<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 12, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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SYNTHETIC INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2221 58-1049400
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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<TABLE>
<C> <C>
LEONARD CHILL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
309 LAFAYETTE ROAD SYNTHETIC INDUSTRIES, INC.
CHICKAMAUGA, GEORGIA 30707 309 LAFAYETTE ROAD
(706) 375-3121 CHICKAMAUGA, GEORGIA 30707
(Address, including zip code, and telephone (706) 375-3121
number, including (Name, address, including zip code, and
area code, of Registrant's principal executive telephone number,
offices) including area code, of agent for service)
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COPIES OF COMMUNICATIONS TO:
<TABLE>
<C> <C>
MARK ZVONKOVIC, ESQ. THOMAS R. POLLOCK, ESQ.
ANDREWS & KURTH L.L.P. PAUL, HASTINGS, JANOFSKY & WALKER LLP
425 LEXINGTON AVENUE 399 PARK AVENUE
NEW YORK, NEW YORK 10017 NEW YORK, NEW YORK 10022
(212) 850-2800 (212) 318-6000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement is declared
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9 1/4% Senior Subordinated Notes
due 2007........................ $170,000,000 100% $170,000,000 $51,515
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee.
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
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 12, 1997
PROSPECTUS
SYNTHETIC INDUSTRIES, INC.
OFFER TO EXCHANGE ITS
9 1/4% SENIOR SUBORDINATED NOTES DUE 2007 (SERIES B)
FOR ANY AND ALL OF ITS OUTSTANDING
9 1/4% SENIOR SUBORDINATED NOTES DUE 2007 (SERIES A)
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED.
Synthetic Industries, Inc., a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus (as the same may be amended or supplemented from time to time, the
"Prospectus") and in the accompanying Letter of Transmittal (the "Letter of
Transmittal") (which together constitute the "Exchange Offer"), to exchange up
to $170,000,000 aggregate principal amount of its 9 1/4% Senior Subordinated
Notes due 2007 (Series B) (the "New Notes"), the offer and sale of which has
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for a like principal amount of its outstanding
9 1/4% Senior Subordinated Notes due 2007 (Series A) (the "Old Notes"), of which
$170,000,000 aggregate principal amount is outstanding. The Old Notes and the
New Notes are together referred to herein as the "Notes."
The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except that the offer and sale of New Notes have been
registered under the Securities Act. The New Notes, therefore, will not be
subject to certain restrictions on transfer applicable to the Old Notes and will
not be entitled to registration rights or other rights under the Registration
Rights Agreement (as defined below). See "The Exchange Offer." The New Notes are
being offered for exchange in order to satisfy certain obligations of the
Company under the Registration Rights Agreement, dated as of February 11, 1997
(the "Registration Rights Agreement"), between the Company and the Initial
Purchaser (as defined herein) of the Old Notes. The New Notes will be issued
under, and be entitled to the benefits of, the same Indenture (as defined
herein) as the Old Notes and the New Notes and the Old Notes will for all
purposes be deemed to be a single series of debt securities under the Indenture.
In the event that the Exchange Offer is consummated, any Old Notes which remain
outstanding after consummation of the Exchange Offer and the New Notes issued in
the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding principal
amount of Notes have taken certain actions or exercised certain rights under the
Indenture. See "Description of the New Notes" and "Description of the Old
Notes."
Interest on the New Notes is payable semiannually on February 15 and August
15 of each year (each, an "Interest Payment Date"), commencing on the first such
date following the original issuance date of the New Notes. The New Notes will
mature on February 15, 2007. The New Notes will be redeemable at the option of
the Company, in whole or in part, at any time on or after February 15, 2002 at
the redemption prices set forth herein, plus accrued and unpaid interest, if
any, thereon (plus Liquidated Damages (as defined herein), if any) to the date
of redemption. Notwithstanding the foregoing, on or prior to February 15, 2000,
the Company may redeem at any time or from time to time up to 35% of the
aggregate principal amount of the New Notes originally issued at a redemption
price of 109.25% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon (plus Liquidated Damages, if any) to the redemption
date, with the net proceeds of one or more Public Equity Offerings (as defined
herein); provided, however, that at least $110.5 million in aggregate principal
amount of the New Notes remain outstanding following each such redemption. Upon
the occurrence of a Change of Control (as defined herein), the Company will be
required to make an offer to repurchase all or any part of the New Notes at a
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, thereon (plus Liquidated Damages, if any) to the date of
repurchase. See "Description of the New Notes."
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 , 1997.
<PAGE> 3
The Company is making the Exchange Offer in reliance on the position of the
staff of the Division of Corporation Finance of the Securities and Exchange
Commission (the "Commission") as set forth in certain No-Action Letters issued
to Morgan Stanley & Co. Incorporated (available June 5, 1991) (the "Morgan
Stanley Letter"), Exxon Capital Holdings Corp. (available April 13, 1988), and
Shearman & Sterling (available July 2, 1993), and certain other interpretive
letters addressed to third parties in other transactions. However, the Company
has not sought its own interpretive letter and there can be no assurance that
the staff of the Division of Corporation Finance of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Division of Corporation Finance of the Commission, and subject to
the two immediately following sentences, the Company believes that New Notes
issued pursuant to this Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a holder thereof (other than a
holder who is a broker-dealer) without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
New Notes are acquired in the ordinary course of such holder's business and that
such holder is not participating, and has no arrangement or understanding with
any person to participate, in a distribution (within the meaning of the
Securities Act) of such New Notes. However, any holder of Old Notes that is an
"affiliate" of the Company or that intends to participate in the Exchange Offer
for the purpose of distributing New Notes, or any broker-dealer who purchased
Old Notes from the Company to resell pursuant to Rule 144A under the Securities
Act ("Rule 144A") or any other available exemption under the Securities Act, (a)
will not be able to rely on the interpretations of the staff of the Division of
Corporation Finance of the Commission set forth in the Morgan Stanley Letter and
the other above-mentioned interpretive letters, (b) will not be permitted or
entitled to tender such Old Notes in the Exchange Offer and (c) must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Notes unless such sale is
made pursuant to an exemption from such requirements. In addition, as described
below, if any broker-dealer holds Old Notes acquired for its own account as a
result of market-making or other trading activities and exchanges such Old Notes
for New Notes, then such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such New
Notes.
Each holder of Old Notes who wishes to exchange Old Notes for New Notes in
the Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Company, (ii) any New Notes to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes, and (iv) if such holder is not
a broker-dealer, such holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities Act) of such New Notes.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Old Notes for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New 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. Based on the position taken by the staff of the
Division of Corporation Finance of the Commission in the interpretive letters
referred to above, the Company believes that broker-dealers who acquired Old
Notes for their own accounts, as a result of market-making activities or other
trading activities ("Participating Broker-Dealers") may fulfill their prospectus
delivery requirements with respect to the New Notes received upon exchange of
such Old Notes (other than Old Notes which represent an unsold allotment from
the original sale of the Old Notes) with a prospectus meeting the requirements
of the Securities Act, which may be the prospectus prepared for an exchange
offer so long as it contains a description of the plan of distribution with
respect to the resale of such New Notes. Accordingly, this Prospectus, as it may
be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer during the period referred to below in connection with resales of
New Notes received in exchange for Old Notes where such Old Notes were acquired
by such Participating Broker-Dealer for its own account as a result of
market-making or other trading activities. Subject to certain provisions set
forth in the Registration Rights Agreement, the Company has agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of such New Notes
for a period ending 180 days
2
<PAGE> 4
(subject to extension under certain limited circumstances described below) after
the Expiration Date (as defined below) or, if earlier, when all such New Notes
have been disposed of by such Participating Broker-Dealer. However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of New Notes received in exchange for Old Notes pursuant to the
Exchange Offer must notify the Company, or cause the Company to be notified, on
or prior to the Expiration Date, that it is a Participating Broker-Dealer. Such
notice may be given in the space provided for that purpose in the Letter of
Transmittal or may be delivered to the Exchange Agent at one of the addresses
set forth herein under "The Exchange Offer -- Exchange Agent." See "Plan of
Distribution." Any Participating Broker-Dealer who is an "affiliate" of the
Company may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. See "The Exchange Offer -- Resales of
New Notes."
In that regard, each Participating Broker-Dealer who surrenders Old Notes
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any material
respect or which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in light of the circumstances under which they were made, not misleading
or of the occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the sale of New
Notes pursuant to this Prospectus until the Company has amended or supplemented
this Prospectus to correct such misstatement or omission and has furnished
copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company has given notice that the sale of the New Notes may
be resumed, as the case may be. If the Company gives such notice to suspend the
sale of the New Notes, it shall extend the 180-day period referred to above
during which Participating Broker-Dealers are entitled to use this Prospectus in
connection with the resale of New Notes by the number of days in the period from
and including the date of the giving of such notice to and including the date
when the Company shall have made available to Participating Broker-Dealers
copies of the supplemented or amended Prospectus necessary to resume resales of
the New Notes or to and including the date on which the Company has given notice
that the use of the applicable Prospectus may be resumed, as the case may be.
Prior to the Exchange Offer, there has been no public market for the Old
Notes or the New Notes. Although the Initial Purchaser has informed the Company
that it currently intends to make a market in the New Notes, it is not obligated
to do so, and any such market-making activities with respect to the New Notes
may be discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes.
The Company currently does not intend to apply for listing of the New Notes on
any securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and will be subject to the
limitations applicable thereto under the Indenture (except for those rights
which terminate upon consummation of the Exchange Offer). Following consummation
of the Exchange Offer, the holders of Old Notes will continue to be subject to
the existing restrictions upon transfer thereof and the Company will have no
further obligation to such holders (other than to the Initial Purchaser under
certain limited circumstances) to provide for registration under the Securities
Act of the Old Notes held by them. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered Old Notes
could be adversely affected. See "Risk Factors -- Certain Consequences of a
Failure to Exchange Old Notes."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
Old Notes may be tendered for exchange on or prior to 5:00 p.m., New York
City time, on , 1997 (such time on such date being hereinafter
called the "Expiration Date"), unless the Exchange Offer is extended by the
Company (in which case the term "Expiration Date" shall mean the latest date and
time to
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<PAGE> 5
which the Exchange Offer is extended). Tenders of Old Notes may be withdrawn at
any time on or prior to the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. However, the Exchange Offer is subject to certain events and
conditions which may be waived by the Company and to the terms and provisions of
the Registration Rights Agreement. Old Notes may be tendered in whole or in part
in a principal amount of $1,000 and integral multiples thereof. The Company has
agreed to pay all expenses of the Exchange Offer. See "The Exchange
Offer -- Fees and Expenses." Each New Note will bear interest from the most
recent date to which interest has been paid or duly provided for on the Old Note
surrendered in exchange for such New Note or, if no such interest has been paid
or duly provided for on such Old Note, from February 11, 1997. Holders of the
Old Notes whose Old Notes are accepted for exchange will not receive accrued
interest on such Old Notes for any period from and after the last Interest
Payment Date to which interest has been paid or duly provided for on such Old
Notes prior to the original issue date of the New Notes or, if no such interest
has been paid or duly provided for, will not receive any accrued interest on
such Old Notes, and will be deemed to have waived the right to receive any
interest on such Old Notes accrued from and after such Interest Payment Date or,
if no such interest has been paid or duly provided for, from and after February
11, 1997.
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of , 1997.
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. No dealer-manager is being used in connection with this
Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of the Old Notes in any jurisdiction in which the
making of the Exchange Offer or acceptance thereof would not be in compliance
with the laws of such jurisdiction or would otherwise not be in compliance with
any provision of any applicable security law.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and at the Commission's Regional Offices in New York (Seven World
Trade Center, 13th Floor, New York, New York 10048), and Chicago (Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661). Copies of
these materials may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
In addition, such reports, proxy statements and other information may be
electronically accessed at the Commission's site on the World Wide Web located
at http://www.sec.gov. Such reports, proxy statements and other information
concerning the Company may also be inspected at the offices of the Nasdaq
National Market, 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments thereto, the "Registration Statement") filed by
the Company with the Commission under the Securities Act. This Prospectus, which
forms a part of the Registration Statement, does not contain all the information
set forth in the Registration Statement, certain parts of which have been
omitted in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and related exhibits and
schedules filed therewith for further information with respect to the Company
and the New Notes offered hereby. Statements contained herein concerning the
provisions of any contract, agreement or other document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed or incorporated by reference as an exhibit to the Registration Statement
or otherwise filed by the Company with the Commission and each such statement is
qualified in its entirety by such reference. The Registration Statement and the
exhibits and schedules thereto may be inspected and copied at the public
reference facilities maintained by the Commission at the addresses set forth
above.
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<PAGE> 6
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and financial
data, including the Consolidated Financial Statements and notes thereto,
appearing elsewhere in this Prospectus. The terms "SI" and "Company" refer to
Synthetic Industries, Inc. and its subsidiaries, unless otherwise stated or
indicated by the context. References to a "fiscal" year refer to the Company's
fiscal year which ends on September 30 (e.g., "fiscal 1996" means the Company's
fiscal year ended September 30, 1996).
THE COMPANY
Synthetic Industries, Inc. ("SI" or the "Company") is one of the world's
leading producers of polypropylene fabrics and fibers for the home furnishing,
construction, environmental, recreational and agricultural industries. The
Company manufactures and sells more than 2,000 products in over 65 end-use
markets. The Company believes that it is the second largest producer of carpet
backing in the world and is the largest producer of synthetic fiber additives
for concrete reinforcement through its Fibermesh(R) line of products. SI also
produces polypropylene products for the geotextile and erosion control markets
and is a leader in designing innovative products for specialty applications. The
Company's products are engineered to meet specific customer criteria such as
strength, flexibility, resistance to sunlight, water/air permeability and
resistance to bacteria. The Company aims to compete in markets in which it can
be the primary or secondary provider of such products, with over 93% of its
products meeting this criterion. The Company's consolidated sales have grown
from $196 million in fiscal 1992 to $300 million in fiscal 1996.
The Company's products are sold along three principal product lines: carpet
backing, construction and civil engineering products, and technical textiles.
The Company has a worldwide presence in carpet backing, a woven fabric used in
all modern tufted carpets, and is one of the two leading manufacturers in the
U.S. that produce a broad range of primary and secondary carpet backing. Carpet
backing accounted for approximately 49% of the Company's fiscal 1996 sales. The
Company's construction and civil engineering products are its fastest growing
product line and include fiber additives for concrete reinforcement and
environmental and geotextile products used in roadways, landfills and building
sites to stabilize soils and control erosion. The Company's sales to the
construction and civil engineering market have grown from approximately $35
million in fiscal 1992 to approximately $97 million in fiscal 1996. These
products represented approximately 32% of the Company's total sales in fiscal
1996, up from approximately 18% of total sales in fiscal 1992. The Company's
technical textile products are comprised of specialty fabrics, industrial yarns
and fibers used in diverse applications such as filtration (e.g., wastewater
treatment, air filtration and bauxite mining), agriculture (e.g., shade cloth
and ground cover) and recreation (e.g., swimming pool covers and trampoline
mats). These products are highly engineered to meet niche customer applications
and represented approximately 19% of fiscal 1996 sales. The Company's products
are principally sold through direct sales to customers by the Company's sales
force and through a broad network of distributors located across North and South
America, Europe and the Pacific Rim.
Management believes that the Company has a reputation in its markets as a
high quality, cost-efficient manufacturer. The Company is committed to
maintaining its market leadership and reputation for innovation through capital
investment in facilities and state-of-the-art equipment, by hiring and training
skilled employees and through process control standards and productivity
improvements. The Company has been awarded ISO-9002 certification at all of its
manufacturing facilities by the International Standards Organization ("ISO"),
and believes it is the only U.S. manufacturer in a majority of its markets to
have been awarded such certification. SI invested approximately $113 million in
expansion capital during the five year period ended September 30, 1996,
primarily for equipment purchases to increase manufacturing capacity. This
investment included a $35 million, 130,000 square foot expansion of its largest
manufacturing facility completed in August 1996 which, based on existing product
prices and demand, should increase the Company's sales by as much as $30 million
for fiscal 1997. The Company anticipates that ongoing maintenance capital
expenditures will be less than $5 million per year. Additional capital
expenditures, if any, will be focused on expansion opportunities, subject to
market conditions. The Company is one of the largest independent consumers of
polypropylene in the world. The Company believes its position as a vertically-
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<PAGE> 7
integrated manufacturer -- performing each step in the conversion of
polypropylene into value-added end products -- provides a competitive advantage
by allowing the Company to manufacture high quality products to customer's
specifications, while controlling manufacturing costs.
The Company's principal business strategy is to leverage its market
presence in its core businesses into additional growth while maintaining its
market position as a high quality, cost-efficient manufacturer. The primary
components of this strategy are:
- Expand Penetration of Existing Markets. The Company is committed to
expanding sales in markets where it currently has a leadership position
by increasing market penetration through the offering of a broader
product line to meet its customers' varied needs and by expanding its
customer base. The Company is pursuing this goal through: (i) the
expansion of geographical coverage of its sales efforts; (ii) the
development of applications-oriented marketing efforts that focus on the
Company's product solutions as alternatives to traditional industry
practices; (iii) increased customer acceptance of its products created
through stringent quality standards and industry accreditation for its
test labs; and (iv) the use of in-house technical consultants to educate
industry leaders as to the cost savings offered by the Company's products
as compared to traditional solutions. The Company has experienced success
with this strategy, as evidenced by the growth of its civil engineering
product line for which sales have increased from approximately $31
million in fiscal 1994 to approximately $55 million in fiscal 1996.
Within this product line, the Company has focused on the roadway and
building sites, erosion control and waste containment sectors. Among
other products, nonwoven geotextile sales to the roadway and building
site markets have grown from approximately $13 million in fiscal 1994 to
approximately $19 million in fiscal 1996. In addition, the Company has
expanded its presence in international markets primarily through
additional distribution arrangements, increased marketing efforts focused
primarily on major international construction projects and the expansion
of its international sales force. As a result, total international sales
increased from approximately $25 million in fiscal 1994 to approximately
$33 million in fiscal 1996.
- Develop Innovative Products. The Company seeks to develop innovative
products and modify existing products in response to specific customer
needs and to establish new markets through the development of novel
applications for its existing products. By increasing its expenditures
for research, product development and marketing, the Company believes it
will be able to capitalize on its manufacturing strengths and
distribution network to introduce new value added products and extend
product lines to complement its existing product base. For example,
within the Company's Fibermesh(R)product line, a specially designed
Fibermesh(R)MD product provides after-crack strength retention to
concrete, thus mitigating immediate failure of the concrete. Since its
introduction in 1991, sales of Fibermesh(R)MD have grown to approximately
$27 million in fiscal 1996.
- Strengthen Market Position in Carpet Backing. The Company intends to
increase its carpet backing market share through: (i) continued capital
investment in state-of-the-art equipment for additional carpet backing
production capacity; (ii) expansion of sales in the growing commercial
carpet sector of the domestic market; and (iii) the continued development
and strengthening of its relationships with key customers. As an example
of this strategy, in August 1996 the Company completed an expansion at
its largest facility that has increased the Company's current capacity in
carpet backing by approximately 16%.
- Continue to Improve Manufacturing Efficiencies and Expand Manufacturing
Capacity. The Company has continued to invest in capital improvements and
new facilities to expand capacity, add new capabilities and enhance
production technologies, and in August 1996 completed a major expansion
at its largest manufacturing facility in order to take advantage of
opportunities in both the carpet backing and geotextile markets. The
Company plans to continue to spend additional capital to increase its
manufacturing capability for primary and secondary carpet backing and
woven and nonwoven geotextiles, subject to prevailing market conditions.
- Pursue Strategic Acquisitions. The Company is continually evaluating the
potential acquisition of companies, technologies or products which will
complement its existing product lines and manufactur-
6
<PAGE> 8
ing and distribution strengths. Acquisition opportunities will be evaluated
based on the strategic fit, the expected return on capital invested and the
ability of management to improve the profitability of acquired operations
through cost reductions and other synergies with existing operations.
While the Company's sales have grown in each of the past five years, the
Company's operating income has fluctuated due to a variety of factors,
principally related to changes in the cost of polypropylene, the Company's
primary raw material. The Company believes that the sales prices of its products
will adjust over time to reflect changes in polypropylene costs, although such
cost changes favorably affected operating results for fiscal 1994 and adversely
affected operating results for fiscal 1995 and the first half of fiscal 1996. In
the second half of fiscal 1996, these movements positively affected the
Company's operating income, which increased by 97% to approximately $29 million
for the third and fourth quarters of fiscal 1996 from approximately $15 million
for the comparable periods of fiscal 1995. These favorable conditions continued
in the first quarter of fiscal 1997 with operating income increasing 119% to
$7,347 from $3,356 for the same period of fiscal 1996.
RECENT DEVELOPMENTS
On February 11, 1997, the Company issued $170 million aggregate principal
amount of Old Notes (the "Old Notes Offering"). The net proceeds of the Old
Notes Offering were used by the Company to (i) repurchase an aggregate of
$132,597,000 principal amount of the Company's 12 3/4% Senior Subordinated
Debentures due December 1, 2002 (the "Debentures") and pay premiums and consent
fees related thereto pursuant to an Offer to Purchase and Consent Solicitation
(the "Purchase Offer") to repurchase all of the Company's outstanding $140
million principal amount of Debentures and (ii) to reduce the Company's
indebtedness under the Company's Fourth Amended and Restated Revolving Credit
and Security Agreement, dated as of October 20, 1995, as subsequently amended
(the "Credit Facility"), among the Company, the financial institutions party
thereto, as the lenders (the "Lenders"), and The First National Bank of Boston,
as agent for the Lenders.
On February 27, 1997, the Company acquired all of the equipment and certain
other assets of a needlepunch nonwoven manufacturer, for approximately $9.4
million in cash. Pro forma results of operations are not presented because the
effects of the acquisition are not significant.
THE EXCHANGE OFFER
The Exchange Offer......... Up to $170,000,000 aggregate principal amount of
New Notes are being offered in exchange for a like
aggregate principal amount of Old Notes. Old Notes
may be tendered for exchange in whole or in part in
a principal amount of $1,000 and integral multiples
thereof. The Company is making the Exchange Offer
in order to satisfy its obligations under the
Registration Rights Agreement relating to the Old
Notes. For a description of the procedures for
tendering Old Notes, see "The Exchange
Offer -- Procedures for Tendering Old Notes."
Expiration Date............ 5:00 p.m., New York City time, on ,
1997 unless the Exchange Offer is extended by the
Company (in which case the term "Expiration Date"
shall mean the latest date and time to which the
Exchange Offer is extended). See "The Exchange
Offer -- Expiration Date; Extensions; Amendments."
Certain Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain
conditions. The Company reserves the right in its
sole and absolute discretion, subject to applicable
law and the terms of the Registration Rights
Agreement, at any time and from time to time, (i)
to delay the acceptance of the Old Notes for
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<PAGE> 9
exchange, (ii) to terminate the Exchange Offer if
certain specified conditions have not been
satisfied, (iii) to extend the Expiration Date of
the Exchange Offer and retain all Old Notes
tendered pursuant to the Exchange Offer, subject,
however, to the right of holders of Old Notes to
withdraw their tendered Old Notes, or (iv) to waive
any condition or otherwise amend the terms of the
Exchange Offer in any respect. See "The Exchange
Offer -- Expiration Date; Extensions; Amendments"
and "-- Certain Conditions to the Exchange Offer."
Withdrawal Rights.......... Tenders of Old Notes may be withdrawn at any time
on or prior to the Expiration Date by delivering a
written notice of such withdrawal to the Exchange
Agent in conformity with certain procedures set
forth below under "The Exchange Offer -- Withdrawal
Rights."
Procedures for Tendering
Old Notes................ Tendering holders of Old Notes must complete and
sign a Letter of Transmittal in accordance with the
instructions contained therein and forward the same
by mail, facsimile or hand delivery, together with
any other required documents, to the Exchange Agent
(as defined below), either with the Old Notes to be
tendered or in compliance with the specified
procedures for guaranteed delivery of Old Notes.
Certain brokers, dealers, commercial banks, trust
companies and other nominees may also effect
tenders by book-entry transfer. Holders of Old
Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee are
urged to contact such person promptly if they wish
to tender Old Notes pursuant to the Exchange Offer.
See "The Exchange Offer -- Procedures for Tendering
Old Notes." Letters of Transmittal and certificates
representing Old Notes should not be sent to the
Company. Such documents should only be sent to the
Exchange Agent. Questions regarding how to tender
and requests for information should be directed to
the Exchange Agent. See "The Exchange Offer --
Exchange Agent."
Resales of New Notes....... The Company is making the Exchange Offer in
reliance on the position of the staff of the
Division of Corporation Finance of the Commission
as set forth in certain No-Action Letters issued to
Morgan Stanley & Co. Incorporated (available June
5, 1991) (the "Morgan Stanley Letter"), Exxon
Capital Holdings Corp. (available April 13, 1988),
and Shearman & Sterling (available July 2, 1993),
and certain other interpretive letters addressed to
third parties in other transactions. However, the
Company has not sought its own interpretive letter
and there can be no assurance that the staff of the
Division of Corporation Finance of the Commission
would make a similar determination with respect to
the Exchange Offer as it has in such interpretive
letters to third parties. Based on these
interpretations by the staff of the Division of
Corporation Finance of the Commission and subject
to the two immediately following sentences, the
Company believes that New Notes issued pursuant to
this Exchange Offer in exchange for Old Notes may
be offered for resale, resold and otherwise
transferred by a holder thereof (other than a
holder who is a broker-dealer) without further
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that such New Notes are acquired in the
ordinary course of such holder's business and that
such holder is not participating, and has no
arrangement or understanding with any person to
participate, in a distribution
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<PAGE> 10
(within the meaning of the Securities Act) of such
New Notes. However, any holder of Old Notes that is
an "affiliate" of the Company or that intends to
participate in the Exchange Offer for the purpose
of distributing the New Notes, or any broker-dealer
who purchased the Old Notes from the Company to
resell pursuant to Rule 144A or any other available
exemption under the Securities Act, (a) will not be
able to rely on the interpretations of the staff of
the Division of Corporation Finance of the
Commission set forth in the Morgan Stanley Letter
and the other above-mentioned interpretive letters,
(b) will not be permitted or entitled to tender
such Old Notes in the Exchange Offer and (c) must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any sale or other transfer of such
Old Notes unless such sale is made pursuant to an
exemption from such requirements. In addition, as
described below, if any broker-dealer holds Old
Notes acquired for its own account as a result of
market-making or other trading activities and
exchanges such Old Notes for New Notes, then such
broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection
with any resales of such New Notes.
Each holder of Old Notes who wishes to exchange Old
Notes for New Notes in the Exchange Offer will be
required to represent that (i) it is not an
"affiliate" of the Company, (ii) any New Notes to
be received by it are being acquired in the
ordinary course of its business, (iii) it has no
arrangement or understanding with any person to
participate in a distribution (within the meaning
of the Securities Act) of such New Notes, and (iv)
if such holder is not a broker-dealer, such holder
is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the
Securities Act) of such New Notes. Each
broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer must
acknowledge that it acquired the Old Notes for its
own account as the result of market-making
activities or other trading activities and must
agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection
with any resale of such New 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. Based on
the position taken by the staff of the Division of
Corporation Finance of the Commission in the
interpretive letters referred to above, the Company
believes that broker-dealers who acquired Old Notes
for their own accounts as a result of market-making
activities or other trading activities
("Participating Broker-Dealers") may fulfill their
prospectus delivery requirements with respect to
the New Notes received upon exchange of such Old
Notes (other than Old Notes which represent an
unsold allotment from the original sale of the Old
Notes) with a prospectus meeting the requirements
of the Securities Act, which may be the prospectus
prepared for an exchange offer so long as it
contains a description of the plan of distribution
with respect to the resale of such New Notes.
Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with
resales of New Notes received in exchange for Old
Notes where such Old Notes were acquired by such
Participating Broker-Dealer for its own account as
a result of
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<PAGE> 11
market-making or other trading activities. Subject
to certain provisions set forth in the Registration
Rights Agreement and to the limitations described
below under "The Exchange Offer -- Resale of New
Notes," the Company has agreed that this
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such
New Notes for a period ending 180 days (subject to
extension under certain limited circumstances)
after the Expiration Date or, if earlier, when all
such New Notes have been disposed of by such
Participating Broker-Dealer. However, a
Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of New
Notes received in exchange for Old Notes pursuant
to the Exchange Offer must notify the Company, or
cause the Company to be notified, on or prior to
the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the
space provided for that purpose in the Letter of
Transmittal or may be delivered to the Exchange
Agent at one of the addresses set forth herein
under "The Exchange Offer -- Exchange Agent." See
"Plan of Distribution." Any Participating
Broker-Dealer who is an "affiliate" of the Company
may not rely on such interpretive letters and must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. See "The
Exchange Offer -- Resales of New Notes."
Exchange Agent............. The exchange agent with respect to the Exchange
Offer is United States Trust Company of New York
(the "Exchange Agent"). The addresses, and
telephone and facsimile numbers of the Exchange
Agent are set forth in "The Exchange
Offer -- Exchange Agent" and in the Letter of
Transmittal.
Use of Proceeds............ The Company will not receive any cash proceeds from
the issuance of the New Notes offered hereby. See
"Use of Proceeds."
Certain United States
Federal Income Tax
Considerations........... Holders of Old Notes should review the information
set forth under "Certain United States Federal
Income Tax Considerations" prior to tendering Old
Notes in the Exchange Offer.
THE NEW NOTES
Securities Offered......... Up to $170,000,000 aggregate principal amount of
the Company's 9 1/4% Senior Subordinated Notes due
2007 (Series B) which have been registered under
the Securities Act.
The New Notes will be issued and the Old Notes were
issued under an Indenture, dated as of February 11,
1997 (the "Indenture"), between the Company and
United States Trust Company of New York, as Trustee
(the "Trustee"). The New Notes and any Old Notes
which remain outstanding after consummation of the
Exchange Offer will for all purposes be deemed to
be a single series of debt securities under the
Indenture and, accordingly, will vote together as a
single class for purposes of determining whether
holders of the requisite percentage in outstanding
principal amount thereof have taken certain actions
or exercised certain rights under the Indenture.
See "Description of the New Notes -- General."
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<PAGE> 12
The terms of the New Notes are identical in all
material respects to the terms of the Old Notes,
except that the offer and sale of the New Notes
have been registered under the Securities Act. The
New Notes, therefore, will not be subject to
certain restrictions on transfer applicable to the
Old Notes and will not be entitled to registration
rights or other rights under the Registration
Rights Agreement. See "The Exchange
Offer -- Purpose of the Exchange Offer,"
"Description of the New Notes" and "Description of
the Old Notes."
Maturity Date.............. February 15, 2007.
Interest Payment Dates..... February 15 and August 15 of each year, commencing
August 15, 1997.
Denominations.............. The New Notes will be issued in minimum
denominations of $1,000 and integral multiples of
$1,000 in excess thereof.
Optional Redemption........ The New Notes will be redeemable at the option of
the Company, in whole or in part, at any time on or
after February 15, 2002, at the redemption prices
set forth herein, plus accrued and unpaid interest,
if any, thereon (plus Liquidated Damages, if any)
to the date of redemption. See "Description of the
New Notes -- Optional Redemption." Notwithstanding
the foregoing, on or prior to February 15, 2000,
the Company may redeem at any time or from time to
time up to 35% of the aggregate principal amount of
the New Notes originally issued at a redemption
price of 109.25% of the principal amount thereof,
plus accrued and unpaid interest, if any, thereon
(plus Liquidated Damages, if any) to the redemption
date, with the net proceeds of one or more Public
Equity Offerings; provided, however, that at least
$110.5 million in aggregate principal amount of the
New Notes remain outstanding following each such
redemption.
Change of Control Offer.... Upon the occurrence of a Change of Control, the
Company will be required to make an offer to
repurchase all or any part of the New Notes at a
price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any,
thereon (plus Liquidated Damages, if any) to the
date of repurchase. See "Description of the New
Notes -- Repurchase at the Option of
Holders -- Change of Control."
Ranking.................... The New Notes will be general unsecured obligations
of the Company, subordinated in right of payment to
all existing and future Senior Debt of the Company,
including all obligations of the Company under the
Credit Facility. As of December 31, 1996, after
giving effect to the Common Stock Offering (as
defined below), the Purchase Offer and the Old
Notes Offering, the Company had outstanding
approximately $27 million of Senior Debt. The New
Notes will be effectively subordinated to all
Indebtedness of the Company's subsidiaries (none at
December 31, 1996). See "Capitalization" and
"Description of the New Notes -- Subordination."
Certain Covenants.......... The Indenture contains certain covenants that,
among other things, limit the ability of the
Company and its Restricted Subsidiaries (as defined
herein) to incur additional Indebtedness, pay
dividends or make other distributions, repurchase
any capital stock or subordinated Indebtedness,
make certain investments, create certain liens,
enter into certain transactions with affiliates,
sell assets or enter into certain mergers and
consolidations. See "Description of the New
Notes -- Certain Covenants."
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<PAGE> 13
Absence of Market for the
New Notes................ The New Notes will be a new issue of securities for
which there currently is no market. Although Bear,
Stearns & Co. Inc., the initial purchaser of the
Old Notes (the "Initial Purchaser"), has informed
the Company that it currently intends to make a
market in the New Notes, it is not obligated to do
so, and any such market making may be discontinued
at any time without notice. Accordingly, there can
be no assurance as to the development or liquidity
of any market for the New Notes. The Company
currently does not intend to apply for listing of
the New Notes on any securities exchange or for
quotation through the National Association of
Securities Dealers Automated Quotation System.
For further information regarding the New Notes, see "Description of the
New Notes."
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<PAGE> 14
RISK FACTORS
Prospective investors should carefully review the information set forth
below, in addition to the other information set forth in this Prospectus, in
evaluating an investment in the Notes.
RAW MATERIAL PRICES AND AVAILABILITY
Polypropylene, a petroleum derivative, is the basic raw material used in
the manufacture of substantially all of the Company's products, accounting for
approximately 50% of the Company's cost of sales. The price of polypropylene is
primarily a function of manufacturing capacity, demand and the prices of
petrochemical feedstocks, crude oil and natural gas liquids. Historically, the
market price of polypropylene has fluctuated, such as in fiscal 1995 when the
average market cost of polypropylene was approximately 50% higher than in fiscal
1994. A significant increase in the price of polypropylene that cannot be passed
on to customers could have a material adverse effect on the Company's results of
operations and financial condition. There can be no assurance that the price of
polypropylene will not increase in the future or that the Company will be able
to pass on any such increase to its customers. In addition, significant
increases in demand for, or a significant disruption in supply of,
polypropylene, without a corresponding expansion of polypropylene manufacturing
capacity, could result in production shortages. Historically, the creation of
such additional facilities has helped to relieve supply pressures although there
can be no assurance that this will continue to be the case.
The Company's major suppliers of polypropylene are Fina Oil & Chemical
Company, Lyondell Polymers Company, Huntsman Polypropylene and Union Carbide.
The loss of any one of the Company's suppliers could adversely affect the
Company's business until alternative supply arrangements were secured. In
addition, there is no assurance that any new supply agreement entered into by
the Company would have terms comparable to those contained in current supply
arrangements. See "Business -- Raw Materials".
LEVERAGE
The Company is highly leveraged. As of December 31, 1996, the Company had
outstanding consolidated long-term debt (including current maturities) of
approximately $204 million, adjusted for the November 1, 1996 underwritten
public offering of 2,875,000 shares of Common Stock (the "Common Stock
Offering"), the Purchase Offer and the Old Notes Offering. The degree to which
the Company is leveraged could have important consequences to holders of Notes,
including: (i) impairment of the Company's ability to obtain additional
financing in the future; (ii) reduction of funds available to the Company for
its operations and general corporate purposes or for capital expenditures, as a
result of the dedication of a substantial portion of the Company's net cash flow
from operations to the payment of principal of and interest on the Company's
indebtedness, including indebtedness under the Notes; (iii) the possibility of
an event of default under financial and operating covenants contained in the
Company's debt instruments, including the Indenture, which, if not cured or
waived, could possibly have a material adverse effect on the Company; (iv) a
relative competitive disadvantage if the Company is substantially more leveraged
than its competitors; and (v) an inability to adjust to rapidly changing market
conditions and consequent vulnerability in the event of a downturn in general
economic conditions or its business because of the Company's reduced financial
flexibility. The Company's ability to make scheduled payments or to refinance
its obligations with respect to its indebtedness depends on its financial and
operating performance, which, in turn, is subject to prevailing economic
conditions and to financial, business and other factors beyond its control.
Although the Company's cash flow from its operations has historically been
sufficient to meet its debt service obligations, there can be no assurance that
the Company's operating results will continue to be sufficient for payment of
the Company's indebtedness, including indebtedness under the Notes. See
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources".
SUBORDINATION OF NOTES
The Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Debt of the
Company, including obligations under the Company's Fourth Amended and Restated
Revolving Credit and Security Agreement, dated as of October 20, 1995, as
subsequently
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<PAGE> 15
amended (the "Credit Facility"), among the Company, the financial institutions
party thereto as the lenders (the "Lenders"), and The First National Bank of
Boston, as agent for the Lenders. As of December 31, 1996, after giving effect
to the Common Stock Offering, the Purchase Offer and the Old Notes Offering, the
Company had outstanding Senior Debt of approximately $27 million. Subject to
certain limitations, the Indenture will permit the Company to incur additional
indebtedness, including Senior Debt. See "Description of the New
Notes -- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Disqualified Stock." In addition, the Notes will be effectively subordinated to
indebtedness of the Company's subsidiaries. The indebtedness under the Credit
Facility will also become due prior to the time the principal obligations under
the Notes become due. As a result of the subordination provisions contained in
the Indenture, in the event of a liquidation or insolvency of the Company, the
assets of the Company will be available to pay obligations on the Notes only
after all Senior Debt has been paid in full, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Notes then outstanding.
In addition, substantially all of the assets of the Company and its subsidiaries
may in the future be pledged to secure other indebtedness of the Company. See
"Description of the New Notes."
REPURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
make an offer to repurchase all or any part of the Notes at a price equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
thereon (plus Liquidated Damages, if any) to the date of repurchase. Certain
events involving a Change of Control may result in an event of default under the
Credit Facility and may result in an event of default under other indebtedness
of the Company that may be incurred in the future. An event of default under the
Credit Facility or other future Senior Debt could result in an acceleration of
such indebtedness, in which case the subordination provisions of the Notes would
require payment in full (or provision therefor) of such Senior Debt before the
Company may repurchase or make other payments in respect of the Notes. See
"Description of the New Notes -- Repurchase at the Option of Holders -- Change
of Control" and " -- Subordination of Notes." There can be no assurance that the
Company would have sufficient resources to repurchase the Notes or pay its
obligations if the indebtedness under the Credit Facility or other future Senior
Debt were accelerated upon the occurrence of a Change of Control. The inability
to repay Senior Debt of the Company, if accelerated, and to repurchase all of
the tendered Notes would constitute an event of default under the Indenture.
These provisions may be deemed to have anti-takeover effects and may delay,
defer or prevent a merger, tender offer or other takeover attempt. No assurance
can be given that the terms of any future indebtedness will not contain cross
default provisions based upon Change of Control or other defaults under such
debt instruments.
COMPETITION
The markets for the Company's products are highly competitive. In the
manufacture and sale of carpet backing, which represented in excess of 49% of
the Company's total net sales for the fiscal years ended 1996 and 1995,
respectively, the Company competes primarily with Amoco Fabrics and Fibers Co.
("Amoco"), a subsidiary of Amoco Corporation, and, to a lesser extent, certain
other companies. Amoco has the leading position in the carpet backing market
worldwide. In the manufacture and sale of the Company's other products, the
Company generally competes with a number of other companies, including, in some
cases, Amoco. Several of these competitors, particularly Amoco, are
significantly larger and have substantially greater resources than the Company.
The pricing policies of the Company's competitors have at certain times in the
past limited the Company's ability to increase its sales prices or caused the
Company to lower its sales prices. See "Business -- Products," " -- Marketing
and Sales" and " -- Raw Materials".
SIGNIFICANT CUSTOMER
For the fiscal years ended 1996 and 1995, Shaw Industries, Inc. ("Shaw"), a
major carpet manufacturer and long-time customer of the Company, was the
Company's largest single customer, accounting for approximately 18% of the
Company's total net sales and approximately 36% and 37%, respectively, of the
Company's carpet backing sales. If Shaw were to significantly reduce or
terminate its purchases of carpet
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<PAGE> 16
backing from the Company, the Company's results of operations and financial
condition could be materially adversely affected. The Company has no other
customers that account for greater than 10% of its total net sales. In fiscal
1996 and fiscal 1995, the Company's ten largest customers for carpet backing
accounted for approximately 78% and 77%, respectively, of its total net sales to
the carpet industry. See "Business -- Marketing and Sales -- Carpet Backing".
ENVIRONMENTAL
Certain local governments have adopted ordinances prohibiting or
restricting the use or disposal of certain polypropylene products. Widespread
adoption of such prohibitions or restrictions could adversely affect demand for
the Company's products and thereby have a material adverse effect upon the
Company. In addition, a decline in consumer preference for polypropylene
products due to environmental considerations could have a material adverse
effect upon the Company.
CERTAIN CONSEQUENCES OF A FAILURE TO EXCHANGE OLD NOTES
The issuance of the Old Notes was not registered under the Securities Act
or any state securities laws and therefore the Old Notes may not be offered,
sold or otherwise transferred except in compliance with the registration
requirements of the Securities Act and any other applicable securities laws, or
pursuant to an exemption therefrom or in a transaction not subject thereto, and
in each case in compliance with certain other conditions and restrictions,
including the Company's and the Trustee's right in certain cases to require the
delivery of opinions of counsel, certifications and other information prior to
any such transfer. Old Notes which remain outstanding after consummation of the
Exchange Offer will continue to bear a legend reflecting such restrictions on
transfer. In addition, upon consummation of the Exchange Offer, holders of Old
Notes which remain outstanding will not be entitled to any rights to have the
sale of such Old Notes registered under the Securities Act or to any similar
rights under the Registration Rights Agreement (subject to certain limited
exceptions applicable solely to the Initial Purchaser). The Company currently
does not intend to register under the Securities Act the sale of any Old Notes
which remain outstanding after consummation of the Exchange Offer (subject to
such limited exceptions, if applicable).
To the extent that Old Notes are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered Old Notes could be adversely
affected. In addition, although the Old Notes are eligible for trading in the
Private Offerings, Resale and Trading through Automatic Linkages ("PORTAL")
market, and Old Notes which remain outstanding after the consummation of the
Exchange Offer will continue to be so eligible, to the extent that Old Notes are
tendered and accepted in connection with the Exchange Offer, any trading market
for Old Notes which remain outstanding after the Exchange Offer could be
adversely affected.
The New Notes and any Old Notes which remain outstanding after consummation
of the Exchange Offer will constitute a single series of debt securities under
the Indenture and, accordingly, will vote together as a single class for
purposes of determining whether holders of the requisite percentage in
outstanding principal amount thereof have taken certain actions or exercised
certain rights under the Indenture. See "Description of the New
Notes -- General."
------------------------
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical facts included in this Prospectus, including, without
limitation, statements under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business" regarding the
Company's financial position, business strategy and plans and objectives of
management of the Company for future operations, constitute forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Cautionary statements
describing important factors that could cause actual results to differ
materially from the Company's expectations are disclosed under the caption "Risk
Factors" and elsewhere in this Prospectus, including, without limitation, in
conjunction with the forward-looking statements included in this Prospectus. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by such cautionary statements.
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<PAGE> 17
THE COMPANY
The Company is one of the world's leading producers of polypropylene
fabrics and fibers for the home furnishing, construction, environmental,
recreational and agricultural industries. The Company manufactures and sells
more than 2,000 products in over 65 end-use markets. The Company believes that
it is the second largest producer of carpet backing in the world and is the
largest producer of synthetic fiber additives for concrete reinforcement through
its Fibermesh(R) line of products. SI also produces polypropylene products for
the geotextile and erosion control markets and is a leader in designing
innovative products for specialty applications. The Company's products are
engineered to meet specific customer criteria such as strength, flexibility,
resistance to sunlight, water/air permeability and resistance to bacteria. The
Company aims to compete in markets in which it can be the primary or secondary
provider of such products, with over 93% of its products meeting this criterion.
The Company's consolidated sales have grown from $196 million in fiscal 1992 to
$300 million in fiscal 1996.
Approximately 67% of the issued and outstanding capital stock of the
Company is owned by Synthetic Industries, L.P., a Delaware limited partnership
(the "Partnership"). SI Management L.P., a Delaware limited partnership (the
"General Partner"), is the sole general partner of the Partnership and controls
the management and affairs of the Partnership and therefore the Company. SI
Management L.P. is controlled indirectly by Leonard Chill, Ralph Kenner, William
Gardner Wright, Jr. and W. Wayne Freed, current executive officers of the
Company, and Jon P. Beckman, a former executive officer of the Company. See
"Management -- Executive Officers and Directors of the Company" and "Certain
Relationships and Related Transactions".
The principal executive offices of the Company are located at 309 LaFayette
Road, Chickamauga, Georgia 30707, and the Company's telephone number is (706)
375-3121.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes in exchange for
Old Notes as described in this Prospectus, the Company will receive Old Notes in
like principal amount. The Old Notes surrendered in exchange for the New Notes
will be retired and canceled. Accordingly, the issuance of the New Notes will
not result in any change in the indebtedness of the Company.
The net proceeds to the Company from the sale of the Old Notes was
approximately $164.5 million. The Company used the net proceeds to fund the
Purchase Offer and to repay outstanding indebtedness under the Credit Facility.
The Credit Facility expires on October 1, 2001. On December 31, 1996, $45,000
was outstanding under the Credit Facility, at interest rates ranging from 8 1/4%
to 9 1/4%.
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CAPITALIZATION
The following table sets forth the capitalization of the Company (i) at
December 31, 1996, and (ii) as adjusted to give effect to (a) the Purchase Offer
and (b) the Old Notes Offering. The information presented below should be read
in conjunction with "Selected Consolidated Financial Information", "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and notes thereto appearing elsewhere in
this Prospectus. The exchange of the New Notes for the Old Notes will have no
effect on the cash position or capitalization of the Company.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------
ACTUAL AS ADJUSTED
---------- -------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C>
Cash and cash equivalents................................... $ 30,806 $ 22,770
Long-term debt(1):
Credit Facility(2):
Term loan portion......................................... $ 45,000 $ 21,000
12 3/4% Senior Subordinated Debentures due 2002............. 140,000 7,403
9 1/4% Senior Subordinated Debentures due 2007.............. -- 170,000
Capitalized lease obligation................................ 3,922 3,922
Other....................................................... 1,264 1,264
-------- --------
Total long-term debt...................................... 190,186 203,589
Less current portion........................................ 673 673
-------- --------
Long term debt, net....................................... 189,513 202,916
-------- --------
Stockholder's equity:
Common Stock $1.00 par value; 25,000,000 shares
authorized, 8,656,250 shares issued and outstanding;
and 8,656,250 shares issued and outstanding, as
adjusted(3)............................................ 8,656 8,656
Additional paid-in capital................................ 94,504 94,504
Cumulative translation adjustments........................ 15 15
Deficit(4)................................................ (2,567) (14,455)
-------- --------
Total stockholder's equity........................ 100,608 88,720
-------- --------
Total capitalization........................................ $290,121 $291,636
======== ========
</TABLE>
- ---------------
(1) For a description of the Company's long-term debt, see Note 9 of Notes to
Consolidated Financial Statements.
(2) At December 31, 1996, the amount available under the Credit Facility and as
adjusted for the Purchase Offer and the Old Notes Offering was $38,108. The
Company is currently in the process of renegotiating the Credit Facility.
(3) Excludes 638,397 shares of Common Stock at December 31, 1996 which are
subject to options granted under the Stock Option Plans, 327,289 of which
are subject to currently exercisable options.
(4) As Adjusted reflects an extraordinary loss from the early extinguishment of
debt of $11,888 resulting from the Purchase Offer.
17
<PAGE> 19
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA AND FINANCIAL RATIOS)
The statement of operations data for the fiscal years ended September 30,
1994, 1995 and 1996 and the balance sheet data as of September 30, 1995 and 1996
are derived from the Consolidated Financial Statements that have been audited by
Deloitte & Touche LLP, independent auditors, and are included elsewhere in this
Prospectus. The statement of operations data for the years ended September 30,
1992 and 1993 and the balance sheet data as of September 30, 1992, 1993 and 1994
are derived from audited financial statements of the Company that are not
included herein. The statement of operations and balance sheet data as of and
for the three month periods ended December 31, 1995 and 1996 have been derived
from the unaudited interim financial statements of the Company and include, in
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary to fairly present the data for such periods. The pro
forma financial data is provided for informational purposes only, is unaudited
and is not necessarily indicative of future results or what the operating
results would have been had the transactions actually been consummated as of the
beginning of the periods indicated. The following Selected Consolidated
Financial Information should be read in conjunction with the Consolidated
Financial Statements and the notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus. The exchange of the New Notes for the Old Notes will have no
effect on the cash position or capitalization of the Company.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, DECEMBER 31,
--------------------------------------------------------- ---------------------
1992 1993 1994 1995(1) 1996 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $ 195,739 $ 210,516 $ 234,977 $ 271,427 $ 299,532 $ 64,608 $ 70,857
Cost of sales.......................... 133,690 142,181 152,305 194,706 208,321 49,917 50,043
--------- --------- --------- --------- --------- --------- ---------
Gross profit........................... 62,049 68,335 82,672 76,721 91,211 14,691 20,814
Selling, general and administrative
expenses............................. 31,795 35,799 39,403 45,468 50,145 10,687 12,819
Amortization of intangibles............ 2,598 2,615 2,499 2,566 2,592 648 648
--------- --------- --------- --------- --------- --------- ---------
Operating income....................... 27,656 29,921 40,770 28,687 38,474 3,356 7,347
Interest expense....................... 17,865 20,854 20,011 22,514 22,773 5,680 5,410
Amortization of deferred financing
costs................................ 1,636 933 739 737 699 173 176
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing
operations before provision for
income taxes......................... 8,155 8,134 20,020 5,436 15,002 (2,497) 1,761
Provision (benefit) for income taxes... 4,560 4,472 8,600 3,500 6,900 (600) 857
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing
operations........................... $ 3,595 $ 3,667 $ 11,420 $ 1,936 $ 8,102 $ (1,897) $ 904
========= ========= ========= ========= ========= ========= =========
Net income (loss) (2).................. $ (3,972) $ (12,310) $ 11,420 $ 1,936 $ 8,102 $ (1,897) $ 904
========= ========= ========= ========= ========= ========= =========
OTHER FINANCIAL DATA:
EBITDA(3).............................. $ 36,937 $ 41,061 $ 52,421 $ 42,887 $ 54,074 $ 7,191 $ 11,651
Depreciation and amortization.......... 10,978 12,073 12,390 14,937 16,299 4,008 4,480
Capitalization expenditures
Maintenance.......................... 1,857 1,770 1,970 1,406 2,563 495 330
Expansion............................ 20,245 9,989 29,896 11,907 31,690 6,899 8,494
--------- --------- --------- --------- --------- --------- ---------
Total............................ 22,102 11,759 31,866 13,313 34,253 7,394 8,824
Ratio of earnings to fixed
charges(4)........................... 1.37x 1.33x 1.84x 1.21x 1.58x --(4) 1.29x
PRO FORMA FINANCIAL DATA(5):
Interest expense....................... $ 18,121 $ 4,564
Net income (6)......................... 10,952 1,422
Net income per share(6)................ 1.24 .16
Weighted average shares outstanding.... 8,805,502 8,805,502
Ratio of EBITDA to interest expense.... 3.0x 2.6x
Ratio of earnings to fixed
charges(4)........................... 1.93x 1.51x
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31, 1996
AS OF SEPTEMBER 30, ----------------------
---------------------------------------------------- AS
1992 1993 1994 1995 1996 ACTUAL ADJUSTED(7)
-------- -------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................... $ 33,980 $ 42,055 $ 44,114 $ 69,039 $ 64,077 $ 90,758 $ 90,164
Total assets.............................. 254,581 260,372 287,933 312,300 324,058 358,151 358,200
Long-term debt, net....................... 158,638 164,723 172,490 192,048 194,353 189,513 202,916
Stockholders' equity...................... 56,700 44,423 55,817 57,756 65,844 100,608 88,720
</TABLE>
18
<PAGE> 20
- ---------------
(1) Fiscal 1995 results of operations include a pre-tax charge of $2,852 to
increase the allowance for doubtful accounts due to a customer who
experienced severe financial difficulty. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
(2) Net income for fiscal 1993 includes (i) an extraordinary loss of $8,892 from
the early extinguishment of debt, (ii) a charge of $8,500 for the cumulative
effect of an accounting change relating to the adoption of SFAS No. 109,
"Accounting for Income Taxes", and (iii) a gain of $1,420 on the disposal of
discontinued operations. Net income for fiscal 1992 includes a loss from
discontinued operations of $553 and a loss on the disposal of discontinued
operations of $7,014.
(3) Represents income before interest, taxes, depreciation, and amortization.
EBITDA is presented because it provides useful information regarding a
company's ability to service and/or incur debt. EBITDA should not be
considered in isolation from or as a substitute for net income, cash flows
from operating activities and other consolidated income or cash flow
statement data prepared in accordance with generally accepted accounting
principles or as a measure of profitability or liquidity.
(4) The ratio of earnings to fixed charges represents the number of times fixed
charges are covered by earnings. For purposes of computing this ratio,
earnings consist of earnings from continuing operations before income taxes
plus fixed charges. Fixed charges consists of interest expense, including
such portion of rental expense which the Company estimates to be
representative of the interest factor attributable to such rental expense,
and amortization of deferred financing costs. The Company's earnings for the
three months ended December 31, 1995 were inadequate to cover fixed charges
by $2,497.
(5) Pro forma financial data reflects the reduction in interest expense after
giving effect to the Common Stock Offering, the Purchase Offer and the Old
Notes Offering calculated as of the beginning of the period indicated. See
"Use of Proceeds".
(6) Pro forma net income and pro forma net income per share do not reflect an
after tax extraordinary loss on early extinguishment of debt of $11,888
($1.35 per share) resulting from the Purchase Offer.
(7) Adjusted to give effect to the Common Stock Offering, the Purchase Offer and
the Old Notes Offering. See "Use of Proceeds" and "Capitalization". The
adjustments to stockholders' equity reflect an extraordinary loss from the
early extinguishment of debt of $11,888 resulting from the Purchase Offer.
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the information
contained in the Consolidated Financial Statements, including the notes thereto,
and the other financial information appearing elsewhere in this Prospectus.
Dollar amounts are in thousands. The following discussion includes
forward-looking statements that involve certain risks and uncertainties. See
"Risk Factors".
INTRODUCTION
The Company's net sales in recent years have increased due to a variety of
factors, including generally increasing sales volumes as a result of growing
demand for the Company's products and the Company's ability to expand its
markets through development of new products.
The Company's products are sold along three principal product lines: carpet
backing, construction and civil engineering products, and technical textiles.
The following table summarizes net sales growth for each of these product lines
during the fiscal years ended September 30, 1994, 1995 and 1996 and the three
month periods ended December 31, 1995 and 1996:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30, THREE MONTHS ENDED DECEMBER 31,
------------------------------------------------------ -----------------------------------
1994 1995 1996 1995 1996
---------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carpet backing..................... $117,791 50.1% $133,025 49.0% $146,491 48.9% $ 33,553 51.9% $ 36,922 52.0%
Construction and civil
engineering...................... 68,706 29.3 82,933 30.6 97,043 32.4 19,400 30.0 21,072 29.8
Technical textiles................. 48,480 20.6 55,469 20.4 55,998 18.7 11,655 18.1 12,863 18.2
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Net sales.......................... $234,977 100.0% $271,427 100.0% $299,523 100.0% $ 64,608 100.0% $ 70,857 100.0%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
The Company's carpet backing business has grown at a faster rate than that
of the industry as a whole, principally due to recent market share gains in the
consumer carpet backing market and increased penetration of the commercial
carpet backing market. The Company's construction and civil engineering business
has grown significantly over the past three years due to increased acceptance of
the Company's proprietary concrete reinforcement products, the expansion of this
product line to offer a full range of geosynthetic products to the markets the
Company serves and other innovative product offerings. Over the past three
years, the Company has streamlined its technical textile business and exited
several product lines which did not meet the Company's strategic sales and
profitability objectives. The Company believes that it has positioned its
technical textile business for increased sales and profitability.
While the Company's sales have grown in each of the past three years, the
Company's gross profit has fluctuated due to a variety of factors, primarily
related to changes in the price of polypropylene. Polypropylene is the basic raw
material used in the manufacture of substantially all of the Company's products,
accounting for approximately 50% of the Company's costs of goods sold. The
Company believes that the selling prices of its products have adjusted over time
to reflect changes in polypropylene prices, although such price changes
favorably affected gross profit for fiscal 1994 and adversely affected gross
profit for fiscal 1995. In the first quarter of fiscal 1997 and for fiscal 1996,
the Company's polypropylene prices were lower, on average, than for the
corresponding periods in the previous year. The benefit of this average cost
decrease was only partially offset by reduced average selling prices, which,
coupled with higher sales volume in each respective period, resulted in a gross
profit improvement. Gross profit for the first quarter of fiscal 1997 was
$20,814, compared to $14,691 for the same period of fiscal 1996, an increase of
$6,123, or 41.7%. As a percentage of sales, gross profit increased to 29.4% form
22.7%. Gross profit for fiscal 1996 was $91,211, compared to $76,721 for the
same period of fiscal 1995, an increase of $14,490, or 18.9%. As a percentage of
sales, gross profit increased to 30.5% form 28.3%.
The Company has not experienced any shortage of supply of polypropylene;
however, continuous increases in demand or major supply disruptions without
offsetting increases in manufacturing capacities could cause future supply
shortages. Higher prices of polypropylene, however, without offsetting selling
price
20
<PAGE> 22
increases could have a significant negative effect on the Company's results of
operations and financial condition.
According to a September 1996 report by Chemical Data Inc. ("Chem Data"), a
monthly petrochemical and plastics analysis publication, current annual
polypropylene capacity in North America is 12.6 billion pounds per year, up from
11.4 billion pounds at December 31, 1995. Total average annual capacity will
rise to 14.0 billion pounds per year for 1997 and 14.6 billion pounds per year
for 1998. Historically, the creation of additional capacity has helped to
relieve supply pressures although there can be no assurance that this will
continue to be the case.
The Company historically has operated at or near full capacity on a 24-hour
per day, seven days per week, 350 days per year schedule. Reflecting this level
of capacity utilization, the Company invested approximately $113,000 on its six
manufacturing facilities during the five year period ended September 30, 1996,
including the completion in August 1996 of a major $35,000 expansion at its
largest manufacturing facility. Based on existing product prices and demand,
this expansion should increase the Company's sales by as much as $30,000 for
fiscal 1997.
The following table sets forth the percentage relationships to net sales of
certain income statement items. See "Selected Consolidated Financial
Information", as well as the Consolidated Financial Statements, the notes
thereto and other financial information included elsewhere in the Prospectus for
more detailed financial information.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
-------------------------- --------------
1994 1995 1996 1995 1996
------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Net sales.......................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales...................................... 64.8 71.7 69.5 77.3 70.6
----- ----- ----- ----- -----
Gross profit..................................... 35.2 28.3 30.5 22.7 29.4
Selling expenses................................... 9.3 9.0 9.2 8.8 9.8
General and administrative expenses................ 7.5 7.8 7.6 7.7 8.3
Amortization of intangibles........................ 1.0 0.9 0.9 1.0 0.9
----- ----- ----- ----- -----
Operating income................................. 17.4 10.6 12.8 5.2 10.4
Interest expense................................... 8.5 8.3 7.6 8.8 7.6
Amortization of deferred financing costs........... 0.3 0.3 0.2 0.3 0.3
----- ----- ----- ----- -----
Income from continuing operations before
provision for taxes........................... 8.6 2.0 5.0 (3.9) 2.5
Provision for income taxes......................... 3.7 1.3 2.3 (0.9) 1.2
----- ----- ----- ----- -----
Income from continuing operations................ 4.9% 0.7% 2.7% (3.0)% 1.3%
===== ===== ===== ===== =====
</TABLE>
RESULTS OF OPERATIONS
Three Months Ended December 31, 1996 as Compared to Three Months Ended
December 31, 1995
Net sales for the first quarter of fiscal 1997 were $70,857 compared to
$64,608 for the same period of fiscal 1996, an increase of $6,249, or 9.7%.
Carpet backing sales for the first quarter of fiscal 1997 were $36,922 compared
to $33,553 for the same period of fiscal 1996, an increase of $3,369, or 10.0%.
The increase was the result of higher unit volume and higher average selling
prices. Construction and civil engineering product sales for the first quarter
of fiscal 1997 were $21,072 compared to $19,400 for the same period of fiscal
1996, an increase of $1,672, or 8.6%. Technical textile sales for the first
quarter of fiscal 1997 were $12,863 compared to $11,655 for the same period of
fiscal 1996, an increase of $1,208, or 10.4%.
Gross profit for the first quarter of fiscal 1997 was $20,814 compared to
$14,691 for the same period of fiscal 1996, an increase of $6,123, or 41.7%. As
a percentage of sales, gross profit increased to 29.4% from
21
<PAGE> 23
22.7%. This increase was primarily due to increased sales volume and lower
average polypropylene costs. See " -- Introduction."
Selling expenses for the first quarter of fiscal 1997 were $6,938 compared
to $5,716 for the same period of fiscal 1996, an increase of $1,222, or 21.4%.
This increase was primarily due to increased expenditures associated with higher
sales volume as well as increased marketing expenses. These expenses are related
to the Company's expectation of higher sales in fiscal 1997 resulting from the
completion of the fiscal 1996 capacity expansion program. As a percentage of
sales, selling expenses increased from 8.8% to 9.8%.
General and administrative expenses for the first quarter of fiscal 1997
were $5,881 compared to $4,971 for the same period of fiscal 1996, an increase
of $910, or 18.3%. As a percentage of sales, general and administrative expenses
increased from 7.7% to 8.3%. The increase in general and administrative expenses
was primarily due to infrastructure expenditures, which included an increased
investment in the Company's Management Information System, to support
anticipated Company growth.
Operating income for the first quarter of fiscal 1997 was $7,347 as
compared to $3,356 for the same period of fiscal 1996, an increase of $3,991, or
118.9%. As a percentage of sales, operating income increased to 10.4% in fiscal
1997 from 5.2% in fiscal 1996. This was primarily due to higher sales volumes
and lower average raw material costs offset by slightly increased selling and
general and administrative costs.
Total interest expense for the first quarter of fiscal 1997 was $5,410
compared to $5,680 for the same period of fiscal 1996, a decrease of $270, or
4.8%, due to interest income of $172 as well as lower average total debt
outstanding at slightly lower interest rates.
The effective income tax rate for the first quarter of fiscal 1997 was 49%
due primarily to the effect of nondeductible expenses, including the
amortization of goodwill, on higher taxable income in fiscal 1997.
Net income for the first quarter of fiscal 1997 was $904 compared to net
loss of $1,897 for the same period of fiscal 1996, an increase of $2,801, or
147.7%. Earnings before interest, taxes, depreciation and amortization
("EBITDA") for the first quarter of fiscal 1997 were $11,651 compared to $7,191
for the same period of fiscal 1996, an increase of $4,460, or 62.0%. The
increase in net income, as well as EBITDA, was primarily due to higher sales
volumes and lower average raw material costs offset by slightly increased
selling and general and administrative costs.
Fiscal 1996 Compared to Fiscal 1995
Net sales for fiscal 1996 were $299,532 compared to $271,427 for fiscal
1995, an increase of $28,105, or 10.4%. This increase was primarily due to
increased sales of carpet backing and construction and civil engineering
products. Carpet backing sales for fiscal 1996 were $146,491 compared to
$133,025 for fiscal 1995, an increase of $13,466, or 10.1%. This increase was
the result of higher unit volume in primary and secondary carpet backing,
partially offset by lower average selling prices. Construction and civil
engineering product sales for fiscal 1996 were $97,043 compared to $82,933 for
fiscal 1995, an increase of $14,110, or 17.0%. This increase was due to an
increase in sales of geotextile and erosion control fabrics of $13,018, or
30.7%, resulting primarily from nonwoven sales in the landfill and roadway and
building site markets. Technical textiles sales for fiscal 1996 were $55,998
compared to $55,469 for fiscal 1995, an increase of $529, or 1.0%.
Gross profit for fiscal 1996 was $91,211, compared to $76,721 for the same
period of fiscal 1995, an increase of $14,490, or 18.9%. As a percentage of
sales, gross profit increased to 30.5% from 28.3%. This increase was primarily
due to increased sales volume as well as lower average polypropylene costs. See
"-- Introduction."
Selling expenses for fiscal 1996 were $27,488 compared to $24,273 for the
same period of fiscal 1995, an increase of $3,215, or 13.2%. This increase was
primarily due to increased expenditures associated with higher sales volume as
well as increased marketing expenses. These expenses are related to the
Company's expectation of higher sales in 1997 resulting from the completion of
the 1996 capacity expansion program. As a percentage of sales, selling expenses
increased from 9.0% to 9.2%.
22
<PAGE> 24
General and administrative expenses for fiscal 1996 were $22,657 compared
to $21,195 for the same period of fiscal 1995, an increase of $1,462, or 6.9%.
As a percentage of sales, general and administrative expenses decreased from
7.8% to 7.6%. In fiscal 1995, general and administrative expenses included a
pre-tax charge of $2,852 related to an increase in the allowance for doubtful
accounts taken to establish a reserve for a carpet backing customer who
experienced severe financial difficulties. Without this charge, fiscal 1995
general and administrative expenses as a percentage of sales would have been
6.8%. The increase in general and administrative expenses was primarily due to
infrastructure expenditures, which included an increased investment in the
Company's Management Information System, to support anticipated Company growth.
Operating income for fiscal 1996 was $38,474 as compared to $28,687 for
fiscal 1995, an increase of $9,787, or 34.1%. As a percentage of sales,
operating income increased to 12.8% in fiscal 1996 from 10.6% in fiscal 1995.
This was primarily due to factors discussed above.
Total interest expense for fiscal 1996 was $22,773 compared to $22,514 for
fiscal 1995, an increase of $259, or 1.2%, due to higher average total debt
outstanding.
The effective income tax rate was 46% and 64% in fiscal 1996 and 1995,
respectively. The decrease was primarily due to the effect of nondeductible
expenses, including the amortization of goodwill, on higher taxable income in
fiscal 1996.
Net income for fiscal 1996 was $8,102 compared to net income of $1,936 for
fiscal 1995, an increase of $6,166, or 318.5%. EBITDA for fiscal 1996 was
$54,074 compared to $42,887 for fiscal 1995, an increase of $11,187, or 26.1%.
The increase in net income, as well as EBITDA, was primarily due to higher sales
volumes and lower average raw material cost partially offset by slightly lower
average selling prices, higher manufacturing costs associated with plant
shutdowns as a result of the winter ice storms in 1996 and increased selling and
general and administrative costs.
Fiscal 1995 Compared to Fiscal 1994
Net sales for fiscal 1995 were $271,427 compared to $234,977 for fiscal
1994, an increase of $36,450, or 15.5%. This increase was primarily due to unit
volume growth in certain product lines and higher average selling prices. Carpet
backing sales for fiscal 1995 were $133,025 compared to $117,791 for fiscal
1994, an increase of $15,234, or 12.9%. This increase was primarily due to
higher unit volume due in part to increased market share in both primary and
secondary carpet backing as well as higher selling prices as compared to fiscal
1994. Construction and civil engineering product sales for fiscal 1995 were
$82,933 compared to $68,706 for fiscal 1994, an increase of $14,227, or 20.7%.
This increase was primarily due to a significant growth in sales of geosynthetic
products as well as an increase in sales of Fibermesh(R) fibers. Technical
textiles sales for fiscal 1995 were $55,469 compared to $48,480 for fiscal 1994,
an increase of $6,989, or 14.4%. This increase was primarily due to unit volume
growth in the furniture and bedding markets.
Gross profit for fiscal 1995 was $76,721 compared to $82,672 for fiscal
1994, a decrease of $5,951, or 7.2%. As a percentage of sales, gross profit
decreased to 28.3% from 35.2%. This decrease was primarily due to the higher
polypropylene costs, offset partially by higher average selling prices. See
" -- Introduction".
Selling expenses for fiscal 1995 were $24,273 compared to $21,815 for
fiscal 1994, an increase of $2,458, or 11.3%. This increase was primarily due to
increased marketing efforts in the construction and civil engineering products
lines as a direct result of increased sales. However, as a percentage of sales,
selling expenses decreased from 9.3% to 8.9%.
General and administrative expenses for fiscal 1995 were $21,195 compared
to $17,588 for fiscal 1994, an increase of $3,607, or 20.5%. As a percentage of
sales, general and administrative expenses increased from 7.5% to 7.8%. This
increase was primarily due to a charge of $2,852 related to an increase in the
allowance for doubtful accounts during the fourth quarter of fiscal 1995. The
charge was taken to establish a reserve for accounts receivable for a carpet
backing customer who experienced severe financial difficulties. The Company
believes the reserve provided is adequate for this account to cover any future
potential losses and in the opinion of management, no significant future loss of
revenue is anticipated.
23
<PAGE> 25
Operating income for fiscal 1995 was $28,687 compared to $40,770 for fiscal
1994, a decrease of $12,083, or 29.6%. As a percentage of sales, operating
income decreased to 10.6% from 17.4%. This decrease was primarily due to the
change in gross profit associated with higher raw material costs.
Total interest expense for fiscal 1995 was $22,514 compared to $20,011 for
fiscal 1994. This increase was due to a higher average total debt outstanding
and a higher base rate for the Credit Facility.
The effective income tax rate for fiscal 1995 was 64.3% compared to 43% for
fiscal 1994. The increase was primarily due to the effect of nondeductible
expenses, including the amortization of goodwill, on lower taxable income in
fiscal 1995.
Net income for fiscal 1995 was $1,936 compared to $11,420 for fiscal 1994,
a decrease of $9,484, or 83%. This decrease was primarily due to increased raw
material and interest costs.
LIQUIDITY AND CAPITAL RESOURCES
To finance its capital expenditures program and fund its operational needs,
the Company has relied upon cash provided by operations, supplemented as
necessary by bank lines of credit and long-term indebtedness. Cash provided by
(used in) operating activities was $9,822 and $6,737 for the three months ended
December 31, 1996 and 1995, respectively, and $31,421 and ($35) for fiscal 1996
and 1995, respectively.
Cash provided by operating activities during the three months ended
December 31, 1996 resulted primarily from net income of $904 after deducting
non-cash charges of $4,556, a decrease in accounts receivable due to
collections, offset by increased inventory and accounts payable balances due to
higher inventory quantities, as well as interest payments on the Debentures.
Also contributing to the increase in cash and cash equivalents at December
31, 1996 as compared to September 30, 1996 were proceeds from the Common Stock
Offering completed November 1, 1996. The net proceeds to the Company from the
Common Stock Offering (after payment of underwriting discounts and commissions
and expenses) were approximately $34,000. These proceeds, together with the
proceeds of the Old Notes Offering, were utilized primarily to retire
approximately $132,000 of the Debentures and to repay certain outstanding
indebtedness under the Credit Facility.
Cash provided by (used in) operating activities in fiscal 1996 and 1995
resulted primarily from net income of $8,102 and $1,936, respectively, after
deducting non-cash charges of $20,723 and $17,945 and net working capital
changes of approximately $2,596 and ($19,916), for each respective period. The
increase in cash provided by operating activities for fiscal 1996 as compared to
fiscal 1995 was principally due to fluctuations in net income and the Company's
working capital requirements. The changes included reduced inventory and
accounts payable balances in 1996 resulting primarily from lower inventory
quantities and lower polypropylene costs. The decrease in cash provided by
operating activities in fiscal 1995 as compared to fiscal 1994 was principally
due to lower net income and fluctuations in working capital requirements.
Working capital requirements increased primarily due to increases in accounts
receivable, inventory and accounts payable. The increase in accounts receivable
results from increased sales over the prior year particularly in certain
seasonal product lines. The increases in inventory and accounts payable resulted
from the effects of higher polypropylene costs, as well as increased units in
finished goods and raw materials. Working capital amounted to $90,758 and
$64,077 at December 31, 1996 and 1995, respectively, and $64,077 and $69,039 at
September 30, 1996 and 1995, respectively.
Capital expenditures in fiscal 1996 and 1995 were approximately $34,200 and
$13,300, respectively. The Company has planned $40,000 of capital expenditures
during fiscal 1997, primarily to expand capacity of the Company's manufacturing
facilities, subject to prevailing market conditions. Of this amount, $8,824 has
been spent to date. The Company expects to incur approximately $40,000 of
additional capital expenditures in fiscal 1998, primarily to expand capacity and
to continue to reduce manufacturing costs, subject to prevailing market
conditions.
The Credit Facility provides for potential borrowing capacity of up to
$85,000 and is comprised of term loan borrowings of $45,000 (of which $10,000 is
payable in 1999 and $17,500 is payable in each of 2000 and
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2001) and a revolving credit loan portion (the "Revolver") of up to $40,000. As
a result of the refinancing, as of March 5, 1997 term loan borrowings have been
reduced to $25 million. The Revolver provides for availability based on a
borrowing formula consisting of 85% of eligible accounts receivable and 50% of
eligible inventory, subject to certain limitations. The maximum amount available
for borrowing under the Revolver at December 31, 1996 was $38,869. The Credit
Facility expires on October 1, 2001. The Company is currently in the process of
renegotiating the Credit Facility.
On December 14, 1992, the Company issued $140,000 of the Debentures, which
represent unsecured obligations of the Company. The Debentures are redeemable at
the option of the Company at any time on or after December 1, 1997, at an
initial redemption price of 106.375% of their principal amount together with
accrued interest, with declining redemption prices thereafter. Interest on the
Debentures is payable semi-annually on June 1 and December 1. On February 11,
1997, the Company repurchased approximately $132,000 million aggregate principal
amount of the Debentures with the net proceeds of the Old Notes Offering.
At December 31, 1996, the Company's total outstanding indebtedness amounted
to $190,859. Such indebtedness consists primarily of borrowings under the Credit
Facility of $45,000, $140,000 aggregate principal amount of the Debentures and
an outstanding capital lease obligation of $4,549 dated as of May 28, 1996. Cash
interest paid during the three months ended December 31, 1996 and 1995 was
$9,959 and $9,871, respectively, and during fiscal 1996, 1995 and 1994 was
$23,176, $22,334 and $19,787, respectively.
On February 27, 1997, the Company acquired all of the equipment and certain
other assets of a needlepunch nonwoven manufacturer, for approximately $9.4
million in cash. Pro forma results of operations are not presented because the
effects of the acquisition are not significant.
Based on current levels of operations and anticipated growth, the Company's
management expects cash from operations to provide sufficient cash flow to
satisfy the debt service requirements of the long-term obligations, including
interest thereon, permit anticipated capital expenditures and fund the Company's
working capital requirements for the next twelve months.
INFLATION AND SEASONALITY
The Company does not believe that its operations have been materially
affected by inflation during the three most recent fiscal years. While the
Company does not expect that inflation will have a material impact upon
operating results, there is no assurance that its business will not be affected
by inflation in the future.
The Company's sales and income from continuing operations have historically
been higher in the third and fourth quarters of its fiscal year. While sales and
operating income in the carpet backing and technical textile product lines are
not greatly affected by seasonal trends, sales and operating income of
construction and civil engineering products are lower in the first and second
quarters of any given fiscal year due to the impact of adverse weather
conditions on the construction and civil engineering markets. Consequently, as
sales and operating income from construction and civil engineering products
continue to increase as a percentage of the Company's total sales, the
seasonality of these products' sales will affect total sales and quarterly
operating results of the Company to a greater degree.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation" which will be effective for the Company beginning October 1, 1996.
SFAS No. 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans. The Company will account for stock-
based compensation awards under the provisions of Accounting Principles Board
Opinion No. 25, as permitted by SFAS No. 123. In accordance with SFAS No. 123.
In accordance with SFAS No. 123, beginning in the fiscal year ended September
30, 1997, the Company will make pro forma disclosures relative to stock-based
compensation as part of the accompanying footnotes to the consolidated financial
statements.
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BUSINESS
THE COMPANY
The Company is one of the world's leading producers of polypropylene
fabrics and fibers for the home furnishing, construction, environmental,
recreational and agricultural industries. The Company manufactures and sells
more than 2,000 products in over 65 end-use markets. The Company believes that
it is the second largest producer of carpet backing in the world and is the
largest producer of synthetic fiber additives for concrete reinforcement through
its Fibermesh(R) line of products. SI also produces polypropylene products for
the geotextile and erosion control markets and is a leader in designing
innovative products for specialty applications. The Company's products are
engineered to meet specific customer criteria such as strength, flexibility,
resistance to sunlight, water/air permeability and resistance to bacteria. The
Company aims to compete in markets in which it can be the primary or secondary
provider of such products, with over 93% of its products meeting this criterion.
The Company's consolidated sales have grown from $196 million in fiscal 1992 to
$300 million in fiscal 1996.
The Company's products are sold along three principal product lines: carpet
backing, construction and civil engineering products, and technical textiles.
The Company has a worldwide presence in carpet backing, a woven fabric used in
all modern tufted carpets, and is one of the two leading manufacturers in the
U.S. that produce a broad range of primary and secondary carpet backing. Carpet
backing accounted for approximately 49% of the Company's fiscal 1996 sales. The
Company's construction and civil engineering products are its fastest growing
product line and include fiber additives for concrete reinforcement and
environmental and geotextile products used in roadways, landfills and building
sites to stabilize soils and control erosion. The Company's sales to the
construction and civil engineering market have grown from approximately $35
million in fiscal 1992 to approximately $97 million in fiscal 1996. These
products represented approximately 32% of the Company's total sales in fiscal
1996, up from approximately 18% of total sales in fiscal 1992. The Company's
technical textile products are comprised of specialty fabrics, industrial yarns
and fibers used in diverse applications such as filtration (e.g., wastewater
treatment, air filtration and bauxite mining), agriculture (e.g., shade cloth
and ground cover) and recreation (e.g., swimming pool covers and trampoline
mats). These products are highly engineered to meet niche customer applications
and represented approximately 19% of fiscal 1996 sales. The Company's products
are principally sold through direct sales to customers by the Company's sales
force and through a broad network of distributors located across North and South
America, Europe and the Pacific Rim.
Management believes that the Company has a reputation in its markets as a
high quality, cost-efficient manufacturer. The Company is committed to
maintaining its market leadership and reputation for innovation through capital
investment in facilities and state-of-the-art equipment, by hiring and training
skilled employees and through process control standards and productivity
improvements. The Company has been awarded ISO-9002 certification at all of its
major manufacturing facilities, and believes it is the only U.S. manufacturer in
a majority of its markets to have been awarded such certification. SI invested
approximately $113 million in capital improvements in its facilities and
equipment during the five year period ended September 30, 1996, including the
completion in August 1996 of a major $35 million, 130,000 square foot expansion
of its largest manufacturing facility. Based on existing product prices and
demand, this expansion should increase the Company's sales by as much as $30
million for fiscal 1997. The Company anticipates that ongoing maintenance
capital expenditures will be less than $5 million per year. Additional capital
expenditures, if any, will be focused on expansion opportunities, subject to
market conditions. The Company is one of the largest independent consumers of
polypropylene in the world. The Company also believes its position as a
vertically-integrated manufacturer -- performing each step in the conversion of
polypropylene into value-added end products -- provides a competitive advantage
by allowing the Company to manufacture high quality products to customer's
specifications, while controlling manufacturing costs.
The Company's principal business strategy is to leverage its market
presence in its core businesses into additional growth while maintaining its
market position as a high quality, cost-efficient manufacturer. The primary
components of this strategy are to expand penetration of existing markets,
develop innovative
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products, strengthen market position in carpet backing, continue to improve
manufacturing efficiencies and expand manufacturing capacity and pursue
strategic acquisitions.
HISTORY
The Company was founded in 1969 to produce polypropylene-based primary
carpet backing. Following the acquisition of the Company in 1976 by a group of
private investors, the Company diversified into the manufacture and sale of
polypropylene-based industrial fabrics and specialty yarns. Between 1981 and
1983, the Company entered the construction and civil engineering products
market, initially by manufacturing woven geotextiles and later through its
introduction of Fibermesh(R) fibers for concrete reinforcement. In 1985, the
Company added secondary carpet backing to its product offerings. In fiscal 1991,
the Company purchased a technical synthetic fabrics operation located in
Gainesville, Georgia, from Chicopee, a subsidiary of Johnson & Johnson (the
"Chicopee Acquisition"). In addition to broadening the Company's line of
geosynthetic products, the acquisition gave the Company access to new markets
for high performance geotextiles. As a result of improved fiber technology and
increased fiber manufacturing capabilities, the Company opened its sixth
facility, the nonwoven geotextile plant in Ringgold, Georgia in 1992, enabling
the Company to offer a full line of geotextile products.
The Company was acquired by the Partnership in December 1986. Immediately
prior to the completion of the Common Stock Offering, all of the issued and
outstanding capital stock of the Company was owned by the Partnership. SI
Management L.P. (the "General Partner") is the sole general partner of the
Partnership. Synthetic Management G.P. is the sole general partner of SI
Management L.P. By virtue of these relationships, Synthetic Management G.P.
controls the management and affairs of the Partnership and, therefore, the
Company. See "Certain Relationships and Related Transactions."
On November 1, 1996, the Company sold 2,875,000 shares of Common Stock in
the Common Stock Offering. The net proceeds to the Company from the sale (after
payment of underwriting discounts and commissions and expenses) were
approximately $34 million. Immediately following the Common Stock Offering, the
Partnership owned 5,781,250 shares of Common Stock, or approximately 67% of the
issued and outstanding shares of Common Stock. Employees, officers and directors
have been granted options to purchase an additional 6.9% of Common Stock on a
fully diluted basis. See "The Company," "Principal Stockholders" and "Certain
Relationships and Related Transactions."
INDUSTRY OVERVIEW
The Company manufactures polypropylene fiber, most of which it consumes
internally to manufacture its products. Polypropylene fiber is the second
largest polymeric material used in synthetic fabrics, representing approximately
30% of the total U.S. synthetic fiber market, behind polyester and ahead of
nylon. According to the Society for the Plastics Industry ("SPI"), total
domestic production of polypropylene fiber was approximately 3 billion pounds in
1995 and grew at an annual rate of approximately 9.3% per year in the period
from 1993 to 1995.
The Company believes it is one of the largest manufacturers of
polypropylene fiber in the U.S. with approximately 8% of total domestic output.
The top ten manufacturers of polypropylene fiber in the United States generate
approximately 70% of the annual domestic output of polypropylene fiber. Most of
the large producers of polypropylene fiber, including the Company, are
vertically integrated, converting polypropylene into fiber which can be used to
manufacture fabrics or can be sold directly to other manufacturers. These large
producers often have significant shares of the markets in which they compete,
such as the Company's share of the primary and secondary carpet backing markets
and concrete fiber reinforcement market.
Most of the products manufactured by the Company are woven and nonwoven
polypropylene fabrics. Woven polypropylene fabrics are produced by weaving
narrow tapes of slit film, which are made by extruding polypropylene into long
sheets. Such fabrics are characterized by high strength to weight ratios. All of
the Company's carpet backing products and approximately 42% of its civil
engineering products are woven polypropylene fabrics. Nonwoven polypropylene
fabrics are produced by mechanically interlocking fibers with
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barbed needles. Several of the Company's technical textile products and 58% of
its civil engineering products, principally for waste containment, roadway and
building site applications, are nonwoven polypropylene fabrics.
Approximately 45% of the polypropylene fiber manufactured by the Company is
used by the Company to make carpet backing. The Carpet and Rug Institute ("CRI")
estimates that 1996 U.S. shipments of primary polypropylene carpet backing were
approximately 1.72 billion square yards. The Company believes that 1996 U.S.
shipments of secondary polypropylene carpet backing were 1.63 billion square
yards, or approximately 95% of primary carpet backing shipments. The Company
shipped worldwide an aggregate of 790 million and 865 million square yards of
primary and secondary polypropylene carpet backing in 1995 and 1996,
respectively. According to CRI, growth of total domestic primary carpet backing
shipments averaged 2.8% in the period from 1993 to 1996. The growth rate of the
Company's primary and secondary carpet backing shipments has generally exceeded
that of the market, with an average annual increase in shipments of 8% for the
period from fiscal 1993 to fiscal 1996.
Approximately 33% of the polypropylene fiber manufactured by the Company is
used to make construction and civil engineering products, of which approximately
22% and 11% are geotextiles and concrete reinforcing fibers, respectively.
According to Industrial Fabrics Association International, approximately 414
million square yards of woven and nonwoven geotextiles were shipped domestically
in 1995 for the civil engineering fabric market. According to industry sources,
domestic shipments of woven and nonwoven geotextiles are expected to grow at an
average annual rate of approximately 6% over the next five years. The growth
rate of the Company's civil engineering product lines has outpaced that of the
market with average annual growth in shipments of 27% for the period from fiscal
1994 to fiscal 1996. In addition, the Company believes that its Fibermesh(R)
products currently have a 70% share of the fiber reinforced concrete market.
Fibermesh(R) concrete reinforcing fiber shipments grew at an average annual rate
of 8% for the period from fiscal 1994 to fiscal 1996.
Approximately 22% of the polypropylene fiber manufactured by the Company is
used to make technical textiles. The technical textiles market consists of a
large number of relatively stable product lines with annual sales in each
product line of approximately $10 million to $12 million. The Company expects to
generate growth in its technical textiles sales through new products such as
building product components and nonwoven furniture construction fabrics.
BUSINESS STRATEGY
The Company's goals are to maintain steady growth in its core business,
develop innovative and value-added products to expand its product lines,
penetrate new international markets, and continue to create new high margin
niche products out of engineered fabrics and fibers. The Company seeks to be the
leading or second supplier in its chosen markets by delivering high-quality
products at competitive prices. Key elements of the Company's strategy to
achieve these goals are:
Expand Penetration of Existing Markets
The Company is committed to expanding sales in markets where it currently
has a leadership position by increasing market penetration through the offering
of a broader product line to meet its customers' varied needs and by expanding
its customer base. The Company is pursuing this goal through (i) the expansion
of geographical coverage of its sales effort; (ii) the development of
applications-oriented marketing efforts that focus on the Company's product
solutions as alternatives to traditional industry practices; (iii) increased
customer acceptance of its products created through stringent quality standards
and industry accreditation for its test labs; and (iv) the use of in-house
technical consultants to educate industry leaders as to the cost savings offered
by the Company's products as compared to traditional solutions.
The Company believes that it has significant expansion opportunities for
its existing products. The Company is developing comprehensive marketing efforts
to increase sales of its products in existing markets and to penetrate new
domestic and international markets, particularly Europe and the Pacific Rim, by
increasing awareness of its products among existing and potential customers. The
Company focuses on education of its customers' engineering support personnel,
advertising and application-oriented marketing
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efforts as it seeks to expand acceptance of its products. The Company has
experienced success with this strategy, as evidenced by the growth of its civil
engineering product line for which sales have increased from $31.4 million in
fiscal 1994 to $55.4 million in fiscal 1996. Within this product line, the
Company has focused on the roadway and building site, erosion control and waste
containment sectors. Among the Company's other products, nonwoven geotextile
sales to the roadway and building site markets have grown from $12.5 million in
fiscal 1994 to $19.2 million in fiscal 1996.
The Company has also expanded its presence in international markets
primarily through additional distribution arrangements, increased marketing
efforts focused primarily on major international construction projects and the
expansion of its international sales force. As a result, total international
sales increased from $25.0 million in fiscal 1994 to $33.3 million in fiscal
1996.
Develop Innovative Products
The Company seeks to develop innovative products and modify existing
products in response to specific customer needs and to establish new markets
through the development of novel applications for its existing products. By
increasing its expenditures for research, product development and marketing, the
Company believes it will be able to capitalize on its manufacturing strengths
and distribution network to introduce new value added products and extend
product lines to complement its existing product base. For example, within the
Company's Fibermesh(R) product line, a specially designed Fibermesh(R) MD
product provides after-crack strength retention to concrete, thus mitigating
immediate failure of the concrete. Since its introduction in 1991, sales of
Fibermesh(R) MD have grown to $26.5 million in fiscal 1996.
The redesign and enhancement of its core products have also resulted in the
development of high strength geotextiles and the Company's building material
products. These developments utilize existing weaving technology to permit
construction over extremely weak soils and to replace fiberglass in certain
construction applications such as wallboard. The Company's soil reinforcement
fibers are used in roadway construction and maintenance and its biotechnical
composite three dimensional mats enable vegetation to be grown on steep slopes
and in high-flow water channels. The Company believes that these products are
environmentally friendly, aesthetically pleasing and low-cost alternatives to
crushed rock. The Company has also developed a new line of products that are
manufactured using the same production techniques as nonwoven geotextiles but
are used as vinyl substrates and spill control products.
Strengthen Market Position in Carpet Backing
The Company intends to increase its carpet backing market share through (i)
continued capital investment in state-of-the-art equipment for additional carpet
backing production capacity, (ii) expansion of sales in the growing commercial
carpet sector of the domestic market and (iii) the continued development and
strengthening of its relationships with key customers. The Company's sales of
primary and secondary carpet backing have grown from $117.8 million in fiscal
1994 to $146.5 million in fiscal 1996. To support this growth, beginning in
fiscal 1994, the Company introduced a new production initiative supported by
capital expenditures in each of fiscal 1994, 1995 and 1996. Recent expenditures
include investments to expand capacity and improve production output through
installation of state-of-the-art equipment, including the Company's 88 loom, $35
million expansion at its largest manufacturing facility completed in August 1996
that has increased the Company's current capacity in carpet backing by
approximately 16.0%.
Despite the Company's recent strong growth, customer demand for the
Company's products has exceeded capacity. The Company believes it is well
positioned, based upon its relationships with its customers, the quality of its
products and its planned expansion in manufacturing capacity, to gain market
share. While the Company estimates that its share of the domestic residential
carpet backing market is 25%, in the growing commercial carpet segment of the
U.S. market, which currently represents approximately 25% of the total U.S.
carpet market, its share is less than 10%.
The Company has successfully cultivated long-term relationships with key
customers, which include nine of the top ten largest carpet manufacturers in the
world. The Company's success in developing and strengthening its relationships
with these and other key customers is attributable to its commitment to product
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quality, dedication to customer technical service and sensitivity and
responsiveness to changing customer needs.
Continue to Improve Manufacturing Efficiencies and Expand Manufacturing
Capacity
The Company is committed to implementing improvements throughout its
manufacturing system that will increase product volume and lower costs. The
Company's product design teams continuously seek to incorporate new operating
capabilities that enhance or maintain performance specifications while lowering
the cost of manufacturing its products. State-of-the-art equipment, much of
which has been developed with direct input from internal engineers, has been
modified and installed to exceed manufacturing processing specifications, to
continuously measure process parameters and to maintain very narrow tolerances,
resulting in less product variation. As a result, the Company has been able to
improve its manufacturing processes to utilize less labor and material and
produce higher quality fabrics. In addition, the Company maintains a human
resource program aimed at capturing productivity gains through team building,
formal training and employee empowerment.
The Company also believes that its sales are enhanced as a result of its
reputation for quality control and process improvement (especially in markets
where product reliability is critical, such as waste containment). The Company
has led this market by being the first (and in many cases, the only)
manufacturer to achieve ISO-9002 quality certification for its manufacturing
facilities. In addition, the Company was the first geosynthetic manufacturer to
have its own test laboratories accredited by the Geosynthetic Research Institute
which assures that a quality system and laboratory infrastructure is in place to
perform specific tests required in the industry.
The Company believes that increasing manufacturing capacity at its existing
plants will provide the capability to gain market share in its current markets
and to continue to expand into new markets. The Company has invested
approximately $113 million in capital improvements and new facilities during the
five year period ended September 30, 1996 and continuously evaluates
opportunities to expand its existing production capacity, add new capabilities
and enhance production technologies. Specifically, in response to opportunities
in the nonwoven market, the Company constructed a state-of-the-art nonwoven
facility in 1992 which management believes to be one of the largest such
facilities in the United States. This facility today generates sales exceeding
$35 million per year as its products support the geotextile, furniture and
building materials markets. The Company's recently completed $35 million capital
expenditure will increase capacity for carpet backing and woven geotextile
production, thus expanding the Company's market base and should increase
consolidated sales over the next twelve months by a projected $30 million.
Included in this expansion is a 130,000 square foot building addition to the
Company's largest manufacturing facility, 88 new looms and related equipment to
support these looms. The Company plans to continue to spend additional capital
to increase its manufacturing capability for primary and secondary carpet
backing, and woven and nonwoven geotextiles, subject to prevailing market
conditions.
Pursue Strategic Acquisitions
The Company is continually evaluating the potential acquisition of
companies, technologies or products which will complement its existing product
lines and manufacturing and distribution strengths. Acquisition opportunities
will be evaluated based on the strategic fit, the expected return on capital
invested and the ability of management to improve the profitability of acquired
operations through cost reductions and other synergies with existing operations.
PRODUCTS
The Company develops, manufactures and sells a wide array of
polypropylene-based industrial fibers and fabrics along its three principal
product lines: carpet backing, construction and civil engineering, which
comprises environmental/geotextile products and concrete reinforcement products,
and technical textiles. The Company manufactures five basic yarn and fiber
types, from which approximately 2,000 products are manufactured to serve in
excess of 65 end-use markets. The Company aims to compete in markets in which it
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can be the primary or secondary provider of such products, with over 93% of its
products meeting this criterion. Although end-use applications are diverse, the
Company has been able to leverage its manufacturing expertise to introduce new
products that often define industry standards. Through research, internal
developments, marketing and acquisitions, the Company has developed or acquired
new technologies to capitalize on a broad range of new niche product
opportunities, enabling it to expand beyond its traditional primary carpet
backing business. Since 1981, the following product lines have been added to the
Company's portfolio: filtration, specialty yarns, geotextiles,
Fibermesh(R)concrete reinforcing fibers, secondary carpet backing, staple
fibers, erosion control fibers, soil reinforcing fibers and high performance
wovens and nonwovens. This diversification has contributed to average annual
sales increases of 23.4% for the period from fiscal 1987 to fiscal 1991 and 9.8%
for the period from fiscal 1992 to fiscal 1996.
Carpet Backing
Carpet backing is the Company's oldest and largest product line. Carpet
backing represented approximately 50.1%, 49.0% and 48.9%, or $117.8 million,
$133.0 million and $146.5 million of the Company's fiscal 1994, 1995 and 1996
net sales, respectively. The technology utilized in the Company's carpet backing
business has provided the basic woven fabric technology for the Company's other
product lines. For example, certain geotextiles, agriculture fabrics and
furniture construction fabrics are woven on the same looms used to weave carpet
backing.
The Company's carpet backing product line consists of woven primary and
secondary fabrics in a variety of styles and widths that are manufactured from
polypropylene raw materials. Primary carpet backing is a tightly woven material
into which carpet yarn is tufted in the manufacture of broadloom floorcoverings.
Secondary carpet backing, which forms the base of the carpet, is the coarser
woven fabric that is laminated to the back of tufted broadloom to insure both
carpet integrity and dimensional stability. The Company produces a broad range
of primary and secondary backing.
The Company believes it is the second largest producer of carpet backing in
the United States, where carpeting is the most popular floor covering material.
The total market for carpeting in the United States has grown approximately 4%
per year over the past decade. In recent years, the growth rate of the Company's
carpet backing sales has generally outpaced that of the market due to the
Company's ability to gain market share. Management believes that the Company's
growth rate has been limited by its production capacity.
Construction and Civil Engineering
The Company's construction and civil engineering product line has two
distinct segments: environmental and geotextile products and concrete
reinforcement fibers. Construction and civil engineering has achieved rapid
growth since 1993 when the Company enhanced its channels of distributions for
Fibermesh(R) and expanded into production of nonwoven geotextiles. Construction
and civil engineering products represented approximately 29.3%, 30.6% and 32.4%,
or $68.7 million, $82.9 million and $97.0 million of the Company's fiscal 1994,
1995 and 1996 net sales, respectively. Within this product line, geotextile
products principally serve the environmental market, with end uses such as
landfill containment and stabilization, erosion control and soil stabilization,
separation and reinforcement. The construction market includes subbase
reinforcement and stabilization for highway and commercial construction and
reinforcement of conventional and pre-cast concrete. Growth in sales in the
environmental/geotextiles sector for the period fiscal 1993 to fiscal 1996
averaged 48.3% annually. Fibermesh(R) concrete reinforcing fiber sales grew at
an average annual rate of 10.5% for the period from fiscal 1993 to fiscal 1996.
Environmental/Geotextile Products. The Company's environmental/geotextile
product line consists of erosion control fabrics, geotextiles, and soil fibers.
These products control erosion and capture sediment; provide filtration,
separation and reinforcement of soils; improve engineering properties of native
soils; protect landfill liners; and extend pavement life. The specifications of
the Company's geosynthetic fabrics and fibers vary depending on specific site
conditions, including such factors as slope angles, water flow velocities,
climate, runoff, soil profile and ultimate land use. The Company's geosynthetic
products generally comply with state agency guidelines pertaining to
geosynthetic products issued to date.
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The Company produces a variety of nonwoven geotextiles for use in landfill
construction, asphalt roadway construction and drainage systems. The Company's
woven geotextiles are typically used in road and building construction to form a
separation barrier between unstable soils and aggregate foundations. The
Company's LANDLOK(R) erosion control products are used in water runoff channels
and in areas of exposed soil and shoreline erosion. These products hold the soil
in place, while allowing and supporting vegetative growth. LANDLOK(R) products
are an environmentally friendly and aesthetically pleasing alternative to rock
or concrete erosion control methods.
The Company has developed a strong market position in
environmental/geotextile products on the basis of sales growth and engineering
strengths. The Company believes it is now the fastest growing supplier of
geotextiles to this market, and has the broadest environmental/geotextile
product line in North America.
Environmental and economic concerns have contributed to an increase in
government mandates as well as industry practices to control surface runoff and
soil erosion and improve water quality. Geotextiles tend to be more durable,
easier to use, and more cost effective as compared to similar products made of
conventional materials. In highly populated urban areas with high concentrations
of roads and buildings the need for good conservation practices is becoming
increasingly acute. The Company believes that this market will continue to
expand as environmental concerns continue to grow, thereby increasing demand for
the Company's products. The Company believes its strength as a cost-effective
manufacturer of geotextiles will allow it to continue to increase sales of
current products, and introduce new products to this market.
Concrete Reinforcement. The Company pioneered the concept of using
polypropylene fibers as a secondary reinforcement for concrete and developed and
introduced Fibermesh(R) to the concrete industry in 1983. The Company believes
that its Fibermesh(R) products have a 70% share of the fiber treated segment of
the concrete industry. All concrete reinforcement fibers, including
Fibermesh(R), have only approximately 9% penetration of the total concrete
industry. Growth in this market will be based on increased acceptance of the use
of synthetic fibers for concrete reinforcement as a replacement for conventional
wire mesh. The Company estimates that 250 million cubic yards of concrete poured
annually in the United States could potentially benefit from the use of
Fibermesh(R) fibers.
The addition of Fibermesh polypropylene fibers to the concrete mixture
gives the concrete greater crack resistance and improved impact strength.
Primary applications for fiber reinforced concrete are commercial and
residential slabs, precast pipe and other products, shotcrete installations, and
whitetopped highways. In 1994, the Company started marketing Fibermesh(R) fibers
containing an antibacterial additive. This niche product is available for use in
concrete where bacteria growth is a concern. Primary targets are hospitals,
clinics, food processing facilities, and veterinary facilities. Fibermesh(R)
provides a cost-effective replacement for the nonstructural wire mesh
traditionally used in concrete construction and improves the concrete's
durability. Fibermesh(R) complies with construction guidelines and
specifications issued by all of the national building code associations. Of the
three synthetic fiber types used in fiber reinforced concrete, polypropylene is
recognized for its superior properties over nylon and polyester. Fibermesh(R) is
sold in fibrillated, monofilament and multi-denier designs, the latter of which
is protected by a U.S. patent.
Technical Textiles
Technical textiles produced by the Company are products and systems that
offer high performance solutions for niche markets. Technical textiles
represented approximately 20.6%, 20.4% and 18.7%, or $48.5 million, $55.5
million and $56.0 million of the Company's fiscal 1994, 1995 and 1996 net sales,
respectively. Technical textiles are sold to several niche markets, including
the furniture, filtration, agricultural and recreational industries, and each
product in those markets generally accounts for $10 to $12 million or less in
sales. The Company's technical textile products are generally differentiated on
the basis of product uniqueness, quality and service rather than price.
The Company's technical textiles consist of specialty fabrics, industrial
yarns and fibers. The specialty fabrics are manufactured in a variety of widths,
weights, permeability ranges and dimensional configurations
32
<PAGE> 34
primarily from polypropylene and, to a minor extent, other synthetic fibers.
Customers use these fabrics to manufacture products used in diverse applications
such as filtration (e.g., bauxite mining, wastewater treatment,
electrostatic-air filters and chemical separation), agriculture (e.g., shade for
foliage protection and environmental screening), and recreation (e.g., swimming
pool covers and trampoline mats).
The Company also sells its industrial yarns and fibers directly to weavers,
knitters, and non-woven manufacturers who produce niche market products, such as
automobile upholstery, coat linings, geotextiles, air filters and water
filtration media.
Recent product line repackaging has created new business programs for the
Company, which programs are currently in the new product launch phase. These
programs include professional landscaping products, livestock maintenance
fabrics, antibacterial products and building product components.
MARKETING AND SALES
Carpet Backing. The Company sells its carpet backing products to 91
customers in the carpet industry, most of whom are carpet manufacturers located
in the United States. In fiscal 1996, the Company's ten largest carpet backing
customers accounted for approximately 78% of its total net sales to the carpet
industry. In fiscal 1996, sales to Shaw, the Company's largest customer,
accounted for approximately 36% of net carpet backing sales and approximately
18% of the Company's total net sales. Shaw is estimated to have 27% of the
United States carpet market.
The Company's carpet backing products are sold primarily through the
Company's sales force that is directed from a central sales office in Calhoun,
Georgia. All of the sales managers have significant industry experience and
monitor ongoing product requirements, styling changes and competitive trends
affecting their customers.
Construction and Civil Engineering. The Company's geosynthetic products are
sold primarily in North America to regional and national distributors,
installers of landfill liners and various governmental transportation
departments, port authorities and waterway commissions. In fiscal 1996, the ten
largest geosynthetic product customers accounted for approximately 30% of the
Company's total net sales in this product line.
The Company's geosynthetic products are marketed by full-time salespeople
with expertise in civil engineering and agronomy who are directed from a central
office in Chattanooga, Tennessee. These salespeople, along with a technical
support staff at Company headquarters, provide design and field engineering
services to customers. They also are integral to the process of obtaining
required governmental permits for use of the products by end-users. In addition,
the Company has an ongoing marketing communications program to build awareness
of product capabilities and expand interest in and use of geotextiles.
Fibermesh(R) is sold through a direct sales force to ready-mix concrete
companies and precast concrete product manufacturers located primarily in the
United States and the United Kingdom. The Fibermesh(R) sales force operates out
of divisional offices in Austin, Texas, Denver, Colorado, Chattanooga, Tennessee
and Chesterfield, England. In addition, Fibermesh(R) is sold through a contract
with Master Builders, Inc., a construction industry product distributor. Other
construction industry product distributors market Fibermesh(R) in over 50
foreign countries. In fiscal 1996, the ten largest Fibermesh(R) customers
accounted for approximately 12% of the Company's total net sales of
Fibermesh(R).
Technical Textiles. The Company sells its specialty fabrics to a diverse
group of approximately 400 manufacturers located primarily in North and Central
America and the Pacific Rim countries. The Company sells its industrial yarns
and fibers to a diverse group of approximately 100 manufacturers located in
North America and Europe. In fiscal 1996, the Company's ten largest technical
textile customers accounted for approximately 26% of the Company's total net
sales of technical textiles. The Company's technical textiles are marketed by
salespersons through sales offices in Gainesville, Ringgold and Calhoun, Georgia
and Chesterfield, England.
33
<PAGE> 35
COMPETITION
The markets for the Company's products are highly competitive. In the
manufacture and sale of carpet backing, which represented approximately 49% of
the Company's total net sales for each of fiscal 1996 and 1995, the Company
competes primarily with Amoco, and, to a lesser extent, Wayn-Tex Inc. and
certain other companies. Amoco has the dominant position in the carpet backing
market worldwide. In the United States, only the Company and Amoco produce a
broad range of primary and secondary carpet backing in a variety of styles and
widths. The Company competes in the carpet backing market primarily on the basis
of quality, availability, service, price and product line variety, providing
carpet manufacturers with a reliable alternative source of supply to Amoco.
In the manufacture and sale of the Company's other products, the Company
generally competes with a number of other companies, some of which are
significantly larger and have substantially greater resources than the Company.
The Company's primary competitors in the construction and civil engineering
market are Amoco and Nicolon Corporation with respect to geotextiles, North
American Green, Inc. with respect to environmental and erosion control products,
and W.R. Grace & Co., which markets but does not manufacture concrete
reinforcement fibers, with respect to concrete reinforcement. The Company
competes in the concrete reinforcement fiber market primarily on the basis of
product design and technical service. In some applications, Fibermesh(R) also
competes with welded wire fabric on the basis of product performance and cost.
The Company competes in the construction and civil engineering market on the
basis of product line breadth and quality, price, and the custom design,
engineering and other services it provides to customers. With respect to
technical textiles, competitors vary depending upon the specific market niche.
The Company competes in each segment of the technical textiles market primarily
on the basis of service, quality, innovation and product line variety.
The pricing policies of the Company's competitors have at certain times in
the past limited the Company's ability to increase the prices or caused the
Company to lower the prices of certain of its products. See "-- Products,"
"-- Marketing and Sales" and "-- Raw Materials".
MANUFACTURING PROCESS
Polypropylene, a chemically inert plastic derived from petroleum, is the
basic raw material used in the manufacture of substantially all of the Company's
products. SI believes it is a technological leader in the conversion of
polypropylene into woven and nonwoven polypropylene products. The expertise of
the Company's research and development and marketing staff has enabled the
Company to develop innovative products, frequently in response to specific
customer needs.
Woven fabrics are produced by interlacing thousands of strands of extruded
yarn at right angles to one another. The manner in which the yarn is interlaced
determines the type of weave. Woven fabrics are characterized by strength and
dimensional stability. The Company's woven fabric products include primary and
secondary carpet backing, geotextiles, erosion control fabrics, and specialty
fabrics for the filtration, recreational, construction and agricultural markets.
Nonwoven fabrics are produced by first stacking several layers of webbed
short length fibers and then entangling the layers by punching barbed needles
through the layers. Nonwoven fabrics provide extensibility without rupture and
dimensionality. The Company's nonwoven fabric products include geotextiles,
erosion control fabrics, furniture and bedding construction fabrics, and spill
control fabrics.
The Company believes that it has state-of-the-art manufacturing capability
in both its woven and nonwoven product lines and is one of the most
cost-efficient producers in the markets in which it participates. The Company's
three primary manufacturing processes are extrusion, weaving and needlepunching.
Extrusion. Much of the Company's expertise has been developed in its
extrusion processes. Many of the product's specification properties are created
by engineering the polymeric raw materials during the extrusion process. In
addition to yarns and fibers for conventional end-uses, the Company has also
developed value-added products through the use of additives including those
which resist sunlight degradation or provide resistance to bacteria. The Company
owns and operates one of the world's largest polypropylene staple fiber
34
<PAGE> 36
lines. Most of the Company's extruded products are consumed internally and
become value-added woven and nonwoven fabrics, but some are sold to weavers,
knitters, nonwovens producers and convertors.
Weaving. The yarns produced in the Company's extrusion and yarn spinning
operations are woven on looms to produce the wide variety of fabrics that the
Company sells through all of its marketing divisions. Fabric properties are
engineered to industry specifications by altering constituent yarns and weave
patterns. Looms are generally interchangeable to weave carpet backing,
geotextiles and certain agricultural fabrics. The breadth of the Company's woven
product offerings was enhanced by the Chicopee Acquisition.
Needlepunching. In 1993, the Company constructed a state-of-the-art
needlepunched nonwovens fabric facility. This modern plant produces a new
generation of engineered cost-effective fabrics for the geotextile, furniture
construction and chemical spill cleanup markets.
The Company maintains a complete rigorous quality control program centered
around statistical process control and customer key measures. Each stage of the
process from the raw material to the final product is monitored using standard
procedures and test methods which satisfy the quality control standards
established by ISO. All of the Company's manufacturing facilities have been
granted ISO-9002 certification for their systematic approach to quality in all
areas of operation.
The Company's production equipment is capable of manufacturing a variety of
woven and nonwoven polypropylene products. This versatility enables the Company
to alter the product mix within its woven and nonwoven product lines in response
to market demand or to take advantage of specific profit opportunities.
The Company's plants are run on a continuous 24-hour per day basis, seven
days a week, 350 days per year. Orders are typically filled from inventory.
RESEARCH AND DEVELOPMENT
The Company's research and development is focused primarily on development
and as such the Company engages in product design, development and performance
validation to improve existing products and to create new products. The Company
expended approximately $2.0 million (approximately 0.7% of sales) and $1.9
million (approximately 0.7% of sales) on Company-sponsored research and
development activities in fiscal 1996 and fiscal 1995, respectively. As part of
a recently completed strategic review, the Company expects to increase research
and development expenses in fiscal 1997 to approximately $5.2 million.
INTERNATIONAL OPERATIONS
The Company conducts its foreign sales operations through subsidiaries in
Europe and a network of distributors worldwide. In fiscal 1996, the aggregate
sales (principally of construction and civil engineering products) by such
foreign subsidiaries and marketing divisions were approximately $5.5 million.
International sales from United States operations in fiscal 1996 were $27.8
million. Total international sales were 9.3% of consolidated net sales.
RAW MATERIALS
Polypropylene, which is a petroleum derivative, is the basic raw material
used in the manufacture of substantially all of the Company's products. The
Company currently purchases polypropylene in pellet form principally from four
suppliers, with Fina Oil & Chemical Company being the Company's largest supplier
of polypropylene. These purchases are generally made pursuant to long-standing
arrangements.
Polypropylene purchases account for approximately 50% of the Company's cost
of sales. Increases in the price of polypropylene without offsetting increases
in selling prices could have a significant negative effect on the Company's
results of operations and financial condition. The Company believes that the
sales prices of its products will adjust over time to reflect changes in
polypropylene costs. The Company has not experienced production curtailment due
to shortages of polypropylene supply at any time.
35
<PAGE> 37
REGULATION
The Company is subject to federal, state and local laws and regulations
affecting its business, including those promulgated under the Occupational
Safety and Health Act and by the Environmental Protection Agency or similar
agencies. Many of the Company's construction and civil engineering products have
applications that are subject to building code association guidelines and
specifications and highway department guidelines. Obtaining the necessary
approvals can delay new product introductions in some areas. Moreover, the
enactment of new legislation or the issuance of new guidelines may require the
Company to modify its existing geotextile and erosion control fabric products
and may also delay the Company's introduction of new geotextiles and erosion
control fabric products.
The Company's expenditures to date in connection with such federal, state
and local laws and regulations have not been material to its operations. The
Company believes it is currently in substantial compliance with applicable
governmental regulations.
ENVIRONMENTAL COMPLIANCE
The Company is subject to a broad range of federal, foreign, state and
local laws and regulations relating to the pollution and protection of the
environment. Among the many environmental requirements applicable to the Company
are laws relating to air emissions, wastewater discharges and the handling,
disposal or release of solid and hazardous substances and wastes. Based on
continuing internal review and advice from independent consultants, the Company
believes that it is currently in substantial compliance with applicable
environmental requirements. A cease- and-desist order was issued by the U.S.
Army Corps of Engineers on June 13, 1996, concerning the Chickamauga, Georgia
facility and the deposit of filling material into national wetlands without a
permit. The Company is working with the Army Corps of Engineers to create an
equivalent wetland area. The Company does not anticipate that such order will
have a material adverse effect on its operations.
The Company is also subject to laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), that
may impose liability retroactively and without fault for releases or threatened
releases of hazardous substances at on-site or off-site locations. The Company
is not aware of any releases for which it may be liable under CERCLA or any
analogous provision.
Actions by federal, state and local governments in the United States and
abroad 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 demand for its products. For example, certain local
governments have adopted ordinances prohibiting or restricting the use or
disposal of certain polypropylene products. Widespread adoption of such
prohibitions or restrictions could adversely affect demand for the Company's
products and thereby have a material adverse effect upon the Company. In
addition, a decline in consumer preference for polypropylene products due to
environmental considerations could have a material adverse effect upon the
Company.
Most of the Company's manufacturing processes are mechanical and are
therefore considered to be environmentally benign. Polypropylene resins are
readily recyclable, and the Company recycles post-industrial waste for certain
of the its products. In addition, each of the Company's manufacturing sites has
equipment and procedures for reclaiming a majority of internally generated
scrap, thus reducing the amount of waste sent to local landfills. As a result,
the Company does not currently anticipate any material adverse effect on its
operations, financial condition or competitive position as a result of its
efforts to comply with environmental requirements. Some risk of environmental
liability is inherent, however, in the nature of the Company's business, and
there can be no assurance that material environmental liabilities will not
arise. It is also possible that future developments in environmental regulation
could lead to material environmental compliance or cleanup costs.
36
<PAGE> 38
PROPERTIES
The Company operates the following principal domestic manufacturing and
distribution facilities. All of the Company's owned properties are subject to
liens in favor of the lenders under the Credit Facility.
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE FOOTAGE OWNED OR
LOCATION PRINCIPAL FUNCTION OF FACILITY LEASED
-------- ------------------ -------------- --------
<S> <C> <C> <C>
Chickamauga, Georgia......... Manufacturing of carpet backing, geotextiles and 738,800 Owned
fibers
Dalton, Georgia.............. Distribution center and multi-product warehouse 216,000 Owned
Ringgold, Georgia............ Manufacturing of geotextiles 183,750 Owned
Chattanooga, Tennessee....... Manufacturing of specialty yarns 126,432 Owned
Alto, Georgia................ Manufacturing of certain yarns 92,400 Owned
Dalton, Georgia.............. Needlepunching of carpet backing 44,945 Owned
Gainesville, Georgia......... Manufacturing of certain fabrics 200,000 Leased
Dalton, Georgia.............. Woven, nonwoven and geotextile warehouse 185,000 Leased
124 Keene Street
Dalton, Georgia.............. Geosynthetic products and fiber warehouse 168,000 Leased
120 Keene Street
Chickamauga, Georgia......... Manufacturing of carpet backing, geotextiles and 143,736 Leased
fibers
Dalton, Georgia.............. Specialty yarn warehouse 104,827 Leased
Cleveland Highway
Cornelia, Georgia............ Assembly of certain fabrics 76,000 Leased
Westside, Georgia............ Carpet backing warehouse 86,440 Leased
Dalton, Georgia.............. Carpet backing warehouse 85,000 Leased
North Dug Gap
Dalton, Georgia.............. Geosynthetic products warehouse 36,000 Leased
Florence
Dalton, Georgia.............. Geosynthetic products warehouse 31,500 Leased
1408 Coronet
Claremont, North Carolina.... Nonwoven fabrics warehouse 14,000 Leased
Tupelo, Mississippi.......... Nonwoven fabrics warehouse 13,500 Leased
Chattanooga, Tennessee....... Corporate support offices 4,800 Leased
---------
Total................................................................ 2,551,130
=========
</TABLE>
ORDER BACKLOG
The Company generally sells its products pursuant to customer orders which
are satisfied either out of inventory or by the manufacture and shipment of the
product promptly following receipt of an order. Accordingly, the dollar amount
of backlog orders believed to be firm is not significant or indicative of the
Company's future sales and earnings.
EMPLOYEES
As of September 30, 1996, the Company employed 2,212 persons in the United
States, of whom 458 were salaried employees and the remainder were hourly
employees. None of the Company's employees are
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<PAGE> 39
unionized. The Company has never experienced any strikes and believes its
relations with employees to be satisfactory. The Company employs 13 persons in
the United Kingdom.
PATENTS AND TRADEMARKS
The Company owns or is licensed under several United States and foreign
patents. While these patents are helpful to the Company's business, it is
believed that a loss of patent exclusivity would not be materially adverse to
the Company's business.
The Company has registered several of its trademarks, including
FIBERGRIDS(R), FIBERMESH(R) and LANDLOK(R), with the United States Patent and
Trademark office and with several foreign trademark offices.
CLAIMS AND LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to litigation arising out of
their business operations. Most of such litigation involves claims for personal
injury, property damage, breach of contract and claims involving employee
relations and certain administrative proceedings. The Company believes such
claims are adequately covered by insurance or do not involve a risk of material
loss to the Company.
The General Partner of the Partnership has been named in a putative class
action lawsuit filed on February 11, 1997 in the Delaware Court of Chancery by a
limited partner of the Partnership alleging, among other things, breach of the
General Partner's fiduciary duty to the limited partners in connection with the
November 1, 1997 Common Stock Offering of the Company, and seeking, among other
things, removal of the General Partner. The Partnership is a principal
stockholder of the Company and certain members of the Company's management
control the General Partner. See "Certain Relationships and Related
Transactions." The Company is not named as a defendant in the lawsuit and the
Company does not believe that the ultimate resolution will have a material
adverse effect on the Company.
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<PAGE> 40
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The following table sets forth certain information concerning each of the
executive officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES HELD
---- --- -------------------------
<S> <C> <C>
Leonard Chill..................... 64 President, Chief Executive Officer and Director
W. Wayne Freed.................... 61 Vice President -- Market Development
Ralph Kenner...................... 52 Vice President -- Manufacturing
William Gardner Wright, Jr........ 67 Vice President -- General Manager Carpet Backing
Division
Robert J. Breyley................. 68 Vice President -- Fibermesh(R) Division
W.O. Falkenberry.................. 54 Vice President -- Human Resources
C. Ted Koerner.................... 47 Vice President -- General Manager Construction/Civil
Engineering Products Group
John Michael Long................. 53 Vice President -- General Manager Technical Textiles
Group
Joseph Sinicropi.................. 43 Chief Financial Officer and Secretary
Bobby Callahan.................... 54 Controller
Joseph F. Dana(1)................. 49 Director
Lee J. Seidler(1)................. 62 Director
William J. Shortt(1).............. 72 Director
Robert L. Voigt(1)................ 78 Director
</TABLE>
- ---------------
(1) Member of Compensation Committee and Audit Committee.
Directors of the Company are elected each year at the annual meeting of
stockholders. The Company's officers serve at the discretion of the Board.
Leonard Chill joined the Company in December 1973 as President and was
appointed Chief Executive Officer in 1986. He has been a director since 1986.
From 1967 until joining the Company, he held a number of positions with Thiokol
Corporation in its Fibers Division, including that of General Manager. Mr. Chill
is also the sole director and sole stockholder of one of the general partners of
Synthetic Management G.P., the entity which is the sole general partner of the
general partner of the Partnership. See "The Company".
W. Wayne Freed joined the Company in 1981 and became Vice
President -- Market Development in 1987. Prior thereto, he had 28 years
experience in the textile industry. Mr. Freed is also the sole director and sole
stockholder of one of the general partners of Synthetic Management G.P.
Ralph Kenner has been Vice President -- Manufacturing since 1984. He joined
the Company in 1974 as Director, Industrial Relations and served in that
capacity until 1976. In 1976, he was appointed Plant Manager and served in that
capacity until 1984. Mr. Kenner is also the sole director and sole stockholder
of one of the general partners of Synthetic Management G.P.
William Gardner Wright, Jr. was Vice President -- Marketing and Sales from
1983 to 1996 at which time he was named Vice President -- General Manager of the
Carpet Backing Division. From 1977 until 1983, he was President of Synca
Marketing Corp., a textile sales agency which served as a sales agent for the
Company's primary carpet backing, as well as the products of other
manufacturers. Mr. Wright is a director of the Sun Trust Bank of Northwest
Georgia. Mr. Wright is also the sole director and sole stockholder of one of the
general partners of Synthetic Management G.P.
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<PAGE> 41
Robert J. Breyley joined the Company in 1984 and became Vice
President -- Fibermesh(R) Division in December 1984. Prior thereto, he held a
variety of managerial positions with Master Builders, Inc., a leading concrete
admixtures supplier. During his last six years with Master Builders, he was
Senior Vice President of Sales and Marketing.
W.O. Falkenberry joined the Company in 1993 as Vice President -- Human
Resources. Prior thereto, he was Director of Human Resources with the Champion
Products Division of the Sara Lee Corporation from 1989 to 1993.
C. Ted Koerner joined the Company in 1990 and became Vice
President -- Construction Products Division in 1993. He was named Vice
President -- General Manager of the Construction/Civil Engineering Products
Group in 1995. Prior thereto, Mr. Koerner was an engineer with the Ohio
Department of Transportation; a sales engineer, product supervisor and regional
engineer with Armco Steel Corporation; and a sales manager with National Seal
Corporation.
John Michael Long was Vice President -- Nonwoven Fabrics from 1991 to 1996
at which time he was named Vice President -- General Manager of the Technical
Textiles Group. Prior thereto, he held a variety of managerial positions with
Spartan Mills, a manufacturer of nonwoven geotextile fabrics. During his last
five years at Spartan, he was Vice President and General Manager.
Joseph Sinicropi joined the Company in 1995 as Chief Accounting Officer. He
was named Chief Financial Officer and Secretary in February 1996. Prior to
joining the Company, he was an audit senior manager in the international
accounting firm of Deloitte & Touche LLP from 1985 to 1995.
Bobby Callahan joined the Company in 1977 and has been Controller since
1980. Prior thereto, he held a variety of financial management positions in the
carpet industry.
Joseph F. Dana has been engaged in the private practice of law for over
twenty years and has been a member of the law firm Watson & Dana, LaFayette,
Georgia, since its formation in 1978. Mr. Dana has served as general counsel to
the Company since 1987 and has been a Director since 1993.
Lee J. Seidler was Senior Managing Director at Bear, Stearns & Co. Inc.
from 1981 to 1989. He is presently associated with Bear, Stearns & Co. Inc. as
Managing Director Emeritus. Mr. Seidler is a director of the Shubert Foundation,
The Shubert Organization, and Players International, Inc. and has been a
director of SafeCard Services, Inc. and Eastbank, N.A. He has been a Director
since 1993.
William J. Shortt retired from Johnson & Johnson in 1989. From 1977 to
1989, he was Director of Government and Trade Relations, Southeast at Johnson &
Johnson. Mr. Shortt has also been a director of Standard Telephone Company,
Standard Group Inc., and First National Bank of Habersham. He has been a
Director since 1993.
Robert L. Voigt served as a consultant to Dixie Yarns Inc. from 1985 until
his retirement at the end of 1991. Mr. Voigt also served as a director of Dixie
Yarns, Inc. from 1981 to 1987. He has been a Director since 1993.
Each of the executive officers, except Mr. Breyley, has an Employment
Agreement with the Company. There are no family relationships between any of the
above officers or directors of the Company.
DIRECTORS' COMPENSATION
Outside directors receive $15,000 per annum for services as a director and
$800 per meeting attended. Directors who are members of management do not
receive any meeting attendance fees or additional compensation for service as a
director or service on committees of the Board. All directors are reimbursed for
reasonable out-of-pocket expenses incurred in connection with their attendance
at meetings of the Board and its committees on which they serve.
Under the Company's 1994 Stock Option Plan for Non-Employee Directors (the
"Directors' Plan"), Messrs. Dana, Seidler, Shortt and Voigt were granted
non-qualified stock options (the "Directors' Options")
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<PAGE> 42
to purchase 28,906, 57,813, 19,271 and 19,271 shares of Common Stock,
respectively. The Directors' Plan does not provide for any further grants of
options thereunder.
The purchase price of the shares of Common Stock subject to the Directors'
Options was determined by reference to the fair market value of the Common
Stock, as determined by the Compensation Committee, at the time Messrs. Dana,
Seidler, Shortt and Voigt became members of the Board. As of October 1, 1996,
100% of the number of shares of Common Stock subject to each Director Option are
vested and are exercisable. As a Company employee, Mr. Chill is not eligible to
participate in the Directors' Plan. In the event that the outstanding shares of
Common Stock are changed by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split, combination or exchange of
shares and the like, or dividends payable in Common Stock, an appropriate
adjustment shall be made by the Committee in the aggregate number of shares of
Common Stock available under the Directors' Plan and in the number of shares and
price per share subject to outstanding Directors' Options. The term of each
Directors' Option is ten years from the date of grant.
BOARD COMMITTEES
The Board has established a Compensation Committee, composed of Messrs.
Dana, Seidler, Shortt and Voigt, which establishes salary, incentives and other
forms of compensation and administers the Company's 1994 Stock Option Plan and
1996 Stock Option Plan and other incentive compensation and benefit plans
applicable to the Company's officers. The Board has also established an Audit
Committee, composed of Messrs. Dana, Seidler, Shortt and Voigt, which recommends
to the Board the selection of independent auditors, and reviews the scope and
results of the audit and other services provided by the independent auditors.
41
<PAGE> 43
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information regarding the compensation paid
during each of the Company's last three completed fiscal years to the Chief
Executive Officer of the Company and each of the other four most highly
compensated executive officers of the Company as of September 30, 1996
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
FISCAL YEAR -------------------------------------- SECURITIES
NAME AND ENDED OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION SEPT. 30, SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
------------------ ----------- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Leonard Chill................ 1996 254,871 118,119 -- -- 9,924(1)
Chief Executive Officer and 1995 254,871 89,939 4,668 -- 10,044(1)
President 1994 247,447 127,260 3,989 -- 9,921(1)
Ralph Kenner................. 1996 145,973 55,063 -- -- 4,170(2)
Vice President -- 1995 145,973 41,926 2,344 -- 4,482(2)
Manufacturing 1994 125,973 66,660 2,300 -- 4,497(2)
William Gardner Wright,
Jr......................... 1996 235,664 81,920 -- -- 4,170(2)
Vice President -- General 1995 235,664 70,238 304 -- 4,005(2)
Manager -- Carpet Backing 1994 235,664 99,384 339 -- 4,497(2)
Division
Robert J. Breyley............ 1996 141,720 48,144 -- -- 4,170(2)
Vice President -- 1995 141,720 49,500 -- -- 3,329(2)
Fibermesh(R) Division 1994 141,720 72,000 -- -- 4,198(2)
W. Wayne Freed............... 1996 152,400 37,123 -- -- 4,170(2)
Vice President -- Market 1995 142,000 28,267 1,808 -- 4,090(2)
Development 1994 128,544 29,969 2,109 -- 3,808(2)
</TABLE>
- ---------------
(1) These amounts consist of $5,424 of insurance premiums paid by the Company
under a term life insurance policy in each of 1996, 1995 and 1994, and
$4,500, $4,620 and $4,497 contributed by the Company under its 401(k) plan
in 1996, 1995 and 1994, respectively.
(2) These amounts represent the annual contribution made by the Company under
its 401(k) Plan in the respective year.
42
<PAGE> 44
OPTIONS GRANTS IN LAST FISCAL YEAR
The following table sets forth options granted to the Named Executive
Officers during fiscal 1996:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5% 10%
---- ---------- ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Leonard Chill................... 34,875 17.8% $10.72 12/09/05 $235,058 $595,665
Ralph Kenner.................... 20,458 10.4 10.72 12/09/05 137,887 349,423
William Gardner Wright, Jr...... 20,458 10.4 10.72 12/09/05 137,887 349,423
Robert J. Breyley............... -- -- -- -- -- --
W. Wayne Freed.................. 20,458 10.4 10.72 12/09/05 137,887 349,423
</TABLE>
- ---------------
(1) These gains are based on arbitrary compounded rates of growth of stock
prices mandated by the Securities and Exchange Commission of 5% and 10% per
year from the date the option was granted over the full option term. These
rates do not represent the Company's estimate or projection of future prices
of the Common Stock. There is no assurance that the values that may be
realized by any Named Executive Officer upon exercise of his options will be
at or near the value estimated in the foregoing table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth option exercises by and the value of the
in-the-money unexercised options held at September 30, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(1) AT FY-END(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leonard Chill............... -- -- 27,602 117,680 $62,933 $268,310
Ralph Kenner................ -- -- 8,353 45,518 19,045 103,781
William Gardner Wright,
Jr........................ -- -- 8,353 45,518 19,045 103,781
Robert J. Breyley........... -- -- 2,421 7,264 5,520 16,562
W. Wayne Freed.............. -- -- 8,353 45,518 19,045 103,781
</TABLE>
- ---------------
(1) Any shares of Common Stock received upon the exercise of options are subject
to "lock-up" agreements with the underwriters of the Common Stock Offering.
(2) Based on the initial public offering price ($13.00 per share) less the
exercise price ($10.72 per share) payable for such shares.
EMPLOYMENT AGREEMENTS
Each of Messrs. Chill, Freed, Kenner and Wright (the "Executives") are
employed by the Company pursuant to individual employment agreements effective
as of September 6, 1996 (the "Effective Date"). The term of employment under
these agreements is three years from the Effective Date; provided that on each
anniversary of the month following the first Effective Date, and each successive
month, the term is automatically extended for one successive month, providing a
minimum remaining term of two years, unless either party terminates the
agreement by written notice. The current annual salaries for Messrs. Chill,
Freed, Kenner and Wright pursuant to these agreements are $270,163, $161,544,
$154,731 and $249,803, respectively, and are subject to annual review by the
Board.
The Company has the right to terminate the Executive's employment for
"cause" or "without cause", in each case as defined in the applicable employment
agreement. In the event that an Executive is terminated by
43
<PAGE> 45
the Company "without cause," other than following a "Change in Control" (as
defined below), the Executive is entitled to receive his base salary at the rate
in effect on the date of termination of employment for a period of two years
from the date of termination, any unpaid, accrued amounts under the annual
incentive plan, a pro rata payment under the annual incentive plan for the
termination year, a payment equal to the three year average of incentive
payments received under the Company's annual incentive plan and any stock option
rights due through the end of the term. Under each employment agreement, a
Change in Control occurs when (i) any person or group becomes the beneficial
owner of capital stock of the Company representing 35% of all the voting stock,
(ii) the members of the Board on the Effective Date cease to constitute a
majority of the Board, or (iii) the Company combines with another entity and a
person holds more than 35% of the voting stock of the Company or the Company's
directors, as of the date immediately before such combination, constitute less
than a majority of the board of directors of the combined entity.
If the Executive is terminated by the Company "without cause" prior to the
occurrence of a Change in Control and it can be shown such termination occurred
in connection with, prior to or in anticipation of the Change in Control, or if
the termination resulted from a Change in Control, the Executive is entitled to
(i) a lump sum payment equal to two times the Executive's annual base salary and
annual incentive plan for the year in which the Change in Control occurs or the
prior year, whichever is greater, (ii) unpaid, accrued amounts under the annual
incentive plan and a payment that equals the average of the incentive payment
received by the Executive under the annual incentive plan for the immediately
preceding three years and (iii) certain other supplemental insurance coverages,
for a maximum of 18 months (the "Change in Control Provision"). In the event of
a Change in Control, whether or not the Executive's employment continues with
the Company, all options granted to such Executive under any of the Management
Plans (as defined below) shall vest immediately on the date of the Change in
Control.
In the event that an Executive's employment is terminated for disability or
death, the Executive (or his estate) is to be paid (a) his base salary at the
rate in effect on the date of termination until the earlier of six months from
the date of termination or the date of commencement of long term disability
payments, if applicable, and (b) any unpaid, accrued amounts under the annual
incentive plan, and will receive any stock option rights to which such Executive
would otherwise be entitled. In the case of termination by reason of death, the
executive is also entitled to a payment under the annual incentive plan equal to
the pro rata amount due for the termination year.
OPTION PLANS
The Company's 1994 Stock Option Plan (the "1994 Plan") was adopted by the
Board upon the recommendations of a special committee consisting of Messrs.
Seidler, Shortt and Voigt, and approved by the Company's sole stockholder during
the fourth quarter of fiscal 1994. The Company's 1996 Stock Option Plan (the
"1996 Plan") was similarly adopted on May 15, 1996, as amended as of July 31,
1996.
Under the 1994 Plan and 1996 Plan (collectively, the "Management Plans")
incentive stock options ("ISOs"), as provided in Section 422A of the Internal
Revenue Code, and non-qualified stock options may be granted to any full-time
employee of the Company or its subsidiaries. The maximum aggregate number of
shares of Common Stock that may be issued under the 1994 Plan and 1996 Plan is
491,413 and 289,062, respectively. As of September 30, 1996, options to purchase
an aggregate of 491,413 shares of Common Stock had been granted under the 1994
Plan. Of such amount, Messrs. Chill, Wright, Freed, Kenner and other key
managers hold options to purchase 145,282, 53,871, 53,871, 53,871 and 130,648
shares of Common Stock, respectively. Mr. Beckman holds options for 53,871
common shares. As of September 30, 1996, the only options granted under the 1996
Plan were options to purchase 21,723 shares of Common Stock granted to Mr.
Sinicropi. Options may not be granted under the Management Plans after August
28, 2004. See "Principal Stockholders".
The purchase price of the shares of Common Stock subject to options under
the Management Plans must be no less than the fair market value of the Common
Stock at the date of grant, as determined by the Committee; provided, however,
that the purchase price of shares of Common Stock subject to ISOs granted to any
optionee who owns shares possessing more than 10% of the combined voting power
of the Company or any
44
<PAGE> 46
parent or subsidiary of the Company ("Ten Percent Stockholder") must not be less
than 110% of the fair market value of the Common Stock at the date of the grant.
The maximum term of an option may not exceed ten years from the date of grant,
except with respect to ISOs granted to Ten Percent Stockholders which must
expire within five years of the date of grant.
The Management Plans are administered by the Company's Compensation
Committee. Subject to the express provisions of the Management Plans, the
Compensation Committee has the discretion and authority to determine to whom
from among the eligible employees an option may be granted, the time or times at
which each option may be exercised, the number of shares of Common Stock subject
to each option and the terms and conditions of each stock option agreement
issued pursuant to the Management Plans; provided, however, that shares of
Common Stock subject to any such agreement shall vest and become exercisable at
a minimum rate of 25% per year over a four-year period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1996 and 1995, the Company paid legal fees totaling
approximately $232,000 and $135,000 to the law firm of Watson & Dana. Mr. Dana,
a director of the Company and a member of the Compensation Committee, is a
member of Watson & Dana.
45
<PAGE> 47
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of February 28, 1997 by: (i) each
stockholder known by the Company to own beneficially 5% or more of the
outstanding shares of Common Stock; (ii) each director of the Company; (iii)
each of the Named Executive Officers; and (iv) all executive officers and
directors of the Company as a group. Unless otherwise indicated, the address for
each officer, director and 5% stockholder is c/o Synthetic Industries, Inc., 309
LaFayette Road, Chickamauga, Georgia 30707.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PERCENT
---- ---------------- -------
<S> <C> <C>
5% STOCKHOLDERS:
Synthetic Industries, L.P......................... 5,781,250(1) 67.53%
The Crabbe Huson Group, Inc.(2)................... 738,000(2) 8.62%
NAMED EXECUTIVE OFFICERS:
Leonard Chill..................................... 73,554(3)(4)(5) *
W. Wayne Freed.................................... 31,453(3)(4)(5) *
William Gardner Wright, Jr. ...................... 31,453(3)(4)(5) *
Ralph Kenner...................................... 31,453(3)(4)(5) *
Robert J. Breyley................................. 5,472(4)(6) *
DIRECTORS:
Joseph F. Dana.................................... 28,906(4) *
Lee J. Seidler.................................... 57,813(4) *
William J. Shortt................................. 19,271(4) *
Robert L. Voigt................................... 19,271(4) *
All executive officers and directors as a group
(14 persons)(5)(6)(7)........................... 322,834 3.77%
</TABLE>
- ---------------
* Less than 1.0%.
(1) Under certain conditions the Partnership has the right to cause the Company
to register the sale of its shares of Common Stock. See "Certain
Relationships and Related Transactions."
(2) The business address for The Crabbe Huson Group, Inc. is 121 S.W. Morrison,
Suite 1400, Portland, Oregon 97204. Information regarding The Crabbe Huson
Group, Inc. has been obtained by the Company from a Schedule 13G filed by
The Crabbe Huson Group, Inc. and certain related investment companies with
the Commission on or about February 7, 1997. The Crabbe Huson Group, Inc.
does not directly own any shares of Common Stock. It has shared voting and
investment power over 738,000 shares of Common Stock.
(3) Includes 9,632 shares as to which such person may be deemed to have
beneficial ownership as a result of his indirect beneficial ownership of
0.1666% of a partnership interest in the Partnership.
(4) Includes shares of Common Stock subject to options exercisable within 60
days, as follows: Leonard Chill -- 63,923 shares; W. Wayne Freed -- 21,821
shares; William Gardner Wright, Jr. -- 21,821 shares; Ralph Kenner -- 21,821
shares; Robert J. Breyley -- 4,842 shares; Joseph F. Dana -- 28,906 shares;
Lee J. Seidler -- 57,813 shares; William J. Shortt -- 19,271 shares; Robert
L. Voigt -- 19,271 shares.
(5) Does not include 5,781,250 shares (other than the 9,632 shares described in
footnote 3 above) as to which Messrs. Chill, Wright, Kenner and Freed may be
deemed to have beneficial ownership by virtue of their indirect control of
the Partnership. See "Certain Relationships and Related Transactions".
(6) Includes 630 shares as to which Mr. Breyley may be deemed to have beneficial
ownership as a result of his indirect beneficial ownership of 0.0109% of a
partnership interest in the Partnership.
(7) Does not include (i) an aggregate of 19,976 shares of Common Stock subject
to options exercisable within 60 days that are owned by employees of the
Company other than the executive officers and (ii) an aggregate of 280,875
shares of Common Stock subject to options that are not exercisable within 60
days that are owned by directors, officers and employees of the Company.
Includes an aggregate of 38,528 shares as to which Messrs. Chill, Wright,
Kenner and Freed may be deemed to have beneficial ownership as a result of
their indirect beneficial ownership of 0.1666% each of a partnership
interest in the Partnership.
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<PAGE> 48
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The General Partner is the sole general partner of the Partnership.
Synthetic Management G.P. is the sole general partner of SI Management L.P. By
virtue of these relationships, Synthetic Management G.P. controls the management
and affairs of the Partnership and, therefore, the Company. The Partnership owns
5,781,250 shares of Common Stock, or approximately 67% of the issued and
outstanding shares of Common Stock, and therefore holds the voting power to
determine the outcome of all matters upon which stockholders vote.
The general partners of Synthetic Management G.P. are the following five
Delaware corporations: Chill Investments, Inc., Beckman Investments, Inc., Freed
Investments, Inc., Kenner Investments, Inc. and W.G. Wright Investments, Inc.
Each of Messrs. Chill, Beckman, Freed, Kenner and Wright is the sole director
and the sole stockholder of one of Synthetic Management G.P.'s general partners.
For further information concerning Messrs. Chill, Beckman, Freed, Kenner and
Wright, see "Management -- Executive Officers and Directors of the Company" and
"-- Executive Compensation".
The Company and the Partnership have entered into a Registration Rights
Agreement pursuant to which the Company has agreed that upon request of the
Partnership the Company will register under the Securities Act and applicable
state securities laws the sale of the Common Stock owned by the Partnership and
as to which registration has been requested. The Company's obligation is subject
to certain limitations relating to a minimum amount required for registration,
the timing of a registration and other similar matters. The Company is obligated
to pay any registration expenses incidental to such registration, excluding
underwriters' commissions and discounts. In connection with the Common Stock
Offering, the Company incurred approximately $300,000 of such registration
expenses on behalf of the Partnership. The above description is qualified in its
entirety by reference to the Registration Rights Agreement, a copy of which has
been filed as an exhibit to Amendment No. 1 to the Company's Registration
Statement on Form S-1, filed with the Commission on September 13, 1996,
substantially in the form executed. The Partnership, however, is subject to a
lock-up agreement with the underwriters of the Common Stock Offering pursuant to
which the Partnership has agreed not to offer, sell, agree to sell, grant any
option for the sale of or otherwise dispose of, directly or indirectly, any
shares of Common Stock (or any security convertible into, exercisable for or
exchangeable for Common Stock) without the consent of Bear, Stearns & Co. Inc.
for a period of 270 days after November 1, 1996, and thereafter, until December
31, 1997, only pursuant to an underwritten public offering.
Lee J. Seidler, a director of the Company, is presently associated with
Bear, Stearns & Co. Inc. as Managing Director Emeritus and from time to time
receives fees in connection with consulting and referral services to Bear,
Stearns & Co. Inc., including the Common Stock Offering and the Old Notes
Offering.
Jon P. Beckman, a former executive officer of the Company and an affiliate
of the General Partner, is being retained as a consultant to the Company.
Pursuant to his consulting agreement with the Company, Mr. Beckman will receive,
until January 31, 2000, or upon earlier termination of his consulting agreement,
$125,000 per year and various insurance coverages, and will be authorized to
exercise all stock options awarded to him, subject to applicable vesting
provisions. Under this agreement, Mr. Beckman is required to provide the Company
with 20 hours of consultation per month, has released the Company from any
liability resulting from his employment and has also agreed not to compete
against the Company.
The Company leases office space under a five-year lease with William
Gardner Wright, Jr., one of the Company's executive officers. The term of the
lease expires on September 30, 1998 and the rent is approximately $4,000 per
month, which the Company believes is within prevailing market rates.
Pursuant to a licensing agreement with the Company, W. Wayne Freed, an
executive officer of the Company, receives royalties related to the manufacture
and sale of a certain product for which Mr. Freed owns all of the U.S. and
foreign patents. Under this agreement, Mr. Freed received royalties of $3,079
and $12,269 in fiscal 1995 and 1996, respectively, and will continue to receive
such royalties until 2012 or the earlier termination of the license agreement.
47
<PAGE> 49
See also the information and the transactions described under
"Management -- Compensation Committee Interlocks and Insider Participation".
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, the Company entered into the
Registration Rights Agreement with the Initial Purchaser, pursuant to which the
Company agreed to use its best efforts to file with the Commission a
registration statement with respect to the exchange of the Old Notes for debt
securities with terms identical in all material respects to the terms of the Old
Notes, except that the offering of the New Notes would be registered under the
Securities Act and therefore the New Notes would not be subject to certain
restrictions on transfer applicable to the Old Notes and would not be entitled
to registration rights and other rights under the Registration Rights Agreement.
The New Notes offered hereby in exchange for Old Notes meet the above
requirements. Upon consummation of the Exchange Offer, holders of Old Notes will
not be entitled to any further registration rights under the Registration Rights
Agreement, except that the Initial Purchaser may have certain registration
rights under limited circumstances. See "Risk Factors -- Certain Consequences of
a Failure to Exchange Old Notes" and "Description of the Old Notes."
The Exchange Offer is not being made to, nor will the Company accept
tenders for exchange from, holders of Old 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.
TERMS OF THE EXCHANGE
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $170,000,000 aggregate principal amount of New Notes for a like
aggregate principal amount of Old Notes properly tendered on or prior to the
Expiration Date (as defined below) and not properly withdrawn in accordance with
the procedures described below. The Company will issue, promptly after the
Expiration Date, an aggregate principal amount of up to $170,000,000 of New
Notes in exchange for a like principal amount of outstanding Old Notes tendered
and accepted in connection with the Exchange Offer. Holders may tender their Old
Notes in whole or in part in a principal amount of $1,000 and integral multiples
thereof.
The Exchange Offer is not conditioned upon any minimum number of Old Notes
being tendered. As of the date of this Prospectus $170,000,000 aggregate
principal amount of the Old Notes is outstanding.
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Old Notes which are not tendered for
exchange or are tendered but not accepted in connection with the Exchange Offer
will remain outstanding and be entitled to the benefits of the Indenture, but
will not be entitled to any further registration rights under the Registration
Rights Agreement, except that the Initial Purchaser may have certain
registration rights under limited circumstances.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof promptly after the Expiration
Date.
Holders who tender Old Notes in connection with 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 Old
Notes for New Notes in connection with 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."
NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION.
48
<PAGE> 50
HOLDERS OF OLD NOTES MUST MAKE THE OWN DECISION WHETHER TO TENDER PURSUANT TO
THE EXCHANGE OFFER AND, IF THEY CHOOSE TO DO SO, THE AGGREGATE AMOUNT OF OLD
NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND
CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION
AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on
, 1997 unless the Exchange Offer is extended by the Company (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Company expressly reserves the right in its sole and absolute
discretion, subject to applicable law and the terms of the Registration Rights
Agreement, at any time and from time to time, (i) to delay the acceptance of the
Old Notes for exchange, (ii) to terminate the Exchange Offer (whether or not any
Old Notes have theretofore been accepted for exchange) if the Company
determines, in its sole and absolute discretion, that any of the events or
conditions referred to under "-- Certain Conditions to the Exchange Offer" have
occurred or exist or have not been satisfied, (iii) to extend the Expiration
Date of the Exchange Offer and retain all Old Notes tendered pursuant to the
Exchange Offer, subject, however, to the right of holders of Old Notes to
withdraw their tendered Old Notes as described under "-- Withdrawal Rights," and
(iv) to waive any condition or otherwise amend the terms of the Exchange Offer
in any respect. If the Exchange Offer is amended in a manner determined by the
Company to constitute a material change, or if the Company waives a material
condition of the Exchange Offer, the Company will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered holders of the Old Notes, and the Company will extend the Exchange
Offer to the extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 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 any public announcement and
subject to applicable law, the Company shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will exchange, and will issue to the Exchange Agent, New Notes for Old
Notes validly tendered and not withdrawn (pursuant to the withdrawal rights
described under "-- Withdrawal Rights") promptly after the Expiration Date.
In all cases, delivery of New Notes in exchange for Old Notes tendered and
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of (i) Old Notes or a book-entry
confirmation of a book-entry transfer of Old Notes into the Exchange Agent's
account at The Depository Trust Company ("DTC"), (ii) the Letter of Transmittal
(or facsimile thereof), properly completed and duly executed, with any required
signature guarantees, and (iii) any other documents required by the Letter of
Transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Notes into the Exchange Agent's account at DTC.
Subject to the terms and conditions of the Exchange Offer, the Company will
be deemed to have accepted for exchange, and thereby exchanged, Old Notes
validly tendered and not withdrawn as, if and when the Company gives oral or
written notice to the Exchange Agent of the Company's acceptance of such Old
Notes for exchange pursuant to the Exchange Offer. The Exchange Agent will act
as agent for the Company for the purpose of receiving tenders of Old Notes,
Letters of Transmittal and related documents, and as agent for tendering holders
for the purpose of receiving Old Notes, Letters of Transmittal and related
documents
49
<PAGE> 51
and transmitting New Notes to validly tendering holders. Such exchange will be
made promptly after the Expiration Date. If for any reason whatsoever,
acceptance for exchange or the exchange of any Old Notes tendered pursuant to
the Exchange Offer is delayed or the Company extends the Exchange Offer or is
unable to accept for exchange or exchange Old Notes tendered pursuant to the
Exchange Offer, then, without prejudice to the Company's rights set forth
herein, the Exchange Agent may, nevertheless, on behalf of the Company and
subject to Rule 14e-1(c) under the Exchange Act, retain tendered Old Notes and
such Old Notes may not be withdrawn except to the extent tendering holders are
entitled to withdrawal rights as described under "-- Withdrawal Rights."
Pursuant to the Letter of Transmittal, a holder of Old Notes will warrant
and agree in the Letter of Transmittal that such holder has full power and
authority to tender, exchange, sell, assign and transfer Old Notes, that the
Company will acquire good, marketable and unencumbered title to the tendered Old
Notes, free and clear of all liens, restrictions, charges and encumbrances, and
that the Old Notes tendered for exchange are not subject to any adverse claims
or proxies. The holder also will warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Company or the
Exchange Agent to be necessary or desirable to complete the exchange, sale,
assignment, and transfer of the Old Notes tendered pursuant to the Exchange
Offer.
PROCEDURES FOR TENDERING OLD NOTES
VALID TENDER. Except as set forth below, in order for Old Notes to be
validly tendered pursuant to the Exchange Offer, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, must be received by the
Exchange Agent at one of its addresses set forth under "-- Exchange Agent," and
either (i) tendered Old Notes must be received by the Exchange Agent, or (ii)
such Old Notes must be tendered pursuant to the procedures for book-entry
transfer set forth below and a book-entry confirmation must be received by the
Exchange Agent, in each case on or prior to the Expiration Date, or (iii) the
guaranteed delivery procedures set forth below must be complied with.
A tendering holder, if tendering less than all of such holder's Old Notes,
should fill in the amount of Old Notes being tendered in the appropriate box on
the Letter of Transmittal. The entire amount of Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER,
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. NO LETTER OF
TRANSMITTAL OR OLD 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.
BOOK-ENTRY TRANSFER. The Exchange Agent will establish an account with
respect to the Old Notes at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus. Any financial institution that
is a participant in DTC's book-entry transfer facility system may make a
book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes
into the Exchange Agent's account at DTC in accordance with DTC's procedures for
transfers. However, although delivery of Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees and any other required documents, must in any
case be delivered to and received by the Exchange Agent at one of its addresses
set forth under "-- Exchange Agent" on or prior to the Expiration Date, or the
guaranteed delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
50
<PAGE> 52
SIGNATURE GUARANTEES. Certificates for the Old Notes need not be endorsed
and signature guarantees on the Letter of Transmittal are unnecessary unless (a)
a certificate for the Old Notes is registered in a name other than that of the
person surrendering the certificate or (b) such registered holder completes the
box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
in the Letter of Transmittal. In the case of (a) or (b) above, such certificates
for Old Notes must be duly endorsed or accompanied by a properly executed bond
power, with the endorsement or signature on the bond power and on the Letter of
Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as an "eligible guarantor institution," including (as
such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association (each, an "Eligible
Institution"), unless surrendered on behalf of such Eligible Institution. See
Instruction [1] to the Letter of Transmittal.
GUARANTEED DELIVERY. If a holder desires to tender Old Notes pursuant to
the Exchange Offer and the certificates for such Old Notes are not immediately
available or time will not permit all required documents to reach the Exchange
Agent on or before the Expiration Date, or the procedures for book-entry
transfer cannot be completed on a timely basis, such Old Notes may nevertheless
be tendered, provided that all of the following guaranteed delivery procedures
are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of Transmittal,
is received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
(iii) the certificates (or a book-entry confirmation) representing all
tendered Old Notes, in proper form for transfer, together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
with any required signature guarantees and any other documents required by
the Letter of Transmittal, are received by the Exchange Agent within three
New York Stock Exchange trading days after the date of execution of such
Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Notes in
exchange for Old Notes tendered and accepted for exchange pursuant to the
Exchange Offer will in all cases be made only after timely receipt by the
Exchange Agent of Old Notes, or of a book-entry confirmation with respect to
such Old Notes, and a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees and any
other documents required by the Letter of Transmittal. Accordingly, the delivery
of New Notes might not be made to all tendering holders at the same time, and
will depend upon when Old Notes, book-entry confirmations with respect to Old
Notes and other required documents are received by the Exchange Agent.
The Company's acceptance for exchange of Old Notes tendered pursuant to any
of the procedures described above will constitute a binding agreement between
the tendering holder and the Company upon the terms and subject to the
conditions of the Exchange Offer.
DETERMINATION OF VALIDITY. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Old Notes will be determined by the Company, in its sole
discretion, whose determination shall be final and binding on all parties. The
Company reserves the absolute right, in its sole and absolute discretion, to
reject any and all tenders determined by it not to be in proper form or the
acceptance of which, or exchange for, may, in the view of counsel to the
Company, be unlawful. The Company also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer as set
forth under "-- Certain Conditions to the Exchange Offer" or any condition or
irregularity in any tender of Old Notes of any particular holder whether or not
similar conditions or irregularities are waived in the case of other holders.
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<PAGE> 53
The Company's interpretation of the terms and conditions of the Exchange
Offer (including the Letter of Transmittal and the instructions thereto) will be
final and binding. No tender of Old Notes will be deemed to have been validly
made until all irregularities with respect to such tender have been cured or
waived. Neither the Company, any affiliates or assigns of the Company, the
Exchange Agent nor any other person shall be under any duty to give any
notification of any irregularities in tenders or incur any liability for failure
to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company, in its sole discretion, of such
person's authority to so act must be submitted.
A beneficial owner of Old Notes that are held by or registered in the name
of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
RESALES OF NEW NOTES
The Company is making the Exchange Offer in reliance on the position of the
staff of the Division of Corporation Finance of the Commission as set forth in
certain No-Action Letters issued to Morgan Stanley & Co. Incorporated (available
June 5, 1991) (the "Morgan Stanley Letter"), Exxon Capital Holdings Corp.
(available April 13, 1988), and Shearman & Sterling (available July 2, 1993),
and certain other interpretive letters addressed to third parties in other
transactions. However, the Company has not sought its own interpretive letter
and there can be no assurance that the staff of the Division of Corporation
Finance of the Commission would make a similar determination with respect to the
Exchange Offer as it has in such interpretive letters to third parties. Based on
these interpretations by the staff of the Division of Corporation Finance of the
Commission, and subject to the two immediately following sentences, the Company
believes that New Notes issued pursuant to this Exchange Offer in exchange for
Old Notes may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holder's business and that such holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such New Notes. However, any
holder of Old Notes that is an "affiliate" of the Company or that intends to
participate in the Exchange Offer for the purpose of distributing New Notes, or
any broker-dealer who purchased Old Notes from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act, (a) will
not be able to rely on the interpretations of the staff of the Division of
Corporation Finance of the Commission set forth in the Morgan Stanley Letter and
the other above-mentioned interpretive letters, (b) will not be permitted or
entitled to tender such Old Notes in the Exchange Offer and (c) must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any sale or other transfer of such Old Notes unless such sale is
made pursuant to an exemption from such requirements. In addition, as described
below, if any broker-dealer holds Old Notes acquired for its own account as a
result of market-making or other trading activities and exchanges such Old Notes
for New Notes, then such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such New
Notes.
Each holder of Old Notes who wishes to exchange Old Notes for New Notes in
the Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Company, (ii) any New Notes to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes, and (iv) if such holder is not
a broker-dealer, such holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities Act) of such New Notes.
Each broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Old Notes for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of
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<PAGE> 54
such New 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. Based on the position
taken by the staff of the Division of Corporation Finance of the Commission in
the interpretive letters referred to above, the Company believes that
broker-dealers who acquired Old Notes for their own accounts as a result of
market-making activities or other trading activities ("Participating Broker-
Dealers") may fulfill their prospectus delivery requirements with respect to the
New Notes received upon exchange of such Old Notes (other than Old Notes which
represent an unsold allotment from the original sale of the Old Notes) with a
prospectus meeting the requirements of the Securities Act, which may be the
prospectus prepared for an exchange offer so long as it contains a description
of the plan of distribution with respect to the resale of such New Notes.
Accordingly, this Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer during the period referred to
below in connection with resales of New Notes received in exchange for Old Notes
where such Old Notes were acquired by such Participating Broker-Dealer for its
own account as a result of market-making or other trading activities. Subject to
certain provisions set forth in the Registration Rights Agreement, the Company
has agreed that this Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of such New Notes for a period ending 180 days (subject to extension under
certain limited circumstances described below) after the Expiration Date or, if
earlier, when all such New Notes have been disposed of by such Participating
Broker-Dealer. However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of New Notes received in exchange for
Old Notes pursuant to the Exchange Offer must notify the Company, or cause the
Company to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided for
that purpose in the Letter of Transmittal or may be delivered to the Exchange
Agent at one of the addresses set forth herein under "-- Exchange Agent." See
"Plan of Distribution." Any Participating Broker-Dealer who is an "affiliate" of
the Company may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old Notes
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any material
respect or which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in light of the circumstances under which they were made, not misleading
or of the occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the sale of New
Notes pursuant to this Prospectus until the Company has amended or supplemented
this Prospectus to correct such misstatement or omission and has furnished
copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Company has given notice that the sale of the New Notes may
be resumed, as the case may be. If the Company gives such notice to suspend the
sale of the New Notes, it shall extend the 180-day period referred to above
during which Participating Broker-Dealers are entitled to use this Prospectus in
connection with the resale of New Notes by the number of days in the period from
and including the date of the giving of such notice to and including the date
when the Company shall have made available to Participating Broker-Dealers
copies of the supplemented or amended Prospectus necessary to resume resales of
the New Notes or to and including the date on which the Company has given notice
that the use of the applicable Prospectus may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth under "-- Exchange Agent"
on or prior to the Expiration Date. Any such notice of withdrawal must specify
the name of the person who tendered the Old Notes to be withdrawn, the aggregate
principal amount of Old
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<PAGE> 55
Notes to be withdrawn, and (if certificates for such Old Notes have been
tendered) the name of the registered holder of the Old Notes as set forth on the
Old Notes, if different from that of the person who tendered such Old Notes. If
Old Notes have been delivered or otherwise identified to the Exchange Agent,
then prior to the physical release of such Old Notes, the tendering holder must
submit the serial numbers shown on the particular Old Notes to be withdrawn and
the signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Old Notes tendered for the account of an
Eligible Institution. If Old Notes have been tendered pursuant to the procedures
for book-entry transfer set forth in "-- Procedures for Tendering Old Notes,"
the notice of withdrawal must specify the name and number of the account at DTC
to be credited with the withdrawal of Old Notes, in which case a notice of
withdrawal will be effective if delivered to the Exchange Agent by written,
telegraphic, telex or facsimile transmission. Withdrawals of tenders of Old
Notes may not be rescinded. Old Notes properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described above under "-- Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Notes which have been tendered
but which are withdrawn will be returned to the holder thereof promptly after
withdrawal.
INTEREST ON THE NEW NOTES
Each New Note will bear interest at the rate of 9 1/4% per annum from the
most recent date to which interest has been paid or duly provided for on the Old
Note surrendered in exchange for such New Note or, if no interest has been paid
or duly provided for on such Old Note, from February 11, 1997. Interest on the
New Notes will be payable semiannually on February 15 and August 15 of each
year, commencing on August 15, 1997.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last Interest Payment Date to which interest has been paid or duly provided for
on such Old Notes prior to the original issue date of the New Notes or, if no
such interest has been paid or duly provided for, will not receive any accrued
interest on such Old Notes, and will be deemed to have waived the right to
receive any interest on such Old Notes accrued from and after such Interest
Payment Date or, if no such interest has been paid or duly provided for, from
and after February 11, 1997.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Company will not be required to accept for
exchange, or to exchange, any Old Notes for any New Notes, and, as described
below, may terminate the Exchange Offer (whether or not any Old Notes have
theretofore been accepted for exchange) or may waive any conditions to or amend
the Exchange Offer, if any of the following conditions have occurred or exists
or have not been satisfied:
(a) there shall have been instituted, threatened or be pending any
action or proceeding before or by any court, governmental, regulatory or
administrative agency or instrumentality, or by any other person, in
connection with the Exchange Offer that is, or is reasonably likely to be,
or which would or might be, in the sole judgment of the Company, materially
adverse to the business, operations, properties, condition (financial or
otherwise), assets, liabilities or prospects of the Company and its
subsidiaries, taken as a whole, or which would or might, in the sole
judgment of the Company, prohibit, prevent, restrict or delay consummation
of the Exchange Offer or have a material adverse effect on the contemplated
benefits of the Exchange Offer to the Company; or
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<PAGE> 56
(b) there shall have occurred any material adverse development, in the
sole judgment of the Company, with respect to any action or proceeding
concerning the Company and its subsidiaries, taken as a whole; or
(c) there exists an order, statute, rule, regulation, executive order,
stay, decree, judgment or injunction that shall have been proposed,
enacted, entered, issued, promulgated, enforced or deemed applicable by any
court or governmental, regulatory or administrative agency or
instrumentality that, in the sole judgment of the Company, would or might
prohibit, prevent, restrict or delay consummation of the Exchange Offer, or
that is, or is reasonably likely to be, in the sole judgment of the
Company, materially adverse to the business, operations, properties,
condition (financial or otherwise), assets, liabilities or prospects of the
Company and its subsidiaries, taken as a whole; or
(d) there shall have occurred or be likely to occur any event
affecting the business or financial affairs of the Company or any of its
subsidiaries that, in the sole judgment of the Company, would or might
prohibit, prevent, restrict or delay consummation of, or could materially
impair the contemplated benefits to the Company of, the Exchange Offer; or
(e) there shall have occurred (1) any general suspension of, or
limitation on prices for, trading in securities in the United States
securities or financial markets, (2) any significant adverse change in the
price of the Notes or in the United States securities or financial markets,
(3) a material impairment in the trading market for debt securities, (4) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (5) any
limitation (whether or not mandatory) by a government authority, or other
event that, in the reasonable judgment of the Company, might affect the
extension of credit by banks or other lending institutions in the United
States; or
(f) a commencement of war, armed hostilities or other national or
international crisis directly or indirectly involving the United States; or
(g) in the case of any of the foregoing existing on the date hereof, a
material acceleration or worsening thereof.
If the Company determines in its sole and absolute discretion that any of
the foregoing events or conditions has occurred or exists or has not been
satisfied, the Company may, subject to applicable law, terminate the Exchange
Offer (whether or not any Old Notes have theretofore been accepted for exchange)
or may waive any such condition or otherwise amend the terms of the Exchange
Offer in any respect. If such waiver or amendment 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 Old Notes, and the Company will extend the Exchange Offer to the extent
required by Rule 14e-1 under the Exchange Act.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Delivery of the Letters of Transmittal and any
other required documents, questions, requests for assistance, and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
By Mail:
United States Trust Company of New York
P.O. Box 843
Cooper Station
New York, New York 10276
Attention: Corporate Trust Services
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<PAGE> 57
By Hand:
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Lower Level Corporate Trust Window
By Overnight Delivery and By Hand After 4:30 P.M.:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Attention: Corporate Trust Redemption Unit
Facsimile Transmissions:
(212) 420-6152
Attention: Customer Service
To Confirm by Telephone:
(800) 548-6565
Delivery to other than one of the above addresses or facsimile number will
not constitute a valid delivery.
FEES AND EXPENSES
The Company has agreed to 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 Company will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Old Notes, and in handling or tendering for their
customers.
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith. If, however, New Notes are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes in connection with 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.
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
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<PAGE> 58
DESCRIPTION OF THE NEW NOTES
GENERAL
The Old Notes were issued and New Notes will be issued pursuant to the
Indenture, dated as of February 11, 1997 (the "Indenture"), among the Company
and United States Trust Company of New York, as trustee (the "Trustee"). The
terms of the New 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 New Notes are subject to all such terms, and
Holders of New Notes are referred to the Indenture and the Trust Indenture Act
for a statement thereof. The following summary of certain provisions of the New
Notes and the Indenture does not purport to be complete and is qualified in its
entirety by reference to the New Notes and the Indenture, including the
definitions therein of certain terms used below. Copies of the Indenture will be
made available to prospective purchasers of New Notes as set forth below under
"--Additional Information." The definitions of certain terms used in the
following summary are set forth below under "-- Certain Definitions."
Capitalized terms used herein and not otherwise defined shall have the
respective meanings assigned to them in the Indenture.
The Old Notes and the New Notes will constitute a single series of debt
securities under the Indenture. If the Exchange Offer is consummated, holders of
the Old Notes who do not exchange their Old Notes for New Notes will vote
together with the holders of New Notes for all relevant purposes under the
Indenture. In that regard, the Indenture requires that certain actions by the
holders thereunder (including acceleration following an Event of Default) must
be taken, and certain rights must be exercised, by specified minimum percentages
of the aggregate principal amount of the outstanding debt securities of the
relevant series. In determining whether holders of the requisite percentage in
principal amount have given any notice, consent or waiver or taken any other
action permitted under the Indenture, any Old Notes which remain outstanding
after the Exchange Offer will be aggregated with the New Notes and the holders
of such Old Notes and the New Notes will vote together as a single series for
all such purposes. Accordingly, all references herein to specified percentages
in aggregate principal amount of the outstanding Notes shall be deemed to mean,
at any time after the Exchange Offer is consummated, such percentage in
aggregate principal amount of the Old Notes and the New Notes then outstanding.
The New Notes will be general unsecured obligations of the Company and will
be subordinated in right of payment to the prior payment in full of all Senior
Debt of the Company and senior or pari passu in right of payment to all existing
and future subordinated Indebtedness of the Company, in each case, whether
outstanding on the date of the Indenture or incurred thereafter. See
"-- Subordination".
PRINCIPAL, MATURITY AND INTEREST
The New Notes will be limited in aggregate principal amount to $170.0
million and will mature on February 15, 2007. Interest on the New Notes will
accrue at the rate of 9 1/4% per annum and will be payable semi-annually in
arrears on February 15 and August 15 of each year, commencing on August 15,
1997, to Holders of record on the immediately preceding February 1 and August 1.
Interest on the New Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from February 11, 1997.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
The New Notes will be payable as to principal, premium, if any, interest
and Liquidated Damages, if any, 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, if any, may
be made by check mailed to the Holders of the New Notes at their respective
addresses set forth in the register of Holders of New Notes; provided that all
payments with respect to Global New Notes will be 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 will be the office of the Trustee maintained for such
purpose. The New Notes will be issued in registered form, without coupons, and
in denominations of $1,000 and integral multiples thereof.
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<PAGE> 59
The Trustee is Paying Agent and Registrar under the Indenture. The Company
may act as Paying Agent or Registrar under the Indenture, and the Company may
change the Paying Agent or Registrar without notice to the Holders of the New
Notes.
OPTIONAL REDEMPTION
The New Notes will not be redeemable at the Company's option prior to
February 15, 2002. Thereafter, the New 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, if any,
thereon (plus Liquidated Damages, if any) to the applicable redemption date, if
redeemed during the twelve-month period beginning on February 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2002........................................................ 104.6250%
2003........................................................ 103.0834%
2004........................................................ 101.5417%
2005 and thereafter......................................... 100.0000%
</TABLE>
Notwithstanding the foregoing, on or prior to February 15, 2000, the
Company may redeem at any time or from time to time up to 35% of the aggregate
principal amount of the New Notes originally issued at a redemption price of
109.25% of the principal amount thereof, plus accrued and unpaid interest, if
any, thereon (plus Liquidated Damages, if any) to the redemption date, with the
net proceeds of one or more Public Equity Offerings; provided that at least
$110.5 million in aggregate principal amount of the New Notes remain outstanding
following each such redemption; provided, further, that notice of such
redemption shall be given not later than 45 days, and such redemption shall
occur not earlier than 30 days or later than 60 days, after the date of the
closing of any such Public Equity Offering.
SELECTION AND NOTICE
If less than all of the New Notes are to be redeemed at any time, selection
of New 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
New Notes are listed, or, if the New Notes are not so listed, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate,
unless otherwise provided in the Indenture, provided that no New Notes of $1,000
or less shall be redeemed in part. Notices of redemption shall be mailed by
first class mail to each Holder of New 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 (unless the
Company shall default in the payment of the redemption price, together with
accrued and unpaid interest and Liquidated Damages, if any, to the redemption
date), interest ceases to accrue on New Notes or portions thereof called for
redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the New Notes. However, as described below, the Company
may be obligated, under certain circumstances, to make an offer to purchase (i)
all outstanding New Notes at a redemption price of 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, thereon (plus Liquidated
Damages, if any) to the date of purchase, upon a Change of Control; and (ii)
outstanding New Notes with a portion of the Net Proceeds of Asset Sales at a
redemption price of 100% of the principal amount thereof, plus accrued and
unpaid interest, if any, thereon (plus Liquidated Damages, if any) to the date
of purchase. See "--Repurchase at the Option of Holders -- Change of Control"
and "-- Asset Sales."
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REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of New 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 New 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, if any, thereon (plus Liquidated Damages, if any) to the date
of purchase (the "Change of Control Payment"). Notice of a Change of Control
Offer shall be prepared by the Company and shall be mailed by the Company with a
copy to the Trustee or at the option of the Company and at the expense of the
Company by the Trustee within 30 days following a Change of Control to each
Holder of the New Notes and such Change of Control Offer must remain open for at
least 30 and not more than 40 days (unless required by applicable law). In
addition, 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 New Notes in connection with a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment New Notes or portions thereof tendered pursuant
to the Change of Control Offer, (ii) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all New Notes or portions
thereof so tendered and (iii) deliver or cause to be delivered to the Trustee
the New Notes so accepted together with an Officers' Certificate stating the New
Notes or portions thereof accepted for payment by the Company. The Paying Agent
will promptly mail to each Holder of New Notes so accepted the Change of Control
Payment for such New 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 New Notes surrendered, if
any; provided that each such new Note will be in a principal amount of $1,000 or
an integral multiple thereof. Prior to complying with the provisions of this
covenant, and in any event within 90 days following a Change of Control, the
Company shall either repay all outstanding Senior Debt of the Company or obtain
the requisite consents, if any, under all agreements governing outstanding
Senior Debt of the Company to permit the repurchase of New 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.
With respect to the sale of assets referred to in the definition of "Change
of Control", the phrase "all or substantially all" as used in the Indenture
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under New York law (which governs the Indenture)
and is subject to judicial interpretation. Accordingly, in certain circumstances
there may be a degree of uncertainty in ascertaining whether a particular
transaction would involve a disposition of "all or substantially all" of the
assets of a person and therefore it may be unclear whether a Change of Control
has occurred and whether the New Notes are subject to a Change of Control Offer.
The Credit Facility may prohibit the Company from purchasing any New Notes
at the time of a Change of Control. In addition, the Credit Facility may also
provide that certain change of control events with respect to the Company would
constitute a default thereunder. An event of default under the Credit Facility
could result in an acceleration of indebtedness, in which case the subordination
provisions of the New Notes would require payment in full (or provision
therefor) of such Senior Debt of the Company before repurchase or other payments
in respect of the New Notes. 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 New Notes, the Company could seek
the consent of its lenders to the purchase of New 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 New Notes. In such case, the Company's failure to
purchase tendered New Notes would constitute an Event of Default under the
Indenture, which would, in turn, constitute a default under the Credit Facility.
In such circumstances, the subordination provisions in the Indenture would
likely restrict payments to the Holders of New Notes.
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Asset Sales
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, engage in any Asset Sale, unless (i) the
Company or such 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 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 or Cash
Equivalents; provided, however, that the amount of (a) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet or in
the notes thereto) of the Company or such Restricted Subsidiary (other than
liabilities that are by their terms subordinated in right of payment to the New
Notes) that are assumed by the transferee of any such assets and (b) any notes
or other obligations received by the Company or 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 any Asset Sale, the Company may apply the Net
Proceeds from such Asset Sale to (i) permanently reduce Senior Debt, (ii)
permanently reduce Indebtedness of the Restricted Subsidiary that sold
properties or assets in the Asset Sale, or (iii) acquire properties and assets
to replace the properties and assets that were the subject of the Asset Sale or
properties and assets that will be used 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 invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds
from the Asset Sale that are not applied as provided in the first sentence of
this paragraph will be deemed to constitute "Excess Proceeds." When the
aggregate cumulative amount of Excess Proceeds exceeds $10.0 million, the
Company shall make an offer to all Holders of New Notes (an "Asset Sale Offer")
to purchase the maximum principal amount of New Notes that may be purchased out
of the Excess Proceeds (and not solely the amount in excess of $10.0 million),
at an offer price in cash in an amount equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, and Liquidated Damages, if
any, to the date of purchase, in accordance with the procedures set forth in the
Indenture. To the extent that the aggregate amount of New Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Company
may use such deficiency for general corporate purposes in any manner provided by
the Indenture. If the aggregate principal amount of New Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the New 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. The Asset
Sale Offer must be commenced within 30 days following the Asset Sale that
triggers the Company's obligation to make the Asset Sale Offer and remain open
for at least 30 and not more than 40 days (unless required by applicable law).
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 New
Notes pursuant to an Asset Sale Offer. The agreements governing certain
outstanding Senior Debt of the Company will require that the Company and its
Subsidiaries apply all proceeds from asset sales to repay in full outstanding
obligations under such Senior Debt prior to the application of such proceeds to
repurchase outstanding New Notes.
SUBORDINATION
The payment of principal of, premium, if any, interest and Liquidated
Damages, if any, on the New Notes will be 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, and
senior or pari passu in right of payment to, all subordinated Indebtedness of
the Company, 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 marshaling of the Company's
assets and liabilities, the holders of Senior Debt of the Company will be
entitled to receive payment in full in cash or Cash
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Equivalents of all Obligations due in respect of such Senior Debt of the Company
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt of the Company) before the Holders of
New Notes will be entitled to receive any payment of principal of, premium, if
any, interest and Liquidated Damages, if any, on the New Notes, and until all
Obligations with respect to Senior Debt of the Company are paid in full in cash
or Cash Equivalents, any distribution to which the Holders of New Notes would be
entitled shall be made to the holders of Senior Debt of the Company; provided,
that notwithstanding the foregoing, Holders of New Notes may receive (i)
securities that are subordinated at least to the same extent as the New Notes to
Senior Debt of the Company and to any securities issued in exchange for Senior
Debt of the Company and (ii) payments made from the trust described under
"-- Legal Defeasance and Covenant Defeasance."
The Company also may not make any payment of principal of, premium, if any,
interest and Liquidated Damages, if any, on the New Notes (except in such
subordinated securities or from such trust) if (i) a default in the payment of
the principal of, premium, if any, interest on Designated Senior Debt of the
Company occurs and is continuing beyond any applicable period of grace or (ii)
any other default occurs and is continuing with respect to Designated Senior
Debt of the Company that permits holders of the Designated Senior Debt of the
Company as to which such default relates to accelerate its maturity and the
Trustee receives a written notice of such default (a "Payment Blockage Notice")
from the holders of any Designated Senior Debt of the Company. Payments on the
New Notes may and shall be resumed (i) in the case of a payment default, upon
the date on which such default is cured or waived or otherwise has ceased to
exist and (ii) in case of a nonpayment default, the earlier of the date on which
such nonpayment default is cured or waived or otherwise has ceased to exist or
179 days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of any Designated Senior Debt of the Company has
been accelerated. No new period of payment blockage may be commenced within 360
days after the receipt by the Trustee of any prior Payment Blockage Notice. No
non-payment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice. Following the expiration of any period
during which the Company is prohibited from making payments on the New Notes
pursuant to a Payment Blockage Notice, the Company will be obligated to resume
making any and all required payments in respect of the New Notes, including
without limitation any missed payments.
The Indenture will further require that the Company promptly notify holders
of Senior Debt of the Company if payment of the New Notes is accelerated because
of an Event of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, Holders of New Notes may recover less ratably
than creditors of the Company who are holders of Senior Debt. After giving
effect to the Common Stock Offering, the Purchase Offer and the Old Notes
Offering, the principal amount of Senior Debt of the Company outstanding as of
December 31, 1996 was approximately $27 million. The Indenture will limit,
subject to certain financial tests, the amount of additional Indebtedness,
including Senior Debt, that the Company and its Restricted Subsidiaries can
incur. See "-- Certain Covenants -- Limitation on the Incurrence of Indebtedness
and Issuance of Disqualified Stock."
CERTAIN COVENANTS
Limitation on Restricted Payments
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or
pay any dividend or make any distribution on account of Equity Interests, other
than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or dividends or distributions payable to the
Company; (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Affiliate of the Company (other than any
such Equity Interests owned by the Company or a Wholly Owned Subsidiary of the
Company that is a Restricted Subsidiary); (iii) purchase, redeem, repay, defease
or otherwise acquire or retire for value any Indebtedness that is subordinated
in right of payment to the New Notes; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively
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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 the caption "Limitation on the
Incurrence of Indebtedness and Issuance of Disqualified Stock;" and
(c) such Restricted Payment (the amount of any such payment, if other
than cash, to be determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a resolution in an
Officers' Certificate delivered to the Trustee), together with the
aggregate of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date of the Indenture (including
Restricted Payments permitted by the next succeeding paragraph other than
pursuant to clause (iii) thereof), shall not exceed the sum of (v) 50% of
the Consolidated Net Income of the Company for the period (taken as one
accounting period) commencing with the first full fiscal quarter after the
date of initial issuance of the New Notes and ending on the last day 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, 100% of such
deficit as a negative number), plus (w) 100% of the aggregate net cash
proceeds received by the Company from the issue or sale since the date of
initial issuance of the New Notes 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 (x)
the aggregate cash received by the Company as capital contributions to the
Company after the date of initial issuance of the New Notes (other than
from a Subsidiary), plus (y) any cash received by the Company after the
date of initial issuance of the New Notes as a dividend or distribution
from any of its Unrestricted Subsidiaries or from the sale of any of its
Unrestricted Subsidiaries less the cost of disposition and taxes, if any
(but in each case excluding any such amounts included in Consolidated Net
Income), plus (z) $5.0 million.
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 redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company, or the defeasance, redemption or repurchase
of subordinated Indebtedness in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the Company) of
Equity Interests of the Company (other than any Disqualified Stock) or out of
the net proceeds of a substantially concurrent cash capital contribution
received by the Company; provided that the amount of any such proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (w) of the preceding paragraph; (iii)
the repayment, defeasance, redemption or repurchase of subordinated Indebtedness
with the net proceeds from an incurrence of Refinancing Indebtedness in a
Permitted Refinancing; and (iv) the purchase, redemption or retirement by the
Company of shares of its common stock held by an employee or former employee of
the Company or any of its Restricted Subsidiaries issued under the Management
Plans pursuant to the terms of such Management Plans; provided that (a) the
purchase, redemption or retirement results from the retirement, death or
disability (as defined in the relevant Management Plan) of the employee or
former employee, and (b) the amount of any such payments in any fiscal year does
not exceed $1.0 million; provided, however, that at the time of, and after
giving effect to, any Restricted Payment permitted under clauses (i), (ii),
(iii) and (iv), no Default or Event of Default shall have occurred and be
continuing.
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
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the calculations required by the covenant "Limitation on Restricted Payments"
were computed, which calculations may be based upon the Company's latest
available financial statements.
Limitation on the Incurrence of Indebtedness and Issuance of Disqualified
Stock
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable with
respect to (collectively, "incur" and, correlatively, "incurred" and
"incurrence") any Indebtedness (including, without limitation, Acquired Debt)
and that the Company and its Restricted Subsidiaries will not issue any
Disqualified Stock and will not permit any of their respective Subsidiaries
(other than their Unrestricted Subsidiaries) to issue any shares of preferred
stock; provided, however, that the Company may incur Indebtedness 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, 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, would have been greater than 2.0 to 1.
The foregoing limitations will not apply to:
(i) Indebtedness incurred by the Company under the Credit Facility in
an aggregate principal amount not to exceed (a) the greater of (x) $125.0
million at any time outstanding (including any Indebtedness issued to
refinance, refund or replace such Indebtedness) or (y) $60.0 million plus
the sum of 85% of the amount of Eligible Receivables of the Company and 60%
of the amount of Eligible Inventory of the Company, in each case calculated
on a consolidated basis in accordance with GAAP, at any time outstanding
(including any Indebtedness issued to refinance, refund or replace such
Indebtedness) minus (b) the amount of any such Indebtedness retired with
Net Cash Proceeds from any Asset Sale;
(ii) additional Indebtedness incurred by the Company in respect of
Capital Lease Obligations or Purchase Money Obligations in an aggregate
principal amount not to exceed $15.0 million at any time outstanding;
(iii) Existing Indebtedness outstanding on the date of the Indenture;
(iv) Indebtedness represented by the New Notes and the Indenture;
(v) Hedging Obligations; provided, that the notional principal amount
of any Interest Rate Agreement does not significantly exceed the principal
amount of the Indebtedness to which such agreement relates; provided,
further, that any Currency Agreement does not increase the outstanding loss
potential or liabilities other than as a result of fluctuations in foreign
currency exchange rates;
(vi) Indebtedness of the Company to any of its Wholly Owned
Subsidiaries that is a Restricted Subsidiary, and Indebtedness of any
Wholly Owned Subsidiary of the Company that is a Restricted Subsidiary to
the Company or any of its Wholly Owned Subsidiaries that is a Restricted
Subsidiary (the Indebtedness incurred pursuant to this clause (vi) being
hereinafter referred to as "Intercompany Indebtedness"); provided, that, in
the case of Indebtedness of the Company such obligations shall be unsecured
and subordinated in all respects to the Company's obligations pursuant to
the New Notes; provided, further, that an incurrence of Indebtedness shall
be deemed to have occurred upon (a) any sale or other disposition of
Intercompany Indebtedness to a Person other than the Company or any of its
Restricted Subsidiaries, (b) any sale or other disposition of Equity
Interests of any Restricted Subsidiary of the Company which holds
Intercompany Indebtedness such that such Restricted Subsidiary ceases to be
a Restricted Subsidiary after such sale or other disposition, or (c)
designation of a Restricted Subsidiary as an Unrestricted Subsidiary;
(vii) in addition to Indebtedness specified in clauses (i) through
(vi) above and clauses (viii) and (ix) below, additional Indebtedness in an
aggregate principal amount not to exceed $15.0 million at any time
outstanding;
(viii) Indebtedness incurred by Synthetic Industries Europe Limited in
an aggregate principal amount not to exceed L500,000 at any time
outstanding; and
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(ix) the incurrence by the Company of Indebtedness issued in exchange
for, or the proceeds of which are used to extend, refinance, renew,
replace, defease or refund Indebtedness incurred pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of this
covenant or pursuant to clauses (iii) or (iv) of this covenant in whole or
in part (the "Refinancing Indebtedness"); provided, however, that (A) the
aggregate principal amount of such Refinancing Indebtedness shall not
exceed the aggregate principal amount of Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded; (B) the Refinancing
Indebtedness shall have a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; (C) if
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is pari passu with or subordinated in right of payment to the New
Notes, the Refinancing Indebtedness shall be pari passu with or
subordinated, as the case may be, in right of payment to the New Notes on
terms at least as favorable to the Holders of New Notes as those contained
in the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded (any such extension, refinancing,
renewal, replacement, defeasance or refunding being referred to as a
"Permitted Refinancing").
Limitation on Liens
The Indenture will provide 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 on any income or profits therefrom or assign or convey any right to receive
income therefrom, except Permitted Liens.
Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture will provide 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 consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (i)
pay dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries (a) on its Capital Stock or (b) with respect to any
other interest or participation in, or measured by, its profits, (ii) pay any
indebtedness owed to the Company or any of its Restricted Subsidiaries, (iii)
make loans or advances to the Company or any of its Restricted Subsidiaries or
(iv) 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 Indenture and the New Notes, (c) applicable law, (d) 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 that the Consolidated Cash Flow of such Person is not taken into
account in determining whether such acquisition was permitted by the terms of
the Indenture, (e) customary nonassignment provisions in leases entered into in
the ordinary course of business and consistent with past practices, (f) Purchase
Money Obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iv) above on the property
so acquired, or (g) Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Refinancing Indebtedness are no more
restrictive with respect to the provisions set forth in clauses (i), (ii), (iii)
and (iv) above than those contained in the agreements governing the Indebtedness
being refinanced.
Limitation on Merger, Consolidation or Sale of Assets
The Indenture will provide 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
Person or entity unless (i) the Company is the surviving corporation or the
Person formed by or surviving any such consolidation or
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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 Person formed by or surviving any such
consolidation or merger (if other than the Company) or the 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 New Notes and the
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately before or immediately after giving effect to
such transaction no Default or Event of Default shall have occurred and be
continuing; and (iv) the Company or any Person formed by or surviving any such
consolidation or merger, or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (a) will have a
Consolidated Net Worth (immediately after the transaction but prior to any
purchase accounting adjustments resulting from 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 covenant entitled "Limitation on Incurrence of Indebtedness and
Issuance of Disqualified Stock."
Limitation on Transactions with Affiliates
The Indenture will provide that the Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, sell, lease,
license, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into 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 arms' length 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 involving aggregate payments 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 such Affiliate Transaction is approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction involving aggregate payments in excess of $10.0 million,
an opinion as to the fairness to the Company or such Restricted Subsidiary from
a financial point of view issued by an investment banking firm of national
standing with expertise in underwriting non-investment grade debt securities;
provided, however, that (i) any reasonable employment agreement or stock option
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, (ii) transactions between or among the
Company and its Wholly Owned Subsidiaries that are Restricted Subsidiaries,
(iii) Restricted Payments, permitted by clauses (i) and (iv) of the second
paragraph of the covenant entitled "Limitation on Restricted Payments," (iv) the
payment of reasonable fees to directors of the Company or its Restricted
Subsidiaries and (v) Affiliate Transactions pursuant to agreements in effect on
the date of the Indenture and described in this Offering Memorandum and renewals
and extensions of such agreements on terms no less favorable to the Holders than
the terms of such original agreements and transactions, in each case, shall not
be deemed Affiliate Transactions.
Limitation on Layering Debt
The Indenture will provide that the Company 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 of the Company and
senior in any respect in right of payment to the New Notes.
Reports
The Indenture will provide that whether or not required by the rules and
regulations of the Commission, so long as any New Notes are outstanding, the
Company will furnish to the Holders of New Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the
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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" that describes the financial condition and results of
operations of the Company and its Subsidiaries and, with respect to the annual
information only, a report thereon by the Company's independent certified public
accountants and (ii) all 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, the Company will file a copy of all such information with the
Commission for public availability (unless the Commission will not accept such a
filing) and make such information available to investors or prospective
investors who request it in writing.
Payments for Consent
The Indenture will prohibit the Company and any of its Subsidiaries from,
directly or indirectly, paying or causing to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any New Notes for or as
an inducement to any consent, waiver or amendment of any terms or provisions of
the New Notes unless such consideration is offered to be paid or agreed to be
paid to all Holders of the New Notes which so consent, waive or agree to amend
in the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide 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, if any, with respect to, any of the New Notes, whether or
not prohibited by the subordination provisions of the Indenture; (ii) default in
payment when due (whether at maturity, upon redemption or repurchase, or
otherwise) of the principal of or premium, if any, on any of the New 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
covenants "Change of Control," "Asset Sales," and "Merger, Consolidation or Sale
of Assets;" (iv) failure by the Company or any Restricted Subsidiary for 30 days
after notice to comply with any of its covenants or agreements in the Indenture
or the New Notes other than those referred to in clauses (i), (ii) and (iii)
above; (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, which default (a) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness (a "Payment
Default") or (b) results in the acceleration of such Indebtedness prior to its
express maturity and, in each case described in clauses (a) and (b) of this
subsection (v), the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$10.0 million or more; (vi) failure by the Company or any of its Restricted
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 after
their entry; and (vii) certain events of bankruptcy or insolvency with respect
to the Company or any of its Significant Subsidiaries that is a Restricted
Subsidiary.
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 New Notes
may declare all of the principal amount of the New Notes, accrued and unpaid
interest thereon and all other Obligations thereunder to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency with respect to the
Company, any Significant Subsidiary that is a Restricted Subsidiary or any group
of Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding New Notes will become due and payable without
further action or notice. Holders of the New Notes may not enforce the Indenture
or the New Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
New Notes may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of the New Notes notice of any
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continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal, premium, interest or Liquidated Damages,
if any) 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 New 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 New Notes. If an Event of Default occurs prior to
February 15, 2002, 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 New Notes prior to such date, 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 New Notes.
The Holders of a majority in aggregate principal amount of the New Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the New 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 principal, premium, interest or Liquidated Damages, if any on
the New 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, agent or
stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the New Notes, the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of New Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the New 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 New Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding New Notes to
receive payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on such New Notes when such payments are due, (ii)
the Company's obligations with respect to the New Notes concerning issuing
temporary New Notes, registration of New Notes, mutilated, destroyed, lost or
stolen New 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 New Notes. In the event Covenant Defeasance occurs,
certain events (not including nonpayment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the New 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 New 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 certified public
accountants, to pay the principal of, premium, if any, interest and Liquidated
Damages, if any, on the outstanding New Notes on the Stated Maturity or on the
applicable redemption date, as the case may be; (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
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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 New 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 New 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 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 shall 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 Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound; (vi) the Company shall 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 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 New Notes over the other creditors of
the Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company; and (viii) the Company shall have delivered to the
Trustee an Officers' Certificate and an opinion of counsel, each stating that
all conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange New 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, the Company is not required to transfer
or exchange any Note for a period of 15 days before a selection of New Notes to
be redeemed.
The registered Holder of a Note will be treated as its owner for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraphs and in the Indenture,
the Indenture or the New Notes may be amended or supplemented with the consent
of the Holders of at least a majority in principal amount of the New Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for New Notes), and any existing default or compliance with any
provision of the Indenture or the New Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding New Notes
(including consents obtained in connection with a tender offer or exchange offer
for New Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any New Notes held by a non-consenting Holder of New Notes):
(i) reduce the principal amount of New 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 New Notes (other than provisions relating to the covenant
described above under "Asset Sales") or reduce the prices at which the Company
shall offer to purchase such New Notes pursuant to the covenants described under
"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, interest or
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Liquidated Damages, if any, on the New Notes (except a rescission of
acceleration of the New Notes by the Holders of at least a majority in aggregate
principal amount of the New 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 New Notes, (vi) make any change in the provisions of the
Indenture relating to waivers of past Defaults or the rights of Holders of New
Notes to receive payments of principal of or premium, if any, interest or
Liquidated Damages, if any, on the New Notes, (vii) waive a redemption payment
with respect to any Note, (viii) make any change to the subordination provision
of the Indenture that adversely affects Holders of New Notes or (ix) make any
change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of New
Notes, the Company and the Trustee may amend or supplement the Indenture or the
New Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated New Notes in addition to or in place of certificated New Notes,
to provide for the assumption of the Company's obligations to Holders of the New
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 the New 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.
THE TRUSTEE
United States Trust Company of New York is to be the Trustee under the
Indenture and has been appointed by the Company as Registrar and Paying Agent
with respect to the New Notes.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; 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 New
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 a Default or 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 New Notes, unless such 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 merged
with or into or became a Restricted 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
Restricted 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, however,
that beneficial ownership of 10% or more of the voting securities (or the
equivalent) of a Person shall be deemed to be control.
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"Asset Sale" means (i) the sale, lease, conveyance or other disposition
(collectively, "dispositions") of any assets (including by way of a
sale/leaseback transaction) other than dispositions of inventory in the ordinary
course of business, (ii) the issuance by any Restricted Subsidiary of the
Company of Equity Interests of such Restricted Subsidiary and (iii) the
disposition by the Company or any of its Restricted Subsidiaries of Equity
Interests of any Subsidiary, in the case of either clause (i), (ii) or (iii),
whether in a single transaction or a series of related transactions (a) that
have a Fair Market Value in excess of $2.0 million or (b) for net proceeds in
excess of $2.0 million. Notwithstanding the foregoing, the following will not be
deemed to be Asset Sales: (i) a disposition of assets by a Restricted Subsidiary
of the Company to the Company or a Wholly Owned Subsidiary of the Company that
is a Restricted Subsidiary or by the Company to a Wholly Owned Subsidiary of the
Company that is a Restricted Subsidiary, (ii) an issuance of Equity Interests by
a Restricted Subsidiary of the Company to the Company or to a Wholly Owned
Subsidiary of the Company that is a Restricted Subsidiary, (iii) a disposition
consisting of a Restricted Payment permitted by the covenant described above
under the caption "-- Limitation on Restricted Payments", (iv) the disposition
of all or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole governed by the covenants described above under
the captions "-- Repurchase at the Option of Holders -- Change of Control"
and/or "-- Merger, Consolidation or Sale of Assets," and (v) the sale of
equipment by the Company or a Restricted Subsidiary to a financial institution
in connection with the entering into by the Company or such Restricted
Subsidiary of a Capital Lease Obligation with respect to such equipment provided
that (a) such equipment was purchased by the Company or such Restricted
Subsidiary subsequent to the date of the Indenture and within eighteen months of
the incurrence of the Capital Lease Obligation and (b) at the time such
equipment was purchased the Company or such Restricted Subsidiary, as evidenced
by a resolution of its Board of Directors or an Officers' Certificate, intended
to finance such equipment through a sale/leaseback transaction resulting in the
incurrence of a Capital Lease Obligation.
"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 so required to be capitalized on the balance sheet in accordance
with GAAP.
"Capital Stock" means (i) any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock, (ii) in the
case of a partnership, partnership interests (whether general or limited), and
(iii) 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) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
Eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million, (iv) repurchase obligations with
a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) entered into with any financial institution
meeting the qualifications specified in clause (iii) above, (v) commercial paper
having the highest rating obtainable from Moody's Investors Service, Inc. or
Standard & Poor's Corporation and in each case maturing within six months after
the date of acquisition, and (vi) shares of any money market mutual fund, or
similar fund, in each case having assets in excess of $500 million, which
invests solely in investments of the types described in clauses (i) through (v)
above.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition, in one or a series of
related transactions, directly or indirectly, of all or substantially all of the
assets of the Company and its Restricted Subsidiaries to any Person or group (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act), (ii) the
adoption of a plan relating to the liquidation or dissolution of the Company,
(iii) any Person or group (as defined above), other than the Partnership, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total voting power of the Voting
Stock of the Company,
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including by way of merger, consolidation or otherwise, or (iv) the first day on
which a majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"Commodity Agreement" means any commodity futures contract, commodity
option or other similar agreement or arrangement entered into by the Company or
any of its Restricted Subsidiaries designed to protect the Company or any of its
Restricted Subsidiaries against fluctuations in the price of commodities
actually used in the ordinary course of business of the Company and its
Restricted Subsidiaries.
"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, non-recurring or unusual loss plus any net loss
realized in connection with an asset sale, to the extent such losses were
deducted or otherwise excluded in computing Consolidated Net Income, plus (ii)
provision for taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, to the extent such provision for taxes was
deducted or otherwise excluded in computing Consolidated Net Income, plus (iii)
Consolidated Interest Expense of such Person less consolidated interest income
for such period, to the extent such amount was deducted or otherwise excluded in
computing Consolidated Net Income, plus (iv) depreciation and amortization
(including amortization of goodwill, amortization of deferred debt expense and
other intangibles and amortization of deferred compensation in respect of
non-cash compensation 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 it represents an accrual of a 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 Restricted Subsidiaries for such period,
to the extent such depreciation and amortization were deducted or otherwise
excluded in computing Consolidated Net Income, plus (v) an amount equal to all
premiums on prepayments of debt, in each case, for such period without
duplication on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes, and the
depreciation and amortization and other non-cash charges of, a Restricted
Subsidiary shall be added to Consolidated Net Income to compute Consolidated
Cash Flow only to the extent (and in the same proportion) the Net Income of such
Restricted 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 distributed by dividend to such Person by such Restricted
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate consolidated interest, whether expensed or capitalized,
paid, accrued or scheduled to be paid or accrued, of such Person and its
Restricted Subsidiaries for such period (including (i) amortization of original
issue discount and deferred financing costs and non-cash interest payments and
accruals, (ii) the interest portion of all deferred payment obligations,
calculated in accordance with the effective interest method and (iii) the
interest component of any payments associated with Capital Lease Obligations and
net payments (if any) pursuant to Hedging Obligations, in each case, to the
extent attributable to such period, but excluding (x) commissions, discounts and
other fees and charges incurred with respect to letters of credit and bankers'
acceptances financing and (y) any interest expense on Indebtedness of another
Person that is Guaranteed by such Person or secured by a Lien on assets of such
Person) determined in accordance with GAAP. Consolidated Interest Expense of the
Company shall not include any prepayment premiums or amortization of original
issue discount or deferred financing costs, to the extent such amounts are
incurred as a result of the prepayment on the date of this Indenture of any
Indebtedness of the Company with the proceeds of the New Notes.
"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,
adjusted to exclude (only to the extent included and without duplication) (i)
all gains which are extraordinary, unusual or are non-recurring (including any
gain from the sale or other disposition of assets outside the ordinary course of
business or from the issuance or sale of capital stock),
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(ii) all gains resulting from currency or hedging transactions, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition and (iv) the cumulative effect of a
change in accounting principles; provided, that (a) the Net Income of any Person
that is not a Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of cash dividends
or cash distributions actually paid to the referent Person or a Wholly Owned
Subsidiary thereof that is a Restricted Subsidiary and (b) the Net Income of any
Person that is an Unrestricted Subsidiary shall be included only to the extent
of the amount of cash dividends or cash distributions paid to the referent
Person or a Restricted Subsidiary thereof.
"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 Restricted 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, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Restricted Subsidiaries, and (z) all unamortized debt discount and
expense and unamortized deferred charges as of such date, all of the foregoing
determined in accordance with GAAP.
"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 affirmative vote of a majority of
the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Credit Facility" means the Fourth Amended and Restated Revolving Credit
and Security Agreement, dated as of October 20, 1995, by and among the Company,
the Subsidiaries of the Company set forth therein, the lenders party thereto and
The First National Bank of Boston, as agent, 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.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Restricted Subsidiaries in the ordinary course of business
against fluctuation in the values of the currencies of the countries (other than
the United States) in which the Company or its Restricted Subsidiaries conduct
business.
"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 Obligations of the Company with
respect to the Credit Facility and (ii) any other Senior Debt of the Company
permitted under the Indenture the principal amount of which at original issuance
is $20.0 million or more (other than Senior Debt that is comprised of Hedging
Obligations owing to a Person that is not a party to the Credit Facility).
"Disqualified Stock" means any Capital Stock which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
or is convertible or exchangeable for Indebtedness at the option of the Holder
thereof, in whole or in part, on or prior to February 15, 2007; provided, that
any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the Stated Maturity of the New Notes
shall not constitute Disqualified Stock if (i) the "asset sale" or "change of
control" provisions applicable to such Capital Stock are no more favorable to
the holders of such Capital Stock than the
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provisions in favor of Holders set forth under the "Asset Sale" and "Change of
Control" covenants, as the case may be, (ii) such Capital Stock specifically
provides that such Person will not repurchase or redeem any such stock pursuant
to such provision prior to the Company's repurchase of such New Notes as are
required to be repurchased pursuant to the "Asset Sale" and "Change of Control"
covenants, and (iii) such Capital Stock is redeemable within 90 days of the
"asset sale" or "change of control" events applicable to such Capital Stock.
"Eligible Inventory" means, with respect to the Company, the consolidated
finished goods, raw materials and work-in-process less any applicable reserves,
each of the foregoing determined in accordance with GAAP.
"Eligible Receivables" means the consolidated trade receivables of the
Company less the allowance for doubtful accounts, each of the foregoing
determined in accordance with GAAP.
"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 Indebtedness of the Company and its
Subsidiaries (other than the Credit Facility) in existence on the date of the
Indenture, until such amounts are repaid.
"Fair Market Value" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction; provided that the Fair Market Value of
any such asset or assets shall be determined by the Board of Directors of the
Company, acting in good faith and by unanimous resolution, and which
determination shall be evidenced by an Officers' Certificate delivered to the
Trustee.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person 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 if the
Company issues or redeems any preferred stock, in each case subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date of the event for which the calculation of the
Fixed Charge Coverage Ratio is made (the "Transaction 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 reference period. For purposes of making the
computation referred to above, acquisitions (including all mergers and
consolidations), dispositions and discontinuance of operations that have been
made by the Company or any of its Restricted Subsidiaries during the reference
period or subsequent to such reference period and on or prior to the Transaction
Date shall be calculated on a pro forma basis assuming that all such
acquisitions, dispositions and discontinuance of operations had occurred on the
first day of the reference period; provided, however, that Fixed Charges shall
be reduced by amounts attributable to operations that are so disposed of or
discontinued only to the extent that the obligations giving rise to such Fixed
Charges would no longer be obligations contributing to the Company's Fixed
Charges subsequent to the Transaction Date.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) Consolidated Interest Expense, (ii) commissions,
discounts and other fees and charges incurred with respect to letters of credit
and bankers' acceptances financing, (iii) any interest expense on Indebtedness
of another Person that is Guaranteed by such Person or secured by a Lien on
assets of such Person, and (iv) the product of (a) all cash or non-cash dividend
payments on any series of preferred stock of any Restricted Subsidiary of such
Person (other than 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, determined, in each case, on a consolidated basis and in
accordance with GAAP.
"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
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entity as have been approved by a significant segment of the accounting
profession, which are in effect in the United States 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.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) Interest Rate Agreements, (ii) Currency Agreements and
(iii) Commodity Agreements.
"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 bankers' 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 of any Indebtedness of such Person or any other Person.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement entered into by the Company or any of its Restricted Subsidiaries
designed to protect the Company or any of its Restricted Subsidiaries in the
ordinary course of business against fluctuations in interest rates.
"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), 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 and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"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).
"Liquidated Damages" means all liquidated damages then owing pursuant to
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 sale of assets (including, without
limitation, dispositions pursuant to sale/leaseback transactions), or (b) the
disposition of any securities or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries, and (ii) any extraordinary gain
(but not loss), together with any related provision for taxes on such
extraordinary gain (but not loss).
"Net Proceeds" means the aggregate amount of consideration received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale in
the form of cash or Cash Equivalents (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
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deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets
(including Equity Interests) the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
or 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; (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 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 principal, premium, interest (including
post-petition interest), penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any
Indebtedness.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer or President and the Chief Financial
Officer or chief accounting officer of such Person.
"Permitted Investments" means (i) any Investments in the Company or in a
Wholly Owned Subsidiary of the Company that is a Restricted Subsidiary; (ii) any
Investments in Cash Equivalents; (iii) Investments by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (a) such Person becomes a Wholly Owned Subsidiary of the Company that
is a Restricted Subsidiary or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of
the Company that is a Restricted Subsidiary; (iv) any Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was made
in compliance with the covenant set forth under "-- Repurchase at the Option of
Holders -- Asset Sales;" and (v) any Investment in an Unrestricted Subsidiary or
in an entity in which the Company or any Restricted Subsidiary has an Equity
Interest together with one or more other Persons, and which is formed after the
date of the Indenture for the purpose of engaging in a business (a) in which the
Company or its Restricted Subsidiaries are engaged on the date of the Indenture
or (b) which is related to a business in which the Company or its Restricted
Subsidiaries are engaged on the date of the Indenture, provided, that, at the
date any such Investment is made and after giving effect thereto, such
Investment, together with all other such Investments by the Company and its
Restricted Subsidiaries since the date of the Indenture, does not exceed $15.0
million.
"Permitted Liens" means (i) Liens in favor of the Company; (ii) Liens
securing Senior Debt of the Company that was permitted to be incurred pursuant
to the Indenture; (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Restricted
Subsidiary of the Company, provided that such Liens were not created in
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 or
such Restricted Subsidiary; (iv) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary of the Company;
provided that such Liens were not created in 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 existing on the date of the Indenture;
(vii) 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, if any, as shall be required in
conformity with GAAP shall have been made therefor; (viii) Liens imposed by law,
such as mechanics', carriers', warehousemen's, materialmen's, and vendors'
Liens, incurred in good faith in the ordinary course of business with respect to
amounts not yet delinquent or being contested in good faith by appropriate
proceedings if a reserve or other appropriate provisions, if any, as shall be
required by GAAP shall have been made therefor; (ix) zoning restrictions,
easements, licenses, covenants, reservations,
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restrictions on the use of real property or minor irregularities of title
incident thereto that do not, in the aggregate, materially detract from the
value of the property or the assets of the Company or impair the use of such
property in the operation of the Company's business; (x) judgment Liens to the
extent that such judgments do not cause or constitute a Default or an Event of
Default; (xi) Liens to secure the payment of all or a part of the purchase price
of property or assets acquired or constructed in the ordinary course of business
on or after the date of the Indenture, provided that (a) such property or assets
are used in the same or similar line of business as the Company was engaged in
on the date of the Indenture, (b) at the time of incurrence of any such Lien,
the aggregate principal amount of the obligations secured by such Lien shall not
exceed the lesser of the cost or fair market value of the assets or property (or
portions thereof) so acquired or constructed, (c) each such Lien shall encumber
only the assets or property (or portions thereof) so acquired or constructed and
shall attach to such property within 120 days of the purchase or construction
thereof and (d) any Indebtedness secured by such Lien shall have been permitted
to be incurred under the "Limitation on the Incurrence of Indebtedness and
Issuance of Disqualified Stock" covenant and (xii) precautionary filings of any
financial statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction made in connection with Capital Lease Obligations permitted
to be incurred under the "Limitation on the Incurrence of Indebtedness and
Issuance of Disqualified Stock" covenant, provided that such Lien does not
violate clauses (a), (b) and (c) of clause (xi) hereof.
"Public Equity Offering" means a bona fide underwritten sale to the public
of Common Stock of the Company pursuant to a registration statement (other than
on Form S-8 or any other form relating to securities issuable under any benefit
plan of the Company) that is declared effective by the Commission and results in
aggregate gross proceeds to the Company of at least $15.0 million.
"Purchase Money Obligations" of any Person means any obligations of such
Person or any of its Restricted Subsidiaries to any seller or any other Person
incurred or assumed in connection with the purchase of real or personal property
to be used in the business of such Person or any of its subsidiaries within 180
days of such incurrence or assumption.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of the date of the Indenture, among the Company and Bear,
Stearns & Co. Inc.
"Restricted Investment" means an Investment other than a Permitted
Investment. With respect to Unrestricted Subsidiaries or Restricted
Subsidiaries, the amount of Restricted Investments shall be calculated as the
greater of (i) the book value of assets contributed by the Company or a
Restricted Subsidiary or (ii) the Fair Market Value of the assets contributed by
the Company or a Restricted Subsidiary (as certified by a resolution of
independent directors of the Company if Fair Market Value or book value is
greater than $1.0 million).
"Restricted Subsidiary" means (i) any Subsidiary of the Company in
existence on the date of the Indenture, (ii) any Subsidiary of the Company
(other than a Subsidiary that is also a Subsidiary of an Unrestricted
Subsidiary) organized or acquired after the date of the Indenture, unless such
Subsidiary shall have been designated as an Unrestricted Subsidiary by
resolution of the Board of Directors as provided in and in compliance with the
definition of "Unrestricted Subsidiary" and (iii) any Unrestricted Subsidiary
which is designated as a Restricted Subsidiary by the Board of Directors of the
Company; provided that, immediately after giving effect to the designation
referred to in clause (iii), no Default or Event of Default shall have occurred
and be continuing and the Company could incur at least $1.00 of additional
Indebtedness under the first paragraph under the "Limitation on Incurrence of
Indebtedness and Issuance of Disqualified Stock" covenant. The Company shall
evidence any such designation to the Trustee by promptly filing with the Trustee
an Officers' Certificate certifying that such designation has been made and
stating that such designation complies with the requirements of the immediately
preceding sentence.
"Senior Debt" means with respect to the Company, (i) the Obligations of the
Company with respect to the Credit Facility and (ii) 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 pari passu with or subordinated in right of payment to the New Notes.
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall not
include (v) any obligation of the Company to, in respect of or
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imposed by any environmental, landfill, waste management or other regulatory
governmental agency, statute, law or court order, (w) any liability for federal,
state, local or other taxes owed or owing by the Company, (x) any Indebtedness
of the Company to any of the Company's Subsidiaries or other Affiliates, (y) any
trade payables or (z) any Indebtedness that is incurred in violation of the
Indenture on or after the date of the Indenture.
"Significant Subsidiary" means any Subsidiary of the Company 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 Persons or one or more Subsidiaries
of such Person or any combination thereof.
"Unrestricted Subsidiary" means, until such time as any of the following
shall be designated as a Restricted Subsidiary of the Company by the Board of
Directors of the Company as provided in and in compliance with the definition of
"Restricted Subsidiary," (i) any Subsidiary of the Company or of a Restricted
Subsidiary of the Company organized or acquired after the date of the Indenture
that is designated concurrently with its organization or acquisition as an
Unrestricted Subsidiary by resolution of the Board of Directors of the Company,
(ii) any Subsidiary of any Unrestricted Subsidiary, and (iii) any Restricted
Subsidiary of the Company that is designated as an Unrestricted Subsidiary by
resolution of the Board of Directors of the Company, provided that, (a)
immediately after giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing, (b) any such designation shall be
deemed, at the election of the Company at the time of such designation, to be
either (but not both) (x) the making of a Restricted Payment at the time of such
designation in an amount equal to the Investment in such Subsidiary subject to
the restrictions contained in the "Limitation on Restricted Payments" covenant
or (y) the making of an Asset Sale at the time of such designation in an amount
equal to the Investment in such Subsidiary subject to the restrictions contained
in the "Asset Sales" covenant, and (c) such Subsidiary or any of its
Subsidiaries does not own any Capital Stock or Indebtedness of, or own or hold
any Lien on any property of, the Company or any other Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated. A Person may be
designated as an Unrestricted Subsidiary only if and for so long as such Person
(i) has no Indebtedness other than Non-Recourse Debt; (ii) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (a) to subscribe for additional Equity
Interests or (b) to make any payment to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified levels of
operating results; and (iii) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries. The Company shall evidence any designation pursuant
to clause (i) or (iii) of the first sentence hereof to the Trustee by filing
with the Trustee within 45 days of such designation an Officers' Certificate
certifying that such designation has been made and, in the case of clause (iii)
of the first sentence hereof, the related election of the Company in respect
thereof.
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"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers,
general partners or trustees of any Person (irrespective of whether or not, at
the time, Capital Stock of any other class or classes shall have, or might have,
voting power by reason of the happening of any contingency) or, with respect to
a partnership (whether general or limited), any general partner interest in such
partnership.
"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 Subsidiary" of any Person means a Subsidiary of such Person
80% of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall be at the time beneficially
owned by such Person either directly or indirectly through Wholly Owned
Subsidiaries.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the New Notes to be resold as
set forth herein will initially be issued in the form of one or more Global
Notes (the "Global Notes"). The Global Notes will be deposited on the date of
the closing of the sale of the New Notes offered hereby (the "Closing Date")
with, or on behalf of, 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").
New Notes that are issued as described below under "-- Certificated
Securities," will be issued in registered form (the "Certificated Securities").
Upon the transfer of Certificated Securities, such Certificated Securities may,
unless the Global Notes have previously been exchanged for Certificated
Securities, be exchanged for an interest in a Global Note representing the
principal amount of New Notes being transferred.
The Depositary is a limited-purpose trust company which 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
Purchaser), 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 through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants with portions of the principal amount of the Global
Notes and (ii) ownership of the New Notes evidenced by the Global Notes 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. Prospective purchasers 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 New Notes
evidenced by the Global Notes will be limited to such extent.
So long as the Global Note Holder is the registered owner of any New Notes,
the Global Note Holder will be considered the sole owner or holder of such New
Notes outstanding under the Indenture. Beneficial owners of New 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. The ability of
a Person having a beneficial interest in New Notes
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represented by a Global Note to pledge such interest to Persons or entities that
do not participate in the Depositary's system or to otherwise take actions in
respect of such interest, may be affected by the lack of a physical certificate
evidencing such interest.
None of the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of New Notes by the Depositary, or for maintaining, supervising or reviewing any
records of the Depositary relating to such New Notes.
Payments in respect of the principal of, premium, if any, interest on any
New Notes registered in the name of a Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of such 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 the New Notes, including the Global Notes, are registered as the
owners thereof for the purpose of receiving such payments and for any and all
other purposes whatsoever. Consequently, none of the Company nor the Trustee has
or will have any responsibility or liability for the payment of such amounts to
beneficial owners of New Notes (including principal, premium, if any, interest
and Liquidated Damages, if any).
The Company believes, however, that it is currently the policy of the
Depositary to immediately credit the accounts of the relevant Participants with
such payment, in amounts proportionate to their respective holdings in principal
amount 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 New 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.
CERTIFICATED SECURITIES
Subject to certain conditions, any Person having a beneficial interest in a
Global Note may, upon request to the Company or the Trustee, exchange such
beneficial interest for New Notes in the form of Certificated Securities. Upon
any such issuance, the Trustee is required to register such New Notes in the
name of, and cause the same to be delivered to, such Person or Persons. In
addition, 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
appoint 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 New
Notes in the form of Certificated Securities under the Indenture, then, upon
surrender by the relevant Global Note Holder of its Global Note, New Notes in
such form will be issued to each Person that the Depositary identifies as the
beneficial owner of the related New Notes.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary in identifying the beneficial owners of the related New Notes and
each such Person may conclusively rely on, and shall be protected in relying on,
instructions from the Depositary for all purposes (including with respect to the
registration and delivery, and the respective principal amounts, of the New
Notes to be issued).
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to Synthetic Industries, Inc., 309 LaFayette Road,
Chickamauga, Georgia, 30707 Attn: Joseph Sinicropi, Chief Financial Officer.
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DESCRIPTION OF THE OLD NOTES
The terms of the Old Notes are identical in all material respects to the
New Notes, except that the Old Notes have not been registered under the
Securities Act, are subject to certain restrictions on transfer and are entitled
to certain registration rights under the Registration Rights Agreement (which
rights will terminate upon consummation of the Exchange Offer, except to the
extent that the Initial Purchaser may have certain registration rights under
limited circumstances). In addition, the Old Notes and the New Notes will for
all purposes be deemed to be a single series of debt securities under the
Indenture. See "Description of the New Notes -- General." Accordingly, holders
of Old Notes should review the information set forth under "Risk
Factors -- Certain Consequences of a Failure to Exchange Old Notes" and
"Description of the New Notes."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States federal income tax
considerations to holders of the New Notes who are subject to U.S. net income
tax with respect to the New Notes ("U.S. persons") and who will hold the New
Notes as capital assets. There can be no assurance that the U.S. Internal
Revenue Service (the "IRS") will take a similar view of the purchase, ownership
or disposition of the New Notes. This discussion is based upon the provisions of
the Internal Revenue Code of 1986, as amended, and regulations, rulings and
judicial decisions now in effect, all of which are subject to change. It does
not include any description of the tax laws of any state, local or foreign
governments or any estate or gift tax considerations that may be applicable to
the New Notes or holders thereof. It does not discuss all aspects of U.S.
federal income taxation that may be relevant to a particular investor in light
of his particular investment circumstances or to certain types of investors
subject to special treatment under the U.S. federal income tax laws (for
example, dealers in securities or currencies, S corporations, life insurance
companies, tax-exempt organizations, taxpayers subject to the alternative
minimum tax and non-U.S. persons) and also does not discuss New Notes held as a
hedge against currency risks or as part of a straddle with other investments or
as part of a "synthetic security" or other integrated investment (including a
"conversion transaction") comprised of a New Note and one or more other
investments, or situations in which the functional currency of the holders is
not the U.S. dollar.
Holders of Old Notes contemplating acceptance of the Exchange Offer should
consult their own tax advisors with respect to their particular circumstances
and with respect to the effects of state, local or foreign tax laws to which
they may be subject.
EXCHANGE OF NEW NOTES
The exchange of Old Notes for New Notes should not be a taxable event to
holders for federal income tax purposes. The exchange of Old Notes for the New
Notes pursuant to the Exchange Offer should not be treated as an "exchange" for
federal income tax purposes, because the New Notes should not be considered to
differ materially in kind or extent from the Old Notes. If, however, the
exchange of the Old Notes for the New Notes were treated as an exchange for
federal income tax purposes, such exchange should constitute a recapitalization
for federal income tax purposes. Accordingly, the New Notes should have the same
issue price as the Old Notes, and a holder should have the same adjusted basis
and holding period in the New Notes as it had in the Old Notes immediately
before the exchange.
INTEREST ON NEW NOTES
A holder of a New Note will be required to report as ordinary interest
income for U.S. federal income tax purposes interest earned on the New Note in
accordance with the holder's method of tax accounting.
DISPOSITION OF NEW NOTES
A holder's tax basis for a New Note generally will be the holder's purchase
price for the Old Note. Upon the sale, exchange, redemption, retirement or other
disposition of a New Note, a holder will recognize gain or loss equal to the
difference (if any) between the amount realized and the holder's tax basis in
the New Note.
80
<PAGE> 82
Such gain or loss will be long-term capital gain or loss if the New Note has
been held for more than one year and otherwise will be short-term capital gain
or loss (with certain exceptions to the characterization as capital gain if the
New Note was acquired at a market discount).
BACKUP WITHHOLDING
A holder of a New Note may be subject to backup withholding at the rate of
31% with respect to interest paid on the New Note and proceeds from the sale,
exchange, redemption or retirement of the New Note, unless such holder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates that fact or (b) provides a correct taxpayer identification number,
certifies as to no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules. A holder
of a New Note who does not provide the Company with his correct taxpayer
identification number may be subject to penalties imposed by the IRS.
A holder of a New Note who is not a U.S. person will generally be exempt
from backup withholding and information reporting requirements, but may be
required to comply with certification and identification procedures in order to
obtain an exemption from backup withholding and information reporting.
Any amount paid as backup withholding will be creditable against the
holder's U.S. federal income tax liability.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in
connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by
Participating Broker-Dealers during the period referred to below in connection
with resales of New Notes received in exchange for Old Notes if such Old Notes
were acquired by such Participating Broker-Dealers for their own accounts as a
result of market-making activities or other trading activities. The Company has
agreed that this Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with resales of
such New Notes for a period ending 180 days (subject to extension under certain
limited circumstances described herein) after the Expiration Date or, if
earlier, when all such New Notes have been disposed of by such Participating
Broker-Dealer. However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of New Notes received in exchange for
Old Notes pursuant to the Exchange Offer must notify the Company, or cause the
Company to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided for
that purpose in the Letter of Transmittal or may be delivered to the Exchange
Agent at one of the addresses set forth herein under "The Exchange
Offer -- Exchange Agent." See "The Exchange Offer -- Resales of New Notes."
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. New Notes received by broker-dealers for their own
accounts in connection with 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 New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such New Notes. Any
broker-dealer that resells New Notes that were received by it for its own
account in connection with the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New 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.
81
<PAGE> 83
LEGAL MATTERS
Certain legal matters in connection with the New Notes will be passed upon
for the Company by Andrews & Kurth L.L.P., New York, New York.
EXPERTS
The Consolidated Financial Statements as of September 30, 1996 and 1995 and
for each of the three fiscal years in the period ended September 30, 1996,
appearing in this Prospectus and Registration Statement, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports thereon
appearing herein and elsewhere in the Registration Statement, and have been so
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
82
<PAGE> 84
SYNTHETIC INDUSTRIES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS:
(1) Consolidated Financial Statements as of September 30, 1996 and 1995 and for
each of the three years in the period ended September 30, 1996.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Changes in Stockholder's
Equity.................................................... F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
(2) Unaudited Consolidated Financial Statements as of December 31, 1996 and 1995
and for the three month periods then ended.
<TABLE>
<S> <C>
Consolidated Balance Sheets................................. F-15
Consolidated Statements of Operations....................... F-16
Consolidated Statements of Cash Flows....................... F-17
Notes to Consolidated Financial Statements.................. F-18
</TABLE>
F-1
<PAGE> 85
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders of
Synthetic Industries, Inc.
Chickamauga, Georgia
We have audited the accompanying consolidated balance sheets of Synthetic
Industries, Inc. and its subsidiaries as of September 30, 1996 and 1995, and the
related consolidated statements of operations, changes in stockholder's equity
and cash flows for each of the three years in the period ended September 30,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Synthetic Industries, Inc. and
subsidiaries at September 30, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
November 12, 1996
F-2
<PAGE> 86
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1996 1995
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash...................................................... $ 101 $ 108
Accounts receivable, net (Note 4)......................... 48,165 47,947
Inventory (Note 5)........................................ 39,142 45,597
Other current assets (Note 6)............................. 14,655 14,708
-------- --------
TOTAL CURRENT ASSETS.............................. 102,063 108,360
PROPERTY, PLANT AND EQUIPMENT, net (Note 7)................. 137,974 116,729
OTHER ASSETS (Note 8)....................................... 84,021 87,211
-------- --------
$324,058 $312,300
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 20,227 $ 24,021
Accrued expenses and other current liabilities............ 9,669 7,378
Income taxes payable (Note 11)............................ 1,407 1,455
Interest payable.......................................... 6,024 6,427
Current maturities of long-term debt (Note 9)............. 659 40
-------- --------
TOTAL CURRENT LIABILITIES......................... 37,986 39,321
LONG-TERM DEBT (Note 9)..................................... 194,353 192,048
DEFERRED INCOME TAXES (Note 11)............................. 25,875 23,175
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDER'S EQUITY (Notes 3 and 13):
Common stock.............................................. 5,781 5,781
Additional paid-in capital................................ 63,519 63,519
Cumulative translation adjustments........................ 15 29
Deficit................................................... (3,471) (11,573)
-------- --------
TOTAL STOCKHOLDER'S EQUITY........................ 65,844 57,756
-------- --------
$324,058 $312,300
======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 87
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net sales............................... $ 299,532 $ 271,427 $ 234,977
--------- --------- ---------
Costs and expenses:
Cost of sales......................... 208,321 194,706 152,305
Selling expenses...................... 27,488 24,273 21,815
General and administrative expenses... 22,657 21,195 17,588
Amortization of excess of purchase
price over net assets acquired and
other intangibles.................. 2,592 2,566 2,499
--------- --------- ---------
261,058 242,740 194,207
--------- --------- ---------
Operating income................... 38,474 28,687 40,770
--------- --------- ---------
Other expenses:
Interest expense, net................. 22,773 22,514 20,011
Amortization of deferred financing
costs.............................. 699 737 739
--------- --------- ---------
23,472 23,251 20,750
--------- --------- ---------
Income before provision for income
taxes................................. 15,002 5,436 20,020
Provision for income taxes (Note 11).... 6,900 3,500 8,600
--------- --------- ---------
NET INCOME.............................. $ 8,102 $ 1,936 $ 11,420
========= ========= =========
Net income per common share (Note 3).... $ 1.37 $ .33 $ 1.93
========= ========= =========
Weighted average shares outstanding..... 5,930,502 5,930,502 5,930,502
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 88
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON PAID-IN TRANSLATION
STOCK CAPITAL ADJUSTMENTS DEFICIT TOTAL
------ ---------- ----------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance, October 1, 1993 (Note 3)....... $5,781 $63,519 $ 52 $(24,929) $44,423
Net income.............................. -- -- -- 11,420 11,420
Foreign currency translation............ -- -- (26) -- (26)
------ ------- ---- -------- -------
Balance, September 30, 1994............. 5,781 63,519 26 (13,509) 55,817
Net income.............................. -- -- -- 1,936 1,936
Foreign currency translation............ -- -- 3 -- 3
------ ------- ---- -------- -------
Balance, September 30, 1995............. 5,781 63,519 29 (11,573) 57,756
Net income.............................. -- -- -- 8,102 8,102
Foreign currency translation............ -- -- (14) -- (14)
------ ------- ---- -------- -------
Balance, September 30, 1996............. $5,781 $63,519 $ 15 $ (3,471) $65,844
====== ======= ==== ======== =======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 89
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................... $ 8,102 $ 1,936 $ 11,420
Adjustments to reconcile net income to net cash provided
by (used in) operations:
Depreciation and amortization......................... 16,299 14,937 12,390
Deferred income taxes................................. 3,400 (355) 3,830
Provision for bad debts............................... 1,024 3,363 217
Loss on disposal of equipment......................... -- -- 266
Change in assets and liabilities:
Increase in accounts receivable..................... (1,247) (12,212) (2,861)
Decrease (increase) in inventory.................... 6,451 (13,076) (7,255)
Increase in other current assets.................... (647) (1,469) (632)
(Decrease) increase in accounts payable............. (3,801) 5,254 5,348
Increase in accrued expenses and other current
liabilities...................................... 2,291 434 533
(Decrease) increase in income taxes payable......... (48) 973 482
(Decrease) increase in interest payable............. (403) 180 224
-------- -------- --------
Cash provided by (used in) operating
activities..................................... 31,421 (35) 23,962
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment............... (29,253) (13,313) (31,866)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under term loan............................... 19,500 11,000 --
Repayments under term loan............................... (500) (6,000) (6,000)
Net (repayment) borrowings under revolving credit line... (20,734) 8,598 13,802
Payment of capital lease obligation and other long term
debt.................................................. (342) (36) (31)
Deferred financing costs.............................. (101) (221) --
-------- -------- --------
Cash (used in) provided by financing activities....... (2,177) 13,341 7,771
Effect of exchange rate changes on cash............... 2 (2) (3)
-------- -------- --------
NET DECREASE IN CASH....................................... (7) (9) (136)
CASH AT BEGINNING OF PERIOD................................ 108 117 253
-------- -------- --------
CASH AT END OF PERIOD...................................... $ 101 $ 108 $ 117
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest.............................................. $ 23,176 $ 22,334 $ 19,787
Income taxes.......................................... 3,548 2,882 3,901
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITY
Capital lease obligation incurred for purchase of
equipment............................................. $ 5,000 $ -- $ --
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 90
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. ORGANIZATION
Synthetic Industries, Inc., a Delaware corporation (the "Company"),
manufactures and markets a wide range of polypropylene-based fabric and fiber
products designed for industrial applications. The Company's diverse mix of
products are marketed to the floor covering, construction and technical textile
markets for such end-use applications as carpet backing, geotextiles, erosion
control, concrete reinforcement and furniture construction fabrics. The Company
manufactures and sells more than 2,000 products in over 65 end-use markets
predominantly in North America, Europe and the Far East.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany transactions and balances have been eliminated.
REVENUE RECOGNITION
Revenue from product sales is recognized at the time of shipment.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of foreign subsidiaries are translated at the
fiscal year-end rates of exchange, and the results of operations are translated
at the average rates of exchange for the years presented. Gains or losses
resulting from translating foreign currency financial statements are accumulated
in the cumulative translation adjustments account in the stockholder's equity
section of the accompanying consolidated balance sheets.
INVENTORY
Inventory is stated at the lower of cost, determined using the first-in,
first-out method, or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation and amortization. Depreciation is provided on the straight-line
method based on estimated useful lives, as follows:
<TABLE>
<S> <C>
Building and improvements.......................... 25 years
Machinery and equipment............................ 14 years
</TABLE>
Leasehold improvements are amortized over the shorter of the useful life of
the asset or the term of the lease. Expenses for repairs, maintenance and
renewals are charged to operations as incurred. Expenditures which improve an
asset or extend its useful life are capitalized. When properties are retired or
otherwise disposed of, the related cost and accumulated depreciation and
amortization are removed from the accounts and any gain or loss is included in
the results of operations.
Capitalized interest is charged to machinery and equipment and amortized
over the lives of the related assets. Interest capitalized during fiscal 1996,
1995 and 1994 was $392, $729 and $283, respectively.
INCOME TAXES
The Company accounts for income taxes using an asset and liability approach
in accordance with Financial Accounting Standards Board ("FASB") Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes".
Under SFAS No. 109, deferred income taxes are recognized for the
F-7
<PAGE> 91
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
tax consequences of temporary differences by applying enacted statutory tax
rates applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. The
effect on deferred taxes of a change in tax rates is recognized in the statement
of operations in the period that includes the enactment date.
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED
The excess of purchase price over net assets acquired is amortized on a
straight-line basis over a period of 40 years. Excess of purchase price over net
assets acquired is assessed for recoverability on a regular basis. In evaluating
the value and future benefits of goodwill, its carrying value would be reduced
by the excess, if any, of the balance over management's best estimate of
undiscounted future operating income before amortization of the related
intangible assets over the remaining amortization period.
DEFERRED FINANCING COSTS AND INTANGIBLE ASSETS
Deferred financing costs are amortized over periods from 5 to 12 years.
Intangible assets consist primarily of a Fibermesh(R) trademark and patents on
civil engineering products, which are amortized on a straight-line basis over 40
and 15 years, respectively.
NET INCOME PER SHARE
Net income per share was computed by dividing net income by the weighted
average number of common shares and common equivalent shares outstanding during
each period, as adjusted for the stock splits. Common equivalent shares include
options calculated using the treasury stock method. Retroactive restatement has
been made to all share and per share amounts for the 115,740.74-for-1 stock
split effective October 30, 1996 (Note 3).
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.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. SFAS No. 121 is effective for
financial statements for fiscal years beginning after December 15, 1995.
Management believes that the adoption of this standard will have no effect on
consolidated financial position or results of operations.
STOCK-BASED COMPENSATION
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation" which will be effective for the Company beginning October 1, 1996.
SFAS No. 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans. The Company will account for stock-
based compensation awards under the provisions of Accounting Principles Board
Opinion No. 25, as permitted by SFAS No. 123. In accordance with SFAS No. 123,
beginning in the fiscal year ended September 30, 1997,
F-8
<PAGE> 92
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company will make pro forma disclosures relative to stock-based compensation
as part of the accompanying footnotes to the consolidated financial statements.
RECLASSIFICATION OF PRIOR FINANCIAL STATEMENTS
Certain reclassifications have been made to previous years' financial
statements to conform with 1996 classifications.
3. RECAPITALIZATION AND INITIAL PUBLIC OFFERING
On July 31, 1996, the board of directors of the Company (the "Board")
approved an amendment to the Company's Certificate of Incorporation to effect a
recapitalization of the Company's Common Stock, pursuant to which the number of
authorized shares of the Company's Common Stock was increased to 25,000,000
shares (the "Recapitalization"). As part of the Recapitalization, the Board
approved a 115,740.74-for-1 stock split of the issued and outstanding shares of
Common Stock. The Recapitalization, including the stock split, became effective
immediately prior to the initial public offering. All share and per share
information included in the accompanying consolidated financial statements and
notes have been adjusted to give retroactive recognition to the stock split.
On November 1, 1996, the Company sold 2,875,000 shares of Common Stock in
an underwritten public offering. The net proceeds to the Company from the sale
(after payment of underwriting discounts and commissions and expenses) were
approximately $34,020. The net proceeds to the Company will be used to repay
certain outstanding indebtedness. Supplementary pro forma net income per share,
assuming the net proceeds were used to reduce outstanding bank indebtedness as
of the beginning of fiscal 1996, would have been $1.12.
4. ACCOUNTS RECEIVABLE
Accounts receivable are presented net of the allowances for doubtful
accounts of $3,036, $4,053 and $1,201 for fiscal 1996, 1995 and 1994,
respectively. Amounts written off against established allowances were $2,041,
$511 and $217 for the years ended September 30, 1996, 1995 and 1994,
respectively.
Most of the Company's carpet backing sales are with customers located in
Georgia. Net sales to one customer represented 18% of consolidated net sales for
all three fiscal years presented.
5. INVENTORY
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1996 1995
------- -------
<S> <C> <C>
Finished goods........................................... $22,555 $27,867
Work in progress......................................... 7,937 5,541
Raw materials............................................ 8,650 12,189
------- -------
$39,142 $45,597
======= =======
</TABLE>
6. OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------
1996 1995
------- -------
<S> <C> <C>
Prepaid supplies......................................... $ 8,283 $ 7,192
Deferred tax assets...................................... 4,765 5,465
Other.................................................... 1,607 2,051
------- -------
$14,655 $14,708
======= =======
</TABLE>
F-9
<PAGE> 93
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1996 1995
-------- --------
<S> <C> <C>
Land................................................... $ 4,458 $ 3,511
Buildings and improvements............................. 29,298 23,457
Machinery and equipment and leasehold improvements..... 179,386 151,921
-------- --------
213,142 178,889
Accumulated depreciation............................... 75,168 62,160
-------- --------
$137,974 $116,729
======== ========
</TABLE>
Depreciation expense on property, plant and equipment was $13,008, $11,634
and $9,152 in fiscal 1996, 1995 and 1994, respectively.
8. OTHER ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1996 1995
-------- --------
<S> <C> <C>
Excess of purchase price over net assets acquired...... $ 99,818 $ 99,818
Intangible assets...................................... 3,546 3,546
Deferred financing costs............................... 12,331 12,230
-------- --------
115,695 115,594
Accumulated amortization............................... 31,674 28,383
-------- --------
$ 84,021 $ 87,211
======== ========
</TABLE>
The excess of purchase price over net assets acquired arose from the
purchase of the Company's Common Stock. The Company was acquired by Synthetic
Industries L.P., a Delaware limited partnership (the "Partnership") on December
4, 1986. This acquisition was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to the net assets
acquired based on estimates by independent appraisals and other valuations of
fair market value as of December 4, 1986, and resulted in a purchase price in
excess of net assets acquired of $99,818.
Amortization expense was $3,291, $3,303 and $3,238 in fiscal 1996, 1995 and
1994, respectively.
9. LONG-TERM DEBT
Long-term debt consists of the following at September 30:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Secured revolving credit facility(a):
Secured revolving credit portion..................... $ 3,993 $ 24,727
Term loan portion.................................... 45,000 26,000
12 3/4% senior subordinated debentures(b).............. 140,000 140,000
Capital lease obligation (Note 10)..................... 4,698 --
Other.................................................. 1,321 1,361
-------- --------
195,012 192,088
Less current portion................................... 659 40
-------- --------
Total long-term portion................................ $194,353 $192,048
======== ========
</TABLE>
F-10
<PAGE> 94
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A. THE SECURED REVOLVING CREDIT FACILITY
On October 20, 1995, the Company and its lenders entered into a Fourth
Amended and Restated Revolving Credit Agreement (as amended to date, the "Credit
Facility"). The Company's term loan portion of the Credit Facility (the "Term
Loan") was increased to $45,000. The Credit Facility has a termination date of
October 20, 2001, and provides for Term Loan repayments of $10,000 in 1999 and
$17,500 in each of 2000 and 2001.
The revolving credit loan portion of the Credit Facility (the "Revolver")
provides for availability based on a borrowing formula consisting of 85% of
eligible accounts receivable and 50% of eligible inventory, subject to certain
limitations. The maximum amount available for borrowing under the Revolver is
increased to $40,000, of which $34,115 is available at September 30, 1996.
The Credit Facility permits borrowings which bear interest, at the
Company's option, (i) for domestic borrowings based on the lender's base rate
plus .75% or 1.00% for Revolver or Term Loan advances, respectively (9.0% and
9.25% at September 30, 1996) or (ii) for Eurodollar borrowings, based on the
Interbank Eurodollar rate at the time of conversion plus 2.75% or 2.5% for Term
Loan or Revolver advances, respectively (8.0938% at September 30, 1996).
The Credit Facility provides for borrowings under letters of credit of up
to $3,000, which borrowings reduce amounts available under the Revolver. At
September 30, 1996, there was $1,892 in letters of credit outstanding under the
Credit Facility. The Company is required to pay a .375% fee on the unused
portion of the commitment and an agency fee of $150 per annum.
The Credit Facility is collateralized by substantially all of the Company's
assets and contains covenants related to the maintenance of certain operating
and working capital levels and limitations as to the amount of capital
expenditures. The Company's ability to pay dividends on its Common Stock is
restricted by both the Credit Facility and the indenture relating to the Senior
Subordinated Debentures discussed below.
B. SENIOR SUBORDINATED DEBENTURES
On December 14, 1992, the Company issued $140,000 of 12 3/4% Senior
Subordinated Debentures due 2002 (the "Debentures"), which represent unsecured
obligations of the Company. The Debentures are redeemable at the option of the
Company at any time on or after December 1, 1997, initially at 106.375% of their
principal amount, together with accrued interest, with declining redemption
prices thereafter. Interest on the Debentures is payable semi-annually on June 1
and December 1.
The fair value of the Company's Debentures is estimated based on quoted
market prices for the Debentures in the over-the-counter market. The estimated
fair value of the Debentures at September 30, 1996 is 107.0% of their face
amount or $149,800.
Approximate aggregate minimum annual payments due on long-term debt and the
capital lease, for the subsequent five years are as follows: 1997, $659; 1998,
$718; 1999, $10,783; 2000, $22,347; 2001, $19,470; and thereafter, $141,036.
10. COMMITMENTS AND CONTINGENCIES
A. LEASE COMMITMENTS
On May 15, 1996, the Company entered into a five year capital lease for
equipment which provides for payments over a five year period at an interest
rate of 8.42% The Company also leases certain factory and warehouse buildings
and equipment under long-term operating leases expiring through 2009.
F-11
<PAGE> 95
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future minimum lease payments under noncancellable lease obligations at
September 30, 1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR LEASES LEASES
- ---- ------- ---------
<S> <C> <C>
1997........................................................ $ 986 $3,786
1998........................................................ 986 2,262
1999........................................................ 986 1,622
2000........................................................ 986 991
2001........................................................ 1,993 362
Thereafter.................................................. -- 817
------ ------
Total minimum lease payments................................ $5,937 $9,840
======
Less amount representing interest........................... 1,239
------
Present value of net minimum lease payments................. 4,698
Less current maturities of capital lease obligation......... 614
------
Capital lease obligation.................................... $4,084
======
</TABLE>
Total rental expense for the above operating leases and other short-term
leases for the fiscal years 1996, 1995 and 1994 was $4,499, $3,731 and $4,684,
respectively.
B. CAPITAL EXPENDITURES
In fiscal 1997, the Company plans a $40,000 expansion of its manufacturing
facilities, primarily to expand capacity and to continue to reduce manufacturing
costs, subject to prevailing market conditions, of which $7,084 is committed at
September 30, 1996.
C. LITIGATION
The Company and its subsidiaries are parties to litigation arising out of
their business operations. Most of such litigation involves claims for personal
injury, property damage, breach of contract and claims involving employee
relations and certain administrative proceedings. The Company believes such
claims are adequately covered by insurance or do not involve a risk of material
loss to the Company.
11. INCOME TAXES
The provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Current:
Federal.................................................. $2,600 $3,180 $3,770
State.................................................... 600 400 1,000
Foreign.................................................. 300 275 --
------ ------ ------
3,500 3,855 4,770
------ ------ ------
Deferred:
Federal.................................................. 3,200 (218) 3,405
State.................................................... 200 (137) 425
------ ------ ------
3,400 (355) 3,830
------ ------ ------
Total taxes on income...................................... $6,900 $3,500 $8,600
====== ====== ======
</TABLE>
F-12
<PAGE> 96
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of US income tax computed at the statutory rate and actual
tax expense is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Amount computed at statutory rate....... $5,250 $1,900 $7,007
State and local taxes less applicable
federal income tax.................... 550 270 747
Amortization of goodwill................ 873 873 871
Other nondeductible expenses............ 115 210 348
Other, net.............................. 112 247 (373)
------ ------ ------
$6,900 $3,500 $8,600
====== ====== ======
</TABLE>
The tax effects of significant items comprising the Company's net deferred
tax liability are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
Property, plant and equipment........... $24,819 $22,121
Trademarks and patents.................. 1,056 1,054
------- -------
Total deferred tax liabilities.......... 25,875 23,175
------- -------
Receivables............................. 996 1,609
Inventory............................... 626 628
Accrued expenses........................ 1,829 1,581
AMT credit carryforward................. 1,314 1,647
------- -------
Total deferred tax assets............... 4,765 5,465
------- -------
Net deferred tax liability.............. $21,110 $17,710
======= =======
</TABLE>
The Company's United States income tax returns for fiscal years 1992 and
1993 have been examined and settled without material adjustment.
12. RETIREMENT PROGRAMS
For United States employees, the Company maintains a trusteed
profit-sharing plan (the "Plan") which is qualified under Section 401(k) of the
Internal Revenue Code. All full-time employees over the age of 21 who have been
employed continuously for at least one year are eligible for participation in
the Plan. The Company may, but has not elected to, contribute a portion of its
profits to the Plan, as determined by the Board. Employer contributions vest
over 1 to 5 years. The Company has elected to match employee contributions to
the Plan on a 50% basis but not to exceed 3% of the employee's annual
compensation. During fiscal years 1996, 1995 and 1994, the Company contributed
$999, $921 and $891, respectively. The Plan provides for the Company to bear the
expense of the administration of the Plan. Pension expense on the foreign plans
is not significant.
13. STOCK OPTIONS
In August 1994, the Company adopted a stock option plan (the "Directors'
Plan"), pursuant to which non-qualified stock options to purchase an aggregate
of 125,261 shares of Common Stock were granted to the four non-employee
Directors of the Company at an exercise price of $6.83 per share which was
determined by reference to the fair market value of the Company's equity at the
time such Directors joined the Board. The stock options will be fully vested by
October 1, 1996 and have a term which expires on August 4, 2004. The Directors'
Plan does not provide for any further grants of options thereunder.
F-13
<PAGE> 97
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In August 1994, the Company adopted a stock option plan ( the "1994 Plan")
for its key employees which provides for the grant of incentive stock options,
within the meaning of Section 422A of the Internal Revenue Code, and
non-qualified stock options. The maximum aggregate number of shares of Common
Stock that may be issued under the 1994 Plan is 491,413 shares.
In December 1995 and 1994, stock options for 174,716 and 316,697 shares of
Common Stock were granted to various employees under the 1994 Plan at an
exercise price of $10.72 per share. The stock options vest and become
exercisable at a rate of 25% per year over a four-year period and expire ten
years from the date of grant. As of September 30, 1996, 79,173 options were
exercisable under the 1994 Plan.
In May 1996, as amended on July 31, 1996, the Company adopted a stock
option plan (the "1996 Plan"), which provides for the grant of incentive stock
options and non-qualified stock options to any full time employee of the Company
under terms substantially the same as the 1994 Plan. The maximum number of
shares of Common Stock that may be issued under the 1996 Plan is 289,062 shares.
Options to purchase an aggregate of 21,723 shares have been granted at an
exercise price of $10.72 per share.
The purchase price of the shares of Common Stock subject to options under
the 1994 and 1996 Plans must be no less than the fair market value of the Common
Stock at the date of grant, provided, however, that the purchase price of shares
of Common Stock subject to Initial Stock Offerings ("ISOs") granted to any
optionee who owns shares possessing more than 10% of the combined voting power
of the Company ("Ten Percent Stockholder") must not be less than 110% of the
fair market value of the Common Stock at the date of grant. The maximum term of
an option may not exceed ten years from the date of grant, except with respect
to ISOs granted to Ten Percent Stockholders which must expire within five years
of the date of grant.
F-14
<PAGE> 98
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1996
------------ -------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 3)........................ $ 30,806 $ 101
Accounts receivable, net of allowance for doubtful
accounts of $3,062 and $3,036.......................... 37,322 48,165
Inventory (Note 4)........................................ 49,084 39,142
Other current assets...................................... 14,595 14,655
-------- --------
TOTAL CURRENT ASSETS.............................. 131,807 102,063
PROPERTY, PLANT AND EQUIPMENT, net (Note 5)................. 143,142 137,974
OTHER ASSETS................................................ 83,202 84,021
-------- --------
$358,151 $324,058
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 28,731 $ 20,227
Accrued expenses and other current liabilities............ 8,704 9,669
Income taxes payable (Note 7)............................. 1,466 1,407
Interest payable.......................................... 1,475 6,024
Current maturities of long-term debt (Note 6)............. 673 659
-------- --------
TOTAL CURRENT LIABILITIES......................... 41,049 37,986
LONG-TERM DEBT (Note 6)..................................... 190,186 194,353
DEFERRED INCOME TAXES (Note 7).............................. 26,308 25,875
-------- --------
STOCKHOLDER'S EQUITY:
Common stock (Note 8)..................................... 8,656 5,781
Additional paid-in capital (Note 8)....................... 94,504 63,519
Cumulative translation adjustments........................ 15 15
Deficit................................................... (2,567) (3,471)
-------- --------
TOTAL STOCKHOLDER'S EQUITY........................ 100,608 65,844
-------- --------
$358,151 $324,058
======== ========
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE> 99
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Net sales................................................... $ 70,857 $ 64,606
---------- ----------
Costs and expenses:
Cost of sales............................................. 50,043 49,917
Selling expenses.......................................... 6,938 5,716
General and administrative expenses....................... 5,881 4,971
Amortization of excess of purchase price over net assets
acquired and other intangibles......................... 648 648
---------- ----------
63,510 61,252
---------- ----------
Operating income....................................... 7,347 3,356
---------- ----------
Other expenses:
Interest expense, net..................................... 5,410 5,680
Amortization of deferred financing costs.................. 176 173
---------- ----------
5,586 5,853
---------- ----------
Income (loss) before income tax provision (benefit)......... 1,761 (2,497)
Income tax provision (benefit) (Note 7)..................... 857 (600)
---------- ----------
NET INCOME (LOSS)........................................... $ 904 $ (1,897)
========== ==========
Net income (loss) per common share.......................... $ 0.11 $ (0.32)
Weighted average shares outstanding......................... 7,870,690 5,930,502
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE> 100
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-------------------
1996 1995
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 904 $ (1,897)
Adjustments to reconcile net income (loss) to net cash
provided by operations:
Depreciation and amortization............................. 4,480 4,008
Provision for bad debts................................... 49 42
Deferred income taxes..................................... 27 (720)
Change in assets and liabilities:
Decrease in accounts receivable........................... 10,794 10,701
(Increase) decrease in inventory.......................... (9,942) 4,267
Decrease in other current assets.......................... 461 268
Increase (decrease) in accounts payable................... 8,504 (3,181)
Decrease in accrued expenses and other current
liabilities............................................ (965) (1,769)
Decrease (increase) in income taxes payable............... 59 (791)
Decrease in interest payable.............................. (4,549) (4,191)
------- --------
Cash provided by operating activities............. 9,822 6,737
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment................ (8,824) (7,394)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under the term loan............................ -- 19,500
Repayments under term loan................................ -- (500)
Net repayments under secured revolving credit line........ (3,993) (17,833)
Deferred financing costs.................................. -- (62)
Proceeds from underwritten public offering................ 33,860 --
Payments of capital lease obligation and other long term
debt................................................... (160) (9)
------- --------
Cash provided by financing activities.................. 29,707 1,096
Effect of exchange rate changes on cash................ -- (18)
------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 30,705 421
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 101 108
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $30,806 $ 529
======= ========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.................................................. $ 9,959 $ 9,871
Income taxes.............................................. 771 911
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE> 101
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
1. ORGANIZATION
Synthetic Industries, Inc., a Delaware corporation (the "Company"),
manufactures and markets a wide range of polypropylene-based fabric and fiber
products designed for industrial applications. The Company's diverse mix of
products are marketed to the floor covering, construction and technical textile
markets for such end-use applications as carpet backing, geotextiles and erosion
control, concrete reinforcement and furniture construction fabrics. The Company
manufactures and sells more than 2,000 products in over 65 end-use markets
predominately in North America, Europe and the Far East. Prior to November 1,
1996, the Company was a wholly owned subsidiary of Synthetic Industries L.P. As
a result of the underwritten public offering (Note 8) on November 1, 1996,
Synthetic Industries L.P. owns approximately 67% of the Company's outstanding
Common Stock as of December 31, 1996.
2. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements as of December 31, 1996 and for the
periods ended December 31, 1996 and 1995 included herein have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation of the financial
position at December 31, 1996 and 1995, and the results of operations for the
three months then ended have been made on a consistent basis. Certain
information and footnote disclosure included in consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures herein are adequate to make the
information presented not misleading. It is suggested that these consolidated
financial statements be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the consolidated
financial statements and notes thereto included elsewhere in this Prospectus.
Operating results for the three months ended December 31, 1996 may not
necessarily be indicative of the results that may be expected for the full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. CASH AND CASH EQUIVALENTS
The Company classifies as cash equivalents all highly liquid investments
with maturities of three months or less. At December 31, 1996, cash equivalents
were composed primarily of investments of United States government securities
and overnight time deposits.
4. INVENTORY
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1996
------------ -------------
<S> <C> <C>
Finished goods.............................................. $27,692 $22,555
Work in process............................................. 9,446 7,937
Raw materials............................................... 11,946 8,650
------- -------
$49,084 $39,142
======= =======
</TABLE>
F-18
<PAGE> 102
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1996
------------ -------------
<S> <C> <C>
Land........................................................ $ 4,458 $ 4,458
Buildings and improvements.................................. 29,298 $ 29,298
Machinery and equipment and leasehold improvements........ 188,210 179,386
-------- --------
221,966 213,142
Accumulated depreciation.................................... 78,824 75,168
-------- --------
$143,142 $137,974
======== ========
</TABLE>
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1996
------------ -------------
<S> <C> <C>
Secured revolving credit facility:
Secured revolving credit portion.......................... $ -- $ 3,993
Term loan portion......................................... 45,000 45,000
12 3/4% senior subordinated debentures...................... 140,000 140,000
Capital lease obligation.................................... 4,548 4,698
Other....................................................... 1,311 1,321
-------- --------
190,859 195,012
Less current portion........................................ 673 659
-------- --------
Total long term portion..................................... $190,186 $194,353
======== ========
</TABLE>
On October 20, 1995 the Company and its lenders entered into the Fourth
Amended and Restated Revolving Credit and Security Agreement (as amended to
date, the "Credit Facility"). The Credit Facility, with a termination date of
October 20, 2001, provides for term loan borrowings of $45,000, of which $10,000
is payable in 1999 and $17,500 is payable in each of 2000 and 2001.
The Credit Facility provides for a revolving credit portion of a maximum
amount of $40,000, of which, at December 31, 1996, the Company had $38,869
available for borrowing.
On February 11, 1997, the Company issued $170,000 in aggregate principal
amount of 9 1/4% senior subordinated notes due 2007. (See Subsequent Event.)
F-19
<PAGE> 103
SYNTHETIC INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The provision (benefit) for income taxes is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
------------------
1996 1995
------ ------
<S> <C> <C>
Current:
Federal................................................... $ 620 $ --
State..................................................... 90 --
Foreign................................................... 120 120
----- -----
830 120
----- -----
Deferred:
Federal................................................... (115) (600)
State..................................................... 142 (120)
----- -----
27 (720)
----- -----
Total provision (benefit)......................... $ 857 $(600)
===== =====
</TABLE>
The federal income tax provision for the three months ended December 31,
1996 and 1995 reflects the non-deductibility of certain expenses for income tax
purposes such as amortization of goodwill. Deferred income taxes result from
temporary differences between tax bases of assets and liabilities and their
reported amounts in the financial statements.
8. RECAPITALIZATION AND UNDERWRITTEN PUBLIC OFFERING
On July 31, 1996, the board of directors of the Company (the "Board")
approved an amendment to the Company's Certificate of Incorporation to effect a
recapitalization of the Company's Common Stock, pursuant to which the number of
authorized shares of the Company's Common Stock was increased to 25,000,000
shares (the "Recapitalization"). As part of the Recapitalization, the Board
approved a 115,740.74-for-1 stock split of the issued and outstanding shares of
Common Stock. The Recapitalization, including the stock split, became effective
immediately prior to the initial public offering. All share and per share
information included in the accompanying consolidated financial statements and
notes have been adjusted to give retroactive recognition to the stock split.
On November 1, 1996, the Company sold 2,875,000 shares of Common Stock in
an underwritten public offering. The net proceeds to the Company from the sale
(after payment of underwriting discounts and commissions and expenses) were
approximately $34,000.
9. SUBSEQUENT EVENT
On February 11, 1997, the Company issued $170,000 in aggregate principal
amount of 9 1/4% Senior Subordinated Notes due 2007 (the "Notes"). Most of the
net proceeds from the Notes were utilized to repurchase approximately $133,000
principal amount of the Company's 12 3/4% Senior Subordinated Debentures due
December 1, 2002 (the "Debentures") which were tendered in accordance with a
tender offer therefor that was commenced by the Company on January 8, 1997. In
connection with the repurchase of the Debentures, the Company will incur an
after tax extraordinary loss of $11,888 or $1.35 per share during the second
quarter of fiscal 1997.
F-20
<PAGE> 104
===============================================================================
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
EXCHANGE OFFER OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OF ITS AFFILIATES. THIS PROSPECTUS DOES NOT 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 WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 4
Prospectus Summary.................... 5
Risk Factors.......................... 13
The Company........................... 16
Use of Proceeds....................... 16
Capitalization........................ 17
Selected Consolidated Financial
Information......................... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 20
Business.............................. 26
Management............................ 39
Principal Stockholders................ 46
Certain Relationships and Related
Transactions........................ 47
The Exchange Offer.................... 48
Description of the New Notes.......... 57
Description of the Old Notes.......... 80
Certain United States Federal Income
Tax Considerations.................. 80
Plan of Distribution.................. 81
Legal Matters......................... 82
Experts............................... 82
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
===============================================================================
===============================================================================
SYNTHETIC INDUSTRIES, INC.
OFFER TO EXCHANGE ITS
9 1/4% SENIOR SUBORDINATED
NOTES DUE 2007
(SERIES B)
FOR ANY AND ALL OF ITS OUTSTANDING
9 1/4% SENIOR SUBORDINATED
NOTES DUE 2007
(SERIES A)
---------------------
PROSPECTUS
---------------------
, 1997
===============================================================================
<PAGE> 105
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") empowers a
Delaware corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. A
corporation may, in advance of the final disposition of any civil, criminal,
administrative or investigative action, suit or proceeding, pay the expenses
(including attorneys' fees) incurred by any officer, director, employee or agent
in defending such action, provided that the director or officer undertakes to
repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the corporation. A corporation may indemnify such
person against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he or she 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, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
A Delaware corporation may indemnify officers and directors in an action by
or in the right of the corporation to procure a judgment in its favor under the
same conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him or
her against the expenses (including attorneys' fees) which he or she actually
and reasonably incurred in connection therewith. The indemnification provided is
not deemed to be exclusive of any other rights to which an officer or director
may be entitled under any corporation's by-laws, agreement, vote or otherwise.
In accordance with Section 145 of the DGCL, Article VII of the Registrant's
Certificate of Incorporation, as amended and restated (the "Restated
Certificate") provides that the Registrant may indemnify, to the fullest extent
permitted by applicable law in effect from time to time, any person, and the
estate and personal representative of any such person, against all liability and
expense (including attorneys' fees) incurred by reason of the fact that such
person is or was a director, officer, fiduciary, or agent of the Registrant, or,
while serving as a director, officer, fiduciary or agent of the Registrant, is
or was serving at the request of the Registrant as a director, officer, partner,
trustee, employee, fiduciary, or agent of, or in any similar managerial or
fiduciary position of another domestic or foreign corporation or other
individual or entity or of an employee benefit plan to the extent and in the
manner provided in any bylaw, resolution of the directors, resolution of the
stockholders, contract, or otherwise so long as such indemnification is legally
permissible.
The foregoing statements are subject to the detailed provisions of Section
145 of the DGCL and Article VII of the Restated Certificate.
II-1
<PAGE> 106
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <S>
4.1 -- Indenture dated as of February 11, 1997 between
Registrant and United States Trust Company of New York,
as trustee.
4.2 -- Registration Rights Agreement, dated as of February 11,
1997, between the Registrant and Bear, Stearns & Co. Inc.
4.3 -- Form of Security for 9 1/4% Senior Subordinated Notes due
2007 originally issued by Synthetic Industries, Inc. on
February 11, 1997.
4.4 -- Form of Security for 9 1/4% Senior Subordinated Notes due
2007 to be issued by Synthetic Industries, Inc. and
registered under the Securities Act of 1933, as amended.
5.1 -- Opinion of Andrews & Kurth L.L.P.
12.1 -- Statement regarding computation of ratio of earnings to
fixed charges.
12.2 -- Statement regarding computation of ratio of pro forma
earnings to pro forma fixed charges.
23.1 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit
5.1).
23.2 -- Consent of Deloitte & Touche LLP.
24 -- Powers of attorney (included on signature page of this
Registration Statement).
25 -- Statement of Eligibility of Trustee.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Exchange Agent Agreement.
</TABLE>
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the forgoing provisions, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or 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 Securities Act and will be governed by the final
adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes 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.
(d) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) 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.
II-2
<PAGE> 107
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Chickamauga, State of Georgia, on the 12th day of March, 1997.
SYNTHETIC INDUSTRIES, INC.
By: /s/ LEONARD CHILL
----------------------------------
Leonard Chill
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Leonard Chill and Joseph Sinicropi, and
each of them, as such person's true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for such person and in such
person's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission and any other
regulatory authority, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or either
of them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ LEONARD CHILL President, Chief Executive Officer March 12, 1997
- ----------------------------------------------------- and Director (Principal
Leonard Chill Executive Officer)
/s/ JOSEPH SINICROPI Chief Financial Officer and March 12, 1997
- ----------------------------------------------------- Secretary (Principal Accounting
Joseph Sinicropi Officer)
/s/ JOSEPH F. DANA Director March 12, 1997
- -----------------------------------------------------
Joseph F. Dana
/s/ LEE J. SEIDLER Director March 12, 1997
- -----------------------------------------------------
Lee J. Seidler
/s/ WILLIAM J. SHORTT Director March 12, 1997
- -----------------------------------------------------
William J. Shortt
/s/ ROBERT L. VOIGT Director March 12, 1997
- -----------------------------------------------------
Robert L. Voigt
</TABLE>
II-3
<PAGE> 108
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
4.1 -- Indenture dated as of February 11, 1997 between
Registrant and United States Trust Company of New York,
as trustee.
4.2 -- Registration Rights Agreement, dated as of February 11,
1997, between the Registrant and Bear, Stearns & Co. Inc.
4.3 -- Form of Security for 9 1/4% Senior Subordinated Notes due
2007 originally issued by Synthetic Industries, Inc. on
February 11, 1997.
4.4 -- Form of Security for 9 1/4% Senior Subordinated Notes due
2007 to be issued by Synthetic Industries, Inc. and
registered under the Securities Act of 1933, as amended.
5.1 -- Opinion of Andrews & Kurth L.L.P.
12.1 -- Statement regarding computation of ratio of earnings to
fixed charges.
12.2 -- Statement regarding computation of ratio of pro forma
earnings to pro forma fixed charges.
23.1 -- Consent of Andrews & Kurth L.L.P. (included in Exhibit
5.1).
23.2 -- Consent of Deloitte & Touche LLP.
24 -- Powers of attorney (included on signature page of this
Registration Statement).
25 -- Statement of Eligibility of Trustee.
99.1 -- Form of Letter of Transmittal.
99.2 -- Form of Notice of Guaranteed Delivery.
99.3 -- Form of Exchange Agent Agreement.
</TABLE>
<PAGE> 1
EXHIBIT 4.1
================================================================================
SYNTHETIC INDUSTRIES, INC.
------------------
$170,000,000
SERIES A AND SERIES B
9 1/4% SENIOR SUBORDINATED NOTES DUE 2007
------------------
INDENTURE
Dated as of February 11, 1997
------------------
================================================================================
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 1.3. Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 1.4. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 2
THE NOTES
SECTION 2.1. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.2. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.3. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.4. Paying Agent to Hold Assets in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.5. Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.6. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.7. Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.8. Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.9. Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.10. Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.13. CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.14. Deposit of Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.15. Liquidated Damages Under Registration Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 3
REDEMPTION AND OFFERS TO PURCHASE
SECTION 3.1. Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.2. Selection of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3.3. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 3.4. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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SECTION 3.5. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.6. Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3.7. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.8. Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 3.9. Offer to Purchase by Application of Excess Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 4
COVENANTS
SECTION 4.1. Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.2. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.3. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.4. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.6. Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.7. Company and Corporate Existence and Maintenance of Properties and Insurance . . . . . . . . . . . . . . 39
SECTION 4.8. Limitation on the Incurrence of Indebtedness and Issuance of Disqualified Stock . . . . . . . . . . . . 40
SECTION 4.9. Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.10. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.11. Limitation on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.12. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries . . . . . . . . . . . . . 44
SECTION 4.13. Limitation on Layering Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.14. Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 4.15. Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 4.16. Payments for Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 5
SUCCESSORS
SECTION 5.1. Limitation on Merger, Consolidation or Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.2. Successor Person Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.2. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.3. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.4. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.5. Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.6. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.7. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.8. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.9. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 7
TRUSTEE
SECTION 7.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.2. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.3. Definitive Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.4. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.5. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.6. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.7. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.8. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.9. Successor Trustee by Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.11. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.2. Legal Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.3. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.4. Conditions to Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
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SECTION 8.5. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous
Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.6. Repayment to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 8.7. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 8.8. Discharge of Liability on Securities; Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 9
AMENDMENTS
SECTION 9.1. Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.2. With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.3. Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9.4. Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9.5. Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9.6. Trustee to Sign Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE 10
SUBORDINATION
SECTION 10.1. Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.2. Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.3. Default on Designated Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.4. Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.5. When Distribution Must be Paid Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.6. Notice by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.7. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.8. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.9. Subordination May Not be Impaired by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.10. Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.11. Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.12. Authorization to Effect Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.13. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
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ARTICLE 11
MISCELLANEOUS
SECTION 11.1. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 11.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 11.3. Communication by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 11.4. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 11.5. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 11.6. Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.7. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.8. No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.9. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.10. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.12. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.13. Counterpart Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.14. Table of Contents, Headings, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SIGNATURES
EXHIBITS
Exhibit A FORM OF NOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B FORM OF CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF NOTES B-1
Exhibit C FORM OF CERTIFICATE TO BE DELIVERED BY ACCREDITED INSTITUTIONS . . . . . . . . . . . . C-1
Exhibit D FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S D-1
</TABLE>
-v-
<PAGE> 7
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section 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) 7.8; 7.10
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.5
(b) 11.3
(c) 11.3
313(a) 7.6
(b)(1) N.A.
(b)(2) 7.6
(c) 7.6
(d) 7.6
314(a) 4.3; 4.4
(b) N.A.
(c)(1) 11.4
(c)(2) 11.4
(c)(3) N.A.
(d) N.A.
(e) 11.5
(f) N.A.
315(a) 7.1(2)
(b) 7.5
(c) 7.1(1)
(d) 7.1(3)
(e) 6.11
316(a)(last sentence) 2.9
(a)(1)(A) 6.5
(a)(1)(B) 6.4
(a)(2) N.A.
(b) 6.7
(c) 9.4
317(a)(1) 6.8
(a)(2) 6.9
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
------------------------- -----------------
<S> <C>
(b) 2.4
318(a) 11.1
(b) N.A.
(c) 11.1
</TABLE>
N.A. means not applicable
*This Cross-Reference Table is not part of this Indenture.
-2-
<PAGE> 9
INDENTURE, dated as of February 11, 1997, between SYNTHETIC
INDUSTRIES, INC., a Delaware corporation (the "Company"), and UNITED STATES
TRUST COMPANY OF NEW YORK, a New York banking corporation, as trustee
("Trustee").
The Company and the Trustee agree as follows for the benefit of
each other and for the equal and ratable benefit of the Holders of the 9 1/4%
Series A Senior Subordinated Notes due 2007 of the Company (the "Series A
Notes"), and the 9 1/4% Series B Senior Subordinated Notes due 2007 of the
Company (the "Series B Notes").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions
"Acquired Debt" means, with respect to any specified Person: (i)
Indebtedness of any other Person existing at the time such other Person merged
with or into or became a Restricted 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
Restricted 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, however, that beneficial ownership of 10% or more of the voting
securities (or the equivalent) 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 (collectively, "dispositions") of any assets (including by way of a
sale/leaseback transaction) other than dispositions of inventory in the
ordinary course of business, (ii) the issuance by any Restricted Subsidiary of
the Company of Equity Interests of such Restricted Subsidiary and (iii) the
disposition by the Company or any of its Restricted Subsidiaries of Equity
Interests of any Subsidiary of the Company, in the case of either clause (i),
(ii) or (iii), whether in a single transaction or a series of related
transactions (a) that have a Fair Market Value in excess of $2.0 million or (b)
for net proceeds in excess of $2.0 million. Notwithstanding the foregoing, the
following will not be deemed to be Asset Sales: (i) a disposition of assets by
a Restricted Subsidiary of the Company to the Company or a Wholly Owned
Subsidiary of the Company that is a Restricted Subsidiary or by the Company to
a Wholly Owned Subsidiary of the Company that is a Restricted Subsidiary, (ii)
an issuance of Equity Interests by a Restricted Subsidiary
<PAGE> 10
of the Company to the Company or to a Wholly Owned Subsidiary of the Company
that is a Restricted Subsidiary, (iii) a disposition consisting of a Restricted
Payment permitted by Section 4.9 hereof, (iv) the disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole governed by Section 4.15 hereof and/or Article 5 hereof, and
(v) the sale of equipment by the Company or a Restricted Subsidiary to a
financial institution in connection with the entering into by the Company or
such Restricted Subsidiary of a Capital Lease Obligation with respect to such
equipment provided that (a) such equipment was purchased by the Company or such
Restricted Subsidiary subsequent to the date of the Indenture and within
eighteen months of the incurrence of the Capital Lease Obligation and (b) at
the time such equipment was purchased the Company or such Restricted
Subsidiary, as evidenced by a resolution of its Board of Directors or an
Officers' Certificate, intended to finance such equipment through a
sale/leaseback transaction resulting in the incurrence of a Capital Lease
Obligation.
"Board of Directors" means, as applicable, 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 so required to be capitalized on the balance
sheet in accordance with GAAP.
"Capital Stock" means (i) any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock, (ii) in the case of a partnership, partnership interests (whether
general or limited), and (iii) 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) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than six months from the date of acquisition, (iii) certificates of
deposit and Eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case with any domestic commercial
bank having capital and surplus in excess of $500.0 million, (iv) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clauses (ii) and (iii) entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
or S&P and in each case maturing within six months after the date of
acquisition, and (vi) shares of any money market mutual fund, or similar fund,
in each case having assets in excess of $500.0 million, which invests solely in
investments of the types described in clauses (i) through (v) above.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition, in one or a
series of related transactions, directly or indirectly, of all or substantially
all of the assets of the Company and its Restricted
-2-
<PAGE> 11
Subsidiaries to any Person or group (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) any Person or group (as
defined above), other than the Partnership, is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a Person shall be deemed to have "beneficial ownership" of all shares that any
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total voting power of the Voting Stock of the Company,
including by way of merger, consolidation or otherwise, or (iv) the first day
on which a majority of the members of the Board of Directors of the Company are
not Continuing Directors.
"Commodity Agreement" means any commodity futures contract,
commodity option or other similar agreement or arrangement entered into by the
Company or any of its Restricted Subsidiaries designed to protect the Company
or any of its Restricted Subsidiaries against fluctuations in the price of
commodities actually used in the ordinary course of business of the Company and
its Restricted Subsidiaries.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"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, non-recurring or unusual loss plus
any net loss realized in connection with an asset sale, to the extent such
losses were deducted or otherwise excluded in computing Consolidated Net
Income, plus (ii) provision for taxes based on income or profits of such Person
and its Restricted Subsidiaries for such period, to the extent such provision
for taxes was deducted or otherwise excluded in computing Consolidated Net
Income, plus (iii) Consolidated Interest Expense of such Person less
consolidated interest income for such period, to the extent such amount was
deducted or otherwise excluded in computing Consolidated Net Income, plus (iv)
depreciation and amortization (including amortization of goodwill, amortization
of deferred debt expense and other intangibles and amortization of deferred
compensation in respect of non-cash compensation 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 it represents an
accrual of a 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
Restricted Subsidiaries for such period, to the extent such depreciation and
amortization were deducted or otherwise excluded in computing Consolidated Net
Income, plus (v) an amount equal to all premiums on prepayments of debt, in
each case, for such period without duplication on a consolidated basis and
determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes, and the
depreciation and amortization and other non-cash charges of, a Restricted
Subsidiary shall be added to Consolidated Net Income to compute Consolidated
Cash Flow only to the extent (and in the same proportion) the Net Income of
such Restricted 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 distributed by dividend to such Person by such
Restricted
-3-
<PAGE> 12
Subsidiary without prior approval (that has not been obtained), pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Consolidated Interest Expense" means, with respect to any
Person for any period, the aggregate consolidated interest, whether expensed or
capitalized, paid, accrued or scheduled to be paid or accrued, of such Person
and its Restricted Subsidiaries for such period (including (i) amortization of
original issue discount and deferred financing costs and non-cash interest
payments and accruals, (ii) the interest portion of all deferred payment
obligations, calculated in accordance with the effective interest method and
(iii) the interest component of any payments associated with Capital Lease
Obligations and net payments (if any) pursuant to Hedging Obligations, in each
case, to the extent attributable to such period, but excluding (x) commissions,
discounts and other fees and charges incurred with respect to letters of credit
and bankers' acceptances financing and (y) any interest expense on Indebtedness
of another Person that is Guaranteed by such Person or secured by a Lien on
assets of such Person) determined in accordance with GAAP. Consolidated
Interest Expense of the Company shall not include any prepayment premiums or
amortization of original issue discount or deferred financing costs, to the
extent such amounts are incurred as a result of the prepayment on the date of
this Indenture of any Indebtedness of the Company with the proceeds of the
Notes.
"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, adjusted to exclude (only to the extent included and without
duplication) (i) all gains which are extraordinary, unusual or are
non-recurring (including any gain from the sale or other disposition of assets
outside the ordinary course of business or from the issuance or sale of capital
stock), (ii) all gains resulting from currency or hedging transactions, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition and (iv) the cumulative effect
of a change in accounting principles; provided, that (a) the Net Income of any
Person that is not a Subsidiary or that is accounted for by the equity method
of accounting shall be included only to the extent of the amount of cash
dividends or cash distributions actually paid to the referent Person or a
Wholly Owned Subsidiary thereof that is a Restricted Subsidiary and (b) the Net
Income of any Person that is an Unrestricted Subsidiary shall be included only
to the extent of the amount of cash dividends or cash distributions actually
paid to the referent Person or a Restricted Subsidiary thereof.
"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 Restricted 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 this
Indenture
-4-
<PAGE> 13
in the book value of any asset owned by such Person or a consolidated
Subsidiary of such Person, (y) all investments as of such date in
unconsolidated Subsidiaries and in Persons that are not Restricted
Subsidiaries, and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"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 this Indenture, or (ii) was nominated
for election or elected to such Board of Directors with the affirmative vote 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 11.2 hereof or such other address as to
which the Trustee may give notice to the Company.
"Credit Facility" means the Fourth Amended and Restated Revolving
Credit and Security Agreement, dated as of October 20, 1995, by and among the
Company, the Subsidiaries of the Company set forth therein, the lenders party
thereto and The First National Bank of Boston, as agent, 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.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect the Company or any of its Restricted Subsidiaries in the ordinary
course of business against fluctuation in the values of the currencies of the
countries (other than the United States) in which the Company or its Restricted
Subsidiaries conduct business.
"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.
"Definitive Notes" means Notes that are in the form of Exhibit A
attached hereto (but without including the text referred to in footnote 1
thereto and the additional schedule referred to therein).
"Depository" means, with respect to the Notes issuable or issued
in whole or in part in global form, the Person specified in Section 2.3 hereof
as the Depository with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"Designated Senior Debt" means (i) the Obligations of the Company
with respect to the Credit Facility and (ii) any other Senior Debt of the
Company permitted under this Indenture the principal amount of which at
original issuance is $20.0 million or more (other than Senior Debt that is
comprised of Hedging Obligations owing to a Person that is not a party to the
Credit Facility).
-5-
<PAGE> 14
"Disqualified Stock" means any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable or is convertible or exchangeable for Indebtedness at the option of
the Holder thereof, in whole or in part, on or prior to February 15, 2007;
provided, that any Capital Stock that would not constitute Disqualified Stock
but for provisions thereof giving holders thereof the right to require such
Person to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the Stated Maturity of
the Notes shall not be Disqualified Stock if (i) the "asset sale" or "change of
control" provisions applicable to such Capital Stock are no more favorable to
the holders of such Capital Stock than the provisions in favor of Holders set
forth in Sections 4.14 and 4.15 hereof, as the case may be, (ii) such Capital
Stock specifically provides that such Person will not repurchase or redeem any
such stock pursuant to such provision prior to the Company's repurchase of such
Notes as are required to be repurchased pursuant to Sections 4.14 and 4.15
hereof, and (iii) such Capital Stock is redeemable within 90 days of the "asset
sale" or "change of control" events applicable to such Capital Stock.
"Eligible Inventory" means, with respect to the Company, the
consolidated finished goods, raw materials and work-in-process less any
applicable reserves, each of the foregoing determined in accordance with GAAP.
"Eligible Receivables" means the consolidated trade receivables
of the Company less the allowance for doubtful accounts, each of the foregoing
determined in accordance with GAAP.
"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).
"Event of Default" has the meaning set forth in Section 6.1
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Note" means any Series B Note issued in exchange for an
Original Note pursuant to the Exchange Offer or the Private Exchange Offer.
"Exchange Offer" means the offer by the Company to the Holders of
all outstanding Transfer Restricted Securities to exchange all such outstanding
Transfer Restricted Securities held by such Holders 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" means the registration
statement under the Securities Act relating to the Exchange Offer, including
the related prospectus.
-6-
<PAGE> 15
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than the Credit Facility) in existence on the date of this
Indenture, until such amounts are repaid.
"Fair Market Value" means, with respect to any asset, the price
(after taking into account any liabilities relating to such assets) which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction; provided that the Fair Market Value of
any such asset or assets shall be determined by the Board of Directors of the
Company, acting in good faith and by unanimous resolution, and which
determination shall be evidenced by an Officers' Certificate delivered to the
Trustee.
"Fixed Charge Coverage Ratio" means with respect to any Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person 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 if the
Company issues or redeems any preferred stock, in each case subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date of the event for which the calculation of the
Fixed Charge Coverage Ratio is made (the "Transaction 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 reference period. For purposes of making the
computation referred to above, acquisitions (including all mergers and
consolidations), dispositions and discontinuance of operations that have been
made by the Company or any of its Restricted Subsidiaries during the reference
period or subsequent to such reference period and on or prior to the
Transaction Date shall be calculated on a pro forma basis assuming that all
such acquisitions, dispositions and discontinuance of operations had occurred
on the first day of the reference period; provided, however, that Fixed Charges
shall be reduced by amounts attributable to operations that are so disposed of
or discontinued only to the extent that the obligations giving rise to such
Fixed Charges would no longer be obligations contributing to the Company's
Fixed Charges subsequent to the Transaction Date.
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of (i) Consolidated Interest Expense, (ii)
commissions, discounts and other fees and charges incurred with respect to
letters of credit and bankers' acceptances financing, (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by such Person or
secured by a Lien on assets of such Person, and (iv) the product of (a) all
cash or non-cash dividend payments on any series of preferred stock of any
Restricted Subsidiary of such Person (other than 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, determined, in
each case, on a consolidated basis and in accordance with GAAP.
"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
-7-
<PAGE> 16
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 in the United States on the date of this Indenture.
"Global Note" means a Note that contains the paragraph referred
to in footnote 1 and the additional schedule referred to in the form of 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
of America 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.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) Interest Rate Agreements, (ii) Currency
Agreements and (iii) Commodity Agreements.
"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 of any Indebtedness of such Person or any
other Person.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Initial Purchaser" means Bear, Stearns & Co. Inc., as initial
purchaser in the Offering.
"Interest Payment Date" means, with respect to any installment of
interest on the Notes, the date specified in such Note as the fixed date on
which such installment of interest is due and payable.
"Interest Record Date" shall have the meaning set forth in the
form of the Note attached hereto as Exhibit A.
-8-
<PAGE> 17
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement entered into by the Company or any of its Restricted
Subsidiaries designed to protect the Company or any of its Restricted
Subsidiaries in the ordinary course of business against fluctuations in
interest rates.
"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), 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 and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"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).
"Liquidated Damages" means all liquidated damages then owing
pursuant to the Registration Rights Agreement.
"Management Plans" means the Company's 1994 Stock Option Plan and
1996 Stock Option Plan, each as adopted by the Board of Directors.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"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 sale of assets (including,
without limitation, dispositions pursuant to sale/leaseback transactions), or
(b) the disposition of any securities or the extinguishment of any Indebtedness
of such Person or any of its Restricted Subsidiaries, and (ii) any
extraordinary gain (but not loss), together with any related provision for
taxes on such extraordinary gain (but not loss).
"Net Proceeds" means the aggregate amount of consideration
received by the Company or any of its Restricted Subsidiaries in respect of any
Asset Sale in the form of cash or Cash Equivalents, (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), amounts required to be applied to the repayment
-9-
<PAGE> 18
of Indebtedness secured by a Lien on the asset or assets (including Equity
Interests) the subject of such Asset Sale and any reserve for adjustment in
respect of the sale price of such asset or assets.
"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; (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 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 Exchange Notes and the Original Notes.
"Obligations" means any principal, premium, interest (including
post-petition interest), penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation governing any
Indebtedness.
"Offering" means the offering of the Series A Notes pursuant to
the Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum of the
Company, dated February 6, 1997, 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, with respect to any Person, a
certificate signed by the Chief Executive Officer or President and the Chief
Financial Officer or chief accounting officer of such Person.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.5 hereof and, to the extent required by the TIA, complies with TIA Section
314. The counsel may be an employee of or counsel to the Company, any of its
Subsidiaries or the Trustee.
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"Original Notes" means the Series A Notes initially issued under
this Indenture prior to the issuance of Exchange Notes.
"Partnership" means Synthetic Industries, L.P., a Delaware
limited partnership.
"Permitted Investments" means (i) any Investments in the Company
or in a Wholly Owned Subsidiary of the Company that is a Restricted Subsidiary;
(ii) any Investments in Cash Equivalents; (iii) Investments by the Company or
any Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (a) such Person becomes a Wholly Owned Subsidiary of the Company
that is a Restricted Subsidiary or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of
the Company that is a Restricted Subsidiary; (iv) any Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was
made in compliance with Sections 3.9 and 4.14 hereof and (v) any Investment in
an Unrestricted Subsidiary or in an entity in which the Company or any
Restricted Subsidiary has an Equity Interest together with one or more other
Persons, and which is formed after the date of the Indenture for the purpose of
engaging in a business (a) in which the Company or its Restricted Subsidiaries
are engaged on the date of this Indenture or (b) which is related to a business
in which the Company or its Restricted Subsidiaries are engaged on the date of
this Indenture, provided, that, at the date any such Investment is made and
after giving effect thereto, such Investment, together with other such
Investments by the Company and its Restricted Subsidiaries since the date of
the Indenture, does not exceed $15.0 million.
"Permitted Liens" means (i) Liens in favor of the Company; (ii)
Liens securing Senior Debt of the Company that was permitted to be incurred
pursuant to this Indenture; (iii) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary of the Company, provided that such Liens were not created
in 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 or such Restricted Subsidiary; (iv) Liens on property existing at the
time of acquisition thereof by the Company or any Restricted Subsidiary of the
Company; provided that such Liens were not created in 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 existing on the date of
this Indenture; (vii) 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, if any, as shall be required
in conformity with GAAP shall have been made therefor; (viii) Liens imposed by
law, such as mechanics', carriers', warehousemen's, materialmen's, and vendors'
Liens, incurred in good faith in the ordinary course of business with respect
to amounts not yet delinquent or being contested in good faith by appropriate
proceedings if a reserve or other appropriate provisions, if any, as shall be
required by GAAP shall have been made therefor; (ix) zoning restrictions,
easements, licenses, covenants, reservations, restrictions on the use of real
property or minor irregularities of title incident thereto that do not, in the
aggregate, materially detract from the value of the property or the assets of
the Company or impair the use of such property in the operation of the
Company's business; (x) judgment Liens to the extent that such judgments do
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not cause or constitute a Default or an Event of Default; (xi) Liens to secure
the payment of all or a part of the purchase price of property or assets
acquired or constructed in the ordinary course of business on or after the date
of this Indenture, provided that (a) such property or assets are used in the
same or similar line of business as the Company was engaged in on the date of
this Indenture, (b) at the time of incurrence of any such Lien, the aggregate
principal amount of the obligations secured by such Lien shall not exceed the
lesser of the cost or fair market value of the assets or property (or portions
thereof) so acquired or constructed, (c) each such Lien shall encumber only the
assets or property (or portions thereof) so acquired or constructed and shall
attach to such property within 120 days of the purchase or construction thereof
and (d) any Indebtedness secured by such Lien shall have been permitted to be
incurred under Section 4.8 hereof; and (xii) precautionary filings of any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction made in connection with Capital Lease Obligations permitted
to be incurred by Section 4.8 hereof, provided, that such Lien does not violate
clauses (a), (b) and (c) of clause (xi) hereof.
"Person" means any individual, corporation, limited liability
company, general or limited partnership, joint venture, association,
joint-stock company, trust, charitable foundation, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Private Exchange Offer" means a private exchange offer pursuant
to Section 2(a) of the Registration Rights Agreement.
"Public Equity Offering" means a bona fide underwritten sale to
the public of common stock of the Company pursuant to a registration statement
(other than on Form S-8 or any other form relating to securities issuable under
any benefit plan of the Company) that is declared effective by the SEC and
results in aggregate gross proceeds to the Company of at least $15.0 million.
"Purchase Money Obligations" of any Person means any obligations
of such Person or any of its Restricted Subsidiaries to any seller or any other
Person incurred or assumed in connection with the purchase of real or personal
property to be used in the business of such Person or any of its subsidiaries
within 180 days of such incurrence or assumption.
"Registration Rights Agreement" means that certain Registration
Rights Agreement, dated as of the date of this Indenture, between the Company
and the Initial Purchaser, as amended or supplemented from time to time.
"Representative" means the Trustee and any other trustee, agent
or representative of holders of any Senior Debt.
"Responsible Officer" when used with respect to the Trustee,
means any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above officers
and also means, with respect to a particular corporate trust matter, any
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<PAGE> 21
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. With respect to Unrestricted Subsidiaries or Restricted
Subsidiaries, the amount of Restricted Investments shall be calculated as the
greater of (i) the book of value of assets contributed by the Company or a
Restricted Subsidiary or (ii) the Fair Market Value of the assets contributed
by the Company or a Restricted Subsidiary (as certified by a resolution of
independent directors of the Company if Fair Market Value or book value is
greater than $1.0 million).
"Restricted Subsidiary" means (i) any Subsidiary of the Company
in existence on the date of this Indenture, (ii) any Subsidiary of the Company
(other than a Subsidiary that is also a Subsidiary of an Unrestricted
Subsidiary) organized or acquired after the date of this Indenture, unless such
Subsidiary shall have been designated as an Unrestricted Subsidiary by
resolution of the Board of Directors as provided in and in compliance with the
definition of "Unrestricted Subsidiary," and (iii) any Unrestricted Subsidiary
which is designated as a Restricted Subsidiary by the Board of Directors of the
Company; provided that, immediately after giving effect to the designation
referred to in clause (iii), no Default or Event of Default shall have occurred
and be continuing and the Company could incur at least $1.00 of additional
Indebtedness under the first paragraph of Section 4.8 hereof. The Company
shall evidence any such designation to the Trustee by promptly filing with the
Trustee an Officers' Certificate certifying that such designation has been made
and stating that such designation complies with the requirements of the
immediately preceding sentence.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (i) the Obligations of the Company with
respect to the Credit Facility and (ii) any other Indebtedness permitted to be
incurred by the Company under the terms of this Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is pari passu with or subordinated in right of payment to the Notes.
Notwithstanding anything to the contrary in the foregoing, Senior Debt shall
not include (v) any obligation of the Company to, in respect of or imposed by
any environmental, landfill, waste management or other regulatory governmental
agency, statute, law or court order, (w) any liability for federal, state,
local or other taxes owed or owing by the Company, (x) any Indebtedness of the
Company to any of the Company's Subsidiaries or other Affiliates, (y) any trade
payables or (z) any Indebtedness that is incurred in violation of this
Indenture on or after the date of this Indenture.
"Series A Notes" means the Company's 9 1/4% Series A Senior
Subordinated Notes due 2007 to be issued pursuant to this Indenture.
"Series B Notes" means the Company's 9 1/4% Series B Senior
Subordinated Notes due 2007 to be issued pursuant to this Indenture in the
Exchange Offer.
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<PAGE> 22
"Significant Subsidiary" means any Subsidiary of the Company 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.
"S&P" means Standard & Poor's Rating Group, and its successors.
"Stated Maturity" means, when used with respect to any Note or
any installment of interest thereon, the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable, and when used with respect to any other Indebtedness, means
the date specified in the instrument governing such Indebtedness as the fixed
date on which the principal of such Indebtedness, or any installment of
interest thereon, is due and payable.
"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 Persons or one or
more Subsidiaries of such Person or any combination thereof.
"TIA" means the Trust Indenture Act of 1939, as in effect on the
date this Indenture is qualified under the TIA.
"Transfer Restricted Securities" has the meaning ascribed to the
term "Registrable Securities" in the Registration Rights Agreement.
"Trustee" means the party named as such above until a successor
replaces it in accordance with applicable provisions of this Indenture, and
thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means, until such time as any of the
following shall be designated as a Restricted Subsidiary of the Company by the
Board of Directors of the Company as provided in and in compliance with the
definition of "Restricted Subsidiary," (i) any Subsidiary of the Company or of
a Restricted Subsidiary of the Company organized or acquired after the date of
this Indenture that is designated concurrently with its organization or
acquisition as an Unrestricted Subsidiary by resolution of the Board of
Directors of the Company, (ii) any Subsidiary of any Unrestricted Subsidiary,
and (iii) any Restricted Subsidiary of the Company that is designated as an
Unrestricted Subsidiary by resolution of the Board of Directors of the Company,
provided that, (a) immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing, (b) any such
designation shall be deemed, at the election of the Company at the time of such
designation, to be either (but not both) (x) the making of a Restricted Payment
at the time of such designation in an amount equal to the Investment in such
Subsidiary subject to the restrictions contained in Section 4.9 hereof or (y)
the making of an Asset Sale at the time of such designation in an amount equal
to the
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<PAGE> 23
Investment in such Subsidiary subject to the restrictions contained in Sections
3.9 and 4.14 hereof, and (c) such Subsidiary or any of its Subsidiaries does
not own any Capital Stock or Indebtedness of, or own or hold any Lien on any
property of, the Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated. A Person may be designated
as an Unrestricted Subsidiary only if and for so long as such Person (i) has no
Indebtedness other than Non-Recourse Debt; (ii) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (a) to subscribe for additional Equity Interests or (b)
to make any payment to maintain or preserve such Person's financial condition
or to cause such Person to achieve any specified levels of operating results;
and (iii) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries. The Company shall evidence any designation pursuant to clause
(i) or (ii) of the first sentence hereof to the Trustee by filing with the
Trustee within 45 days of such designation an Officers' Certificate certifying
that such designation has been made and, in the case of clause (iii) of the
first sentence hereof, the related election of the Company in respect thereof.
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers, general partners or trustees of any Person (irrespective of whether
or not, at the time, Capital Stock of any other class or classes shall have, or
might have, voting power by reason of the happening of any contingency) or,
with respect to a partnership (whether general or limited), any general partner
interest in such partnership.
"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 Subsidiary" of any Person means a Subsidiary of
such Person 80% of the outstanding Capital Stock or other ownership interests
of which (other than directors' qualifying shares) shall be at the time
beneficially owned by such Person (either directly or indirectly through Wholly
Owned Subsidiaries).
SECTION 1.2. Other Definitions
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Asset Sale Offer" 4.14
"Bankruptcy Law" 6.1
"Change of Control Offer" 4.15
"Change of Control Payment" 4.15
</TABLE>
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<PAGE> 24
<TABLE>
<S> <C>
"Change of Control Payment Date" 4.15
"Covenant Defeasance" 8.3
"Custodian" 6.1
"Excess Proceeds" 4.14
"incur" 4.8
"Intercompany Indebtedness" 4.8
"Legal Defeasance" 8.2
"Legal Holiday" 11.7
"Offer Amount" 3.9
"Offer Period" 3.9
"Paying Agent" 2.3
"Payment Blockage Notice" 10.3
"Payment Default" 6.1
"Permitted Refinancing" 4.8
"Purchase Date" 3.9
"Registrar" 2.3
"Refinancing Indebtedness" 4.8
"Restricted Payments" 4.9
</TABLE>
SECTION 1.3. 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 Notes;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company, as obligor, or 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 1.4. Rules of Construction
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
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(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 words 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
or the Exchange Act shall be deemed to include substitute, replacement
or successor sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.1. Form and Dating
The Original Notes and the Trustee's certificate of
authentication relating thereto shall be substantially in the form of Exhibit A
hereto, with such appropriate insertions, substitutions and other variations as
are required or permitted by this Indenture. The Exchange Notes and the
Trustee's certificate of authentication relating thereto shall be substantially
in the form of Exhibit A hereto, with such appropriate insertions,
substitutions and other variations as are required or permitted by this
Indenture; provided, that Exchange Notes issued in the Exchange Offer shall not
bear the legend set forth in Exhibit A hereto as indicated by footnote 2;
provided, further, that Exchange Notes issued in both the Exchange Offer and
the Private Exchange Offer shall not refer to Liquidated Damages and shall not
include paragraph 20 of Exhibit A hereto. The Notes may have notations,
legends or endorsements required by this Indenture, law, stock exchange rule,
depository rule or usage. Any such notation, legend or endorsement shall be
delivered in writing to the Trustee by the Company. Each Note shall be dated
the date of its issuance and show the date of its authentication.
The terms and provisions contained in the Notes, annexed hereto
as Exhibit A hereto, shall constitute, and are hereby expressly made, a part of
this Indenture, and the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
The Original Notes initially will be issued in global form,
substantially in the form of Exhibit A attached hereto (including the text set
forth in footnote 1 thereto and the additional schedule referred to therein)
and may be issued in definitive form, substantially in the form of Exhibit A
hereto (not including the text set forth in footnote 1 thereto and the
additional schedule referred to therein). The Original Notes initially will be
deposited with the Trustee, as Note Custodian. The Global Notes initially shall
be registered in the name of the Depository or the
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nominee of the Depository. A Global Note shall represent such of the
outstanding Notes as shall be specified therein and 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, as Note Custodian, in
accordance with instructions given by the Holder thereof as required by Section
2.6 hereof.
SECTION 2.2. Execution and Authentication
Two Officers of the Company shall sign the Notes for the Company
by manual or facsimile signature. The seal of the Company shall be reproduced
on the Notes and may be in facsimile form.
If an Officer of the Company whose signature is on a Note no
longer holds that office at the time the Note is authenticated, the Note shall
nevertheless be valid.
Only such Notes as shall bear thereon a certificate of
authentication substantially in the form set forth in Exhibit A hereto,
manually executed by the Trustee, shall be entitled to the benefits of this
Indenture or be valid or obligatory for any purpose. Such certificate of
authentication executed by the Trustee upon any Note executed by the Company
shall be conclusive evidence that the Note so authenticated has been duly
authenticated and delivered hereunder.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company to the Trustee for authentication, together with a request for the
authentication and delivery of such Notes signed by an Officer of the Company,
and the Trustee, in accordance with such request, shall authenticate and
deliver such Notes as provided in this Indenture.
The Trustee shall authenticate (i) Original Notes for original
issue in the aggregate principal amount not to exceed $170,000,000, and (ii)
Exchange Notes issued, either (x) in the Exchange Offer for the Original Notes
pursuant to the Exchange Offer Registration Statement filed with the Commission
from time to time, for issue only in exchange for a like principal amount of
Original Notes or (y) in the Private Exchange Offer, for issue only in exchange
for a like principal amount of Original Notes, in each case, upon written order
of the Company in the form of an Officers' Certificate. The Officers'
Certificate shall specify the amount of Notes to be authenticated and the date
on which the Notes are to be authenticated, whether the Notes are to be
Original Notes or Exchange Notes and whether the Notes are to be Definitive
Notes or Global Notes. Except as contemplated by Section 2.7 hereof, the
aggregate principal amount of Notes outstanding at any time may not exceed
$170,000,000. Notwithstanding the foregoing, all Notes issued under this
Indenture shall vote and consent together on all matters as one class and no
series of Notes will have the right to vote or consent as a separate class on
any matter.
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The Notes shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 and any integral multiple thereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. Unless limited by the terms of such
appointment, 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 right as an Agent to deal with the Company or an Affiliate of the Company.
The Trustee shall not be liable for any act or failure to act of the
authenticating agent to perform any duty either required herein or authorized
herein to be performed by such person in accordance with this Indenture. Each
authenticating agent shall be acceptable to the Company and otherwise comply in
all respects with the eligibility requirements of the Trustee contained in this
Indenture.
SECTION 2.3. Registrar and Paying Agent
The Company shall maintain an office or agency where (a) Notes
may be presented for registration of transfer or for exchange ("Registrar"),
(b) Notes may be presented or surrendered for payment ("Paying Agent") and (c)
notices and demands to or upon the Company in respect of the Notes may be
served. 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 agents. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company shall notify the Trustee 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 and shall be
entitled to appropriate compensation in accordance with Section 7.7 hereof.
The Company or any of its Subsidiaries may act as Paying Agent or Registrar,
except that for purposes of payments on the Notes pursuant to Sections 4.14 and
4.15 hereof, neither the Company nor any of its Affiliates may act as Paying
Agent.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture
that relate to such Agent. The Company initially appoints The Depository Trust
Company ("DTC") to act as Depository with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and agent for service of notices and demands in
connection with the Notes.
SECTION 2.4. Paying Agent to Hold Assets 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 assets held by the Paying Agent for the
payment of principal of, premium, if any, or interest on, or Liquidated Damages
with respect to, the Notes (whether such assets have been distributed to it by
the Company or any other obligor on the Notes), and will notify the Trustee of
any Default
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<PAGE> 28
by the Company or any other obligor on the Notes in making any such payment.
While any such Default continues, the Trustee may require a Paying Agent to
distribute all assets held by it to the Trustee and account for any assets
disbursed. The Company at any time may require a Paying Agent to pay all
assets held by it to the Trustee and account for any assets disbursed. Upon
payment over and accounting to the Trustee, the Paying Agent (if other than the
Company or any of its Subsidiaries) shall have no other liability for the
assets. If either the Company or any of its Subsidiaries acts as Paying Agent,
it shall segregate and hold in a separate trust fund for the benefit of the
Holders all money held by it as Paying Agent.
SECTION 2.5. 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
Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee as of each Interest
Record 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 Holders, including the aggregate principal amount of
Notes held by each Holder.
SECTION 2.6. Transfer and Exchange
(a) Transfer and Exchange of Definitive Notes. When Definitive
Notes are presented to the Registrar with the request to register the transfer
of the Definitive Notes, or to exchange such Definitive Notes for an equal
principal amount of Definitive 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
Definitive Notes presented or surrendered for registration of transfer or
exchange:
(i) shall be duly endorsed or accompanied by a
written instrument of transfer in form satisfactory to the
Trustee and the Registrar duly executed by the Holder thereof or
by an attorney who is duly authorized in writing to act on behalf
of the Holder; and
(ii) shall, in the case of a Transfer Restricted
Security, be accompanied by the following additional information
and documents, as applicable:
(A) if such Transfer Restricted Securities
are being delivered to the Registrar 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); or
(B) if such Transfer Restricted Securities
are being transferred (1) to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act)
in a transaction meeting the requirements of Rule 144A
under the Securities Act or (2) pursuant to an exemption
from registration in a transaction meeting the requirements
of Rule 144 under the Securities Act (based upon an Opinion
of Counsel if the Company so requests) or (3)
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<PAGE> 29
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); or
(C) if such Transfer Restricted Securities
are 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 (based upon an Opinion of Counsel if the
Company so requests), a certification to that effect from
such Holder (in substantially the form of Exhibit B hereto)
and a certification from the applicable transferee (in
substantially the form of Exhibit C hereto);
(D) if such Transfer Restricted Securities
are being transferred outside the U.S. to a foreign person
pursuant to an exemption from registration in a transaction
meeting the requirements of Regulation S under the
Securities Act (based on an Opinion of Counsel if the
Company so requests), certification to that effect from
such Holder (in substantially the form of Exhibits B and D
hereto); or
(E) if such Transfer Restricted Securities
are being transferred in reliance on another exemption from
the registration requirements of the Securities Act (based
upon an Opinion of Counsel if the Company so requests), a
certification to that effect from such Holder (in
substantially the form of Exhibit B hereto).
(b) Transfer of a Definitive Note for a Beneficial Interest in
a Global Note. A Definitive 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 Definitive Note, duly endorsed
or accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by the Holder thereof or by an attorney who is duly
authorized in writing to act on behalf of the Holder, together with:
(i) if such Definitive Note is being delivered to the
Trustee by a Holder, without transfer, to enable such Holder to obtain a
beneficial interest in a Global Note, a certification from such Holder
to that effect (in substantially the form of Exhibit B hereto); provided
that such Holder provides a certification that such Holder is otherwise
permitted to hold a beneficial interest in a Global Note;
(ii) if such Definitive Note is a Transfer Restricted
Security and is being transferred, certification, substantially in the
form of Exhibit B hereto, that either (A) such Definitive Note is being
transferred to a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) in a transaction meeting the requirements
of Rule 144A under the Securities Act, (B) 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 (based upon an
Opinion
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of Counsel if the Company so requests), provided that the Trustee
receives a certification from such transferee (in substantially the form
of Exhibit C hereto), or (C) to a foreign person outside the U.S.
pursuant to an exemption from registration in a transaction meeting the
requirements of Regulation S under the Securities Act (based upon an
Opinion of Counsel if the Company so requests), provided that the
Trustee receives a certification from such transferor (in substantially
the form of Exhibit D hereto); and
(iii) whether or not such Definitive Note is a Transfer
Restricted Security, written instructions directing the Trustee to make,
or directing 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;
then the Trustee shall cancel such Definitive 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 Depository
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 2.2 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 Depository, in accordance with this Indenture and the procedures of
the Depository 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
Definitive Note.
(i) Any Person having a beneficial interest in a Global
Note may upon request exchange such beneficial interest for a Definitive
Note. Upon receipt by the Trustee of written instructions or such other
form of instructions as is customary for the Depository from the
Depository 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 Depository as being
the beneficial owner, a certification from such Person to that
effect (in substantially the form of Exhibit B hereto); or
(B) if such beneficial interest is being
transferred (1) to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in a transaction meeting
the requirements of Rule 144A under the Securities Act or (2)
pursuant to an exemption from registration in a transaction
meeting the requirements of Rule 144 under the Securities Act
(based upon 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 from the
transferor (in substantially the form of Exhibit B hereto); or
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(C) if such beneficial interest 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 (based upon an
Opinion of Counsel if the Company so requests), a certification
to that effect from such transferor (in substantially the form of
Exhibit B hereto) and a certification from the applicable
transferee (in substantially the form of Exhibit C hereto); or
(D) if such beneficial interest is being
transferred outside the U.S. to a foreign person pursuant to an
exemption from registration in a transaction meeting the
requirements of Regulation S under the Securities Act (based upon
an Opinion of Counsel if the Company so requests), certifications
to that effect from such transferor (in substantially the form of
Exhibits B and D hereto); or
(E) if such beneficial interest is being
transferred in reliance on another exemption from the
registration requirements of the Securities Act (based upon an
Opinion of Counsel if the Company so requests), a certification
to that effect from such transferor (in substantially the form of
Exhibit B hereto);
then the Trustee or the Note Custodian, at the direction of the Trustee,
shall, in accordance with the standing instructions and procedures
existing between the Depository 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 2.2
hereof, the Trustee shall authenticate and deliver to the transferee a
Definitive Note in the appropriate principal amount.
(ii) Definitive Notes issued in exchange for a beneficial
interest in a Global Note pursuant to this Section 2.6(d) shall be
registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Definitive Notes to the Persons in whose names such
Notes are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in subsection (f) of this Section 2.6), a Global Note may
not be transferred except as a whole by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) Authentication of Definitive Notes. If at any time:
(i) the Company notifies the Trustee in writing that the
Depository for the Notes is no longer willing or able to act as
Depository for the Global Notes and a successor Depository for the
Global Notes is not appointed by the Company within 90 days after
delivery of such notice; or
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(ii) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of Definitive Notes under
this Indenture;
then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Notes,
will authenticate and deliver Definitive Notes, in an aggregate principal
amount equal to the principal amount of the Global Notes, in exchange for such
Global Notes and registered in such names as the Depository shall instruct the
Trustee or the Company in writing.
(g) Legends.
(i) Except as permitted by the following paragraphs
(iii) and (iv), each Note certificate evidencing the Global Notes and
the Definitive Notes (and all Notes issued in exchange therefor or
substitution thereof) shall bear a legend in substantially the following
form until after the third anniversary of the later of the date of
original issuance of the Note and the last day on which the Company or
any Affiliate of the Company was the owner of such Note (or any
predecessor security):
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY
PERSON EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT), (B) IT IS AN "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) WHO IS AN INSTITUTION (AN "INSTITUTIONAL ACCREDITED
INVESTOR"), OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO THE DATE
WHICH IS THREE YEARS AFTER THE LATER OF THE DATE OF ORIGINAL
ISSUANCE OF THIS NOTE AND THE LAST DATE ON WHICH THE ISSUER OR
ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE (THE
"RESALE RESTRICTION TERMINATION DATE") OFFER, SELL OR OTHERWISE
TRANSFER THIS NOTE, EXCEPT (A) TO THE ISSUER, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF
ANOTHER QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH THE
RESALE PROVISIONS OF RULE 144A UNDER THE SECURITIES ACT, (C) TO
AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A WRITTEN CERTIFICATION
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE), (D) PURSUANT TO
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THE RESALE LIMITATIONS PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE), (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (F) OUTSIDE THE U.S. TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
REGULATION S UNDER THE SECURITIES ACT OR (G) PURSUANT TO ANY
OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (BASED, IN THE CASE OF CLAUSES (C), (D), (F)
AND (G) ABOVE, UPON AN OPINION OF COUNSEL REASONABLY ACCEPTABLE
TO THE ISSUER IF THE ISSUER SO REQUESTS), SUBJECT IN EACH OF THE
FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF
ITS PROPERTY OR THE PROPERTY OF SUCH ACCOUNT BE AT ALL TIMES
WITHIN ITS CONTROL AND TO COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF
THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO
THE RESALE RESTRICTION TERMINATION DATE."
(ii) Each Global Note shall also bear the following
legend:
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
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. 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. THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE REFERRED TO
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HEREINAFTER. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN WHOLE OR IN PART, FOR A
SECURITY REGISTERED IN THE NAME OF ANY PERSON OTHER THAN THE DEPOSITORY TRUST
COMPANY OR A NOMINEE THEREOF EXCEPT IN THE CIRCUMSTANCES SET FORTH IN SECTION
2.6 OF THE INDENTURE, AND MAY NOT BE TRANSFERRED, IN WHOLE OR IN PART, EXCEPT
IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.6 OF THE INDENTURE.
BENEFICIAL INTEREST IN THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT IN
ACCORDANCE WITH SECTION 2.6 OF THE INDENTURE.
(iii) 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 an
effective registration statement under the Securities Act:
(A) in the case of any Transfer Restricted
Security that is a Definitive Note, the Registrar shall permit
the Holder thereof to exchange such Transfer Restricted Security
for a Definitive Note that does not bear the legend set forth in
clause (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
clause (i) above if all other interests in such Global Note have
been or are concurrently being sold or transferred pursuant to
Rule 144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act, but such
Transfer Restricted Security shall continue to be subject to the
provisions of Section 2.6(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 Definitive
Note that does not bear a legend set forth in clause (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).
(iv) Notwithstanding the foregoing, upon consummation of
the Exchange Offer, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.2 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 clause (i) above, and the Registrar
shall rescind any restriction on the transfer of such Notes, in each
case unless the Holder of such Series A Notes is either (A) a
broker-dealer, (B) a Person participating in the distribution (within
the meaning of the Securities Act) of the Series A Notes or (C) a Person
who is an affiliate (as defined in Rule 144A) of the Company. The
Company shall identify to the Trustee such Holders of the Notes in a
written certification signed by an Officer of the Company and, absent
certification from the Company to such effect, the Trustee shall assume
that there are no such Holders.
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(v) By its acceptance of any Note bearing the legend set
forth in Section 2.6(g)(i) hereof, each Holder of such a Note
acknowledges the restrictions on transfer of such Note set forth in this
Indenture and in such legend and agrees that it will transfer such Note
only as provided in this Indenture.
(h) Cancellation and/or Adjustment of Global Note. At such
time as all beneficial interests in a Global Note have either been exchanged
for Definitive Notes, redeemed, repurchased or cancelled, such Global Note
shall be returned to or retained and cancelled by the Trustee. At any time
prior to such cancellation, if any beneficial interest in a Global Note is
exchanged for Definitive Notes, redeemed, repurchased or cancelled, the
principal amount of Notes represented by such Global Note shall be reduced 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 with respect to Transfer and Exchanges.
(i) To permit registrations of transfers and exchanges,
the Company shall execute and the Trustee shall authenticate, pursuant
to the terms of this Indenture, Definitive 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 charges payable upon exchange or
transfer pursuant to Sections 2.10, 3.7, 3.9, 4.14, 4.15 and 9.5
hereof).
(iii) Neither the Company nor the Registrar shall be
required to register the transfer or exchange of any Note selected for
redemption in whole or in part, except the unredeemed portion of any
Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued upon
any registration of transfer or exchange of Definitive Notes or Global
Notes shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefit under this Indenture as the
Definitive Notes or Global Notes surrendered upon such registration of
transfer or exchange.
(v) The Company shall not be required to issue, register
the transfer or exchange of Notes during a period beginning at the
opening of 15 days before the day of any selection of Notes for
redemption under Section 3.2 and ending at the close of business on the
day of selection.
(vi) Prior to due presentment for registration of
transfer of any Note, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of, and premium, interest and Liquidated Damages, if any, on
such Note, and
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<PAGE> 36
neither the Trustee, any Agent nor the Company shall be affected by
notice to the contrary.
(vii) The Trustee shall authenticate Definitive Notes and
Global Notes in accordance with the provisions of Section 2.2 hereof.
(viii) Neither the Company nor the Trustee shall be liable
for any delay by the Depository in identifying the beneficial owners of
the Notes and each such Person may conclusively rely on, and shall be
protected in relying on, instructions from the Depository for all
purposes (including with respect to the registration and delivery, and
the respective principal amounts, of any Notes to be issued).
(ix) Members of, or participants in, the Depository shall
have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depository, or the Trustee as the Note Custodian,
or under the Global Note, and the Depository may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of the Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall (x) prevent the
Company, the Trustee or any agent of the Company or the Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depository or (y) impair, as between the Depository and
members of, or participants in, the Depository, the operation of
customary practices governing the exercise of the rights of a Holder of
any Note.
SECTION 2.7. Replacement Notes
If any mutilated Note is surrendered to the Trustee, or the
Company and the Trustee receive evidence to their 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 an Officer 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 or any
authenticating agent from any loss which any of them may suffer if a Note is
replaced. The Company and the Trustee may charge for their expenses in
replacing a Note. If after the delivery of such new Note, a bona fide
purchaser of the original Note in lieu of which such new Note was issued
presents for payment such original Note, the Company and the Trustee shall be
entitled to recover such new Note from the person to whom it was delivered or
any transferee thereof, except a bona fide purchaser, and shall be entitled to
recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Company or the Trustee in
connection therewith.
Every replacement Note is an additional obligation of the Company
and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
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SECTION 2.8. 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 hereunder, and those described in this Section 2.8 as not outstanding.
Except as set forth in Section 2.9 hereof, a Note does not cease to be
outstanding because either of the Company or an Affiliate of the Company holds
a Note.
If a Note is replaced pursuant to Section 2.7 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 4.1 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) segregates and holds in trust, in accordance with
this Indenture, 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 the portion thereof to be redeemed or
maturing, as the case may be), then on and after that date such Notes (or
portions thereof) shall be deemed to be no longer outstanding and shall cease
to accrue interest.
SECTION 2.9. Treasury Notes
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver, consent or notice,
Notes owned by the Company or any Affiliate of 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,
consent or notice, only Notes which a Responsible Officer of the Trustee
actually knows are so owned shall be so disregarded. The Company shall notify
the Trustee, in writing, when the Company or any of its Affiliates repurchases
or otherwise acquires Notes and the aggregate principal amount of such Notes so
repurchased or otherwise acquired.
SECTION 2.10. Temporary Notes
Until Definitive Notes are ready for delivery, the Company may
prepare and the Trustee, upon receipt of the written order of the Company
signed by an Officer of the Company, shall authenticate and deliver temporary
Notes. Temporary Notes shall be substantially in the form of Definitive Notes
but may have variations that the Company and the Trustee consider appropriate
for temporary Notes. Without unreasonable delay, the Company shall prepare and
the Trustee, upon receipt of the written order of the Company signed by an
Officer of the Company, shall authenticate and deliver, definitive Notes in
exchange for temporary Notes.
Until such exchange, Holders of temporary Notes shall be entitled
to all of the rights, benefits and privileges of this Indenture.
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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 shall cancel all Notes surrendered for registration of transfer or
exchange, payment, replacement or cancellation, except as expressly permitted
by this Indenture. The Company may not issue new Notes to replace Notes that
have been redeemed or paid or that have been delivered to the Trustee for
cancellation. All cancelled Notes held by the Trustee shall be destroyed and
certification of their destruction delivered to the Company unless by a written
order delivered to the Trustee at the time such cancelled Notes are delivered
to the Trustee, signed by one Officer of the Company, the Company shall direct
that cancelled Notes be returned to it.
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, which date shall be at the
earliest practicable date but in all events at least five Business Days prior
to the payment date, in each case as provided in the Notes and in Section 4.1
hereof. The Company shall, with the consent of the Trustee, fix or cause to be
fixed each such special record date and payment date. At least 15 days before
the special record date, the Company (or the Trustee, in the name of and at the
expense of the Company) shall mail 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. CUSIP Number
The Company in issuing the Notes shall use a CUSIP number, and
the Trustee shall use the CUSIP number in notices of redemption or exchange as
a convenience to Holders; provided, however, that no representation is hereby
deemed to be made by the Trustee as to the correctness or accuracy of the CUSIP
number printed in the notice or on the certificates representing the Notes, and
that reliance may be placed only on the other identification numbers printed on
the certificates representing the Notes. The Company will promptly notify the
Trustee of any change in a CUSIP number.
SECTION 2.14. Deposit of Moneys
On each Interest Payment Date and each date on which payments in
respect of the Notes are required to be made pursuant to the terms of this
Indenture, the Company shall, not later than 11:00 a.m., New York City time,
deposit with the Paying Agent in immediately available funds money sufficient
to make any cash payments due on such date in a timely manner which permits the
Paying Agent to remit payment to the Holders on such date.
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SECTION 2.15. Liquidated Damages Under Registration Rights Agreement
Under certain circumstances, the Company shall be obligated to
pay certain Liquidated Damages to the Holders, all as set forth in Section 2 of
the Registration Rights Agreement.
ARTICLE 3
REDEMPTION AND OFFERS TO PURCHASE
SECTION 3.1. Notice to Trustee
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date (unless a
shorter notice period shall be satisfactory to the Trustee or a different
notice period is set forth in Section 3.7 hereof), an Officers' Certificate
setting forth (i) the Section 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.
If the Company is required to make an offer to purchase Notes
pursuant to the provisions of Sections 4.14 or 4.15 hereof, it shall furnish to
the Trustee, at least 30 days before the scheduled purchase date, an Officers'
Certificate setting forth (i) the Section of this Indenture pursuant to which
the offer to purchase shall occur, (ii) the terms of the offer, (iii) the
purchase price, (iv) the principal amount of the Notes to be purchased, and (v)
further setting forth a statement to the effect that (a) the Company or one of
its Restricted Subsidiaries has made an Asset Sale and there are Excess
Proceeds aggregating more than $10.0 million and the amount of such Excess
Proceeds or (b) a Change of Control has occurred, as applicable.
SECTION 3.2. Selection of Notes to Be Redeemed
If less than all of the Notes are to be redeemed at any time, the
Trustee shall, unless otherwise set forth herein, select the Notes to be
redeemed among the Holders of the Notes pro rata, by lot or in accordance with
a method which the Trustee considers to be fair and appropriate (and in such
manner as complies with applicable legal and principal national securities
exchanges requirements, if any). 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 and the Registrar
(if other than the Trustee) 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 them selected shall be in
face amounts of $1,000 or whole multiples of $1,000. Except as provided
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in the preceding sentence, provisions of this Indenture that apply to Notes
called for redemption also apply to portions of Notes called for redemption.
In the event the Company is required to make an Asset Sale Offer
pursuant to Section 3.9 and Section 4.14, and the amount of the Net Proceeds
from the Asset Sale is not evenly divisible by $1,000, the Trustee shall
promptly refund to the Company the portion of such Excess Proceeds that is not
necessary to purchase the immediately lesser principal amount of Notes that is
so divisible.
SECTION 3.3. Notice of Redemption
Subject to the provisions of Sections 3.9 and 4.15 hereof, at
least 30 days but not more than 60 days before a redemption date (unless a
different notice period is set forth in Section 3.7 hereof), the Company shall
mail by first class mail a notice of redemption to each Holder of Notes to be
redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price, separately stating the amount of any
accrued and unpaid interest and Liquidated Damages, if any, to be paid
in connection with the redemption;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date, upon cancellation of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that, unless the Company defaults in making such redemption
payment together with accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date, interest ceases to accrue on
and after the redemption date on Notes or portions of Notes called for
redemption;
(7) the paragraph of the Notes or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed;
and
(8) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Notes; and
(9) the aggregate principal amount of Notes being redeemed.
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At the Company's request, the Trustee shall give the notice of
redemption in the name of the Company and at its expense; provided, however,
that the Company shall deliver 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 3.4. Effect of Notice of Redemption
Once notice of redemption is mailed in accordance with Section
3.3 herein, Notes called for redemption become due and payable on the
redemption date at the redemption price stated in such notice. A notice of
redemption may not be conditional.
SECTION 3.5. Deposit of Redemption Price
On or before the redemption date, the Company shall deposit with
the Trustee (to the extent not already held by the Trustee) or with the Paying
Agent money in immediately available funds sufficient to pay the redemption
price, together with accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date on all Notes to be redeemed. The Trustee or the
Paying Agent shall return to the Company any money deposited with the Trustee
or the Paying Agent by the Company in excess of the amount necessary to pay the
redemption price of, and accrued and unpaid interest and Liquidated Damages, if
any, on, 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. Upon surrender of a
Note for redemption in accordance with the notice given pursuant to Section 3.3
hereof, such Note shall be purchased by the Company at the redemption price,
together with accrued and unpaid interest and Liquidated Damages, if any, to
the redemption 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,
premium and Liquidated Damages, if any, from the redemption date until such
principal, premium or Liquidated Damages, if any, is paid, and to the extent
lawful on any interest not paid on such unpaid principal, premium or Liquidated
Damages, if any, in each case at the rate provided in the Notes and in Section
4.1 hereof.
SECTION 3.6. Notes Redeemed in Part
Upon surrender and cancellation of a Note that is redeemed in
part only, the Company shall issue and 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 surrendered and cancelled original Note.
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SECTION 3.7. Optional Redemption
The Notes are not redeemable at the Company's option prior to
February 15, 2002. 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, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on February 15 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
-------- ---------------
<S> <C>
2002 . . . . . . . . . . . . . . . . . 104.6250%
2003 . . . . . . . . . . . . . . . . . 103.0834%
2004 . . . . . . . . . . . . . . . . . 101.5417%
2005 and thereafter . . . . . . . . . . 100.0000%
</TABLE>
Notwithstanding the foregoing, on or prior to February 15, 2000,
the Company may redeem at any time or from time to time up to 35% of the
aggregate principal amount of the Notes originally issued, at a redemption
price of 109.25% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net proceeds of one or more Public Equity Offerings; provided, that at
least $110.5 million in aggregate principal amount of the Notes remain
outstanding following each such redemption; provided, further, that notice of
such redemption shall be given not later than 45 days, and such redemption
shall occur not earlier than 30 or later than 60 days, after the date of the
closing of any such Public Equity Offering.
SECTION 3.8. Mandatory Redemption
The Company shall not be required to make any mandatory
redemption or sinking fund payments with respect to the Notes. However, as
described in Sections 3.9, 4.14 and 4.15, the Company may be obligated, under
certain circumstances, to make an offer to purchase (i) all outstanding Notes
at a redemption price of 101% of the principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
purchase, upon a Change of Control; and (ii) outstanding Notes with a portion
of the Net Proceeds of Asset Sales at a redemption price of 100% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of purchase.
SECTION 3.9. Offer to Purchase by Application of Excess Proceeds
Any Asset Sale Offer pursuant to Section 4.14 shall remain open
for at least 30 and not more than 40 days, except to the extent that a longer
period is required by applicable law (the "Offer Period"). On a date within
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 4.14 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer.
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Payment for any Notes so purchased shall be made in the same manner as interest
payments are made.
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 3.9,
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
and Liquidated Damages, if any, 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 3.9 and Section 4.14 hereof and the length of time the Asset
Sale Offer shall remain open;
(b) the Offer Amount, the purchase price, separately stating
the amount of any accrued and unpaid interest and Liquidated Damages, if
any, 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 payments,
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
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;
(f) 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;
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(g) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Trustee shall
select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Trustee so that only
Notes in denominations of $1,000, or integral multiples thereof, shall
be purchased); and
(h) that Holders whose Notes are 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 3.9. The Company, the Depository or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five Business 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 plus accrued and unpaid
interest and Liquidated Damages, if any, 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 3.9 and
Section 4.14, any purchase pursuant to this Section 3.9 shall be made pursuant
to the provisions of Sections 3.1 through 3.6 hereof.
No repurchase of Notes under this Section 3.9 shall be deemed to
be a redemption of Notes.
ARTICLE 4
COVENANTS
SECTION 4.1. Payment of Notes
The Company shall pay the principal, premium, if any, and
interest, if any, on the Notes on the dates and in the manner provided in the
Notes and in this Indenture. Principal, premium, if any, and interest, if any,
shall be considered paid on the date due if the Paying Agent, other than the
Company or any of its Subsidiaries or Affiliates, holds on or before that date
money deposited by the Company in immediately available funds and designated
for and sufficient to pay all principal, premium and interest, if any, then
due. The Company shall pay all Liquidated Damages, if any, in the same manner
on the dates and in the amounts set forth
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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
under any Bankruptcy Law) on overdue principal and premium, if any, from time
to time on demand at the rate equal to 1% per annum in excess of the then
applicable interest rate on the Notes to the extent lawful; the Company shall
pay interest (including post-petition interest under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard to any
applicable grace period) 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
comprised of twelve 30-day months.
SECTION 4.2. Maintenance of Office or Agency
The Company shall maintain in the Borough of Manhattan, The City
of New York, an office or agency (which may be an office of the Trustee,
Registrar or co-registrar) where Notes may be surrendered for registration of
transfer or exchange, where Notes may be presented or surrendered for payment
and where notices and demands to or upon the Company in respect of the Notes
and this Indenture may be served. The Company shall give prompt written notice
to the Trustee of the location, and any change in the location, of such office
or agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the 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 obligations to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company will
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 office of the Trustee at 114
West 47th Street, New York, New York as one such office or agency of the
Company in accordance with Section 2.3.
SECTION 4.3. Reports
(a) Whether or not required by the rules and regulations of the
SEC, so long as any Notes are outstanding, the Company shall furnish to the
Holders of Notes (i) within 45 days following the end of each fiscal quarter
and 90 days following the end of each fiscal year, respectively, 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
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<PAGE> 46
file such Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition and
results of operations of the Company and its Subsidiaries and, with respect to
the annual information only, a report thereon by the Company's independent
certified public accountants and (ii) all 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, the Company shall file a copy of all such information with the SEC for
public availability (unless the SEC will not accept such filing) and make such
information available to investors or prospective investors who request it in
writing.
(b) Upon qualification of this Indenture under the TIA, the
Company shall also comply with the provisions of TIA Section 314(a).
(c) For so long as any Transfer Restricted Securities remain
outstanding, the Company shall furnish to all Holders or beneficial owners of
Notes and prospective purchasers of the Notes designated by the Holders of
Transfer Restricted Securities, upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.4. Compliance Certificate
(a) The Company shall deliver to the Trustee, within 90 days
after the end of each fiscal year, but not less often than annually, 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 each of
the Company and its Subsidiaries 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 knowledge each of the
Company and its Subsidiaries has kept, observed, performed and fulfilled each
and every covenant contained in this Indenture, and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
or thereof (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he may have
knowledge and what action each is taking or proposes to take with respect
thereto).
(b) So long as not contrary to the then current recommendations
of the American Institute of Certified Public Accountants, the year-end
financial statements delivered pursuant to Section 4.3(a) above shall be
accompanied by a written statement of the Company's independent certified
public accountants (who shall be a firm of established national reputation
reasonably satisfactory to the Trustee) that in making the examination
necessary for certification of such financial statements nothing has come to
their attention which would lead them to believe that either the Company or any
of its Subsidiaries has violated any provisions of Article 4, 5 or 6 of this
Indenture 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 will, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of (i) any Default or Event of Default or
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<PAGE> 47
(ii) any event of default under any other mortgage, indenture or instrument
referred to in Section 6.1(5), an Officers' Certificate specifying such
Default, Event of Default or other event of default and what action the Company
is taking or proposes to take with respect thereto.
SECTION 4.5. Taxes
The Company shall, and shall cause its Subsidiaries to, pay or
discharge prior to delinquency all material taxes, assessments, and
governmental levies except as contested in good faith and by appropriate
proceedings and for which adequate reserves, to the extent required under GAAP,
have been taken.
SECTION 4.6. 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, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and 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 4.7. Company and Corporate Existence and Maintenance of Properties and
Insurance
Subject to Section 4.15 and Article 5 hereof, the Company shall
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence, and the corporate, partnership or other
existence of each of its Subsidiaries, in accordance with their respective
organizational documents (as the same may be amended from time to time) and its
(and its Subsidiaries') rights (charter and statutory), licenses and
franchises; 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 Subsidiary, if the Board of Directors of the Company
shall determine in good faith that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its respective
Subsidiaries taken as a whole and that the loss thereof is not adverse in any
material respect to the Holders.
The Company shall, and shall cause each of its Subsidiaries to,
maintain its properties in good working order and condition (subject to
ordinary wear and tear) and make all reasonably necessary repairs, renewals,
replacements, additions and improvements required for it to actively conduct
and carry on its business; provided, however, that nothing in this Section 4.7
shall prevent the Company or any of its Subsidiaries from discontinuing the
operation and maintenance of any of its properties if such discontinuance is,
in the good faith judgment of the Board of Directors or other governing body of
the Company or the Subsidiary concerned, as the case may be, desirable in the
conduct of its businesses and is not adverse in any material respect to the
Holders.
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<PAGE> 48
The Company shall maintain insurance against loss or damage of
the kinds that, in the good faith judgment of the Company, are adequate and
appropriate for the conduct of the business of the Company and its Subsidiaries
in a prudent manner, with reputable insurers or with the government of the
United States of America or an agency or instrumentality thereof, in such
amounts, with such deductibles, and by such methods as shall be customary, in
the good faith judgment of the Company, for companies similarly situated in the
industry.
SECTION 4.8. Limitation on the Incurrence of Indebtedness and Issuance of
Disqualified Stock
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable with respect to
(collectively, "incur" and, correlatively, "incurred" and "incurrence") any
Indebtedness (including, without limitation, Acquired Debt) and that the
Company and its Restricted Subsidiaries shall not issue any Disqualified Stock
and will not permit any of their respective Subsidiaries (other than their
Unrestricted Subsidiaries) to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness 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, 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, would have been greater than 2.0 to 1.
The foregoing limitations will not apply to:
(i) Indebtedness incurred by the Company under the Credit
Facility in an aggregate principal amount not to exceed (a) the greater
of (x) $125.0 million at any time outstanding (including any
Indebtedness issued to refinance, refund or replace such Indebtedness)
or (y) $60.0 million plus the sum of 85% of the amount of Eligible
Receivables of the Company and 60% of the amount of Eligible Inventory
of the Company, in each case calculated on a consolidated basis in
accordance with GAAP, at any time outstanding (including any
Indebtedness issued to refinance, refund or replace such Indebtedness),
minus (b) the amount of any such Indebtedness retired with Net Cash
Proceeds from any Asset Sale;
(ii) additional Indebtedness incurred by the Company in respect
of Capital Lease Obligations or Purchase Money Obligations in an
aggregate principal amount not to exceed $15.0 million at any time
outstanding;
(iii) Existing Indebtedness outstanding on the date of this
Indenture;
(iv) Indebtedness represented by the Notes and this Indenture;
(v) Hedging Obligations; provided, that the notional principal
amount of any Interest Rate Agreement does not significantly exceed the
principal amount of the Indebtedness to which such agreement relates;
provided, further, that any Currency
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<PAGE> 49
Agreement does not increase the outstanding loss potential or
liabilities other than as a result of fluctuations in foreign currency
exchange rates;
(vi) Indebtedness of the Company to any of its Wholly Owned
Subsidiaries that is a Restricted Subsidiary, and Indebtedness of any
Wholly Owned Subsidiary of the Company that is a Restricted Subsidiary
to the Company or any of its Wholly Owned Subsidiaries that is a
Restricted Subsidiary (the Indebtedness incurred pursuant to this clause
(vi) being hereinafter referred to as "Intercompany Indebtedness");
provided, that, in the case of Indebtedness of the Company such
obligations shall be unsecured and subordinated in all respects to the
Company's obligations pursuant to the Notes; provided, further, that an
incurrence of Indebtedness shall be deemed to have occurred upon (a) any
sale or other disposition of Intercompany Indebtedness to a Person other
than the Company or any of its Restricted Subsidiaries, (b) any sale or
other disposition of Equity Interests of any Restricted Subsidiary of
the Company which holds Intercompany Indebtedness such that such
Restricted Subsidiary ceases to be a Restricted Subsidiary after such
sale or other disposition, or (c) designation of a Restricted Subsidiary
as an Unrestricted Subsidiary;
(vii) in addition to Indebtedness specified in clauses (i)
through (vi) above and clauses (viii) and (ix) below, additional
Indebtedness in an aggregate principal amount not to exceed $15.0
million at any time outstanding;
(viii) Indebtedness incurred by Synthetic Industries Europe
Limited in an aggregate principal amount not to exceed L.500,000 at any
time outstanding; and
(ix) the incurrence by the Company of Indebtedness issued in
exchange for, or the proceeds of which are used to extend, refinance,
renew, replace, defease or refund Indebtedness incurred pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of
this Section 4.8 or incurred pursuant to clauses (iii) and (iv) of this
Section 4.8 in whole or in part (the "Refinancing Indebtedness");
provided, however, that (A) the aggregate principal amount of such
Refinancing Indebtedness shall not exceed the aggregate principal amount
of Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded; (B) the Refinancing Indebtedness shall have a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; (C) if the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is pari passu with
or subordinated in right of payment to the Notes, the Refinancing
Indebtedness shall be pari passu with or subordinated, as the case may
be, 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 (any such extension, refinancing, renewal, replacement,
defeasance or refunding being referred to as a "Permitted Refinancing").
SECTION 4.9. Limitation on Restricted Payments
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
make any distribution on account of
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Equity Interests, other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable to the Company; (ii) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of the Company or any
Affiliate of the Company (other than any such Equity Interests owned by the
Company or a Wholly Owned Subsidiary of the Company that is a Restricted
Subsidiary); (iii) purchase, redeem, repay, defease or otherwise acquire or
retire for value any Indebtedness that is subordinated in right of payment to
the Notes; 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:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(2) 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 4.8 hereof;
(3) such Restricted Payment (the amount of any such payment, if
other than cash, to be determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a
resolution in an Officers' Certificate delivered to the Trustee),
together with the aggregate of all other Restricted Payments made by the
Company and its Restricted Subsidiaries after the date of this Indenture
(including Restricted Payments permitted by the next succeeding
paragraph other than pursuant to clause (iii) thereof), shall not exceed
the sum of (v) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) commencing with the first full
fiscal quarter after the date of initial issuance of the Notes and
ending on the last day 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, 100% of such deficit as a negative number),
plus (w) 100% of the aggregate net cash proceeds received by the Company
from the issue or sale since the date of initial issuance of the Notes
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 (x) the aggregate cash
received by the Company as capital contributions to the Company after
the date of initial issuance of the Notes (other than from a
Subsidiary), plus (y) any cash received by the Company after the date
of initial issuance of the Notes as a dividend or distribution from any
of its Unrestricted Subsidiaries or from the sale of any of its
Unrestricted Subsidiaries less the cost of disposition and taxes, if any
(but in each case excluding any such amounts included in Consolidated
Net Income), plus (z) $5.0 million.
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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 redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company, or the defeasance, redemption or
repurchase of subordinated Indebtedness in exchange for, or out of the proceeds
of, the substantially concurrent sale (other than to a Subsidiary of the
Company) of Equity Interests of the Company (other than any Disqualified Stock)
or out of the proceeds of a substantially concurrent cash capital contribution
received by the Company; provided, that the amount of any such proceeds that
are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (w) of the preceding paragraph;
(iii) the repayment, defeasance, redemption or repurchase of subordinated
Indebtedness with the net proceeds from an incurrence of Refinancing
Indebtedness in a Permitted Refinancing; and (iv) the purchase, redemption or
retirement by the Company of shares of its common stock held by an employee or
former employee of the Company or any of its Restricted Subsidiaries issued
under the Management Plans pursuant to the terms of such Management Plans;
provided that (a) the purchase, redemption or retirement results from the
retirement, death or disability (as defined in the relevant Management Plan) of
the employee or former employee, and (b) the amount of any such payments in any
fiscal year does not exceed $1.0 million; provided, however, that at the time
of, and after giving effect to, any Restricted Payment permitted under clauses
(i), (ii), (iii) and (iv), no Default or Event of Default shall have occurred
and be continuing.
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 4.9 were computed, which calculations may
be based upon the Company's latest available financial statements.
SECTION 4.10. Limitation on 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 on any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens.
SECTION 4.11. Limitation on Transactions with Affiliates
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, sell, lease, license, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into 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 arms' length 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 involving aggregate
payments 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 such Affiliate Transaction is approved by a
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majority of the disinterested members of the Board of Directors and (b) with
respect to any Affiliate Transaction involving aggregate payments in excess of
$10.0 million, an opinion as to the fairness to the Company or such Restricted
Subsidiary from a financial point of view issued by an investment banking firm
of national standing with expertise in underwriting non-investment grade debt
securities; provided, however, that (i) any reasonable employment agreement or
stock option 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, (ii) transactions
between or among the Company and its Wholly Owned Subsidiaries that are
Restricted Subsidiaries, (iii) Restricted Payments, permitted by clauses (i)
and (iv) of the second paragraph of Section 4.9 hereof, (iv) the payment of
reasonable fees to directors of the Company or its Restricted Subsidiaries, and
(v) Affiliate Transactions pursuant to agreements in effect on the date of this
Indenture and described in the Offering Memorandum and renewals and extensions
of such agreements on terms no less favorable to the Holders than the terms of
such original agreements and transactions, in each case, shall not be deemed
Affiliate Transactions.
SECTION 4.12. Limitation on 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 consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (a) on its
Capital Stock or (b) with respect to any other interest or participation in, or
measured by, its profits, (ii) pay any indebtedness owed to the Company or any
of its Restricted Subsidiaries, (iii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iv) 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 this Indenture, (b) this Indenture and
the Notes, (c) applicable law, (d) 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 that the Consolidated
Cash Flow of such Person is not taken into account in determining whether such
acquisition was permitted by the terms of this Indenture, (e) customary
nonassignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (f) Purchase Money Obligations for
property acquired in the ordinary course of business that impose restrictions
of the nature described in clause (iv) above on the property so acquired, or
(g) Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Refinancing Indebtedness are no more restrictive with
respect to the provisions set forth in clauses (i), (ii), (iii) and (iv) above
than those contained in the agreements governing the Indebtedness being
refinanced.
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SECTION 4.13. Limitation on Layering Debt
The Company 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 of the Company and senior in any respect in
right of payment to the Notes.
SECTION 4.14. Asset Sales
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in any Asset Sale, unless (i) the Company or such
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 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 or Cash Equivalents; provided,
however, that the amount of (a) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet or in the notes thereto)
of the Company or such Restricted Subsidiary (other than liabilities that are
by their terms subordinated in right of payment to the Notes) that are assumed
by the transferee of any such assets and (b) any notes or other obligations
received by the Company or 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 any Asset Sale, the Company may apply the
Net Proceeds from such Asset Sale to (i) permanently reduce Senior Debt, (ii)
permanently reduce Indebtedness of the Restricted Subsidiary that sold
properties or assets in the Asset Sale, or (iii) acquire properties and assets
to replace properties and assets that were the subject of the Asset Sale or
properties and assets that will be used 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 invest such Net
Proceeds in any manner that is not prohibited by this Indenture. Any Net
Proceeds from the Asset Sale that are not applied as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate cumulative amount of Excess Proceeds exceeds $10.0 million,
the Company shall 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 (and not solely the amount in excess of $10.0 million), 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, if any, to the
date of purchase, in accordance with the procedures set forth in this
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
such deficiency for general corporate purposes in any manner provided by this
Indenture. 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. The Asset Sale
Offer must be commenced within 30 days following the Asset Sale that triggers
the Company's obligation to make the Asset Sale Offer and remain open for at
least 30 and not more than 40 days (unless required by applicable law). The
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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 Notes
pursuant to an Asset Sale Offer.
SECTION 4.15. 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, if any, thereon to the date of purchase
(the "Change of Control Payment"). Notice of a Change of Control Offer shall
be prepared by the Company and shall be mailed by the Company with a copy to
the Trustee or at the option of the Company and at the expense of the Company
by the Trustee within 30 days following a Change of Control to each Holder of
the Notes and such Change of Control Offer must remain open for at least 30 and
not more than 40 days (unless required by applicable law). The notice to each
Holder of the Notes shall state: (1) that the Change of Control Offer is being
made pursuant to this Section 4.15 and that all Notes tendered and not
withdrawn will be accepted for payment; (2) the purchase price, separately
stating the amount of any accrued and unpaid interest and Liquidated Damages,
if any, and the purchase date, which will be no earlier than 30 days nor later
than 60 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 will 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 Holders, the
principal amount of Notes delivered for purchase, and a statement that such
Holder is withdrawing his election to have such Notes purchased; (7) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered,
which unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof; and (8) the circumstances and material facts
regarding the Change of Control (including but not limited to information with
respect to the historical consolidated financial information of the Company and
pro forma consolidated financial information of the Company after giving effect
to the Change of Control, information regarding the Person or Persons acquiring
control, to the extent reasonably available, and the business plans of such
Person or Persons with respect to the Company, to the extent reasonably
available). 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 in connection with a Change of Control.
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On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating
the Notes or portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail to each Holder of Notes so accepted the Change of
Control Payment for such Notes, and the Trustee shall 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. Prior to complying with the provisions of
this Section 4.15, and in any event within 90 days following a Change of
Control, the Company shall either repay all outstanding Senior Debt of the
Company or obtain the requisite consents, if any, under all agreements
governing outstanding Senior Debt of the Company to permit the repurchase of
Notes required by this covenant. 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.
Other than as specifically provided in this Section 4.15, any
purchase pursuant to this Section 4.15 shall be made pursuant to the provisions
of Section 3.1 through 3.6 hereof.
SECTION 4.16. Payments for Consent
The Company and its Subsidiaries shall be prohibited from,
directly or indirectly, paying or causing to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any terms or provisions of
the Notes unless such consideration is offered to be paid or agreed to be paid
to all Holders of the Notes which so consent, waive or agree to amend in the
time frame set forth in solicitation documents relating to such consent, waiver
or agreement.
ARTICLE 5
SUCCESSORS
SECTION 5.1. Limitation on Merger, Consolidation or Sale of Assets
(a) 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 Person or
entity unless (i) the Company is the surviving corporation, 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 Person formed by or surviving any such consolidation or
merger (if other than the Company) or the Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the
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Company under the Notes and this Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately before or
immediately after giving effect to such transaction no Default or Event of
Default shall have occurred and be continuing; and (iv) the Company or any
Person formed by or surviving any such consolidation or merger, 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 but prior to any purchase accounting adjustments resulting from 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 Section 4.8 hereof.
(b) The Company shall deliver to the Trustee prior to the
consummation of any proposed transaction subject to the foregoing paragraph (a)
an Officers' Certificate to the foregoing effect and an Opinion of Counsel
stating that the proposed transaction and such supplemental indenture comply
with this Indenture. The Trustee shall be entitled to conclusively rely upon
such Officers' Certificate and Opinion of Counsel.
SECTION 5.2. Successor Person 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 5.1 hereof, the successor
Person 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 to or include instead the successor Person and not 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.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1. Events of Default
An "Event of Default" occurs if:
(1) the Company defaults in the payment of the principal of or
premium, if any, on any Note when the same becomes due and payable (upon
Stated Maturity, acceleration, optional redemption, required purchase
(whether pursuant to Sections 4.14 or 4.15 or otherwise) or otherwise),
whether or not prohibited by Article 10 hereof; or
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(2) the Company defaults in the payment of an installment of
interest on, or Liquidated Damages, if any, with respect to, any of the
Notes, when the same becomes due and payable, which default continues
for a period of 30 days, whether or not prohibited by Article 10 hereof;
or
(3) the Company fails to comply with the provisions described
under Sections 4.14, 4.15 or Article 5 hereof; or
(4) the Company or any Restricted Subsidiary fails to comply
with any of its covenants or agreements contained in the Notes or this
Indenture (other than a default specified in clause (1), (2) or (3)
above) and such default continues for a period of 30 days after notice
of such default requiring the Company to remedy the same shall have been
given (x) to the Company by the Trustee or (y) to the Company and the
Trustee by Holders of 25% in aggregate principal amount of the Notes
then outstanding; or
(5) a 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 this Indenture,
which default (a) is caused by failure to pay principal of or premium,
if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness (a "Payment Default") or (b)
results in the acceleration of such Indebtedness prior to its express
maturity and, in each case described in clauses (a) and (b) of this
subsection (5), the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more; or
(6) the Company or any of its Restricted Subsidiaries fails to
pay one or more final judgments against the Company or any Restricted
Subsidiary in an aggregate amount in excess of $10.0 million, which
judgments are not paid, discharged or stayed for a period of 60 days
from the entry thereof;
(7) the Company or any of its Significant Subsidiaries that are
Restricted Subsidiaries or any group of Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary, pursuant to
or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against
it in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or
for all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
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(E) admits in writing its inability to pay debts as the
same become due; or
(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 of its
Significant Subsidiaries that are Restricted Subsidiaries or any
group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary, in an involuntary case or
proceeding,
(B) appoints a Custodian of the Company or any of its
Significant Subsidiaries that are Restricted Subsidiaries or any
group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary, or for all or substantially
all of its property, or
(C) orders the liquidation of the Company, or any of its
Significant Subsidiaries that are Restricted Subsidiaries or any
group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary,
and, in each case, the order or decree remains unstayed and in effect
for 60 days.
The term "Bankruptcy Law" means title 11, U.S. Code or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
In the case of any Event of Default pursuant to the provisions of
this Section 6.1 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 3.7 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. If an Event of
Default occurs prior to February 15, 2002, 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 such
date, 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.
SECTION 6.2. Acceleration
If an Event of Default (other than an Event of Default specified
in clauses (7) and (8) of Section 6.1) occurs and is continuing, the Trustee by
notice to the Company, or the Holders of at least 25% in principal amount of
the then outstanding Notes by written notice to the Company and the Trustee may
declare the unpaid principal of, any accrued and unpaid interest on and on all
other Obligations under all the Notes to be due and payable immediately. Upon
such declaration the principal, interest and all other Obligations shall be due
and payable immediately. If an Event of Default specified in clause (7) or (8)
of Section 6.1 occurs, such an amount shall ipso facto become and be
immediately due and payable without any notice,
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declaration or other act on the part of the Trustee or any Holder. The Holders
of a majority in principal amount of the then outstanding Notes by written
notice to the Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or any other
Obligation that has become due solely because of the acceleration) have been
cured or waived.
SECTION 6.3. Other Remedies
If an Event of Default occurs and is continuing, the Trustee may
and shall at the direction of the Holders of 25% in principal amount of the
then outstanding Notes pursue any available remedy (under this Indenture or
otherwise) to collect the payment of principal, premium, interest or Liquidated
Damages, if any, on the Notes or to enforce the performance of any provision of
the Notes, this Indenture or the Registration Rights Agreement.
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 Notes 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 6.4. Waiver of Past Defaults
Subject to Sections 2.9, 6.7 and 9.2, Holders of a majority in
principal amount of the then outstanding Notes by notice to the Trustee may on
behalf of the Holders of all the Notes waive an existing Default or Event of
Default and its consequences, except a continuing Default or Event of Default
in the payment of the principal, premium, interest or Liquidated Damages, if
any, with respect to any Note held by a non-consenting Holder. 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 6.5. Control by Majority
Subject to Section 2.9, the Holders of a majority in principal
amount of the then outstanding Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it. Subject to Section 7.1, 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. Subject to the provisions of TIA Section 315, the Trustee may take
any other action deemed proper by the Trustee which is not inconsistent with
such direction.
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SECTION 6.6. Limitation on Suits
A Holder of Notes may pursue a remedy with respect to this
Indenture or the Notes only if:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) 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;
(3) such Holder or Holders offer and, if requested, provide to
the Trustee indemnity satisfactory to the Trustee in its sole discretion
against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(5) 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 Notes may not use this Indenture to prejudice the rights of another
Holder of Notes or to obtain a preference or priority over another Holder of
Notes.
SECTION 6.7. Rights of Holders to Receive Payment
Notwithstanding any other provision of this Indenture, the right
of any Holder of a Note to receive payment of principal, premium, interest, or
Liquidated Damages, if any, with respect to the Notes, on or after the
respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.8. Collection Suit by Trustee
If an Event of Default specified in Section 6.1(1) or (2) 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, interest and Liquidated Damages, if any, 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 6.9. 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
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and counsel) and the Holders of Notes allowed in any judicial proceedings
relative to the Company (or any other obligor upon the Notes), their creditors
or their 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 of Notes 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 of Notes, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7 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 7.7 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 which the Holders of the
Notes 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 of Notes any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof, or to authorize the Trustee to vote in respect of the claim of
any Holder of Notes 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 7.7, 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, interest and Liquidated Damages, if any,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal 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.
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
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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 to
enforce the provisions of Section 6.7 hereof, or a suit by a Holder or Holders
of more than 10% in principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
SECTION 7.1. Duties of Trustee
(1) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of its own affairs.
(2) Except during the continuance of a Default or an Event of
Default:
(A) The duties of the Trustee shall be determined solely
by the TIA or express provisions of this Indenture and the Trustee need
perform, and be liable for (as set forth herein), only those duties that
are specifically set forth in the TIA or this Indenture and no others,
and no implied covenants or obligations shall be read into this
Indenture against the Trustee.
(B) 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.
(3) 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:
(A) This paragraph does not limit the effect of
paragraph (2) of this Section 7.1.
(B) 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.
(C) 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 6.5.
(4) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs (1), (2) and (3) of this Section 7.1.
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(5) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any financial liability in the
performance of any of its duties hereunder, if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(6) The Trustee shall not be liable for interest on any money
or assets received by it except as the Trustee may agree in writing with the
Company. Assets held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
SECTION 7.2. Rights of Trustee
(1) The Trustee may conclusively rely and shall be protected in
relying upon any resolution, document, Officers' Certificate or any other
certificate, statement, instrument, opinion, report, notice, request, consent,
order, bond or other 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.
(2) 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.
(3) The Trustee may act through its agent and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(5) 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.
(6) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture
including, without limitation, the provisions of Section 6.5 hereof, unless
such Holders shall have offered to the Trustee security or indemnity reasonably
satisfactory to the Trustee against the costs, expenses and liabilities which
may be incurred by it in compliance with such request, order or direction.
SECTION 7.3. Definitive 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 an
Affiliate of the Company with the
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same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. However, the Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.4. 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 hereof, 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 7.5. Notice of Defaults
If a Default or Event of Default occurs and is continuing and if
it is actually known to a Responsible Officer of the Trustee, the Trustee shall
mail to Holders of Notes a notice of the Default or Event of Default within 30
days after it occurs. Except in the case of a Default or Event of Default in
payment on any Note pursuant to Section 6.1(1) or (2), the Trustee may withhold
the notice if it in good faith determines that withholding the notice is in the
interests of Holders of Notes.
SECTION 7.6. Reports by Trustee to Holders
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, the Trustee shall mail to Holders of
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).
Commencing at the time this Indenture is qualified under the TIA,
a copy of each report at the time of its mailing to Holders of Notes shall be
filed with the SEC and each stock exchange on which the Notes are listed. The
Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange and the Trustee shall comply with TIA Section 313(d).
SECTION 7.7. 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. Except as otherwise expressly provided herein,
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 in accordance with any provision
of this Indenture (including, without limitation, the reasonable compensation,
expenses and disbursements of its counsel and
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of all agents and other persons not regularly in its employ (A) in connection
with the preparation, execution and delivery of this Indenture, any waiver or
consent hereunder, any modification or termination hereof, or any Event of
Default or alleged Event of Default; (B) if an Event of Default occurs, in
connection with such Event of Default and collection, bankruptcy, insolvency
and other enforcement proceedings relating thereto; (C) in connection with the
administration of the Trustee's rights pursuant hereto; or (D) in connection
with any removal of the Trustee pursuant to subsection 7.8 hereof), except such
disbursements, advances and expenses as may be attributable to its negligence
or bad faith.
The Company shall indemnify the Trustee against any and all
losses, liabilities, obligations, damages, penalties, judgments, actions,
suits, proceedings, reasonable costs and expenses (including reasonable fees
and disbursements of counsel) of any kind whatsoever which may be incurred by
the Trustee in connection with any investigative, administrative or judicial
proceeding (whether or not such indemnified party is designated a party to such
proceeding) arising out of or in connection with the acceptance or
administration of its duties under this Indenture; provided, however, that the
Company need not reimburse any expense or indemnify against any loss,
obligation, damage, penalty, judgment, action, suit, proceeding, reasonable
cost or expense (including reasonable fees and disbursements of counsel) of any
kind whatsoever which may be incurred by the Trustee in connection with any
investigative, administrative or judicial proceeding (whether or not such
indemnified party is designated a party to such proceeding) in which it is
determined that the Trustee acted with negligence, bad faith or willful
misconduct. 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. Unless
otherwise set forth herein, 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 7.7 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section 7.7,
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 6.1(7) or (8) occurs, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.8. 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.
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The Trustee may resign at any time and be discharged from the
trust hereby created by so notifying the Company by at least 30 days' advance
written notice. The Holders 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:
(1) the Trustee fails to comply with Section 7.10;
(2) 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;
(3) a Custodian or public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the 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 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 Notes who
has been a Holder of Notes for at least six months fails to comply with Section
7.10, such Holder of Notes may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
The Company shall give or cause to be given notice of each
resignation and each removal of the Trustee to all Holders in the manner
provided herein. Each notice shall include the name of the successor Trustee
and the address of its Corporate Trust Office.
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 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 7.7. Notwithstanding replacement of the Trustee pursuant to
this Section 7.8, the Company's obligations under Section 7.7 hereof shall
continue for the benefit of the retiring Trustee. No successor Trustee shall
accept its appointment unless at the time of such acceptance such successor
Trustee shall be qualified and eligible under this Article 7.
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SECTION 7.9. 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; provided that such successor is otherwise eligible
hereunder.
SECTION 7.10. Eligibility; Disqualification
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof or territory or of the District of Columbia
authorized under such laws to exercise corporate trustee power, shall be
subject to supervision or examination by Federal, state, territorial or
District of Columbia authority and shall have a combined capital and surplus of
at least $50,000,000 as set forth in its most recent published annual report of
condition.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.10 it shall resign immediately
in the manner and with the effect specified in this Article 7. If the Trustee
has or shall acquire a conflicting interest within the meaning of the TIA, the
Trustee shall either eliminate such interest or resign, to the extent and in
the manner provided by, and subject to the provision of, the TIA and this
Indenture.
This Indenture shall always have a Trustee who satisfies the
requirements of the TIA, including TIA Sections 310(a)(1) and 310(a)(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 8.1. Option to Effect Legal Defeasance or Covenant Defeasance
The Company may, at the option of the Board of Directors of the
Company, evidenced by a resolution set forth in an Officers' Certificate, at
any time, elect to have either Section 8.2 or 8.3 hereof be applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article 8.
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SECTION 8.2. Legal Defeasance and Discharge
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.2, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.4 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 8.5 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all their
other obligations under such Notes and this Indenture (and the Trustee,
promptly on demand of and at the expense of the Company, shall execute proper
instruments prepared by the Company 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 8.4 hereof, and as more
fully set forth in such Section, payments in respect of the principal, premium,
interest and Liquidated Damages, if any, on such Notes when such payments are
due, (b) the Company's obligations with respect to outstanding Notes under
Article 2 and Section 4.2 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 8. Subject to compliance with this Article 8,
the Company may exercise its option under this Section 8.2 notwithstanding the
prior exercise of its option under Section 8.3 hereof.
SECTION 8.3. Covenant Defeasance
Upon the Company's exercise under Section 8.1 hereof of the
option applicable to this Section 8.3, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, be released
from their obligations under the covenants contained in Section 4.3(a), 4.4,
4.5, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15 and 4.16 and Article 5
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 or in any other document, and such omission to comply shall not
constitute a Default or Event of Default under Section 6.1 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 8.1
hereof of the option applicable to this Section 8.3 hereof, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, Sections
6.1(3), 6.1(4), 6.1(5) and 6.1(6) and, with respect to any Restricted
Subsidiary that is a Significant Subsidiary, 6.1(7) and 6.1(8) hereof shall not
constitute Events of Default.
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SECTION 8.4. Conditions to Legal Defeasance or Covenant Defeasance
The following shall be the conditions to the application of
either Section 8.2 or 8.3 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance, as applicable:
(a) the Company must irrevocably deposit or cause to be
deposited with the Trustee, in trust, for the benefit of the Holders of
the Notes, cash in United States dollars, non-callable Government
Securities which through the scheduled payment of principal and interest
in respect thereof in accordance with their terms will provide, not
later than one day before the due date of any payment, cash, or a
combination thereof, in such amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent certified public
accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee to pay and discharge, the principal, premium, interest and
Liquidated Damages, if any, on the outstanding Notes on the Stated
Maturity or on the applicable redemption date, as the case may be;
(b) in the case of an election under Section 8.2 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 8.3 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 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 deposit or insofar as Section 6.1(7) or
6.1(8) hereof are concerned, at any time in the period ending on the
91st day after the date of deposit;
(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 Restricted Subsidiaries is a party or by which
the Company or any of its Restrictive Subsidiaries is bound;
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(f) the Company shall 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;
(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 any
other creditors of the Company with the intent of defeating, hindering,
delaying or defrauding creditors of the Company; 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 8.5. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions
Subject to Section 8.6 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
8.5, the "Trustee") pursuant to Section 8.4 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, interest and Liquidated Damages, if any, but such money and Government
Securities 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 deposited pursuant to Section 8.4 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.
SECTION 8.6. Repayment to Company
(a) Anything in this Article 8 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 8.4 hereof which, in the opinion of a nationally
recognized firm of independent certified public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the
opinion delivered under Section 8.4(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.
(b) Subject to any applicable abandoned property law, the
Trustee and the Paying Agent shall pay to the Company upon request in the form
of an Officers' Certificate any money
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held by them for the payment of principal, premium, interest or Liquidated
Damages, if any, that remains unclaimed for two years after such principal,
interest, premium, if any, or Liquidated Damages, if any, became due and
payable, and, thereafter, Holders entitled to the money must look to the
Company for payment of such money as creditors and all liability of the Trustee
and the Paying Agent with respect to such money shall cease.
SECTION 8.7. Reinstatement
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.2 or 8.3 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 8.2 or 8.3 hereof until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 8.2 or 8.3 hereof, as the case may; provided 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.
SECTION 8.8. Discharge of Liability on Securities; Defeasance
When (a) (i) the Company delivers to the Trustee all outstanding
Notes for cancellation (other than Notes which have been destroyed, lost or
stolen and which have been replaced or paid as provided in Section 2.7 and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) or (ii) all outstanding Notes have
become due and payable, whether at maturity or on a specified redemption date
as a result of the mailing of a notice of redemption pursuant to Article 3
hereof, (b) the Company irrevocably deposits or causes to be deposited with the
Trustee as trust funds in trust solely for that purpose an amount of money
sufficient to pay and discharge at maturity or upon redemption all outstanding
Notes, including interest, premium and Liquidated Damages, if any, thereon, and
the Company pays or causes to be paid all other sums payable hereunder by the
Company, (c) the Company has delivered irrevocable instructions to the Trustee
to apply the deposited money toward the payment of the Notes at maturity or
redemption, as the case may be; and (d) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, stating that all
conditions precedent specified herein relating to the satisfaction and
discharge of this Indenture have been complied with; then this Indenture shall
cease to be of further effect except for (i) the provisions set forth in
Article 2, Sections 4.1, 4.2, 6.7, 7.7, 8.5, 8.6 and 8.7 hereof and (ii) if the
Notes have been called for redemption and the redemption date has not occurred,
the Company's obligation to pay the redemption price on such redemption date.
The Trustee shall acknowledge satisfaction and discharge of this Indenture
promptly on demand of the Company after receipt from the Company of an
Officers' Certificate and an Opinion of Counsel and at the cost and expense of
the Company.
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ARTICLE 9
AMENDMENTS
SECTION 9.1. Without Consent of Holders
The Company and the Trustee may amend or supplement this
Indenture or the Notes without the consent of any Holder of Notes:
(1) to cure any ambiguity, defect or inconsistency; provided
that such amendment or supplement does not adversely affect the rights
of any Holder;
(2) to comply with Article 5;
(3) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(4) to provide security for the Notes;
(5) to add Guarantees with respect to the Notes;
(6) 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 Notes; or
(7) 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
the Board of Directors of the Company, authorizing the execution of any such
supplemental indenture or amendment, and upon receipt by the Trustee of the
documents described in Section 9.6 hereof required or requested by the Trustee,
the Trustee shall join with the Company in the execution of any supplemental
indenture or amendment authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
supplemental indenture or amendment which affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.2. With Consent of Holders
Except as otherwise provided herein, the Company and the Trustee
may amend or supplement this Indenture or the Notes with the written consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes (including consents obtained in connection with a tender offer or
exchange offer for the Notes).
Upon the request of the Company, accompanied by a resolution of
the Board of Directors of the Company authorizing the execution of any such
supplemental indenture or
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amendment, 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 9.6 hereof, the Trustee
shall join with the Company in the execution of such supplemental indenture or
amendment unless such supplemental indenture or amendment 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 supplemental indenture.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed supplemental
indenture or amendment, but it shall be sufficient if such consent approves the
substance thereof.
After a supplemental indenture or amendment under this Section
becomes effective, the Company shall mail to the Holders of each Note affected
thereby a notice briefly describing the amendment or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture,
amendment or waiver. Subject to Sections 6.4 and 6.7 hereof, the Holders of a
majority in 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 of Notes affected, an
amendment or waiver under this Section may not (with respect to any Notes held
by a non-consenting Holder of Notes):
(1) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of
interest or Liquidated Damages, if any, including default interest, on
any Note;
(3) reduce the principal of or change the fixed maturity of any
Note or alter the optional or mandatory redemption provisions (other
than provisions relating to the covenants described in Sections 3.9 and
4.14) or reduce the prices at which the Company shall offer to purchase
such Notes pursuant to Sections 3.9, 4.14 or 4.15 hereof;
(4) make any Note payable in money other than that stated in
the Note;
(5) make any change in Section 6.4 or 6.7 hereof or in this
sentence of this Section 9.2;
(6) waive a Default or Event of Default in the payment of
principal of or interest or Liquidated Damages, if any, on, or
redemption payment with respect to, any Note (other than a Default in
the payment of an amount due as a result of an acceleration if the
Holders of Notes rescind such acceleration pursuant to Section 6.2);
(7) waive a redemption payment with respect to any Note; or
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(8) make any change to Article 10 of this Indenture that
adversely affects Holders of Notes.
SECTION 9.3. Compliance with Trust Indenture Act
If at the time of an amendment to this Indenture or the Notes,
this Indenture shall be qualified under the TIA, every amendment to this
Indenture or the Notes shall be set forth in a supplemental indenture that
complies with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents
Until a supplemental indenture, an amendment or waiver becomes
effective, a consent to it by a Holder of a Note is a continuing consent by the
Holder 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. Subject to the following paragraph, any
such Holder or subsequent Holder may revoke the consent as to such Holder's
Note or portion of such Note by notice to the Trustee or the Company received
before the date specified in any solicitation or waiver. Subject to Section
9.2 hereof, a supplemental indenture, amendment or waiver becomes effective in
accordance with its terms and thereafter binds every Holder of Notes.
The Company may fix a record date for determining which Holders
must consent to such supplemental indenture, amendment or waiver or action
permitted by Section 6.5. If the Company fixes a record date, the record date
shall be fixed at the later of (i) 30 days prior to the first solicitation of
such consent or the date of the most recent list of Holders furnished to the
Trustee prior to such solicitation pursuant to Section 2.5, or (ii) such other
date as the Company shall designate.
SECTION 9.5. Notation on or Exchange of Notes
The Trustee may place an appropriate notation about a
supplemental indenture, amendment 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 or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment or waiver.
SECTION 9.6. Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. If it
does, the Trustee may, but need not, sign it. In signing or refusing to sign
such amendment or supplemental indenture, the Trustee shall be entitled to
receive, if requested, an indemnity reasonably satisfactory to it and to
receive and, subject to Section 7.1, shall be fully protected in relying upon,
an Officers' Certificate and an Opinion of
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Counsel as conclusive evidence that such amendment or supplemental indenture is
authorized or permitted by this Indenture, that it is not inconsistent herewith
or therewith, and that it will be valid and binding upon the Company in
accordance with its terms. The Company may not sign an amendment or
supplemental indenture until the Board of Directors of the Company approves it.
ARTICLE 10
SUBORDINATION
SECTION 10.1. Agreement to Subordinate
The Company agrees, and each Holder by accepting a Note agrees,
that the Indebtedness evidenced by, and the payment of principal, premium,
interest and Liquidated Damages, if any, on, 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 10.2. 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 marshaling of the
Company's assets and liabilities, in each such case whether voluntary or
involuntary, domestic or foreign:
(1) the holders of Senior Debt shall be entitled to receive
payment in full in cash or Cash Equivalents of all Obligations due in
respect of such Senior Debt (including interest after the commencement
of any such proceeding in accordance with the terms of the applicable
Senior Debt, whether or not such interest is an allowed claim
enforceable against the debtor in a bankruptcy case under Title 11 of
the United States Code) before Holders shall be entitled to receive any
payment of principal, premium, interest or Liquidated Damages, if any,
on the Notes (including any such payment or other distribution that may
be payable by reason of the payment of any other Indebtedness of the
Company (including, without limitation, the Series B Notes) being
subordinated to the payment of the Notes); and
(2) until all Obligations with respect to Senior Debt are paid
in full in cash or Cash Equivalents, any such distribution to which
Holders would be entitled shall be made to the holders of such Senior
Debt;
except that so long as the Notes are not treated in any case or
proceeding or other event described above as part of the same class of
claims as the Senior Debt or any class of claim on a parity with or
senior to the Senior Debt for any payment or distribution,
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Holders may receive (i) securities that are subordinated, at least to
the same extent as the Notes, to Senior Debt of the Company and to any
securities issued in exchange for such Senior Debt and that are
authorized by an order or decree of a court of competent jurisdiction in
a reorganization proceeding under any applicable bankruptcy, insolvency
or similar law which gives effect to the subordination of the Notes to
Senior Debt and (ii) payments made from the trust described in Article 8
hereof.
SECTION 10.3. Default on Designated Senior Debt
The Company also may not make any payment of principal, premium,
interest and Liquidated Damages, if any, on the Notes upon or in respect of the
Notes whether on account of principal, interest, premiums, Liquidated Damages
or otherwise (other than as set forth in Section 10.2(2) hereof) if: (i) a
default in the payment of the principal, premium, or interest, if any, on any
Designated Senior Debt occurs and is continuing beyond any applicable period of
grace; or (ii) any other default occurs and is continuing with respect to
Designated Senior Debt or would occur as a consequence of such payment that
permits holders of the Designated Senior Debt as to which such default relates
to accelerate its maturity without further notice (except such notice as may be
required to effect such acceleration) or lapse of time and the Trustee receives
a written notice of such default (a "Payment Blockage Notice") from the holders
of any such Designated Senior Debt. No new period of payment blockage may be
commenced within 360 days after the receipt by the Trustee of any prior Payment
Blockage Notice. No non-payment default that existed or was continuing on the
date of delivery of any Payment Blockage Notice to the Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice.
The Company may and shall resume payment on the Notes: (1) in
the case of a payment default, upon the date on which such default is cured or
waived or otherwise has ceased to exist, and (2) in the case of a non-payment
default, the earlier of the date on which such non-payment default is cured or
waived or otherwise has ceased to exist 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 and not paid, if this Article
otherwise permits the payment, distribution or acquisition at the time of such
payment or acquisition. Following the expiration of any period during which
the Company is prohibited from making payments on the Notes pursuant to a
Payment Blockage Notice, the Company will be obligated to resume making any and
all required payments in respect of the Notes, including without limitation any
missed payments.
The Company shall give prompt written notice to the Trustee of
any default in the payment of any Senior Debt or any acceleration under any
Senior Debt or under any agreement pursuant to which Senior Debt may have been
issued. Failure to give such notice shall not affect the subordination of the
Notes to the Senior Debt or the application of the other provisions provided in
this Article 10.
SECTION 10.4. 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 10.5. When Distribution Must be Paid Over
In the event that the Trustee receives or is holding, or any
Holder receives, any payment of any principal, premium, interest and Liquidated
Damages, if any, with respect to the Notes at a time when the Trustee or such
Holder, as applicable, has actual knowledge (in the case of the Trustee as
described in Section 10.11 hereof), that such payment is prohibited by Section
10.2 or 10.3 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 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 the
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 10.6. 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 10.7. 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.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article 10 shall
have been applied, pursuant to the provisions of this Article, to the payment
of all amounts payable under the Senior Debt, then and in such case the Holders
shall be entitled to receive from the holders of such Senior Debt at the time
outstanding any payments or distributions received by such holders of such
Senior
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Debt in excess of the amount sufficient to pay all amounts payable under or
in respect of such Senior Debt in full; provided that such payments or
distributions shall be paid first pro rata to Holders that previously paid
amounts then pro rata to all Holders.
SECTION 10.8. 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,
premium, interest and Liquidated Damages, if any, 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
(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or an 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,
premium, interest and Liquidated Damages, if any, on a Note on the due date,
the failure is still a Default or an Event of Default.
SECTION 10.9. 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. Distribution or 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.
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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 a Responsible Officer of the Trustee
shall have received at its Corporate Trust Office at least two Business Days
prior to the due date of such payment written notice of facts that would cause
the payment of any principal, premium, interest and Liquidated Damages, if any,
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 7.7
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 6.9 hereof at least 30 days before the expiration of the
time to file such claim, a Representative of Designated Senior Debt is hereby
authorized to file an appropriate claim for and on behalf of the Holders of the
Notes.
SECTION 10.13. Payment
A payment with respect to a Note or with respect to principal of
or interest on a Note shall include, without limitation, payment of principal,
premium, interest and Liquidated Damages, if any, on any Note, any payment on
account of any mandatory or optional repurchase or redemption of any Note
(including payments pursuant to Article 3 or Section 4.14 or Section 4.15
hereof) and any payment or recovery on any claim (whether for rescission or
damages and whether based on contract, tort, duty imposed by law, or any other
theory of liability) relating to or arising out of the offer, sale or purchase
of any Note provided that any such payment, other payment or recovery (i) not
prohibited pursuant to this Article 10 at the time actually made shall not be
subject to any recovery by any holder of Senior Debt or Representative therefor
or other Person pursuant to this Article 10 at any time thereafter (unless such
payment is a voluntary prepayment on the Notes made at the time a Default
exists under this Indenture) and (ii) made by or from any Person other than the
Company shall not be subject to any recovery by any holder of Senior Debt or
Representative therefor or other Person pursuant to this Article 10 at any time
thereafter except to the extent such Person recovers any such amount paid from
the Company, whether pursuant to rights of indemnity, rescission or otherwise.
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ARTICLE 11
MISCELLANEOUS
SECTION 11.1. Trust Indenture Act Controls
If any provision of this Indenture limits, qualifies or conflicts
with a provision of the TIA that is required under the TIA to be a part of and
govern this Indenture, such required provision shall control. If any provision
of this Indenture modifies or excludes any provision of the TIA that may be so
modified or excluded, the provision of the TIA shall be deemed to apply to this
Indenture as so modified or excluded, as the case may be.
SECTION 11.2. Notices
Any notice or communication by the Company or the Trustee to the
others is duly given if in writing and delivered by hand delivery, by
first-class mail (registered or certified, return receipt requested), by
facsimile or by overnight air courier guaranteeing next day delivery, to the
others' addresses as follows:
If to the Company:
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, Georgia 30707
Attention: Joseph Sinicropi
Chief Financial Officer
Telecopier No.: (706) 375-7842
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10031
Attention: Ms. Patricia Stermer
Telecopier No.: (212) 852-1625
The Company or the Trustee by notice to the others may designate
additional or different addresses of subsequent notices or communications.
All notices and communications (other than those sent to Holders
of Notes) shall be deemed to have been duly received: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when receipt is
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confirmed, if sent by facsimile; and the next Business Day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next day
delivery.
Any notice or communication to a Holder of Notes shall be mailed
by first-class mail, certified or registered, return receipt requested, to his
address shown on the register kept by the Registrar. Failure to mail a notice
or communication to a Holder of Notes or any defect in it shall not affect its
sufficiency with respect to other Holders of Notes.
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 of
Notes, it shall mail a copy to the Trustee and each Agent at the same time.
SECTION 11.3. Communication by Holders with Other Holders
Holders of Notes may communicate pursuant to TIA Section 312(b)
with other Holders of Notes 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). Upon qualification of this
Indenture under the TIA, the Trustee shall otherwise comply with TIA Section
312(b).
SECTION 11.4. 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
(if required by the TIA or this Indenture):
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 11.5 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 complied with;
and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 11.5 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been complied
with.
SECTION 11.5. 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 include:
(1) statement that the Person making such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
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(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with, provided,
however, that with respect to matters of fact, an Opinion of Counsel may
rely upon an Officers' Certificate or a certificate of a public
official.
SECTION 11.6. Rules by Trustee and Agents
The Trustee may make reasonable rules for action by or at a
meeting of Holders of Notes. The Registrar or Paying Agent may make reasonable
rules and set reasonable requirements for its functions.
SECTION 11.7. Legal Holidays
A "Legal Holiday" is a Saturday, a Sunday or a day on which
banking institutions in The City of New York, in the city in which the
Corporate Trust Office of the Trustee is located or at a place of payment are
authorized or obligated 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.
SECTION 11.8. No Recourse Against Others
(a) No past, present or future director, officer, employee,
agent, or stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation.
Each Holder of Notes, by accepting a Note, waives and releases all such
liability. The waiver and release shall be part of the consideration for the
issuance of the Notes.
(b) Notwithstanding the foregoing, nothing in this provision
shall be construed as a waiver or release of any claims under the federal
securities laws.
SECTION 11.9. Governing Law
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE
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COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS INDENTURE.
SECTION 11.10. No Adverse Interpretation of Other Agreements
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.11. Successors
All agreements of the Company in this Indenture and the Notes
shall bind its successor. All agreements of the Trustee in this Indenture
shall bind its successor.
SECTION 11.12. Severability
In case any one or more of the provisions in this Indenture or in
the Notes shall be held invalid, illegal or unenforceable in any jurisdiction,
in any respect for any reason, the validity, legality and enforceability of any
such provision in every other jurisdiction and in every other respect, and of
the remaining provisions, shall not in any way be affected or impaired thereby,
it being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.
SECTION 11.13. Counterpart Originals
This Indenture may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of them together shall
represent the same agreement.
SECTION 11.14. 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 hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
[signatures on following page]
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SIGNATURES
IN WITNESS WHEREOF, the undersigned have caused this Indenture to
be executed as of the date first above written.
SYNTHETIC INDUSTRIES, INC.
By:
-------------------------------------
Name:
Title:
UNITED STATES TRUST COMPANY OF NEW YORK
By:
-------------------------------------
Name:
Title:
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EXHIBIT A
FORM OF NOTE
[Face of Note]
SYNTHETIC INDUSTRIES, INC.
9 1/4% SERIES [A/B] SENIOR SUBORDINATED NOTE DUE 2007
No. _________ CUSIP NO. __________
Synthetic Industries, Inc., a Delaware corporation, promises to
pay to __________________________ or registered assigns, the principal sum of
____________________ Dollars on February 15, 2007.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
Dated:
[Seal]
SYNTHETIC INDUSTRIES, INC.
By:
-------------------------------------
By:
-------------------------------------
Certificate of Authentication:
United States Trust Company of New York, as Trustee,
certifies that this is one of the [Global] Notes
referred to in the within-mentioned Indenture.
By:
-----------------------------------
Authorized Signature
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<PAGE> 86
[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
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. 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. THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE REFERRED TO HEREINAFTER. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN
WHOLE OR IN PART, FOR A SECURITY REGISTERED IN THE NAME OF ANY PERSON OTHER
THAN THE DEPOSITORY TRUST COMPANY OR A NOMINEE THEREOF EXCEPT IN THE
CIRCUMSTANCES SET FORTH IN SECTION 2.6 OF THE INDENTURE, AND MAY NOT BE
TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.6 OF THE INDENTURE. BENEFICIAL INTEREST IN THIS GLOBAL
NOTE MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SECTION 2.6 OF THE
INDENTURE.](1)
["THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY
PERSON EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT), (B) IT IS AN "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) WHO IS AN INSTITUTION (AN "INSTITUTIONAL ACCREDITED
INVESTOR"), OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH THE RULE 904
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT PRIOR TO
THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE DATE OF
ORIGINAL ISSUANCE OF THIS NOTE AND THE LAST DATE ON WHICH THE
ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE
(THE "RESALE RESTRICTION TERMINATION DATE") OFFER, SELL OR
- --------------------
(1) This paragraph should be included only if the Note is issued in global
form.
A-2
<PAGE> 87
OTHERWISE TRANSFER THIS NOTE, EXCEPT (A) TO THE ISSUER, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH THE RESALE PROVISIONS OF RULE
144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
WRITTEN CERTIFICATION CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE), (D) PURSUANT TO THE RESALE
LIMITATIONS PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, (F) OUTSIDE THE U.S. TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF REGULATION S UNDER THE
SECURITIES ACT OR (G) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (BASED, IN THE CASE OF
CLAUSES (C), (D), (F) AND (G) ABOVE, UPON AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE ISSUER IF THE ISSUER SO REQUESTS), SUBJECT
IN EACH OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE
DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF SUCH ACCOUNT BE AT ALL
TIMES WITHIN ITS CONTROL AND TO COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE FOREGOING RESTRICTIONS ON RESALE WILL NOT APPLY
SUBSEQUENT TO THE RESALE RESTRICTION TERMINATION DATE."](2)
- --------------------
(2) This paragraph should not be included on Exchange Notes received in an
Exchange Offer.
A-3
<PAGE> 88
[Reverse of Note]
SYNTHETIC INDUSTRIES, INC.
9 1/4% SERIES [A/B] SENIOR SUBORDINATED NOTE DUE 2007
1. Interest. Synthetic Industries, Inc., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount
of this Note at 9 1/4% per annum from February 11, 1997 until maturity and to
pay Liquidated Damages, if any, payable pursuant to Section 2 of the
Registration Rights Agreement referred to below. The Company will pay interest
and Liquidated Damages, if any, semiannually in arrears on February 15 and
August 15 of each year (each an "Interest Payment Date"), or if any such day is
not a Business Day, on the next succeeding Business Day. Interest on the Notes
will accrue from the most recent Interest Payment Date to which interest has
been paid or, if no interest has been paid, from February 11, 1997; 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 August 15, 1997. 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
equal to 1% per annum in excess of the interest rate then in effect 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 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 comprised 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 the record date
immediately preceding the 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, if any, 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, if any, may be made by check mailed to the Holders at
their respective addresses set forth in the register of Holders; provided that
payment by wire transfer of immediately available/same day funds will be
required with respect to principal, premium, interest and Liquidated Damages,
if any, on, all Global Notes. 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, the Trustee will
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without notice to any Holder. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar, except that for purposes
of payments on the Notes pursuant to Sections 7 and 8 hereof, neither the
Company nor any of its Affiliates may act as Paying Agent.
A-4
<PAGE> 89
4. Indenture. The Company issued the Notes under an
Indenture, dated as of February 11, 1997 (the "Indenture"), between the Company
and the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. 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 (15 U.S. Code Sections 77aaa-77bbb) as in effect on the
date of the Indenture. Notwithstanding anything to the contrary herein, 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 unsecured senior
subordinated general obligations of the Company limited to $170,000,000
aggregate principal amount (subject to Section 2.7 of the Indenture).
5. Optional Redemption. The Notes are not redeemable at the
Company's option prior to February 15, 2002. 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, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
February 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002 . . . . . . . . . . . . . 104.6250%
2003 . . . . . . . . . . . . . 103.0834%
2004 . . . . . . . . . . . . . 101.5417%
2005 and thereafter . . . . . . 100.0000%
</TABLE>
Notwithstanding the foregoing, on or prior to February 15, 2000,
the Company may redeem at any time or from time to time up to 35% of the
aggregate principal amount of the Notes originally issued, at a redemption
price of 109.25% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net proceeds of one or more Public Equity Offerings; provided, that at
least $110.5 million in aggregate principal amount of the Notes remain
outstanding following each such redemption; and provided, further, that notice
of such redemption shall be given not later than 45 days and such redemption
shall occur not earlier than 30 days or later than 60 days, after the date of
the closing of any such Public Equity Offering.
6. Notice of Redemption. Subject to the provisions of the
Indenture, notice of redemption will be mailed by first class mail to the
Holder's registered address at least 30 days but not more than 60 days before
the redemption date (unless a different notice period is set forth in Section 5
hereof) to each Holder of Notes to be redeemed. If less than all Notes are to
be redeemed at any time, the Trustee shall, unless otherwise set forth in the
Indenture, select the Notes to be redeemed in multiples of $1,000 pro rata, by
lot or in accordance with a method which the Trustee considers to be fair and
appropriate. On and after the redemption date interest ceases to accrue on
Notes or portions of them called for redemption (unless the Company shall
default in the payment of the redemption price together with accrued and unpaid
interest and Liquidated Damages, if any, to the redemption date).
A-5
<PAGE> 90
7. Change of Control. In the event of a Change of Control of
the Company, 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, at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the Change of Control Payment Date.
8. Asset Sales. In the event of certain Asset Sales, the
Company may be required to make an Asset Sale Offer to purchase the maximum
principal amount of Notes that may be purchased out of Excess Proceeds, at an
offer price in cash equal to 100% of the principal amount of the Notes plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of purchase.
9. Restrictive Covenants. The Indenture imposes certain
limitations on, among other things, the ability of the Company to consolidate
or merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets, the ability of
the Company or its Restricted Subsidiaries to dispose of certain assets, to
declare or pay dividends or make certain other distributions and payments, to
make certain investments or purchase, redeem, or otherwise acquire or retire
for value Equity Interests, to incur additional Indebtedness or incur Liens and
to enter into certain transactions with Affiliates, all subject to certain
limitations described in the Indenture.
10. Denominations, Transfer, Exchange. The Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof. 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. Neither the Company nor the Registrar shall be
required to transfer or exchange any Notes selected for redemption. Also, the
Company need not transfer or exchange any Notes for a period of 15 days before
a selection of Notes to be redeemed.
11. Persons Deemed Owners. The registered Holder of a Note may
be treated as the owner of it for all purposes and neither the Company, the
Trustee nor any Agent shall be affected by notice to the contrary.
12. Unclaimed Money. If money for the payment of principal,
premium, interest or Liquidated Damages, if any, remains unclaimed for two
years, the Trustee or Paying Agent will pay the money back to the Company at
its request. After that, all liability of the Trustee and such Paying Agent
with respect to such money shall cease.
13. Amendment, Supplement, Waiver. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
written consent of the Holders of at least a majority in principal amount of
the Notes then outstanding (including consents obtained in connection with a
tender offer or exchange offer for the Notes). Holders of a majority in
principal amount of the then outstanding Notes by notice to the Trustee may on
behalf of the Holders of all the Notes waive an existing Default or Event of
Default and its consequences, except a continuing Default or Event of Default
in the payment of principal, premium, interest or Liquidated Damages, if any,
with respect to any Note held by a non-consenting Holder.
A-6
<PAGE> 91
Without the consent of any Holder, the Company may amend or supplement the
Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency that does not adversely affect the rights of any Holder or to
provide for uncertificated Notes in addition to or in place of certificated
Notes or to make any change that does not adversely affect the legal rights of
any Holder.
14. Events of Default and Remedies. An Event of Default
generally is: (i) default for 30 days in the payment when due of interest on,
or Liquidated Damages, if any, with respect to, any of the Notes, whether or
not prohibited by the subordination provisions of the Indenture; (ii) default
in payment when due (whether at maturity, upon redemption or repurchase, or
otherwise) of the principal of or premium, if any, on any of the Notes, whether
or not prohibited by the subordination provisions of the Indenture; (iii)
failure by the Company to comply with certain of its agreements in the
Indenture and the Notes; (iv) failure by the Company or any Restricted
Subsidiary for 30 days after notice to comply with any of its covenants or
agreements in the Indenture or the Notes other than those referred to in
clauses (i), (ii) and (iii) above; (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, which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case described in
clauses (a) and (b) of this subsection (v), the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10.0 million or more; (vi) failure by the Company
or any of its Restricted 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 after their entry; and (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Significant
Subsidiaries that is a Restricted Subsidiary. Subject to certain limitations
in the Indenture, if an 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 of the principal amount of the Notes, accrued and unpaid
interest thereon and all other Obligations thereunder, to be due and payable
immediately, except that in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company, any
Significant Subsidiary that is a Restricted Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes shall become due and payable immediately
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 Notes may direct the Trustee
in its exercise of any trust or power. The Company must furnish an annual
compliance certificate to the Trustee.
15. Trustee Dealings with Company. United States Trust Company
of New York, the Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Notes and may otherwise deal with
the Company or its respective Subsidiaries or Affiliates with the same rights
it would have if it were not Trustee.
A-7
<PAGE> 92
16. No Recourse Against Others. No past, present or future
director, officer, employee, agent or stockholder of the Company, as such,
shall have any liability for any obligations of the Company under the Notes or
the Indenture or for any claim based on, in respect of or by reason of, such
obligations or 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 issue of the Notes.
17. Subordination. The payment of principal, premium, interest
and Liquidated Damages, if any, on the Notes will be subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full of all
Senior Debt, whether outstanding on the date of the Indenture or thereafter
incurred, and senior or pari passu in right of payment to, all subordinated
Indebtedness whether outstanding on the date of the Indenture or thereafter
incurred.
18. Authentication. This Note shall not be valid until the
Trustee or an authenticating agent signs the certificate of authentication on
the other side of this Note.
19. 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).
20. Additional Rights of Holders of Transfer Restricted
Securities. In addition to the rights provided to Holders of Notes under the
Indenture, Holders of Transfer Restricted Securities shall have all the rights
set forth in the Registration Rights Agreement, dated as of the date of the
Indenture (the "Registration Rights Agreement"), between the Company and the
Initial Purchaser.
21. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Note Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Notes as a convenience to Holder of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
22. Governing Law. This Note and the Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
as applied to contracts made and performed entirely within the State of New
York, without regard to principles of conflicts of law.
23. Indenture. Each Holder, by accepting a Note, agrees to be
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture or Registration Rights Agreement.
Requests may be made to: Synthetic Industries, Inc., 309 Lafayette Road,
Chickamauga, GA 30707, Attention: Joseph Sinicropi, Chief Financial Officer.
A-8
<PAGE> 93
ASSIGNMENT FORM
To assign this Note, fill in the form below and have your signature guaranteed:
I or we assign and transfer this Note to:
________________________________________________________________________________
(Insert assignee's social security or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ______________________________________ as agent to
transfer this Note on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Your Signature:
-----------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Date:
------------------------------------------
Signature Guarantee:
------------------------------------------------------------
NOTICE: Your Signature must be guaranteed by an Institution which is a member
of one of the following recognized signature Guarantee Programs: (i) The
Securities Transfer Agent Medallion Program; (ii) The New York Stock Exchange
Medallion Program; (iii) The Stock Exchange Medallion Program; or (iv) any
other guarantee program acceptable to the Trustee.
In connection with any transfer of this Note the Holder hereof may be required
by the Indenture to deliver to the Trustee and the Registrar a certification
substantially in the form of Exhibit B to the Indenture.
A-9
<PAGE> 94
FORM OF OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.14 or Section 4.15 of the Indenture, check the
appropriate box:
Section 4.14 [ ] Section 4.15 [ ]
If you want to have only part of this Note purchased by the
Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount (in integral multiples of $1,000):
$
--------------------------------
Date:
------------------------------------------------
Signature:
------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
---------------------------------
NOTICE: Your Signature must be guaranteed by an Institution which is a member
of one of the following recognized signature Guarantee Programs: (i) The
Securities Transfer Agent Medallion Program; (ii) The New York Stock Exchange
Medallion Program; (iii) The Stock Exchange Medallion Program; or (iv) any
other guarantee program acceptable to the Trustee.
SCHEDULE OF EXCHANGES FOR DEFINITIVE NOTES(3)
The following exchanges of a part of this Global Note for Definitive Notes have
been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Note authorized officer
Date of Principal Amount of Principal Amount of following such of Trustee or Note
Exchange this Global Note this Global Note decrease (or increase) Custodian
-------- --------------------- --------------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------------------------------
(3) This schedule should be included only if the Note is issued in global
form.
A-10
<PAGE> 95
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF NOTES
Re: 9 1/4% Series [A/B] Senior Subordinated Notes due 2007 of Synthetic
Industries, Inc.
This Certificate relates to $_____ principal amount of Notes held
in (*) _______ book-entry or (*) ______ definitive form by _________________
(the "Transferor").
The Transferor:(*)
[ ] has requested the Registrar by written order to exchange or register the
transfer of a Note or Notes; or
[ ] has requested the Trustee by written order to exchange its Note or Notes
in definitive, registered form for a beneficial interest in a Global
Note held by the Depository equal to the principal amount of Notes it
holds (or the portion thereof indicated above); or
[ ] has requested the Trustee by written order to deliver in exchange for
its beneficial interest in a Global Note held by the Depository a Note
or Notes in definitive, registered form equal to its beneficial interest
in such Global Note (or the portion thereof indicated above).
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that the Transferor is familiar with the
Indenture relative to the above captioned Notes and that 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 2.6(a)(ii)(A), Section 2.6(b)(i) or
Section 2.6(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 a transaction meeting the requirements of Rule
144A under the Securities Act.
[ ] Such Note is being transferred outside the U.S. to a foreign person
pursuant to an exemption from registration in a transaction meeting the
requirements of Regulation S under the Securities Act (based on an
opinion of counsel if the Company so requests and together with a
certification in substantially the form of Exhibit D to the Indenture).
- ----------------------------------
(*) Check applicable box.
B-1
<PAGE> 96
[ ] Such Note is being transferred in a transaction meeting the requirements
of Rule 144 under the Securities Act (based on an opinion of counsel if
the Company so requests).
[ ] Such Note is being transferred pursuant to an effective registration
statement under the Securities Act.
[ ] Such Note 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 (based on an opinion of
counsel if the Company so requests together with a certification in
substantially the form of Exhibit C to the Indenture).
[ ] Such Note is being transferred in reliance on and in compliance with
another exemption from the registration requirements of the Securities
Act (based on an opinion of counsel if the Company so requests).
----------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------------
Name:
Title:
Address:
Date:
----------------------------
TO BE COMPLETED BY TRANSFEREE IF SECOND BOX ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: Signed:
------------------------ -----------------------------------------
NOTICE: To be executed by an executive
officer
B-2
<PAGE> 97
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED BY ACCREDITED INSTITUTIONS
____________ ___, ____
United States Trust Company of New York,
as Registrar
Attn: Corporate Trust Department
Dear Sirs:
In connection with our proposed purchase of $_____ aggregate
principal amount of 9 1/4% Series [A/B] Senior Subordinated Notes due 2007 (the
"Notes") of Synthetic Industries, Inc. (the "Issuer"), a Delaware corporation,
we confirm that:
1. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act")) purchasing for our own account or for
the account of such an institutional "accredited investor," and we are
acquiring the Notes for investment purposes and not with a view to, or
for offer or sale in connection with, any distribution in violation of
the Securities Act or the laws of any state or other jurisdiction, and
we have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of our investment in
the Notes, and we and any accounts for which we are acting are each able
to bear the economic risk of our or its investment.
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the
Indenture relating to the Notes (the "Indenture") and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer
the Notes except in compliance with, such restrictions and conditions of
the Securities Act.
3. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes may not be
offered or sold except as described below. We agree, on our own behalf
and on behalf of any account for which we are purchasing the Notes, and
each subsequent holder of the Notes by its acceptance thereof will
agree, not to offer, sell or otherwise transfer such Notes prior to the
date which is three years after the later of the date of original issue
of such Notes and the last date on which the Issuer or any affiliate of
the Issuer was the owner of such Notes (the "Resale Restriction
Termination Date"), except (A) to the Issuer, (B) in accordance with
Rule 144A under the Securities Act to a "qualified institutional buyer"
(as defined therein) in a transaction meeting the requirements of Rule
144A, (C) to an institutional "accredited investor" (as defined above)
that is purchasing for his own account or for the account of such an
"accredited investor," and that, prior to such transfer, furnishes to
the Trustee (as
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<PAGE> 98
defined in the Indenture) a signed letter, substantially identical to
this letter, containing certain representations and agreements relating
to the restrictions on transfer of the Notes (the form of which letter
can be obtained from the Trustee), (D) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act, if
available, (E) pursuant to an effective registration statement under the
Securities Act, (F) outside the U.S. to a foreign person in a
transaction meeting the requirements of Regulation S under the
Securities Act, or (G) pursuant to any other available exemption from
the registration requirements of the Securities Act (based upon an
opinion of counsel reasonably acceptable to the Issuer if the Issuer so
requests), subject in each of the foregoing cases, to any requirement of
law that the disposition of our property or the property of such
investor account or accounts be at all times within our or their control
and to compliance with applicable securities laws of any state of other
jurisdiction. The foregoing restrictions on resale will not apply
subsequent to the Resale Restriction Termination Date, and we further
agree to provide to any person purchasing any of the Notes from us a
notice advising such purchaser that resales of the Notes are restricted
as stated herein.
4. We understand that, on any proposed offer, sale or other
transfer of any Notes prior to the Resale Restriction Termination Date,
we will be required to furnish to the Trustee and the Issuer such
certifications, legal opinions, and other information as either of them
may reasonably require to confirm that the proposed transaction complies
with the foregoing restrictions. We further understand that the Notes
purchased by us will bear a legend reflecting the substance of this and
the preceding paragraph.
5. We are acquiring the Notes purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
We acknowledge that you, the Trustee and others are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or
a copy hereof to any interested party in any administrative or legal
proceedings or official inquiry with respect to the matters covered hereby. We
agree to notify you promptly in writing if any of our representations or
warranties ceases to be accurate and complete.
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<PAGE> 99
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
----------------------------------------------
(Name of Purchaser)
By:
-------------------------------------
Name:
Title:
Address:
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<PAGE> 100
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS PURSUANT TO REGULATION S
__________, _____
United States Trust Company of New York,
as Registrar
Attention: Corporate Trust Department
Ladies and Gentlemen:
In connection with our proposed sale of $__________
aggregate principal amount of 9 1/4% Series [A/B] Senior Subordinated Notes due
2007 (the "Notes") of Synthetic Industries, Inc., a Delaware corporation (the
"Company"), we represent that:
(i) the offer of the Notes was not made to a person
in the United States;
(ii) at the time the buy order was originated, the
transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was
outside the United States;
(iii) no directed selling efforts have been made by us,
any of our affiliates or any person acting on our or their behalf
in the United States in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S, as applicable; and
(iv) the transaction is not part of a plan or scheme
to evade the registration requirements of the U.S. Securities Act
of 1933.
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<PAGE> 101
You and the Company are entitled to rely upon this letter
and you are irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
----------------------------------------
[Name of Transferor]
By:
------------------------------------
Name:
Title:
Address:
D-2
<PAGE> 1
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of February 11, 1997 between SYNTHETIC INDUSTRIES, INC., a
Delaware corporation (the "Company"), and Bear, Stearns & Co. Inc. (the
"Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement
dated as of February 6, 1997 between the Company and the Initial Purchaser (the
"Purchase Agreement"), which provides for the sale by the Company to the
Initial Purchaser of an aggregate of $125,000,000 aggregate principal amount of
the Company's 9 1/4% Senior Subordinated Notes due 2007 (the "Notes"). In
order to induce the Initial Purchaser to enter into the Purchase Agreement and
to purchase the Notes, the Company has agreed to provide to the Initial
Purchaser and its direct and indirect transferees the registration rights for
the Notes set forth in this Agreement. The execution and delivery of this
Agreement is a condition precedent to the obligations of the Initial Purchaser
under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
capitalized defined terms shall have the following meanings (and, unless
otherwise indicated, capitalized terms used herein without definition shall
have the meanings ascribed to them in the Purchase Agreement):
"Act" shall mean the Securities Act of 1933, as amended.
"Agreement" shall have the meaning set forth in the preamble
to this Agreement.
"Applicable Period" shall have the meaning set forth in
Section 3(t) hereof.
"Closing Date" shall mean the Closing Date as defined in the
Purchase Agreement.
"Commission" shall mean the Securities and Exchange
Commission, or such other federal agency administering the Act or the
Exchange Act.
"Company" shall have the meaning set forth in the preamble to
this Agreement, and shall also include the Company's successors.
<PAGE> 2
"Depository" shall mean The Depository Trust Company, or any
successor depositary appointed by the Company; provided, however, that
such depositary must have an address in the Borough of Manhattan, The
City of New York.
"Effectiveness Period" shall have the meaning set forth in
Section 2(b) hereof.
"Event Date" shall have the meaning set forth in Section 2(e)
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Notes for Notes pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under
the Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean the
registration statement (on Form S-4 or, if applicable, on any other
appropriate form) relating to the Exchange Offer, and all amendments
and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"Exchange Period" shall have the meaning set forth in Section
2(a) hereof.
"Exchange Notes" shall mean the 9 1/4% Series B Senior
Subordinated Notes due 2007, to be issued by the Company under the
Indenture and containing terms identical to the Notes (except that (i)
interest thereon shall accrue from the last date on which interest was
paid on the Notes or, if no such interest has been paid, from February
11, 1997, and (ii) the transfer restrictions thereon shall be
eliminated) to be offered to Holders of Notes in exchange for Notes
pursuant to the Exchange Offer.
"Holder" shall mean the Initial Purchaser, for so long as it
owns any Registrable Securities, and each of its respective
successors, assigns and direct and indirect transferees who become
registered owners of Registrable Securities under the Indenture.
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<PAGE> 3
"Indenture" shall mean the Indenture dated as of February 11,
1997 by and between the Company and United States Trust Company of New
York, as trustee, as the same may be amended or supplemented from time
to time in accordance with the terms thereof.
"Initial Purchaser" shall have the meaning set forth in the
preamble to this Agreement.
"Inspectors" shall have the meaning set forth in Section 3(n)
hereof.
"Liquidated Damages" shall have the meaning set forth in
Section 2(e) hereof.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding (as determined under the
Indenture) Registrable Securities.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Notes" shall have the meaning set forth in the preamble to
this Agreement.
"Participating Broker-Dealer" shall have the meaning set forth
in Section 3(t) hereof.
"Person" shall mean any individual, corporation, limited
liability company, general or limited partnership, limited liability
partnership, joint venture, association, joint-stock company, trust,
charitable foundation, unincorporated organization, government or
agency or political subdivision thereof or any other entity.
"Private Exchange" shall have the meaning set forth in Section
2(a) hereof.
"Private Exchange Notes" shall have the meaning set forth in
Section 2(a) hereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Securities
covered by a Shelf Registration Statement, including
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<PAGE> 4
post-effective amendments, and in each case including all material
incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble to this Agreement.
"Records" shall have the meaning set forth in Section 3(n)
hereof.
"Registrable Securities" shall mean the Notes and, if issued,
the Private Exchange Notes; provided, however, that Notes or Private
Exchange Notes, as the case may be, shall cease to be Registrable
Securities when (i) a Registration Statement with respect to such
Notes or Private Exchange Notes or the resale thereof shall have been
declared effective under the Act and such Notes or Private Exchange
Notes, as the case may be, shall have been disposed of pursuant to
such Registration Statement, (ii) such Notes or Private Exchange
Notes, as the case may be, shall have become eligible to be sold to
the public pursuant to Rule 144(k) (or any similar provision then in
force, but not Rule 144A) under the Act, (iii) such Notes or Private
Exchange Notes, as the case may be, shall have ceased to be
outstanding or (iv) with respect to the Notes, such Notes have been
exchanged for Exchange Notes upon consummation of the Exchange Offer.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including, without limitation: (i) Commission, stock
exchange or NASD registration and filing fees, including, if
applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel that is required to be retained by any
Holder of Registrable Securities in accordance with the rules and
regulations of the NASD, (ii) fees and expenses incurred in connection
with compliance with state securities or blue sky laws (including
reasonable fees and disbursements of counsel for any underwriters or
Holders in connection with the blue sky qualification of any of the
Exchange Notes or Registrable Securities) and compliance with the
rules of the NASD, (iii) expenses of any Persons in preparing or
assisting in preparing, printing and distributing any Registration
Statement, any Prospectus and any amendments or supplements thereto,
and in preparing or assisting in preparing, printing and distributing
any underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with the
obligations under this Agreement, (iv) rating agency fees, (v) fees
and disbursements of counsel for and independent certified public
accountants of the Company, including the expenses of any "cold
comfort" letters required by or incident to such performance and
compliance, (vi) fees and expenses of the Trustee, and any exchange
agent or custodian, (vii) fees and expenses incurred in
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<PAGE> 5
connection with the listing, if any, of any of the Registrable
Securities on any securities exchange or exchanges, and (viii) the
reasonable fees and expenses of any special experts retained by the
Company in connection with any Registration Statement. The term
"Registration Expenses" shall not include fees of counsel to any
underwriters or the Holders (other than the fees described in clauses
(i) and (ii) above), underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder pursuant to a Shelf Registration
Statement.
"Registration Statement" shall mean any registration statement
of the Company relating to the Exchange Notes or Registrable
Securities pursuant to the provisions of this Agreement, and all
amendments and supplements to any such registration statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of
Section 2(b) of this Agreement which covers all of the Registrable
Securities, on an appropriate form under Rule 415 under the Act, or
any similar rule that may be adopted by the Commission, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated
by reference therein.
"TIA" shall mean the Trust Indenture Act of 1939, as amended.
"Trustee" shall mean the trustee under the Indenture.
2. Registration Under the Act.
(a) Exchange Offer. To the extent not prohibited by any
applicable law or applicable interpretation of the staff of the Commission, the
Company shall, for the benefit of the Holders, at the Company's cost, use its
best efforts to cause to be filed with the Commission an Exchange Offer
Registration Statement on or prior to 30 days after the Closing Date on an
appropriate form under the Act covering the offer by the Company to the Holders
to exchange all of the Registrable Securities (other than Private Exchange
Notes) for a like aggregate principal amount of Exchange Notes, to cause such
Exchange Offer Registration Statement to be declared effective under the Act by
the Commission on or prior to 120 days after the Closing
-5-
<PAGE> 6
Date, to cause such Registration Statement to remain effective until the
closing of the Exchange Offer and to cause the Exchange Offer to be consummated
on or prior to 45 days after the date on which the Exchange Offer Registration
Statement was declared effective under the Act by the Commission. The Exchange
Notes will be issued under the Indenture. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company shall promptly commence the
Exchange Offer, it being the objective of such Exchange Offer to enable each
Holder (other than Participating Broker- Dealers (as defined in Section 3(t)
hereof)) eligible and electing to exchange Registrable Securities for Exchange
Notes (assuming that such Holder is not an affiliate of the Company within the
meaning of Rule 405 under the Act, acquires the Exchange Notes in the ordinary
course of such Holder's business and has no arrangements or understandings with
any Person to participate in the Exchange Offer for the purpose of distributing
the Exchange Notes) to transfer such Exchange Notes from and after their
receipt without any limitations or restrictions under the Act or under state
securities or blue sky laws.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus
forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related
documents;
(ii) keep the Exchange Offer open for acceptance for a
period of not less than 30 days after the date notice thereof is
mailed to the Holders, or longer if required by applicable law
(such period being referred to herein as the "Exchange Period");
(iii) utilize the services of the Depository for the
Exchange Offer;
(iv) permit Holders to withdraw tendered Notes at any
time prior to the close of business, New York City time, on the
last business day of the Exchange Period, by sending to the
institution specified in the notice a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the
principal amount of Notes delivered for exchange, and a statement
that such Holder is withdrawing its election to have such Notes
exchanged;
(v) notify each Holder that any Note not tendered
will remain outstanding and continue to accrue interest, but will
not retain any rights under this Agreement (except in the case of
the Initial Purchaser and Participating Broker-Dealers as provided
herein); and
(vi) otherwise comply in all respects with all
applicable laws relating to the Exchange Offer.
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<PAGE> 7
If, prior to consummation of the Exchange Offer, the
Initial Purchaser holds any Notes acquired by it and having the status of an
unsold allotment in the initial distribution, the Company upon the request of
the Initial Purchaser shall, simultaneously with the delivery of the Exchange
Notes in the Exchange Offer, issue and deliver to the Initial Purchaser in
exchange (the "Private Exchange") for Notes held by the Initial Purchaser a
like principal amount of debt securities of the Company that are identical
(except that such securities shall bear appropriate transfer restrictions) to
the Exchange Notes (the "Private Exchange Notes") and which are issued pursuant
to the Indenture (which will provide that the Exchange Notes will not be
subject to the transfer restrictions set forth in the Indenture and that the
Exchange Notes, the Private Exchange Notes and the Notes will vote and consent
together on all matters as one class and that none of the Exchange Notes, the
Private Exchange Notes or the Notes will have the right to vote or consent as a
separate class on any matter). The Private Exchange Notes shall be of the same
series as and shall bear the same CUSIP number as the Exchange Notes.
As soon as practicable after the close of the Exchange
Offer or the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Notes or portions thereof
duly tendered and not validly withdrawn pursuant to the Exchange
Offer;
(ii) accept for exchange all Notes or portions thereof
duly tendered pursuant to the Private Exchange; and
(iii) deliver, or cause to be delivered, to the Trustee
for cancellation all Notes or portions thereof so accepted for
exchange by the Company, and issue, and cause the Trustee to
promptly authenticate and deliver to each Holder, a new Exchange
Note or Private Exchange Note, as the case may be, equal in
principal amount to the principal amount of the Notes surrendered
by such Holder.
To the extent not prohibited by applicable law or any
applicable interpretation of the staff of the Commission, the Company shall use
its best efforts to complete the Exchange Offer as provided above, and shall
comply with all applicable requirements of the Act, the Exchange Act and other
applicable laws in connection with the Exchange Offer. The Exchange Offer
shall not be subject to any condition, other than that (i) the Exchange Offer
does not violate any applicable law or interpretation of the staff of the
Commission, (ii) no action or proceeding has been instituted or threatened in
any court or by or before any governmental agency with respect to the Exchange
Offer which, in the reasonable judgment of the Company, might impair the
ability of the Company to proceed with the Exchange Offer, (iii) there has not
been any material change, or development involving a prospective
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<PAGE> 8
material change, in the business or financial affairs of the Company or any of
its subsidiaries which, in the reasonable judgment of the Company, would
materially impair the Company's ability to consummate the Exchange Offer or
have a material adverse effect on the Company if the Exchange Offer is
consummated, (iv) there has not been proposed, adopted, or enacted any law,
statute, rule or regulation which, in the reasonable judgment of the Company,
might materially impair the ability of the Company to proceed with the Exchange
Offer or have a material adverse effect on the Company if the Exchange Offer is
consummated or (v) all governmental approvals which the Company shall
reasonably deem necessary for the consummation of the Exchange Offer as
contemplated shall have been obtained. Each Holder of Registrable Securities
who wishes to exchange such Registrable Securities for Exchange Notes in the
Exchange Offer will be required to make certain customary representations in
connection therewith, including representations that such Holder is not an
affiliate of the Company within the meaning of Rule 405 under the Act, that any
Exchange Notes to be received by it will be acquired in the ordinary course of
business and that at the time of the commencement of the Exchange Offer it had
no arrangement with any Person to participate in the distribution (within the
meaning of the Act) of the Exchange Notes and will be required to make such
other representations as may be necessary under applicable Commission rules,
regulations or interpretations to render available the use of Form S-4 or any
other appropriate form under the Act. The Company shall inform the Initial
Purchaser, after consultation with the Trustee and the Initial Purchaser, of
the names and addresses of the Holders to whom the Exchange Offer is made, and
the Initial Purchaser shall have the right to contact such Holders and
otherwise facilitate the tender of Registrable Securities in the Exchange
Offer.
In the event that the Company is unable to consummate the
Exchange Offer due to any event listed in clauses (i) through (v) in the
paragraph immediately above, the Company shall not be deemed to have breached
any covenant under this Section 2(a).
Upon consummation of the Exchange Offer in accordance with
this Section 2(a), the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Securities that are
Private Exchange Notes and Exchange Notes held by Participating Broker-Dealers,
and the Company shall have no further obligation to register Registrable
Securities (other than Private Exchange Notes) pursuant to Section 2(b) of this
Agreement.
(b) Shelf Registration. In the event that (i) the
Exchange Offer Registration provided in Section 2(a) above is not available to
any Holder or may not be consummated as soon as practicable after the last day
of the Exchange Period because, in either case, it would violate applicable
securities laws or because the applicable interpretations of the staff of the
Commission would not permit the
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<PAGE> 9
Company to effect the Exchange Offer, or (ii) the Exchange Offer is not for any
other reason consummated within 180 days of the Closing Date, the Company
shall, at its cost, cause to be filed with the Commission as promptly as
practicable after such determination or date, as the case may be, and, in any
event, on or prior to 30 days thereafter, a Shelf Registration Statement
providing for the sale by the Holders of all of the Registrable Securities, and
shall use its best efforts to cause such Shelf Registration Statement declared
effective by the Commission on or prior to 90 days after such determination or
date. No Holder of Registrable Securities may include any of its Registrable
Securities in any Shelf Registration pursuant to this Agreement unless and
until such Holder furnishes to the Company in writing, within 15 days after
receipt of a request therefor, such information as the Company may, after
conferring with counsel with regard to information relating to Holders that
would be required by the Commission to be included in such Shelf Registration
Statement or Prospectus included therein, reasonably request for inclusion in
any Shelf Registration Statement or Prospectus included therein. Each Holder
as to which any Shelf Registration is being effected agrees to furnish promptly
to the Company all information required to be disclosed in the applicable Shelf
Registration Statement or Prospectus included therein by the rules and
regulations of the Commission applicable to the Shelf Registration Statement in
order to make the information previously furnished to the Company by such
Holder not materially misleading.
The Company agrees, subject to applicable law or
applicable interpretation of the staff of the Commission, to use its reasonable
best efforts to keep the Shelf Registration Statement continuously effective,
supplemented and amended under the Act for a period ending on the earlier of
the date three years from the Closing Date (subject to extension pursuant to
the last paragraph of Section 3) or when all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement or cease to be outstanding (the "Effectiveness
Period"). The Company shall not permit any securities other than Registrable
Securities to be included in the Shelf Registration. The Company will, in the
event a Shelf Registration Statement is declared effective, provide to each
Holder copies of the prospectus which is a part of the Shelf Registration
Statement, notify each such Holder when the Shelf Registration Statement has
become effective and take certain other actions as are customary to permit
unrestricted resales of the Registrable Securities covered by the Shelf
Registration Statement. The Company further agrees, if necessary, to use its
reasonable best efforts to supplement or amend the Shelf Registration
Statement, if required by the Act or the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration Statement or by any other rules and regulations thereunder for
shelf registrations, or if reasonably requested by the Majority Holders, and
the Company agrees to furnish to the Holders copies of any such supplement or
amendment promptly after its being used or filed with the Commission.
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<PAGE> 10
(c) Expenses. The Company shall pay all Registration
Expenses in connection with registrations pursuant to Section 2(a) or 2(b).
Each Holder shall pay all expenses of its counsel (other than the fees
described in clauses (i) and (ii) of the definition of "Registration
Expenses"), underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. An Exchange
Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf
Registration Statement pursuant to Section 2(b) hereof will not be deemed to
have become effective unless it has been declared effective by the Commission;
provided, however, that if, after it has been declared effective, the offering
of Registrable Securities pursuant to a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the Commission or any other governmental agency or court, such Registration
Statement will be deemed not to have been effective during the period of such
interference, until the offering of Registrable Securities pursuant to such
Registration Statement may legally resume.
(e) Liquidated Damages. In the event that an
Exchange Offer Registration Statement has not been filed with the Commission on
or prior to 30 days after the Closing Date, additional interest payable by the
Company as liquidated damages ("Liquidated Damages") will accrue on the Notes
from and including the 31st day after the Closing Date until but excluding the
date such Exchange Offer Registration Statement is filed. In addition, if on
or prior to 120 days after the Closing Date, such Exchange Offer Registration
Statement is not declared effective under the Act by the Commission, Liquidated
Damages will accrue on the Notes from and including the 121st day after the
Closing Date until but excluding the date such Exchange Offer Registration
Statement is declared effective. Further, if on or prior to 45 days after the
date specified for effectiveness of the Exchange Offer Registration Statement
the Exchange Offer is not consummated, Liquidated Damages will accrue on the
Notes from and including the 46th day after the date specified for
effectiveness of the Exchange Offer Registration Statement, but excluding, the
consummation of the Exchange Offer. If applicable law or interpretations of
the staff of the Commission prohibit a Holder from participating in the
Exchange Offer or if for any reason the Exchange Offer is not consummated
within 180 days of the Closing Date and if a Shelf Registration Statement is
not filed or declared effective within the time periods provided by Section
2(b) hereof for such filing or declaration, Liquidated Damages will accrue on
the Notes (other than those exchanged in the Exchange Offer) or the Private
Exchange Notes, as the case may be, from and including the day immediately
following such default until but excluding the effective date of the Shelf
Registration Statement. Further, if the Shelf Registration Statement or the
Exchange Offer Registration Statement is declared effective but thereafter
ceases to be effective or usable during the time periods specified in this
Agreement, Liquidated Damages will
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<PAGE> 11
accrue on the Notes (other than those exchanged in the Exchange Offer) or the
Private Exchange Notes, as the case may be, from and including the day
immediately following such default until but excluding the date such
Registration Statement is declared effective. In each case, such Liquidated
Damages will be payable in cash semiannually in arrears, with the first
semiannual payment due on the first interest payment date in respect of the
Notes (or the Private Exchange Notes) following the date from which Liquidated
Damages begin to accrue, and will accrue, under each circumstance set forth
above at a rate per annum equal to an additional one half of one percent
(0.50%) of the principal amount of the Notes (or the Private Exchange Notes)
upon the occurrence of each such circumstance, which rate will increase by one
half of one percent (0.50%) for each 90-day period that such Liquidated Damages
continues to accrue under any circumstance, with an aggregate maximum increase
in the interest rate per annum equal to two percent (2.00%).
Upon the filing of the Exchange Offer Registration
Statement, the effectiveness of the Exchange Offer Registration Statement, or
the consummation of the Exchange Offer, as the case may be, the interest rate
borne by the Notes will be reduced by the full amount of any such increase to
the extent that such increase related to the failure of any such event to have
occurred. Upon the effectiveness of a Shelf Registration Statement, the
interest rate borne by the Notes (and the Private Exchange Notes) shall be
reduced, from and as of the date of such effectiveness, to the original
interest rate of the Notes unless and until increased as described above.
Notwithstanding the foregoing, the Company (i) shall not be required to amend
or supplement the Shelf Registration Statement, any related prospectus or any
document incorporated therein by reference and (ii) may suspend the
effectiveness of any such Shelf Registration Statement in the event that, and
for a period not to exceed, for so long as this Agreement is in effect, an
aggregate of 90 days in any one calendar year if (A) an event occurs and is
continuing as a result of which the Shelf Registration Statement, any related
prospectus or any document incorporated therein by reference as then amended or
supplemented would, in the Company's good faith judgment, contain an untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading, and (B) the Company
determines in its good faith judgment that the disclosure of such event at such
time would have a material adverse effect on the business, operations or
prospects of the Company; provided that any such suspension shall not relieve
the Company from its obligation to pay Liquidated Damages.
The Company shall notify the Trustee within three business
days after each and every date on which an event occurs in respect of which
Liquidated Damages is required to be paid (an "Event Date"). Liquidated
Damages shall be paid by depositing with the Trustee, in trust, for the benefit
of the Holders of Notes, Exchange Notes or Private Exchange Notes, as the case
may be, on or before the applicable semiannual interest payment date,
immediately available funds in sums
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<PAGE> 12
sufficient to pay the Liquidated Damages then due. The Liquidated Damages due
shall be payable on each interest payment date to the record Holder of Notes
entitled to receive the interest payment to be paid on such date as set forth
in the Indenture. Each obligation to pay Liquidated Damages shall be deemed to
accrue from and including the day following the applicable Event Date.
(f) Specific Enforcement. Without limiting the
remedies available to the Initial Purchaser and the Holders, the Company
acknowledges that any failure by the Company to comply with its obligations
under Section 2(a) and Section 2(b) hereof would result in material irreparable
injury to the Initial Purchaser or the Holders for which there is no adequate
remedy at law, that it would not be possible to measure damages for such
injuries precisely and that, in the event of any such failure, the Initial
Purchaser or any Holder may obtain such relief as may be required to
specifically enforce the Company's obligations under Section 2(a) and Section
2(b) hereof.
3. Registration Procedures. In connection with the
obligations of the Company with respect to the Registration Statements pursuant
to Sections 2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the Commission a Registration
Statement or Registration Statements as prescribed by Sections
2(a) and 2(b) within the relevant time periods specified in
Section 2 hereof on the appropriate form under the Act, which form
(i) shall be selected by the Company, (ii) shall, in the case of a
Shelf Registration, be available for the sale of the Registrable
Securities by the selling Holders and (iii) shall comply as to
form in all material respects with the requirements of the
applicable form and include or incorporate by reference all
financial statements required by the Commission to be filed
therewith, and the Company shall use its best efforts to cause
such Registration Statement to become effective and remain
effective in accordance with Section 2; provided, however, that if
(1) such filing is pursuant to Section 2(b), or (2) a Prospectus
contained in an Exchange Offer Registration Statement filed
pursuant to Section 2(a) is required to be delivered under the Act
by any Participating Broker-Dealer who seeks to sell Exchange
Notes, before filing any Registration Statement or Prospectus or
any amendments or supplements thereto, the Company, if requested,
shall furnish to and afford the Holders and each such
Participating Broker-Dealer, as the case may be, covered by such
Registration Statement, their counsel and the managing
underwriters, if any, a reasonable opportunity to review copies of
all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto)
proposed to be filed at least five business days prior to such
filing. The Company shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of
which the
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<PAGE> 13
Holders, pursuant to this Agreement, must be afforded an
opportunity to review prior to the filing of such document, if the
Majority Holders or such Participating Broker-Dealer, as the case
may be, their counsel or the managing underwriters, if any, shall
reasonably object;
(b) subject to Section 3(a) hereof, prepare and file
with the Commission such amendments and post-effective amendments
to each Registration Statement as may be necessary to keep such
Registration Statement effective for the Effectiveness Period or
the Applicable Period, as the case may be, and cause each
Prospectus to be supplemented by any required prospectus
supplement and as so supplemented to be filed pursuant to Rule 424
(or any similar provision then in force) under the Act, and comply
with the provisions of the Act, the Exchange Act and the rules and
regulations promulgated thereunder applicable to it with respect
to the disposition of all securities covered by each Registration
Statement during the Effectiveness Period or the Applicable
Period, as the case may be, in accordance with the intended method
or methods of distribution by the selling Holders thereof
described in this Agreement (including sales by any Participating
Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify
each Holder, at least five business days prior to filing, that a
Shelf Registration Statement with respect to the Registrable
Securities is being filed and advising such Holder that the
distribution of Registrable Securities will be made in accordance
with the method selected by the Majority Holders, (ii) furnish to
each Holder and to each underwriter of an underwritten offering of
Registrable Securities, if any, without charge, as many copies of
each Prospectus, including each preliminary Prospectus, and any
amendment or supplement thereto and such other documents as such
Holder or underwriter may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable
Securities, and (iii) subject to the last paragraph of this
Section 3, consent to the use of the Prospectus or any amendment
or supplement thereto by each of the selling Holders in connection
with the offering and sale of the Registrable Securities covered
by the Prospectus or any amendment or supplement thereto, provided
that such use complies with all applicable laws and regulations;
(d) use its best efforts to register or qualify the
Registrable Securities under all applicable state securities or
"blue sky" laws of such jurisdictions as any Holder of Registrable
Securities covered by a Registration Statement and each
underwriter of an underwritten offering of Registrable Securities
shall reasonably request by the time the applicable Registration
Statement is declared effective by the Commission, and do any and
all other acts and things which may be reasonably necessary or
advisable to enable such
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<PAGE> 14
Holder and underwriter to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder;
provided, however, that the Company shall not be required to (i)
qualify as a foreign partnership or foreign corporation or as a
dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (ii)
file any general consent to service of process in any jurisdiction
where it would not otherwise be subject to such service of process
or (iii) subject itself to taxation in any such jurisdiction if it
is not then so subject;
(e) in the case of (A) a Shelf Registration or (B)
Participating Broker-Dealers who have notified the Company that
they will be utilizing the Prospectus contained in the Exchange
Offer Registration Statement as provided in Section 3(t) hereof,
are seeking to sell Exchange Notes and are required to deliver
Prospectuses, notify each Holder, or such Participating
Broker-Dealers, as the case may be, their counsel and the managing
underwriters, if any, promptly and, if requested by such Holder or
Participating Broker-Dealer, confirm such notice in writing (i)
when a Registration Statement has become effective and when any
post-effective amendments and supplements thereto become
effective, (ii) of any request by the Commission or any state
securities authority for amendments and supplements to a
Registration Statement or Prospectus or for additional information
after the Registration Statement has become effective, (iii) of
the issuance by the Commission or any state securities authority
of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose,
(iv) in the case of a Shelf Registration, if, between the
effective date of a Registration Statement and the closing of any
sale of Registrable Securities covered thereby, the
representations and warranties of the Company contained in any
underwriting agreement, securities sales agreement or other
similar agreement, if any, relating to such offering cease to be
true and correct in all material respects, (v) if the Company
receives any notification with respect to the suspension of the
qualification of the Registrable Securities or the Exchange Notes
to be sold by any Participating Broker-Dealer for offer or sale in
any jurisdiction or the initiation of any proceeding for such
purpose, (vi) of the happening of any event or the failure of any
event to occur or the discovery of any facts or otherwise, during
the period a Shelf Registration Statement is effective or the
Applicable Period, as the case may be, which makes any statement
made in the Shelf Registration Statement, the Exchange Offer
Registration Statement or any related Prospectus untrue in any
material respect or which causes such Registration Statement or
Prospectus, as the case may be, to omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and (vii)
the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate;
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<PAGE> 15
(f) make every effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at
the earliest possible moment;
(g) in the case of a Shelf Registration, furnish to
each Holder, upon request and without charge, at least one
conformed copy of each Registration Statement and any
post-effective amendment thereto (without documents incorporated
therein by reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate
with the selling Holders to facilitate the timely preparation and
delivery of certificates, if any, representing Registrable
Securities to be sold, which certificates shall not bear any
restrictive legends and shall be in a form eligible for deposit
with the Depository; and cause such Registrable Securities to be
in such denominations (consistent with the provisions of the
Indenture) and registered in such names as the selling Holders or
the managing underwriters may reasonably request at least two
business days prior to the closing of any sale of Registrable
Securities;
(i) subject to Section 3(a) hereof and the second
paragraph of Section 2(e) hereof, in the case of a Shelf
Registration or an Exchange Offer Registration, upon the
occurrence of any circumstance contemplated by Section 3(e)(ii),
3(e)(iii), 3(e)(iv), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, use
its best efforts to prepare a supplement or post-effective
amendment to the Registration Statement and the related Prospectus
or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, such Prospectus will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. The Company agrees to notify each Holder to suspend
use of the Prospectus as promptly as practicable after the
occurrence of any such circumstance, and each Holder hereby agrees
to suspend use of the Prospectus until the Company has amended or
supplemented the Prospectus to correct such misstatement or
omission;
(j) in the case of a Shelf Registration, furnish to
each Holder of Registrable Securities, upon request and without
charge, a reasonable number of copies of any document which is
incorporated by reference into or is an exhibit to a Registration
Statement or a Prospectus after the initial filing of a
Registration Statement;
(k) obtain a CUSIP number for all Exchange Notes or
Registrable Securities, as the case may be, not later than the
effective date of a
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<PAGE> 16
Registration Statement, and provide the Trustee with printed
certificates for the Exchange Notes or the Registrable Securities,
as the case may be, in a form eligible for deposit with the
Depository;
(l) cause the Indenture to be qualified under the TIA
in connection with the registration of the Exchange Notes or
Registrable Securities, as the case may be, cooperate with the
Trustee and the Holders to effect such changes to the Indenture as
may be required for the Indenture to be so qualified in accordance
with the terms of the TIA and execute, and use its best efforts to
cause the Trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents required to
be filed with the Commission to enable the Indenture to be so
qualified in a timely manner;
(m) in the case of a Shelf Registration, enter into
such agreements (including underwriting agreements) as are
customary in underwritten public offerings and take all such other
appropriate actions as are reasonably requested in order to
expedite or facilitate the registration or the disposition of such
Registrable Securities, and in such connection, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration: (i) make such
representations and warranties to Holders of such Registrable
Securities and the underwriters (if any), with respect to the
business of the Company and its subsidiaries and the Registration
Statement, the Prospectus and all documents, if any, incorporated
or deemed to be incorporated by reference therein, in each case,
as are customarily made by issuers to underwriters in underwritten
public offerings, and confirm the same if and when reasonably
requested; (ii) obtain customary opinions of counsel to the
Company and updates thereof in form and substance reasonably
satisfactory to the managing underwriters (if any) and the Holders
of a majority in principal amount of the Registrable Securities
being sold, addressed to each selling Holder and the underwriters
(if any) covering the matters customarily covered in opinions
requested in underwritten public offerings and such other matters
as may be reasonably requested by such Holders and underwriters;
(iii) obtain "cold comfort" letters and updates thereof in form
and substance reasonably satisfactory to the managing underwriters
from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business
acquired or to be acquired by the Company for which financial
statements and financial data are, or are required to be, included
in the Registration Statement), addressed to the selling Holders
of Registrable Securities and to each of the underwriters, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten public offerings; and
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<PAGE> 17
(iv) if an underwriting agreement is entered into, cause the same
to contain indemnification provisions and procedures no less
favorable than those set forth in Section 4 hereof (or such other
provisions and procedures acceptable to Holders of a majority in
aggregate principal amount of Registrable Securities covered by
such Registration Statement and the managing underwriters or
agents) with respect to all parties to be indemnified pursuant to
said Section. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required
thereunder;
(n) if (A) a Shelf Registration is filed pursuant to
Section 2(b) or (B) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2(a) is required
to be delivered under the Act by any Participating Broker-Dealer
who seeks to sell Exchange Notes during the Applicable Period,
make available for inspection by any selling Holder of such
Registrable Securities being sold, or each such Participating
Broker-Dealer, as the case may be, any underwriter participating
in any such disposition of Registrable Securities, if any, and any
attorney, accountant or other agent retained by any such selling
Holder or each such Participating Broker-Dealer, as the case may
be, or underwriter (collectively, the "Inspectors"), at the
offices where normally kept, during reasonable business hours, all
financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them to
exercise any applicable due diligence responsibilities, and cause
the officers, directors and employees of the Company and its
subsidiaries to supply all information in each case reasonably
requested by any such Inspector in connection with such
Registration Statement. Records which the Company determines, in
good faith, to be confidential and as to which they notify the
Inspectors are confidential shall not be disclosed by the
Inspectors unless, after prior consultation with the Company, (i)
the disclosure of such Records is necessary to avoid or correct a
material misstatement or omission in such Registration Statement,
(ii) the release of such Records is ordered pursuant to an
effective subpoena or other order from a court of competent
jurisdiction or (iii) the information in such Records has been
made generally available to the public, other than as a result of
a breach of confidentiality or secrecy to the Company. Each
selling Holder of such Registrable Securities and each such
Participating Broker-Dealer will be required to agree that
information obtained by it as a result of such inspections shall
be deemed confidential and shall not be used by it as the basis
for any market transactions in the securities of the Company
unless and until such is made generally available to the public,
other than as a result of a breach of confidentiality or secrecy
to the Company. Each selling Holder of such Registrable
Securities and each such Participating Broker-Dealer will be
required to further agree that it will, upon learning that
disclosure of such
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<PAGE> 18
Records is sought in a court of competent jurisdiction or is
otherwise required in the opinion of such Participating
Broker-Dealer, give notice to the Company and allow the Company at
its expense to undertake appropriate action to prevent disclosure
of the Records deemed confidential;
(o) comply with all applicable rules and regulations
of the Commission and, as soon as reasonably practicable, make
generally available to the Holders earnings statements of the
Company covering at least 12 months satisfying the provisions of
Section 11(a) of the Act and Rule 158 thereunder (or any similar
rule promulgated under the Act);
(p) upon consummation of an Exchange Offer or a
Private Exchange, obtain an opinion of counsel to the Company
addressed to the Trustee for the benefit of all Holders of
Registrable Securities participating in the Exchange Offer or the
Private Exchange, as the case may be, and which includes an
opinion that (i) the Company has duly authorized, executed and
delivered the Exchange Notes and Private Exchange Notes and the
Indenture, as the case may be, and (ii) each of the Exchange Notes
or the Private Exchange Notes and the Indenture, as the case may
be, constitute a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its
respective terms (in each case, with customary exceptions);
(q) if an Exchange Offer or a Private Exchange is to
be consummated, upon delivery of the Registrable Securities by
Holders to the Company (or to such other Person as directed by the
Company) in exchange for the Exchange Notes or the Private
Exchange Notes, as the case may be, the Company shall mark, or
cause to be marked, on such Registrable Securities delivered by
such Holders that such Registrable Securities are being cancelled
in exchange for the Exchange Notes or the Private Exchange Notes,
as the case may be; in no event shall such Registrable Securities
be marked as paid or otherwise satisfied;
(r) cooperate with each seller of Registrable
Securities covered by any Registration Statement and each
underwriter, if any, participating in the disposition of such
Registrable Securities and their respective counsel in connection
with any filings required to be made with the NASD;
(s) use its best efforts to take all other steps
necessary to effect the registration of the Registrable Securities
covered by a Registration Statement contemplated hereby;
(t) (A) in the case of the Exchange Offer
Registration Statement (i) include in the Exchange Offer
Registration Statement a section entitled
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<PAGE> 19
"Plan of Distribution," which section shall be reasonably
acceptable to the Initial Purchaser or another representative of
the Participating Broker-Dealers, and which shall contain a
summary statement of the positions taken or policies made by the
staff of the Commission with respect to the potential
"underwriter" status of any broker-dealer (a "Participating
Broker-Dealer") that holds Registrable Securities acquired for its
own account as a result of market-making activities or other
trading activities and that will be the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of Exchange Notes to
be received by such broker-dealer in the Exchange Offer, whether
such positions or policies have been publicly disseminated by the
staff of the Commission or such positions or policies, in the
reasonable judgment of the Initial Purchaser or such other
representative, represent the prevailing views of the staff of the
Commission, including a statement that any such broker-dealer who
receives Exchange Notes for Registrable Securities pursuant to the
Exchange Offer may be deemed a statutory underwriter and must
deliver a prospectus meeting the requirements of the Act in
connection with any resale of such Exchange Notes, (ii) furnish to
each Participating Broker-Dealer who has delivered to the Company
the notice referred to in Section 3(e), without charge, as many
copies of each Prospectus included in the Exchange Offer
Registration Statement, including any preliminary prospectus, and
any amendment or supplement thereto, as such Participating
Broker-Dealer may reasonably request, (iii) subject to the last
paragraph of this Section 3, hereby consent to the use of the
Prospectus forming part of the Exchange Offer Registration
Statement or any amendment or supplement thereto, by any Person
subject to the prospectus delivery requirements of the Commission,
including all Participating Broker-Dealers, in connection with the
sale or transfer of the Exchange Notes covered by the Prospectus
or any amendment or supplement thereto, (iv) use its best efforts
to keep the Exchange Offer Registration Statement effective and to
amend and supplement the Prospectus contained therein, in order to
permit such Prospectus to be lawfully delivered by all Persons
subject to the prospectus delivery requirements of the Act for
such period of time as such Persons must comply with such
requirements in order to resell the Exchange Notes (provided,
however, that such period shall not be required to exceed 180
days, or such longer period if extended pursuant to the last
sentence of this Section 3 (the "Applicable Period")), and (v)
include in the transmittal letter or similar documentation to be
executed by an exchange offeree all necessary information for such
offeree to participate in the Exchange Offer;
(B) in the case of any Exchange Offer Registration
Statement, the Company agrees to deliver to the Initial Purchaser
or to another representative of the Participating Broker-Dealers
on behalf of the Participating Broker-Dealers upon consummation of
the Exchange Offer (i) an opinion of counsel
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<PAGE> 20
substantially in the form attached hereto as Exhibit A, (ii) an
Officers' Certificate containing certifications substantially
similar to those set forth in Section 8(d) of the Purchase
Agreement and such additional certifications as are customarily
delivered in a public offering of debt securities, and (iii) a
comfort letter in customary form permitted by Statement of
Auditing Standards No. 72 of the American Institute of Certified
Public Accountants.
The Company may require each seller of Registrable
Securities as to which any registration is being effected to furnish to the
Company such information regarding such seller and the proposed distribution of
such Registrable Securities as the Company may from time to time reasonably
request in writing. The Company may exclude from such registration the
Registrable Securities of any seller who unreasonably fails to furnish such
information within a reasonable time after receiving such request.
In the case of (i) a Shelf Registration Statement or (ii)
Participating Broker-Dealers who have notified the Company that they will be
utilizing the Prospectus contained in the Exchange Offer Registration Statement
as provided in Section 3(t) hereof, are seeking to sell Exchange Notes and are
required to deliver copies of such Prospectus, each Holder agrees that, upon
receipt of any notice from the Company of the happening of any event of the
kind described in Section 3(e)(ii), 3(e)(iii), 3(e)(iv), 3(e)(v), 3(e)(vi) or
3(e)(vii) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(i) hereof or until it is advised in writing by the Company that the
use of the applicable Prospectus may be resumed, and, if so directed by the
Company, such Holder will deliver to the Company (at the Company's expense) all
copies in such Holder's possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable
Securities or Exchange Notes, as the case may be, current at the time of
receipt of such notice. If the Company shall give any such notice to suspend
the disposition of Registrable Securities or Exchange Notes, as the case may
be, pursuant to a Registration Statement as a result of the happening of any
event of the kind described in Section 3(e)(ii), 3(e)(iii), 3(e)(iv), 3(e)(v),
3(e)(vi) or 3(e)(vii) hereof, the Company shall use its best efforts to file
and have declared effective (if an amendment) as soon as practicable an
amendment or supplement to the Registration Statement and shall extend the
period during which such Registration Statement shall be maintained effective
pursuant to this Agreement by the number of days in the period from and
including the date of the giving of such notice to and including the date when
the Company shall have made available to the Holders copies of the supplemented
or amended Prospectus necessary to resume such dispositions or shall have
advised the Holders in writing that the use of the applicable Prospectus may be
resumed.
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<PAGE> 21
4. Indemnification and Contribution. (a) The
Company shall indemnify and hold harmless the Initial Purchaser, each Holder,
each Participating Broker-Dealer, each underwriter who participates in an
offering of Registrable Securities, each of their respective affiliates, each
Person, if any, who controls any of such parties within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, and each of their respective
directors, officers, partners, employees, representatives and agents, to the
fullest extent lawful as follows:
(i) from and against any and all loss, liability,
claim, damage and expense whatsoever, joint or several, as
incurred, arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Registration
Statement or any amendment thereto pursuant to which the offer and
sale of the Registrable Securities or Exchange Notes were
registered under the Act including all documents incorporated
therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, or
arising out of any untrue statement or alleged untrue statement of
a material fact contained in any Prospectus or any amendment or
supplement thereto, or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading;
(ii) from and against any and all loss, liability,
claim, damage and expense whatsoever, joint or several, as
incurred, to the extent of the aggregate amount paid in settlement
of any litigation, or any investigation or proceeding by any court
or governmental agency or body, whether commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if and
only if such settlement is effected with the prior written consent
of the Company; and
(iii) from and against any and all expenses whatsoever
(including reasonable fees and disbursements of counsel chosen by
such Initial Purchaser, Holder, Participating Broker-Dealer or
underwriter (except to the extent otherwise expressly provided in
Section 4(c) hereof)), as incurred, reasonably incurred in
investigating, preparing for or defending against any litigation,
or any investigation or proceeding by any court or governmental
agency or body, whether commenced or threatened, and any amount
paid in settlement thereof, or any other claim whatsoever based
upon any such untrue statement or omission, or any such alleged
untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (i) or (ii) of this Section 4(a);
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<PAGE> 22
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission (i) made solely in reliance
upon and in conformity with written information furnished to the Company by the
Initial Purchaser, such Holder, such Participating Broker-Dealer or any
underwriter in writing expressly for use in the Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto)
or (ii) contained in any preliminary prospectus or any Prospectus if the
Initial Purchaser, such Holder, such Participating Broker-Dealer or such
underwriter failed to send or deliver a copy of the Prospectus (as then amended
or supplemented if the Company shall have timely furnished any amendments or
supplements thereto) to the Person asserting such losses, liabilities, claims
or damages on or prior to the delivery of written confirmation of any sale of
securities covered thereby to such Person in any case where such delivery is
required by the Act and a court of competent jurisdiction in a judgment not
subject to appeal or final review shall have determined that such Prospectus
(as so amended or supplemented) would have corrected such untrue statement or
omission and the delivery thereof would have eliminated such losses, claims,
damages or liabilities. Any amounts advanced by the Company to an indemnified
party pursuant to this Section 4 as a result of such losses shall be returned
to the Company if it shall be finally judicially determined by such a court in
a judgment not subject to appeal or final review that such indemnified party
was not entitled to indemnification by the Company.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Initial Purchaser, each
underwriter who participates in an offering of Registrable Securities and the
other selling Holders and each of their respective directors, officers
(including each officer of the Company who signed the Registration Statement),
employees, representatives and agents, and each Person, if any, who controls
the Company, the Initial Purchaser, any underwriter or any other selling Holder
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any and all loss, liability, claim, damage and expense
whatsoever described in the indemnity contained in Section 4(a) hereof, as
reasonably incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto) or any Prospectus (or any amendment or supplement
thereto) solely in reliance upon and in conformity with written information
furnished to the Company by such selling Holder expressly for use in the
Registration Statement (or any amendment thereto) or any such Prospectus (or
any amendment or supplement thereto); provided, however, that, in the case of a
Shelf Registration Statement, no such Holder shall be liable for any claims
hereunder in excess of the amount of net proceeds received by such Holder from
the sale of Registrable Securities pursuant to such Shelf Registration
Statement.
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<PAGE> 23
(c) Each indemnified party shall give prompt notice
to each indemnifying party of any action commenced against it in respect of
which indemnity may be sought hereunder, enclosing a copy of all papers
properly served on such indemnified party (but failure to notify an
indemnifying party shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability which it may have other
than on account of this indemnity agreement). An indemnifying party may
participate, at its own expense, in the defense of any such action. If an
indemnifying party so elects within a reasonable time after receipt of such
notice, such indemnifying party, jointly with any other indemnifying party, may
assume the defense of such action with counsel chosen by it and reasonably
satisfactory to the indemnified parties defendant in such action; provided,
however, that if any such indemnified party reasonably determines, upon written
advice of counsel, that there may be legal defenses available to such
indemnified party which are different from or in addition to those available to
such indemnifying party or that representation of such indemnifying party and
any indemnified party by the same counsel would present a conflict of interest,
then such indemnifying party or parties shall not so be entitled to assume such
defense. If an indemnifying party is not so entitled to assume the defense of
such action, counsel for such indemnifying party shall be entitled to conduct
the defense of such indemnifying party and counsel for each indemnified party
or parties shall be entitled to conduct the defense of such indemnified party
or parties. If an indemnifying party assumes the defense of an action in
accordance with and as permitted by the provisions of this Section 4(c), such
indemnifying party shall not be liable for any fees and expenses of counsel for
the indemnified parties incurred thereafter in connection with such action. In
no event shall the indemnifying party or parties be liable for the fees and
expenses of more than one counsel for all indemnified parties in connection
with any one action, or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, which consent shall not be unreasonably withheld, settle or compromise
or consent to the entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever in respect of which indemnification or
contribution could be sought under this Section 4, unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such litigation, investigation,
proceeding or claim and does not include a statement as to or an admission of
fault, culpability or a failure to act by or on behalf of any indemnified
party.
(d) Notwithstanding any payment or payments made by
the Company hereunder, the Company hereby expressly waives subrogation to, and
agrees that it shall not be entitled to be subrogated to, any of the rights of
any indemnified party against the Company or any other right of offset held by
any
-23-
<PAGE> 24
indemnified party for the payment of any amounts owed to any indemnified party
pursuant to this Section 4; provided, however, that if any of the foregoing
provisions of this paragraph are held to be contrary to applicable law or
unenforceable by a court of competent jurisdiction, the Company hereby
expressly agrees that any right of subrogation or contribution that the Company
may have as a result of such applicable law or unenforceability, as the case
may be, shall be subordinate in right of payment to the payment in full in cash
of all amounts owed to any indemnified party pursuant to this Section 4.
(e) If the indemnification provided for in this
Section 4 is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
or parties on the one hand and the indemnified party or parties on the other
hand from the offering of the Notes pursuant to the Purchase Agreement, or (ii)
if the allocation provided by clause (i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the indemnifying
party or parties on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Company on the one
hand and the Initial Purchaser on the other hand in connection with the
offering of the Notes pursuant to the Purchase Agreement shall be deemed to be
in the same respective proportions as the total net proceeds from the offering
of the Notes pursuant to the Purchase Agreement (before deducting expenses)
received by the Company and the total discount received by the Initial
Purchaser bear to the aggregate initial offering price of the Notes.
The relative fault of the Company on the one hand and the
Holders on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Holders, and the respective 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 4 were determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations
-24-
<PAGE> 25
referred to above in this Section 4(e). The aggregate amount of losses,
liabilities, claims, damages and expenses incurred by an indemnified party and
referred to above in this Section 4(e) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in investigating,
preparing for or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission.
Notwithstanding the provisions of this Section 4(e), the
Initial Purchaser shall not be required to contribute any amount in excess of
the amount by which the total discount received by the Initial Purchaser in
respect of the purchase price of the Notes purchased by it from the Company
exceeds the amount of any damages which the Initial Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 4(e), each person, if any,
who controls the Initial Purchaser within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act shall have the same rights to contribution as
the Initial Purchaser, and each director of the Company and each officer of the
Company who signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
of the Exchange Act shall have the same rights to contribution as the Company.
5. Participation in Underwritten Registrations. No
Holder may participate in any underwritten registration hereunder unless such
Holder (a) agrees to sell such Holder's Registrable Securities on the basis
provided in any customary underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents reasonably required in
connection with such underwriting arrangements.
6. Selection of Underwriters. In any underwritten
offering, the underwriter or underwriters and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Registrable Securities included in such
offering; provided, however, that such underwriters and managers must be
reasonably satisfactory to the Company.
-25-
<PAGE> 26
7. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall
not have entered into nor will the Company on or after the date of this
Agreement enter into any agreement that is inconsistent 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 or similar rights with respect to
its securities to any person. The rights granted to the Holders hereunder do
not in any way conflict with and are not inconsistent with the rights granted
to the holders of the Company's other issued and outstanding securities, if
any, under any agreement in effect on the date hereof.
(b) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of Holders of at least a majority of the then outstanding aggregate
principal amount of the Registrable Securities; provided, however, that no
amendment, modification or supplement or waiver or consent to the departure
with respect to the provisions of Section 4 hereof shall be effective as
against any Holder of Registrable Securities unless consented to in writing by
such Holder of Registrable Securities.
(c) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
sent by registered or certified mail, postage prepaid, sent by any national
courier service guaranteeing overnight delivery or transmitted by any standard
form of telecommunication, as follows: (i) if to a Holder, at the most current
address given by such Holder to the Company in accordance with the provisions
of this Section 7(c), which address, with respect to the Initial Purchaser,
shall initially be the address provided for the Initial Purchaser in the
Purchase Agreement; and (ii) if to the Company, at its address as set forth in
the Purchase Agreement, or at such other address provided in accordance with
the provisions of this Section 7(c).
All such notices and communications shall be deemed to
have been duly given at the earlier of: (i) the time of actual receipt by the
addressee; or (ii) the time delivered, if personally delivered, or five
business days after being sent by registered or certified mail, postage
prepaid, if mailed, or when answered back, if telexed, or when transmission is
confirmed, if telecopied, or on the next business day, if timely delivered to a
national courier service guaranteeing overnight delivery.
Copies of all notices, demands, or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
its address specified in the Indenture.
-26-
<PAGE> 27
(d) Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the successors, assigns and
transferees of the Initial Purchaser, including, without limitation and without
the need for an express assignment, subsequent Holders; provided, however, that
nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Registrable Securities in violation of the terms of the Purchase
Agreement or the Indenture. If any transferee of any Holder shall acquire
Registrable Securities, in any manner, whether by operation of law or
otherwise, such Registrable Securities shall be held subject to all of the
terms of this Agreement, and by taking and holding such Registrable Securities,
such Person shall be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement and such Person shall
be entitled to receive the benefits hereof.
(e) Third Party Beneficiary. The Holders shall be
third party beneficiaries of the agreements made hereunder between the Company,
on the one hand, and the Initial Purchaser, on the other hand, and the Holders
shall have the right to enforce such agreements directly to the extent they
deem such enforcement necessary or advisable to protect their rights or the
rights of any of the other Holders.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
(h) 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.
(i) Notes Held by the Company or its Affiliates.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities held by
the Company or any affiliate of the Company (as such term is defined in Rule
405 under the Act) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage.
(j) Counterparts. This Agreement may be executed in
one or more counterparts and, when so executed, all such counterparts taken
together shall constitute one and the same agreement.
-27-
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement as of the date first written above.
SYNTHETIC INDUSTRIES, INC.
By:
---------------------------
Name:
Title:
Accepted as of the
date first above written:
BEAR, STEARNS & CO. INC.
By:
----------------------------
Name:
Title:
-28-
<PAGE> 29
Exhibit A
Form of Opinion of Counsel
1. Each of the Exchange Offer Registration Statement and
the Prospectus (other than the financial statements, notes or schedules thereto
and other financial and statistical data and supplemental schedules included or
referred to therein or omitted therefrom and the Form T-l, as to which such
counsel need express no opinion), complies as to form in all material respects
with the applicable requirements of the Act and the applicable rules and
regulations promulgated under the Act.
2. In the course of such counsel's review and discussion
of the contents of the Exchange Offer Registration Statement and the Prospectus
with certain officers and other representatives of the Company and
representatives of the independent certified public accountants of the Company,
but without independent check or verification or responsibility for the
accuracy, completeness or fairness of the statements contained therein, on the
basis of the foregoing (relying as to materiality to a large extent upon
representations and opinions of officers and other representatives of the
Company), no facts have come to such counsel's attention which cause such
counsel to believe that the Exchange Offer Registration Statement (other than
the financial statements, notes and schedules thereto and other financial and
statistical information contained or referred to therein and the Form T-1, as
to which such counsel need express no belief), at the time the Exchange Offer
Registration Statement became effective, 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 contained therein not misleading, or that
the Prospectus (other than the financial statements, notes and schedules
thereto and other financial and statistical information contained or referred
to therein, as to which such counsel need express no belief) contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained therein, in the light of the circumstances
under which they were made, not misleading.
-29-
<PAGE> 1
EXHIBIT 4.3
SYNTHETIC INDUSTRIES, INC.
9 1/4% SERIES A SENIOR SUBORDINATED NOTE DUE 2007
No. 1 CUSIP NO. __________
Synthetic Industries, Inc., a Delaware corporation, promises to
pay to Cede & Co. or registered assigns, the principal sum of ______________
_________________________________________________________ Dollars on
February 15, 2007.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
Reference is hereby made to the further provisions of this Note
set forth herein, which further provisions shall for all purposes have the same
effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
Dated: February 11, 1997
[Seal]
SYNTHETIC INDUSTRIES, INC.
By:
---------------------------
By:
---------------------------
Certificate of Authentication:
United States Trust Company of New York, as Trustee,
certifies that this is one of the Global Notes
referred to in the within-mentioned Indenture.
By:
---------------------------------------------
Authorized Signature
<PAGE> 2
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
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. 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. THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE REFERRED TO HEREINAFTER. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN
WHOLE OR IN PART, FOR A SECURITY REGISTERED IN THE NAME OF ANY PERSON OTHER
THAN THE DEPOSITORY TRUST COMPANY OR A NOMINEE THEREOF EXCEPT IN THE
CIRCUMSTANCES SET FORTH IN SECTION 2.6 OF THE INDENTURE, AND MAY NOT BE
TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.6 OF THE INDENTURE. BENEFICIAL INTEREST IN THIS GLOBAL
NOTE MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SECTION 2.6 OF THE
INDENTURE.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSON EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) WHO IS AN INSTITUTION (AN
"INSTITUTIONAL ACCREDITED INVESTOR"), OR
<PAGE> 3
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH THE RULE 904 UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER
OF THE DATE OF ORIGINAL ISSUANCE OF THIS NOTE AND THE LAST DATE ON WHICH THE
ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE (THE "RESALE
RESTRICTION TERMINATION DATE") OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE,
EXCEPT (A) TO THE ISSUER, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES
IS A QUALIFIED INSTITUTIONAL BUYER PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH THE RESALE
PROVISIONS OF RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A
WRITTEN CERTIFICATION CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE), (D) PURSUANT TO THE RESALE LIMITATIONS
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (F) OUTSIDE THE
U.S. TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
REGULATION S UNDER THE SECURITIES ACT OR (G) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (BASED, IN
THE CASE OF CLAUSES (C), (D), (F) AND (G) ABOVE, UPON AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE ISSUER IF THE ISSUER SO REQUESTS), SUBJECT IN EACH
OF THE FOREGOING CASES TO ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS
PROPERTY OR THE PROPERTY OF SUCH ACCOUNT BE AT ALL TIMES WITHIN ITS CONTROL AND
TO COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION
AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE FOREGOING
<PAGE> 4
RESTRICTIONS ON RESALE WILL NOT APPLY SUBSEQUENT TO THE RESALE RESTRICTION
TERMINATION DATE.
<PAGE> 5
SYNTHETIC INDUSTRIES, INC.
9 1/4% SERIES A SENIOR SUBORDINATED NOTE DUE 2007
1. Interest. Synthetic Industries, Inc., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount
of this Note at 9 1/4% per annum from February 11, 1997 until maturity and to
pay Liquidated Damages, if any, payable pursuant to Section 2 of the
Registration Rights Agreement referred to below. The Company will pay interest
and Liquidated Damages, if any, semiannually in arrears on February 15 and
August 15 of each year (each an "Interest Payment Date"), or if any such day is
not a Business Day, on the next succeeding Business Day. Interest on the Notes
will accrue from the most recent Interest Payment Date to which interest has
been paid or, if no interest has been paid, from February 11, 1997; 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 August 15, 1997. 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
equal to 1% per annum in excess of the interest rate then in effect 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 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 comprised 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 the record date
immediately preceding the 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, if any, 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, if any, may be made by check mailed to the Holders at
their respective addresses set forth in the register of Holders; provided, that
payment by wire transfer of immediately available/same day funds will be
required with respect to principal, premium, interest and Liquidated Damages,
if any, on, all Global Notes. 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.
<PAGE> 6
3. Paying Agent and Registrar. Initially, the Trustee will
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without notice to any Holder. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar, except that for purposes
of payments on the Notes pursuant to Sections 7 and 8 hereof, neither the
Company nor any of its Affiliates may act as Paying Agent.
4. Indenture. The Company issued the Notes under an
Indenture, dated as of February 11, 1997 (the "Indenture"), between the Company
and the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. 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 (15 U.S. Code Sections 77aaa-77bbb) as in effect on the
date of the Indenture. Notwithstanding anything to the contrary herein, 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 unsecured senior
subordinated general obligations of the Company limited to $170,000,000
aggregate principal amount (subject to Section 2.7 of the Indenture).
5. Optional Redemption. The Notes are not redeemable at the
Company's option prior to February 15, 2002. 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, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
February 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
<S> <C>
2002 . . . . . . . . . . . . . 104.6250%
2003 . . . . . . . . . . . . . 103.0834%
2004 . . . . . . . . . . . . . 101.5417%
2005 and thereafter . . . . . . 100.0000%
</TABLE>
Notwithstanding the foregoing, on or prior to February 15, 2000,
the Company may redeem at any time or from time to time up to 35% of the
aggregate principal amount of the Notes originally issued, at a redemption
price of 109.25% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net proceeds of one or more Public Equity Offerings; provided, that at
least $110.5 million in aggregate principal amount of the Notes remain
outstanding following each such redemption; and provided, further, that notice
of such redemption shall be given not later than
<PAGE> 7
45 days and such redemption shall occur not earlier than 30 days or later than
60 days, after the date of the closing of any such Public Equity Offering.
6. Notice of Redemption. Subject to the provisions of the
Indenture, notice of redemption will be mailed by first class mail to the
Holder's registered address at least 30 days but not more than 60 days before
the redemption date (unless a different notice period is set forth in Section 5
hereof) to each Holder of Notes to be redeemed. If less than all Notes are to
be redeemed at any time, the Trustee shall, unless otherwise set forth in the
Indenture, select the Notes to be redeemed in multiples of $1,000 pro rata, by
lot or in accordance with a method which the Trustee considers to be fair and
appropriate. On and after the redemption date interest ceases to accrue on
Notes or portions of them called for redemption (unless the Company shall
default in the payment of the redemption price together with accrued and unpaid
interest and Liquidated Damages, if any, to the redemption date).
7. Change of Control. In the event of a Change of Control of
the Company, 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, at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the Change of Control Payment Date.
8. Asset Sales. In the event of certain Asset Sales, the
Company may be required to make an Asset Sale Offer to purchase the maximum
principal amount of Notes that may be purchased out of Excess Proceeds, at an
offer price in cash equal to 100% of the principal amount of the Notes plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of purchase.
9. Restrictive Covenants. The Indenture imposes certain
limitations on, among other things, the ability of the Company to consolidate
or merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets, the ability of
the Company or its Restricted Subsidiaries to dispose of certain assets, to
declare or pay dividends or make certain other distributions and payments, to
make certain investments or purchase, redeem, or otherwise acquire or retire
for value Equity Interests, to incur additional Indebtedness or incur Liens and
to enter into certain transactions with Affiliates, all subject to certain
limitations described in the Indenture.
10. Denominations, Transfer, Exchange. The Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof. 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
<PAGE> 8
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.
Neither the Company nor the Registrar shall be required to transfer or exchange
any Notes selected for redemption. Also, the Company need not transfer or
exchange any Notes for a period of 15 days before a selection of Notes to be
redeemed.
11. Persons Deemed Owners. The registered Holder of a Note may
be treated as the owner of it for all purposes and neither the Company, the
Trustee nor any Agent shall be affected by notice to the contrary.
12. Unclaimed Money. If money for the payment of principal,
premium, interest or Liquidated Damages, if any, remains unclaimed for two
years, the Trustee or Paying Agent will pay the money back to the Company at
its request. After that, all liability of the Trustee and such Paying Agent
with respect to such money shall cease.
13. Amendment, Supplement, Waiver. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
written consent of the Holders of at least a majority in principal amount of
the Notes then outstanding (including consents obtained in connection with a
tender offer of exchange offer for the Notes). Holders of a majority in
principal amount of the then outstanding Notes by notice to the Trustee may on
behalf of the Holders of all the Notes waive an existing Default or Event of
Default and its consequences, except a continuing Default or Event of Default
in the payment of principal, premium, interest or Liquidated Damages, if any,
with respect to any Note held by a non-consenting Holder. Without the consent
of any Holder, the Company may amend or supplement the Indenture or the Notes
to, among other things, cure any ambiguity, defect or inconsistency that does
not adversely affect the rights of any Holder or to provide for uncertificated
Notes in addition to or in place of certificated Notes or to make any change
that does not adversely affect the legal rights of any Holder.
14. Events of Default and Remedies. An Event of Default
generally is: (i) default for 30 days in the payment when due of interest on,
or Liquidated Damages, if any, with respect to, any of the Notes, whether or
not prohibited by the subordination provisions of the Indenture; (ii) default
in payment when due (whether at maturity, upon redemption or repurchase, or
otherwise) of the principal of or premium, if any, on any of the Notes, whether
or not prohibited by the subordination provisions of the Indenture; (iii)
failure by the Company to comply with certain of its agreements in the
Indenture and the Notes; (iv) failure by the Company or any Restricted
Subsidiary for 30 days after notice to comply with any of its covenants or
agreements in the Indenture or the Notes other than those referred to in
clauses (i), (ii) and (iii) above; (v) default under any mortgage, indenture or
instrument under
<PAGE> 9
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, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case described in
clauses (a) and (b) of this subsection (v), the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10.0 million or more; (vi) failure by the Company
or any of its Restricted 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 after their entry; and (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Significant
Subsidiaries that is a Restricted Subsidiary. Subject to certain limitations
in the Indenture, if an 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 of the principal amount of the Notes, accrued and unpaid
interest thereon and all other Obligations thereunder, to be due and payable
immediately, except that in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company, any
Significant Subsidiary that is a Restricted Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes shall become due and payable immediately
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 Notes may direct the Trustee
in its exercise of any trust or power. The Company must furnish an annual
compliance certificate to the Trustee.
15. Trustee Dealings with Company. United States Trust Company
of New York, the Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Notes and may otherwise deal with
the Company or its respective Subsidiaries or Affiliates with the same rights
it would have if it were not Trustee.
16. No Recourse Against Others. No past, present or future
director, officer, employee, agent or stockholder of the Company, as such,
shall have any liability for any obligations of the Company under the Notes or
the Indenture or for any claim based on, in respect of or by reason of, such
obligations or 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 issue of the Notes.
<PAGE> 10
17. Subordination. The payment of principal, premium, interest
and Liquidated Damages, if any, on the Notes will be subordinated in right of
payment, as set forth in the Indenture, to the prior payment in full of all
Senior Debt, whether outstanding on the date of the Indenture or thereafter
incurred, and senior or pari passu in right of payment to, all subordinated
Indebtedness whether outstanding on the date of the Indenture or thereafter
incurred.
18. Authentication. This Note shall not be valid until the
Trustee or an authenticating agent signs the certificate of authentication on
the other side of this Note.
19. 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).
20. Additional Rights of Holders of Transfer Restricted
Securities. In addition to the rights provided to Holders of Notes under the
Indenture, Holders of Transfer Restricted Securities shall have all the rights
set forth in the Registration Rights Agreement, dated as of the date of the
Indenture (the "Registration Rights Agreement"), between the Company and the
Initial Purchaser.
21. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Note Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Notes as a convenience to Holder of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
22. Governing Law. This Note and the Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
as applied to contracts made and performed entirely within the State of New
York, without regard to principles of conflicts of law.
23. Indenture. Each Holder, by accepting a Note, agrees to be
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture or Registration Rights Agreement.
Requests may be made to: Synthetic Industries, Inc., 309 Lafayette Road,
Chickamauga, GA 30707, Attention: Joseph Sinicropi, Chief Financial Officer.
<PAGE> 11
ASSIGNMENT FORM
To assign this Note, fill in the form below and have your signature guaranteed:
I or we assign and transfer this Note to:
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint __________________________ as agent to transfer this
Note on the books of the Company. The agent may substitute another to act for
him.
- -------------------------------------------------------------------------------
Your Signature:
----------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Date:
------------------------------------------
Signature Guarantee:
----------------------------------------------------------
NOTICE: Your Signature must be guaranteed by an Institution which is a member
of one of the following recognized signature Guarantee Programs: (i) The
Securities Transfer Agent Medallion Program; (ii) The New York Stock Exchange
Medallion Program; (iii) The Stock Exchange Medallion Program; or (iv) any
other guarantee program acceptable to the Trustee.
In connection with any transfer of this Note the Holder hereof may be required
by the Indenture to deliver to the Trustee and the Registrar a certification
substantially in the form of Exhibit B to the Indenture.
<PAGE> 12
FORM OF OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.14 or Section 4.15 of the Indenture, check the
appropriate box:
Section 4.14 [ ] Section 4.15 [ ]
If you want to have only part of this Note purchased by the
Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount (in integral multiples of $1,000):
$
--------------------------------
Date:
------------------------------------------------
Signature:
--------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
---------------------------------
NOTICE: Your Signature must be guaranteed by an Institution which is a member
of one of the following recognized signature Guarantee Programs: (i) The
Securities Transfer Agent Medallion Program; (ii) The New York Stock Exchange
Medallion Program; (iii) The Stock Exchange Medallion Program; or (iv) any
other guarantee program acceptable to the Trustee.
<PAGE> 13
SCHEDULE OF EXCHANGES FOR DEFINITIVE NOTES
The following exchanges of a part of this Global Note for Definitive Notes have
been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Note authorized officer
Date of Principal Amount of Principal Amount of following such of Trustee or Note
Exchange this Global Note this Global Note decrease (or increase) Custodian
-------- --------------------- --------------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 4.4
SYNTHETIC INDUSTRIES, INC.
9 1/4% SERIES B SENIOR SUBORDINATED NOTE DUE 2007
No. ________ CUSIP NO. __________
Synthetic Industries, Inc., a Delaware corporation, promises to
pay to Cede & Co. or registered assigns, the principal sum of ______________
_________________________________________________________ Dollars on
February 15, 2007.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
Reference is hereby made to the further provisions of this Note
set forth herein, which further provisions shall for all purposes have the same
effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
Dated: , 1997
[Seal]
SYNTHETIC INDUSTRIES, INC.
By:
---------------------------
By:
---------------------------
Certificate of Authentication:
United States Trust Company of New York, as Trustee,
certifies that this is one of the Global Notes
referred to in the within-mentioned Indenture.
By:
---------------------------------------------
Authorized Signature
<PAGE> 2
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
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITORY. 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. THIS SECURITY IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE REFERRED TO HEREINAFTER. THIS GLOBAL NOTE MAY NOT BE EXCHANGED, IN
WHOLE OR IN PART, FOR A SECURITY REGISTERED IN THE NAME OF ANY PERSON OTHER
THAN THE DEPOSITORY TRUST COMPANY OR A NOMINEE THEREOF EXCEPT IN THE
CIRCUMSTANCES SET FORTH IN SECTION 2.6 OF THE INDENTURE, AND MAY NOT BE
TRANSFERRED, IN WHOLE OR IN PART, EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.6 OF THE INDENTURE. BENEFICIAL INTEREST IN THIS GLOBAL
NOTE MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH SECTION 2.6 OF THE
INDENTURE.
<PAGE> 3
SYNTHETIC INDUSTRIES, INC.
9 1/4% SERIES B SENIOR SUBORDINATED NOTE DUE 2007
1. Interest. Synthetic Industries, Inc., a Delaware
corporation (the "Company"), promises to pay interest on the principal amount of
this Note at 9 1/4% per annum from February 11, 1997 until maturity. The Company
will pay interest semiannually in arrears on February 15 and August 15 of each
year (each an "Interest Payment Date"), or if any such day is not a Business
Day, on the next succeeding Business Day. Interest on the Notes will accrue
from the most recent Interest Payment Date to which interest has been paid or,
if no interest has been paid, from February 11, 1997; 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 August 15, 1997. 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
equal to 1% per annum in excess of the interest rate then in effect to the
extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(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 comprised of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the
Notes (except defaulted interest) to the Persons who are registered Holders of
Notes at the close of business on the record date immediately preceding the
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 and interest 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 may be made by check mailed to the Holders at their
respective addresses set forth in the register of Holders; provided, that
payment by wire transfer of immediately available/same day funds will be
required with respect to principal, premium and interest on all Global Notes.
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.
<PAGE> 4
3. Paying Agent and Registrar. Initially, the Trustee will
act as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-registrar without notice to any Holder. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar, except that for purposes
of payments on the Notes pursuant to Sections 7 and 8 hereof, neither the
Company nor any of its Affiliates may act as Paying Agent.
4. Indenture. The Company issued the Notes under an
Indenture, dated as of February 11, 1997 (the "Indenture"), between the Company
and the Trustee. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. 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 (15 U.S. Code Sections 77aaa-77bbb) as in effect on the
date of the Indenture. Notwithstanding anything to the contrary herein, 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 unsecured senior
subordinated general obligations of the Company limited to $170,000,000
aggregate principal amount (subject to Section 2.7 of the Indenture).
5. Optional Redemption. The Notes are not redeemable at the
Company's option prior to February 15, 2002. 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 thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on February 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
<S> <C>
2002 . . . . . . . . . . . . . 104.6250%
2003 . . . . . . . . . . . . . 103.0834%
2004 . . . . . . . . . . . . . 101.5417%
2005 and thereafter . . . . . . 100.0000%
</TABLE>
Notwithstanding the foregoing, on or prior to February 15, 2000,
the Company may redeem at any time or from time to time up to 35% of the
aggregate principal amount of the Notes originally issued, at a redemption
price of 109.25% of the principal amount thereof, plus accrued and unpaid
interest thereon to the redemption date, with the net proceeds of one or more
Public Equity Offerings; provided, that at least $110.5 million in aggregate
principal amount of the Notes remain outstanding following each such
redemption; and provided, further, that notice of such redemption shall be
given not later than
<PAGE> 5
45 days and such redemption shall occur not earlier than 30 days or later than
60 days, after the date of the closing of any such Public Equity Offering.
6. Notice of Redemption. Subject to the provisions of the
Indenture, notice of redemption will be mailed by first class mail to the
Holder's registered address at least 30 days but not more than 60 days before
the redemption date (unless a different notice period is set forth in Section 5
hereof) to each Holder of Notes to be redeemed. If less than all Notes are to
be redeemed at any time, the Trustee shall, unless otherwise set forth in the
Indenture, select the Notes to be redeemed in multiples of $1,000 pro rata, by
lot or in accordance with a method which the Trustee considers to be fair and
appropriate. On and after the redemption date interest ceases to accrue on
Notes or portions of them called for redemption (unless the Company shall
default in the payment of the redemption price together with accrued and unpaid
interest to the redemption date).
7. Change of Control. In the event of a Change of Control of
the Company, 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, at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest thereon to the
Change of Control Payment Date.
8. Asset Sales. In the event of certain Asset Sales, the
Company may be required to make an Asset Sale Offer to purchase the maximum
principal amount of Notes that may be purchased out of Excess Proceeds, at an
offer price in cash equal to 100% of the principal amount of the Notes plus
accrued and unpaid interest thereon to the date of purchase.
9. Restrictive Covenants. The Indenture imposes certain
limitations on, among other things, the ability of the Company to consolidate
or merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets, the ability of
the Company or its Restricted Subsidiaries to dispose of certain assets, to
declare or pay dividends or make certain other distributions and payments, to
make certain investments or purchase, redeem, or otherwise acquire or retire
for value Equity Interests, to incur additional Indebtedness or incur Liens and
to enter into certain transactions with Affiliates, all subject to certain
limitations described in the Indenture.
10. Denominations, Transfer, Exchange. The Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof. 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
<PAGE> 6
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.
Neither the Company nor the Registrar shall be required to transfer or exchange
any Notes selected for redemption. Also, the Company need not transfer or
exchange any Notes for a period of 15 days before a selection of Notes to be
redeemed.
11. Persons Deemed Owners. The registered Holder of a Note may
be treated as the owner of it for all purposes and neither the Company, the
Trustee nor any Agent shall be affected by notice to the contrary.
12. Unclaimed Money. If money for the payment of principal,
premium or interest remains unclaimed for two years, the Trustee or Paying
Agent will pay the money back to the Company at its request. After that, all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
13. Amendment, Supplement, Waiver. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
written consent of the Holders of at least a majority in principal amount of
the Notes then outstanding (including consents obtained in connection with a
tender offer of exchange offer for the Notes). Holders of a majority in
principal amount of the then outstanding Notes by notice to the Trustee may on
behalf of the Holders of all the Notes waive an existing Default or Event of
Default and its consequences, except a continuing Default or Event of Default
in the payment of principal, premium or interest with respect to any Note held
by a non-consenting Holder. Without the consent of any Holder, the Company may
amend or supplement the Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency that does not adversely affect the rights of
any Holder or to provide for uncertificated Notes in addition to or in place of
certificated Notes or to make any change that does not adversely affect the
legal rights of any Holder.
14. Events of Default and Remedies. An Event of Default
generally is: (i) default for 30 days in the payment when due of interest on
any of the Notes, whether or not prohibited by the subordination provisions of
the Indenture; (ii) default in payment when due (whether at maturity, upon
redemption or repurchase, or otherwise) of the principal of or premium, if any,
on any of the Notes, whether or not prohibited by the subordination provisions
of the Indenture; (iii) failure by the Company to comply with certain of its
agreements in the Indenture and the Notes; (iv) failure by the Company or any
Restricted Subsidiary for 30 days after notice to comply with any of its
covenants or agreements in the Indenture or the Notes other than those referred
to in clauses (i), (ii) and (iii) above; (v) default under any mortgage,
indenture or instrument under
<PAGE> 7
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, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case described in
clauses (a) and (b) of this subsection (v), the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10.0 million or more; (vi) failure by the Company
or any of its Restricted 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 after their entry; and (vii) certain events of bankruptcy
or insolvency with respect to the Company or any of its Significant
Subsidiaries that is a Restricted Subsidiary. Subject to certain limitations
in the Indenture, if an 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 of the principal amount of the Notes, accrued and unpaid
interest thereon and all other Obligations thereunder, to be due and payable
immediately, except that in the case of an Event of Default arising from
certain events of bankruptcy or insolvency with respect to the Company, any
Significant Subsidiary that is a Restricted Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes shall become due and payable immediately
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 Notes may direct the Trustee
in its exercise of any trust or power. The Company must furnish an annual
compliance certificate to the Trustee.
15. Trustee Dealings with Company. United States Trust Company
of New York, the Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Notes and may otherwise deal with
the Company or its respective Subsidiaries or Affiliates with the same rights
it would have if it were not Trustee.
16. No Recourse Against Others. No past, present or future
director, officer, employee, agent or stockholder of the Company, as such,
shall have any liability for any obligations of the Company under the Notes or
the Indenture or for any claim based on, in respect of or by reason of, such
obligations or 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 issue of the Notes.
<PAGE> 8
17. Subordination. The payment of principal, premium and
interest on the Notes will be subordinated in right of payment, as set forth in
the Indenture, to the prior payment in full of all Senior Debt, whether
outstanding on the date of the Indenture or thereafter incurred, and senior or
pari passu in right of payment to, all subordinated Indebtedness whether
outstanding on the date of the Indenture or thereafter incurred.
18. Authentication. This Note shall not be valid until the
Trustee or an authenticating agent signs the certificate of authentication on
the other side of this Note.
19. 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).
20. CUSIP Numbers. Pursuant to a recommendation promulgated by
the Committee on Uniform Note Identification Procedures, the Company will cause
CUSIP numbers to be printed on the Notes as a convenience to Holder of the
Notes. No representation is made as to the accuracy of such numbers as printed
on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
21. Governing Law. This Note and the Indenture shall be
governed by and construed in accordance with the laws of the State of New York,
as applied to contracts made and performed entirely within the State of New
York, without regard to principles of conflicts of law.
22. Indenture. Each Holder, by accepting a Note, agrees to be
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to: Synthetic
Industries, Inc., 309 Lafayette Road, Chickamauga, GA 30707, Attention: Joseph
Sinicropi, Chief Financial Officer.
<PAGE> 9
ASSIGNMENT FORM
To assign this Note, fill in the form below and have your signature guaranteed:
I or we assign and transfer this Note to:
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint __________________________ as agent to transfer this
Note on the books of the Company. The agent may substitute another to act for
him.
- -------------------------------------------------------------------------------
Your Signature:
----------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Date:
------------------------------------------
Signature Guarantee:
----------------------------------------------------------
NOTICE: Your Signature must be guaranteed by an Institution which is a member
of one of the following recognized signature Guarantee Programs: (i) The
Securities Transfer Agent Medallion Program; (ii) The New York Stock Exchange
Medallion Program; (iii) The Stock Exchange Medallion Program; or (iv) any
other guarantee program acceptable to the Trustee.
In connection with any transfer of this Note the Holder hereof may be required
by the Indenture to deliver to the Trustee and the Registrar a certification
substantially in the form of Exhibit B to the Indenture.
<PAGE> 10
FORM OF OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.14 or Section 4.15 of the Indenture, check the
appropriate box:
Section 4.14 [ ] Section 4.15 [ ]
If you want to have only part of this Note purchased by the
Company pursuant to Section 4.14 or Section 4.15 of the Indenture, state the
amount (in integral multiples of $1,000):
$
--------------------------------
Date:
------------------------------------------------
Signature:
--------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
---------------------------------
NOTICE: Your Signature must be guaranteed by an Institution which is a member
of one of the following recognized signature Guarantee Programs: (i) The
Securities Transfer Agent Medallion Program; (ii) The New York Stock Exchange
Medallion Program; (iii) The Stock Exchange Medallion Program; or (iv) any
other guarantee program acceptable to the Trustee.
<PAGE> 11
SCHEDULE OF EXCHANGES FOR DEFINITIVE NOTES
The following exchanges of a part of this Global Note for Definitive Notes have
been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Note authorized officer
Date of Principal Amount of Principal Amount of following such of Trustee or Note
Exchange this Global Note this Global Note decrease (or increase) Custodian
-------- --------------------- --------------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF ANDREWS & KURTH L.L.P.]
March 12, 1997
Synthetic Industries, Inc.
309 LaFayette Road
Chickamauga, Georgia 30707
Ladies and Gentlemen:
We have acted as special counsel for Synthetic Industries, Inc. (the
"Company"), a Delaware corporation, in connection with the preparation and
filing with the Securities and Exchange Commission, of a registration statement
on Form S-4 (the "Registration Statement") in connection with the proposed
issuance of up to $170,000,000 aggregate principal amount of the Company's
9 1/4% Senior Subordinated Notes due 2007 (Series B) (the "Notes") registered
under the Securities Act of 1933, as amended, in exchange for up to $170,000,000
aggregate principal amount of the Company's outstanding 9 1/4% Senior
Subordinated Notes due 2007 (Series A). The Notes are issuable under an
Indenture, dated as of February 11, 1997 (the "Indenture"), between the Company
and United States Trust Company of New York (the "Trustee").
In the above capacity and for the purpose of rendering the opinion set
forth below, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of all such corporate records, agreements,
documents and other instruments of the Company, including the Indenture, and
such certificates or comparable documents of public officials and of officers
and representatives of the Company, and have made such other and further
investigations as we have deemed necessary or appropriate for the purpose of
rendering the opinion set forth below. In our examination, we have assumed,
without investigation or independent verification (i) the legal capacity of all
natural persons, (ii) the genuineness of all signatures, (iii) the authority of
all signatories, (iv) the authenticity and completeness of all documents
submitted to us as originals and (v) the conformity to authentic, original
documents of all documents submitted to us as certified, conformed or
photostatic copies. As to any other facts material to the opinions expressed
herein that have not been independently established or verified by us, we have
relied upon certificates of officers of the Company and certificates of public
officials and statements contained in the Registration Statement.
We are qualified to practice law in the State of New York. We express no
opinion as to, and for the purposes of the opinions set forth herein, we have
conducted no investigation of, and do not purport to be experts on, any laws
other than the laws of the State of New York and, to the extent expressly set
forth herein, the federal laws of the United States of America.
Based upon the foregoing examination, and subject to the assumptions,
limitations, qualifications and exceptions set forth herein, we are of the
opinion that, when the Notes have been executed and delivered by the Company,
authenticated by the Trustee and delivered and paid for as described in the
Prospectus included in the Registration Statement, the Notes will constitute
legal, valid and binding obligations of the Company, entitled to the benefits
of, and subject to the provisions of, the Indenture, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to or
affecting enforcement of creditors' rights generally and except as enforcement
thereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
<PAGE> 2
To the extent relevant to the opinions set forth above, we have assumed
that the Trustee is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization; that the Trustee is duly qualified
to engage in the activities contemplated by the Indenture and is qualified and
eligible under the terms of the Indenture to act as trustee thereunder; that the
Indenture was duly authorized, executed and delivered by the Trustee; that the
Indenture is a valid and binding obligation of the Trustee; that the Trustee is
in compliance, generally with respect to acting as a trustee under the
Indenture, with all applicable laws and regulations; and that the Trustee has
the requisite organizational and legal power and authority to perform its
obligations under the Indenture.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
ANDREWS & KURTH L.L.P.
<PAGE> 1
EXHIBIT 12.1
SYNTHETIC INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended
Fiscal Year Ended September 30, December 31,
----------------------------------------------- ---------------
1992 1993 1994 1995 1996 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations before provision
for income taxes $ 8,155 $ 8,134 $20,020 $ 5,436 $15,002 $(2,497) $1,761
Fixed Charges, excluding
capitalized interest 20,687 23,234 22,311 24,495 24,942 6,228 5,981
----------------------------------------------- -----------------
Earnings $28,842 $31,368 $42,331 $29,931 $39,944 $ 3,731 $7,742
=============================================== =================
Fixed Charges:
Rent expense $ 3,558 $ 4,340 $ 4,684 $ 3,731 $ 4,499 $ 1,125 $1,185
One-third of rent expense,
representative of the interest
factor 1,186 1,447 1,561 1,244 1,500 375 395
Amortization of deferred
debt costs 1,636 933 739 737 669 173 176
Capitalized interest 315 283 729 255 392 - -
Interest expense 17,865 20,854 20,011 22,514 22,773 5,680 $5,410
----------------------------------------------- -----------------
Fixed charges $21,002 $23,517 $23,040 $24,750 $25,334 $ 6,228 $5,981
=============================================== =================
Ratio of earnings to fixed
charges 1.37x 1.33x 1.84x 1.21x 1.50x (1) 1.29x
</TABLE>
- ----------
(1) Earnings were inadequate to cover fixed charges by $2,497 for the three
months ended December 31, 1995.
Page 1
<PAGE> 1
EXHIBIT 12.2
SYNTHETIC INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF RATIO
OF PRO FORMA EARNINGS TO PRO FORMA FIXED CHARGES
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
------------------------------
Three Months
Ended
December 31,
Fiscal 1996 1996
<S> <C> <C>
Income from continuing operations before
provision for income taxes $ 19,636 $ 2,603
Fixed charges, excluding
capitalized interest 20,338 5,139
---------------------------
Earnings $ 39,974 7,742
---------------------------
Fixed Charges:
Rent expense $ 4,499 $ 1,185
One-third of rent expense, representative
of the interest factor 1,500 395
Amortization of deferred costs 717 180
Capitalized interest 392 --
Interest expense 18,121 4,564
---------------------------
Fixed charges $ 20,730 $ 5,139
---------------------------
Ratio of pro forma earnings to
pro forma fixed charges 1.93x 1.51x
</TABLE>
Page 1
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement on Form S-4 of
Synthetic S-4 of Synthetic Industries, Inc. of our report dated November 12,
1996 appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected
Consolidated Financial Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
New York, New York
March 11, 1997
<PAGE> 1
EXHIBIT 25
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
_______________
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) ______
_______________
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification Number)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
_______________
Synthetic Industries, Inc.
(Exact name of obligor as specified in its charter)
Delaware 58-1049400
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
309 LaFayette Road 30707
Chickamauga, Georgia (Zip Code)
(Address of principal executive offices)
_______________
9-1/4% Senior Subordinated Notes due 2007
(Title of the indenture securities)
===============================================================================
<PAGE> 2
-2-
GENERAL
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.
Federal Reserve Bank of New York (2nd District), New York, New
York (Board of Governors of the Federal Reserve System).
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
3,4,5,6,7,8,9,10,11,12,13,14 and 15.
The obligor is currently not in default under any of its outstanding
securities for which United States Trust Company of New York is Trustee.
Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15
of Form T-1 are not required under General Instruction B.
16. List of Exhibits
T-1.1 -- Organization Certificate, as amended, issued by the State of New
York Banking Department to transact business as a Trust Company,
is incorporated by reference to Exhibit T-1.1 to Form T-1 filed
on September 15, 1995 with the Commission pursuant to the Trust
Indenture Act of 1939, as amended by the Trust Indenture Reform
Act of 1990 (Registration No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
<PAGE> 3
16. List of Exhibits (continued)
T-1.4 -- The By-laws of the United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to Form
T-1 filed on September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee pursuant
to law or the requirements of its supervising or examining
authority.
NOTE
As of March 11, 1997, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United
States Trust Company of New York and its parent company, U.S. Trust
Corporation.
In answering Item 2 in this statement of eligibility, as to matters
peculiarly within the knowledge of the obligor or its directors, the
trustee has relied upon information furnished to it by the obligor and will
rely on information to be furnished by the obligor and the trustee
disclaims responsibility for the accuracy or completeness of such
information.
---------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, United States Trust Company of New York, a corporation organized
and existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of
New York, on the 11th day of March, 1997.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By: /s/ PATRICIA STERMER
----------------------------------
Patricia Stermer
Assistant Vice President
<PAGE> 4
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ GERARD F. GANEY
----------------------------------
Gerard F. Ganey
Senior Vice President
<PAGE> 5
EXHIBIT T-1.7
U.S. TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
SEPTEMBER 30, 1996
-----------------------------------
(IN THOUSANDS)
ASSETS
- ------
Cash and Due from Banks $ 38,257
Short-Term Investments 82,377
Securities, Available For Sale 861,975
Loans 1,404,930
Less: Allowance for Credit Losses 13,048
----------
Net Loans 1,391,882
Premises and Equipment 60,012
Other Assets 133,673
----------
Total Assets $2,568,176
==========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 466,849
Interest Bearing 1,433,894
----------
Total Deposits 1,900,743
Short-Term Credit Facilities 369,045
Accounts Payable and Accrued Liabilities 143,604
----------
Total Liabilities 2,413,392
----------
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 98,402
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes (1,007)
----------
Total Stockholder's Equity 154,784
----------
Total Liabilities and Stockholder's Equity $2,568,176
==========
I, Richard E. Brinkmann, Senior Vice President & Comptroller
of the named bank do hereby declare that this Statement of
Condition has been prepared in conformance with the
instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
/s/ RICHARD E. BRINKMANN
- -------------------------------------
Signature of Officer
October 24, 1996
- -------------------------------------
Date
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
SYNTHETIC INDUSTRIES, INC.
OFFER TO EXCHANGE ITS
9 1/4% SENIOR SUBORDINATED NOTES DUE 2007 (SERIES B)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
9 1/4% SENIOR SUBORDINATED NOTES DUE 2007 (SERIES A)
PURSUANT TO THE PROSPECTUS
DATED , 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1997, UNLESS THE OFFER IS EXTENDED.
The Exchange Agent for the Exchange Offer is:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<C> <C>
By Mail: By Hand to 4:30 P.M.:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 843 111 Broadway
Cooper Station New York, New York 10006
New York, New York 10276 Attention: Lower Level Corporate Trust Window
Attention: Corporate Trust Services
By Overnight Delivery and By Hand After 4:30 P.M.:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Attention: Corporate Trust Redemption Unit
</TABLE>
To Confirm by Telephone or for Information:
(800) 548-6565
Facsimile Transmissions:
(212) 420-6152
(Attention: Customer Service)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Old Notes (as
defined below) either if Old Notes are to be forwarded herewith or if tenders of
Old Notes are to be made by book-entry transfer to an account maintained by
United States Trust Company of New York (the "Exchange Agent") at The Depository
Trust Company ("DTC") pursuant to the procedures set forth in "The Exchange
Offer -- Procedures for Tendering Old Notes" in the Prospectus.
Holders of Old Notes whose certificates (the "Certificates") for such Old
Notes are not immediately available or who cannot deliver their Certificates and
all other required documents to the Exchange Agent on or prior to the Expiration
Date (as defined in the Prospectus) or who cannot complete the procedures for
book-entry transfer on a timely basis, must tender their Old Notes according to
the guaranteed delivery procedures set forth in "The Exchange Offer --
Procedures for Tendering Old Notes -- Guaranteed Delivery" in the Prospectus.
SEE INSTRUCTION 1. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO
THE EXCHANGE AGENT.
<PAGE> 2
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX:
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED
- ----------------------------------------------------------------------------------------------------------------------------
IF BLANK, PLEASE PRINT NAME AND OLD NOTES TENDERED
ADDRESS OF REGISTERED HOLDER (ATTACH ADDITIONAL LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
CERTIFICATE PRINCIPAL AMOUNT OF OF OLD NOTES TENDERED
NUMBER(S)* OLD NOTES* (IF LESS THAN ALL)**
- ----------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Amount Tendered:
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Old Notes may be tendered in whole or in part in denominations of $1,000 and
integral multiplies thereof. All Old Notes held shall be deemed tendered
unless a lesser number is specified in this column.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution:
- --------------------------------------------------------------------------------
DTC Account No.
----------------------------------------- Transaction Code No.
-----------------------------------
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
- --------------------------------------------------------------------------------
Window Ticket Number (if any):
---------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------------------------------------------------------
Name of Institution which Guaranteed Delivery:
-------------------------------------------------------------------------
IF GUARANTEED DELIVERY IS TO BE MADE BY BOOK-ENTRY TRANSFER:
Name of Tendering Institution:
---------------------------------------------------------------------------
DTC Account No.
----------------------------------------- Transaction Code No.
-----------------------------------
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to Synthetic Industries, Inc., a Delaware
corporation (the "Company"), the above described aggregate principal amount of
the Company's 9 1/4% Senior Subordinated Notes due 2007 (the "Old Notes") in
exchange for a like aggregate principal amount of the Company's 9 1/4% Senior
Subordinated Notes due 2007 (the "New Notes") which have been registered under
Securities Act of 1933 (the "Securities Act"), upon the terms and subject to the
conditions set forth in the Prospectus dated , 1997 (as the same may
be amended or supplemented from time to time, the "Prospectus"), receipt of
which is acknowledged, and in this Letter of Transmittal (which, together with
the Prospectus, constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Old Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer) with respect to the tendered Old Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described in
the Prospectus, to (i) deliver Certificates for Old Notes to the Company
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company, upon receipt by the Exchange Agent, as the
undersigned's agent, of the New Notes to be issued in exchange for such Old
Notes, (ii) present Certificates for such Old Notes for transfer, and to
transfer the Old Notes on the books of the Company, and (iii) receive for the
account of the Company all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms and
conditions of the Exchange Offer.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD
NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE
COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND
CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD
NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE
UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS
DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO
COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY,
AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION
RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE
EXCHANGE OFFER.
The name(s) and address(es) of the registered holder(s) of the Old Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
If any tendered Old Notes are not exchanged pursuant to the Exchange Offer
for any reason, or if Certificates are submitted for more Old Notes than are
tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered by
book-entry transfer, such Old Notes will be credited to an account maintained at
DTC), without expense to the tendering holder, promptly following the expiration
or termination of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any one
of the procedures described in "The Exchange Offer -- Procedures for Tendering
Old Notes" in the Prospectus and in the instructions hereto will, upon the
Company's acceptance for exchange of such tendered Old Notes, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Company may
not be required to accept for exchange any of the Old Notes tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes be issued
in the name(s) of the undersigned or, in the case of a book-entry transfer of
Old Notes, that such New Notes be credited to the account indicated above
maintained at DTC. If applicable, substitute Certificates representing Old Notes
not exchanged or not accepted for exchange will be issued to the undersigned or,
in the case of a book-entry transfer of Old Notes, will be credited to the
account indicated above maintained at DTC. Similarly, unless otherwise indicated
under "Special Delivery Instructions," please deliver New Notes to the
undersigned at the address shown below the undersigned's signature.
By tendering Old Notes and executing this Letter of Transmittal, the
undersigned hereby represents and agrees that (i) the undersigned is not an
"affiliate" of the Company, (ii) any New Notes to be received by the undersigned
are being acquired in the ordinary course of its business, (iii) the undersigned
has no arrangement or understanding with any person
<PAGE> 4
to participate in a distribution (within the meaning of the Securities Act) of
New Notes to be received in the Exchange Offer, and (iv) if the undersigned is
not a Broker-Dealer, the undersigned is not engaged in, and does not intend to
engage in, a distribution (within the meaning of the Securities Act) of such New
Notes. By tendering Old Notes pursuant to the Exchange Offer and executing this
Letter of Transmittal, a holder of Old Notes which is a Broker-Dealer represents
and agrees, consistent with certain interpretive letters issued by the staff of
the Division of Corporation Finance of the Securities and Exchange Commission to
third parties, that (a) such Old Notes held by the Broker-Dealer are held only
as a nominee, or (b) such Old Notes were acquired by such Broker-Dealer for its
own account as a result of market-making activities or other trading activities
and it will deliver the Prospectus (as amended or supplemented from time to
time) meeting the requirements of the Securities Act in connection with any
resale of such New Notes (provided that, by so acknowledging and by delivering a
prospectus, such Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act). See "The Exchange
Offer -- Resales of New Notes" in the Prospectus.
The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer (as defined below) in
connection with resales of New Notes received in exchange for Old Notes, where
such Old Notes were acquired by such Participating Broker-Dealer for its own
account as a result of market-making activities or other trading activities, for
a period ending 180 days after the Expiration Date (subject to extension under
certain limited circumstances described in the Prospectus) or, if earlier, when
all such New Notes have been disposed of by such Participating Broker-Dealer.
However, a Participating Broker-Dealer who intends to use the Prospectus in
connection with the resale of New Notes received in exchange for Old Notes
pursuant to the Exchange Offer must notify the Company, or cause the Company to
be notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided herein for that
purpose or may be delivered to the Exchange Agent at one of the addresses set
forth in the Prospectus under "The Exchange Offer -- Exchange Agent." In that
regard, each Broker-Dealer who acquired Old Notes for its own account as a
result of market-making or other trading activities (a "Participating
Broker-Dealer"), by tendering such Old Notes and executing this Letter of
Transmittal, agrees that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in the Prospectus untrue in any material
respect or which causes the Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
therein, in light of the circumstances under which they were made, not
misleading or of the occurrence of certain other events specified in the
Registration Rights Agreement, such Participating Broker-Dealer will suspend the
sale of New Notes pursuant to the Prospectus until the Company has amended or
supplemented the Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to the Participating
Broker-Dealer or the Company has given notice that the sale of the New Notes may
be resumed, as the case may be. If the Company gives such notice to suspend the
sale of the New Notes, it shall extend the 180-day period referred to above
during which Participating Broker-Dealers are entitled to use the Prospectus in
connection with the resale of New Notes by the number of days in the period from
and including the date of the giving of such notice to and including the date
when the Company shall have made available to Participating Broker-Dealers
copies of the supplemented or amended Prospectus necessary to resume resales of
the New Notes or to and including the date on which the Company has given notice
that the use of the applicable Prospectus may be resumed, as the case may be.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last Interest Payment Date to which interest has been paid or duly provided for
on such Old Notes prior to the original issue date of the New Notes or, if no
such interest has been paid or duly provided for, will not receive any accrued
interest on such Old Notes, and the undersigned waives the right to receive any
interest on such Old Notes accrued from and after such Interest Payment Date or,
if no such interest has been paid or duly provided for, from and after February
11, 1997.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
<PAGE> 5
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Old Notes hereby tendered or on a security position
listing, or by any person(s) authorized to become the registered holder(s) by
endorsements and documents transmitted herewith (including such opinions of
counsel, certifications and other information as may be required by the Company
or the Trustee for the Old Notes to comply with the restrictions on transfer
applicable to the Old Notes). If signature is by an attorney-in-fact, executor,
administrator, trustee, guardian, officer of a corporation or another acting in
a fiduciary capacity or representative capacity, please set forth the signer's
full title. See Instruction 5.
(Signature(s) of Holder(s))
Date: ____________________________ , 1997
Name(s)
(Please Print)
Address
(Include Zip Code)
Area Code and Telephone Number
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 2 AND 5)
Authorized Signature
Name
(Please Print)
Date: ________________________ , 1997
Capacity of Title
Name of Firm
Address
(Include Zip Code)
Area Code and Telephone Number
<PAGE> 6
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the New Notes are to be issued in the name of someone
other than the registered holder of the Old Notes whose name(s) appear(s) above:
Issue New Notes to:
Name:
- ----------------------------------------------
(Please Print)
Address:
- --------------------------------------------
- ------------------------------------------------------
(Include Zip Code)
- ------------------------------------------------------
(Taxpayer Identification or Social Security No.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if the New Notes are to be sent to someone other than the
registered holder of the Old Notes whose name(s) appear(s) above, or to such
registered holder(s) at an address other than that shown above.
Mail New Notes to:
Name:
- ----------------------------------------------
(Please Print)
Address:
- --------------------------------------------
- ------------------------------------------------------
(Include Zip Code)
- ------------------------------------------------------
(Taxpayer Identification or Social Security No.)
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth in "The Exchange
Offer -- Procedures for Tendering Old Notes" in the Prospectus. Certificates, or
timely confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC, as well as this Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent at one of its addresses set forth herein on or
prior to the Expiration Date. Old Notes may be tendered in whole or in part in
the principal amount of $1,000 and integral multiples thereof.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent on or prior
to the Expiration Date or (iii) who cannot complete the procedures for delivery
by book-entry transfer on a timely basis, may tender their Old Notes by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer -- Procedures
for Tendering Old Notes -- Guaranteed Delivery" in the Prospectus. Pursuant to
such procedures: (i) such tender must be made by or through an Eligible
Institution (as defined below); (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by the
Company, must be received by the Exchange Agent on or prior to the Expiration
Date; and (iii) the Certificates (or a book-entry confirmation (as defined in
the Prospectus)) representing all tendered Old Notes, in proper form for
transfer, together with a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent within three New York Stock Exchange trading days after the date
of execution of such Notice of Guaranteed Delivery, all as provided in "The
Exchange Offer -- Procedures for Tendering Old Notes -- Guaranteed Delivery" in
the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Old Notes to be
properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein and in the Prospectus, "Eligible Institution" means a firm
or other entity identified in Rule 17Ad-15 under the Exchange Act as "an
eligible guarantor institution," including (as such terms are defined therein)
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any participant
in DTC whose name appears on a security position listing as the owner of
the Old Notes) of Old Notes tendered herewith, unless such holder(s) has
completed either the box entitled "Special Issuance Instructions" or the
box entitled "Special Delivery Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes" is inadequate, the Certificate number(s) and/or the
principal amount of Old Notes and any other required information should be
listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be
accepted only in the principal amount of $1,000 and integral multiples thereof.
If less than all the Old Notes evidenced by any Certificate submitted are to be
tendered, fill in the principal amount of Old Notes which are to be tendered in
the box entitled "Principal Amount of Old Notes Tendered (if less than all)." In
such case, new Certificate(s) for the remainder of the Old Notes that were
evidenced by your old Certificate(s) will only be sent to the holder of the Old
Note, promptly after the Expiration Date. All Old Notes represented by
Certificates delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
<PAGE> 8
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date. In order for a withdrawal to be
effective on or prior to that time, a written, telegraphic, telex or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth above or in the Prospectus on
or prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Notes to be withdrawn, the aggregate
principal amount of Old Notes to be withdrawn, and (if Certificates for Old
Notes have been tendered) the name of the registered holder of the Old Notes as
set forth on the Certificate for the Old Notes, if different from that of the
person who tendered such Old Notes. If Certificates for the Old Notes have been
delivered or otherwise identified to the Exchange Agent, then prior to the
physical release of such Certificates for the Old Notes, the tendering holder
must submit the serial numbers shown on the particular Certificates for the Old
Notes to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Notes tendered
for the account of an Eligible Institution. If Old Notes have been tendered
pursuant to the procedures for book-entry transfer set forth in "The Exchange
Offer -- Procedures for Tendering Old Notes," the notice of withdrawal must
specify the name and number of the account at DTC to be credited with the
withdrawal of Old Notes, in which case a notice of withdrawal will be effective
if delivered to the Exchange Agent by written, telegraphic, telex or facsimile
transmission. Withdrawals of tenders of Old Notes may not be rescinded. Old
Notes properly withdrawn will not be deemed validly tendered for purposes of the
Exchange Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described in the Prospectus
under "The Exchange Offer -- Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification. Any Old Notes which have been tendered
but which are withdrawn will be returned to the holder thereof without cost to
such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Old
Notes tendered hereby, the signature(s) must correspond exactly with the name(s)
as written on the face of the Certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different name(s) on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates 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 must submit proper evidence
satisfactory to the Company, in its sole discretion, of such persons' authority
to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Old Notes listed and transmitted hereby, no endorsement(s) of Certificate(s) or
separate bond power(s) are required unless New Notes are to be issued in the
name of a person other than the registered holder(s). Signature(s) on such
Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Notes listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
the Company or the Trustee for the Old Notes may require in accordance with the
restrictions on transfer applicable to the Old Notes. Signatures on such
Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance of which, or exchange for, may, in the view of
counsel to the Company, be unlawful. The Company also reserves the absolute
right, subject to applicable law, to waive any of the conditions of the Exchange
Offer set forth in the Prospectus under "The Exchange Offer -- Certain
Conditions to the Exchange Offer" or any conditions or irregularity in any
tender of Old Notes of any particular holder whether or not similar conditions
or irregularities are waived in the case of other holders.
<PAGE> 9
The Company's interpretation of the terms and conditions of the Exchange
Offer (including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Old Notes will be deemed to have been validly
made until all irregularities with respect to such tender have been cured or
waived. Neither the Company, any affiliates or assigns of the Company, the
Exchange Agent, nor any other person shall be under any duty to give
notification of any irregularities in tenders or incur any liability for failure
to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Exchange Agent at one of its
addresses and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal may be obtained from the Exchange Agent
or from your broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income
tax law, a holder whose tendered Old Notes are accepted for exchange is required
to provide the Exchange Agent with such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 below. If the Exchange Agent is not
provided with the correct TIN, the Internal Revenue Service (the "IRS") may
subject the holder or other payee to a $50 penalty. In addition, payments to
such holders or other payees with respect to Old Notes exchanged pursuant to the
Exchange Offer may be subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 2 is checked, the
holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 2 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60 day period following the date of the Substitute Form W-9.
If the holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60 day period
will be remitted to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the Exchange Agent with its TIN within such 60 day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the Old Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person 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.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as to the
steps that must be taken in order to replace the Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Certificate(s) have been followed.
11. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the Old Notes
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Notes in connection with the Exchange Offer, then the amount of any such
transfer tax (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.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
<PAGE> 10
TO BE COMPLETED BY ALL TENDERING NOTEHOLDERS
(SEE INSTRUCTION 9)
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK
- -------------------------------------------------------------------------------------------------------------------------------
PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT ------------------------------------
RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Social Security Number
or
SUBSTITUTE ------------------------------------
FORM W-9 Employer Identification Number
-------------------------------------------------------------------------------------------
CERTIFICATION -- UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) the number shown on this form is my correct Taxpayer Identification Number (or I am
waiting for a number to be issued to me),
(2) I am not subject to backup withholding because: (a) I am exempt from backup
withholding, (b) I have not been notified by the Internal Revenue Service (the "IRS") that
I am subject to backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to backup
withholding.
(3) any other information provided on this form is true and correct.
Certification Instructions -- You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because of
under-reporting interest or dividends on your tax return. However, if after being
DEPARTMENT OF THE TREASURY notified by the IRS that you were subject to backup withholding, you received another
INTERNAL REVENUE SERVICE notification from the IRS that you are no longer subject to backup withholding, do not
PAYER'S REQUEST FOR cross out item (2).
TAXPAYER IDENTIFICATION
NUMBER ("TIN") AND
CERTIFICATION
-------------------------------------------------------------------------------------------
Signature PART 2 --
-----------------------------------
Awaiting TIN [ ]
Date
----------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID 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 CHECKED
THE BOX IN PART 2 OF SUBSTITUTE FORM W-9.
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 (1) 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 (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide Taxpayer Identification Number by the time of payment, 31%
of all payments made to me on account of the New Notes shall be retained until I
provide a Taxpayer Identification Number to the Exchange Agent and that, if I do
not provide my Taxpayer Identification Number within 60 days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a Taxpayer
Identification Number.
Signature Date , 1997
---------------------------------- ----------------
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
9 1/4% SENIOR SUBORDINATED NOTES DUE 2007
OF
SYNTHETIC INDUSTRIES, INC.
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the Company's (as defined below) 9 1/4% Senior Subordinated
Notes due 2007 (the "Old Notes") are not immediately available, (ii) Old Notes,
the Letter of Transmittal and all other required documents cannot be delivered
to United States Trust Company of New York (the "Exchange Agent") on or prior to
the Expiration Date (as defined in the Prospectus referred to below) or (iii)
the procedures for delivery by book-entry transfer cannot be completed on a
timely basis. This Notice of Guaranteed Delivery may be delivered by hand,
overnight courier or mail, or transmitted by facsimile transmission, to the
Exchange Agent. See "The Exchange Offer -- Procedures for Tendering Old Notes"
in the Prospectus.
The Exchange Agent for the Exchange Offer is:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C>
By Mail: By Hand:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 843 111 Broadway
Cooper Station New York, New York 10006
New York, New York 10276 Attention: Lower Level Corporate Trust Window
Attention: Corporate Trust Services
By Overnight Delivery and By Hand After 4:30 P.M.:
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Attention: Corporate Trust Redemption Unit
Facsimile Transmissions: To Confirm by Telephone:
(212) 420-6152 (800) 548-6565
Attention: Customer Service
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to Synthetic Industries, Inc., a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated , 1997 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of Old Notes set forth
below pursuant to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer -- Procedures for Tendering Old Notes."
<TABLE>
<S> <C>
Aggregate Principal Amount Tendered: ------ Name(s) of Registered Holder(s):-----------
Certificate No(s). (if available): ------------ Address(es):---------------------------------
If Old Notes will be tendered by book-entry ------------------------------------------------
transfer, provide the following information: ------------------------------------------------
DTC Account Number: Area Code and Telephone Number(s): -----
Date: --------------------------------- Signature(s):---------------------------------
- ------------------------------------------------
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association (each, an "Eligible Institution"),
hereby guarantees to deliver to the Exchange Agent, at one of its addresses set
forth above, either the Old Notes tendered hereby in proper form for transfer,
or confirmation of the book-entry transfer of such Old Notes to the Exchange
Agent's account at The Depository Trust Company ("DTC"), pursuant to the
procedures for book-entry transfer set forth in the Prospectus, in either case
together with one or more properly completed and duly executed Letter(s) of
Transmittal (or facsimile thereof) and any other required documents within three
New York Stock Exchange trading days after the date of execution of this Notice
of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal and the Old Notes tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
<TABLE>
<S> <C>
Name of Firm: -------------------------------- -------------------------
Address: ------------------------------------- (Authorized Signature)
- ------------------------------------------------ Title:
- ------------------------------------------------ ------------------------------------------
(Zip Code) Name:----------------------------------------
Area Code and Telephone Number: --------- (Please type or print)
Date:-----------------------------------------
</TABLE>
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL
SURRENDER OF OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A
PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS.
<PAGE> 1
EXHIBIT 99.3
SYNTHETIC INDUSTRIES, INC.
EXCHANGE AGENT AGREEMENT
DATED AS OF MARCH , 1997
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust Administration
Ladies and Gentlemen:
Pursuant to the provision of the Offer (the "Exchange Offer") for all of
Synthetic Industries, Inc.'s (the "Company") outstanding 9 1/4% Senior
Subordinated Notes due 2007 (Series A) (the "Initial Notes") in exchange for
9 1/4% Senior Subordinated Notes due 2007 (Series B) (the "Exchange Notes"), all
of the Company's issued and outstanding Initial Notes accepted for tender of
exchange (the "Exchange") prior to 5:00 p.m., New York City time, on
, 1997 unless extended, for the Exchange Notes will be exchanged pursuant to
the terms and conditions of the Exchange Offer. The Exchange Offer is being made
pursuant to a prospectus (the "Prospectus") included in the Company's
registration statement on Form S-4 (File No. 333- ), as amended (the
"Registration Statement"), filed with the Securities and Exchange Commission
(the "SEC"). The term "Expiration Date" shall mean the date on which the
Exchange Offer, as it may be extended in accordance with the terms and
conditions set forth in the Prospectus, shall expire. Upon receipt and execution
of this letter and confirmation of the arrangements herein set forth, United
States Trust Company of New York will act as the Exchange Agent for the Exchange
(the "Exchange Agent").
Definitive copies of the form of the letter of transmittal, including the
related notice of guaranteed delivery, the form of letter to brokers, the form
of letter to clients and the taxpayer identification form (collectively, the
"Letters of Transmittal"), to be used by the holders of the Initial Notes (the
"Holders") to surrender their Initial Notes in order to receive the Exchange
Notes pursuant to the Exchange have been provided to you.
The Company hereby appoints you to act as Exchange Agent in connection with
the Exchange. In carrying out your duties as Exchange Agent, you are to act in
accordance with the following:
1. You are to mail the Prospectus and the Letters of Transmittal to
all of the Holders on the day that you are notified by the Company that the
Registration Statement has become effective under the Securities Act of
1933, as amended, or as soon as practicable thereafter, and to make
subsequent mailings thereof to any persons who become Holders prior to the
Expiration Date, and any persons as may from time to time be requested by
the Company. All mailings pursuant to this Section shall be by first class
mail, postage prepaid, unless otherwise specified. You shall also accept
and comply with telephone requests for information relating to the Exchange
Offer provided that such information shall relate only to the procedures
for accepting (or withdrawing from) the Exchange Offer. All other requests
for information relating to the Exchange Offer shall be directed to the
Company, Attention: , telephone (706) 375-3121.
2. You are to examine the Letter of Transmittal and the Initial Notes
and other documents delivered or mailed to you, by or for the Holders,
prior to the Expiration Date, to ascertain whether (i) the Letters of
Transmittal are properly executed and completed in accordance with the
instructions set forth therein, (ii) the Initial Notes are in proper form
for transfer, and (iii) all other documents submitted to you are in proper
form. In each case where a Letter of Transmittal or other document has been
improperly executed or completed or, for any other reason, is not in proper
form, or some other irregularity exists, you are authorized to endeavor to
take such action as you consider appropriate to notify the tenderer of such
irregularity and as to the appropriate means of resolving the same.
Determination of
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questions as to the proper completion or execution of the Letters of
Transmittal, or as to the proper form for transfer of the Initial Notes or
as to any other irregularity in connection with the submission of Letters
of Transmittal and/or Initial Notes and other documents in connection with
the Exchange, shall be made by you together with officers of, or counsel
for, the Company and with representatives of the Company at their written
instructions or oral direction confirmed by facsimile. Any determination
made by the Company on such questions shall be final and binding. As
Exchange Agent, you are entitled to rely on any determination by the
Company as described above and shall be fully protected and indemnified in
such reliance.
3. At the written request of the Company or its counsel, Andrews &
Kurth L.L.P., you shall notify tendering holders of Initial Notes in the
event of any rescission or modification of the Exchange Offer. In the event
of any such recission, you will return all tendered Initial Notes to the
persons entitled thereto, at the request of the Company or its counsel,
Andrews & Kurth L.L.P.
4. Tender of the Initial Notes may be made only as set forth in the
Letter of Transmittal. Notwithstanding the foregoing, tenders which the
Company shall approve in writing as having been properly tendered shall be
considered to be properly tendered. Letters of Transmittal shall be
recorded by you as to the date and time of receipt and shall be preserved
and retained by you. Exchange Notes are to be issued in exchange for the
Initial Notes pursuant to the Exchange only against deposit with you of the
Initial Notes, together with executed Letters of Transmittal and any other
documents required by the Exchange Offer on each business day from the
execution hereof up to the Expiration Date.
5. Upon the oral and written request of the Company (with written
confirmation of such oral request thereafter), you will transmit by
telephone, and promptly thereafter confirm in writing to (i) Joseph
Sinicropi, Chief Financial Officer (telephone (706) 375-3121) and (ii)
Andrews & Kurth L.L.P. (Attention: Mark Zvonkovic, Esq.), counsel to the
Company (telephone (212) 850-2800), or such other persons as the Company
may reasonably request, the aggregate number of the Initial Notes tendered
to you and the number of the Initial Notes properly tendered that day. In
addition, you will also inform the aforementioned persons, upon oral
request made from time to time (with written confirmation of such request
thereafter) prior to the Expiration Date, of such information as they or
any of them may reasonably request.
6. Upon the terms and subject to the conditions of the Exchange Offer,
delivery of Exchange Notes to be issued in exchange for accepted Initial
Notes will be made by you promptly after acceptance of the tendered Initial
Notes. You will hold all items which are deposited for tender with you
after 5:00 p.m., New York City time, on the Expiration Date pending further
instructions from an officer of the Company.
7. If any Holder shall report to you that such Holder's failure to
surrender Initial Notes registered in such Holder's name is due to the
loss, misplacement or destruction of a certificate or certificates, you
shall request such Holder (i) to furnish to the Exchange Agent an affidavit
of loss and, if required by the Company, a corporate bond of indemnity in
an amount and evidenced by such certificate or certificates of a surety, as
may be satisfactory to you and the Company, and (ii) to execute and deliver
an agreement to indemnify the Company and you in such form as is acceptable
to you and the Company. The obligees to be named in each such indemnity
bond shall include the Company and you. You shall report to the Company the
names of all Holders who claim that their Initial Notes have been lost,
misplaced or destroyed and the principal amount of such Initial Notes.
8. As soon as practicable after you mail or deliver to a Holder the
Exchange Notes that such Holder may be entitled to receive, you shall
arrange for cancellation of the Initial Notes submitted to you. Such
Initial Notes shall be forwarded to United States Trust Company of New
York, as Trustee (the "Trustee"), under the Indenture, dated as of February
11, 1997, governing the Initial Notes, for cancellation and retirement as
you are instructed by the Company (or a representative designated by the
Company).
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9. For your services as the Exchange Agent hereunder, the Company
shall pay you in accordance with the schedule of fees attached hereto as
Exhibit A. The Company also will reimburse you for your reasonable
out-of-pocket expenses (including but not limited to reasonable counsel
fees not previously paid to you as set forth in Exhibit A) in connection
with your services promptly after submission to the Company of itemized
statements.
10. You are not authorized to pay or offer to pay any concessions,
commissions or solicitation fees to any broker, dealer, bank or other
persons or to engage or utilize any person to solicit tenders.
11. As the Exchange Agent hereunder you:
(a) shall perform the duties and obligations as Exchange Agent with
due care and shall have no duties or obligations other than those
specifically set forth herein or in the Prospectus or Letters of
Transmittal or as may subsequently be requested in writing of you by the
Company and agreed to by you in writing with respect to the Exchange
Offer;
(b) will be regarded as making no representations and having no
responsibilities except to act in good faith and in a manner that is not
negligent as to the validity, accuracy, sufficiency, value or
genuineness of any Initial Notes deposited with you pursuant to the
Exchange Offer or any Exchange Notes, any Letters of Transmittal or
other documents prepared by the Company in connection with the Exchange
Offer or any signatures or endorsements other than your own, and will
not be required to and will make no representations as to the validity,
value or genuineness of the Exchange Offer; provided, however, that in
no way will your general duty to act in good faith be discharged by the
foregoing;
(c) shall not be obligated to take any legal action hereunder which
might in your reasonable judgment involve any expense not contemplated
hereby or liability unless you shall have been furnished with reasonable
indemnity;
(d) may rely on and shall be protected in acting upon any
certificate, instrument, opinion, notice, letter, facsimile
transmission, telex, telegram or other document, or any security
delivered to you, and reasonably believed by you to be genuine and to
have been signed by the proper party or parties;
(e) may rely on and shall be protected in acting upon written or
oral instructions with respect to any matter relating to your
obligations as Exchange Agent specifically covered by this Agreement, or
supplementing or qualifying any such action of the President and Chief
Executive Officer, the Chief Financial Officer or any Vice President of
the Company or such other person or persons designated by the Company;
(f) may consult with counsel satisfactory to you (including counsel
for the Company) and any action taken by you in accordance with the
advice and opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by you hereunder in good faith and in accordance with such
advice or opinion of such counsel;
(g) shall arrange for insurance protecting the Company and yourself
against any liability arising out of the loss, destruction or
non-delivery of checks or certificates for any cause; and
(h) shall not at any time advise any person as to the advisability
of the Exchange, as to the market value or decline or appreciation in
market value of any Initial Notes or Exchange Notes or as to any other
financial or legal aspect of the Exchange Offer or any transaction
related thereto.
12. The Company covenants and agrees to reimburse, indemnify, and to
hold you harmless against any costs, expenses (including reasonable fees of
your legal counsel), losses or damages, which may be paid, incurred or
suffered by you or to which you may become subject, arising from or out of,
directly or indirectly, any claim or liability resulting from your
obligations as Exchange Agent as specified in this Agreement or any
amendment, modification, or supplement hereto; provided, that such covenant
and agreement does not extend to, and you shall not be indemnified with
respect to, such costs, expenses,
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losses and damages incurred or suffered by you as a result of, or arising
out of, your negligence, misconduct, bad faith, or willful failure to
perform your obligations as Exchange Agent. In no case will the Company be
liable under this indemnity with respect to any claim against you unless,
promptly after you have received any written assertion of a claim or have
been served with summons or other first legal process giving information as
to the nature and basis of the claim, you notify the Company, by letter or
by cable or telex or facsimile confirmed by letter, of the written
assertion of such claim against you or of any action commenced against you
or of the service of any summons on you, or other first legal process
giving information as to the nature and basis of the claim, but failure so
to notify the Company shall not relieve the Company from any liability
which it may have otherwise than on account of this indemnity. The Company
will be entitled to participate at its own expense in the defense of such
claim or liability. If the Company so elects at any time after receipt of
such notice and agrees in writing that such claim is a claim for which you
are entitled to be indemnified and held harmless hereunder or if you in
such notice request and the Company agrees, the Company will assume the
defense of any suit brought to enforce any such claim. In the event the
Company assumes the defense of any such suit, the Company may select
counsel of its own choosing for such purpose who is recognized as having
expertise in defending against such proceedings, and the Company will not
be liable for the fees and expenses of any additional counsel thereafter
retained by you, unless in your judgment, which must be reasonable, it is
advisable for you to be represented by separate counsel because your
interest may conflict with the interests of the Company.
13. This Agreement and your appointment as the Exchange Agent shall be
construed and enforced in accordance with the laws of the State of New York
and shall inure to the benefit of, and the obligations created hereby shall
be binding upon, the successors and respective assigns of the parties
hereto. No other person shall acquire or have any rights under or by virtue
of this Agreement.
14. This Agreement may not be modified, amended or supplemented
without an express written agreement executed by the parties hereto. Any
inconsistency between this Agreement and the Letters of Transmittal, as
they may from time to time be supplemented or amended, shall be resolved in
favor of the latter, except with respect to the duties, liabilities and
indemnification of you as Exchange Agent.
15. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
16. In case any provision of this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability or the
remaining provisions shall not in any way be affected or impaired thereby.
17. Unless terminated earlier by the parties hereto, this Agreement
shall terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Paragraphs 9 and 12 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly
deliver to the Trustee any certificates for Initial Notes, funds or
property then held by you as Exchange Agent under this Agreement.
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If the foregoing is in accordance with your understanding, would you please
indicate your agreement by signing and returning the enclosed copy of this
Agreement to the Company.
Very truly yours,
SYNTHETIC INDUSTRIES, INC.
By:
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Name: Joseph Sinicropi
Title: Chief Financial Officer
Agreed to this day of
, 1997
UNITED STATES TRUST COMPANY OF NEW
YORK
By:
--------------------------------
Name: Patricia Stermer
Title: Trust Officer
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EXHIBIT A
UNITED STATES TRUST COMPANY OF NEW YORK
EXCHANGE OFFER:
Exchange Agent Fee $4,500.00
COUNSEL FEE:
Counsel services related to the examination and review of the documentation
in connection with the Exchange Offer are in addition to the foregoing.
EXPENSES:
Out-of-pocket expenses for postage, stationery, etc. are in addition to the
foregoing.
EXTRAORDINARY SERVICES:
Extraordinary services or those not specifically contemplated within the
foregoing proposal may be subject to additional charges.
