfected by filing under the UCC, and no further filing or
recording of any document or instrument or other action will be required so to
perfect the Article 9 Security Interest, except that (i) continuation
statements with respect to each Financing Statement must be filed within the
respective time periods set forth on Schedule 7 to the Perfection Certificate;
(ii) additional filings may be necessary if the Company changes its name,
identity or corporate structure or the jurisdiction in which its places of
business, its chief executive office or the Collateral are located; and (iii)
we express no opinion on the perfection of, or need for further filing or
recording to perfect, the Article 9 Security Interest in goods now or hereafter
located in any jurisdiction other than the Filing Jurisdictions.
7. Each Pledge Agreement creates a valid security
interest (the "Pledge Security Interest") for the benefit of the secured
parties named therein, in all right, title and interest of the Pledgor in all
property referred to therein. The delivery to the Administrative Agent in the
State of New York of the certificates and related stock powers executed in
blank representing the Pledged Stock (as defined in each of the Pledge
Agreements) is effective to create in favor of the Agent for the benefit of the
Secured Parties named therein a perfected and first priority security interest
in the Pledged Stock under the Uniform Commercial Code as in effect in the
State of New York. No registration, recordation or filing with any
governmental body, agency or official is required in connection with the
execution or delivery of the Pledge Agreements or necessary for the
4
<PAGE> 191
validity or enforceability thereof or for the perfection of the Pledge Security
Interest.
8. There are
(i) no UCC financing statements which name any of the
Obligors as debtor or seller and cover any of the Collateral, other
than the Financing Statements, [and the financing statements with
respect to Permitted Liens annexed as Schedule 5(A) to the Perfection
Certificate,] listed in the available records in the UCC filing
offices set forth in paragraphs 2 and 3 of each of the Perfection
Certificates, which include all of the offices prescribed under the
UCC as the offices in which filings should have been made to perfect
security interests in the Collateral; and
(ii) no notices of the filing of any federal tax lien (filed
pursuant to Section 6323 of the Internal Revenue Code) or any lien of
the Pension Benefit Guaranty Corporation (filed pursuant to Section
4068 of ERISA) covering any of the Collateral listed in the available
records in the office of [ ] of [specify States] which
are the only offices having files which must be searched in order to
fully determine the existence of notices of the filing of federal tax
liens (filed pursuant to Section 6323 of the Internal Revenue Code)
and liens of the Pension Benefit Guaranty Corporation (filed pursuant
to Section 4068 of ERISA) on the Collateral.
9. The Liens and security interests created by the Article 9
Security Interest and the Pledge Security Interest validly secure the payment of
all future Loans made by the Lenders to the Borrower and Guarantees by the
Obligors with respect thereto, whether or not at the time such Loans are made an
Event of Default or other event not within the control of the Lenders has
relieved or may relieve the Lenders from their obligations to make such Loans,
and are perfected to the extent set forth in paragraph 9 above, with respect to
such future Loans. Insofar as the priority thereof is governed by the UCC, the
Article 9 Security
5
<PAGE> 192
Interest has the same priority with respect to such future Loans as
they do with respect to Loans made on the date hereof, except that (i)
the Article 9 Security Interest in the Collateral acquired after the
filing of a federal tax lien pursuant to Section 6323 of the Internal
Revenue Code or a lien of the Pension Benefit Guaranty Corporation
pursuant to Section 4068 of ERISA have priority over such liens only
with respect to the Collateral acquired before the 46th day following
such filing and (ii) the Article 9 Security Interest has priority over
such liens to the extent they secure Loans made after the date of
filing of such liens only if such future Loans are made before the
earlier of the 46th day after such liens are filed or the time that
the Lenders have actual notice or knowledge that such liens were
filed. The priority of the Pledge Security Interest will be the same
with respect to Loans made or deemed made after the date hereof, as
with respect to any Loans made on the date hereof, except to the
extent that any priority may be affected by any Lien, security
interest or other encumbrance imposed by law in favor of any
government or governmental authority or agency.
10. None of the Agents or the Lenders is required to pay any
tax or be qualified to do business or file any designation for service
of process or file any reports in the State of [North Carolina] or
comply with any statutory or regulatory rule or requirement applicable
only to financial institutions chartered or qualified to do business
in the State of [North Carolina] solely by reason of its execution and
delivery or acceptance of the Loan Documents or by reason of its
participation in any of the transactions under or contemplated by the
Loan Documents, including, without limitation, the making of any Loan,
and the purchase and holding of any Note contemplated thereby, and the
making and receipt of any payments pursuant thereto, and the validity
and enforceability of the Loan Documents will not be affected by any
failure to so qualify or file.
11. No taxes or other charges, including, without limitation,
intangible, documentary, stamp, mortgage, transfer or recording taxes
or similar charges, are payable to the State of [North Carolina] or to
any jurisdiction
6
<PAGE> 193
therein on account of the execution, delivery or ownership of the Loan
Documents, the creation of the indebtedness (including, without
limitation, the Loans and the indebtedness evidenced by the Notes)
evidenced or secured thereby, the creation of the Liens and security
interests thereunder, or the filing, recording or registration of the
Financing Statements, except for nominal filing or recording fees.
12. The choice of New York law to govern the Loan Documents
in which such choice is stipulated is a valid and effective choice of
law under the laws of the State of [North Carolina] and adherence to
existing judicial precedents would require a court sitting in the
State of [North Carolina] to abide by such choice of law.
13. The Administrative Agent will have the power, without
naming all the Secured Parties, to exercise remedies under the Pledge
Agreements and the Security Agreement for the realization of the
Collateral (as the case may be) in its own name as Administrative
Agent.
[To the extent that any of the foregoing opinions concerns a
matter of New York law, we have assumed that the laws of the State of
New York are identical to the laws of the State of North Carolina in
all relevant respects.]
Very truly yours,
7
<PAGE> 194
SCHEDULE I
(TO OPINION OF COUNSEL FOR THE COMPANY)
FINANCING STATEMENTS
<PAGE> 195
EXHIBIT E-1
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENTS
________________, 199_
To the Lenders and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Administrative Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Credit
Agreement (the "Credit Agreement") dated as of March 13, 1996 among the Exide
Electronics Group, Inc. (the "Borrower"), the Guarantors party thereto, the
lenders listed on the signature pages thereof (the "Lenders"), the issuing
lenders party thereto, Morgan Guaranty Trust Company of New York, as
Administrative Agent and Bank of America Illinois, as Documentation Agent (the
"Agents"), and have acted as special counsel for the Agents for the purpose of
rendering this opinion pursuant to Section 3.1(c) of the Credit Agreement.
Terms defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
<PAGE> 196
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of
the Credit Agreement and of the Notes are within the Borrower's corporate
powers and have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding
agreement of the Borrower and each Note constitutes a valid and binding
obligation of the Borrower, in each case enforceable in accordance with its
terms except as the same may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York, the federal
laws of the United States of America and the General Corporation Law of the
State of Delaware. In giving the foregoing opinion, we express no opinion as
to the effect (if any) of any law of any jurisdiction (except the State of New
York) in which any Lender is located which limits the rate of interest that
such Lender may charge or collect.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other purpose
or relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE> 197
EXHIBIT E-2
OPINION OF SPECIAL COUNSEL
FOR THE AGENT
________________, 199_
To the Lenders and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Administrative Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
[To come -- being negotiated separately with each foreign
counsel.]
<PAGE> 198
EXHIBIT F
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among <NAME OF ASSIGNOR>
(the "Assignor"), <NAME OF ASSIGNEE> (the "Assignee"), EXIDE ELECTRONICS GROUP,
INC. (the "Borrower") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent (the "Agent").
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the Credit Agreement dated as of March 13, 1996 (the
"Credit Agreement") among the Borrower, the Guarantors party thereto, the
Lenders party thereto, as Lenders, the issuing lenders party thereto, Morgan
Guaranty Trust Company of New York, as Administrative Agent and Bank of America
Illinois, as Documentation Agent;
WHEREAS, Term Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof;
WHEREAS, as provided under the Credit Agreement, the Assignor
has a Revolving Commitment in the amount of $_______________, under which the
Assignor has outstanding Revolving Loans in the aggregate amount of
$___________ at the date hereof;
[WHEREAS, the Assignor proposes to assign to the Assignee all
of the rights of the Assignor under the Credit Agreement in respect of a
pro-rata portion of each of its Term Loans in an amount equal to $__________
(the "Term Assigned Amount"), and the Assignee proposes to accept such
assignment of such rights and assume the corresponding obligations from the
Assignor;]
[WHEREAS, the Assignor proposes to assign to the Assignee all
of the rights of the Assignor under the Credit
<PAGE> 199
Agreement in respect of a portion of its Revolving Commitment in an amount
equal to $__________ (the "Revolving Commitment Assigned Amount"), together
with a corresponding portion of each of its Revolving Loans, and the Assignee
proposes to accept such assignment of such rights and assume the corresponding
obligations from the Assignor;]
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.
SECTION 2. Assignment. [The Assignor hereby assigns and
sells to the Assignee all of the rights of the Assignor under the Credit
Agreement with respect to its Term Loans to the extent of the Term Assigned
Amount, and the Assignee hereby accepts such assignment from the Assignor and
assumes all of the obligations of the Assignor under the Credit Agreement to
the extent of the Term Assigned Amount, including the purchase from the
Assignor of a pro-rata portion of the principal amount of each of the Term
Loans of the Assignor outstanding at the date hereof.] [The Assignor hereby
assigns and sells to the Assignee all of the rights of the Assignor under the
Credit Agreement with respect to its Revolving Commitment to the extent of the
Revolving Commitment Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the Assignor
under the Credit Agreement to the extent of the Revolving Commitment Assigned
Amount, including the purchase from the Assignor of a pro-rata portion of the
principal amount of each Revolving Loan of the Assignor outstanding at the date
hereof.] Upon the execution and delivery hereof by the Assignor, the Assignee,
the Borrower, the Administrative Agent [, each Issuing Lender and the Swing
Lender] and the payment of the amounts specified in Section 3 required to be
paid on the date hereof [(i) the Assignee shall, as of the date hereof, succeed
to the rights and be obligated to perform the obligations of a Lender under the
Credit Agreement with
2
<PAGE> 200
outstanding Term Loans in an aggregate amount equal to the Term Assigned
Amount, [(ii) the Assignee shall, as of the date hereof, succeed to the rights
and be obligated to perform the obligations of a Lender under the Credit
Agreement with a Revolving Commitment in an amount equal to the Revolving
Commitment Assigned Amount, and (iii) the Revolving Commitment of the Assignor
shall, as of the date hereof, be reduced by a like amount and the Assignor
released from its obligations under the Credit Agreement to the extent such
obligations have been assumed by the Assignee]. The assignment provided for
herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor
on the date hereof in Federal funds the amount heretofore agreed between them.1
It is understood that commitment and/or facility fees accrued to the date
hereof are for the account of the Assignor and such fees accruing from and
including the date hereof are for the account of the Assignee. Each of the
Assignor and the Assignee hereby agrees that if it receives any amount under
the Credit Agreement which is for the account of the other party hereto, it
shall receive the same for the account of such other party to the extent of
such other party's interest therein and shall promptly pay the same to such
other party.
SECTION 4. Consent of the Borrower, the Administrative Agent
and the Issuing Lenders. This Agreement is conditioned upon the consent of the
Borrower, the Administrative Agent and each Issuing Lender pursuant to Section
10.6(c) of the Credit Agreement. The execution of this Agreement by the
Borrower, the Administrative Agent and each Issuing Lender is evidence of this
consent. Pursuant
- ---------------------
(1) Amount should combine principal together with accrued
interest and breakage compensation, if any, to be paid by the Assignee, net
of any portion of any upfront fee to be paid by the Assignor to the Assignee.
It may be preferable in an appropriate case to specify these amounts
generically or by formula rather than as a fixed sum.
3
<PAGE> 201
to Section 10.6(c), the Borrower agrees to execute and deliver a Note payable
to the order of the Assignee to evidence the assignment and assumption provided
for herein and the Assignor agrees to provide to the Borrower the Note so
assigned marked cancelled.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of any
Obligor, or the validity and enforceability of the obligations of any Obligor
in respect of the Credit Agreement or any Note. The Assignee acknowledges that
it has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Obligors.
SECTION 6. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
4
<PAGE> 202
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their duly authorized officers as of the date
first above written.
<NAME OF ASSIGNOR>
By
--------------------------
Name:
Title:
<NAME OF ASSIGNEE>
By
---------------------------
Name:
Title:
EXIDE ELECTRONICS GROUP, INC.
By
---------------------------
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Administrative Agent
By
---------------------------
Name:
Title:
[ISSUING LENDER(S)]
as Issuing Lender
5
<PAGE> 203
By
--------------------------
Name:
Title:
6
<PAGE> 204
EXHIBIT G
FORM OF BORROWING BASE CERTIFICATE
I, ________________, the ____________ of EXIDE ELECTRONICS GROUP,
INC. (the "Borrower"), DO HEREBY CERTIFY, pursuant to the Credit Agreement
dated as of March 13, 1996 (as amended from time to time, the "Credit
Agreement") among the Borrower, the Guarantors party thereto, the Lenders
referred to therein, Morgan Guaranty Trust Company of New York, as
Administrative Agent and Bank of Illinois America, as Documentation Agent, that
attached hereto as Exhibit A is a true and accurate calculation of the
Borrowing Base of Borrower as of __________, 19__, determined in accordance
with the requirements of the Credit Agreement.
Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Credit Agreement.
IN WITNESS WHEREOF, I have signed this certificate as of this ___ day
of ____________, 19__.
--------------------------
Name:
Title:
(i)
<PAGE> 205
Exhibit A
to
BORROWING BASE CERTIFICATE
(all numbers in thousands)
As at ____________, 19__
********************************************************************************
ACCOUNTS RECEIVABLE
<TABLE>
<S> <C> <C>
Gross Accounts Receivable of the Borrower
and its Consolidated Subsidiaries __________
Less:
(a) Receivables for which have
been established a contra
account, but only to the
extent of such account ________
(b) Receivables subject to a Lien
pursuant to a Permitted
Receivables Financing ________
(c) Receivables against which a
reserve has been taken ________
Total Eligible Receivables $_________
</TABLE>
<PAGE> 206
ELIGIBLE RECEIVABLES $________ X 70% =
========
(2)
<PAGE> 207
INVENTORY
<TABLE>
<S> <C>
Value (determined
on a basis consistent
with that used in the
preparation of the financial
statements referred to in
Section 4.4(a) of the Credit
Agreement) of all
Inventory owned by the
Borrower and its Consolidated
Subsidiaries _________
Less:
(a) Inventory that is subject
to a Lien (other than
Liens created pursuant to
the Loan Documents) _________
(b) Inventory against which
a reserve has been taken _________
(c) Inventory for which has
been established a contra
account, but only to the
extent of such account _________
Total Ineligible Inventory $________
ELIGIBLE INVENTORY $________ X 50% = _________
BORROWING BASE TOTAL $________
</TABLE>
(3)
<PAGE> 208
EXHIBIT H
GUARANTOR ADDENDUM
(ADDENDUM TO LOAN DOCUMENTS)
ADDENDUM dated as of ____________, ____ to CREDIT AGREEMENT
dated as of March 13, 1996 (as amended and supplemented from time to time, the
"Credit Agreement") entered into among Exide Electronics Group, Inc. (the
"Borrower"), the Guarantors party thereto, the lenders listed on the signatory
pages thereof, Bank of America Illinois as Documentation Agent and MORGAN
GUARANTY TRUST COMPANY OF NEW YORK as Administrative Agent for the Lenders
referred to therein (together with its successors in such capacity, the
"Agent"). Capitalized terms used but not defined herein are used as defined in
the Credit Agreement.
[Name of new Guarantor] (the "New Guarantor"), has become a
Subsidiary of the Borrower, and the New Guarantor and the Company wish to
comply with the terms of the Credit Agreement referred to therein. The New
Guarantor accordingly agrees as follows:
1. The New Guarantor hereby agrees that it is (and hereby
becomes) a "Guarantor" party to the Credit Agreement and an "Obligor" party to
the Security Agreement, in each case for all purposes as though a Guarantor or
Obligor (as the case may be) originally signatory thereto.
2. Without limitation of the foregoing:
(a) In order to secure the full and punctual payment and
performance of the Secured Obligations in accordance with the terms thereof,
the New Guarantor hereby grants to the Agent for the ratable benefit of the
Secured Parties (as defined in the Security Agreement) a continuing security
interest in and to all of the Collateral (as defined in the Security Agreement)
of the New Guarantor.
(4)
<PAGE> 209
(b) The New Guarantor hereby unconditionally guarantees the
full and punctual payment (whether at stated maturity, upon acceleration or
otherwise) of the principal of and interest on each Note and the full amount of
all Letter of Credit Liabilities under the Credit Agreement, and the full and
punctual payment of all other amounts payable by the Borrower or any other
Obligor under the Loan Documents, [including without limitation all interest
accruing before and after the commencement of any bankruptcy, insolvency or
similar proceedings, whether or not allowed or allowable as a claim in such
proceedings]. Upon failure by the Borrower or any other Obligor to pay
punctually any such amount, each Guarantor agrees jointly and severally that it
shall forthwith on demand pay the amount not so paid at the place and in the
manner specified in the Credit Agreement or the other Loan Documents.
(c) The New Guarantor represents that:
(i) The New Guarantor has been duly organized, is validly
existing as a corporation, limited liability company or other business
entity and is in good standing under the laws of its jurisdiction of
organization, with full corporate or other entity powers to carry on
its business as presently conducted.
(ii) The execution, delivery and performance by the New Guarantor
of this Addendum and each other Loan Document to which the New
Guarantor is a party are within the New Guarantor's corporate or other
entity powers, have been duly authorized by all necessary corporate or
other entity action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene,
or constitute a default under, any provision of applicable law or
regulation or of the certificate of organization or by-laws of the New
Guarantor or of any agreement, judgment, injunction, order, decree or
other instrument binding upon the New Guarantor or result in the
creation or imposition of any Lien on any asset of the New Guarantor
or any of its Subsidiaries.
(5)
<PAGE> 210
(iii) This Addendum and each other Loan Document to which the New
Guarantor is a party constitutes a valid and binding agreement of the
New Guarantor, enforceable in accordance with its terms except as (i)
the enforceability hereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (ii) rights of
acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability.
(6)
<PAGE> 211
IN WITNESS WHEREOF, the New Guarantor has caused this Addendum
to be duly executed by its duly authorized officer as of the day and year first
above written.
[NAME OF NEW GUARANTOR]
By
----------------------------
Title:
Accepted and Acknowledged as of
the date first written above:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Administrative Agent
By
---------------------------
Title
(7)
<PAGE> 1
EXHIBIT 10.2
CONFORMED COPY
AMENDMENT TO CREDIT AGREEMENT
AMENDMENT AGREEMENT dated as of March 25, 1996 among EXIDE
ELECTRONICS GROUP, INC. (the "Borrower"), the LENDERS listed on Schedule 1
hereto (each, an "Assignor" and, collectively, the "Assignors"), MORGAN
GUARANTY TRUST COMPANY OF NEW YORK as Issuing Lender (an "Issuing Lender"),
Administrative Agent (the "Administrative Agent"), and Swing Lender (the "Swing
Lender"), FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Issuing Lender
(together with the Issuing Lender, the "Issuing Lenders") and the lenders
listed on Schedule 2 hereto (each, an "Assignee" and collectively, the
"Assignees").
W I T N E S S E T H :
WHEREAS, the Borrower, certain of its Subsidiaries as
Guarantors, the Assignors, the Issuing Lenders, the Administrative Agent, the
Swing Lender and Bank of America Illinois, as Documentation Agent have
heretofore entered into a Credit Agreement dated as of March 13, 1996 (the
"Credit Agreement");
WHEREAS, the Borrower and the Assignors wish to amend the
Credit Agreement as set forth herein;
WHEREAS, each Assignor proposes to assign to each Assignee all
of the rights of such Assignor under the Credit Agreement and the other Loan
Documents in respect of a portion of its Revolving Commitment and its
Revolving Loan and Term Loan, on the terms and conditions set forth herein, and
each Assignee proposes to accept such assignment of such rights and assume the
corresponding obligations from each Assignor; and
WHEREAS, the parties agree that each Assignee shall be a
Lender for all purposes under the Credit Agreement as though a Lender initially
a signatory to the Credit Agreement together with the Assignors, and wish to
amend the signature pages to the Credit Agreement to reflect the foregoing;
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE> 2
SECTION 1. Definitions; References. Unless otherwise
specifically defined herein, each term used herein which is defined in the
Credit Agreement shall have the meaning assigned to such term in the Credit
Agreement.
SECTION 2. Amendment of Credit Agreement.
(a) The signature pages to the Credit Agreement are amended
by replacing the signature pages designated therein as containing the names of
the "Lenders" with the signature pages attached to this Agreement designated as
containing the names of the Lenders (the "Amended Lender Signature Pages").
The Amended Lender Signature Pages shall constitute the complete set of
signature pages to the Credit Agreement containing the names of the Lenders;
provided that the references to "Term Commitments" on the Amended Lender
Signature Pages are for convenience of reference only, and do not indicate any
Term Commitment on the part of any Lender, which Term Commitments were the
subject of a Term Borrowing on the Closing Date and thereupon terminated in
accordance with the terms of Section 2.4(a) of the Credit Agreement.
(b) The words "of any Major Casualty Event" where they appear
in Section 2.8(b) of the Credit Agreement are replaced with the words "from the
receipt of any Major Casualty Proceeds".
SECTION 3. Assignment of Commitments and Loans. (a) On and
effective as of the date hereof, (i) each Assignor assigns and sells to the
Assignees (ratably in accordance with the aggregate amounts thereof purchased
and accepted by each such Assignee hereunder pursuant to clause (ii) below) a
portion of its Revolving Commitment (including without limitation rights and
obligations with respect to outstanding Letters of Credit) and its outstanding
Revolving Loan and Term Loan, and (ii) each Assignee hereby purchases and
accepts from the Assignors (ratably in accordance with the respective amounts
thereof assigned and sold by each such Assignor pursuant to clause (i) above),
a portion of such Revolving Credit Commitments (including without limitation
rights and obligations with respect to outstanding Letters of Credit) and
outstanding Revolving Loans and Term Loans (the "Assigned Amounts"), such that
after giving effect to all such transactions:
(A) each Assignor shall have a Revolving Commitment and an
outstanding principal amount of Revolving Loan and Term Loan in the
respective amounts set forth under the applicable heading opposite
such Assignor's name on Schedule 1 hereto; and
2
<PAGE> 3
(B) each Assignee shall become a "Lender" for all purposes
under the Credit Agreement with a Revolving Commitment and an
outstanding principal amount of Revolving Loan and Term Loan in the
respective amounts set forth under the applicable heading opposite
such Assignee's name on Schedule 2 hereto and, in the case of any such
Lender designated as a "Lead Manager" on such Schedule 2, shall be a
Lead Manager under the Credit Agreement.
Each Assignor represents that, other than pursuant to this Agreement, it has
not transferred any interest in or caused any Lien to be created with respect
to the Assigned Amounts assigned by it hereunder.
(b) The transactions referred to in clause (a) shall be
effective upon (i) payment by each Assignee to the Administrative Agent, for
the account of the several Assignors in accordance with clause (a) above of the
respective amounts on Part 1 of Schedule 3 hereto opposite such Assignee's name
under the heading "Amount To Be Paid by Assignees" (representing the principal
amount of, without accrued interest on, the Term Loans and the Revolving Loans,
respectively, purchased by such Assignee) and (ii) receipt by each Assignor of
the respective amounts on Part 2 of Schedule 3 hereto opposite such Assignor's
name under the heading "Amount To Be Received by Assignors" (representing the
principal amount of, without accrued interest on, the Term Loans and the
Revolving Loans, respectively, transferred by such Assignor).
(c) It is understood that commitment fees with respect to the
portion of the Revolving Commitments, and interest on the portion of the
Revolving Loans and Term Loans, assigned hereunder by each Assignor accruing to
the date hereof are for the account of the such Assignor, and such fees and
interest with respect to the portion of the Revolving Commitments, Revolving
Loans and Term Loans assumed hereunder by each Assignee accruing from and
including the date hereof are for the account of such Assignee. Each Assignor
and each Assignee hereby agrees that if it receives any amount under the Credit
Agreement which is for the account of any other party hereto, it shall receive
the same for the account of such other party to the extent of such other
party's interest therein and shall promptly pay the same to such other party.
(d) This Agreement is conditioned upon the consent of the
Borrower, the Administrative Agent, the Issuing Lenders and the Swing Lender
pursuant to Section 10.6(c) of the Credit Agreement. The execution of this
3
<PAGE> 4
Agreement by the Borrower, the Administrative Agent, the Issuing Lenders and
the Swing Lender is evidence of this consent. Pursuant to Section 10.6(c) the
Borrower agrees to execute and deliver a Note payable to the order of each
Assignee to evidence the assignment and assumption provided for herein.
(e) Each Assignor makes no representation or warranty in
connection with, and shall have no responsibility with respect to, the
solvency, financial condition, or statements of the Borrower, or the validity
and enforceability of the obligations of the Borrower in respect of any Loan
Document. Each Assignee acknowledges that it has, independently and without
reliance on the Assignors, and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement and will continue to be responsible for making its own
independent appraisal of the business, affairs and financial condition of the
Borrower.
SECTION 4. Representations and Warranties. The Borrower
hereby represents and warrants that as of the date hereof and after giving
effect hereto:
(a) no Default under the Credit Agreement has occurred and is
continuing; and
(b) each representation and warranty of the Obligors
contained in the Loan Documents are true on and as of the date of this
Agreement.
SECTION 5. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York.
SECTION 6. Counterparts; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument, and shall be effective upon (i) receipt by the Administrative Agent
of a duly executed counterpart copy hereof from each Assignor, each Assignee,
the Borrower, the Administrative Agent, the Swing Lender and the Issuing Lender
(or, in the case of any party as to which an executed counterpart shall not
have been received, telegraphic, telex or other written confirmation from such
party of execution of a counterpart hereof by such party) and (ii) payment of
the amounts referred to in Section 3(b) above.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
EXIDE ELECTRONICS GROUP, INC.
By /s/ Marty R. Kittrell
---------------------------
Title: Vice President
SIGNATURES CONTINUE ON NEXT PAGE
5
<PAGE> 6
<TABLE>
<CAPTION>
TERM REVOLVING
COMMITMENTS COMMITMENTS LENDERS THAT ARE AGENTS OR CO-AGENTS
- ----------- ----------- ------------------------------------
<S> <C> <C>
$3,642,857 $9,107,143 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Douglas A. Cruikshank
---------------------------
Title: Vice President
$3,607,143 $9,017,857 FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By /s/ T. M. Molitor
------------------------------
Title: Vice President
$3,607,143 $9,017,857 BANK OF AMERICA ILLINOIS
By /s/ Michael J. McKenney
-------------------------------
Title: Vice President
$3,571,429 $8,928,571 NATIONSBANK, N.A.
By /s/ Richard G. Parkhurst, Jr.
------------------------------
Title: Vice President
$3,571,429 $8,928,571 ABN AMRO BANK, N.V.
By /s/ Larry Kelley
------------------------------
Title: Group Vice President
By /s/ Robert A. Budnek
------------------------------
Title: Vice President
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
TERM REVOLVING
COMMITMENTS COMMITMENTS LENDERS AND LEAD MANAGERS
- ----------- ----------- -------------------------
<S> <C> <C>
$2,857,143 $7,142,857 BANQUE PARIBAS
By /s/ Mary T. Finnegan
------------------------------
Title: Group Vice President
By /s/ John J. McCormick, III
------------------------------
Title: Vice President
$2,857,143 $7,142,857 BRANCH BANKING & TRUST COMPANY
By /s/ Richard E. Fowler
------------------------------
Title: Senior Vice President
$2,857,143 $7,142,857 BANQUE FRANCAISE DU COMMERCE EXTERIEUR
By /s/ Timothy Daileader
------------------------------
Title: Assistant Vice President
By /s/ William Maier
------------------------------
Title: Vice President and Group
Manager
$2,857,143 $7,142,857 CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Frederick S. Haddad
------------------------------
Title: Senior Vice President
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By /s/ Frederick S. Haddad
------------------------------
Title: Authorized Signature
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
TERM REVOLVING
COMMITMENTS COMMITMENTS LENDERS AND LEAD MANAGERS
- ----------- ----------- -------------------------
<S> <C> <C>
$2,857,143 $7,142,857 LTCB TRUST COMPANY
By /s/ John J. Sullivan
------------------------------
Title: Executive Vice President
$2,857,143 $7,142,857 MERITA BANK LTD
By /s/ Pentti Mansukoski
------------------------------
Title: Senior Vice President
By /s/ John Kehnle
------------------------------
Title: Vice President
$2,857,143 $7,142,857 THE MITSUBISHI TRUST AND BANKING
CORPORATION
By /s/ Patricia Loret de Mola
------------------------------
Title: Senior Vice President
$2,857,143 $7,142,857 SOCIETE GENERALE
By /s/ Ralph Saheb
------------------------------
Title: Vice President
OTHER LENDERS
-------------
$2,000,000 $5,000,000 VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By /s/ Brian G. Wood
------------------------------
Title: Vice President
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
TERM REVOLVING
COMMITMENTS COMMITMENTS OTHER LENDERS
- ----------- ----------- -------------
<S> <C> <C>
$1,428,571 $3,571,429 THE MITSUBISHI BANK, LIMITED
By /s/ Randy Szuch
------------------------------
Title: Vice President
$1,428,571 $3,571,429 BANK OF MONTREAL
By /s/ Danise Longworth
------------------------------
Title: Director
$1,428,571 $3,571,429 THE DAI-ICHI KANGYO BANK, LIMITED,
ATLANTA AGENCY
By /s/ Toshiaki Kurihara
------------------------------
Title: Joint General Manager
$1,428,571 $3,571,429 THE FUJI BANK, LIMITED, ATLANTA
AGENCY
By /s/ Toshihiro Mitsui
------------------------------
Title: Vice President & Manager
$1,428,571 $3,571,429 THE YASUDA TRUST & BANKING CO., LTD.
By /s/ Makoto Tagawa
------------------------------
Title: Deputy General Manager
TOTAL TERM TOTAL REVOLVING
COMMITMENTS COMMITMENTS
- ----------- -----------
$50,000,000 $125,000,000
</TABLE>
9
<PAGE> 10
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative
Agent, Issuing Lender and
Swing Lender
By /s/ Douglas A. Cruikshank
------------------------------
Name: Douglas A. Cruikshank
Title: Vice President
Address: 60 Wall Street
New York, NY 10260-0060
Telex:
Facsimile: (212) 648-5336
BANK OF AMERICA ILLINOIS, as
Documentation Agent
By /s/ Michael J. McKenney
-------------------------------
Name: Michael J. McKenney
Title: Vice President
Address: 1230 Peachtree Street
Suite 3800
Atlanta, Georgia 30309
Telex:
Facsimile: (404) 249-6938
10
<PAGE> 11
SCHEDULE 1
<TABLE>
<CAPTION>
Term Loan Revolving Commitment Revolving Loans
--------- -------------------- ---------------
<S> <C> <C> <C>
Morgan Guaranty Trust $3,642,857 $9,107,143 $6,411,429
Company of New York
First Union National Bank 3,607,143 9,017,857 6,348,571
of North Carolina
Bank of America Illinois 3,607,143 9,017,857 6,348,571
NationsBank, N.A. 3,571,429 8,928,571 6,285,714
ABN AMRO Bank, N.V. 3,571,429 8,928,571 6,285,714
</TABLE>
<PAGE> 12
SCHEDULE 2
<TABLE>
<CAPTION>
Lenders Term Loan Revolving Commitment Revolving Loans
------- --------- -------------------- ---------------
<S> <C> <C> <C>
Lenders and Lead
----------------
Managers
-----------------
Banque Paribas $2,857,143 $7,142,857 $5,028,571
Branch Banking & Trust Company $2,857,143 $7,142,857 $5,028,571
Banque Francaise du Commerce $2,857,143 $7,142,857 $5,028,571
Exterieur
Credit Lyonnais New York Branch $2,857,143 $7,142,857 $5,028,571
and Credit Lyonnais Cayman
Island Branch
LTCB Trust Company $2,857,143 $7,142,857 $5,028,571
Merita Bank Ltd $2,857,143 $7,142,857 $5,028,571
The Mitsubishi Trust and $2,857,143 $7,142,857 $5,028,571
Banking Corporation
Societe Generale $2,857,143 $7,142,857 $5,028,571
Other Lenders
-------------
Van Kampen American Capital $2,000,000 $5,000,000 $3,520,000
Prime Rate Income Trust
Bank of Montreal $1,428,571 $3,571,429 $2,514,286
The Dai-Ichi Kangyo Bank, Ltd. $1,428,571 $3,571,429 $2,514,286
The Fuji Bank, Limited, Atlanta $1,428,571 $3,571,429 $2,514,286
Agency
</TABLE>
<PAGE> 13
<TABLE>
<S> <C> <C> <C>
The Mitsubishi Bank, Limited $1,428,571 $3,571,429 $2,514,286
The Yasuda Trust & Banking Co., $1,428,571 $3,571,429 $2,514,286
Ltd.
</TABLE>
2
<PAGE> 14
SCHEDULE 3
Part 1 Amount to be Paid by Assignees
<TABLE>
<CAPTION>
Assignee Term Loans Revolving Loans
-------- ---------- ---------------
<S> <C> <C>
Banque Paribas $2,857,143 $5,028,571
Branch Banking & Trust Company $2,857,143 $5,028,571
Banque Francaise du Commerce Exterieur $2,857,143 $5,028,571
Credit Lyonnais New York Branch and $2,857,143 $5,028,571
Credit Lyonnais Cayman Island Branch
LTCB Trust Company $2,857,143 $5,028,571
Merita Bank Ltd $2,857,143 $5,028,571
The Mitsubishi Trust and Banking $2,857,143 $5,028,571
Corporation
Societe Generale $2,857,143 $5,028,571
Van Kampen American Capital Prime Rate $2,000,000 $3,520,000
Income Trust
Bank of Montreal $1,428,571 $2,514,286
The Dai-Ichi Kangyo Bank, Ltd. $1,428,571 $2,514,286
The Fuji Bank, Limited, Atlanta Agency $1,428,571 $2,514,286
The Mitsubishi Bank, Limited $1,428,571 $2,514,286
The Yasuda Trust & Banking Co., Ltd. $1,428,571 $2,514,286
</TABLE>
<PAGE> 15
Part 2 Amount to be Received by Assignors
<TABLE>
<CAPTION>
Assignor Term Loans Revolving Loans
-------- ---------- ---------------
<S> <C> <C>
Morgan Guaranty Trust Company $9,690,476 $17,055,237
First Union National Bank of North $8,615,079 $15,162,540
Carolina
Bank of America Illinois $7,503,968 $13,206,985
NationsBank, N.A. $3,095,238 $5,447,619
ABN AMRO Bank, N.V. $3,095,238 $5,447,619
</TABLE>
2
<PAGE> 1
EXHIBIT 12.1
EXIDE ELECTRONICS GROUP, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDING SEPTEMBER 30, ENDED
------------------------------------------------------- DECEMBER 31,
1991 1992 1993 1994 1995 1995
------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) before income
taxes and the cumulative
effect of accounting
change................... $(7,596) $ 9,159 $16,046 $13,459 $12,077 $ 666
Add:
Interest expense......... 4,749 5,090 4,421 5,417 5,575 1,497
One-third of rental
expense................ 2,194 2,185 2,388 2,593 2,703 676
Less:
Equity Method
(undistributed income
of less than 50% owner)
investees.............. 0 (70) 0 (6) (257) (11)
------- ------- ------- ------- ------- ------------
(653) 16,364 22,855 21,463 20,098 2,828
------- ------- ------- ------- ------- ------------
FIXED CHARGES:
Interest expense............ 4,749 5,090 4,421 5,417 5,575 1,497
One-third of rental
expense.................. 2,194 2,185 2,388 2,593 2,703 676
------- ------- ------- ------- ------- ------------
6,943 7,275 6,809 8,010 8,278 2,173
------- ------- ------- ------- ------- ------------
Fixed charges in excess of
earnings.................... $(7,596) $ 9,089 $16,046 $13,453 $11,820 $ 655
======= ======= ======= ======= ======= ==========
Ratio......................... (0.1) 2.2 3.4 2.7 2.4 1.3
======= ======= ======= ======= ======= ==========
</TABLE>
For purposes of determining the ratio of earnings to fixed charges, earnings
consist of income before income taxes plus fixed charges minus the undistributed
earnings of Exide Electronics' 50%-owned subsidiary accounted for by the equity
method. Fixed charges consist of interest expense, which includes amortization
of deferred financing costs and one-third of rental expenses, representing that
portion of rental expenses attributable to interest. Earnings were inadequate to
cover fixed charges for the fiscal year ending September 30, 1991.
<PAGE> 1
EXHIBIT 21.1
DIRECT AND INDIRECT SUBSIDIARIES OF THE COMPANY
<TABLE>
<C> <S>
1. Exide Electronics Corporation
2. Exide Electronics International Corp.
3. International Power Machines Corporation
4. Lectro Products, Inc.
5. Exide Electronics International Sales Corp.
6. Exide Electronics USA Holdings Corp.
7. DataTrax Acquisition Corporation
8. Exide Electronics Canada, Inc.
9. Exide Electronics, S.A.(1)
10. Exide Electronics, GmbH
11. MPL Powerware Systems, Ltd.
12. Exide Electronics, B.V.(1)
13. GS-EE Co., Ltd.(2)
14. LorTec Power Systems, Inc.
15. IPM Pacific Limited(3)
16. International Power Machines, GmbH(3)
17. International Power Machines Canada, Inc.(3)
18. International Power Machines de Mexico, S.A.(3)
19. Deltec Power Systems, Inc.(4)
20. Deltec Electronics Corporation
21. FPS Power Systems Oy Ab
22. Deltec S.A. de C.V.(5)
23. Fiskars Power Systems AS
24. FPS Power Systems AS
25. Fiskars Power Systems AB
26. Fiskars Electronics Limited
27. Fiskars Power Systems, GmbH
</TABLE>
- ---------------
Notes:
(1) Except for a de minimus number of shares held by officers and/or directors
as required by the laws of the country in which the subsidiary was formed,
Exide Electronics International Sales Corp. owns all of the outstanding
capital stock of this subsidiary.
(2) MPL Powerware Systems Ltd. owns 50% of the ownership interests of this
subsidiary.
(3) Except for a de minimus number of shares held by officers and/or directors
as required by the laws of the country in which the subsidiary was formed,
International Powerware Machines Corporation owns all of the outstanding
capital stock of this subsidiary.
(4) The Company owns all of the outstanding capital stock of Deltec Power
Systems, Inc. except for fifty (50) shares of Class A Preferred Stock held
by Fiskars Holding, Inc.
(5) Except for a de minimus number of shares held by officers and/or directors
as required by the laws of the country in which this subsidiary was formed,
Deltec Electronics Corporation owns all of the outstanding capital stock of
this subsidiary.
2
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and all references to our firm) included in or made a part of this
registration statement (Registration Statement File No. 33-XXXXX).
Arthur Andersen LLP
Raleigh, North Carolina,
April 11, 1996.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Exide Electronics Group, Inc. of our
report dated March 15, 1996 relating to the combined/consolidated financial
statements of Deltec Power Systems, Inc. which appears in such Prospectus. We
also consent to the reference to us under the heading "Experts" in such
Prospectus.
PRICE WATERHOUSE LLP
Milwaukee, Wisconsin
April 11, 1996
<PAGE> 1
EXHIBIT 23.4(A)
To the Board of Directors
and Shareholder of
Fiskars Power Systems AS
We consent to the inclusion of our report dated March 15, 1996 with respect
to the balance sheets of Fiskars Power Systems AS as of December 31, 1994,
September 30, 1995 and December 31, 1995, and the related statements of income
and retained earnings and of cash flows for the nine months ended September 30,
1995 and for each of the years in the three-year period ended December 31, 1995,
which report appears in the registration statement on Form S-4 of Exide
Electronics Group, Inc. and to the reference to our firm under the heading
"Experts" in the prospectus.
Oslo, Norway
April 10, 1996
KPMG as
Tom Myhre
State Authorized Public Accountant (Norway)
<PAGE> 1
EXHIBIT 23.4(B)
To the Board of Directors
and Shareholders of
Fiskars Power Systems A/S
We consent to the inclusion of our report dated March 15, 1996 with respect
to the balance sheets of Fiskars Power Systems A/S as of December 31, 1994,
September 30, 1995 and December 31, 1995, and the related statements of income
and retained earnings and of cash flows for the nine months ended September 30,
1995 and for each of the years in the three-year period ended December 31, 1995,
which report appears in the registration statement on Form S-4 of Exide
Electronics Group, Inc. and to the reference to our firm under the heading
"Experts" in the prospectus.
KPMG C. Jespersen
Copenhagen, Denmark
April 10, 1996
Torben Vonsild
State Authorized
Public Accountant
<PAGE> 1
EXHIBIT 23.4(C)
To the Board of Directors
and Shareholders of
FPS Power Systems Oy Ab
We consent to the inclusion of our report dated March 15, 1996 with respect
to the balance sheets of FPS Power Systems Oy Ab as of December 31, 1994 and
1995 and September 30, 1995, and the related statements of income and of cash
flows for each of the years in the three-year period ended December 31, 1995 and
the nine months ended September 30, 1995, which report appears in the
registration statement on Form S-4 of Exide Electronics Group, Inc. and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG WIDERI OY AB
Helsinki, Finland
April 10, 1996
Sixten Nyman
Authorized Public Accountant
<PAGE> 1
EXHIBIT 23.4(D)
To the Board of Directors
and Shareholder of
Fiskars Power Systems AB
We consent to the inclusion of our report dated March 15, 1996 with respect
to the balance sheets of Fiskars Power Systems AB as of December 31, 1994,
September 30, 1995 and December 31, 1995, and the related statements of income
and of cash flows for the nine months ended September 30, 1995 and for each of
the years in the three-year period ended December 31, 1995, which report appears
in the registration statement on Form S-4 of Exide Electronics Group, Inc. and
to the reference to our firm under the heading "Experts" in the prospectus.
KPMG Bohlins AB
Stockholm, Sweden
April 10, 1996
Thomas Thiel
Partner
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
---------------------
AMERICAN BANK NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
<TABLE>
<S> <C>
A NATIONAL BANKING ASSOCIATION 41-0122055
(State of incorporation if not a national (I.R.S. Employer Identification No.)
bank)
101 EAST FIFTH STREET 55101
CORPORATE TRUST DEPARTMENT (Zip Code)
ST. PAUL, MINNESOTA
(Address of principal executive offices)
</TABLE>
AMERICAN BANK NATIONAL ASSOCIATION
101 EAST FIFTH STREET
ST. PAUL, MINNESOTA 55101
(612) 298-6280
(Exact name, address, and telephone number of agent for service)
---------------------
EXIDE ELECTRONICS GROUP, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 22-2231834
(State of incorporation or other (I.R.S. Employer Identification incorporation
jurisdiction) or organization)
8609 SIX FORKS ROAD 27615
RALEIGH, NORTH CAROLINA (Zip Code)
(Address of principal executive offices)
</TABLE>
---------------------
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
(Title of 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, DC
--Federal Deposit Insurance Corporation
Washington, DC
--The Board of Governors of the Federal Reserve System
Washington, DC
(b) The Trustee is authorized to exercise corporate trust powers.
GENERAL
ITEM 2.AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
If the obligor or any underwriter for the obligor is an affiliate of the
Trustee, describe each such affiliation.
None
See Note following Item 16.
ITEMS 3-15 ARE NOT APPLICABLE BECAUSE TO THE BEST OF THE TRUSTEE'S KNOWLEDGE THE
OBLIGOR IS NOT IN DEFAULT UNDER ANY INDENTURE FOR WHICH THE TRUSTEE ACTS AS
TRUSTEE.
ITEM 16. LIST OF EXHIBITS
Listed below are all the exhibits filed as a part of this statement of
eligibility and qualification. The exhibits listed below are incorporated by
reference from a previous filing.
<TABLE>
<S> <C>
Exhibit 1. Copy of Articles of Association of the trustee now in effect.
Exhibit 2. a. A copy of the certificate of the Comptroller of Currency dated June 1,
1965, authorizing American Bank National Association to act as fiduciary.
b. A copy of the certificate of authority of the trustee to commence
business issued June 9, 1903, by the Comptroller of the Currency to
American National Association.
Exhibit 3. A copy of the authorization of the trustee to exercise corporate trust
powers issued by the Federal Reserve Board.
Exhibit 4. Copy of By-laws of the trustee as now in effect.
Exhibit 5. Copy of each Indenture referred to in Item 4. 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.
</TABLE>
<PAGE> 3
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligor within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligor, or affiliates, are based
upon information furnished to the Trustee by the obligor. While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, a national banking association organized and existing under the laws of
the United States, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned, thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City of
Saint Paul and State of Minnesota on the 9th day of April, 1996.
AMERICAN BANK NATIONAL ASSOCIATION
[SEAL]
/s/ FRANK P. LESLIE III
--------------------------------------
Vice President
<PAGE> 5
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, American Bank National Association, hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: April 9, 1996
AMERICAN BANK NATIONAL ASSOCIATION
/s/ FRANK P. LESLIE III
--------------------------------------
Vice President
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006, SERIES A
OF
EXIDE ELECTRONICS GROUP, INC.
PURSUANT TO THE PROSPECTUS
DATED , 1996
EXIDE ELECTRONICS GROUP, INC. WILL ACCEPT ALL SERIES A NOTES (AS
HEREINAFTER DEFINED) TENDERED AND NOT WITHDRAWN PRIOR TO 5:00 P.M., NEW
YORK CITY TIME, ON , 1996, UNLESS EXTENDED (THE "EXPIRATION
DATE"). TENDERS MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
The Exchange Agent is:
American Bank National Association
<TABLE>
<S> <C> <C>
By Facsimile: By Registered or Certified By Overnight Delivery:
Mail:
American Bank American Bank American Bank
National Association National Association National Association
(612) 229-6415 101 East Fifth Street 101 East Fifth Street
St. Paul, Minnesota 55101 St. Paul, Minnesota 55101
Attention: Attention:
Corporate Trust Department Corporate Trust Department
By Hand Delivery: Confirm by Telephone:
American Bank
National Association (612) 229-2600
101 East Fifth Street
St. Paul, Minnesota 55101
Attention:
Corporate Trust Department
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus dated ,
1996 (the "Prospectus"), of Exide Electronics Group, Inc. (the "Company"), and
this Letter of Transmittal (the "Letter of Transmittal"), which together with
the Prospectus constitutes the Company's offer (the "Exchange Offer") to
exchange $1,000 principal amount of its 11 1/2% Senior Subordinated Notes due
2006, Series B (the "Series B
<PAGE> 2
Notes") for each $1,000 principal amount of its outstanding 11 1/2% Senior
Subordinated Notes due 2006, Series A (the "Series A Notes"). Recipients of the
Prospectus should read the requirements described in such Prospectus with
respect to eligibility to participate in the Exchange Offer. Capitalized terms
used but not defined herein have the meaning given to them in the Prospectus.
The undersigned hereby tenders the Series A Notes described in the box
entitled "Description of Series A Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered owner of all the Series A Notes and the
undersigned represents that it has received from each beneficial owner of Series
A Notes ("Beneficial Owners") a duly completed and executed form of "Instruction
to Registered Holder from Beneficial Owner" accompanying this Letter of
Transmittal, instructing the undersigned to take the action described in this
Letter of Transmittal.
This Letter of Transmittal is to be used only by a holder of Series A Notes
(i) if certificates representing Series A Notes are to be forwarded herewith or
(ii) if delivery of Series A Notes is to be made by book-entry transfer to the
Exchange Agent's account at The Depository Trust Company ("Depositary"),
pursuant to the procedures set forth in the section of the Prospectus entitled
"The Exchange Offer -- Procedures for Tendering." If delivery of the Series A
Notes is to be made by book-entry transfer to the account maintained by the
Exchange Agent at the Depositary, this Letter of Transmittal need not be
manually executed; provided, however, that tenders of the Series A Notes must be
effected in accordance with the procedures mandated by the Depositary's
Automated Tender Offer Program and the procedures set forth in the Prospectus
under the caption "The Exchange Offer -- Book-Entry Transfer."
The undersigned hereby represents and warrants that the information set
forth in the box entitled "Beneficial Owner(s)" is true and correct.
Any beneficial owner whose Series A 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 of Series A Notes promptly and
instruct such registered holder of Series A Notes to tender on behalf of the
beneficial owner. If such beneficial owner wishes to tender on its own behalf,
such beneficial owner must, prior to completing and executing this Letter of
Transmittal and delivering its Series A Notes, either make appropriate
arrangements to register ownership of the Series A Notes in such beneficial
owner's name or obtain a properly completed bond power from the registered
holder of Series A Notes. The transfer of record ownership may take considerable
time.
In order to properly complete this Letter of Transmittal, a holder of
Series A Notes must (i) complete the box entitled "Description of Series A
Notes," (ii) if appropriate, check and complete the boxes relating to book-entry
transfer, guaranteed delivery, Special Issuance Instructions and Special
Delivery Instructions, (iii) sign the Letter of Transmittal by completing the
box entitled "Sign Here" and (iv) complete the Substitute Form W-9. Each holder
of Series A Notes should carefully read the detailed instructions below prior to
completing the Letter of Transmittal.
Holders of Series A Notes who desire to tender their Series A Notes for
exchange and (i) whose Series A Notes are not immediately available, (ii) who
cannot deliver their Series A Notes and all other documents required hereby to
the Exchange Agent on or prior to the Expiration Date or (iii) who are unable to
complete the procedure for book-entry transfer on a timely basis, must tender
the Series A Notes pursuant to the guaranteed delivery procedures set forth in
the section of the Prospectus entitled "The Exchange Offer -- Guaranteed
Delivery Procedures." See Instruction 2.
Holders of Series A Notes who wish to tender their Series A Notes for
exchange must, at a minimum, complete columns (1) through (3) in the box below
entitled "Description of Series A Notes" and sign the box below entitled "Sign
Here." If only those columns are completed, such holder of Series A Notes will
have tendered for exchange all Series A Notes listed in column (3) below. If the
holder of Series A Notes wishes to tender for exchange less than all of such
Series A Notes, column (4) must be completed in full. In such case, such holder
of Series A Notes should refer to Instruction 5.
2
<PAGE> 3
- --------------------------------------------------------------------------------
DESCRIPTION OF SERIES A NOTES
<TABLE>
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
(1) (2) (3) (4)
PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) OF REGISTERED TENDERED FOR
HOLDER(S) EXCHANGE (ONLY IF
OF SERIES A NOTE(S), EXACTLY AS SERIES A NOTE DIFFERENT AMOUNT
NAME(S) NUMBER(S)(1) FROM COLUMN (3))
APPEAR(S) ON SERIES A NOTE (ATTACH SIGNED AGGREGATE (MUST BE IN
CERTIFICATE(S) LIST PRINCIPAL INTEGRAL MULTIPLES
(PLEASE FILL IN, IF BLANK) IF NECESSARY) AMOUNT OF $1,000)(2)
- -----------------------------------------------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Column (2) need not be completed by holders of Series A Notes tendering
Series A Notes for exchange by book-entry transfer. Please check the
appropriate box below and provide the requested information.
(2) Column (4) need not be completed by holders of Series A Notes who wish to
tender for exchange the principal amount of Series A Notes listed in Column
(3). Completion of column (4) will indicate that the holder of Series A
Notes wishes to tender for exchange only the principal amount of Series A
Notes indicated in column (4).
/ / CHECK HERE IF TENDERED SERIES A NOTES ARE ENCLOSED HEREWITH.
/ / CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
DEPOSITARY AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS
HEREINAFTER DEFINED) ONLY):
Name of Tendering Institution
Account Number
Transaction Code Number
3
<PAGE> 4
/ / CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Series A Note(s)
-------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------
Window Ticket Number (if available)
-----------------------------------
Name of Institution which Guaranteed Delivery
-------------------------
Account Number (if delivered by book-entry transfer)
------------------
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name
------------------------------------------------------------------
Address
---------------------------------------------------------------
---------------------------------------------------------------
4
<PAGE> 5
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY (i) if the Series B Notes issued in exchange for Series A
Notes, certificates for Series A Notes in a principal amount not exchanged for
Series B Notes or Series A Notes (if any) not tendered for exchange, are to be
issued in the name of someone other than the undersigned, or (ii) if Series A
Notes tendered by book-entry transfer which are not exchanged are to be returned
by credit to an account maintained at the Depositary.
Issue to:
-----------------------------------------------------------------------
Name:
---------------------------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
Credit Series A Notes not exchanged and delivered by book-entry transfer to
the Depositary account set forth below:
- --------------------------------------------------------------------------------
(ACCOUNT NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY (i) if the Series B Notes issued in exchange for Series A
Notes, certificates for Series A Notes in a principal amount not exchanged for
Series B Notes or Series A Notes (if any) not tendered for exchange, are to be
mailed or delivered to someone other than the undersigned, or to the undersigned
at an address other than the address shown below the undersigned's signature
Mail or deliver to:
Name:
---------------------------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
5
<PAGE> 6
- --------------------------------------------------------------------------------
BENEFICIAL OWNER(S)
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF SERIES A NOTES
BENEFICIAL OWNER OF SERIES A NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER(S)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
If delivery of Series A Notes is to be made by book-entry transfer to the
account maintained by the Exchange Agent at the Depositary, then tenders of
Series A Notes must be effected in accordance with the procedures mandated by
the Depositary's Automated Tender Offer Program and the procedures set forth in
the Prospectus under the caption "The Exchange Offer -- Book-Entry Transfer."
6
<PAGE> 7
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
Pursuant to the offer by Exide Electronics Group, Inc. (the "Company"),
upon the terms and subject to the conditions set forth in the Prospectus dated
, 1996 (the "Prospectus") and this Letter of Transmittal (the "Letter
of Transmittal"), which together with the Prospectus constitutes the Company's
offer (the "Exchange Offer") to exchange $1,000 principal amount of its 11 1/2%
Senior Subordinated Notes Due 2006, Series B (the "Series B Notes") for each
$1,000 principal amount of its outstanding 11 1/2% Senior Subordinated Notes Due
2006, Series A (the "Series A Notes"). The undersigned hereby tenders to the
Company for exchange the Series A Notes indicated above.
By executing this Letter of Transmittal and subject to and effective upon
acceptance for exchange of the Series A Notes tendered for exchange herewith,
the undersigned will have irrevocably sold, assigned, transferred and exchanged,
to the Company, all right, title and interest in, to and under all of the Series
A Notes tendered for exchange hereby, and hereby appoints the Exchange Agent as
the true and lawful agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as agent of the Company) of such holder of Series A
Notes with respect to such Series A Notes, with full power of substitution to
(i) deliver certificates representing such Series A Notes, or transfer ownership
of such Series A Notes on the account books maintained by the Depositary
(together, in any such case, with all accompanying evidences of transfer and
authenticity), to the Company, (ii) present and deliver such Series A Notes for
transfer on the books of the Company and (iii) receive all benefits and
otherwise exercise all rights and incidents of beneficial ownership with respect
to such Series A Notes, all in accordance with the terms of the Exchange Offer.
The power of attorney granted in this paragraph shall be deemed to be
irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that (i) the undersigned is
the owner; (ii) has a net long position within the meaning of Rule 14e-4 under
the Securities Exchange Act as amended ("Rule 14e-4") equal to or greater than
the principal amount of Series A Notes tendered hereby; (iii) the tender of such
Series A Notes complies with Rule 14e-4 (to the extent that Rule 14e-4 is
applicable to such exchange); (iv) the undersigned has full power and authority
to tender, exchange, assign and transfer the Series A Notes and (v) that when
such Series A Notes are accepted for exchange by the Company, the Company will
acquire good and marketable title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claims.
The undersigned will, upon receipt, execute and deliver any additional documents
deemed by the Exchange Agent or the Company to be necessary or desirable to
complete the exchange, assignment and transfer of the Series A Notes tendered
for exchange hereby.
The undersigned hereby further represents to the Company that (i) the
Series B Notes to be acquired by the undersigned in exchange for the Series A
Notes tendered hereby and any beneficial owner(s) of such Series A Notes in
connection with the Exchange Offer will be acquired by the undersigned and such
beneficial owner(s) in the ordinary course of business of the undersigned, (ii)
the undersigned (if not a broker-dealer referred to in the last sentence of this
paragraph) are not participating and do not intend to participate in the
distribution of the Series B Notes, (iii) the undersigned have no arrangement or
understanding with any person to participate in the distribution of the Series B
Notes, (iv) the undersigned and each beneficial owner acknowledge and agree that
any person participating in the Exchange Offer for the purpose of distributing
the Series B Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Series B Notes acquired by such person and cannot rely on the
position of the staff of the SEC set forth in certain no-action letters, (v) the
undersigned and each beneficial owner understand that a secondary resale
transaction described in clause (iv) above should 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 of the SEC
and (vi) neither the undersigned nor any beneficial owner is an "affiliate" of
the Company, as defined under Rule 405 under the Securities Act. If the
undersigned is a broker-dealer that will receive Series B Notes for its own
account in exchange for Series A Notes that were acquired as a result of market
making activities or other trading activities, it acknowledges
7
<PAGE> 8
that it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such Series B Notes received in respect of such
Series A Notes pursuant to the Exchange Offer; 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.
For purposes of the Exchange Offer, the Company will be deemed to have
accepted for exchange, and to have exchanged, validly tendered Series A Notes,
if, as and when the Company gives oral or written notice thereof to the Exchange
Agent. Tenders of Series A Notes for exchange may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date. See "The Exchange
Offer--Withdrawal of Tenders" in the Prospectus. Any Series A Notes tendered by
the undersigned and not accepted for exchange will be returned to the
undersigned at the address set forth above unless otherwise indicated in the box
above entitled "Special Delivery Instructions."
The undersigned acknowledges that the Company's acceptance of Series A
Notes validly tendered for exchange pursuant to any one of the procedures
described in the section of the Prospectus entitled "The Exchange Offer" 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 in the box entitled "Special Issuance
Instructions," please return any Series A Notes not tendered for exchange in the
name(s) of the undersigned. Similarly, unless otherwise indicated in the box
entitled "Special Delivery Instructions," please mail any certificates for
Series A Notes not tendered or exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Series B Notes issued in exchange for the Series A Notes
accepted for exchange in the name(s) of, and return any Series A Notes not
tendered for exchange or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to transfer
any Series A Notes from the name of the holder of Series A Note(s) thereof if
the Company does not accept for exchange any of the Series A Notes so tendered
for exchange or if such transfer would not be in compliance with any transfer
restrictions applicable to such Series A Note(s).
IN ORDER TO VALIDLY TENDER SERIES A NOTES FOR EXCHANGE, HOLDERS OF SERIES A
NOTES MUST COMPLETE, EXECUTE, AND DELIVER THIS LETTER OF TRANSMITTAL.
Except as stated in the Prospectus, all authority herein conferred or
agreed to be conferred shall survive the death or incapacity of the undersigned,
and any obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Except as
otherwise stated in the Prospectus, this tender for exchange of Series A Notes
is irrevocable.
8
<PAGE> 9
SIGN HERE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Date:
, 1996
---------------
Must be signed by the registered holder(s) of Series A Notes exactly as
name(s) appear(s) on certificate(s) representing the Series A Notes or on a
security position listing or by person(s) authorized to become registered Series
A Note holder(s) by certificates and documents transmitted herewith. If
signature is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, please provide the following information. (See
Instruction 6).
Name(s)
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
-----------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.
---------------------------------------
Tax Identification or Social Security Nos.
-------------------------
GUARANTEE OF SIGNATURE(S)
(SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 1)
Authorized Signature
-----------------------------------------------
Dated
--------------------------------------------------------------
Name and Title
-----------------------------------------------------
(PLEASE PRINT)
Name of Firm
-------------------------------------------------------
9
<PAGE> 10
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc. or is a commercial bank or
trust company having an office or correspondence in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934 which is a member of one of the following
recognized Signature Guarantee Programs (an "Eligible Institution"):
a. The Securities Transfer Agents Medallion Program (STAMP)
b. The New York Stock Exchange Medallion Signature Program (MSP)
c. The Stock Exchange Medallion Program (SEMP)
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the registered holder(s) of the Series A
Notes tendered herewith and such registered holder(s) have not completed the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) if such Series A Notes are
tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND SERIES A NOTES; GUARANTEED
DELIVERY PROCEDURE. This Letter of Transmittal is to be completed by holders of
Series A Notes (i) if certificates are to be forwarded herewith or (ii) if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer or guaranteed delivery set forth in the section of the Prospectus
entitled "The Exchange Offer." Certificates for all physically tendered Series A
Notes or any confirmation of a book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth on the cover of this Letter of Transmittal prior to 5:00 p.m.,
New York City time, on the Expiration Date. Holders of Series A Notes who elect
to tender Series A Notes and (i) whose Series A Notes are not immediately
available, (ii) who cannot deliver the Series A Notes or other required
documents to the Exchange Agent prior to 5:00 p.m., New York City time on the
Expiration Date or (iii) who are unable to complete the procedure for book-entry
transfer on a timely basis, may have such tender effected if: (a) such tender is
made by or through an Eligible Institution; and (b) prior to 5:00 p.m., New York
City time, on the Expiration Date, the Exchange Agent has received from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile hereof) and Notice of Guaranteed Delivery (by
telegram, telex, facsimile transmission, mail or hand delivery) setting forth
the name and address of the holder of such Series A Notes, the certificate
numbers(s) of such Series A Notes and the principal amount of Series A Notes
tendered for exchange, stating that tender is being made thereby and
guaranteeing that, within three New York Stock Exchange trading days after the
Expiration Date, the certificates representing such Series A Notes (or a
Book-Entry Confirmation), in proper form for transfer, and any other documents
required by this Letter of Transmittal, will be deposited by such Eligible
Institution with the Exchange Agent; and (c) certificates for all tendered
Series A Notes, or a Book-Entry Confirmation, together with a copy of the
previously executed Letter of Transmittal (or facsimile thereof) and any other
documents required by this Letter of Transmittal are received by the Exchange
Agent within three New York Stock Exchange trading days after the Expiration
Date.
THE METHOD OF DELIVERY OF SERIES A NOTES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER
OF SERIES A NOTES. EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. NEITHER THIS LETTER OF TRANSMITTAL NOR ANY SERIES A
NOTES SHOULD BE SENT TO THE COMPANY OR THE TRUSTEE.
10
<PAGE> 11
No alternative, conditional or contingent tenders will be accepted. All
tendering holders of Series A Notes, by execution of this Letter of Transmittal
(or facsimile hereof, if applicable), waive any right to receive notice of the
acceptance of their Series A Notes for exchange.
3. INADEQUATE SPACE. If the space provided in the box entitled
"Description of Series A Notes" above is inadequate, the certificate numbers and
principal amounts of the Series A Notes being tendered should be listed on a
separate signed schedule affixed hereto.
4. WITHDRAWALS. A tender of Series A Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date by delivery of
written notice of withdrawal to the Exchange Agent at the address set forth on
the cover of this Letter of Transmittal. To be effective, a notice of withdrawal
of Series A Notes must (i) specify the name of the person who tendered the
Series A Notes to be withdrawn (the "Depositor"), (ii) identify the Series A
Notes to be withdrawn (including the certificate number or numbers and aggregate
principal amount of such Series A Notes), (iii) be signed by the holder of
Series A Notes in the same manner as the original signature on the Letter of
Transmittal by which such Series A Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the applicable transfer agent register the transfer of such Series A Notes
into the name of the person withdrawing the tender. Withdrawals of tenders of
Series A Notes may not be rescinded, and any Series A Notes withdrawn will
thereafter be deemed not validly tendered for purposes of the Exchange Offer and
no Series B Notes will be issued with respect thereto unless the Series A Notes
so withdrawn are validly retendered. Properly withdrawn Series A Notes may be
retendered by following one of the procedures described in the section of the
Prospectus entitled "The Exchange Offer--Procedures for Tendering" at any time
prior to 5:00 p.m., New York City time, on the Expiration Date.
5. PARTIAL TENDERS. (Not applicable to holders of Series A Notes who
tender Series A Notes by book-entry transfer). Tenders of Series A Notes will be
accepted only in integral multiples of $1,000 principal amount. If a tender for
exchange is to be made with respect to less than the entire principal amount of
any Series A Notes, fill in the principal amount of Series A Notes which are
tendered for exchange in column (4) of the box entitled "Description of Series A
Notes," as more fully described in the footnotes thereto. In case of a partial
tender for exchange, a new certificate, in fully registered form, for the
remainder of the principal amount of the Series A Notes, will be sent to the
holders of Series A Notes unless otherwise indicated in the appropriate box on
this Letter of Transmittal as promptly as practicable after the expiration or
termination of the Exchange Offer.
6.SIGNATURES ON THIS LETTER OF TRANSMITTAL, POWERS OF ATTORNEY AND
ENDORSEMENTS.
(a) The signature(s) of the holder of Series A Notes on this Letter of
Transmittal must correspond with the name(s) as written on the face of the
Series A Notes without alternation, enlargement or any change whatsoever.
(b) If tendered Series A Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
(c) If any tendered Series A 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 of Transmittal and any necessary or required
documents as there are different registrations or certificates.
(d) When this Letter of Transmittal is signed by the holder of the Series A
Notes listed and transmitted hereby, no endorsements of Series A Notes or
separate powers of attorney are required. If, however, Series A Notes not
tendered or not accepted, are to be issued or returned in the name of a person
other than the holder of Series A Notes, then the Series A Notes transmitted
hereby must be endorsed or accompanied by appropriate powers of attorney in a
form satisfactory to the Company, in either case signed exactly as the name(s)
of the holder of Series A Notes appear(s) on the Series A Notes. Signatures on
such Series A Notes or powers of attorney must be guaranteed by an Eligible
Institution (unless signed by an Eligible Institution).
(e) If this Letter of Transmittal or Series A Notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or
11
<PAGE> 12
representative capacity, such persons should so indicate when signing, and
proper evidence satisfactory to the Company of their authority so to act must be
submitted.
(f) If this Letter of Transmittal is signed by a person other than the
registered holder of Series A Notes listed, the Series A Notes must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name(s) of the registered holder of Series A Notes appear(s) on the
certificates. Signatures on such Series A Notes or powers of attorney must be
guaranteed by an Eligible Institution (unless signed by an Eligible
Institution).
7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company
will pay all transfer taxes, if any, applicable to the transfer and exchange of
Series A Notes pursuant to the Exchange Offer. If, however, issuance of Series B
Notes is to be made to, or Series A Notes not tendered for exchange are to be
issued or returned in the name of, any person other than the holder of Series A
Notes, and satisfactory evidence of payment of such taxes or exemptions from
taxes therefrom is not submitted with this Letter of Transmittal, the amount of
any transfer taxes payable on account of the transfer to such person will be
imposed on and payable by the holder of Series A Notes tendering Series A Notes
for exchange prior to the issuance of the Series B Notes.
8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Series B Notes are
to be issued, or if any Series A Notes not tendered for exchange are to be
issued or sent to someone other than the holder of Series A Notes or to an
address or other than that shown above, the appropriate boxes on this Letter of
Transmittal should be complete. Holders of Series A Notes tendering Series A
Notes by book-entry transfer may request that Series A Notes not accepted be
credited to such account maintained at the Depositary as such holder of Series A
Notes may designate.
9. IRREGULARITIES. All questions as to the form of documents and the
validity, eligibility (including time or receipt), acceptance and withdrawal of
Series A Notes will be determined by the Company, in its sole discretion, whose
determination shall be final and binding. The Company reserves the absolute
right to reject any or all tenders for exchange of any particular Series A Notes
that are not in proper form, or the acceptance of which would, in the opinion of
the Company or its counsel, be unlawful. The Company reserves the absolute right
to waive any defect, irregularity or condition of tender for exchange with
regard to any particular Series A Notes. The Company's interpretation of the
term of, and conditions to, the Exchange Offer (including the instructions
herein) will be final and binding. Unless waived, any defects or irregularities
in connection with the Exchange Offer must be cured within such time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notice of any defects or irregularities
in Series A Notes tendered for exchange, nor shall any of them incur any
liability for failure to give such notice. A tender of Series A Notes will not
be deemed to have been made until all defects and irregularities with respect to
such tender have been cured or waived. Any Series A Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive, amend or modify certain of the specified conditions as described under
"The Exchange Offer--Conditions of the Exchange Offer" in the Prospectus in the
case of any Series A Notes tendered (except as otherwise provided in the
Prospectus).
12
<PAGE> 13
11. MUTILATED, LOST, STOLEN OR DESTROYED SERIES A NOTES. If a holder of
Series A Notes desires to tender Series A Notes pursuant to the Exchange Offer,
but any of such Series A Notes has been mutilated, lost, stolen or destroyed,
such holder of Series A Notes should write to or telephone the Trustee at the
address listed below, concerning the procedures for obtaining replacement
certificates for such Series A Notes, arranging for indemnification or any other
matter that requires handling by the Trustee:
American Bank National Association
101 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Department
(612) 229-2600
12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for
information or for additional copies of the Prospectus and this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover of this Letter of Transmittal.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF, IF
APPLICABLE) TOGETHER WITH CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY OR THE
NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED
BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION
DATE.
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of Series A Notes whose
tendered Series A Notes are accepted for exchange may be subject to backup
withholding unless the holder provides the Company (as payor), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Series A
Notes is awaiting a TIN) and that (A) the holder of Series A Notes has not been
notified by the Internal Revenue Service that he or she is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the Internal Revenue Service has notified the holder of Series A Notes that he
or she is no longer subject to backup withholding; or (ii) an adequate basis for
exemption from backup withholding. If such holder of Series A Notes is an
individual, the TIN is such holder's social security number. If the Exchange
Agent is not provided with the correct taxpayer identification number, the
holder of Series A Notes may be subject to certain penalties imposed by the
Internal Revenue Service.
Certain holders of Series A Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt holders of Series A Notes should
indicate their exempt status on Substitute Form W-9. A foreign individual may
qualify as an exempt recipient by submitting to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (which the Exchange Agent will
provide upon request) signed under penalty of perjury, attesting to the holder's
exempt status. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "Guidelines") for additional
instructions.
If backup withholding applies, the Company is required to withhold 31% of
any payment made to the holder of Series A Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
The holder of Series A Notes is required to give the Exchange Agent the TIN
(e.g., social security number or employer identification number) of the record
owner of the Series A Notes. If the Series A Notes are held in more than one
name or are not held in the name of the actual owner, consult the enclosed
Guidelines for additional guidance regarding which number to report.
13
<PAGE> 14
PAYER'S NAME:
<TABLE>
<C> <S> <C> <C>
- --------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE Social Security Number
FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND OR
DATING BELOW ------------------------------
Employer Identification Number
------------------------------------------------------------------------------------
PART 2 -- Certification Under Penalties of Perjury, I certify PART 3
that:
(1) The number shown on this form is my current taxpayer Awaiting TIN / /
identification number (or I am waiting for a number to be
DEPARTMENT OF THE TREASURY issued to me) and
INTERNAL REVENUE SERVICE (2) I am not subject to backup withholding either because I have
not been notified by the Internal Revenue Service (the "IRS")
that I am subject to backup withholding as a result of
failure to report all interest or dividends, or the IRS has
notified me that I am no longer subject to backup
withholding.
------------------------------------------------------------------------------------
Certificate instructions -- You must cross out item (2) in Part 2 above if you have
been notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you receive another
PAYER'S REQUEST FOR TAXPAYER notification from the IRS stating that you are no longer subject to backup
IDENTIFICATION NUMBER withholding, do not cross out item (2).
(TIN) Signature Date , 199
------------------------------------------ ---------------- ------
Name
-------------------------------------------------------------------------------
Address
----------------------------------------------------------------------------
City State Zip Code
------------------------------------------ -------------- --------
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENT 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.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECK
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
PAYOR'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or
delivered an application to receive a taxpayer identification number to
the appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number within (60) days, 31% of all reportable payments
made to me thereafter will be withheld until I provide such a number.
<TABLE>
<S> <C>
, 199
- ------------------------------------------------ ------------------- -----
Signature Date
</TABLE>
14
<PAGE> 15
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF
EXIDE ELECTRONICS GROUP, INC.'S
11 1/2% SENIOR SUBORDINATED NOTES DUE 2006
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1996 (the "Prospectus") of Exide Electronics Group, Inc., a Delaware
corporation (the "Company") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the 11 1/2% Senior
Subordinated Notes due 2006 (the "Series A Notes") held by you for the account
of the undersigned.
The aggregate face amount of the Series A Notes held by you for the account
of the undersigned is (fill in amount):
$ of the Series A Notes.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
/ / To TENDER the following Series A Notes held by you for the account
of the undersigned (insert principal amount of Series A Notes to
be tendered, if any):
$ of the Series A Notes.
/ / NOT to TENDER any Series A Notes held by you for the account of
the undersigned.
If the undersigned instructs you to tender the Series A Notes held by you
for the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner of the Series A Notes, including but not limited to the
representations that (i) the undersigned's principal residence is in the state
of (fill in state) , (ii) the undersigned is acquiring the
Series B Notes in the ordinary course of business of the undersigned, (iii) the
undersigned is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of Series B Notes, (iv) the undersigned acknowledges that any person
participating in the Exchange Offer for the purpose of distributing the Series B
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended, in connection with any resale
transaction of the Series B Notes acquired by such person and cannot rely on the
position of the Staff of the Securities and Exchange Commission set forth in
certain no-action letters (See the section of the Prospectus entitled "The
Exchange Offer--Resales of the Series B Notes"), (v) the undersigned understands
that a secondary resale transaction described in clause (iv) above should be
covered by an effective registration statement containing the selling
securityholder information required by Item 507 or Item 508, if applicable, of
Regulation S-K of the Commission, (vi) the undersigned is not an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company, (vii) if the
undersigned is not a broker-dealer, that it is not engaged in, and does not
intend to engage in, a distribution of Series B Notes; and (viii) if the
undersigned is a broker-dealer that will receive Series B Notes for its own
account in exchange for Series A Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Series B Notes received in respect of such
Series A Notes pursuant to the Exchange Offer; 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; (b) to agree, on
behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to
take such other action as necessary under the Prospectus or the Letter of
Transmittal to effect the valid tender of Series A Notes.
15
<PAGE> 16
SIGN HERE
Name of Beneficial Owner(s):
---------------------------------------------------
Signature(s):
------------------------------------------------------------------
Name(s) (please print):
--------------------------------------------------------
Address:
-----------------------------------------------------------------------
Telephone Number:
--------------------------------------------------------------
Taxpayer Identification or Social Security Number:
-----------------------------
Date:
--------------------------------------------------------------------------
16
