<PAGE>
As filed with the Securities and Exchange Commission on January 30, 1996
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
Form S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
AMERICOLD CORPORATION
(Exact name of registrant as specified in its charter)
Oregon 4222 93-0295215
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)
7007 S.W. Cardinal Lane, Suite 135, Portland, Oregon 97224
(503) 624-8585
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
-----------------------
JOEL M. SMITH
Senior Vice President and Chief Financial Officer
Americold Corporation
7007 S.W. Cardinal Lane, Suite 135, Portland, Oregon 97224
(503) 624-8585
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------------
Copies to:
Thomas P. Palmer, Esq. Richard D. Bohm, Esq.
Tonkon, Torp, Galen, Marmaduke & Booth Debevoise & Plimpton
888 S.W. Fifth Avenue 875 Third Avenue
Portland, Oregon 97204 New York, New York 10022
-----------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable following the date on which this Registration
Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Securities Amount to be Offering Price Per Aggregate Offering Amount of
to be Registered Registered Unit Price/1/ Registration Fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
__% Senior Subordinated
Notes due 2008........................ $120,000,000 100% $120,000,000 $41,380
=========================================================================================================================
</TABLE>
/1/ Estimated solely for purposes of calculating registration fee in accordance
with Rule 457.
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, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
AMERICOLD CORPORATION
Cross Reference Sheet Pursuant to Item 501(b) of Regulation S-K
Between Items in Part I of Form S-1 and the Prospectus
<TABLE>
<CAPTION>
Location or Caption
Form S-1 Item Number and Caption in Prospectus
- ---------------------------------- -------------------
<S> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus........................ Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................ Inside Front Cover Page; Outside Back Cover
Page; Additional Information
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges............................. Prospectus Summary; Risk Factors; Selected
Consolidated Financial and Other Information
4. Use of Proceeds......................................... Use of Proceeds
5. Determination of Offering Price......................... Not applicable
6. Dilution................................................ Not applicable
7. Selling Security Holders................................ Not applicable
8. Plan of Distribution.................................... Outside Front Cover Page; Underwriting
9. Description of Securities to Be Registered.............. Description of Senior Subordinated Notes
10. Interests of Named Experts and Counsel.................. Legal Matters; Experts
11. Information with Respect to the
Registrant............................................ Outside Front Cover Page; Prospectus
Summary; Capitalization; Selected
Consolidated Financial and Other
Information; Management's Discussion and
Analysis of Financial Condition and Results
of Operations; Business; Properties; Legal
Proceedings; Management; Principal
Shareholders; Consolidated Financial
Statements
12. Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities....................................... Not applicable
</TABLE>
i
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ 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 jurisdiction in which such offer, solicitation or sale +
+ would be unlawful prior to registration or qualification under the +
+ securities laws of any such jurisdiction. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued January 30, 1996
$120,000,000
Americold Corporation [Logo]
__ % SENIOR SUBORDINATED NOTES DUE 2008
------------
Interest payable May 1 and November 1
------------------
The Notes will be redeemable at the option of the Company, in whole or in part,
at any time on or after May 1, 2001, initially at ___% of their principal amount
declining to 100% of their principal amount on or after May 1, 2003, in each
case plus accrued interest. In addition, at the option of the Company, at any
time prior to May 1, 1999, up to 35% of the original principal amount of the
Notes will be redeemable from the proceeds of one or more Public Equity
Offerings (as defined), at ___% of their principal amount, plus accrued
interest.
Upon a Change of Control (as defined), in certain circumstances each holder of
Notes will have the right to require the Company to purchase all or any portion
of the Notes held by such holder at 101% of the principal amount thereof, plus
accrued interest. There can be no assurance that the Company will have the
financial ability or will be permitted by its other financing instruments to
purchase the Notes upon the occurrence of a Change of Control.
The Notes offered hereby (the "Offering") will be unsecured senior subordinated
obligations of the Company, ranking pari passu with all other existing and
future senior subordinated indebtedness of the Company and senior in right of
payment to any future indebtedness of the Company that is expressly subordinated
to senior subordinated indebtedness of the Company. The Notes will be
subordinated to Senior Debt (as defined), including indebtedness under the
Company's bank credit agreement and indebtedness under the Company's outstanding
First Mortgage Bonds (as defined). See "Description of Senior Subordinated
Notes." As of November 30, 1995, Senior Debt of the Company and its subsidiary
(including obligations under capitalized leases) was approximately $349.5
million.
------------------
AN INVESTMENT IN THE NOTES INVOLVES SIGNIFICANT RISKS.
SEE "RISK FACTORS" ON PAGE 12 FOR INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------
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.
-----------------
PRICE 100% AND ACCRUED INTEREST
---------------
<TABLE>
<CAPTION>
Underwriting Discounts Proceeds to
Price to Public(1) and Commissions(2) Company(1)(3)
------------------ ------------------ -------------
<S> <C> <C> <C>
Per Senior Subordinated Note............. 100.0%
Total.................................... $120,000,000
- ------------------------------------
</TABLE>
(1) Plus accrued interest from ______________________, 1996, if any.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $__________.
------------------
The Notes are offered, subject to prior sale, when, as and if accepted by
the Underwriters and subject to approval of certain legal matters by Debevoise &
Plimpton, counsel for the Underwriters. It is expected that delivery of the
Notes will be made on or about February ___, 1996 at the offices of Morgan
Stanley & Co. Incorporated, New York, New York, against payment therefor in New
York funds.
------------------
Morgan Stanley & Co.
Incorporated
CS First Boston
Smith Barney Inc.
February , 1996
<PAGE>
Americold's Nationwide Network
Americold's network of 49 warehouse facilities, with its related
refrigerated transportation management capabilities, are linked by a common,
integrated information system.
[GRAPHIC APPEARS HERE]
[Narrative description: outline map of the contiguous states of the United
States showing, within circles, the number of company warehouse facilities
located in a geographic area and indicating with a star the Company's corporate
headquarters as of December 31, 1995.]
<TABLE>
<CAPTION>
CALIFORNIA IDAHO MAINE PENNSYLVANIA WISCONSIN
- ------------ ---------- --------------- ------------- ------------------------
<S> <C> <C> <C> <C>
Burbank Burley Portland Fogelsville Plover
Corona Nampa Tomah
Fullerton MASSACHUSETTS TENNESSEE
Los Angeles ILLINOIS --------------- -------------
---------- Boston Murfreesboro
Turlock(2) Chicago Gloucester (4)
Watsonville(3) Rochelle Watertown Utah
-------------
Clearfield
COLORADO IOWA NEBRASKA
- ------------ ---------- ---------------
Denver (2) Bettendorf Grand Island WASHINGTON
Fort Dodge ------------- ------------------------
FLORIDA OREGON Burlington All information as of
- ------------ --------------- Connell
Bartow KANSAS Brooks Kent December 31, 1995.
---------- Moses Lake
Plant City Kansas City Hermiston Pasco Numbers in parentheses
Tampa (3) Milwaukie Walla Walla indicate multiple
Ontario Wallula locations per city.
Portland
(corporate office)
Salem
Woodburn
</TABLE>
2
<PAGE>
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or any Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the Notes offered hereby, nor does it constitute an
offer to sell or a solicitation of an offer to buy any securities offered to any
person in any jurisdiction in which it is unlawful to make such an offer or
solicitation to such person. Neither the delivery of this Prospectus nor any
sale made hereunder shall under any circumstances create any implication that
the information contained herein is correct as of any date subsequent to the
date hereof.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................................................... 4
Risk Factors.......................................................... 12
Use of Proceeds....................................................... 18
Capitalization........................................................ 19
Selected Consolidated
Financial and Other
Information.......................................................... 21
Management's Discussion
and Analysis of
Financial Condition
and Results of
Operations........................................................... 24
Business.............................................................. 42
Properties............................................................ 53
Legal Proceedings..................................................... 56
Management............................................................ 57
Principal Shareholders................................................ 68
Debt of the Company................................................... 71
Description of Senior
Subordinated Notes................................................... 89
Underwriting.......................................................... 121
Legal Matters......................................................... 123
Experts............................................................... 123
Additional Information................................................ 123
Index to Consolidated
Financial Statements................................................. F-1
</TABLE>
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE NOTES PURSUANT TO EXEMPTIONS FROM RULES 10b-6, 10b-7
AND 10b-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
WITH RESPECT TO SALES OF THE SECURITIES BEING OFFERED HEREBY TO CALIFORNIA
RESIDENTS, AS OF THE DATE OF THE PROSPECTUS, SUCH SECURITIES MAY BE SOLD ONLY
TO: (1)"ACCREDITED INVESTORS" WITHIN THE MEANING OF REGULATION D UNDER THE
SECURITIES ACT OF 1933, (2) BANKS, SAVINGS AND LOAN ASSOCIATIONS, TRUST
COMPANIES, INSURANCE COMPANIES, INVESTMENT COMPANIES REGISTERED UNDER THE
INVESTMENT COMPANY ACT OF 1940, PENSION AND PROFIT-SHARING TRUSTS, CORPORATIONS
OR OTHER ENTITIES WHICH, TOGETHER WITH THE CORPORATION'S OR OTHER ENTITY'S
AFFILIATES WHICH ARE UNDER COMMON CONTROL, HAVE A NET WORTH ON A CONSOLIDATED
BASIS ACCORDING TO THEIR MOST RECENT REGULARLY PREPARED FINANCIAL STATEMENTS
(WHICH SHALL HAVE BEEN REVIEWED, BUT NOT NECESSARILY AUDITED, BY OUTSIDE
ACCOUNTANTS) OF NOT LESS THAN $14 MILLION AND SUBSIDIARIES OF THE FOREGOING, (3)
ANY PERSON (OTHER THAN A PERSON FORMED FOR THE SOLE PURPOSE OF PURCHASING THE
SECURITIES BEING OFFERED HEREBY) WHO PURCHASES AT LEAST $1 MILLION AGGREGATE
AMOUNT OF THE SECURITIES OFFERED HEREBY OR (4) ANY PERSON WHO (A) HAS AN INCOME
OF $65,000 AND A NET WORTH OF $250,000 OR (B) HAS A NET WORTH OF $500,000 (IN
EACH CASE, EXCLUDING HOME, HOME FURNISHINGS AND PERSONAL AUTOMOBILES). EACH
CALIFORNIA RESIDENT PURCHASING SECURITIES OFFERED HEREBY WILL BE DEEMED TO
REPRESENT BY SUCH PURCHASE THAT IT COMES WITHIN ONE OF THE AFOREMENTIONED
CATEGORIES, THAT IT WILL NOT SELL OR OTHERWISE TRANSFER ANY OF SUCH SECURITIES
TO A CALIFORNIA RESIDENT UNLESS THE TRANSFEREE COMES WITHIN ONE OF THE
AFOREMENTIONED CATEGORIES AND THAT IT WILL ADVISE THE TRANSFEREE OF THIS
CONDITION WHICH TRANSFEREE, BY BECOMING SUCH, WILL BE DEEMED TO BE BOUND BY THE
SAME RESTRICTIONS ON RESALE.
"SUPERCOLD(R)" IS A REGISTERED SERVICE MARK OF AMERICOLD CORPORATION.
3
<PAGE>
PROSPECTUS SUMMARY
The following prospectus summary is qualified in its entirety by the more
detailed information and consolidated financial statements appearing elsewhere
in this Prospectus. Prospective investors are urged to read this Prospectus in
its entirety. As used herein, the terms "Americold" and the "Company" refer to
Americold Corporation, an Oregon corporation, and its subsidiary, unless the
context indicates otherwise. See "Risk Factors" for a discussion of certain
factors that should be considered in connection with the Offering.
------------
The Company
Americold, the nation's largest supplier of public refrigerated warehouse
space, provides integrated logistics services for the frozen food industry.
These services, consisting of warehousing and transportation management, are
provided through the Company's network of 49 refrigerated warehouses in 16
states and through the Company's refrigerated transportation management unit.
Americold serves a broad array of customers ranging from small local food
producers to most of the large national frozen food companies, including
ConAgra, Inc., H. J. Heinz Co., J. R. Simplot Co., Kellogg Company and Ocean
Spray Cranberries Inc. The Company's strategy is to use its position as the
largest supplier of public refrigerated warehouse space to access both increased
volumes of frozen food storage and additional transportation management
business.
Refrigerated Warehousing
Since its founding in 1911, the Company has grown to become the largest owner
and operator of refrigerated warehouses in the United States. The Company
believes it supplies approximately 16% of the total publicly-available freezer
storage space in the country. With approximately twice the capacity of its
nearest competitor, the Company's network of 49 refrigerated warehouse
facilities provides a total storage capacity of approximately 229 million cubic
feet. Approximately 94% of the storage space operated by the Company is freezer
space (zero degrees Fahrenheit and below), with the remaining space comprised of
cooler space (28 degrees Fahrenheit and above) and unrefrigerated dry storage
space. Major items stored include potatoes, vegetables, fish, poultry, prepared
foods and fruits. The Company believes that its facilities are sufficiently
dispersed geographically to allow it to compete in most of the significant
markets in the United States.
According to 1993 industry statistics (the most recent available),
approximately 77% of all commercial freezer space is available through public
suppliers, such as the Company, and the remainder is owned or operated by food
processors and distributors for their private use. Since 1979, there has been a
trend toward the use of public as opposed to private freezer space. The Company
believes it is well-positioned to benefit from this growth in public
refrigerated warehouse space. Since August 1994, the Company has added
approximately 15.1 million cubic feet of new warehouse space, while eliminating
approximately 12 million cubic feet of non-strategic warehouse space.
Refrigerated warehouse services provided by the Company include storage,
handling, blast freezing, and facility leasing. In addition to these services,
the Company has developed several ancillary services and intends to continue
developing and promoting such services as well as adding incremental freezer,
cooler or dry space. Ancillary services include product assembly/packaging,
palletizing, labeling and SUPERCOLD freezer storage provided at 11 of
Americold's facilities for the preservation of products, such as ice cream,
which require storage at temperatures as low as 20 degrees below zero
(Fahrenheit).
Transportation Management
The Company has recently expanded its focus to provide integrated warehousing
and transportation management services to the frozen food industry. To expand
its transportation management business,
4
<PAGE>
the Company has consolidated its transportation management functions, added
staff resources and improved its transportation management information systems
capabilities, including integrating these systems with the Company's warehouse
information systems. Transportation management services offered by the Company
include dispatching, freight rate negotiation, backhaul coordination, freight
bill auditing, network flow management, local/store door delivery, order
consolidation, truck routing and distribution channel assessment. As part of
its expanded transportation management services, the Company has entered into
arrangements with three subsidiaries of its largest customer, H.J. Heinz Co.
("Heinz"), pursuant to which it is providing transportation management services
from manufacturing plants through distribution channels to the subsidiaries'
customers. In addition, for one of these subsidiaries, the Company also manages
the in-bound transportation of over 200 non-frozen ingredients to the
subsidiary's manufacturing plants.
Company Strategy
The Company's strategy is to use its position as the largest supplier of
public refrigerated warehouse space to access both increased volumes of frozen
food storage and additional transportation management business. The Company
believes its strong industry position, its geographically dispersed network of
refrigerated warehouse facilities and its integrated logistics information
systems provide it with a competitive advantage in developing and maintaining
relationships with large frozen food manufacturers, distributors and retailers
that have freezer storage and product distribution requirements in numerous
locations throughout the United States. Industry studies suggest that frozen
food processors spend approximately twice as much on transportation as on
warehousing of frozen food products. The Company's customers, by outsourcing to
Americold, may benefit from the transportation efficiencies Americold achieves
while being able to reduce redundant staff and avoid individual investments in
warehouse facilities and in the computer hardware and software systems necessary
for transportation management.
The Company's experience in providing a wide range of services in what it
believes to be a reliable and cost-effective manner, together with its warehouse
network and expanding capabilities in transportation management services, may
enable the Company to attract new customers and to offer enhanced services to
current customers. The Company believes that the potential cost savings brought
to customers in product distribution will strengthen and broaden the Company's
relationships with its customers and provide opportunities to expand its
operations to meet customer needs.
Recent Development
On May 9, 1995, the Company filed a prepackaged plan of reorganization (the
"Plan") under Chapter 11 of the Bankruptcy Code (the "Prepackaged Bankruptcy").
The principal purpose of the Plan was to reduce the Company's short-term cash
requirements with respect to payments due on its senior subordinated
indebtedness by extending the maturity of such indebtedness and to adjust
certain restrictive financial covenants and other provisions contained in an
agreement with one of its principal lenders. The bankruptcy court approved the
Plan as filed and it became effective on June 30, 1995. The Plan as approved
provided, among other things, that each holder of the Company's then outstanding
11% Senior Subordinated Debentures due 1997 (the "11% Debentures") was entitled
to receive a corresponding amount of the Company's new 15% Senior Subordinated
Debentures due 2007 (the "15% Debentures"), plus accrued but unpaid interest;
that the holders of the Company's Senior Debt, including holders of the 11.45%
First Mortgage Bonds, Series A, due 2002 (the "Series A Bonds") and the 11.5%
First Mortgage Bonds, Series B, due 2005 (the "Series B Bonds," and together
with the Series A Bonds, the "First Mortgage Bonds") were not adversely affected
by the Prepackaged Bankruptcy; and that the prior Amended and Restated
Investment Agreement dated as of March 2, 1993 (the "Investment Agreement") was
superseded by the Second Amended and Restated Investment Agreement dated as of
May 5, 1995 (the "Second Investment Agreement") with Metropolitan Life Insurance
Company (the "Institutional Investor"). See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources--Liquidity--Effect of Prepackaged Bankruptcy" and "Legal Proceedings."
The Company believes that the restructuring pursuant to the Prepackaged
Bankruptcy has not adversely affected the holders of its Senior Debt or its
relationships with its customers, suppliers or shareholders. See "Risk Factors--
Conclusion of Prepackaged Bankruptcy."
5
<PAGE>
Ownership
The Company is controlled by Kelso & Company, a private investment firm, and
its affiliates ("Kelso"), which together currently hold approximately 53% of the
Company's common equity. Management of the Company beneficially owns
approximately 11% of the Company's common equity. See "Principal Shareholders."
The Company's principal executive offices are located at 7007 S.W. Cardinal
Lane, Suite 135, Portland, Oregon 97224. Its telephone number at that address
is (503) 624-8585.
6
<PAGE>
The Offering
$120,000,000 principal amount of ___% Senior Subordinated Notes due 2008
Maturity Date................May 1, 2008.
Interest................... __% per annum payable semi-annually in arrears on
each May 1 and November 1, commencing November 1,
1996.
Optional Redemption........ The Notes may not be redeemed at the option of the
Company prior to May 1, 2001. Thereafter, the
Notes will be redeemable at any time, in whole or
in part, at the option of the Company, initially
at ___% of their principal amount declining
ratably to 100% of their principal amount on or
after May 1, 2003, in each case plus accrued
interest. In addition, at any time prior to May
1, 1999 up to 35% of the original principal amount
of the Notes will be redeemable, at the option of
the Company, from the proceeds of one or more
Public Equity Offerings (as defined), at ___% of
their principal amount, plus accrued interest.
See "Description of Senior Subordinated
Notes--Optional Redemption."
Change of Control.......... Upon the occurrence of a Change of Control (as
defined in the indenture pursuant to which the
Notes will be issued; the "Note Indenture"), and
after satisfaction by the Company of the
requirements described below, each holder of the
Notes will have the right to require the Company
to repurchase all or any part of such holder's
Notes at a price in cash equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase,
subject to the terms of any Senior Debt (as
defined in the Note Indenture). The Company's
Senior Debt agreements restrict the redemption or
repurchase of the Notes so long as Senior Debt
remains outstanding. If a Change of Control
occurs, there can be no assurance that the Company
will have the financial ability to redeem the
Notes. See "Description of Senior Subordinated
Notes--Change of Control."
7
<PAGE>
Ranking.................... The Notes will be unsecured senior subordinated
obligations of the Company, subordinated in right
of payment to all existing and future Senior Debt,
including, without limitation, the Company's
obligations under the credit agreement with its
primary bank dated June 30, 1995 (the "Bank Credit
Agreement") and the indenture governing the First
Mortgage Bonds (the "Bond Indenture"), dated as of
March 9, 1993 and as amended on June 30, 1995,
between the Company and Fleet National Bank of
Connecticut, as trustee (the "Bond Trustee"). The
Notes will rank pari passu with all other existing
and future senior subordinated indebtedness of the
Company and senior in right of payment to any
future indebtedness of the Company that is
expressly subordinated to senior subordinated
indebtedness of the Company. See "Debt of the
Company--The Bank Credit Agreement" and "--The
First Mortgage Bonds," and "Description of Senior
Subordinated Notes--Ranking." As of November 30,
1995, the Company had approximately $349.5 million
of Senior Debt outstanding.
Covenants.................. The Note Indenture will contain certain covenants
for the benefit of the holders of the Notes,
including among others, covenants limiting (a) the
incurrence of additional indebtedness by the
Company, (b) the issuance of debt and preferred
stock by the Company's subsidiary, (c) the payment
of dividends on, and the redemption of, capital
stock of the Company and its subsidiary, (d) the
making of investments, (e) the sale of assets and
subsidiary stock and (f) transactions with
affiliates. In addition, the Note Indenture will
restrict the ability of the Company to consolidate
or merge with or into, or to transfer all or
substantially all its assets to, another person.
However, these limitations will be subject to a
number of important qualifications and exceptions.
See "Description of Senior Subordinated
Notes--Certain Covenants" and "--Consolidation,
Merger and Sale of Assets."
8
<PAGE>
Use of Proceeds............ The net proceeds of the Offering will be used by
the Company to retire at par the Company's 15%
Debentures. See "Use of Proceeds."
Risk Factors
For a discussion of certain factors which should be considered by prospective
investors in evaluating an investment in the Notes, see "Risk Factors" beginning
on page 12.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION
The following table presents selected consolidated historical financial
and other information of the Company. The information should be read in
conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" as furnished below. The consolidated
financial information for the Company for each of the five fiscal years set
forth in the table has been derived from the historical consolidated financial
statements of the Company which have been audited by KPMG Peat Marwick LLP,
independent certified public accountants for the Company. The reports of KPMG
Peat Marwick LLP refer to changes in accounting for income taxes and
postretirement benefits other than pensions. Selected consolidated financial
information for the nine months ended November 30, 1994 and November 30, 1995
has been derived from unaudited consolidated financial statements and, in the
opinion of the Company, includes all adjustments that are considered necessary
for a fair presentation of such financial information. Historical data and
interim results are not necessarily indicative of future results and interim
data are not necessarily indicative of results for a full year.
<TABLE>
<CAPTION>
Nine
Months Ended
Fiscal Year Ended Last Day of February, November 30,
--------------------------------------------------------- --------------------------
1991 1992 1993 1994 1995 1994 1995
--------- ----------- ---------- ---------- --------- ------------- -----------
(Dollars are in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales................................... $196,927 $200,680 $196,130 $ 198,887 $215,207 $162,214 $ 199,897
Operating expenses:
Cost of sales............................. 115,030 115,452 118,846 126,273 138,132 104,188 135,903
Amortization of cost in excess of
net assets acquired...................... 2,527 2,528 2,533 2,531 2,535 1,902 2,146
Selling and administrative expense........ 30,517 30,094 27,192 27,090 25,955 19,500 21,154
Employee stock ownership plan expense 750 750 750 -- 750 -- --
-------- -------- -------- --------- -------- -------- ---------
Total operating expense................... 148,824 148,824 149,321 155,894 167,372 125,590 159,203
-------- -------- -------- --------- -------- -------- ---------
Gross operating margin...................... 48,103 51,856 46,809 42,993 47,835 36,624 40,694
Other income (expense):
Interest income........................... 22 16 323 757 1,870 1,134 1,018
Interest expense.......................... (53,112) (51,601) (51,943) (55,403) (55,344) (41,318) (42,135)
Amortization of debt issuance cost........ (1,120) (1,129) (1,173) (1,249) (1,276) (944) (761)
Other, net(a)............................. 165 773 289 680 17,706 17,483 (7,308)
-------- -------- -------- --------- -------- -------- ---------
Total other expenses...................... (54,045) (51,941) (52,504) (55,215) (37,044) (23,645) (49,186)
-------- -------- -------- --------- -------- -------- ---------
Income (loss) before taxes,
extraordinary items and
cumulative effect of
accounting changes......................... (5,942) (85) (5,695) (12,222) 10,791 12,979 (8,492)
Income tax expense (benefit)................ 3,774 5,408 2,455 (1,183) 5,227 5,754 (2,489)
Extraordinary gain (loss)(b)................ 654 -- -- (1,848) -- -- (1,793)
Cumulative effect of accounting changes(c) . -- -- -- (64,234) -- -- --
-------- -------- -------- --------- -------- -------- ---------
Net income (loss)........................... $ (9,062) $ (5,493) $ (8,150) $ (77,121) $ 5,564 $ 7,225 $ (7,796)
======== ======== ======== ========= ======== ======== =========
Net income (loss) per common share.......... $(1.93) $(1.24) $(1.80) $(16.00) $1.00 $1.38 $(1.71)
Other Data:
Adjusted EBITDA(d).......................... $ 71,438 $ 75,104 $ 68,179 $ 66,870 $ 71,565 $ 54,454 $ 57,215
Ratio of Adjusted EBITDA to interest
expense (d)................................ 1.35x 1.46x 1.31x 1.21x 1.29x 1.32x 1.36x
Capital expenditures(e)..................... $ 8,509 $ 9,212 $ 7,661 $ 8,925 $ 13,203 $ 13,213 $ 29,300
Ratio of earnings to fixed charges(f)....... -- -- -- -- 1.19x 1.30x --
Deficiency in earnings to cover
fixed charges(g)........................... $ 5,942 $ 148 $ 5,699 $ 12,283 -- -- $ 8,996
Weighted average capacity--cubic feet
(in millions)............................. 223.4 225.9 228.8 231.4 229.2 227.5 230.1
Total pounds handled--receipts and releases
(in millions)............................. 17,380 17,154 16,609 17,906 20,004 15,160 15,709
Total pounds stored--average at month-end
(in millions)............................. 1,560 1,635 1,534 1,493 1,568 1,563 1,552
<CAPTION>
As of
As of Last Day of February, November 30,
--------------------------------------------------------- ---------------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets................................ $493,651 $483,841 $490,151 $ 528,703 $544,595 $537,205 $ 523,543
Long-term debt.............................. 449,299 435,133 443,003 467,337 442,912 438,251 461,791
Preferred stock............................. 3,208 4,204 4,773 5,348 5,789 5,850 6,325
Common stockholders' deficit................ (10,578) (16,882) (25,175) (102,577) (97,747) (95,853) (106,079)
</TABLE>
10
<PAGE>
(a) Includes a pretax gain of approximately $17.0 million in fiscal 1995 from
insurance proceeds related to the Company's settlement of claims arising out
of the Kansas City fire. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Introduction--Effect of
Kansas City Fire." Includes a pretax expense of approximately $6.7 million
in the nine months ended November 30, 1995 relating to reorganization fees
and expenses incurred as part of the Prepackaged Bankruptcy.
(b) For fiscal 1991, includes a gain of approximately $0.7 million from the
purchase of $5 million face value of the Company's 11% Debentures. For
fiscal 1994, includes a loss of approximately $1.8 million from the
retirement of $150 million in principal amount of Series A Bonds as part of
the issuance of the Series B Bonds. For the nine months ended November 30,
1995, includes a loss of approximately $1.8 million relating to the exchange
of the Company's 11% Debentures for the 15% Debentures and the repurchase of
$10 million in principal amount of Series A Bonds.
(c) Effective March 1, 1993, the Company implemented Financial Accounting
Standards Board Statement of Financial Accounting Standard No. 106,
"Employer's Accounting for Postretirement Benefits Other Than Pensions," and
Statement No. 109, "Accounting for Income Taxes." As a result of the
implementation of these accounting standards, the Company's fiscal 1994
earnings were reduced by approximately $64.2 million.
(d) EBIDTA is a widely accepted financial indicator of a company's ability to
service debt. However, the Company believes that because of the gain from
insurance proceeds in fiscal 1995 and in the nine months ended November 30,
1994, and the reorganization fees and expenses in the nine months ended
November 30, 1995, a more meaningful indicator is Adjusted EBITDA. Except
for fiscal 1995 and the nine months ended November 30, 1994 and 1995, EBITDA
is the same as Adjusted EBITDA. Adjusted EBITDA is calculated as follows:
<TABLE>
<CAPTION>
Nine
Months Ended
Fiscal Year Ended Last Day of February, November 30,
-------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before taxes,
extraordinary items and
cumulative effect of
accounting changes............ $(5,942) $ (85) $(5,695) $(12,222) $ 10,791 $ 12,979 $(8,492)
Interest income................. (22) (16) (323) (757) (1,870) (1,134) (1,018)
Interest expense................ 53,112 51,601 51,943 55,403 55,344 41,318 42,135
Total non-cash charges(g)....... 25,015 24,542 23,322 25,651 25,622 19,253 18,316
Amortization of original issue
discount (included in
interest expense)............. (725) (938) (1,068) (1,205) (1,369) (1,009) (430)
Gain on insurance proceeds...... -- -- -- -- (16,953) (16,953) --
Reorganization expense.......... -- -- -- -- -- -- 6,704
------- ------- ------- -------- -------- -------- -------
Adjusted EBITDA................. $71,438 $75,104 $68,179 $ 66,870 $ 71,565 $ 54,454 $57,215
======= ======= ======= ======== ======== ======== =======
</TABLE>
The Company believes that Adjusted EBITDA, while providing useful
information, should not be considered in isolation or as a substitute for
the consolidated income statement data prepared in accordance with generally
accepted accounting principles. For example, Adjusted EBITDA should not be
considered an alternative to net income as an indicator of operating
performance or an alternative to the use of cash flow as a measure of
liquidity. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
(e) During the nine months ended November 30, 1995, the Company completed
capital expenditure projects related to the construction and expansion of
refrigerated warehouse facilities totalling $24.5 million. Approximately
$18.6 million of such capital expenditures were funded from the escrow fund
established with the proceeds from the sale of the Series B Bonds. See
"Management's Discussion and Analysis of Financial condition and Results of
Operations--Liquidity and Capital Resources--Capital Resources--Capital
Expenditures."
(f) For purposes of computing the ratio of earnings to fixed charges, "earnings"
are defined as earnings before income taxes, extraordinary items, cumulative
effect of accounting changes and fixed charges, and "fixed charges" consist
of interest expense, amortization of debt issuance cost and that portion of
rental expense considered to be representative of the interest factor in
capital leases.
(g) Non-cash charges to the Company, which also have been included in the
calculation of Adjusted EBITDA above, have been as follows:
<TABLE>
<CAPTION>
Nine
Months Ended
Fiscal Year Ended Last Day of February, November 30,
------------------------------------------- ----------------
1991 1992 1993 1994 1995 1994 1995
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Non-cash Charges:
Depreciation............................. $19,822 $19,171 $17,725 $19,938 $20,140 $15,154 $14,505
Goodwill amortization.................... 2,527 2,528 2,533 2,531 2,535 1,902 2,146
Amortization of debt issuance costs...... 1,120 1,129 1,173 1,249 1,276 944 761
Amortization of original issue discount.. 725 938 1,068 1,205 1,369 1,009 430
Other amortization....................... 221 291 373 408 302 244 474
Employee stock ownership plan expense.... 600 485 450 320 -- -- --
------- ------- ------- ------- ------- ------- -------
Total.................................... $25,015 $24,542 $23,322 $25,651 $25,622 $19,253 $18,316
======= ======= ======= ======= ======= ======= =======
</TABLE>
11
<PAGE>
RISK FACTORS
In addition to the other matters described in this Prospectus, the
following factors should be considered carefully by each prospective investor
prior to any purchase of Notes.
SUBSTANTIAL LEVERAGE; NET LOSSES; DEFICIT OF EARNINGS TO FIXED CHARGES
The Company is highly leveraged, with a percentage of total debt to total
capitalization at November 30, 1995 of approximately 127%. See
"Capitalization." In addition, the Company may, subject to certain restrictions
in its debt agreements, incur further indebtedness from time to time to finance
expansion either through construction, acquisitions or capital leases, or for
other purposes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
Significant payments are required to service the Company's debt. As a
result of the significant interest charges on the debt incurred in connection
with its leveraged acquisition in December 1986, the adverse effect on the
Company's net sales resulting from drought and flood conditions in the
agricultural sector in the United States in certain years and the adverse
effects of a December 1991 fire at the Kansas City, Kansas warehouse, the
Company experienced losses before extraordinary items and the cumulative effect
of accounting changes of approximately $9.7 million, $5.5 million, $8.2 million
and $11.0 million for fiscal 1991, 1992, 1993 and 1994, respectively. The
Company's earnings were sufficient to cover fixed charges in fiscal 1995 as a
result of the receipt of insurance payments related to the Kansas City fire, but
were insufficient to cover fixed charges by approximately $5.9 million, $0.15
million, $5.7 million, $12.3 million and $6.3 million in fiscal 1991, 1992,
1993, 1994 and 1995 (before insurance payments), respectively. As of November
30, 1995, the Company had a common stockholders' deficit of approximately $106.1
million. See "--Substantial Payment Obligations; Consequences of Failure to
Service Debt" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Results of Operations."
The extent to which the Company is leveraged could have important
consequences to holders of the Notes, including: (a) impairment of the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or other purposes; (b) impairment of
the Company's ability to refinance existing debt; (c) dedication of a
substantial portion of the Company's cash flow from operations to the payment of
debt service requirements (principal and interest) on its indebtedness; (d)
vulnerability of the
12
<PAGE>
Company to changes in general economic conditions, including conditions in the
agricultural sector; and (e) limitations on the Company's ability to capitalize
on significant business opportunities and to respond to competition, including
limitations on its ability to make capital expenditures included in its business
plan.
RESTRICTIONS IMPOSED BY DEBT AGREEMENTS
The Company's debt agreements contain a number of significant financial and
operating covenants that, among other things, significantly restrict the ability
of the Company and its subsidiaries to dispose of assets, incur additional
indebtedness, pay dividends, create liens on assets, enter into leases, make
investments or acquisitions, engage in mergers or consolidations, or engage in
certain transactions with subsidiaries and affiliates and otherwise restrict
corporate activities. In particular, the Company's Senior Debt agreements may
substantially restrict the ability of the Company to redeem or otherwise make
payments in respect of principal on the Notes prior to the maturity thereof.
See "Debt of the Company" and "Description of Senior Subordinated Notes."
The Second Investment Agreement contains further restrictive covenants,
including covenants requiring the Company to comply with specific financial
ratios and maintenance tests. See "Debt of the Company--The Second Investment
Agreement."
The Company is currently in compliance with all of the covenants in its
debt agreements. However, to remain in compliance with these covenants, the
Company will be required to achieve financial and operating results that are
better than those achieved historically. There can be no assurance that such
improved results will be achieved.
The breach of any of these covenants or restrictions could result in a
default under the Company's debt agreements. In the event of such a default,
the holders of such indebtedness could elect to declare all such indebtedness
immediately due and payable, including accrued and unpaid interest, and to
terminate their commitments (if any) with respect to funding obligations under
the agreements related to such indebtedness. In addition, such holders could
proceed against any collateral securing their debt. The collateral securing the
Company's senior indebtedness constitutes substantially all of the assets of the
Company. Any such default would also have a significant adverse effect on the
market value and marketability of the Notes.
13
<PAGE>
SUBSTANTIAL PAYMENT OBLIGATIONS; CONSEQUENCES OF FAILURE TO SERVICE DEBT
The Company has substantial payment obligations with respect to its
indebtedness, including the First Mortgage Bonds. The First Mortgage Bonds will
mature nearly six years (Series A) and three years (Series B) prior to the
maturity of the Notes. No assurance can be given that the Company will be able
to generate sufficient cash flow from operations to meet its debt service
obligations. To make long-term debt repayments, the Company will attempt to
increase operating cash flow through improvements in existing operations,
through expansion of its transportation management business, and through
capacity growth by pursuing viable growth opportunities, such as the acquisition
or expansion of warehouse facilities. Alternatively, the Company may seek to
refinance its debt as it matures. There can be no assurance, however, that such
improved operations, expanded transportation management business, warehouse
capacity growth or refinancing will be accomplished successfully. If such
increase in operating cash flow or refinancing is not accomplished, the Company
anticipates it would pursue the following alternatives: (1) restrict its
projected capital expenditure program; (2) seek alternative sources of
financing; (3) seek modifications to its financing arrangements with existing
lenders; or (4) sell certain warehouses (subject to obtaining any necessary
lender consents). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Debt of the Company."
If for any reason the Company were unable to meet its debt service
obligations, it would be in default under the terms of its indebtedness. The
consequences of any such default could be the same as a covenant default
described above under "--Restrictions Imposed by Debt Agreements."
SUBORDINATION
The Notes will be subordinated to all Senior Debt, as defined in the Note
Indenture, including the debt evidenced by the Company's Bank Credit Agreement
and the First Mortgage Bonds. See "Description of Senior Subordinated Notes."
Substantially all the assets of the Company are encumbered pursuant to its
Senior Debt agreements. In a liquidation, bankruptcy, reorganization or similar
proceeding, the assets of the Company would be available to pay obligations on
its subordinated indebtedness (including the Notes) only after all Senior Debt
had been paid in full and, in such event, there may be insufficient assets to
pay in full amounts due on the Notes. On November 30, 1995, the Company had
$349.5 million in principal amount of Senior Debt outstanding.
14
<PAGE>
CONCLUSION OF PREPACKAGED BANKRUPTCY
Although the Plan became effective on June 30, 1995, lease rejection claims
by two landlords involving four warehouse properties remain unresolved. The
Company does not believe that the resolution of such claims will have a material
adverse effect upon the Company, but there can be no assurance as to the outcome
of such proceedings. See "Legal Proceedings."
COMPANY DEPENDENCE ON SIGNIFICANT CUSTOMERS
A number of the Company's facilities depend to a large extent upon one or a
small number of customers. In fiscal 1995, the Company's ten largest customers
accounted for approximately 55% of the Company's total net sales. One customer
of the Company, Heinz and its subsidiaries, accounted for approximately 21% of
the Company's net sales in fiscal 1995 (consisting primarily of refrigerated
warehousing sales) and 33% of the Company's net sales in the first nine months
of fiscal 1996 (consisting of both refrigerated warehousing and transportation
management sales). An interruption or reduction in the business received from
such customers would result in a decrease in the sales at certain facilities and
in the overall net sales of the Company. See "--Expansion of Transportation
Management Services."
The Company is aware that one customer intends to transfer a significant
portion of the customer's storage volume at one production warehouse to another
warehouse expected to be constructed by a competitor closer to one of the
customer's production facilities and to be operational by mid- to late fiscal
1997. The Company believes it will locate replacement business to recover some
portion of the expected loss of revenues and gross operating margin represented
by such storage volume by fiscal 1998, but there can be no assurance in this
regard. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Results of Operations--Comparison of Nine-month Periods
Ended November 30, 1994 and 1995" and "Business--Customers."
EXPANSION OF TRANSPORTATION MANAGEMENT SERVICES
The Company has recently expanded its transportation management services,
and its current strategy involves assuming full responsibility for certain
logistics requirements of its customers. See "Business--Company Strategy." Due
to the complexity of implementing and coordinating several inter-related
systems, the Company encountered start-up difficulties in achieving agreed-upon
service levels with respect to the introduction of certain transportation
management services for customers in the latter part of fiscal 1996 . The
Company believes that it has overcome such difficulties, but there can be no
assurance that the Company will not encounter difficulties in the future or that
such difficulties, if encountered, would not
15
<PAGE>
adversely affect operating income. There can also be no assurance that
difficulties, if encountered, would not adversely affect customer relationships.
The maintenance and continued growth of the Company's transportation
management services is dependent upon meeting customer expectations. There can
be no assurance that existing transportation management services customers will
continue to use the Company's services, that the Company will be successful in
its effort to reach arrangements with additional customers for the provision of
integrated logistics services or that the Company will not experience losses in
the transportation management business in the future. See "--Company Dependence
on Significant Customers."
COMPETITION
Americold operates in a competitive environment in which several national
and regional, and many smaller, warehouse operators compete with the Company.
One important competitive factor is the location of the Company's warehouse
facilities, and, consequently, the geographic markets in which it competes are
primarily local. Competition varies from local market to local market, but
almost all local markets are characterized by low barriers to entry since any
competitor able to obtain financing may build a competing facility. In
addition, the Company's customers, many of which have substantially greater
resources than the Company, may divert business from the Company or build their
own private refrigerated warehouse facilities. See "Business--Competition."
In the transportation management business, there are several national and
local enterprises that presently provide or may in the future provide
transportation management services to frozen food shippers. The Company is
unaware, however, of any competitor which at this time provides significant
transportation management services in conjunction with a single, integrated
network of frozen food warehouses. See "Business--Competition."
DEPENDENCE ON AGRICULTURAL MARKETS
A substantial portion of the Company's warehousing sales are derived from
storage and handling of agricultural products and foods prepared from
agricultural products. The Company's operating results, therefore, may be
materially affected by severe weather or other conditions affecting the
agricultural sector generally.
VOTING CONTROL
Kelso holds approximately 53% and seven entities (including Kelso) and
management together hold approximately 83% of the outstanding shares of the
Company's common stock. These
16
<PAGE>
entities and management are able to elect all of the members of the Company's
Board of Directors. As a result of such stock ownership, these shareholders can
effectively control the affairs and business policies of the Company. See
"Principal Shareholders."
ABSENCE OF ESTABLISHED TRADING MARKET; LIQUIDITY OF NOTES
The Company does not intend to apply for listing of the Notes on any
securities exchange or seek approval for quotation of the Notes on any inter-
dealer quotation system. It is unlikely that a public trading market for the
Notes will exist. The Underwriters have advised the Company that they presently
intend to make a market in the Notes, but they are not obligated to do so and
any such market-making may be discontinued by the Underwriters in their sole
discretion at any time without notice. Accordingly, no assurance can be given
as to the liquidity of, or the existence of trading markets for, the Notes.
The Notes may be characterized as "high-yield" securities. In recent
years, uncertainties in the high-yield debt market have been reflected in
volatile prices of such securities. Such volatility may have a material adverse
effect on the ability of a purchaser to resell the Notes for any value.
Accordingly, no assurance can be given that any purchaser of the Notes will be
able to sell the Notes in the future.
17
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering are expected to be
approximately $115 million after payment of underwriting discounts and
commissions and certain fees and expenses related to the Offering. The Company
intends to apply the net proceeds of the Offering to redeem at par all of its
15% Debentures. As of December 31, 1995, there was $115.0 million aggregate
principal amount of 15% Debentures outstanding at an interest rate of 15%
with a maturity date of November 1, 2007. Concurrently with the closing of the
Offering, the Company will defease all outstanding 15% Debentures in accordance
with the provisions of the indenture related to such debentures by depositing
with the trustee under such indenture $115.0 million of the proceeds from the
Offering, plus accrued interest. The 15% Debentures will remain a legal
obligation of the Company for approximately 45 days following the closing of the
Offering until the trustee applies such proceeds to redeem the 15% Debentures
upon expiration of the applicable notice periods provided in such indenture. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Underwriting."
18
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
November 30, 1995, and as adjusted to give effect to the issuance of the Notes
and the redemption of the 15% Debentures as if the Offering and the redemption
had been completed on November 30, 1995. The information included in the table
is qualified in its entirety by, and should be read in conjunction with, the
Consolidated Financial Statements and related notes included elsewhere herein.
<TABLE>
<CAPTION>
November 30, 1995
-----------------
Actual As Adjusted(a)
------ --------------
(Dollars in thousands)
<S> <C> <C>
Debt:
Bank Credit Agreement(b).... $ -- $ --
Series A Bonds.............. 140,000 140,000
Series B Bonds.............. 176,250 176,250
15% Debentures.............. 115,000 --
Notes....................... -- 120,000
Other indebtedness.......... 33,243 33,243
--------- ---------
Total debt............. 464,493 469,493
Preferred stock $100
par value; authorized
1,000,000 shares;
issued and outstanding
52,936 shares............... 6,325 6,325
Common stockholders'
deficit:
Common stock $.01 par
value; authorized
10,000,000 shares;
issued and outstanding
4,860,934 shares.......... 49 49
Additional paid
in capital................ 49,022 49,022
Retained deficit............ (155,107) (155,107)
Equity adjustment to
recognize minimum
pension liability (c)..... (43) (43)
Total common --------- ---------
stockholders'
deficit................... (106,079) (106,079)
--------- ---------
Total capitalization. $ 364,739 $ 369,739
========= =========
</TABLE>
- --------------------
(a) Gives effect to the issuance of the Notes and the redemption of the 15%
Debentures as if the Offering and the redemption had been completed on
November 30, 1995.
19
<PAGE>
(b) The Company currently has a revolving credit facility with its primary bank
of up to $27.5 million, including up to $10.0 million of letters of credit.
Other than letters of credit, the Company, as of November 30, 1995, had no
borrowings outstanding under the credit facility. See "Debt of the
Company--The Bank Credit Agreement."
(c) This adjustment reflects the excess of the present value of accumulated
plan benefits over the fair value of plan assets under one of the Company's
pension plans.
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION
The following table presents selected consolidated historical
financial and other information of the Company. The information should be read
in conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" as furnished below. The consolidated
financial information for the Company for each of the five fiscal years set
forth in the table has been derived from the historical consolidated financial
statements of the Company which have been audited by KPMG Peat Marwick LLP,
independent certified public accountants for the Company. The reports of KPMG
Peat Marwick LLP refer to changes in accounting for income taxes and post-
retirement benefits other than pensions. Selected consolidated financial
information for the nine months ended November 30, 1994 and November 30, 1995
has been derived from unaudited consolidated financial statements and, in the
opinion of the Company, includes all adjustments that are considered necessary
for a fair presentation of such financial information. Historical data and
interim results are not necessarily indicative of future results and interim
data are not necessarily indicative of results for a full year.
<TABLE>
<CAPTION>
Nine
Months Ended
Fiscal Year Ended Last Day of February, November 30,
--------------------------------------------------------- --------------------------
1991 1992 1993 1994 1995 1994 1995
--------- ----------- ---------- ---------- --------- ------------- -----------
(Dollars are in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales................................... $196,927 $200,680 $196,130 $ 198,887 $215,207 $162,214 $ 199,897
Operating expenses:
Cost of sales............................. 115,030 115,452 118,846 126,273 138,132 104,188 135,903
Amortization of cost in excess of
net assets acquired...................... 2,527 2,528 2,533 2,531 2,535 1,902 2,146
Selling and administrative expense........ 30,517 30,094 27,192 27,090 25,955 19,500 21,154
Employee stock ownership plan expense 750 750 750 -- 750 -- --
-------- -------- -------- --------- -------- -------- ---------
Total operating expense................... 148,824 148,824 149,321 155,894 167,372 125,590 159,203
-------- -------- -------- --------- -------- -------- ---------
Gross operating margin...................... 48,103 51,856 46,809 42,993 47,835 36,624 40,694
Other income (expense):
Interest income........................... 22 16 323 757 1,870 1,134 1,018
Interest expense.......................... (53,112) (51,601) (51,943) (55,403) (55,344) (41,318) (42,135)
Amortization of debt issuance cost........ (1,120) (1,129) (1,173) (1,249) (1,276) (944) (761)
Other, net(a)............................. 165 773 289 680 17,706 17,483 (7,308)
-------- -------- -------- --------- -------- -------- ---------
Total other expenses...................... (54,045) (51,941) (52,504) (55,215) (37,044) (23,645) (49,186)
-------- -------- -------- --------- -------- -------- ---------
Income (loss) before taxes,
extraordinary items and
cumulative effect of
accounting changes......................... (5,942) (85) (5,695) (12,222) 10,791 12,979 (8,492)
Income tax expense (benefit)................ 3,774 5,408 2,455 (1,183) 5,227 5,754 (2,489)
Extraordinary gain (loss)(b)................ 654 -- -- (1,848) -- -- (1,793)
Cumulative effect of accounting changes(c) . -- -- -- (64,234) -- -- --
-------- -------- -------- --------- -------- -------- ---------
Net income (loss)........................... $ (9,062) $ (5,493) $ (8,150) $ (77,121) $ 5,564 $ 7,225 $ (7,796)
======== ======== ======== ========= ======== ======== =========
Net income (loss) per common share.......... $(1.93) $(1.24) $(1.80) $(16.00) $1.00 $1.38 $(1.71)
Other Data:
Adjusted EBITDA(d).......................... $ 71,438 $ 75,104 $ 68,179 $ 66,870 $ 71,565 $ 54,454 $ 57,215
Ratio of adjusted EBITDA to interest
expense (d)................................ 1.35x 1.46x 1.31x 1.21x 1.29x 1.32x 1.36x
Capital expenditures(e)..................... $ 8,509 $ 9,212 $ 7,661 $ 8,925 $ 13,203 $ 13,213 $ 29,300
Ratio of earnings to fixed charges(f)....... -- -- -- -- 1.19x 1.30x --
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Nine
Months Ended
Fiscal Year Ended Last Day of February, November 30,
--------------------------------------------------------- --------------------------
1991 1992 1993 1994 1995 1994 1995
---------- ---------- ---------- ---------- --------- ------------ ------------
(Dollars are in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Deficiency in earnings to cover
fixed charges(g)........................... $ 5,942 $ 148 $ 5,699 $ 12,283 -- -- $ 8,996
Weighted average capacity--cubic feet
(in millions)............................. 223.4 225.9 228.8 231.4 229.2 227.5 230.1
Total pounds handled--receipts and releases
(in millions)............................. 17,380 17,154 16,609 17,906 20,004 15,160 15,709
Total pounds stored--average at month-end
(in millions)............................. 1,560 1,635 1,534 1,493 1,568 1,563 1,552
<CAPTION>
As of
As of Last Day of February, November 30,
-------------------------------------------------------- -----------------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets................................ $493,651 $483,841 $490,151 $ 528,703 $544,595 $537,205 $ 523,543
Long-term debt.............................. 449,299 435,133 443,003 467,337 442,912 438,251 461,791
Preferred stock............................. 3,208 4,204 4,773 5,348 5,789 5,850 6,325
Common stockholders' deficit................ (10,578) (16,882) (25,175) (102,577) (97,747) (95,853) (106,079)
</TABLE>
(a) Includes a pretax gain of approximately $17.0 million in fiscal 1995 from
insurance proceeds related to the Company's settlement of claims arising out
of the Kansas City fire. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Introduction--Effect of
Kansas City Fire." Includes a pretax expense of approximately $6.7 million
in the nine months ended November 30, 1995 relating to reorganization fees
and expenses incurred as part of the Prepackaged Bankruptcy.
(b) For fiscal 1991, includes a gain of approximately $0.7 million from the
purchase of $5 million face value of the Company's 11% Debentures. For
fiscal 1994, includes a loss of approximately $1.8 million from the
retirement of $150 million in principal amount of Series A Bonds as part of
the issuance of the Series B Bonds. For the nine months ended November 30,
1995, includes a loss of approximately $1.8 million relating to the exchange
of the Company's 11% Debentures for the 15% Debentures and the repurchase of
$10 million in principal amount of Series A Bonds.
(c) Effective March 1, 1993, the Company implemented Financial Accounting
Standards Board Statement of Financial Accounting Standard No. 106,
"Employer's Accounting for Postretirement Benefits Other Than Pensions," and
Statement No. 109, "Accounting for Income Taxes." As a result of the
implementation of these accounting standards, the Company's fiscal 1994
earnings were reduced by approximately $64.2 million.
(d) EBIDTA is a widely accepted financial indicator of a company's ability to
service debt. However, the Company believes that because of the gain from
insurance proceeds in fiscal 1995 and in the nine months ended November 30,
1994, and the reorganization fees and expenses in the nine months ended
November 30, 1995, a more meaningful indicator is Adjusted EBITDA. Except
for fiscal 1995 and the nine months ended November 30, 1994 and 1995, EBITDA
is the same as Adjusted EBITDA. Adjusted EBITDA is calculated as follows:
<TABLE>
<CAPTION>
Nine
Months Ended
Fiscal Year Ended Last Day of February, November 30,
------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before taxes,
extraordinary items and
cumulative effect of
accounting changes............ $(5,942) $ (85) $(5,695) $(12,222) $ 10,791 $ 12,979 $(8,492)
Interest income................. (22) (16) (323) (757) (1,870) (1,134) (1,018)
Interest expense................ 53,112 51,601 51,943 55,403 55,344 41,318 42,135
Total non-cash charges(g)....... 25,015 24,542 23,322 25,651 25,622 19,253 18,316
Amortization of original issue
discount (included in interest
expense)...................... (725) (938) (1,068) (1,205) (1,369) (1,009) (430)
Gain on insurance proceeds...... -- -- -- -- (16,953) (16,953) --
Reorganization expense.......... -- -- -- -- -- -- 6,704
------- ------- ------- -------- -------- -------- -------
Adjusted EBITDA................. $71,438 $75,104 $68,179 $ 66,870 $ 71,565 $ 54,454 $57,215
======= ======= ======= ======== ======== ======== =======
</TABLE>
The Company believes that Adjusted EBITDA, while providing useful information,
should not be considered in isolation or as a substitute for the consolidated
income statement data prepared in accordance with generally accepted
accounting principles. For example, Adjusted EBITDA should not be considered
an alternative to net income as an indicator of operating performance or an
alternative to the use of cash flow as a measure of liquidity. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
22
<PAGE>
(e) During the nine months ended November 30, 1995, the Company completed
capital expenditure projects related to the construction and expansion of
refrigerated warehouse facilities totalling $24.5 million. Approximately
$18.6 million of such capital expenditures were funded from the escrow fund
established with the proceeds from the sale of the Series B Bonds. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Capital Resources--Capital
Expenditures."
(f) For purposes of computing the ratio of earnings to fixed charges, "earnings"
are defined as earnings before income taxes, extraordinary items, cumulative
effect of accounting changes and fixed charges, and "fixed charges" consist
of interest expense, amortization of debt issuance cost and that portion of
rental expense considered to be representative of the interest factor in
capital leases.
(g) Non-cash charges to the Company, which also have been included in the
calculation of Adjusted EBITDA above, have been as follows:
<TABLE>
<CAPTION>
Nine Months Ended
Fiscal Year Ended Last Day of February, November 30,
------------------------------------------- ----------------
1991 1992 1993 1994 1995 1994 1995
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Non-cash Charges:
Depreciation............................. $19,822 $19,171 $17,725 $19,938 $20,140 $15,154 $14,505
Goodwill amortization.................... 2,527 2,528 2,533 2,531 2,535 1,902 2,146
Amortization of debt issuance costs...... 1,120 1,129 1,173 1,249 1,276 944 761
Amortization of original issue discount.. 725 938 1,068 1,205 1,369 1,009 430
Other amortization....................... 221 291 373 408 302 244 474
Employee stock ownership plan expense.... 600 485 450 320 -- -- --
------- ------- ------- ------- ------- ------- -------
Total.................................... $25,015 $24,542 $23,322 $25,651 $25,622 $19,253 $18,316
======= ======= ======= ======= ======= ======= =======
</TABLE>
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Americold provides integrated logistics services for the frozen food
industry consisting of warehousing and transportation management. These services
are provided through the Company's network of 49 refrigerated warehouses and its
refrigerated transportation management unit. The Company's fiscal year ends on
the last day of February.
Development of Transportation Management Services - In recent quarters, the
Company has experienced increased interest by customers in procuring
transportation management services from the Company. In this regard, the Company
entered into arrangements in the first half of fiscal 1996 pursuant to which it
is providing such services to three subsidiaries of one large customer.
Transportation management services provided to these three customers account for
substantially all of the increase in the Company's transportation management
revenues thus far in fiscal 1996. The Company has made proposals to offer
similar services to certain other potential customers by emphasizing its
logistics expertise and warehouse industry position which enable customers to
obtain services in support of distribution of frozen food products from a single
provider.
The maintenance and continued growth of transportation management services
revenues is dependent upon meeting customer expectations. Due to the complexity
of implementing and coordinating several inter-related systems, the Company
encountered start-up difficulties in achieving agreed-upon service levels with
respect to the introduction of certain transportation management services for
customers in the latter part of fiscal 1996. The Company believes that it has
overcome such difficulties, but there can be no assurance that the Company will
not encounter difficulties in the future or that such difficulties, if
encountered, would not adversely affect operating income. There can also be no
assurance that difficulties, if encountered, would not adversely affect customer
relationships. The Company believes, however, that its transportation management
activities may lead to stronger customer relationships and increased revenues in
the higher-margin warehousing business. See "Risk Factors--Expansion of
Transportation Management Services."
As the Company does not own transportation equipment, the Company has
entered into contracts with independent carriers to provide freight
transportation at negotiated rates. Accordingly, the margins that the Company
earns in providing transportation management services are lower than for its
warehousing services.
24
<PAGE>
Development of Refrigerated Warehouse Properties - The Company continually
evaluates the need for warehouse space and intends to pursue growth of its
refrigerated warehouse business both by expanding its network of warehouses and
by expanding existing facilities in response to customer requirements. Since
August 1994 (mid-fiscal 1995), the Company has added approximately 15.1 million
cubic feet of storage capacity in five locations. Two of such facilities became
operational in fiscal 1995, and one in the second quarter and two in the third
quarter of fiscal 1996. The increase, net of warehouse closures discussed below,
represents a 1.4% increase in available warehouse space. The Company is
currently working toward the development of several new warehouses which include
the acquisition of 2.1 million cubic feet and the construction of 13 million
cubic feet of new refrigerated warehouse space. The Company intends to finance
such expansion primarily through operating leases pursuant to an existing
commitment and from other financing sources. See "--Liquidity and Capital
Resources-- Capital Resources."
Since August 1994, the Company has reduced the amount of available
refrigerated warehouse space by approximately 12 million cubic feet due to the
sale of one property, termination of four operating leases in the Prepackaged
Bankruptcy in the third quarter of fiscal 1996 and the non-renewal of three
other operating leases. The Company expects that the effects of the closure or
disposition of such non-strategic facilities will have a positive effect on
future gross operating margin as a percentage of net sales.
Prepackaged Bankruptcy - During the first quarter of fiscal 1996, the
Company solicited acceptance of the Plan in the Prepackaged Bankruptcy. The
principal purpose of the Plan was to reduce the Company's short-term cash
requirements with respect to payments due on its subordinated indebtedness by
extending the maturity on such indebtedness from May 1997 to November 2007 and
to adjust certain restrictive financial covenants and certain other provisions
contained in the prior Investment Agreement between the Company and the
Institutional Investor. Each holder of the 11% Debentures received a
corresponding amount of the Company's new 15% Debentures at par, plus accrued
but unpaid interest. The Company received approval from the classes of
debtholders entitled to vote on the Plan and, on May 9, 1995, filed the Plan as
approved with the United States Bankruptcy Court for the District of Oregon. On
June 19, 1995, the Court approved the Company's Plan, and on June 30, 1995, the
Plan became effective. The Company was debtor-in-possession during the
proceedings. The Company believes the Prepackaged Bankruptcy has not adversely
affected the holders of its Senior Debt or its relationships with its customers,
suppliers or shareholders. See "Risk Factors--Conclusion of Prepackaged
Bankruptcy" and
25
<PAGE>
"--Liquidity and Capital Resources--Liquidity--Effect of Prepackaged
Bankruptcy."
Through the third quarter of fiscal 1996, the Company incurred
approximately $6.7 million in reorganization fees and expenses related to the
Prepackaged Bankruptcy. In addition, the write-off of unamortized original
issue discount and unamortized issuance costs related to the exchange of the 11%
Debentures and the repurchase of $10.0 million in principal amount of the Series
A Bonds in the Prepackaged Bankruptcy resulted in an extraordinary loss, net of
taxes, of approximately $1.8 million in the same period.
Effect of the 1986 Acquisition - In December 1986, Kelso, certain
institutional investors and members of Americold's management (its "Management
Group") purchased the Company from its prior owners (the "1986 Acquisition").
The Company's operating results and cash flow have been and will continue to be
materially affected by the indebtedness incurred to finance the 1986
Acquisition. For fiscal 1994 and 1995, interest expense, principally related to
debt incurred to finance the 1986 Acquisition, totaled $55.4 million and $55.3
million, respectively. See "Risk Factors--Substantial Leverage; Net Losses;
Deficit of Earnings to Fixed Charges."
Effect of Kansas City Fire - In December 1991 a fire began at the
Company's Kansas City, Kansas underground warehouse, the Company's largest
warehouse facility. Due to its underground location, the fire required an
extended period to extinguish. As a result of the fire, the Company's
warehousing activities in Kansas City have operated at a substantially reduced
level, due to loss of public storage and lease customers. Although a
substantial portion of the Kansas City warehouse facility has been restored to
its pre-fire condition, the Company is unable to predict its ability to return
the facility to pre-fire operating volumes and profits. The Company settled its
first party claims with its insurance carriers for business interruption losses,
property damage and out-of-pocket expenses with respect to the fire and
recognized in the third quarter of fiscal 1995 approximately $17 million as a
gain on insurance settlement.
HISTORICAL INCOME STATEMENT INFORMATION
The following table sets forth, for the nine-month periods ended
November 30, 1994 and November 30, 1995, respectively, certain consolidated
financial data of the Company, expressed as a percentage of net sales:
26
<PAGE>
PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
Nine Months
Ended
November 30,
1994 1995
------ ------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 64.2% 68.0%
Amortization of cost in excess
of net assets acquired 1.2% 1.1%
Selling and administrative
expenses 12.0% 10.6%
Gross operating margin 22.6% 20.4%
Interest expense 25.5% 21.1%
</TABLE>
The following table sets forth, for the fiscal years ended the last day of
February 1993, 1994 and 1995, respectively, certain consolidated financial data
for the Company, expressed as a percentage of net sales:
PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
Last Day of
February,
-----------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 60.6% 63.5% 64.2%
Amortization of cost in excess
of net assets acquired 1.3% 1.3% 1.2%
Selling and administrative
expenses 13.9% 13.6% 12.1%
Gross operating margin 23.9% 21.6% 22.2%
Interest expense 26.5% 27.9% 25.7%
</TABLE>
27
<PAGE>
RESULTS OF OPERATIONS
Comparison of Nine-month Periods
Ended November 30, 1994 and 1995
Net Sales - The Company's net sales increased 23.2% from $162.2 million for
the first nine months of fiscal 1995 to $199.9 million for the first nine months
of fiscal 1996, reflecting a substantial increase in transportation management
sales as well as a 3.7% increase in warehousing sales. The Company's third
fiscal quarter is typically its strongest sales quarter.
Americold's net sales for the first nine months of fiscal 1995 and the
first nine months of fiscal 1996 are detailed in the table below, by activity:
NET SALES
(Dollars in Millions)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended % Change
November 30, 1994 November 30, 1995 FY95 to FY96
------------------ ------------------ -------------
Amount % Amount %
----------- ----- --------- -------
<S> <C> <C> <C> <C> <C>
Logistics
Warehousing
Storage $ 77.4 47.7% $ 79.9 40.0% 3.2 %
Handling 53.1 32.7% 56.8 28.4% 7.0 %
Leasing 5.3 3.3% 5.1 2.6% (3.8)%
Freezing
and other 9.4 5.8% 8.7 4.3% (7.4)%
------ ---- ------ ---- ------
145.2 89.5% 150.5 75.3% 3.7%
Transportation
management
services 12.9 8.0% 46.0 23.0% 256.6 %
------ ---- ------ ---- ------
Total logistics 158.1 97.5% 196.5 98.3% 24.3 %
Other non-
logistics 4.1 2.5% 3.4 1.7% (17.1)%
------ ---- ------ ---- ------
Total net sales $162.2 100.0% $199.9 100.0% 23.2 %
====== ===== ====== ===== ======
</TABLE>
28
<PAGE>
Warehousing sales increased 3.7% from $145.2 million for the first
nine months of fiscal 1995 to $150.5 million for the first nine months of fiscal
1996, principally due to a 3.2% increase in storage revenue and a 7.0% increase
in handling revenue. The increase in storage revenue is primarily due to price
increases and changes in product mix, as storage volume remained stable at
approximately 1.56 billion pounds stored on average per month in each of the two
periods.
The Company is aware that a portion of the revenue derived from a
customer at one warehouse location and reflected in the first nine months of
fiscal 1996 is intended to be directed to another warehouse, which is expected
to be constructed by a competitor closer to one of the customer's production
facilities and to be operational by mid- to late fiscal 1997. Unless mitigated
by the Company's efforts to obtain replacement business, the effect on gross
operating margin from this relocation will be a reduction of approximately $2.0
million per year. The Company believes that it will locate replacement business
to recover some portion of the gross operating margin represented by such
storage volume by fiscal 1998, but there can be no assurance in this regard. See
"Risk Factors--Dependence on Significant Customers."
The 7.0% increase in handling revenue resulted primarily from a 3.7%
increase in volume of product handled, with the remaining increase due to price
increases and changes in product mix. For the first nine months of fiscal 1995,
15.2 billion pounds of product were handled by the Company compared with 15.7
billion pounds during the same period in fiscal 1996.
Transportation management sales increased 256.6% from $12.9 million
for the first nine months of fiscal 1995 to $46.0 million for the first nine
months of fiscal 1996, due to the outsourcing to the Company of additional
transportation management responsibilities by three customers.
Other non-logistics sales (quarry sales) decreased 17.1% from $4.1
million for the first nine months of fiscal 1995 to $3.4 million for the first
nine months of fiscal 1996. The Company has entered into a letter of intent
with respect to the sale of the quarry. See "--Liquidity and Capital Resources-
- -Capital Resources--Capital Expenditures."
Cost of Sales - Cost of sales increased 30.4% from $104.2 million for the
first nine months of fiscal 1995 to $135.9 million for the first nine months of
fiscal 1996. The increased volume of transportation management services, which
required increases in transportation capacity purchased from carriers and the
addition of new employees, resulted in an approximately $32.1 million increase
in cost of sales. In addition, the cost of sales decreased as a result of
warehouse additions and closures in the net amount of $1.6 million. See "--
Introduction--Development of Refrigerated Warehouse Properties."
29
<PAGE>
Cost of sales as a percentage of net sales increased from 64.2% for
the first nine months of fiscal 1995 to 68.0% for the first nine months of
fiscal 1996, as handling and transportation management sales, which each have
high variable cost requirements, increased from 40.7% of net sales in the prior
period to 51.4% in the more recent period.
Selling and Administrative Expenses - Selling and administrative
expenses increased 8.5% from $19.5 million for the first nine months of fiscal
1995 to $21.2 million for the first nine months of fiscal 1996. The increase
primarily reflects an increase of approximately $1.0 million in salaries and
related fringe benefits. Selling and administrative expenses as a percentage of
net sales decreased from 12.0% in the first nine months of fiscal 1995 to 10.6%
in the first nine months of fiscal 1996 due to the increase in transportation
management sales which did not require a corresponding increase in selling and
administrative expenses.
Gross Operating Margin - As a result of the factors discussed above,
gross operating margin increased 11.1% from $36.6 million for the first nine
months of fiscal 1995 to $40.7 million for the first nine months of fiscal 1996.
Interest Expense - Interest expense increased from $41.3 million for
the first nine months of fiscal 1995 to $42.1 million for the first nine months
of fiscal 1996 as a result of slightly higher overall interest rates partially
offset by slightly lower overall borrowings. The increase in interest rates
resulted from the exchange in the Prepackaged Bankruptcy of the Company's 11%
Debentures for the new 15% Debentures.
Reorganization Expenses - Reorganization expenses of approximately
$6.7 million reflect the expenses incurred for professional services related to
the Prepackaged Bankruptcy including investment banking, accounting and legal
fees, through the third quarter of fiscal 1996.
Income (Loss) - The Company's income before income taxes and
extraordinary item for the first nine months of fiscal 1995 was $13.0 million,
compared to a loss of $8.5 million in the first nine months of fiscal 1996. The
decrease in income between the two periods is due to the approximately $6.7
million of reorganization fees and expenses incurred during the first nine
months of fiscal 1996 and the recognition by the Company of an approximately
$17.0 million gain from the insurance settlement related to the Kansas City,
Kansas fire in the first nine months of fiscal 1995. These two factors were
offset in part by improved earnings from operations.
Extraordinary Item - In connection with the exchange of the Company's
11% Debentures for the 15% Debentures and the
30
<PAGE>
repurchase of the $10.0 million of Series A Bonds in the Prepackaged Bankruptcy,
unamortized original issue discount of approximately $2.0 million and
unamortized issuance costs of approximately $1.0 million were written off,
resulting in an extraordinary loss, net of taxes, of approximately $1.8 million.
Comparison of Fiscal Years 1994 and 1995
Net Sales - The Company's net sales increased 8.2% from $198.9 million
for fiscal 1994, to $215.2 million for fiscal 1995.
Americold's net sales for fiscal 1994 and fiscal 1995 are detailed in
the table below, by activity:
<TABLE>
<CAPTION>
NET SALES
(Dollars in Millions)
% Change
Fiscal 1994 Fiscal 1995 FY94 to FY95
------------- ------------- -------------
Amount % Amount %
------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Logistics
Warehousing
Storage $ 98.5 49.5% $103.4 48.0% 5.0%
Handling 65.3 32.8% 70.7 32.9% 8.3%
Leasing 7.4 3.7% 7.0 3.3% (5.4)%
Freezing and
other 9.9 5.0% 11.4 5.3% 15.2%
------ ---- ------ ---- -----
181.1 91.0% 192.5 89.5% 6.3%
Transportation
management
services 12.6 6.4% 18.0 8.3% 42.9%
------ ---- ------ ---- -----
Total logistics 193.7 97.4% 210.5 97.8% 8.7%
Other non-
logistics 5.2 2.6% 4.7 2.2% (9.6)%
------ ---- ------ ---- -----
Total net sales $198.9 100.0% $215.2 100.0% 8.2%
====== ===== ====== ===== =====
</TABLE>
Warehousing sales increased 6.3% from $181.1 million for fiscal 1994
to $192.5 million for fiscal 1995, primarily due to a 5.0% increase in storage
revenue and an 8.3% increase in handling revenue. The increase in storage
revenue was
31
<PAGE>
principally due to a 5.0% increase in storage volume as the storage volume
increased from 1.49 billion pounds stored on average per month in fiscal 1994 to
1.57 billion pounds on average per month in fiscal 1995. The increase in
storage volume was due primarily to the increased storage of vegetables, which
is attributable to a stronger vegetable harvest in the Midwest in fiscal 1995.
The increase in handling revenue resulted primarily from an 11.7%
increase in volume of product handled. For fiscal 1994, 17.9 billion pounds of
product were handled by the Company compared with 20.0 billion pounds in fiscal
1995. While handling volume increased 11.7%, handling revenue increased only
8.3% due to decreased special services revenue (classified by the Company as
handling revenue), changes in product mix and other factors.
Transportation management sales increased 42.9% from $12.6 million in
fiscal 1994 to $18.0 million in fiscal 1995 due to the startup by one customer
of a distribution program in the Company's Kansas City, Kansas warehouse
facility for which the Company provided transportation management services.
Other non-logistics (quarry) sales decreased 9.6% from $5.2 million in fiscal
1994 to $4.7 million in fiscal 1995.
Cost of Sales - Cost of sales increased 9.4% from $126.3 million for
fiscal 1994 to $138.1 million for fiscal 1995. Approximately $6.2 million of
the increase was due to the increased volume of transportation management
business, which requires corresponding increases in transportation capacity
purchased from carriers. Another $4.2 million of the increase in cost of sales
was primarily attributable to increased warehouse payroll expense resulting from
the increase in handling volume at the Company's facilities.
Cost of sales as a percentage of net sales increased from 63.5% in
fiscal 1994 to 64.2% in fiscal 1995, as handling and transportation management
sales, which have high variable cost requirements, increased from 39.2% of total
sales in fiscal 1994 to 41.2% in fiscal 1995.
Selling and Administrative Expenses - Selling and administrative
expenses decreased 4.2% from $27.1 million for fiscal 1994 to $26.0 million for
fiscal 1995. The reduction primarily reflects a decrease of approximately $0.5
million in professional fees. Selling and administrative expenses as a
percentage of net sales decreased from 13.6% in fiscal 1994 to 12.1% in fiscal
1995. The Company was able to reduce selling and administrative expenses in an
environment of increasing sales due to an intensive program to reduce and
restructure administrative activities.
32
<PAGE>
Gross Operating Margin - As a result of the factors discussed above,
gross operating margin increased 11.3% from $43.0 million for fiscal 1994 to
$47.8 million for fiscal 1995.
Interest Expense - Interest expense decreased from $55.4 million for
fiscal 1994 to $55.3 million for fiscal 1995, as a result of slightly lower
average borrowings during the fiscal year.
Gain on Insurance Settlement - This one-time gain reflects the gain on
insurance settlement of approximately $17.0 million related to the Company's
settlement with its insurance carriers of its first party claims for business
interruption losses, property damage and out-of-pocket expenses incurred with
respect to the Kansas City fire.
Income (Loss) - The Company's loss before income taxes, extraordinary
item and cumulative effect of accounting changes for fiscal 1994 was $12.2
million, compared to income of $10.8 million in fiscal 1995. The increase in
income reported in the more recent period is primarily the result of the
insurance settlement referred to above.
Extraordinary Loss - During the first quarter of fiscal 1994, the
Company completed a debt refinancing transaction related to the First Mortgage
Bonds which resulted in an extraordinary loss to the Company, net of taxes, of
approximately $1.8 million due to the write-off of unamortized issuance costs.
Comparison of Fiscal Years 1993 and 1994
Net Sales - The Company's net sales increased 1.4% from $196.1 million
for fiscal 1993 to $198.9 million for fiscal 1994.
Americold's net sales for fiscal 1993 and 1994 are detailed below, by
activity:
33
<PAGE>
<TABLE>
<CAPTION>
NET SALES
(Dollars in Millions)
% Change
Fiscal 1993 Fiscal 1994 FY93 to FY94
------------- ------------- -------------
Amount % Amount %
------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
Logistics
Warehousing
Storage $101.0 51.5% $ 98.5 49.5% (2.5)%
Handling 60.3 30.8% 65.3 32.8% 8.3%
Leasing 9.5 4.8% 7.4 3.7% (22.1)%
Freezing and
other 10.2 5.2% 9.9 5.0% (2.9)%
------ ---- ------ ---- ------
181.0 92.3% 181.1 91.0% 0.1%
Transportation
management
services 11.9 6.1% 12.6 6.4% 5.9%
------ ---- ------ ---- ------
Total logistics 192.9 98.4% 193.7 97.4% 0.4%
Other non-
logistics 3.2 1.6% 5.2 2.6% 62.5%
------ ---- ------ ---- ------
Total net sales $196.1 100.0% $198.9 100.0% 1.4%
====== ===== ====== ===== ======
</TABLE>
Warehousing sales increased 0.1% from $181.0 million in fiscal 1993 to
$181.1 million for fiscal 1994, primarily due to an 8.3% increase in handling
revenues. This increase was partially offset by a 2.5% decline in storage
revenue and a 22.1% decline in leasing revenue. The decline in storage revenue
resulted from a 2.7% decrease in storage volume, offset slightly by net price
increases and other factors. The Company believes the decreased storage volume
was due to a reduction in certain frozen vegetable stocks across several
production warehouses. The reduction in frozen vegetable stocks was principally
attributable to the flooding in the Midwest in fiscal 1994. For fiscal 1993,
1.53 billion pounds of product were stored on average per month compared to 1.49
billion pounds of product stored on average per month in fiscal 1994.
Approximately $1.9 million of the $2.1 million decline in leasing activity was
attributable to the loss of lease customers in the Company's Kansas City, Kansas
warehouse facility.
34
<PAGE>
The increase in handling revenue resulted primarily from a 7.8%
increase in volume of product handled. For fiscal 1993, 16.6 billion pounds
were handled compared with 17.9 billion pounds during fiscal 1994.
Transportation management sales increased 5.9% from $11.9 million for
fiscal 1993 to $12.6 million in fiscal 1994. Non-logistics sales increased
62.5% from $3.2 million for fiscal 1993 to $5.2 million for fiscal 1994 as the
increase in quarry sales of approximately $2.4 million helped offset the loss of
approximately $0.4 million in sales due to the closure of the vital records
center. Due to the fire in Kansas City, the vital records center ceased
operations during the first quarter of fiscal 1994.
Cost of Sales - Cost of sales increased 6.2% from $118.8 million for
fiscal 1993 to $126.3 million for fiscal 1994. Excluding the approximately $4.1
million allowance for non-collection of disputed billings and other expenses
related to the Kansas City, Kansas warehouse fire, cost of sales for fiscal 1993
would have been $114.7 million. Payroll costs and energy costs increased
approximately $3.9 million and $1.5 million, respectively, as a result of
increased handling volume at the Company's facilities, including the quarry, and
as a result of the new warehouse facility added in January 1993. Depreciation
increased approximately $1.7 million related to the adoption of Financial
Accounting Standards Board Statement No. 109, "Accounting For Income Taxes."
Cost of sales as a percentage of net sales increased from 60.6% for
fiscal 1993 to 63.5% for fiscal 1994, primarily due to increased handling and
non-logistics sales which carry lower operating margins.
Selling and Administrative Expenses - Selling and administrative
expenses decreased 0.4% from $27.2 million in fiscal 1993 to $27.1 million for
fiscal 1994. This decrease primarily reflects a decrease of approximately $1.2
million in salaries and related fringe benefits. Certain other costs declined,
including office supplies, communications and equipment rentals, while
professional fees, due primarily to one-time expenses for consulting services
related to administrative cost reduction efforts, and meeting and travel
expenses, increased.
Gross Operating Margin - As a result of the factors discussed above,
gross operating margin decreased 8.2% from $46.8 million for fiscal 1993 to
$43.0 million for fiscal 1994.
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<PAGE>
Interest Expense - Interest expense increased from $51.9 million for
fiscal 1993 to $55.4 million for fiscal 1994, resulting from both the $26.3
million net increase in the principal amount of First Mortgage Bonds
outstanding and from the addition of the mortgage payable on the Burley, Idaho
warehouse facility.
Income (Loss) - The Company's loss before income taxes, extraordinary
item and cumulative effect of accounting changes for fiscal 1993 was $5.7
million compared to a loss of $12.2 million for fiscal 1994. The principal
reasons for the increased loss includes the increase in interest expense and the
increase in cost of sales.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes it has sufficient liquidity and capital resources
to meet its needs related to payment of interest expense, continued operation
and maintenance of its warehouses, operation and planned expansion of its
transportation management business and limited growth in warehouse investment.
Anticipated growth in the volume of transportation management services is not
expected to consume significant capital resources. Although the Company's
internal resources for new warehouse acquisition or construction are limited,
the Company has arranged for up to $25 million in lease financing for new
warehouse facilities from a finance company (the "Lease Line"). See "--Capital
Resources." The Company plans to finance its warehouse expansion program
principally through lease financing, and the Company believes it has the ability
to finance all of its fiscal 1997 expansion projects from the Lease Line or
similar lease financing, other than with respect to one project for which the
Company is seeking additional financing. In light of the significant debt
obligations due between fiscal 2000 and fiscal 2008, the Company continues to
need to increase operating cash flow and seek external sources for refinancing.
To the extent such operating cash flow growth will result from warehouse
capacity growth, the Company will be required to obtain additional sources of
financing. See "Risk Factors--Substantial Payment Obligations; Consequences of
Failure to Service Debt."
Liquidity
Operating Cash Flow - Net cash flow from operating activities,
representing cash provided from operations, is used to fund capital expenditures
and meet debt service requirements. Operating cash flow reported for any one
period is sensitive to the timing of the collection of receivables and the
payment of payables. Net cash flow from operating activities as reported in the
Company's consolidated financial statements decreased from $4.4 million for the
first nine months of fiscal 1995 to a negative $0.9 million for the first nine
months of fiscal 1996.
36
<PAGE>
The decrease is due to the reorganization fees and expenses associated with the
Prepackaged Bankruptcy and changes in certain working capital items. The
Company's operating cash flow would have been $5.8 million for the first nine
months of fiscal 1996 without reorganization fees and expenses of $6.7 million.
Net cash flow from operating activities in fiscal years 1993, 1994 and 1995 was
$17.7 million, $18.5 million and $12.7 million, respectively. See "--Results of
Operations--Comparison of Nine-month Periods Ended November 30, 1994 and 1995."
Working Capital - The Company's working capital position as of the
last day of the nine-month period ended November 30, 1995 was a negative $1.1
million. This position compares to a negative $14.9 million at fiscal 1995 year
end. Working capital was reduced in the more recent period due to the decrease
in net cash flow from operations discussed above and the funding of the
construction of the Grand Island, Nebraska warehouse facility discussed below,
but was increased by the effects of the Prepackaged Bankruptcy. Under the Plan,
approximately $28.8 million of senior subordinated debt payments were postponed
from May 1995 until fiscal 2008, which reduced the current portion of long-term
debt. Partially offsetting this decrease in the current portion of long-term
debt, as part of the reorganization proceedings, the Company repurchased for
cash $10.0 million in principal amount of long-term Series A Bonds.
The Company's historical negative working capital position has not
affected its ability to meet its cash operating needs. The Company, however, in
fiscal 1995 experienced a shortfall in working capital necessary to make the
fiscal 1995 and fiscal 1996 sinking fund payments required with respect to the
11% Debentures, leading to the Prepackaged Bankruptcy. See "Risk Factors--
Substantial Leverage; Net Losses; Deficit of Earnings to Fixed Charges."
Capital Resources
The Bank Credit Agreement provides an aggregate availability of $27.5
million, which may be used for any combination of letters of credit (not to
exceed $10.0 million) and revolving cash borrowings for general working capital
purposes, subject to borrowing base limitations. The borrowing base for both
cash borrowings and letter of credit amounts equals 85% of eligible accounts
receivable pledged to the bank plus, at the option of the Company, 70% of the
value of all real property mortgaged to the bank, up to a maximum of $27.5
million. The Company has not mortgaged any properties under the Bank Credit
Agreement. The Bank Credit Agreement, which matures on February 28, 1999,
requires a 30-day resting period (during which there may be no outstanding
borrowings) in fiscal 1997, and requires two such periods during each of fiscal
1998 and fiscal 1999. The Bank Credit Agreement also contains certain
37
<PAGE>
restrictive covenants, including financial covenants. See "Debt of the
Company--The Bank Credit Agreement."
Based on eligible accounts receivable as of November 30, 1995, the
Company had an available credit line of $25.2 million, of which $7.9 million was
used for letters of credit, principally related to leasing commitments and
worker's compensation reserves. No cash borrowings were outstanding.
The Lease Line, for which the Company signed a commitment letter in
November 1995, is available to finance, subject to meeting certain conditions,
the construction or acquisition of new warehouses or the expansion of existing
warehouses which are not pledged as collateral security for Senior Debt. The
Company intends to finance several of the planned warehouse additions with the
new Lease Line. The terms of each lease financing will be separately
established. The first funding of approximately $5.7 million is expected to
close in late fiscal 1996 with respect to the Company's recently completed Grand
Island, Nebraska facility. The Lease Line commitment expires December 31, 1996.
The lease rate will be fixed at the time of funding each property, and will be
based on a spread over seven-year Treasury Bills.
The Company, as part of its Kansas City, Kansas location, operates a
limestone quarry. Subject to the resolution of certain remaining due diligence
issues, the Company expects to dispose of this business during fiscal 1997. Net
proceeds of the sale of approximately $4.5 million must, in accordance with the
Second Investment Agreement, be reinvested in warehouse properties within 360
days or used to satisfy, in part, the mortgage obligation on the property.
There can be no assurance that such sale will be completed.
Capital Expenditures - Budgeted fiscal 1996 capital expenditures total
approximately $35.4 million, including approximately $25.6 million for warehouse
expansions. Expenditures for property, plant and equipment for the first nine
months of fiscal 1996 totaled $29.7 million, of which approximately $24.5
million related to warehouse expansions. Of the $24.5 million, all expenditures
other than the construction of the Grand Island facility were funded from
sources other than net cash flow from operations. Two new warehouse facilities,
in Pasco, Washington and Rochelle, Illinois, were funded with approximately
$18.6 million of escrow funds established with the proceeds from the sale of the
Series B Bonds and available under the Bond Indenture.
As a result of the expenditures described above, the Company has
exhausted substantially all of the escrowed funds under the Bond Indenture,
except for approximately $4.8 million from the insurance proceeds from the
Kansas City fire. A portion of the $4.8 million is expected to be released to
the Company in late
38
<PAGE>
fiscal 1996 conditioned upon the Company submitting to the Bond Trustee an
accounting of restoration expenses incurred to date at the Kansas City warehouse
facility. The Company is working with the Bond Trustee to define its options
with respect to the use of any remaining funds held by the Bond Trustee
following the reimbursement of such restoration expenses.
The projects the Company is currently exploring for fiscal 1997 would
require the expenditure of up to $34.0 million, no portion of which is presently
committed. The Company anticipates that it will use the Lease Line to finance
approximately $15.0 million of such expenditures. One project, requiring
approximately $6.0 million of capital expenditures, is expected to be financed
by the finance company apart from the Lease Line. The Company is currently
seeking financing for the remaining project. Certain capital expenditures
originally planned for late fiscal 1996 will be deferred until early fiscal
1997, and certain capital expenditures originally planned for early fiscal 1997
are expected to be deferred until late fiscal 1997, resulting in corresponding
delays in the realization of benefits from such investments.
Expenditures, including capital leases, for property, plant and
equipment for fiscal years 1993, 1994 and 1995 totaled $18.9 million, $9.9
million and $14.3 million, respectively, as summarized in the following table:
39
<PAGE>
HISTORICAL CAPITAL EXPENDITURES
(In Millions)
<TABLE>
<CAPTION>
Fiscal Year Ended Last Nine Months Ended
Day of February, November 30, 1995
---------------------- -----------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C> <C>
Routine
Replacements/
Betterments $ 2.6 $ 2.7 $ 5.5 $ 2.8
Revenue
Enhancements
or Cost Reductions 1.9 1.9 1.9 2.4
Expansions 14.4 5.3 6.9 24.5
----- ----- ----- -----
Total $18.9 $ 9.9 $14.3 $29.7
===== ===== ===== =====
Cash Portion of
Capital Expenditures(a) $ 7.7 $ 8.9 $13.2 $29.3
===== ===== ===== =====
</TABLE>
- --------------------
(a) The cash portion of capital expenditures for all periods was funded from
escrow funds available under the Bond Indenture and net cash flow from
operations. The non-cash portion of capital expenditures was funded from,
for fiscal 1993, a seller-provided mortgage and capital leases and, for all
other periods, from capital leases.
Effect of Prepackaged Bankruptcy - The Bankruptcy Court approved the
Plan on June 19, 1995 and the Plan became effective on June 30, 1995. The Plan
as approved provided, among other things, that each holder of the Company's then
outstanding 11% Debentures was entitled to receive a corresponding amount of the
Company's new 15% Debentures at par, plus accrued but unpaid interest; that the
holders of the Company's Senior Debt were not adversely affected by the
Prepackaged Bankruptcy; and that the prior Investment Agreement was superseded
by the Second Investment Agreement with the Institutional Investor. See "Debt
of the Company--The Second Investment Agreement."
Subsequently, the Company rejected in the Prepackaged Bankruptcy
certain operating lease agreements relating to four warehouse facilities at
Watsonville, Oakland and San Francisco, California; and Chicago, Illinois.
Properties subject to the leases accounted for approximately $11.7 million of
sales and a minimal amount of gross operating margin in fiscal 1995. The
outcome of any damage claims resulting from the lease rejections cannot be
predicted at this time, but the Company does not believe that the resolutions of
such claims will be material. See "Risk Factors--Conclusion of Prepackaged
Bankruptcy."
The Company believes that the effect of the Plan has been to improve
the Company's financial position by postponing the maturity of its subordinated
debt and increasing the likelihood that the Company will realize the benefits of
its
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<PAGE>
capital expenditures and the continuing expansion of its transportation
management activities. The Company remains highly leveraged, however, and will
continue to be subject to substantial principal and interest obligations with
respect to its indebtedness. See "Risk Factors--Substantial Payment
Obligations; Consequences of Failure to Service Debt."
Inflation
The Company's operations have not been, nor are they expected to be,
materially affected by inflation or changing prices.
New Accounting Standards
Effective March 1, 1993, the Company implemented Financial Accounting
Standards Board Statement of Financial Accounting Standard No. 106, "Employer's
Accounting for Postretirement Benefits Other Than Pensions", and Statement No.
109, "Accounting for Income Taxes." The Company has not implemented the
requirements of Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," although it will be
required to do so for fiscal years beginning March 1, 1996 and thereafter. This
statement generally requires assessment of recoverability of an asset after
events or circumstances that indicate an impairment to the asset and its future
cash flows. Any impairment loss would be recognized as a one-time charge to
earnings affecting results of operations, but would not affect the cash flow of
the Company. At this time, the Company does not believe there will be an
impairment loss to report.
41
<PAGE>
BUSINESS
Americold, the nation's largest supplier of public refrigerated
warehouse space, provides integrated logistics services for the frozen food
industry. These services, consisting of warehousing and transportation
management, are provided through the Company's network of 49 refrigerated
warehouses in 16 states and through the Company's refrigerated transportation
management unit. Americold serves a broad array of customers ranging from small
local food producers to most of the large national frozen food companies,
including ConAgra, Inc., Heinz, J. R. Simplot Co., Kellogg Company and Ocean
Spray Cranberries Inc.
The Company has recently expanded its focus to provide integrated
warehousing and transportation management services to the frozen food industry.
To expand its transportation management business, the Company has consolidated
its transportation management functions, added staff resources and improved its
transportation management information systems capabilities, including
integrating these systems with the Company's warehouse information systems. The
Company currently offers integrated warehousing and transportation management
services that permit it to coordinate and manage the distribution of frozen food
products for its customers. The Company believes that its facilities are
sufficiently dispersed geographically to allow the Company to provide these
logistics services in most of the significant markets in the United States.
Americold, an Oregon corporation, was founded in 1911. In December
1986, Americold was purchased from its prior owners by a private group
consisting of Kelso, certain institutional investors and the Management Group.
BUSINESS STRATEGY
The Company's strategy is to use its position as the largest supplier
of public refrigerated warehouse space to access both increased volumes of
frozen food storage and additional transportation management business. The
Company believes its strong industry position, its geographically dispersed
network of refrigerated warehouse facilities and its integrated logistics
information systems provide it with a competitive advantage in developing and
maintaining relationships with large frozen food manufacturers, distributors and
retailers that have freezer storage and product distribution requirements in
numerous locations throughout the United States. Industry studies suggest that
frozen food processors spend approximately twice as much on transportation as on
warehousing of frozen food products. The Company's customers, by outsourcing to
Americold, may benefit from the transportation efficiencies Americold achieves
while being able to reduce redundant staff and avoid individual
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<PAGE>
investments in warehouse facilities and in the computer hardware and software
systems necessary for transportation management.
The Company believes that the potential cost savings brought to
customers in product distribution will strengthen and broaden the Company's
relationships with customers and provide opportunities to expand its operations
to meet customer needs. In this regard, the Company has entered into
arrangements with three subsidiaries of its largest customer, Heinz, pursuant to
which it is providing transportation management services from manufacturing
plants through distribution channels to the subsidiaries' customers. In
addition, for one of these subsidiaries, the Company also manages the in-bound
transportation of over 200 non-frozen ingredients to the subsidiary's
manufacturing plants. See "--Company Services--Transportation Management." The
Company believes that the availability of such services will attract additional
customers to its existing warehouse facilities and create opportunities to
develop additional warehouses and provide incremental transportation management
services.
Americold's logistics systems allow it to perform the entire process
of warehousing and transportation management for the storage and distribution of
frozen food products for its customers. The Company, by utilizing logistical
data and combining product volumes from multiple customers, can pool shipments
and achieve transportation efficiencies which would be unavailable to any one
customer operating on its own. Moreover, the integration of transportation
management services with the Company's network of 49 refrigerated warehouses
enables larger frozen food customers with broad distribution requirements to
obtain integrated logistics services from a single provider rather than
contracting with individual carriers and warehousing providers in many
locations. The Company plans to continue to actively pursue these larger
customers who are able to utilize the full resources of the Company.
The Company has also entered into warehousing agreements with two
large frozen food manufacturers pursuant to which the Company has become a
preferred provider of services. Under such agreements, the Company has the
opportunity to increase its warehousing business with such customers in multiple
locations in return for a commitment to provide certain continuing services and
volume-based pricing incentives. The Company believes these agreements have the
potential to reduce these customers' overall distribution costs while providing
the Company with increased storage volume in existing warehouses. The Company
believes that such agreements may also create opportunities to build or acquire
additional warehouses and encourage such customers to utilize the transportation
management services offered by the Company.
43
<PAGE>
COMPANY SERVICES
The Company provides frozen food manufacturers with refrigerated
warehousing and transportation management services. Integration of these
services allows frozen food manufacturers to contract on an outsource basis with
a single entity, the Company, for the following services to coordinate and
manage the distribution of frozen food products:
AMERICOLD'S LOGISTICS SERVICES
------------------------------
Warehousing Transportation
Services Management Services
----------- -------------------
Storage Dispatching
Handling Freight Rate Negotiation
Order Assembly Backhaul Coordination
Order Management Freight Bill Auditing
Blast Freezing/Tempering Network Flow Management
Facility Leasing Local/Store Door Delivery
Facility Operation Order Consolidation
Inventory Status Information Truck Routing
Product Assembly/Packaging Distribution Channel
Product Recalls Assessment
The Company offers these services both on a separate and an integrated basis.
The Company also provides services such as electronic order processing, order
status information and freight payment to its customers as part of its
integrated services, although such services are not billed separately. The
Company's integrated services allow customers to focus on their manufacturing
and marketing requirements instead of on the complex process of storing and
transporting their frozen food products.
Refrigerated Warehousing
Since its founding in 1911, the Company has grown to become the
largest owner and operator of refrigerated warehouses in the United States.
With approximately twice the storage capacity of its nearest competitor,
Americold supplies approximately 14.5% of the total publicly-available
refrigerated storage space and approximately 16% of the total publicly-available
freezer storage space in the United States, based on 1993 data published by the
United States Department of Agriculture (the most recent year for which
information is available) and 1995 data prepared by the International
Association of Refrigerated Warehousemen (the "IARW"). As of December 31, 1995,
the Company's network of 49 refrigerated warehouse facilities in 16 states
provided a total storage capacity of approximately 229 million cubic feet.
Approximately 94% of the storage space operated by the Company is freezer space
44
<PAGE>
(zero degrees Fahrenheit and below), with the remaining space comprised of
cooler space (28 degrees Fahrenheit and above) and unrefrigerated dry storage
space. Refrigerated warehouse services provided by the Company include storage,
handling, blast freezing and facility leasing.
The Company intends to pursue growth of its refrigerated warehouse
business both by expanding its network of warehouses across the country and by
expanding existing facilities in response to customer requirements. Since
August 1994, the Company has added storage capacity in the following locations:
<TABLE>
<CAPTION>
Cubic Feet Completion
Location (in millions) New/Expansion Date
- ------------------------ ------------- ------------- -------------
<S> <C> <C> <C>
Tomah, Wisconsin 2.2 Expansion August 1994
Burley, Idaho 2.3 Expansion January 1995
Pasco, Washington 2.5 New July 1995
Rochelle, Illinois 5.9 New August 1995
Grand Island, Nebraska 2.2 New November 1995
</TABLE>
In addition, the Company is working toward the development of several new
warehouses which include the acquisition of 2.1 million cubic feet and the
construction of 13 million cubic feet of refrigerated warehouse space. The
Company has signed letters of intent or received preliminary approval from
certain of its customers for commitments involving 3.7 million cubic feet of the
anticipated new warehouse space. Generally, the Company does not acquire or
construct warehouse space without assurances of support from the anticipated
customer base for the facilities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Capital Resources--Capital
Expenditures." The Company also continually evaluates the need for warehouse
space in certain locations and, since August 1994, the Company has reduced the
amount of its available refrigerated warehouse space by approximately 12 million
cubic feet due to the sale of one warehouse facility, termination of four
operating leases in the Prepackaged Bankruptcy and the non-renewal of three
other operating leases.
Most of the Company's warehouses may be classified as combination
production and distribution facilities, although some provide solely production
or distribution services. Production facilities differ from distribution
facilities in that they typically serve one or a small number of customers
located nearby. These customers store large quantities of processed or
partially processed products in the facility until they are further processed or
shipped to the next stage of production or distribution. Distribution
facilities primarily serve customers of the Company's production warehouses and
other customers who store a wide variety of finished products to support
shipment to
45
<PAGE>
end-users, such as food retailers and food service companies, in a specific
geographic market.
During the past four years, the Company has implemented new management
operating systems and performance standards in its warehouses. The IBM AS400
warehouse management information system was completed in December 1992 to tie
together into a single network with common services all of the Company's
locations. To further integrate the Company's services, the Company, using
upgraded computer hardware and a combination of purchased and internally
developed software, completed in March 1995 a transportation management system
which has been fully integrated with the Company's warehouse management system.
The Company also offers electronic data interchange to receive customer orders
and to transmit product flow and status information to its customers. The
Company believes that the standardization of warehouse operating systems and
procedures, combined with the enhanced integrated logistics management
information systems and capabilities, have improved the quality and consistency
of customer services, reduced costs and led to the overall enhancement of
performance.
The Company has developed several services ancillary to its warehouse
freezer operations and intends to continue developing and promoting such
services as well as adding incremental freezer, cooler or dry space. Ancillary
services include product assembly/packaging, palletizing, labeling and SUPERCOLD
freezer storage provided at 11 of Americold's facilities for the preservation of
products, such as ice cream, which require storage at temperatures as low as 20
degrees below zero (Fahrenheit).
Transportation Management
To expand its transportation management business, the Company has
consolidated its transportation management functions, added staff resources and
improved its transportation management information systems capabilities,
including integrating these systems with the Company's warehouse information
systems. Utilizing its network of IBM AS400 computers, its transportation
management and communications software and its multiple warehouse locations, the
Company is currently providing integrated warehousing and transportation
management services to certain of its customers, including subsidiaries of its
largest customer, Heinz.
Transportation management services offered by the Company include
dispatching, freight rate negotiation, backhaul coordination, freight bill
auditing, network flow management, local/store door delivery, order
consolidation, truck routing and distribution channel assessment. The Company
also offers services that enable customers to assess the most economical means
to store and ship frozen food
46
<PAGE>
products. The Company believes that its temperature-controlled logistics
expertise and access to both frozen food warehouses and distribution channels
will enable its customers to respond quickly and efficiently to time-sensitive
orders from distributors and retailers using the Company's systems.
In fiscal 1996, the Company began providing a broad range of
transportation management services to three subsidiaries of Heinz. For each
of the subsidiaries, the Company manages the distribution of frozen food
products from manufacturing plants through distribution channels to the
subsidiaries' customers. In addition, for one of these subsidiaries, the
Company also manages the in-bound transportation of over 200 non-frozen
ingredients to the subsidiary's manufacturing plants. The Company believes
that this is an example of the kind of integrated warehousing and
transportation management services that other frozen food manufacturers will
seek to subcontract to outside specialists in the future. The Company is
presently discussing similar arrangements with several other potential
customers. See "Risk Factors--Expansion of Transportation Management
Services."
In providing transportation management services, the actual freight
transportation is performed by carriers who have negotiated rates with the
Company. The Company does not own and does not intend to own significant
transportation equipment.
CUSTOMERS
Americold's customers consist primarily of national, regional and
local frozen food manufacturers, distributors, retailers and food service
organizations. Americold serves a broad array of customers ranging from small
local food producers to most of the large national frozen food companies,
including ConAgra, Inc., Heinz, J. R. Simplot Co., Kellogg Company, and Ocean
Spray Cranberries Inc. Although the Company provides services to approximately
3,200 customers, in fiscal 1995 the 10 largest customers accounted for
approximately 55% of total net sales. One customer of the Company, Heinz and
subsidiaries, accounted for approximately 21% of the Company's net sales in
fiscal 1995 (consisting primarily of warehousing sales) and 33% of the Company's
net sales in the first nine months of fiscal 1996 (consisting of both
warehousing and transportation management sales). The Company believes that the
risk to the Company of losing such large customers has been reduced in several
cases through long-term storage and operating agreements and by the fact that
services are provided to certain large customers in multiple locations.
At several locations, the Company's production warehouses are located
adjacent to customers' processing facilities. Several of the Company's
customers guarantee a minimum quantity of product to be stored in return for
guaranteed
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<PAGE>
space pursuant to long-term contracts. At several locations, the Company leases
space to manufacturers or distributors on a long-term, fixed-rate basis. At a
number of facilities, particularly those located adjacent to customers'
processing facilities, a majority of, and in some cases virtually all, business
is attributable to a single user of the facility. The Company is aware that one
customer intends to transfer a significant portion of the customer's storage
volume at one production warehouse to another warehouse expected to be
constructed by a competitor closer to one of the customer's production
facilities and to be operational by mid- to late fiscal 1997. The Company
believes it will locate replacement business to recover some portion of the
expected loss of revenues and gross operating margin represented by such storage
volume by fiscal 1998, but there can be no assurance in this regard.
Management has observed in the past that to the extent products
produced at locations adjoining the Company's facilities are commodities grown
in the surrounding area, demand for the products has been more significant to
the long-term sales and profitability of the facility than has been the
viability of a single customer. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations--
Comparison of the Nine-month Periods Ended November 30, 1994 and 1995," "Risk
Factors--Company Dependence on Significant Customers" and "--Expansion of
Transportation Management Services."
SEASONALITY
Warehousing sales are seasonal, depending upon the timing and
availability of crops grown for frozen food production and the seasonal
build-up of certain products for holiday consumption. The third quarter,
ending each November 30, normally represents the strongest sales quarter.
Capacity utilization at facilities varies from season to season, with average
annual capacity utilization of approximately 72%. The Company generally keeps
sufficient space available at individual warehouses to meet peak season
demand. The Company has experienced similar seasonality in its transportation
management business.
COMPETITION
Americold operates in an environment in which location, customer mix,
warehouse size, breadth of service, service performance and price are the
principal competitive factors. Since frozen food manufacturers and distributors
incur transportation costs which typically are significantly greater than
warehousing costs, location is a major competitive factor. In addition, in
certain locations customers depend upon pooling shipments, which involves
combining their products with the products of others destined for the same
markets. In these
48
<PAGE>
cases, the mix of customers in a warehouse can significantly influence the cost
of delivering products to markets. The size of a warehouse is important because
large customers generally prefer to have all of the products needed to serve a
given market in a single location and to have the flexibility to increase
storage at that single location during seasonal peaks. The Company believes
that customers generally will select a warehouse facility based upon the types
of services available, service performance and price, if there are several
warehouse locations which satisfy its transportation, customer mix and size
requirements.
Competition is national, regional and local in nature. There are no
significant barriers to entry, permitting a relatively large number of smaller
competitors to enter the Company's markets. On the national level, Americold
competes with United Refrigerated Services, Inc. ("URS"), United States Cold
Storage, Inc., Millard Refrigerated Services and Christian Salvesen, Inc.,
which, according to statistics compiled by the IARW, accounted for approximately
6.3%, 4.2%, 2.7% and 2.2% of public freezer space, respectively, in 1993 (the
most recent year in which statistics are available). On the regional and local
level, there are many smaller warehouse operators that compete with the Company.
According to data prepared by the IARW, warehouse operators who own or control
less than 35 million cubic feet each of refrigerated space or freezer space
accounted for approximately 71% of all public refrigerated storage space in
1993. The Company believes that competition from these local and regional
competitors is significant because national competitors often do not compete in
the same markets as the Company. The Company's customers, many of which have
substantially greater resources than the Company, may also divert business from
the public warehousing sector by building their own refrigerated warehouse
facilities.
The Company believes that if its strategy of providing fully
integrated warehousing and transportation management services is successful,
the ability to reduce customers' distribution costs resulting from the
economies of scale attendant to the movement of large quantities of diverse
products through its national network of warehouses will create a marketing
advantage not available to smaller competitors. Other companies, such as GATX
Corporation and Exel Logistics, Inc., provide transportation management
services to shippers, but the Company is not aware of another company's
ability to provide such transportation services in conjunction with full
service refrigerated warehousing capabilities.
Kelso holds approximately 57% of the common equity of URS and,
therefore, owns a controlling interest in both the Company and URS. Kelso has
implemented procedures intended to
49
<PAGE>
address possible conflicts of interest that might arise from its investment in
both URS and the Company. Kelso has considered on a preliminary basis the
possibility of a business combination between the Company and URS. Although
Kelso continues to have discussions concerning such a combination, there
currently are no discussions between Americold and URS. Any such combination
would not trigger a Change of Control, as defined in the Note Indenture. See
"Description of Senior Subordinated Notes."
ORGANIZATION
The Company's operations are headquartered in Portland, Oregon. The
Company's warehouse facilities are organized into four districts. Each district
is managed by a District Manager to whom the respective General Managers report.
General Managers are responsible for one to five warehouses and are supported at
the district and corporate levels by certain logistics, accounting, marketing,
engineering, data processing and operational functions. The Company's
transportation management services are managed from the Company's headquarters.
SALES AND MARKETING
Sales responsibility at the Company resides primarily with district
and local management who are supported at the national level by the Company's
executive and sales and marketing staff. Marketing is principally a corporate
management function.
Local sales efforts are supplemented by the national corporate sales,
marketing and logistics departments, which supply sales support, logistics
analysis, account pricing guidance and advertising, and monitor relationships
with large district and national accounts. The Company employs two sales
managers and a sales representative, all reporting to a director of sales in
Portland, Oregon. The sales managers are based in California and Colorado,
while the sales representative is based in Massachusetts. The Company also
employs a Senior Vice President, Logistics, based in Portland.
In addition, a primary account manager and pricing contact is
assigned to each of the Company's top 100 accounts in order to facilitate
services for such customers. Certain customers storing product in multiple
facilities, but who are not among the Company's top 100 accounts, are also
offered similar contacts. It is the responsibility of each warehouse's or
group's management to understand and be responsive to the needs of its
individual marketplace and to adapt sales efforts accordingly. Each General
Manager actively engages in the sales effort. Although the Company operates
nationally, prices charged by the Company tend to reflect local market
conditions.
50
<PAGE>
The Company has promoted its logistics services to existing and
potential customers through consultations with such customers, during which the
Company presents a range of potential logistics services to that customer.
Although the Company has primarily focused on its existing large frozen food
manufacturer customers, the Company is also currently approaching smaller
manufacturers, distributors and retailers to offer the Company's network of
warehouses and transportation management services, which such customers may find
more attractive than developing their own logistics resources. The Company
intends to continue to emphasize integrated warehousing and transportation
management services and to pursue other customers who may wish to outsource
logistics responsibilities to Americold.
The majority of the Company's customers are billed on a monthly basis
for warehousing charges. Handling and first period storage is billed upon
receipt of the product. Recognition of one-half of the handling revenue is
deferred until the product is released. Transportation management customers are
generally billed on a shipment by shipment basis.
EMPLOYEES
The Company had approximately 2,032 employees as of November 30, 1995.
A breakdown of employees by function is set forth below:
Employee Breakdown by Function
<TABLE>
<CAPTION>
Number of Percentage
Function Employees of Total
- -------- --------- -----------
<S> <C> <C>
Warehousing Services 1,587 78.1%
Transportation Management
Services 41 2.0%
Sales and Marketing 4 0.2%
Non-Logistics 27 1.3%
Administration
(Warehouse and Corporate) 373 18.4%
----- -----
Total 2,032 100.0%
===== =====
</TABLE>
Approximately 643 of the Company's employees are covered by union
contracts. Currently, 23 facilities employ unionized labor, while 26 facilities
are non-unionized. Union contracts for individual locations are with the local
chapters of national unions, principally the International Brotherhood of
Teamsters, and generally have staggered expiration dates. During the past three
years there has been one strike which lasted for approximately four days. The
Company believes its relationships with its employees are satisfactory.
51
<PAGE>
As a result of the anticipated continued expansion in transportation
management, the size of the transportation management staff is expected to
increase in fiscal 1997.
PATENTS, LICENSES AND TRADEMARKS
The Company's operations are not dependent upon any single or related
group of patents, licenses, franchises or concessions. The Company's operations
are also not dependent upon a single trademark or service mark, although the
Company has registered the SUPERCOLD(R) service mark with the United States
Patent and Trademark Office.
RESEARCH AND DEVELOPMENT
The Company believes that the refrigerated warehouse industry is not
one in which research and development has traditionally played a significant
role. The Company, however, has made significant expenditures in developing its
integrated warehousing and transportation management services, including
installing its new computer data processing support system which integrates
modern transportation management systems with the Company's warehouse management
system. The Company also continues to pursue methods of reducing energy costs at
its facilities.
ENVIRONMENTAL COMPLIANCE
In fiscal 1995, the Company completed the conversion of its last
remaining freon-based cooling system to an ammonia-based system. The Company's
capital expenditures, earnings and competitive position are not materially
affected by compliance with federal, state and local provisions which have been
enacted or adopted to regulate or otherwise protect the environment.
52
<PAGE>
PROPERTIES
As of December 31, 1995, the Company owned or leased 49 warehouse
facilities in 16 states. Although most of the facilities are owned by the
Company, eight facilities comprising approximately 6.0% of the Company's total
cubic feet of storage space are leased or subleased by the Company under
operating-type lease arrangements. Four facilities representing approximately
5.4% of the total cubic feet of storage space are leased, in whole or in part,
under sale-and-leaseback or capitalized-type lease arrangements. Five
facilities, or portions thereof, representing approximately 6.2% of the total
cubic feet of storage space, are situated on leased land.
Capacity utilization at facilities varies from season to season, with
average annual capacity utilization of approximately 72%. All but six of the
Company's 40 owned warehouses are currently encumbered as security for Senior
Debt.
The Company's facilities are typically single-story concrete or
insulated panel buildings constructed at dock height elevation, with very heavy
insulation and vapor barrier protection. Refrigeration is generally supplied by
screw-type compressors in ammonia-based cooling systems. All facilities are
served by truck and all but seven by rail. Many facilities also have room for
expansion.
The following table lists the 49 refrigerated warehouse properties
owned or leased by the Company as of December 31, 1995. It also shows the 32
facilities that presently secure the Company's First Mortgage Bonds.
REFRIGERATED WAREHOUSE FACILITIES
<TABLE>
<CAPTION>
Total
Storage
Space Type
(Cubic of Owned or
Ft./Mil) Facility(*) Leased
-------- ----------- ------
<S> <C> <C> <C>
Burbank (W. Magnolia Blvd.),
California 0.8 P/D Owned
Fullerton (S. Raymond Ave.),
California 4.0 P/D Leased(1)
Los Angeles (Corona St.),
California 0.7 D Leased(1)
Los Angeles (Jesse St.),
California 2.7 P/D Owned(4)
Pajaro (Salinas Rd.),
California 0.8 P/D Leased(1)
Turlock (5th St.),
California 2.5 P/D Owned(4)
</TABLE>
53
<PAGE>
<TABLE>
<S> <C> <C> <C>
Turlock (S. Kilroy Rd.),
California 3.0 P/D Owned(4)
Watsonville (W. Riverside Dr.),
California 5.2 P/D Owned(2)(4)
Watsonville (Second St.),
California 1.5 P/D Leased(1)
Denver (E. 50th St.),
Colorado 2.8 P/D Owned(2)/Leased(3)(4)
Denver (N. Washington St.),
Colorado 0.5 P/D Leased(1)
Bartow (U. S. Highway 17),
Florida 1.2 P/D Owned(2)(4)
Plant City (S. Alexander St.),
Florida 0.9 P/D Owned
Tampa (N. 50th St.),
Florida 4.1 P/D Owned/Leased(3)
Tampa (S. Lois Ave.),
Florida 0.4 D Owned
Tampa (Shoreline Dr.),
Florida 0.8 D Owned(2)
Burley (U.S. Highway 30),
Idaho 7.8 P/D Owned(2)(6)
Nampa (4th St. N.),
Idaho 8.0 P Owned(4)
Chicago (S. Blue Island Ave.),
Illinois 2.9 P/D Leased(1)
Rochelle (Americold Drive),
Illinois 5.9 D Owned(4)
Bettendorf (State St.),
Iowa 8.9 P/D Owned(4)
Fort Dodge (Maple Dr.),
Iowa 3.7 D Owned(4)
Kansas City (Inland Dr.),
Kansas 35.2 P/D Owned(4)
Portland (Read St.), Maine 1.8 P/D Owned
Boston (Widett Ci.),
Massachusetts 3.1 P/D Owned(4)
Gloucester (E. Main St.),
Massachusetts 1.9 P/D Owned(4)
Gloucester (Railroad Ave.),
Massachusetts 0.3 P/D Owned(4)
Gloucester (Rogers St.),
Massachusetts 2.8 P/D Owned(4)
Gloucester (Rowe Sq.),
Massachusetts 2.4 P/D Owned(4)
Watertown (Pleasant St.),
Massachusetts 4.7 P/D Owned(4)
Grand Island (E. Roberts St.),
Nebraska 2.4 P/D Leased(1)
Brooks (Brooklake Rd.),
Oregon 4.8 P Owned(4)
Hermiston (Westland Rd.),
Oregon 4.0 P Owned(4)
Milwaukie (S. E. McLoughlin
Blvd.), Oregon 4.7 D Owned(4)
Ontario (N. E. First St.),
Oregon 8.1 P Leased(5)
Salem (Portland Rd. N.E.),
Oregon 12.5 P/D Owned(4)
Woodburn (Silverton Rd.),
Oregon 6.3 P/D Owned(4)
</TABLE>
54
<PAGE>
<TABLE>
<S> <C> <C> <C>
Fogelsville (Mill Rd.),
Pennsylvania 14.0 D Owned/Leased(3)(4)
Murfreesboro (Stephenson Dr.),
Tennessee 2.9 P/D Owned(4)
Clearfield (South St.),
Utah 8.6 P/D Owned(4)
Burlington (S. Walnut),
Washington 4.7 P/D Owned(4)
Connell (W. Juniper St.),
Washington 5.7 P Owned
Kent (S. 190th St.),
Washington 1.0 D Leased(1)
Moses Lake (Wheeler Rd.),
Washington 7.3 P/D Owned(4)
Pasco (Industrial Way),
Washington 2.5 P Owned(4)
Walla Walla (4-14th Ave. S.),
Washington 3.1 P Owned(4)
Wallula (Dodd Rd.),
Washington 1.2 P/D Owned(4)
Plover (110th St.),
Wisconsin 9.4 P/D Owned(4)
Tomah (Route 2), Wisconsin 4.6 P Owned(4)
----
228.9
=====
</TABLE>
- ----------------------------
(*) "P" designates a production facility.
"D" designates a distribution facility.
"P/D" designates a facility that is used for both production and
distribution.
(1) Operating lease.
(2) Building owned by the Company; land is leased.
(3) Capitalized lease.
(4) Security for Company's First Mortgage Bonds. See Note 7 to Consolidated
Financial Statements.
(5) Financing lease.
(6) Security for mortgage payable.
55
<PAGE>
LEGAL PROCEEDINGS
On May 9, 1995, the Company filed the Plan under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the District of Oregon
(Case No. 395-33058elp11) in the Prepackaged Bankruptcy. On the filing date,
the Plan had received approval from both of the classes of debtholders entitled
to vote on the Plan. A hearing was held on June 19, 1995 to consider the motion
of the Company requesting the Bankruptcy Court (1) to approve the Company's
Disclosure Statement dated April 14, 1995 and the Company's procedure for
solicitation of votes to accept or reject the Plan, and (2) to confirm the Plan.
The Bankruptcy Court granted the motions and confirmed the Plan on June 19,
1995, and the Plan became effective on June 30, 1995. As a part of the
Prepackaged Bankruptcy, the Company also rejected certain lease agreements
relating to four warehouse facilities, and lease rejection claims filed by the
lessors with respect to these facilities are pending. See "Risk Factors--
Conclusion of Prepackaged Bankruptcy." For additional information with respect
to the Plan, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
From time to time, the Company has been involved in litigation
relating to claims arising out of its operations in the regular course of
business. As of December 31, 1995, the Company was not a party to any legal
proceedings, the outcome of which would, in management's opinion, have a
material adverse effect on the Company's results of operations or financial
position.
The Company maintains property, liability and warehouseman's legal
liability insurance in amounts which it believes are consistent with industry
practice and adequate for its operations. The Company has settled all of the
material lawsuits and claims filed in connection with the 1991 Kansas City
underground warehouse fire. The aggregate amount of all settlement payments for
the litigation and claims related to the Kansas City fire did not exceed the
amount of the Company's applicable insurance coverage and no cash payment by the
Company was therefore required. After resolution of the lawsuits and claims,
the Company applied the insurance proceeds paid to the Company in the third
quarter of fiscal 1995. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Introduction--Effect of Kansas City Fire."
56
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of Americold as of December 31, 1995
are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<C> <C> <S>
Ronald H. Dykehouse 54 Chairman of the Board, President and Chief Executive
Officer
Joel M. Smith 52 Senior Vice President, Chief Financial Officer and
Director
John P. LeNeveu 49 Executive Vice President, Operations and Sales
F. Stanley Sena 46 Executive Vice President, Transportation and
Distribution Logistics
J. Roy Coxe 55 Senior Vice President, Logistics
Ronald A. Nickerson 58 Vice President, Operations
Lon V. Leneve 39 Vice President and Treasurer
Frank Edelstein 70 Director
George E. Matelich 39 Director
James C. Pigott 59 Director
William A. Marquard 75 Director
</TABLE>
Ronald H. Dykehouse was named President of Americold Corporation in
May 1990 and Chairman of the Board and Chief Executive Officer in June 1990.
From 1989 to 1990, Mr. Dykehouse was a private investor and consultant. From
1986 to 1989, he was Executive Vice President and Chairman of the Food and
Distribution Groups of Amfac Inc., a diversified holding company. Mr. Dykehouse
is a past director of the National Frozen Foods Association and past Chairman of
the American Frozen Food Institute.
Joel M. Smith has been Senior Vice President and a director of the
Company since December 1986. Mr. Smith has been the Chief Financial Officer of
Americold since 1978 and a Vice President since 1984.
John P. LeNeveu was named Executive Vice President, Operations and
Sales of Americold in July 1995. From July 1991
57
<PAGE>
to 1995, he was Senior Vice President, Operations and Sales. From 1988 to 1991,
he was a management consultant with the Institute of Management Resources, an
international management consulting company.
F. Stanley Sena was named Executive Vice President, Transportation and
Distribution Logistics of the Company in July 1995. From August 1991 to 1995,
he was Senior Vice President, Administration and Technical Services. From 1986
to 1990, Mr. Sena was Vice President, Operations, Western Region, and from 1990
to 1991, Mr. Sena was Vice President, Operations of the Company.
J. Roy Coxe was named Senior Vice President, Logistics, of Americold
in December 1993. From 1991 to 1993, he was a management consultant with A. T.
Kearney, Inc., an international management consulting company. Mr. Coxe was a
vice president of Drake Sheahan Stewart Dougall and successors, a logistics and
transportation consulting firm, from 1983 to 1991.
Ronald A. Nickerson has been Vice President, Operations since 1990.
From 1987 to 1990, Mr. Nickerson was Vice President, Operations, Eastern Region,
of the Company.
Lon V. Leneve was named Vice President in September 1992 and has been
Treasurer of Americold since July 1988. Mr. Leneve joined Americold in 1982 and
was Controller from 1984 to 1988.
Frank Edelstein was elected a director of the Company in 1986. He is
currently a consultant to Kelso and Vice President of Gordon+Morris Group, Inc.,
an investment banking firm. Mr. Edelstein joined Kelso in 1987 and held the
position of Vice President at Kelso until 1992. Mr. Edelstein is also a
director of Ceradyne, Inc., IHOP Corporation and Arkansas Best Corporation.
George E. Matelich has been a director of the Company since December
1986. Mr. Matelich joined Kelso in 1985 as an Associate, served as a Vice
President of Kelso from 1986 to 1990 and is currently a Managing Director of
Kelso.
James C. Pigott was elected a director of Americold in June 1987. He
is President of Pigott Enterprises, Inc., a private investment company. Mr.
Pigott has been Chairman of the Board and Chief Executive Officer of Management
Reports and Services, Inc., an accounting consulting firm since 1987. Mr.
Pigott's other business activities include membership on the Board of Directors
of PACCAR, Inc.
William A. Marquard was elected a director of Americold in June 1987.
Mr. Marquard is a director of Treadco, Inc.,
58
<PAGE>
Mosler, Inc., Earle M. Jorgenson Holding Company, Inc., Earle M. Jorgenson
Company, Arkansas Best Corporation and Best Holdings Corporation. He is also
Vice Chairman of the Board of Directors of Kelso.
All directors hold office until the next annual meeting of
shareholders of the Company or until their successors have been elected and
qualified. The executive officers of the Company are chosen by the Board and
serve at its discretion.
For their services on the Board of Directors of the Company, Messrs.
Pigott, Marquard and Edelstein are paid $16,000 per year. Mr. Pigott receives
$1,000 per year as Chairman of the Company's Audit Committee. Messrs. Pigott,
Marquard and Edelstein also receive $600 per meeting attended. Directors who
are also officers of the Company and Mr. Matelich do not receive additional
compensation as directors of the Company. Directors are reimbursed for out-of-
pocket expenses incurred in connection with attendance at meetings.
The Compensation Committee for fiscal 1995 consisted of Mr. Matelich,
Mr. Marquard and Mr. Pigott. The Audit Committee for fiscal 1995 consisted of
Mr. Edelstein, Mr. Matelich, and Mr. Pigott.
On December 23, 1992, Kelso and its chief executive officer, without
admitting or denying the findings contained therein, consented to an
administrative order in respect of a Commission inquiry relating to the 1990
acquisition of a portfolio company by a Kelso affiliate. The order found that
Kelso's tender offer filing in connection with the acquisition did not comply
fully with the Commission's tender offer reporting requirements, and required
Kelso and the chief executive officer to comply with these requirements in the
future.
STOCKHOLDERS' AGREEMENT
Certain of the Company's shareholders have agreed, pursuant to the
Stockholders' Agreement dated as of December 24, 1986 (as amended, the
"Stockholders' Agreement"), that prior to the occurrence of an initial public
offering of at least 25% of the outstanding shares of common stock of the
Company pursuant to an effective registration statement under the Securities
Act, or December 24, 1996, whichever is earlier, sales of shares of common stock
by a member of the Management Group and, in certain events, the non-management
shareholders who are parties to the Stockholders' Agreement, are subject to a
right of first refusal granted to the Company. See "Principal Shareholders."
59
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information as to the compensation of
the Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company as of the last day of February 1995 for
services in all capacities to the Company for the years ended the last day of
February 1993, 1994 and 1995.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
----------------------------------------- -------------
Other Option/
Name and Annual SARs
Principal Position Year Salary Bonus Compensation(1) No.
- ----------------------- ---- -------- -------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Ronald H. 1995 $300,000 $231,000 $ - $ -
Dykehouse 1994 300,000 68,608 - -
President, 1993 300,000 65,276 - -
Chairman & CEO
Joel M. Smith 1995 159,120 98,654 - -
Sr. Vice President 1994 159,120 29,920 - -
and CFO 1993 159,120 27,946 44,009 -
John P. Leneveu 1995 159,120 98,654 - -
Exec. Vice 1994 159,120 29,920 - 30,000
President, 1993 159,120 27,946 27,208 -
Operations & Sales
F. Stanley Sena 1995 150,320 93,403 - -
Exec. Vice 1994 140,712 26,459 - -
President, 1993 140,712 24,713 43,774 -
Transportation &
Distribution
Logistics
J. Roy Coxe(2) 1995 150,000 93,000 - -
Sr. Vice President, 1994 30,192 23,250 - 30,000
Logistics
</TABLE>
(1) Consists of the cost of relocation, the value of automobiles, payments made
on behalf of the individuals to a bank which made loans to facilitate
acquisition of the Company's stock by each individual, and other
miscellaneous fringe benefits. For fiscal years 1994 and 1995, the amounts
did not exceed the lesser of $50,000 or 10% of the named executive
officer's annual salary and bonus. For fiscal 1993, the value of such
benefits was as follows: Mr. Smith, bank loan $40,291, other $3,718; Mr.
LeNeveu, relocation $25,999, other $1,209; and Mr. Sena, bank loan $41,910,
and other $1,864.
(2) Mr. Coxe's employment commenced December 20, 1993.
60
<PAGE>
AGGREGATED OPTION TABLE
The following table sets forth information as to the options held by
the Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company through the end of fiscal 1995.
<TABLE>
<CAPTION>
Number of
Unexercised
Options at Value of
Fiscal Unexercised
Shares Year-End Options at
Acquired on Value Exercisable/ Fiscal
Name Exercise Realized Unexercisable Year-End
- ---- ----------- -------- ------------- -----------
<S> <C> <C> <C> <C>
Ronald H. Dykehouse 0 $0 80,000/20,000 $0
Joel M. Smith 0 0 8,278/0 0
John P. LeNeveu 0 0 6,000/24,000 0
F. Stanley Sena 0 0 8,279/0 0
J. Roy Coxe 0 0 6,000/24,000 0
</TABLE>
BENEFIT PLANS AND ARRANGEMENTS
Management Incentive Plan - The Company has a Management Incentive Plan
(the "MIP Plan") to provide additional compensation to participants, including
executive officers, upon the achievement of certain financial objectives of the
Company and individual personal objectives of the participants. The MIP Plan is
administered by the Compensation Committee of the Board of Directors (the
"Compensation Committee") and is applicable to management employees of Americold
and, at the option of the President of the Company, other employees of
Americold. The financial objective award is 50% of the total award and is based
on attainment of actual operating results as compared to financial targets. The
financial targets were established and approved by the Company based upon the
annual business plan. The personal objective award is 50% of the total award
and is based on attainment of both quantifiable and nonquantifiable goals
established at the beginning of the MIP Plan year. Incentive compensation
earned under the MIP Plan is computed as soon as possible after the close of the
Company's fiscal year and payment is generally made following approval by the
Board unless a deferred payment election has been filed with the Company in
accordance with the terms of the Plan.
61
<PAGE>
The Board of Directors authorized the payment of approximately $1.6
million in total fiscal 1995 awards pursuant to the MIP Plan. These awards were
paid in July 1995. Incentive compensation earned by the Company's executive
officers for the fiscal year ended the last day of February 1995, including
awards under the MIP Plan, is included in the above Summary Compensation Table.
In addition to the MIP Plan, between March 1, 1991 and February 28,
1994 the Company had a Stock Incentive Plan, a long-term incentive plan which
was intended to provide additional financial incentives to key employees,
including executive officers of the Company.
Retirement Plan - Americold has a noncontributory defined benefit
retirement plan for salaried employees, including executive officers (the
"Retirement Plan"). The Retirement Plan provides retirement benefits based on
credited years of service and average monthly compensation for the highest five
calendar years of the final 15 calendar years of employment or, if higher, the
highest 60 consecutive months in the last 120 months of employment. A
participant's retirement benefits vest after the participant has completed at
least five years of vesting service.
The following table shows the approximate annual retirement benefits
payable to employees for life from normal retirement date pursuant to the
Retirement Plan before reduction for Social Security payments. The actual
retirement benefit to employees is offset by Social Security benefits. Service
credited under a retirement plan of the Company's former owners will be
recognized by the Retirement Plan for purposes of determining the pension
benefits payable under the Retirement Plan.
Estimated years of credited service to date under the Retirement Plan
for the individuals named in the Summary Compensation Table are as follows: Mr.
Dykehouse, 4 years; Mr. Smith, 16 years; Mr. LeNeveu, 3 years; Mr. Sena, 25
years; and Mr. Coxe, 1 year. Estimated years of credited service at normal
retirement date (age 65) under the Retirement Plan for the individuals named in
the Summary Compensation Table are as follows: Mr. Dykehouse, 16 years; Mr.
Smith, 26 years; Mr. LeNeveu, 20 years; Mr. Sena, 45 years; and Mr. Coxe, 12
years.
62
<PAGE>
<TABLE>
<CAPTION>
Years of Service
--------------------------------------
Average Annualized
Compensation 20 30 40 50
------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$100,000 $30,000 $45,000 $60,000 $ 75,000
125,000 37,500 56,250 75,000 93,744
150,000 45,000 67,500 90,000 112,500
175,000 45,000 67,500 90,000 112,500
200,000 45,000 67,500 90,000 112,500
300,000 45,000 67,500 90,000 112,500
</TABLE>
In addition to the above, certain individuals named in the Summary
Compensation Table are entitled to a benefit calculated by using additional
years of service credited under supplements to the Retirement Plan. Years of
credited service under the supplements for the individuals named in the Summary
Compensation Table as of the last day of February 1995 are as follows: Mr.
Dykehouse, 0 years; Mr. Smith, 5 years; Mr. LeNeveu, 0 years; Mr. Sena, 0 years;
and Mr. Coxe, 0 years. The annual amount to be received at normal retirement
date pursuant to the supplements is estimated to be as follows: Mr. Dykehouse,
$0 per annum; Mr. Smith, $5,906 per annum; Mr. LeNeveu, $0 per annum; Mr. Sena,
$0 per annum; and Mr. Coxe, $0 per annum.
A participant's retirement benefits (excluding any incremental benefit
earned under any supplement) under the Retirement Plan plus 50% of Social
Security benefits may not exceed 60% of his compensation at retirement after 40
years of service, subject to maximum dollar limitations. See Note 8 of Notes to
Consolidated Financial Statements.
Employee Stock Ownership Plan - Americold established, effective March 1,
1987, an Employee Stock Ownership Plan, as amended January 1, 1994 (the "ESOP"),
in which all qualifying employees of the Company not covered by collective
bargaining arrangements are able to participate. It is contemplated that
contributions on an annual basis will not exceed 15% of the aggregate total
compensation of any participating employee. The Company may contribute cash as
well as or in lieu of its stock. The consent of the Company's Board of
Directors is required to authorize any contribution by Americold to the ESOP.
Contributions are allocated among participants based on the ratio of each
participant's compensation to the total compensation of all such participants,
subject to certain limitations. The ESOP is intended to provide retirement
funds to participants in addition to present pension benefits.
Benefits under the ESOP vest based upon years of service as follows:
20% after three years of service, increased by 20% for each of the next four
years with a maximum of 100%
63
<PAGE>
after seven years of service. A participant is 100% vested if employed by the
Company on or after his 65th birthday, or if the participant incurs a total and
permanent disability or dies while employed by the Company. The ESOP has the
right to repurchase previously distributed shares from employees terminating
their ESOP participation, using funds obtained through cash contributions by the
Company. Participant forfeitures are allocated pro rata to remaining
participants.
Participants are eligible for distribution of their capital
accumulation in the ESOP at the normal retirement age of 65. The distribution
will be made in whole shares of the Company's stock, cash or a combination of
both, as determined by the Compensation Committee, provided the participant has
not elected to be paid in stock.
Upon termination of the ESOP, the ESOP's trust will be maintained
until the capital accumulations of all participants have been distributed.
A $750,000 ESOP contribution was declared and paid for fiscal 1995.
No ESOP contribution has been declared to date for fiscal 1996.
Key Employee Stock Option Plan - In 1987, Americold established a Key
Employee Stock Option Plan (the "Option Plan"). The Option Plan permits the
issuance of nonstatutory options to purchase up to 300,000 shares of common
stock of the Company to directors, officers and other key employees of the
Company. Of these, options to purchase up to 150,000 shares were reserved for
issuance to the Management Group and options to purchase the remaining 150,000
shares are reserved for issuance to all eligible employees (including the
Management Group) of the Company.
An individual exercising options under the Option Plan must become a
party to the Stockholders' Agreement. The Option Plan is administered by the
Compensation Committee. The Compensation Committee determines the recipients of
options granted, the exercise price and the number of shares of common stock
subject to each option. Options to purchase common stock are granted at a price
not less than 85% of the fair market value on the day that the option is
granted. The Board of Directors may amend the Option Plan from time to time.
The maximum term of each stock option is ten years. Options become exercisable
at such time or times as the Compensation Committee may determine at the time of
grant.
If the outstanding shares of common stock are changed into or
exchanged for a different number or kind of shares of the Company or other
securities of the Company, by reason of any merger, consolidation,
recapitalization, reclassification, stock
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<PAGE>
split-up, stock dividend or combination of shares, the Compensation Committee
shall make an appropriate and equitable adjustment in the number and kind of
shares as to which the unexercised portion of the option shall be exercisable,
to the extent that after such event the optionee's right to a proportionate
interest in the Company shall be maintained as if the option had already been
exercised and the option shares were subject to such change or exchange. Such
adjustment shall be made without change in the total price applicable to the
unexercised portion of the option and with a corresponding adjustment in the
exercise price per option share. Any such adjustment made by the Compensation
Committee shall be final and binding upon the Company, the optionee and all
other interested persons.
In the event of (i) dissolution or liquidation of the Company, (ii) a
merger in which the Company is not the surviving corporation or (iii) a share
exchange pursuant to which the outstanding shares of common stock of the Company
are acquired by another corporation, then either (a) the Compensation Committee,
upon authorization of the Board, shall make an appropriate and equitable
adjustment in the number and kinds of securities covered by outstanding options,
and such options shall be expressly assumed by the successor corporation, if
any; or (b) in lieu of such adjustment, the Board shall provide a 30-day period
immediately prior to such an event during which each optionee shall have the
right to exercise the optionee's outstanding options, in whole or in part,
without regard to the time the options have been outstanding or the vesting
schedule provided for in any option agreement entered into pursuant to the
Option Plan and all options not exercised shall expire at the end of the 30-day
period.
Information with regard to the grant of options as of the last day of
February 1995 under the Plan follows:
<TABLE>
<CAPTION>
Number of Option Number Expiration
Options Price Exercisable Date
--------- ------ ----------- -------------
<S> <C> <C> <C>
93,795 $10.00 93,795 May 1998
100,000 $18.95 80,000 June 2000
30,000 $21.88 6,000 May 2003
30,000 $20.40 6,000 December 2003
</TABLE>
No options were exercised during fiscal 1995. See Note 9 of Notes to
Consolidated Financial Statements.
Other Arrangements - In calendar 1995, the Board of Directors authorized
employment agreements for certain executive officers of the Company.
65
<PAGE>
On November 1, 1995, the Company entered into an employment agreement
with Mr. Dykehouse. The agreement expires on December 16, 1998 and may be
extended for one-year periods by mutual agreement. Pursuant to the agreement,
Mr. Dykehouse agreed to serve as Chairman of the Board, President and Chief
Executive Officer of the Company for a minimum base monthly salary of $25,000
and the right to participate in the MIP Plan (or any other senior management
incentive program offered by the Company) and receive all customary employee
benefits ("Benefits"). The agreement provides that if during the term of the
agreement Mr. Dykehouse is terminated "without cause," as defined, the Company
will pay his base compensation through December 16, 1998, employ him as a
consultant at his base salary for 24 months beginning January 1, 1999 and
provide to him all Benefits through the earlier of the date he obtains other
employment and December 16, 2006. The Company is not required to make any such
payments if the termination is "for cause," as defined. Among other termination
provisions, the agreement provides that Mr. Dykehouse may terminate the
agreement with 30 days' written notice if such termination is for "good reason"
(as defined), and in such case, Mr. Dykehouse will receive the same treatment as
if he were terminated "without cause." The employment agreement contains other
customary terms and conditions.
On August 1, 1995, the Company entered into two-year employment
agreements with Messrs. Smith, LeNeveu, Sena and Coxe. Each employee agreed to
serve in the position and at the minimum base monthly salary as follows: Mr.
Smith, Senior Vice President and Chief Financial Officer, $13,666.66; Mr.
LeNeveu, Executive Vice President, $14,166.66; Mr. Sena, Executive Vice
President, $13,666.67; and Mr. Coxe, Senior Vice President, Logistics $12,500.
The agreements provide, among other conditions, that if during the term of the
employment agreement the employee is terminated "without cause," as defined, the
Company will pay the employee any unpaid base compensation, any benefits accrued
to the date of termination and, for 24 months, a monthly amount equal to the
last monthly salary amount received. The Company is not required to make any
such payment if the termination is "for cause," as defined. The employee may
terminate employment upon 30 days' written notice, and the Company will pay such
employee an amount equal to either 12 months' salary if such termination is
without "good reason," as defined, or 24 months' salary if such termination is
for "good reason." The employment agreements contain other customary terms and
conditions.
Concurrently with the entering into of the employment agreements,
Messrs. Dykehouse, Smith, LeNeveu, Sena and Coxe each also entered into a
covenant not to compete and consulting and non-disclosure agreement with the
Company. Under these agreements, each individual has agreed not to compete with
the Company during the term of his employment with the Company, under
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<PAGE>
the terms of an employment contract or otherwise. Mr. Dykehouse has agreed not
to compete with the Company for a period of 24 months following termination of
employment or until October 31, 2000, whichever is earlier, while the other
officers have agreed not to compete with the Company (i) for a 24-month period
following termination of his employment or until July 31, 2000, whichever is
earlier, if the termination is "for cause," as defined in the employment
agreement, or (ii) for a 12-month period or until July 31, 2000, whichever is
earlier, if the employee terminates employment with or without "good reason," as
defined in the employment agreement. Subject to certain exceptions, each
individual has further agreed to be available for employment as a consultant to
the Company following termination of employment.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial
ownership of common stock as of December 31, 1995 by (i) each person known by
the Company to own more than five percent of its common stock, (ii) each
director of the Company, (iii) each named executive officer, (iv) all directors
and officers as a group and (v) the Management Group:
<TABLE>
<CAPTION>
Percent of
Number of Outstanding
Name and Address Shares Shares
- ---------------- --------- -----------
<S> <C> <C>
KIA III-Americold, Inc., L.P.(1) 2,000,000 41.1%
("KIA III")
c/o Kelso & Company
350 Park Avenue, 21st Floor
New York, NY 10017
Kelso Investment Associates II, L.P.(1) 500,000 10.3%
("KIA II")
c/o Kelso & Company
350 Park Avenue, 21st Floor
New York, NY 10017
Kelso Equity Partners, L.P.(1) 70,000 1.4%
("Kelso Equity")
c/o Kelso & Company
350 Park Avenue, 21st Floor
New York, NY 10017
Joseph S. Schuchert(2) 2,593,600 53.4%
350 Park Avenue, 21st Floor
New York, NY 10017
Frank T. Nickell(2) 2,593,600 53.4%
350 Park Avenue, 21st Floor
New York, NY 10017
George E. Matelich(2) 2,593,600 53.4%
350 Park Avenue, 21st Floor
New York, NY 10017
Thomas R. Wall, IV(2) 2,593,600 53.4%
350 Park Avenue, 21st Floor
New York, NY 10017
The Northwestern Mutual Life
Insurance Company(1) 500,000 10.3%
720 East Wisconsin Avenue
Milwaukee, WI 53202
</TABLE>
68
<PAGE>
<TABLE>
<S> <C> <C>
New York Life Insurance Company(1) 330,000 6.8%
51 Madison Avenue
New York, NY 10010
New York Life Insurance and
Annuity Corporation(1) 250,000 5.1%
51 Madison Avenue
New York, NY 10010
Ronald H. Dykehouse(1)(3) 117,900 2.4%
7007 S. W. Cardinal Lane, Suite 135
Portland, OR 97224
Joel M. Smith(1)(3) 38,278 0.8%
7007 S. W. Cardinal Lane, Suite 135
Portland, OR 97224
John P. LeNeveu(3) 14,000 0.3%
7007 S. W. Cardinal Lane, Suite 135
Portland, OR 97224
F. Stanley Sena(1)(3) 38,279 0.8%
7007 S. W. Cardinal Lane, Suite 135
Portland, Or 97224
J. Roy Coxe(3) 12,000 0.2%
7007 S. W. Cardinal Lane, Suite 135
Portland, OR 97224
Frank Edelstein -- --
The Gordon+Morris Group, Suite 1400
620 Newport Center Drive
Newport Beach, CA 92660
James C. Pigott -- --
1405 - 42nd Avenue East
Seattle, WA 98112
William A. Marquard -- --
Eaglestone Farm
2199 Maysville Road
Carlisle, KY 40311
All directors and officers as
a group (11 persons)(2)(3) 285,095 5.9%
Management Group (30 persons)(1)(3) 558,556 11.5%
</TABLE>
- -------------------
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<PAGE>
(1) These persons are party to the Stockholders' Agreement which gives the
Company a right of first refusal for shares of common stock sold by these
parties prior to an initial public offering of at least 25% of the
outstanding shares of common stock of the Company. See "Management--
Stockholders' Agreement."
(2) Messrs. Schuchert, Nickell, Matelich and Wall may be deemed to share
beneficial ownership of shares owned of record by KIA III, KIA II, Kelso
Equity and Kelso & Company (Kelso & Company owns 23,600 shares) by virtue
of their status as the general partners of Kelso Partners III, L.P. (the
general partner of KIA III), Kelso Partners II, L.P. (the general partner
of KIA II), and Kelso Equity and the controlling stockholders and officers
of Kelso & Company. Messrs. Schuchert, Nickell, Matelich and Wall share
investment and voting power with respect to securities owned by the
foregoing entities. Messrs. Schuchert, Nickell, Matelich and Wall disclaim
beneficial ownership of such securities (other than the 23,600 shares owned
by Kelso & Company).
(3) Includes the following numbers of shares of common stock that may be
acquired within 60 days after December 31, 1995 through the exercise of
stock options granted pursuant to the Company's Option Plan:
100,000 shares for Mr. Dykehouse; 8,278 shares for Mr. Smith; 12,000
shares for Mr. LeNeveu; 8,279 shares for Mr. Sena; 12,000 shares for
Mr. Coxe; 151,595 for all directors and officers as a group; and
213,656 shares for the Management Group.
The shareholders of the Company listed above hold approximately 83% of
the voting power of the Company's common stock and are able to elect all of the
members of the Board of Directors and thereby control the Company.
In consideration for certain assistance provided by Kelso in
connection with the Prepackaged Bankruptcy and the refinancing of the 15%
Debentures pursuant to the Offering, the Company expects to pay Kelso a
financial advisory fee of $500,000 upon closing of the Offering.
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<PAGE>
DEBT OF THE COMPANY
THE BANK CREDIT AGREEMENT
The Company and its primary bank entered into the Bank Credit Agreement
effective June 30, 1995. The following summary, which describes certain
provisions of the Bank Credit Agreement does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Bank Credit
Agreement, including the definitions therein of terms not defined in this
Prospectus. Capitalized terms in this description shall have the meanings
ascribed to them in the Bank Credit Agreement, unless otherwise noted.
The Bank Credit Agreement provides an aggregate availability of up to $27.5
million, subject to Borrowing Base limitations, which may be used for any
combination of letters of credit (not to exceed $10 million) and revolving cash
borrowings. The Bank Credit Agreement is secured primarily by the Company's
trade receivables and may at the Company's option be secured by mortgages on
certain of the Company's warehouse properties. The Borrowing Base equals 85% of
eligible accounts receivable plus 70% of the appraised value of all real
property optionally mortgaged to the bank. As of the date hereof, no real
property of the Company was mortgaged to the bank. Borrowings under the Bank
Credit Agreement constitute Senior Debt, as defined in the Note Indenture. The
funds borrowed under the Bank Credit Agreement are required to be used for
general working capital purposes. The Bank Credit Agreement matures on February
28, 1999.
Interest rates under the Bank Credit Agreement are based on either (i) the
prime lending rate, as announced by the bank from time to time, plus 1 percent,
or (ii) the Eurodollar Market rate plus 2 percent, at the option of the Company.
These rates are subject to adjustment, up to a maximum increase of 0.25% and a
maximum reduction of 1.00%, based on the Company's operating performance
relative to Fixed Charges, measured quarterly. Interest is payable quarterly in
arrears. The Bank Credit Agreement also requires that there be certain 30-day
periods ("resting periods") during which there may be no outstanding borrowings,
including borrowings to reimburse the bank with respect to letters of credit.
One such resting period is required during the fiscal year ending February 28,
1997, and two such periods are required during each of the fiscal years ending
February 28, 1998 and February 28, 1999. There is no resting period requirement
for the fiscal year ending February 29, 1996. The resting periods are not
expected to affect the Company's ability to service its seasonal working capital
or short-term debt requirements or maintain outstanding letters of credit.
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<PAGE>
The Bank Credit Agreement contains certain covenants restricting the
Company's ability to, among other things, (i) pay dividends or any other
distribution with respect to its capital stock; (ii) voluntarily prepay or
redeem any Subordinated Debt; (iii) enter into a consolidation or merger
transaction in which the Company or any Subsidiary is not the surviving entity;
(iv) sell or otherwise transfer its assets; (v) enter into transactions with
affiliates (other than wholly-owned subsidiaries) except on an arm's-length
basis as determined by the Board of Directors; or (vi) modify, waive or amend
any provision of its debt agreements, if such modification, waiver or amendment
would adversely affect the rights of the bank.
In addition, the Company is required to comply with certain specified
financial ratios and tests, including the following:
Available Cash Flow to Pro Forma Debt Service Ratio -- The Company may not
permit the ratio of (x) Available Cash Flow plus Net Cash to (y) Pro Forma Debt
Service for any period of four consecutive fiscal quarters to be less than
1.01:1.
Senior Debt to Net Worth Ratio -- The Company may not permit the ratio of
(x) consolidated indebtedness of the Company and its Subsidiaries to (y) Net
Worth to exceed the ratios shown below during the periods shown below:
<TABLE>
<CAPTION>
Fiscal Year Ending Maximum Ratio
------------------ -------------
<S> <C>
February 29, 1996 5.10
February 28, 1997 5.05
February 28, 1998 4.85
February 28, 1999 4.55
</TABLE>
Under the Bank Credit Agreement, the following, among other things, will
constitute events of default: (i) non-payment of principal when due, (ii) non-
payment of interest within five days after being due, (iii) a material
misrepresentation, (iv) a default in the performance of any covenant unless
cured within the applicable grace period, (v) default in the payment or
performance of obligations under an agreement with respect to any Indebtedness
in a principal amount of at least $5.0 million that permits acceleration of such
Indebtedness, (vi) bankruptcy or insolvency of the Company or any Subsidiary,
(vii) existence of unfunded liabilities under ERISA in excess of $5.0 million or
a reportable event under ERISA with respect to a plan having unfunded
liabilities in excess of $5.0 million, (viii) the liens of the bank upon its
collateral shall cease to be in full force
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<PAGE>
and effect, or (ix) a Change of Control (as defined in the Bond Indenture) shall
occur.
Certain Definitions. Certain definitions contained in the Bank Credit
Agreement are summarized below. Reference is made to the Bank Credit Agreement
for complete definitions of these terms.
Adjusted EBITDA: The term "Adjusted EBITDA" has the same meaning as
ascribed to it in the Second Investment Agreement. See "--The Second Investment
Agreement--Certain Definitions."
Available Cash Flow: The term "Available Cash Flow" means Adjusted
EBITDA minus (i) cash income taxes paid or payable during the determination
period and (ii) the amount of capital expenditures (other than any noncash
capital expenditures and expenditures for the acquisition of assets or property
using net proceeds of the Series B Bonds) of the Company and its Subsidiaries
during such period.
Net Cash: The term "Net Cash" means the amount shown on the Company's
consolidated balance sheet (excluding cash held in restricted accounts,
unavailable to pay interest and principal due on the Company's indebtedness),
minus the amount of any obligations of the Company outstanding under the Bank
Credit Agreement, other than obligations representing undrawn letters of credit.
Pro Forma Debt Service: The term "Pro Forma Debt Service" has the
same meaning as ascribed to it in the Second Investment Agreement. See "--The
Second Investment Agreement--Certain Definitions."
Net Worth: The term "Net Worth" means the sum of (i) stockholder's
equity plus (ii) the 15% Debentures.
THE FIRST MORTGAGE BONDS
The terms of the First Mortgage Bonds, issued in two series, Series A
and Series B, are governed by the Bond Indenture between the Company and the
Bond Trustee. The following summary, which describes certain provisions of the
Bond Indenture, the First Mortgage Bonds and the Mortgages (each as defined
below), does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, such documents, including the definitions therein
of terms not defined in this Prospectus. Capitalized terms in this description
of the First Mortgage Bonds shall have the meanings ascribed to them in the Bond
Indenture, unless otherwise noted. See below for a description of the Second
Investment Agreement between the Company and the Institutional Investor, which
provides to the
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<PAGE>
Institutional Investor and, in certain instances, to all holders of First
Mortgage Bonds, certain additional rights.
General - The First Mortgage Bonds are direct, unsubordinated, full
recourse obligations of the Company and constitute Senior Debt, as such term is
defined in the Bond Indenture and in the Note Indenture. The Series A Bonds
will mature on June 30, 2002, subject to the redemption provisions summarized
below. The Series A Bonds, of which a principal amount of $140 million is
currently outstanding, bear interest at the annual rate of 11.45 percent,
payable semiannually in arrears on January 1 and July 1 of each year. The
Series B Bonds will mature on March 1, 2005, subject to the redemption
provisions summarized below. The Series B Bonds, of which a principal amount of
$176.25 million currently is outstanding, bear interest at the annual rate of
11.5 percent, payable semiannually in arrears on March 1 and September 1 of each
year. Interest on overdue principal and (to the extent permitted by law) on
overdue installments of interest accrue at a rate equal to the lesser of (i) the
greater of (a) 18% per annum and (b) 4% per annum over the prime rate or
equivalent rate of interest from time to time in effect as announced by the Bond
Trustee and (ii) the maximum rate of interest on the First Mortgage Bonds then
permitted by applicable law.
Mortgages and Other Security - The First Mortgage Bonds are secured by
mortgages or deeds of trust (the "Mortgages") on 32 of the Company's properties.
See "Properties." Each Mortgage secures the full amount payable with respect to
all the First Mortgage Bonds except in the case of a Mortgage on any Property
located in Tennessee, Florida or Kansas where, due to mortgage recording or
similar taxes, the aggregate amount of the First Mortgage Bonds secured by such
Mortgage may be limited to 100% of the appraised value of the related Property
as of the original issuance of Series A Bonds in 1987. The Mortgages establish
certain Release Values for the release of Mortgaged Properties from the lien of
the Mortgages. The Release Values are adjusted to reflect the addition of new
properties to the collateral pool, redemptions of principal and amortization
payments, releases of obsolete property and certain other specified events.
The Mortgages prohibit subordinated financing on the Properties and
direct or indirect sales thereof except after release as provided in the Bond
Indenture. The Mortgages also contain covenants on the part of the Company to
repair, maintain, pay taxes on and insure the properties and comply with
applicable law.
Optional Redemption - The Company may redeem Series A Bonds on or after
June 30, 1995, and may redeem Series B Bonds on or after March 1, 1998, upon 45
days' notice to the Bond Trustee (which shall provide no less than 30 days'
notice thereof to the
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<PAGE>
bondholders), at optional redemption prices as delineated in the Bond Indenture,
together with accrued interest to the date of redemption.
So long as the relevant provisions of the Second Investment Agreement
remain in effect, the Company may not optionally redeem any Series B Bonds
unless it simultaneously redeems or has previously redeemed the entire principal
amount of Series A Bonds. On or after March 1, 1998, provided that the Second
Investment Agreement is no longer in effect, optional redemptions may be
allocated between the Series B Bonds and the Series A Bonds at the discretion of
the Company.
So long as the covenant in the Second Investment Agreement relating to
optional redemptions of Series A Bonds remains in effect, the holders of the
Series A Bonds will be entitled to receive the greater of the applicable
redemption price specified in the Bond Indenture and the applicable redemption
price specified in the Second Investment Agreement upon an optional redemption
of Series A Bonds. In addition, so long as the relevant covenants in the Second
Investment Agreement remain in effect, the Company will be required to redeem
all Series A Bonds, or, in certain events, only Series A Bonds held by the
Institutional Investor, upon the occurrence of other specified events at the
greater of the prices specified therein. See "--The Second Investment
Agreement--Required Redemptions."
In addition, the Bond Indenture includes provisions relating to the
redemption of First Mortgage Bonds in connection with certain events of
casualty, condemnation, taxation and other events, as well as provisions
relating to the release and substitution of collateral.
Subject to certain exceptions, partial redemptions of First Mortgage
Bonds are not permitted unless (i) the aggregate principal amount of Series A
Bonds then being redeemed, if any, is more than $5 million and the aggregate
principal amount of Series B Bonds then being redeemed, if any, is more than $25
million and (ii) the aggregate principal amount of Series B Bonds outstanding
after such redemption exceeds $25 million. In addition, the Company may redeem
or prepay the Series A Bonds, in whole or in part, on one or more occasions at
any time on or prior to December 31, 1996 without payment of any prepayment
premium. Further, the Company may at any time redeem up to $25 million
principal amount of Series A Bonds (less any amounts redeemed in the 18-month
period on or prior to December 31, 1996) without payment of any prepayment
premium.
Sinking Fund - The Series A Bonds are entitled to mandatory sinking fund
payments on each interest payment date beginning July 1, 1999, calculated to
retire prior to maturity 73% of the principal amount of the $140 million of
Series A Bonds
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<PAGE>
outstanding. Sinking fund payments will be made with respect to outstanding
Series A Bonds according to the following schedule:
<TABLE>
<CAPTION>
Percent of $140 Million
Aggregate Principal Amount of
Principal the Series A Bonds
Payment Date Payment Amortized Per Payment
------------ --------- -----------------------
<S> <C> <C>
July 1, 1999 $12,000,000 8.5%
January 1, 2000 18,000,000 12.9%
July 1, 2000 18,000,000 12.9%
January 1, 2001 18,000,000 12.9%
July 1, 2001 18,000,000 12.9%
January 1, 2002 18,000,000 12.9%
June 30, 2002 38,000,000 27.0%
(maturity)
</TABLE>
The Series B Bonds are entitled to a mandatory sinking fund payment of $88.125
million on March 1, 2004, calculated to retire prior to maturity 50% of the
original principal amount of the Series B Bonds. The Series A Bond and Series B
Bond sinking fund payments will be made prior to the maturity of the Notes.
See "Risk Factors--Substantial Payment Obligations; Consequences of Failure to
Service Debt."
Change of Control - Upon a Change of Control of the Company, as defined in
the Bond Indenture, each holder of First Mortgage Bonds will have the right to
require the Company to repurchase all or any part of such holder's First
Mortgage Bonds at a repurchase price in cash equal to 101% of the principal
amount thereof plus any accrued and unpaid interest as of the date of repurchase
(subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date). The Change of
Control provisions contained in the Bond Indenture are substantially similar to
the Change of Control provisions of the Note Indenture. However, the holders of
First Mortgage Bonds may require the Company to repurchase the First Mortgage
Bonds prior to repurchasing the Notes. See "Description of the Senior
Subordinated Notes--Change of Control." If the Company merges or consolidates
with or into another entity controlled by Kelso, the holders of the First
Mortgage Bonds may not be able to require the Company to repurchase their First
Mortgage Bonds, unless the holders of voting stock of the Company immediately
prior to such transaction, together with Kelso and its affiliates, own, directly
or indirectly, in the aggregate, less than 70% of the voting stock of the post-
transaction surviving entity.
Certain Covenants - The Bond Indenture contains certain covenants limiting,
among other things, (i) the issuance of additional debt by the Company, (ii) the
issuance of debt and preferred stock by the Company's subsidiaries, (iii) the
payment
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<PAGE>
of dividends on and redemption of capital stock of the Company and its
subsidiaries, (iv) the redemption of subordinated obligations of the Company,
(v) the sale of assets and stock of the Company's subsidiaries, (vi)
transactions with affiliates, (vii) sale and leaseback transactions, (viii)
distributions from subsidiaries and (ix) consolidations, mergers and transfers
of substantially all the assets of the Company. Certain of the covenants
contained in the Bond Indenture are substantially similar to certain of the
covenants contained in the Note Indenture. See "Description of the Senior
Subordinated Notes." The covenants contained in the Bond Indenture relating to
the redemption or prepayment of subordinated obligations of the Company may
substantially restrict the ability of the Company to redeem or otherwise make
payments in respect of principal on the Notes prior to the maturity thereof.
The covenants under the Bond Indenture are, in certain respects,
different from those under the Second Investment Agreement. In particular, the
Bond Indenture provides that the Company must apply the Net Available Cash from
an Asset Disposition as follows: first, at the Company's election (or to the
extent required by the terms of Senior Debt), to redeem or prepay Senior Debt
other than the First Mortgage Bonds; second, to repurchase First Mortgage Bonds
tendered pursuant to an offer made by the Company to purchase such First
Mortgage Bonds at the applicable redemption price (an "Offer"); and third, to
the extent of the balance of Net Available Cash from such Asset Disposition, to
acquire tangible property or to redeem or prepay Debt within one year of the
later of the receipt of such Net Available Cash or the consummation of such
Offer; provided, however, that any redemption or prepayment of Debt pursuant to
the first and third clauses above shall cause the related loan commitment (if
any) to be permanently reduced in an amount equal to the amount so redeemed or
prepaid. However, while the relevant covenants in the Second Investment
Agreement remain in effect, the Company may first apply Net Available Cash to
acquire Tangible Property acceptable to the Institutional Investor prior to
repurchasing First Mortgage Bonds. See "--The Second Investment Agreement."
Defaults - The following types of events, among others, will constitute an
Event of Default under the Bond Indenture: (i) a default for 30 days in the
payment of interest on any First Mortgage Bond; (ii)(A) a default in the payment
of the principal or premium, if any, on any First Mortgage Bond when the same
becomes due and payable at its stated Maturity upon redemption, upon declaration
or otherwise, or (B) the failure by the Company to redeem or purchase First
Mortgage Bonds when required pursuant to the Bond Indenture or the First
Mortgage Bonds; (iii) the failure by the Company to comply with certain
obligations in the event of a merger, consolidation or transfer of substantially
all the assets of the Company or the failure of the Company or
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<PAGE>
Americold Services Corporation to comply with the covenant in the Bond Indenture
requiring the Company to own the capital stock of Americold Services Corporation
free of any Lien (other than the lien granted to the Bond Trustee and the lien
granted to the bank in connection with the Bank Credit Agreement); (iv) the
failure by the Company to comply with certain covenants in the First Mortgage
Bonds or the Bond Indenture; (v) the failure of the Company or any Subsidiary to
pay Debt within any applicable grace period; (vi) certain events of bankruptcy,
insolvency or reorganization of the Company or a Subsidiary; (vii) an "Event of
Default" as defined in any of the security documents relating to the collateral
securing the payment of the First Mortgage Bonds; (viii) an "Event of Default"
under the Second Investment Agreement; (ix) any judgment or decree for the
payment of money in excess of $5.0 million is rendered against the Company or a
Subsidiary and is not discharged within specified time periods.
The Mortgages, which constitute security documents, include additional
Events of Default including, among others, (A) failure to maintain required
insurance on the Properties, (B) any prohibited disposition or encumbrance of
the Properties, (C) in the case of Mortgages on leasehold estates, termination
of or the happening of certain other events with respect to the applicable lease
and (D) with certain exceptions, failure for 30 days to comply with any other
terms or covenants contained in the Mortgages.
Subject to certain exceptions and conditions, upon an Event of
Default, the Bond Trustee or the holders of at least 25% in principal amount of
the First Mortgage Bonds may declare the principal of and accrued but unpaid
interest on all the First Mortgage Bonds, plus a premium in certain
circumstances, to be immediately due and payable.
THE SECOND INVESTMENT AGREEMENT
The Company and the Institutional Investor entered into an investment
agreement dated as of July 2, 1987 in connection with the issuance of the Series
A Bonds. The investment agreement was amended and restated as of March 2, 1993
in connection with the issuance of the Series B Bonds. On June 30, 1995, upon
payment by the Company of an Agreement Modification Fee to the Institutional
Investor, the prior Investment Agreement was cancelled and the Second Investment
Agreement became effective.
The following summary of certain provisions of the Second Investment
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the Second Investment Agreement, including
definitions therein of terms not defined in this Prospectus. Certain important
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definitions are included in this summary under "Definitions" below.
Certain covenants, redemption obligations and other provisions of the
Second Investment Agreement will terminate in the event the Institutional
Investor should at any time either (1) hold less than 25% of the outstanding
principal amount of Series A Bonds or (2) hold less than $25 million in
principal amount of the Series A Bonds. The Second Investment Agreement will
terminate completely when neither the Institutional Investor nor any of its
Affiliates continues to hold any Series A Bonds. Upon termination of the Second
Investment Agreement, all Series A Bonds, together with the Series B Bonds, will
be governed solely by the provisions of the Bond Indenture.
Certain Covenants - Among financial covenants contained in the Second
Investment Agreement, the Company may not permit Adjusted Consolidated Net Worth
at any time to be less than the amount set forth below opposite the period in
which the measurement is made:
<TABLE>
<CAPTION>
Fiscal Years Ended February Amount
--------------------------- -------------
<S> <C>
1996 ($37,000,000)
1997 ($36,000,000)
1998 ($34,000,000)
1999 ($32,000,000)
2000 ($28,000,000)
2001 ($25,000,000)
2002 ($19,000,000)
2003 ($10,000,000)
</TABLE>
The Company also may not permit the ratio of Senior Debt to Adjusted
Total Capitalization at any time to be greater than the following amounts:
<TABLE>
<CAPTION>
Maximum
Permitted
Fiscal Years Ended February Ratio
--------------------------- ---------
<S> <C>
1996 86.0%
1997 86.0%
1998 85.0%
1999 85.0%
2000 84.0%
2001 81.0%
2002 79.0%
2003 77.0%
</TABLE>
The Company further may not permit the ratio of (1) the sum of
Available Cash Flow for the four most recently ended quarters, plus Net Cash, to
(2) Pro Forma Debt Service for the
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four succeeding quarters (or if such determination is made on a day which is not
the last day of a fiscal quarter, the quarter in which a determination is being
made and the following three quarters) at any time to be less than:
<TABLE>
<CAPTION>
Fiscal Years Ended February Ratio
--------------------------- ------------
<S> <C>
1996 1.00 to 1.00
1997 1.10 to 1.00
1998 1.20 to 1.00
1999 .95 to 1.00
2000 .70 to 1.00
2001 .65 to 1.00
2002 .66 to 1.00
2003 1.00 to 1.00
</TABLE>
Moreover, so long as the Bank Credit Agreement is in effect, the
negative covenants in such agreement, other than those dealing with transactions
with affiliates and modifications of indebtedness and other agreements, are
incorporated by reference into the Second Investment Agreement. In addition, if
the Bank Credit Agreement is replaced by any other bank financing, any
corresponding covenants in such replacement financing agreement will be
incorporated into the Second Investment Agreement so long as any such
replacement financing agreement is in effect.
The Second Investment Agreement restricts the ability of the Company
to (i) pay dividends or make other distributions with respect to the capital
stock of the Company, (ii) redeem capital stock of the Company, (iii) redeem
prior to maturity any subordinated debt of the Company, and (iv) make
investments in certain Affiliates of the Company. Such provisions are in
certain respects more restrictive than those contained in the Bond Indenture and
may substantially restrict the ability of the Company to redeem or otherwise
make payments in respect of principal on the Notes prior to the maturity
thereof.
Required Redemptions - In addition to any redemption required by the Bond
Indenture, the Company may be required under the Second Investment Agreement to
redeem Series A Bonds (but only Series A Bonds held by the Institutional
Investor in the case of clause (iii) below) in the following circumstances and
in the principal amounts indicated:
(i) At any time the Company makes an optional redemption of any Series
B Bonds pursuant to the terms of the Bond Indenture, the Company shall,
concurrently with such redemption of Series B Bonds, redeem the entire principal
amount of the Series A Bonds;
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(ii) On March 9, 1996, the Company shall prepay a principal amount of
Series A Bonds equal to the difference, if any, between (x) $21,525,588 and (y)
the value of Mortgaged Properties acceptable to the Institutional Investor that
have become subject to the lien of a Mortgage (or, in the case of the
construction of an addition upon property which is already subject to the lien
of a Mortgage, the value of each addition qualifying as Mortgaged Property under
the Bond Indenture) after April 12, 1995 and prior to March 9, 1996 (other than
Mortgaged Properties acquired with cash or U.S. government obligations held by
the Bond Trustee pursuant to the release and substitution provisions of the Bond
Indenture), except that no such prepayment shall be required if the difference
between the amounts described above in clauses (x) and (y) is less than $50,000;
(iii) If the Company or any Affiliate of the Company or other Person
(as defined in the Bond Indenture) acting on behalf of the Company acquires
Series B Bonds, in open market purchases or otherwise (excluding, however, any
redemption of Series B Bonds in accordance with the terms of the Bond Indenture
and the Second Investment Agreement that occurs concurrently with a pro rata
redemption of Series A Bonds), the Institutional Investor shall have the option
to require the Company to redeem all of the Series A Bonds held by the
Institutional Investor;
(iv) Upon an Asset Disposition, the Company shall apply to the
redemption of an aggregate principal amount of Senior Debt of the Company an
amount equal to the amount of Net Available Cash not applied within 360 days of
such Asset Disposition to the acquisition of Tangible Property acceptable to the
Institutional Investor; and
(v) At any time the Company exercises certain defeasance options
provided in the Bond Indenture, the Company shall, concurrently with the
exercise of such option, prepay the entire principal amount of Series A Bonds.
Subject to certain exceptions specified in the Second Investment
Agreement, any such redemption of Series A Bonds and any other redemptions of
Series A Bonds permitted or required under the Bond Indenture shall be made at a
price equal to the redemption price specified below for the date on which such
redemption is to be made (together with accrued interest to the date of
redemption), as long as the Second Investment Agreement is in effect:
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<PAGE>
<TABLE>
<CAPTION>
Twelve Months
Beginning March 1 Redemption Price
----------------- ----------------
<S> <C>
1995 111.500%
1996 109.583%
1997 107.666%
1998 105.750%
1999 103.833%
2000 101.917%
2001 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, the Company is not required to pay any
premium on any redemption or prepayment of Series A Bonds on or prior to
December 31, 1996, or on the redemption of $25 million of Series A Bonds (less
any amount redeemed or prepaid on or prior to December 31, 1996) whenever such
redemption shall occur.
Change of Control - Upon a Change of Control (as defined in the Bond
Indenture, which definition is substantially similar to the definition of a
Change in Control contained in the Note Indenture), the Institutional Investor
shall have the right to require the Company to redeem all of the Series A Bonds
at a price equal to 101% of the aggregate principal amount thereof plus any
accrued and unpaid interest as of the date of such redemption.
Events of Default - As long as the Second Investment Agreement remains in
effect, the Institutional Investor will be able to declare an Event of Default
if (i) any interest on the Series A Bonds is not paid within five days of the
applicable payment date, (ii) there is any default which continues for 30 days
in the performance of any other covenant or agreement included or incorporated
by reference in the Second Investment Agreement, (iii) there is a material
breach of a material representation, warranty or other statement made by or on
behalf of the Company included or incorporated by reference in the Second
Investment Agreement or (iv) any event shall occur or any condition shall exist
with respect to any Indebtedness of the Company (other than the Series A Bonds
and the Series B Bonds) or a Subsidiary of the Company in a principal (or
capitalized) amount of at least $2.5 million, or under any agreement securing or
relating to such Indebtedness, the effect of which is to cause or permit any
holder thereof or a trustee to accelerate the maturity of such Indebtedness, or
any such Indebtedness shall not have been paid at the final maturity date
thereof (as renewed or extended if such Indebtedness shall have been renewed or
extended) and any applicable grace period shall have expired; and in any such
case the Institutional Investor has notified the Company and the Bond Trustee
that an Event of Default has occurred under the Second Investment Agreement.
Such an Event of
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Default constitutes an Event of Default under the Bond Indenture. The Second
Investment Agreement requires the Company promptly to notify the Institutional
Investor of the occurrence of any Event of Default under the Second Investment
Agreement or Bond Indenture, certain pending litigation and any other event
which is likely to affect the financial condition, operations or prospects of
the Company or any Restricted Subsidiary materially and adversely.
Certain Definitions - Certain definitions contained in the Second
Investment Agreement are listed below.
Adjusted Consolidated Interest Expense: The term "Adjusted
Consolidated Interest Expense" means, for any period, the total interest expense
of the Company and its Restricted Subsidiaries, including (i) interest expense
attributable to capital leases, (ii) amortization of debt discount and debt
issuance cost, (iii) capitalized interest, (iv) non-cash interest payments, (v)
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (vi) net costs under interest rate
protection agreements (including amortization of fees), (vii) preferred stock
dividends (other than dividends payable solely in kind) in respect of all
preferred stock held by persons other than the Company or a Restricted
Subsidiary, (viii) interest incurred in connection with investments in
discontinued operations and (ix) interest actually paid by the Company or any of
its Restricted Subsidiaries under any guarantee of Indebtedness or any other
obligation of any other person.
Adjusted Consolidated Net Income. The term "Adjusted Consolidated Net
Income" means, for any period, the net income (or net loss) of the Company and
its Restricted Subsidiaries determined on a consolidated basis in accordance
with generally accepted accounting principles; provided, however, that there
shall not be included in such Adjusted Consolidated Net Income:
(i) any net income of any person if such person is not a Restricted
Subsidiary, except that (A) the Company's or any Restricted Subsidiary's equity
in the net income of any such person for such period shall be included in such
Adjusted Consolidated Net Income up to the aggregate amount of cash actually
distributed by such person during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (subject, in the case of a
dividend or other distribution to a Restricted Subsidiary, to the limitations
contained in clause (iii) below) and (B) the Company's or any Restricted
Subsidiary's equity in a net loss of any such person for such period shall be
included in determining such Adjusted Consolidated Net Income;
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(ii) any net income of any person acquired by the Company or a
Restricted Subsidiary in a pooling of interests transaction for any period prior
to the date of such acquisition;
(iii) any net income of any Restricted Subsidiary if such Restricted
Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Restricted Subsidiary, directly
or indirectly, to the Company, except that (A) the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Adjusted Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to another Restricted
Subsidiary, to the limitation contained in this clause) and (B) the Company's
equity in a net loss of any such Restricted Subsidiary for such period shall be
included in determining such Adjusted Consolidated Net Income;
(iv) any gain or loss realized upon the sale or other disposition of
any property, plant or equipment of the Company or its Restricted Subsidiaries
(including pursuant to any sale-and-leaseback arrangement), provided, however,
that the exclusion from Adjusted Consolidated Net Income of gains described in
this clause (iv) shall not apply to deferred gains resulting from sale and
leaseback arrangements to the extent that there is an offsetting increase in
depreciation expense resulting from the recapitalization of the related
property, plant or equipment which is not sold or otherwise disposed of in the
ordinary course of business and any gain or loss realized upon the sale or other
disposition of any Capital Stock of any person;
(v) the cumulative effect of a change in accounting principles,
including the cumulative effect of the implementation of SFAS 106 by the Company
with respect to services rendered by employees in periods prior to its
implementation, but excluding any effects of such implementation with respect to
services rendered in periods following such implementation, and excluding any
one-time or cumulative charges associated with the implementation of SFAS 109.
(vi) the cash effect of the rejection of any leases or executory
contracts pursuant to the Plan; and
(vii) the cash effect of the Company's incurring costs (including but
not limited to professional fees) in connection with the Plan in excess of
$5,750,000.
Adjusted Consolidated Net Worth: The term "Adjusted Consolidated Net
Worth" of the Company and its Restricted Subsidiaries means an amount equal to
the total amounts shown on
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the balance sheet of the Company and its Restricted Subsidiaries, as of the date
for which the determination is being made, as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid-in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit, (B) any amounts attributable to
Redeemable Stock, (C) any amounts attributable to Exchangeable Stock, (D) any
amounts attributable to treasury stock and (E) adjustments relating to pension
liabilities, in all cases determined on a consolidated basis in accordance with
generally accepted accounting principles; provided, however, that to the extent
such balance sheet reflects any effects attributable to any one-time or
cumulative charges associated with the implementation of SFAS 106 and 109, or
any changes in accounting principles implemented thereafter, such effect shall
be disregarded; provided further, that to the extent such balance sheet reflects
any gain or loss realized upon the sale or other disposition of any property,
plant or equipment of the Company or its restricted subsidiaries after February
28, 1995 upon the sale or other disposition of any Capital Stock of any person,
such gain or loss shall also be disregarded and provided, further, that the cash
effects of the rejection of any leases or executory contracts pursuant to the
Plan and the cash effects of the Company's incurring costs (including but not
limited to professional fees) in connection with the Plan in excess of
$5,750,000 shall also be disregarded.
Adjusted EBITDA: The term "Adjusted EBITDA" means, for any period,
Adjusted Consolidated Net Income plus (to the extent deducted in calculating
Adjusted Consolidated Net Income) Adjusted Consolidated Interest Expense, income
taxes, depreciation expense, amortization expense, non-cash write-offs of
deferred financing costs and non-cash deductions for contributions to the ESOP
(but without giving effect to any extraordinary gain or loss) for such period.
Adjusted Total Capitalization: The term "Adjusted Total
Capitalization" means, without duplication, Adjusted Consolidated Net Worth plus
Indebtedness of the Company and its Restricted Subsidiaries, consolidated in
accordance with generally accepted accounting principles.
Asset Disposition: The term "Asset Disposition" means any sale,
lease, transfer or other disposition (or series of related sales, leases,
transfers or dispositions) of shares of capital stock of a Subsidiary (other
than directors' qualifying shares), property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Company or any of
its Subsidiaries, other than (i) a disposition by a Subsidiary to the Company or
by the Company or a Subsidiary to a wholly owned Subsidiary that is a Restricted
Subsidiary, (ii) a disposition of property or assets at fair market value in the
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ordinary course of business, (iii) a disposition of obsolete or worn out assets
in the ordinary course of business, (iv) a disposition subject to and made in
accordance with the provisions of the Bond Indenture relating to optional
redemptions and redemptions in connection with casualty, condemnation, taxation
and certain other events, or (v) a disposition subject to the provision of the
Bond Indenture relating to Limitations on Restricted Payments.
Available Cash Flow: The term "Available Cash Flow" means, for the
most recent four-quarter period ended prior to the date on which a determination
is being made, Adjusted EBITDA minus (i) cash income taxes paid or payable
during such period and (ii) the amount of Capital Expenditures (other than any
non-cash Capital Expenditures) of the Company and its Restricted Subsidiaries
during such period.
Indebtedness: The term "Indebtedness" of any person means, without
duplication, (a) all indebtedness of such person for borrowed money or for the
deferred purchase price of property or services; (b) except to the extent
supporting Indebtedness of such person (but no other indebtedness) of the type
described in clause (a) above, the face amount of all letters of credit issued
for the account of such person and, without duplication, all drafts drawn
thereunder; (c) all liabilities secured by any lien on any property owned by
such person, whether or not such indebtedness has been assumed; (d) all Capital
Lease Obligations (as defined in the Second Investment Agreement); and (e) all
Contingent Obligations (as defined in the Second Investment Agreement) of such
person.
Net Available Cash: The term "Net Available Cash" from an Asset
Disposition means cash payments received (including any cash payments received
by way of deferred payment of principal pursuant to a note or installment
receivable or otherwise, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring person of
Indebtedness or other obligations relating to such properties or assets or
received in any other non-cash form) therefrom, in each case net of all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state, provincial, foreign and local taxes required
to be accrued as a liability under generally accepted accounting principles, as
a consequence of such Asset Disposition, and in each case net of all payments
made on any Indebtedness which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law be repaid out of the proceeds from such Asset Disposition, and
net of all distributions and other payments required to be made and actually
made to minority interest
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holders in Subsidiaries or joint ventures as a result of such Asset Disposition.
Net Cash: The term "Net Cash" of the Company and its Restricted
Subsidiaries on a consolidated basis means, as of any date, the amount shown on
the consolidated balance sheet of the Company and its Restricted Subsidiaries as
cash as of such date (but not including cash held in accounts or deposits that
are subject to any lien, encumbrances or restrictions or which is required to be
held in connection with any agreements or obligations), computed in accordance
with generally accepted accounting principles, plus the total amount of cash
payments which the Company has made as of the date of computation for redemption
or prepayment of Series A Bonds pursuant to redemptions without payment of
premium described above (other than the redemption of $10 million of Series A
Bonds pursuant to the Restructuring) minus the amount of Indebtedness
outstanding on such date under the Bank Credit Agreement (or any Indebtedness
issued in any refinancing, refunding, replacement, extension or restructuring
thereof), other than any Indebtedness representing undrawn amounts under letters
of credit under the Bank Credit Agreement (or any Indebtedness issued in any
refinancing, refunding, replacement, extension or restructuring thereof) not in
excess of $10.0 million in the aggregate; provided, however, that Net Cash shall
not be less than zero.
Pro Forma Debt Service: The term "Pro Forma Debt Service" for any
period, means the sum of (i) Adjusted Consolidated Interest Expense (excluding
any non-cash items included in Adjusted Consolidated Interest Expense to the
extent no current liability exists with respect thereto) that would be payable
during such period by the Company and its Restricted Subsidiaries assuming (x)
that all Indebtedness outstanding on the last day of the quarter prior to the
period for which the determination is being made were outstanding throughout
such period (other than scheduled payments of principal to the extent included
in clause (ii) below), and (y) that, with respect to any floating rate or other
Indebtedness, the interest rate in effect on the date of such determination were
in effect throughout such period, but giving effect to any scheduled increase or
decrease in interest rate that is ascertainable on the date of determination,
and (ii) the amount of principal payments payable during such period (and any
interest payable during such period on such principal amounts to the extent not
included in clause (i) above) on all Indebtedness of the Company and its
Restricted Subsidiaries, in each case consolidated in accordance with generally
accepted accounting principles.
Senior Debt: The term "Senior Debt" means all Indebtedness of the
Company and its Restricted Subsidiaries, consolidated in accordance with
generally accepted accounting principles, other than Subordinated Debt.
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Subordinated Debt: The term "Subordinated Debt" means the 15% Senior
Subordinated Debentures due 2007, the Notes, and any other unsecured
Indebtedness for money borrowed of the Company which (i) on the date on which
the status of such Indebtedness is determined for any purpose hereof (1) has a
final maturity not earlier than September 1, 2005, and (2) is not subject to
payment, redemption or other retirement by means of any installment, sinking
fund, serial maturity or other required payments prior to September 1, 2005 and
(ii) is issued or assumed pursuant to, or evidenced by, an indenture or other
instrument that contains provisions for the subordination of such Indebtedness
(to which appropriate reference shall be made in the instruments evidencing such
Indebtedness if not contained therein) to the Series A Bonds and the Series B
Bonds (and, at the option of the Company, if so provided, to other Indebtedness
of the Company, either generally or as specifically designated) as specified in
the Second Investment Agreement.
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DESCRIPTION OF SENIOR SUBORDINATED NOTES
The Notes are to be issued under the Note Indenture, to be dated as of
the Effective Date, between the Company and United States Trust Company of New
York, as trustee (the "Note Trustee"), which will govern the terms of the
Notes. The terms of the Note Indenture are also governed by certain provisions
of the Trust Indenture Act of 1939, as amended. The following summary, which
describes certain provisions of the Note Indenture, does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Note Indenture, including the definitions therein of terms not defined in
this Prospectus. A copy of the Note Indenture has been filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. Certain
important definitions used in the Note Indenture are included below under
"Certain Definitions."
The Notes will be transferable and exchangeable at the office of the
Note Trustee and will be issued in fully registered form, without coupons, in a
minimum denomination of $50,000 and such greater denominations as are whole
multiples of $100,000.
The Company has no sinking fund obligations with respect to the Notes.
Interest on the Notes will be computed on the basis of a 360-day year
of twelve 30-day months. Principal and interest will be payable at the office
of the Note Trustee, but, at the option of the Company, interest may be paid by
check mailed to the registered holders of the Notes (the "Holders") at their
registered addresses. The Company is required to pay interest on overdue
principal and (to the extent permitted by law) on overdue installments of
interest at the rate specified in the Note Indenture.
TERMS OF THE NOTES
The Notes will be unsecured, subordinated obligations of the Company,
will be limited in aggregate principal amount to $120.0 million, and will mature
on May 1, 2008. Interest will accrue on the Notes from the date of issuance, or
from the most recent Interest Payment Date to which interest has been paid or
provided for, and will be payable in cash semiannually on May 1 and November 1
of each year, commencing November 1, 1996, at the rate of __% per annum of the
principal amount at maturity of the Notes to Holders of record at the close of
business on the April 15 or October 15 immediately preceding the interest
Payment Date.
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OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in
part, at any time and from time to time on or after May 1, 2001 upon not less
than 30 nor more than 60 days' prior written notice mailed by first-class mail
to each Holder's registered address, at the following redemption prices
(expressed in percentages of principal amount), plus accrued and unpaid interest
to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant Interest Payment
Date), if redeemed during the 12-month period commencing on or after May 1 of
the years set forth below:
<TABLE>
<CAPTION>
Redemption
Period Price
- ---------------------------- ------------------------
<S> <C>
2001 ....................... %
2002 .......................
2003 and thereafter ........ 100.000
</TABLE>
In addition, at any time and from time to time prior to May 1, 1999,
the Company may redeem in the aggregate up to 35% of the original principal
amount of the Notes with the proceeds of one or more Public Equity Offerings, at
a redemption price (expressed as a percentage of principal amount) of __% plus
accrued and unpaid interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date).
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Note Trustee on a pro rata basis, by lot or by
such other method as the Note Trustee in its sole discretion shall deem to be
fair and appropriate, although no Note of $1,000 in principal amount or less
shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating 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.
The Company's Senior Debt agreements may substantially restrict the
ability of the Company to redeem or otherwise make payments in respect of
principal on the Notes prior to the maturity thereof. See "Debt of the
Company."
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RANKING
The Debt evidenced by the Notes constitutes Senior Subordinated Debt
of the Company, and will rank pari passu with all existing or future Senior
Subordinated Debt of the Company and senior to all existing and future
subordinated Debt of the Company. The payment of the principal of and premium,
if any, and interest on the Notes will, to the extent set forth in the Note
Indenture, be subordinated in right of payment to the prior payment in full, in
cash or cash equivalents, of all amounts payable under Senior Debt, including,
without limitation, the Company's obligations under the Bank Credit Agreement,
the Bond Indenture and the Second Investment Agreement (including any interest
accruing subsequent to a bankruptcy event specified in the Note Indenture,
whether or not such interest is an allowed claim enforceable against the debtor
under the United States Bankruptcy Code). As of November 30, 1995, the Company
had approximately $349.5 million of Senior Debt outstanding. The Company's
obligations under the Bank Credit Agreement and the First Mortgage Bonds are
secured by first priority liens on substantially all of the Company's assets.
The Note Indenture does not limit the Company's right to incur additional Senior
Debt, if such incurrence is otherwise permitted by the covenant governing the
incurrence of Debt generally.
No direct or indirect payment by or on behalf of the Company on
account of principal of, interest on and premium, if any, and penalties and fees
("Other Subordinated Obligations") with respect to the Notes, whether pursuant
to the terms of the Notes or upon acceleration or otherwise, and no payment to
acquire, repurchase, retire, redeem or defease any of the Notes shall be made
if, at the time of such payment, there exists a default in the payment of all or
any portion of any Senior Debt, and such default shall not have been cured or
waived or the benefits of this sentence waived by or on behalf of the holders of
such Senior Debt. In addition, during the continuance of any other event of
default with respect to the Bank Credit Agreement, the First Mortgage Bonds, the
Second Investment Agreement or other Senior Debt pursuant to which the maturity
thereof may be accelerated, and (i) upon receipt by the Note Trustee of written
notice from any holder or holders (or representatives thereof) of such Senior
Debt in the aggregate principal amount of $10 million, or (ii) if such event of
default under the Bank Credit Agreement, the First Mortgage Bonds, the Second
Investment Agreement or other Senior Debt results from the acceleration of the
Notes, from and after the date of such acceleration or notice, no payment of
principal of, interest on, and Other Subordinated Obligations with respect to
the Notes may be made by or on behalf of the Company upon or in respect of the
Notes for a period (a "Payment Blockage Period") commencing on the earlier of
the date of receipt of such notice or the date of such acceleration and ending
179 days thereafter (unless such Payment
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Blockage Period shall be terminated by written notice to the Note Trustee from
the relevant entity giving notice commencing the payment Blockage Period or such
event of default has been cured or waived or by repayment in full of cash or
cash equivalents of such Senior Debt). Not more than one Payment Blockage
Period may be commenced with respect to the Notes during any period of 360
consecutive days. Notwithstanding anything in the Indenture to the contrary,
there must be 180 consecutive days in any 360-day period in which no Payment
Blockage Period is in effect. No event of default (other than an event of
default pursuant to the financial maintenance covenants under the Bank Credit
Agreement, the Bond Indenture or the Second Investment Agreement) that existed
or was continuing (it being acknowledged that any subsequent action that would
give rise to any event of default pursuant to any provision under which an event
of default previously existed or was continuing shall constitute a new event of
default for this purpose) on the date of the commencement of any Payment
Blockage Period with respect to the Bank Credit Agreement, the First Mortgage
Bonds, the Second Investment Agreement or other Senior Debt initiating such
Payment Blockage period shall be, or shall be made, the basis for the
commencement of a second Payment Blockage Period by the representative for, or
the holders of, such Senior Debt, whether or not within a period of 360
consecutive days, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days.
Upon any payment or distribution of assets or securities of the
Company, as the case may be, of any kind or character, whether in cash, property
or securities, upon any dissolution or winding up or total or partial
liquidation or reorganization of the Company, whether voluntary or involuntary,
or in bankruptcy, insolvency, receivership or other proceedings, all amounts due
or to become due upon all Senior Debt (including any interest accruing
subsequent to a bankruptcy event specified in the Note Indenture, whether or not
such interest is an allowed claim enforceable against the debtor under the
United States Bankruptcy Code) shall first be paid in full, in cash or cash
equivalents, before the Holders or the Note Trustee on behalf of the Holders
shall be entitled to receive any payment by or on behalf of the Company on
account of principal of, interest on, or any payment to acquire, repurchase,
retire, redeem or defease any of the Notes for cash, property or securities, or
any distribution with respect to the Notes of any cash, property or securities.
Before any payment may be made by, or on behalf of, the Company on account of
principal of, interest on, and Other Subordinated Obligations with respect to
the Notes upon any such dissolution, winding up, liquidation or reorganization,
any payment or distribution of assets or securities of the Company or any kind
or character, whether in cash, property or securities, to which the Holders or
the Note Trustee on behalf of the Holders would be entitled, but for the
subordination provisions of the
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Note Indenture, shall be made by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other similar Person making such
payment or distribution, or by the Holders or the Note Trustee if received by
them or it, directly to the holders of Senior Debt (pro rata to such holders on
the basis of the respective amounts of Senior Debt held by such holders) or
their representatives, or to any trustee or trustees under any other indenture
pursuant to which any such Senior Debt may have been issued, as their respective
interests appear, to the extent necessary to pay all such Senior Debt in full,
in cash or cash equivalents, after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of such Senior Debt.
By reason of such subordination, in the event of insolvency, creditors
of the Company who are holders of Senior Debt may recover more, ratably, than
Holders of the Notes.
CHANGE OF CONTROL
Upon the occurrence of any of the following events each Holder of
Notes will have the right to require the Company to repurchase all or any part
of such Holder's Notes at a repurchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment date): (i) prior
to the earlier to occur of (A) the first public offering (which shall mean the
sale of shares of common stock of the relevant entity pursuant to an effective
registration statement under the Securities Act that covers (together with any
such prior effective registrations) not less than 25% of the outstanding shares
of common stock of such entity on a fully diluted basis after giving effect to
all such registrations) of common stock of Parent or (B) the first public
offering of common stock of the Company, the Permitted Holders cease to be 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 a
majority in the aggregate of the total voting power of the Voting Stock of the
Company, whether as a result of issuance of securities of the Company, any
merger, consolidation, liquidation or dissolution of the Company, any direct or
indirect transfer of securities by Parent or otherwise (for purposes of this
clause (i) and clause (ii) below, the Permitted Holders shall be deemed to
beneficially own any Voting Stock of a corporation (the "specified corporation")
held by any other corporation (the "parent corporation") so long as the
Permitted Holders beneficially own (as so defined), directly or indirectly, in
the aggregate a majority of the voting power of the Voting Stock of
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the parent corporation); (ii) any "Person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders,
is or becomes the beneficial owner (as defined in clause (i) above), directly or
indirectly, of more than 30% of the total voting power of the Voting Stock of
the Company; provided, however, that the Permitted Holders beneficially own (as
so defined), directly or indirectly, in the aggregate a lesser percentage of the
total voting power of the Voting Stock of the Company than such other Person and
do not have the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the Board of Directors of the Company
(for the purposes of this clause (ii), such other Person shall be deemed to
beneficially own any Voting Stock of a specified corporation held by a parent
corporation, if such other Person "beneficially owns" (as so defined), directly
or indirectly, more than 30% of the voting power of the Voting Stock of such
parent corporation and the Permitted Holders "beneficially own" (as so defined),
directly or indirectly, in the aggregate a lesser percentage of the voting power
of the Voting Stock of such parent corporation and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of such parent corporation); (iii)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of the Company (together with any
new directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Company was approved by a vote of 66 2/3% of
the directors of the Company then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (iv) the Company
consolidates with or merges with or into any other Person or conveys, transfers
or leases all or substantially all of its assets to any Person or any Person
consolidates with or merges into the Company, in either event pursuant to a
transaction in which either (A) the outstanding Voting Stock of the Company is
changed into or exchanged for cash, securities or other property (excluding,
however, any such transaction where the outstanding Voting Stock of the Company
is changed into or exchanged for Voting Stock of the surviving or transferee
corporation which is neither Redeemable Stock nor Exchangeable Stock) or (B) the
holders of the Voting Stock of the Company immediately prior to such
transaction, together with Kelso and Affiliates of Kelso which are either
controlled by or under common control with Kelso, own, directly or indirectly,
in the aggregate, less than 50.01% of the Voting Stock of the surviving Person
immediately after such transaction.
Clause (iv) of the definition of Change of Control set forth above
includes a conveyance, transfer or lease of all or "substantially all" of the
Company's assets. Although there is a
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developing body of case law interpreting the phrase "substantially all," there
is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a transfer or lease of the Company's assets
to another Person may be uncertain. In addition, if the Company merges or
consolidates with or into another entity controlled by Kelso, the Holders of
Notes may not be able to require the Company to repurchase such Notes.
Within 30 days following any Change of Control, the Company will mail
a notice to each Holder of Notes with a copy to the Note Trustee stating (i)
that a Change of Control has occurred and that such Holder has the right to
require the Company to repurchase all or any part of such Holder's Notes at a
repurchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of repurchase (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date); (ii) the circumstances and relevant
facts regarding such Change of Control (including, but not limited to,
information with respect to pro forma historical income, cash flow and
capitalization after giving effect to such Change of Control); (iii) the
repurchase date (which will be no earlier than 30 days nor later than 60 days
from the date such notice is mailed); and (iv) the instructions determined by
the Company, consistent with the Note Indenture, that a Holder must follow in
order to have its Notes repurchased.
The Change of Control provisions of the Notes may in certain
circumstances make more difficult or discourage a takeover of the Company and,
thus, the removal of incumbent management. Subject to the limitations discussed
below, the Company could, in the future, enter into certain transactions,
including acquisitions, refinancings or other recapitalizations, that would not
constitute a Change of Control under the Note Indenture, but that could increase
the amount of indebtedness outstanding at such time or otherwise affect the
Company's capital structure or credit ratings.
The occurrence of certain of the events which would constitute a
Change of Control also would constitute a default under certain of the Company's
other existing indebtedness. In addition, the exercise by the Holders of their
right to require the Company to repurchase the Notes could cause a default under
such indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. The Company's ability to
pay cash to the Holders of Notes upon a repurchase may also be limited by the
Company's then existing financial resources. Finally, the fact that a
transaction would constitute a Change of Control as defined does not mean that
the transaction would be permitted under the Note Indenture unless
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the transaction would be otherwise permissible under the Note Indenture.
The Company will comply with any tender offer rules under the Exchange
Act which may then be applicable, including Rule 14e-1, in connection with any
offer required to be made by the Company to repurchase the Notes as a result of
a Change of Control.
The provisions relative to the Company's obligation to make an offer
to repurchase the Notes as a result of a Change of Control may be waived or
modified with the written consent of the Holders of a majority in principal
amount of the Notes.
CERTAIN COVENANTS
Set forth below are certain covenants contained in the Note Indenture
relating to the Notes:
Limitation on Senior Subordinated Debt
The Company shall not issue, directly or indirectly, any Debt that is
expressly subordinate in right of payment to any Senior Debt unless such Debt is
expressly made pari passu with, or subordinate in right of payment to, the
Notes.
Limitation on Debt
The Company shall not issue, directly or indirectly, any Debt unless
the Consolidated EBITDA Coverage Ratio (as shown by a consolidated pro forma
income statement of the Company and its consolidated Subsidiaries for the
Reference Period after giving effect to (i) the issuance of such Debt and (if
applicable) the application of the net proceeds thereof to refinance other Debt
as if such Debt was issued and the application of such proceeds occurred at the
beginning of the Reference Period, (ii) the issuance and retirement of any other
Debt since the last day of the most recent fiscal quarter covered by such income
statement as if such Debt was issued or retired at the beginning of the
Reference Period and (iii) the acquisition or disposition of any company or
business acquired or disposed of by the Company since the first day of the
Reference Period, including any acquisition or disposition which will be
consummated substantially contemporaneously with the issuance of such Debt, as
if such acquisition or disposition occurred at the beginning of the Reference
Period) exceeds 1.75:1 for the Reference Period.
Notwithstanding the foregoing, the Company may issue the following
Debt: (1) Debt issued as working capital and letter of credit financing in an
aggregate principal amount outstanding at any time not to exceed the greater of
(i) the sum
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of (A) 85% of the book value of the net trade receivables of the Company and its
Subsidiaries and (B) $10.0 million or (ii) up to $27.5 million of Debt incurred
pursuant to the terms of the Bank Credit Agreement and Debt issued in exchange
for, or the proceeds of which are used to refund or refinance, the Debt
permitted by this clause (ii); (2) Debt owed to and held by a Wholly Owned
Subsidiary; provided, however, that any subsequent issuance or transfer of any
Capital Stock which results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any transfer of such Debt (other than to a Wholly
Owned Subsidiary) shall be deemed, in each case, to constitute the issuance of
such Debt by the Company; (3) the Notes and Debt issued in exchange for, or the
proceeds of which are used to refund or refinance, any Debt permitted by this
clause (3), including reasonable fees, expenses, premiums and defeasance costs
incurred in connection with such refunding or refinancing; provided, however,
that (i) the principal amount of the Debt so issued shall not exceed the
principal amount of the Debt so exchanged, refunded or refinanced (plus
reasonable fees, expenses, premiums and defeasance costs incurred in connection
with such refunding or refinancing) and (ii) the Debt so issued (A) shall not
mature prior to the Stated Maturity of the Debt so exchanged, refunded or
refinanced and (B) shall have an Average Life equal to or greater than the
remaining Average Life of the Debt so exchanged, refunded or refinanced; (4)
Debt (other than Debt described in clause (1), (2) or (3) of this paragraph)
outstanding on the date on which the Notes are originally issued and Debt issued
in exchange for, or the proceeds of which are used to refund or refinance, any
Debt permitted by this clause (4), including reasonable fees, expenses, premiums
and defeasance costs incurred in connection with such exchange, refunding or
refinancing; provided, however, that (i) the principal amount of the Debt so
issued shall not exceed the principal amount of the Debt so exchanged, refunded
or refinanced (plus reasonable fees, expenses, premiums and defeasance costs
incurred in connection with such refunding or refinancing) and (ii) the Debt so
issued (A) shall not mature prior to the Stated Maturity of the Debt so
exchanged, refunded or refinanced, (B) shall have an Average Life equal to or
greater than the remaining Average Life of the Debt so exchanged, refunded or
refinanced and (C) shall be subordinate in right of payment to the Notes if the
Debt so exchanged, refunded or refinanced is so subordinated; and (5) Purchase
Money Debt, provided, however, that the aggregate amount of Purchase Money Debt
may not exceed $25 million; (6) Non-Recourse Debt of a Non-Recourse Subsidiary
issued after the date of original issuance of the Notes to finance the
acquisition of assets by such Non-Recourse Subsidiary or to provide working
capital for such Non-Recourse Subsidiary and any Non-Recourse Debt of a
Non-Recourse Subsidiary issued in exchange for, or the proceeds of which are
used to refund or refinance, any Non-Recourse Debt permitted by this clause (6),
including reasonable fees, expenses, premiums and defeasance costs incurred in
connection with such exchange, refunding or refinancing; provided, however, that
(i) the principal amount of the Non-Recourse Debt issued in exchange for, or the
proceeds of which are used to refund or refinance, any Non-Recourse Debt shall
not exceed the principal amount of the Debt so exchanged, refunded or refinanced
(plus reasonable fees, expenses, premiums and defeasance costs incurred in
connection with such refunding or refinancing), and (ii) if any such Debt
thereafter ceases to be Non-Recourse Debt of a Non-Recourse Subsidiary, then
such event will be deemed to constitute the issuance of such Debt by the issuer
thereof; and (7) Debt in an aggregate principal amount which, together with all
other Debt of the Company then outstanding (other than Debt permitted by clauses
(1) through (6) of this paragraph) does not exceed the greater of: (i) $25
million and (ii) 5% of Consolidated Net Tangible Assets as of the end of the
most recent fiscal quarter of the Company ending not less than 45 days from the
date of determination.
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Limitation on Subsidiary Debt and Preferred Stock
The Company shall not permit any Subsidiary to issue, directly or
indirectly any Debt or Preferred Stock, except: (1) Debt or Preferred Stock
issued to and held by the Company or a Wholly Owned Subsidiary; provided,
however, that (i) any subsequent issuance or transfer of any Capital Stock which
results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or (ii) any subsequent transfer of such Debt or Preferred Stock
(other than to the Company or a Wholly Owned Subsidiary) shall be deemed, in
each case, to constitute the issuance of such Debt or Preferred Stock by the
issuer thereof; (2) Debt or Preferred Stock of a Subsidiary issued and
outstanding on or prior to the date on which such Subsidiary was acquired by the
Company (other than Debt or Preferred Stock issued as consideration in, or to
provide all or any portion of the funds utilized to consummate, the transaction
or series of related transactions pursuant to which such Subsidiary became a
Subsidiary or was acquired by the Company); (3) Debt or Preferred Stock issued
and outstanding on or prior to the date on which the Notes are originally
issued, other than Debt or Preferred Stock described in clause (1) or (2) of
this paragraph; (4) Non-Recourse Debt of a Non-Recourse Subsidiary issued after
the date of the Note Indenture to finance the acquisition of assets after such
date; and (5) Debt or Preferred Stock issued in exchange for, or the proceeds of
which are used to refund or refinance, Debt or Preferred Stock referred to in
clause (2) or (3) of this paragraph, including reasonable fees, expenses,
premiums, and defeasance costs incurred in connection with such refunding or
refinancing; provided, however, that (i) the principal amount of such Debt or
the liquidation value of such Preferred Stock so issued shall not exceed the
principal amount or liquidation value of the Debt or Preferred Stock so
exchanged, refunded or refinanced (plus reasonable fees, expenses, premiums and
defeasance costs incurred in connection with such refunding or refinancing);
(ii) the Debt or Preferred Stock so issued (A) shall have a Stated Maturity
later than the Stated Maturity of the Debt or final redemption date (if any) of
the Preferred Stock being exchanged, refunded or refinanced and (B) shall have
an Average Life equal to or greater than the remaining Average Life of the Debt
or Preferred Stock being exchanged, refunded or refinanced; (iii) the Debt so
issued shall be subordinate in right of payment to the Notes if the Debt so
exchanged, refunded or refinanced is so subordinated; and (iv) Debt may not be
issued in exchange for, and the proceeds of such Debt may not be used to refund
or refinance, Preferred Stock.
Limitation on Restricted Payments
The Company shall not, and shall not permit any Subsidiary, directly
or indirectly, to (i) declare or pay any dividend or make any distribution on or
in respect of its Capital
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Stock (including any distribution in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of its Capital Stock
(except dividends or distributions payable solely in its Non-Convertible Capital
Stock or in options, warrants or other rights to purchase its Non-Convertible
Capital Stock and except dividends or distributions payable to the Company or a
Subsidiary), (ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or of any direct or indirect Parent of the Company,
(iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment any Subordinated Obligations (other than the purchase, repurchase
or other acquisition of Subordinated Obligations purchased in anticipation of
and used for satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition), or
(iv) make any Investment in an Affiliate of the Company, other than a Subsidiary
that is not a Non-Recourse Subsidiary or a person which will become a Subsidiary
that is not a Non-Recourse Subsidiary as a result of any such Investment (any
such dividend, distribution, purchase, redemption, repurchase, defeasance, other
acquisition, retirement or Investment being hereinafter referred to as a
"Restricted Payment") if at the time the Company or such Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); (2) the Company is not able to issue $1.00 of
additional Debt in accordance with the provisions of the first paragraph under
"Limitation on Debt" above; or (3) the aggregate amount of such Restricted
Payment and all other Restricted Payments since the date on which the Notes are
issued would exceed the sum of: (a) 50% of the Consolidated Net Income accrued
during the period (treated as one accounting period) from the date of issuance
of the Notes, to the end of the most recent fiscal quarter ending at least 45
days prior to the date of such Restricted Payment (or, in case such Consolidated
Net Income shall be a deficit, minus 100% of such deficit), minus 100% of the
amount of any write-downs, write-offs, other negative revaluations and other
negative extraordinary charges not otherwise reflected in Consolidated Net
Income during such period; (b) the aggregate Net Cash Proceeds received by the
Company from the issuance or sale of its Capital Stock (other than Redeemable
Stock or Exchangeable Stock) subsequent to the date on which the Notes are
originally issued (other than an issuance or sale to a Subsidiary or an employee
stock ownership plan); (c) the aggregate Net Cash Proceeds received by the
Company from the issue or sale of its Capital Stock (other than Redeemable Stock
or Exchangeable Stock) to an employee stock ownership plan subsequent to the
date of issuance of the Notes, but (if such employee stock ownership plan incurs
any Debt) only to the extent that any such proceeds are equal to any increase in
the Consolidated Net Worth of the Company resulting from principal repayments
made by such employee
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stock ownership plan with respect to Debt incurred by it to finance the purchase
of such Capital Stock; and (d) the amount by which Debt of the Company is
reduced on the Company's balance sheet upon the conversion or exchange (other
than by a Subsidiary) subsequent to the date on which the Notes are issued of
any Debt of the Company convertible or exchangeable for Capital Stock (other
than Redeemable Stock or Exchangeable Stock) of the Company (less the amount of
any cash, or other property, distributed by the Company upon such conversion or
exchange).
The restrictions described in the preceding paragraph will not
prohibit (i) any purchase or redemption of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of the Company (other than
Redeemable Stock or Exchangeable Stock and other than Capital Stock issued or
sold to a Subsidiary or an employee stock ownership plan); and (A) such purchase
or redemption shall be excluded in the calculation of the amount of Restricted
Payments made since the date on which the Notes are issued and (B) the Net Cash
Proceeds from such sale shall be excluded from clauses 3(b) and 3(c) of the
previous paragraph; (ii) any purchase or redemption of Subordinated Obligations
of the Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, other Subordinated Obligations of the Company; and such
purchase or redemption, shall be excluded in the calculation of the amount of
Restricted Payments made since the date on which the Notes are issued; (iii) any
purchase or redemption of Subordinated Obligations from Net Available Cash to
the extent permitted under "Limitation on Sales of Assets and Subsidiary Stock"
below; and such purchase or redemption shall be excluded in the calculation of
the amount of Restricted Payments made since the date on which the Notes are
issued; (iv) dividends paid within 60 days after the date of declaration thereof
if at such date of declaration such dividends would have complied with this
covenant; provided, however, that (A) at the time of payment of such dividends,
no other Default shall have occurred and be continuing (or result therefrom);
and (B) such dividends shall be included in the calculation of the amount of
Restricted Payments made since the date on which the Notes are originally
issued; (v) any repurchase of capital stock of the Company after the date of
issuance of the Notes pursuant to the terms of the Stockholders' Agreement from
officers and employees (or their estates) of the Company or its Subsidiaries
upon death, disability or termination of employment of such officers and
employees; provided, however, that (A) the aggregate amount of all such
repurchases (excluding repurchases made with proceeds of life insurance policies
maintained by the Company on such employees or officers) in any fiscal year
shall not exceed $500,000; (B) to the extent that the aggregate amount of such
repurchases (excluding repurchases made with proceeds of life insurance policies
maintained by the Company on such employees or officers) in any fiscal year is
less than $500,000,
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the difference between $500,000 and such amount may be carried forward and
applied to repurchases in subsequent fiscal years; and (C) all such repurchases
(other than repurchases made with proceeds of life insurance policies maintained
by the Company on such employees or officers) shall be included in the
calculation of the amount of Restricted Payments made since the date on which
the Notes are originally issued; (vi) cash dividends paid after the date of
issuance of the Notes with respect to the ESOP Preferred Stock; provided,
however, that (A) the aggregate amount of all such dividends paid in any fiscal
year shall not exceed $500,000; (B) to the extent that the aggregate amount of
such dividends paid in any fiscal year is less than $500,000, the difference
between $500,000 and such amount may be carried forward and applied to the
payment of such dividends in subsequent fiscal years; and (C) all such dividends
shall be included in the calculation of the amount of Restricted Payments made
since the date on which the Notes are issued; (vii) Investments in Non-Recourse
Subsidiaries not to exceed $5.0 million outstanding at any one time during the
term of the Note Indenture; and all such Investments shall be excluded in the
calculation of the amount of Restricted Payments made since the date on which
the Notes are originally issued; or (viii) Restricted Payments not to exceed
$5.0 million in the aggregate during the term of the Note Indenture; and such
Restricted Payments shall be included in the calculation of the amount of
Restricted Payments made since the date on which the Notes are issued.
Limitation on Restrictions on Distributions From Subsidiaries
The Company shall not, and shall not permit any Subsidiary to, create
or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary to (i) pay dividends
or make any other distributions on its Capital Stock or pay any Debt or other
obligation owed to the Company or any Subsidiary, (ii) make any loans or
advances to the Company or any Subsidiary or (iii) transfer any of its property
or assets to the Company or any Subsidiary, in each case except: (1) any
encumbrance or restriction pursuant to an agreement in effect on the date of the
Note Indenture; (2) any encumbrance or restriction with respect to a Subsidiary
pursuant to an agreement relating to any Debt issued by such Subsidiary on or
prior to the date on which such Subsidiary became a Subsidiary or was acquired
by the Company (other than Debt issued as consideration in, or to provide all or
any portion of the funds utilized to consummate, the transaction or series of
related transactions pursuant to which such Subsidiary became a Subsidiary or
was acquired by the Company) and outstanding on such date; (3) any encumbrance
or restriction pursuant to an agreement effecting a refinancing of Debt issued
pursuant to an agreement referred to in clause (1) or (2) of this paragraph;
provided, however, that the encumbrances and
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restrictions contained in any such refinancing agreement are no less favorable
to the Holders of the Notes than the encumbrances and restrictions contained in
the agreements being refinanced; (4) any such encumbrance or restriction
consisting of customary nonassignment provisions in leases governing leasehold
interests to the extent such provisions restrict the transfer of the lease; (5)
restrictions contained in security agreements securing Debt of a Subsidiary to
the extent such restrictions restrict the transfer of the property subject to
such security agreements and (6) any such encumbrance or restriction relating to
a Non-Recourse Subsidiary.
Limitation on Sales of Assets and Subsidiary Stock
The Company shall not, and shall not permit any Subsidiary to, make
any Asset Disposition unless (i) the Company or such Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value, as determined in good faith by the Board of Directors (including a
determination as to the value of all non-cash consideration), of the shares and
assets subject to such Asset Disposition, and at least 90% of the consideration
therefor received by the Company or such Subsidiary is in the form of cash or
cash equivalents and (ii) an amount equal to 100% of the Net Available Cash from
such Asset Disposition is applied by the Company (or such Subsidiary, as the
case may be) either (A) to the extent the Company elects (or is required by the
terms of any Senior Debt), to redeem, prepay, repay or purchase Senior Debt or
Debt of a Wholly Owned Subsidiary to the extent the asset disposed of was
previously held by such Wholly Owned Subsidiary (in each case other than Debt
owed to the Company or an Affiliate of the Company) within 60 days from the
later of the date of such Asset Disposition or the receipt of such Net Available
Cash; or (B) to the extent of Net Available Cash not so applied in accordance
with clause (A), to the acquisition by the Company or any Wholly Owned
Subsidiary of Tangible Property of a nature or type or that is used in a
business (or in a company having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the Tangible
Property of, or the business of, the Company and its Subsidiaries existing on
the date of such acquisition (as determined by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution); and (C)
to the extent there is Net Available Cash after application in accordance with
clauses (A) and (B), to make an Offer (as defined below) to purchase Notes
pursuant to and subject to the conditions of the following paragraph and to
effect any Offer accepted, in each case within one year from the later of the
receipt of such Net Available Cash and the date the Offer described in the
following paragraph is consummated; provided, however, that in connection with
any redemption, prepayment, repayment or purchase of Debt pursuant to clause (A)
above, the Company shall cause the related loan commitment (if
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any) to be permanently reduced in an amount equal to the principal amount so
redeemed, prepaid, repaid or purchased. Notwithstanding the foregoing
provisions of this paragraph, the Company and its Subsidiaries shall only be
required to apply any Net Available Cash in accordance with this paragraph to
the extent that the aggregate Net Available Cash from all Asset Dispositions
exceeds $20 million. Pending application of Net Available Cash pursuant to this
paragraph, such Net Available Cash shall be invested in Permitted Investments.
To the extent that there is Net Available Cash remaining after (i) any
elected or required payment of Senior Debt or Debt of a Wholly Owned Subsidiary
as described in clause (ii)(A) of the previous paragraph and (ii) any
acquisition of Tangible Property as described in clause (ii)(B) of the previous
paragraph, the Company will be required to purchase Notes tendered pursuant to
an offer by the Company for the Notes (the "Offer") at a purchase price equal to
the applicable redemption price, plus accrued interest. The Company shall not
be required to make an Offer for Notes pursuant to this paragraph if the Net
Available Cash available therefor (after application of the proceeds as provided
in clauses (ii)(A) and (B) of the previous paragraph) is less than $5.0 million
for any particular Asset Disposition (which lesser amounts shall not be carried
forward for purposes of determining whether an Offer is required with respect to
the Net Available Cash from any subsequent Asset Disposition).
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with this covenant, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the Note Indenture by virtue thereof.
Limitation on Transactions with Affiliates
The Company shall not, and shall not permit any Subsidiary to, conduct
any business or enter into any transaction or series of related transactions
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of the Company or any legal or
beneficial owner of five percent or more of any class of Capital Stock of the
Company or with any Affiliate of such owner (other than a Wholly Owned
Subsidiary of the Company or an employee stock ownership plan for the benefit of
the Company's or a Subsidiary's employees) unless (i) the terms of such
business, transaction or series of transactions are (a) set forth in writing and
(b) as favorable to the Company or such Subsidiary as
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terms that would be obtainable at the time for a comparable transaction or
series of related transactions in arm's-length dealings with an unrelated third
Person and (ii) the Board of Directors has, by resolution, determined in good
faith that such business or transaction or series of related transactions meets
the criteria set forth in (i) above. This paragraph, however, will not prohibit
any dividend or distribution permitted under the covenant described under
"Limitation on Restricted Payments" above.
Securities and Exchange Commission Reports
The Company shall file with the Note Trustee and provide the Holders
of the Notes, within 15 days after it files them with the Commission, copies of
its annual report and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) which the Company is required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding that the
Company may not be required to remain subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall continue to file with
the Commission so long as any Notes remain outstanding and provide the Note
Trustee and Holders of the Notes with such annual reports and such information,
documents and other reports (or copies of such portions of any of the foregoing
as the Commission may by rules and regulations prescribe) which are specified in
Sections 13 and 15(d) of the Exchange Act.
The holders of the Senior Debt are entitled to the benefit of
covenants and other provisions similar to those contained in the Note Indenture,
including, without limitation, those relating to Change of Control, defeasance
and optional redemptions, that in many cases are substantially similar to or
more restrictive than the covenants and other provisions described herein. The
holders of the Senior Debt are also entitled to the benefits of the
subordination provisions of the Note Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person unless: (i)
the resulting, surviving or transferee Person (the "Successor Company") is a
Person organized and existing under the laws of the United States of America,
any state thereof or the District of Columbia and the Successor Company (if not
the Company) expressly assumes by an indenture supplemental to the Note
Indenture, executed and delivered to the Note Trustee, in form satisfactory to
the Note Trustee, all the obligations of the Company under the Notes and the
Note Indenture; (ii) immediately after giving effect to such
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transaction (and treating any Debt which becomes an obligation of the Successor
Company or any Subsidiary as a result of such transaction as having been
incurred by such Successor Company or such Subsidiary at the time of such
transaction), no Default has occurred and is continuing; (iii) immediately after
giving effect to such transaction, the Consolidated EBITDA Coverage Ratio of the
Successor Company is at least 1:1; provided, however, that, if the Consolidated
EBITDA Coverage Ratio of the Company before giving effect to such transaction is
within the range set forth in column (A) below, then the Consolidated EBITDA
Coverage Ratio of the Successor Company, as the case may be, shall be at least
equal to the lesser of (1) the ratio determined by multiplying the percentage
set forth in column (B) below by the Consolidated EBITDA Coverage Ratio prior to
such transaction and (2) the ratio set forth in column C below:
<TABLE>
<CAPTION>
(A) (B) (C)
<S> <C> <C>
1.11:1 to 1.99:1............ 90% 1.50:1
2.00:1 to 2.99:1............ 80% 2.10:1
3.00:1 to 3.99:1............ 70% 2.40:1
4.00:1 or more.............. 60% 2.50:1
</TABLE>
(iv) immediately after giving effect to such transaction, the Successor Company
has Consolidated Net Worth in an amount which is not less than the Consolidated
Net Worth of the Company prior to such transaction; and (v) the Company delivers
to the Note Trustee an officers' certificate and an opinion of counsel, each
stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Note Indenture.
The Successor Company will be the successor to the Company and will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Note Indenture, but the predecessor Company in the case of
a conveyance, transfer or lease will not be released from the obligation to pay
the principal of and interest on the Notes.
DEFAULTS
An Event of Default is defined in the Note Indenture as (i) a default
in the payment of interest on any Notes when due and payable, continued for 30
days, (ii) a default in the payment of the principal of or premium (if any) on
any Notes when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration or otherwise, (iii) the failure by the Company to
comply with its obligations under "Consolidation, Merger and Sale of Assets"
above, (iv) the failure by the Company to comply for 30 days after notice with
any of its covenants or agreements in the Notes or the Note Indenture (other
than those described in clause (i), (ii) or (iii) of this paragraph), (v) Debt
of the Company or any Subsidiary is not paid within any applicable grace period
after final maturity or is accelerated by
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the holders thereof because of a default and the total amount of such Debt
unpaid or accelerated exceeds $5.0 million or its foreign currency equivalent
and such failure continues for 10 days after notice (the "cross acceleration
provision"), (vi) certain events of bankruptcy, insolvency or reorganization of
the Company or a Subsidiary (the "bankruptcy provisions"), or (vii) any judgment
or decree for the payment of money in excess of $5.0 million is rendered against
the Company and is not discharged and either (A) an enforcement proceeding has
been commenced by any creditor upon such judgment or decree or (B) there is a
period of 60 days following such judgment or decree during which such judgment
or decree is not discharged, waived or the execution thereof stayed and, in the
case of (B), such default continues for 10 days after notice (the "judgment
default provision"). However, a default under clause (iv), (v) or (vii)(B)
above will not constitute an Event of Default until the Note Trustee or the
Holders of 25% in principal amount of the outstanding Notes notify the Company
of the default and the Company does not cure such default within the time
specified after receipt of such notice.
Subject to the subordination provisions in the Note Indenture, if an
Event of Default occurs and is continuing, the Note Trustee or the Holders of at
least 25% in principal amount of the outstanding Notes may declare the principal
of and accrued but unpaid interest on all the Notes to be due and payable. Upon
such a declaration, such principal and interest shall be due and payable
immediately. If an Event of Default relating to certain events of bankruptcy,
insolvency or reorganization of the Company occurs and is continuing, the
principal of and interest on all the Notes will automatically become due and
payable, without presentment, demand or other requirements of any kind. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
No Holder of Notes may pursue any remedy with respect to the Note
Indenture or the Notes unless (i) such Holder has previously given the Note
Trustee notice that an Event of Default is continuing, (ii) Holders of at least
25% in principal amount of the outstanding Notes have requested the Note Trustee
to pursue the remedy, (iii) such Holders have offered the Note Trustee
reasonable security or indemnity against any loss, liability or expense, (iv)
the Note Trustee has not complied with such request within 60 days after the
receipt thereof and the offer of security or indemnity and (v) the Holders of a
majority in principal amount of the outstanding Notes have not given the Note
Trustee a direction inconsistent with such request within such 60-day period.
Subject to certain restrictions, the Holders of a majority in principal amount
of the outstanding Notes are given the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Note
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Trustee or of exercising any trust or power conferred on the Note Trustee. The
Note Trustee, however, may refuse to follow any direction that conflicts with
law or the Note Indenture or that the Note Trustee determines is unduly
prejudicial to the rights of any other Holder of Notes or that would involve the
Note Trustee in personal liability.
The Note Indenture provides that if a Default or Event of Default
occurs and is continuing and is known to the Note Trustee, the Note Trustee
shall mail to each Holder of the Notes notice of the Default or Event of Default
within 90 days after it occurs. Except in the case of a Default in the payment
of principal of, premium (if any) or interest on any Notes, the Note Trustee
may, however, withhold notice if and so long as a committee of its trust
officers determines that withholding notice is in the interest of the Holders of
the Notes. In addition, the Company is required to deliver to the Note Trustee,
within 120 days after the end of each fiscal year, an officers' certificate
indicating whether the signers thereof know of any Default or Event of Default
that occurred during the previous year. The Company also is required to deliver
to the Note Trustee, within 30 days after the occurrence thereof, written notice
in the form of an officers' certificate of any event which would constitute
certain Defaults, their status and what action the Company is taking or proposes
to take in respect thereof.
AMENDMENT, SUPPLEMENT, WAIVER
Subject to certain exceptions, the Note Indenture may be amended or
supplemented with the consent of the Holders of a majority in principal amount
of the Notes then outstanding, and any past default or compliance with any
provisions may be waived with the consent of the Holders of a majority in
principal amount of the Notes then outstanding. However, without the consent of
each Holder of outstanding Notes, no amendment may, among other things, (i)
reduce the amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the rate of or extend the time for payment of
interest on any Notes, (iii) reduce the principal of or extend the fixed
maturity of any Notes, (iv) reduce the premium payable upon the redemption of
any Note or change the time at which or circumstances under which any Notes may
or shall be redeemed or repurchased, (v) make any Notes payable in money other
than that stated in the Notes, (vi) impair the right of any Holder of the Notes
to receive payment of principal of and interest on such Holder's Notes on or
after the due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Holder's Notes, (vii) make any change in the
amendment provisions which require each Holder's consent or in the waiver
provisions, or (viii) waive any Default in the payment of principal of or
interest on any Notes.
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Without the consent of any Holder of Notes, the Company and the Note
Trustee may amend or supplement the Note Indenture to cure any ambiguity,
omission, defect or inconsistency, to provide for the assumption by a successor
corporation of the obligations of the Company under the Note Indenture, 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 rights of any
Holder of the Notes.
The consent of the Holders of the Notes is not necessary under the
Note Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Note Indenture becomes effective, the
Company is required to mail to Holders of the Notes a notice briefly describing
such amendment. However, the failure to give such notice to all Holders of the
Notes, or any defect therein, will not impair or affect the validity of the
amendment.
TRANSFER
The Notes will be issued in registered form, and will be transferable
only upon the surrender of the Notes being transferred for registration of
transfer. The Company may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge payable in connection with certain
transfers and exchanges.
DEFEASANCE
Subject to certain covenants in documents governing certain of the
Company's Senior Debt which prohibit certain restricted payments, including
defeasance of the Notes, the Company may terminate all its obligations under the
Notes and the Note Indenture ("legal defeasance") except for certain
obligations, including those respecting the defeasance trust and obligation to
register the transfer or exchange of the Notes, to replace mutilated, destroyed,
lost or stolen Notes and to maintain a registrar and paying agent in respect of
the Notes, and the Company at any time may terminate (a) its obligations under
the covenants described under "Certain Covenants," "Change of Control" and "Use
of Proceeds," and the covenants relating to payment of taxes and other claims,
the corporate existence of the Company's Subsidiaries, and certain obligations
regarding books of record and account, notices and providing information to the
Note Trustee, in each case, as described in the Note Indenture; (b) the
operation of the following default provisions described above under "Defaults":
the provision contained in clause (iv) concerning failure to comply with
covenants (with respect to those covenants being defeased), the cross-
acceleration provision
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contained in clause (v), certain of the bankruptcy provisions contained in
clause (vi) (with respect to any Subsidiary) and the judgment default provision
contained in clause (viii); and (c) the limitations contained in clauses (iii)
and (iv) described above under "Consolidation, Merger and Sale of Assets"
("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding
its prior exercise of its covenant defeasance option. If the Company exercises
its legal defeasance option, payment of the Notes may not be accelerated because
of an Event of Default. If the Company exercises its covenant defeasance
option, payment of the Notes may not be accelerated because of an Event of
Default which is being defeased, as described in the preceding paragraph, or
because of the failure of the Company to comply with clause (iii) or (iv) under
"Consolidation, Merger and Sale of Assets" above.
In order to exercise either defeasance option, the Company must
irrevocably deposit in trust (the "defeasance trust") with the Note Trustee
money or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Notes to the date of redemption or maturity, as the
case may be, and must comply with certain other conditions, including delivering
to the Note Trustee an opinion of counsel to the effect that Holders of the
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such deposit and defeasance and will be subject to federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred (and, in the
case of legal defeasance only, such opinion of counsel must be based on a ruling
of the Internal Revenue Service or a change in applicable federal income tax
law).
CONCERNING THE NOTE TRUSTEE
United States Trust Company of New York is to be the Note Trustee
under the Note Indenture and will be appointed by the Company as Registrar and
Paying Agent with regard to the Notes.
GOVERNING LAW
The Note Indenture provides that it and the Notes will be governed by,
and construed in accordance with, the laws of the State of New York without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
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CERTAIN DEFINITIONS
Certain definitions contained in the Note Indenture are listed below.
AFFILIATE: The term "Affiliate" means with respect to any Person (i)
any other Person (or group of Persons acting in concert in respect of such
specified Person) which, directly or indirectly, is in control of, is controlled
by or is under common control with such specified Person or (ii) any other
Person who is a director, executive officer or general partner (A) of such
specified Person, (B) of any Subsidiary of such specified Person or (C) of any
Person described in clause (i) above. For purposes of this definition, control
of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing; provided, however, that a Person shall not be
deemed to be an Affiliate of another Person solely as a result of a warehouse
management contract entered into between such Persons in the ordinary course of
business.
ASSET DISPOSITION: The term "Asset Disposition" means any sale,
lease, transfer or other disposition (or series of related sales, leases,
transfers or dispositions) of shares of Capital Stock of a Subsidiary (other
than directors' qualifying shares), property or other assets (each referred to
for the purposes of this definition as a "disposition") by the Company or any of
its Subsidiaries, other than (i) a disposition by a Subsidiary to the Company or
by the Company or a Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition
of property or assets at fair market value in the ordinary course of business,
(iii) a disposition of obsolete or worn out assets in the ordinary course of
business, (iv) a disposition subject to and made in accordance with the
redemption provisions described above, (v) a disposition subject to the covenant
described under "Certain Covenants--Limitation on Restricted Payments" above or
(vi) a sale-and-leaseback transaction pursuant to which either (x) the lease in
such sale-and-leaseback transaction is for a period, including renewal rights,
of not in excess of three years or (y) the Company could incur Attributable Debt
under "Certain Covenants--Limitation on Debt" above.
ATTRIBUTABLE DEBT: The term "Attributable Debt" in respect of a sale-
and-leaseback transaction means, as at the time of determination, the present
value (discounted at the interest rate borne by the Series B Bonds compounded
annually) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such arrangement (including any period
for which such lease has been extended).
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AVERAGE LIFE: The term "Average Life" means, as of the date of
determination, with respect to any Debt or Preferred Stock, the quotient
obtained by dividing (i) the sum of the products of the numbers of years from
the date of determination to the dates of each successive scheduled principal
payment of such Debt or redemption payment on such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
CAPITAL LEASE OBLIGATION: The term "Capital Lease Obligation" of a
Person means any obligation which is required to be classified and accounted for
as a capital lease on the face of a balance sheet of such Person prepared in
accordance with generally accepted accounting principles; the amount of such
obligation shall be the capitalized amount thereof, determined in accordance
with generally accepted accounting principles; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty.
CAPITAL STOCK: The term "Capital Stock" means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) corporate stock, including
any Preferred Stock.
CONSOLIDATED EBITDA COVERAGE RATIO: The term "Consolidated EBITDA
Coverage Ratio" as determined on any date means the ratio of (i) the aggregate
amount of Consolidated Net Income plus (to the extent deducted in calculating
Consolidated Net Income) Consolidated Interest Expense, income taxes,
depreciation expense, amortization expense, non-cash write-offs of deferred
financing costs, non-cash deductions for contributions to the ESOP and any
loss realized upon the sale or other disposition of any property, plant or
equipment of the Company or a Subsidiary, including pursuant to any sale or
leaseback arrangement (but without giving any effect to any extraordinary gain
or loss) for the Reference Period to (ii) the aggregate amount of Consolidated
Interest Expense for the Reference Period.
CONSOLIDATED INTEREST EXPENSE: The term "Consolidated Interest
Expense" means, for any period, the total interest expense of the Company and
its consolidated Subsidiaries, including (i) interest expense attributable to
capital leases, (ii) amortization of debt discount and debt issuance cost, (iii)
capitalized interest, (iv) non-cash interest payments, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs under Interest Rate Protection
Agreements (including amortization of fees), (vii) Preferred Stock dividends in
respect of all Preferred Stock held by Persons other than the
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Company or a Wholly Owned Subsidiary, (viii) interest incurred in connection
with investments in discontinued operations and (ix) interest actually paid by
the Company or any of its consolidated Subsidiaries under any guarantee of Debt
or any other obligation of any other Person.
CONSOLIDATED NET INCOME: The term "Consolidated Net Income" means,
for any period, the net income of the Company and its consolidated Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles; provided, however, that there shall not be included in
such Consolidated Net Income:
(i) any net income of any Person if such Person is not a Subsidiary,
except that (A) the Company's equity in the net income of any such Person
for such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such
period to the Company or a Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Subsidiary,
to the limitations contained in clause (iii) below) and (B) the Company's
equity in a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income;
(ii) any net income of any Person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(iii) any net income of any Subsidiary if such Subsidiary is subject
to restrictions, directly or indirectly, on the payment of dividends or the
making of distributions by such Subsidiary, directly or indirectly, to the
Company, except that (A) the Company's equity in the net income of any such
Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Subsidiary during such period to the Company or another Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to another Subsidiary, to the limitation contained in this
clause) and (B) the Company's equity in a net loss of any such Subsidiary
for such period shall be included in determining such Consolidated Net
Income;
(iv) any gain (but not loss) realized upon the sale or other
disposition of any property, plant or equipment of the Company or its
consolidated Subsidiaries (including pursuant to any sale and leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary
course of business and
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any gain (but not loss) realized upon the sale or other disposition of any
Capital Stock of any Person; or
(v) the cumulative non-cash effect of a change in accounting
principles, including (A) the cumulative or one-time non-cash charges
associated with the implementation of SFAS 106 by the Company with respect
to services rendered by employees in periods prior to its implementation,
but excluding any effects of such implementation with respect to services
rendered in periods following such implementation, and (B) any cumulative
or one-time non-cash charges associated with the implementation of SFAS
109.
CONSOLIDATED NET TANGIBLE ASSETS: The term "Consolidated Net Tangible
Assets" means the total assets shown on the balance sheet of the Company and its
consolidated Subsidiaries, determined on a consolidated basis using generally
accepted accounting principles, as of any date selected by the Company not more
than 90 days prior to the taking of any action for the purpose of which the
determination is being made, less (i) all current liabilities and minority
interests and (ii) goodwill and other intangibles.
CONSOLIDATED NET WORTH: The term "Consolidated Net Worth" of any
Person means the total amounts shown on the balance sheet of such Person and its
consolidated Subsidiaries, determined on a consolidated basis in accordance with
generally accepted accounting principles, as of the end of the most recent
fiscal quarter of such Person ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of such Person plus (ii) paid-
in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit, (B) any
amounts attributable to Redeemable Stock and (C) any amounts attributable to
Exchangeable Stock, and excluding amounts attributable to cumulative or onetime
non-cash charges associated with the implementation of SFAS 106 and 109.
DEBT: The term "Debt" of any Person means, without duplication,
(i) all obligations of such Person in respect of (A) indebtedness
for money borrowed and (B) indebtedness evidenced by the Notes, or the
First Mortgage Bonds, the Notes, debentures, bonds or other similar
instruments for the payment of which such person is responsible or liable
including, without limitation (x) all Obligations (as defined in the Bond
Indenture), in respect of money owed under the Bond Indenture (y) interest
accruing subsequent to an event of bankruptcy or reorganization relating to
the Company, whether or not such interest is an allowed claim
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enforceable against the debtor under the United States Bankruptcy Code, and
(z) the fees and expenses of the Institutional Investor payable under the
Second Investment Agreement;
(ii) all Capital Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations of
such Person and all obligations of such Person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business);
(iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit
securing obligations (other than obligations described in (i) through (iii)
above) entered into in the ordinary course of business of such Person to
the extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third
business day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Redeemable Stock or
Exchangeable Stock;
(vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable as obligor,
guarantor or otherwise; provided, however, that to the extent such Person
is responsible or liable only for the obligation of another Person to pay
interest on Debt, then a designated percentage of such interest or the
amount of the underlying Debt, as the case may be, shall be deemed Debt of
the referent Person and the amount of such deemed Debt of the referent
Person shall be equal to the lesser of (A) the aggregate principal amount
of the underlying Debt or (B) the aggregate amount of interest due or
payable over the term of such Debt (or the term of the Notes, if shorter)
determined based upon the rate of interest in effect as of the date of such
determination, together with the maximum prepayment premium or penalty
which could become due or payable with respect to such Debt if such Debt
was prepaid prior to the maturity of the Notes;
(vii) all obligations of the type referred to in clauses (i) through
(vi) of other Persons secured by any
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Lien on any property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the value of such property or assets or the
amount of the obligation so secured; and
(viii) all obligations of such Person consisting of modifications,
renewals, extensions, replacements and refundings of any obligations
described in any of clauses (i) through (vii).
DEFAULT: The term "Default" means any condition or event which
constitutes or which, after notice or lapse of time or both, would constitute an
Event of Default under the Note Indenture.
ESOP: The term "ESOP" means the Company's Employee Stock Ownership
Plan.
ESOP PREFERRED STOCK: The term "ESOP Preferred Stock" means shares of
preferred stock of the Company held by the ESOP.
EXCHANGEABLE STOCK: The term "Exchangeable Stock" means any Capital
Stock which is exchangeable or convertible into another security (other than
Capital Stock of the Company which is neither Exchangeable Stock nor Redeemable
Stock).
HOLDER: The term "Holder" means the Person in whose name Notes is
registered on the Registrar's books.
INTEREST RATE PROTECTION AGREEMENT: The term "Interest Rate
Protection Agreement" means any interest rate swap agreement, interest rate cap
agreement or other financial agreement or arrangement designed to protect the
Company or any Subsidiary against fluctuations in interest rates.
INVESTMENT: The term "Investment" in any Person means any loan or
advance to, any acquisition of Capital Stock, equity interest, obligation or
other security of, or capital contribution or other investment in, such Person.
LIEN: The term "Lien" means any mortgage, pledge, security interest,
conditional sale or other title retention agreement, constructive trust or other
similar lien.
NET AVAILABLE CASH: The term "Net Available Cash" from an Asset
Disposition means cash payments received (including any cash payments received
by way of deferred payment of principal pursuant to a note or installment
receivable or otherwise, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of Debt
or other obligations relating to such properties or assets
115
<PAGE>
or received in any other non-cash form) therefrom, in each case net of all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state, provincial, foreign and local taxes required
to be accrued as a liability under generally accepted accounting principles, as
a consequence of such Asset Disposition, and in each case net of all payments
made on any Debt which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law be repaid out of the proceeds from such Asset Disposition, and
net of all distributions and other payments required to be made and actually
made to minority interest holders in Subsidiaries or joint ventures as a result
of such Asset Disposition.
NET CASH PROCEEDS: The term "Net Cash Proceeds," with respect to any
issuance or sale of Capital Stock, means the cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
actually incurred in connection with such issuance or sale and net of taxes paid
or payable as a result thereof.
NON-CONVERTIBLE CAPITAL STOCK: The term "Non-Convertible Capital
Stock" means, with respect to any corporation, any non-convertible Capital Stock
of such corporation and any Capital Stock of such corporation convertible solely
into non-convertible common stock of such corporation; provided, however, that
Non-Convertible Capital Stock shall not include any Redeemable Stock or
Exchangeable Stock.
NON-RECOURSE DEBT: The term "Non-Recourse Debt" means Debt or that
portion of Debt of a Subsidiary as to which (i) neither the Company nor any
Subsidiary (other than a Non-Recourse Subsidiary) (A) provides credit support,
(B) is directly or indirectly liable or (C) constitutes a lender and (ii) no
default with respect to such Debt (including any right which the holders thereof
may have to take enforcement action against such Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Debt of the Company or
any other Subsidiary to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its Stated Maturity.
NON-RECOURSE SUBSIDIARY: The term "Non-Recourse Subsidiary" means a
Subsidiary (i) which has been organized or acquired after the date of the Note
Indenture, (ii) which has not required any assets (other than (x) cash and (y)
receivables purchased by such Subsidiary for fair market value) directly or
indirectly from the Company or any Subsidiary, (iii) which has no Debt other
than Non-Recourse Debt and (iv) which has been designated as a Non-Recourse
Subsidiary by the Board of Directors of the Company, as provided below. The
Board of Directors of the Company may designate any Subsidiary organized or
acquired after the date of the Note
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<PAGE>
Indenture as a Non-Recourse Subsidiary; provided, however, that, notwithstanding
the foregoing, no Subsidiary as of the date of the Note Indenture shall be
reclassified as a Non-Recourse Subsidiary or become a Subsidiary of a Non-
Recourse Subsidiary. The Note Trustee shall be given prompt notice by the
Company of each resolution adopted by the Board of Directors under this
provision, together with a certified copy of each such resolution adopted and an
officers' certificate certifying that such designation complies with the
foregoing conditions.
PARENT: The term "Parent" means any Person of which the Company is a
Subsidiary at the relevant time.
PERMITTED HOLDERS: The term "Permitted Holders" means Kelso and its
Affiliates, the Co-Investors and the Management Shareholders. The terms Kelso,
Co-Investors and Management Shareholders have the respective meanings specified
in the Stockholders' Agreement, as in effect on the date of the Note Indenture.
PERMITTED INVESTMENTS: The term "Permitted Investments" shall mean
(i) U.S. Government Obligations maturing within 90 days of the date of
acquisition thereof, (ii) investments in certificates of deposit maturing within
90 days of the date of acquisition thereof issued by a bank or trust company
which is organized under the laws of the United States or any state thereof
having capital, surplus and undivided profits aggregating in excess of $500
million or issued in an amount not to exceed $1.0 million at any time by United
States National Bank of Oregon (or, if United States National Bank of Oregon
ceases to be the bank with which the Company has its principal banking
relationship, the bank with which the Company then has its principal banking
relationship), (iii) investments in commercial paper given the highest rating
(i.e., A-1/P-1 or better) by two established national credit rating agencies and
maturing not more than 90 days from the date of acquisition thereof and (iv)
solely with respect to investments by the Note Trustee, in the absence of any
direction by the Company or during the continuance of a Default or an Event of
Default, shares in any money market fund registered under the Investment Company
Act of 1940, as amended, the portfolio of which is limited to U.S. Government
Obligations and U.S. agency obligations.
PERSON: The term "Person" means any individual, corporation,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
PREFERRED STOCK: The term "Preferred Stock," as applied to the
Capital Stock of any corporation, means Capital Stock of any class or classes
(however designated) which is preferred as to the payment of dividends, or as to
the
117
<PAGE>
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such corporation, over shares of Capital Stock of any other class
of such corporation.
PUBLIC EQUITY OFFERING: The term "Public Equity Offering" means an
underwritten primary public offering of common stock of the Company pursuant to
an effective registration statement under the Securities Act.
PURCHASE MONEY DEBT: The term "Purchase Money Debt" means Debt (i)
consisting of the deferred purchase price of property, conditional sale
obligations, obligations under any title retention agreement and other purchase
money obligations, in each case where the maturity of such Debt does not exceed
the anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition or construction by any Subsidiary of such asset,
including additions and improvements; provided, however, that (i) any Lien
arising in connection with any such Debt shall be limited to the specified asset
being financed or, in the case of real property or fixtures, including additions
and improvements, the real property on which such asset is attached, and (ii)
the principal amount of such Debt does not exceed the lesser of 80% of the cost
or 80% of the fair market value of the asset being financed (such fair market
value as determined in good faith by the Board of Directors, as evidenced by a
resolution).
REDEEMABLE STOCK: The term "Redeemable Stock" means any Capital Stock
that by its terms or otherwise is required to be redeemed on or prior to the
first anniversary of the Stated Maturity of the Notes or is redeemable at the
option of the holder thereof at any time on or prior to the first anniversary of
the Stated Maturity of the Notes.
REFERENCE PERIOD: The term "Reference Period," with respect to any
computation of the Consolidated EBITDA Coverage Ratio, means the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
determination of the Consolidated EBITDA Coverage Ratio.
SENIOR DEBT: The term "Senior Debt" means Debt unless, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are pari passu or junior or
subordinate in right of payment to the Notes; provided, however, that Senior
Debt shall not be deemed to include (1) any obligation of the Company to any
Subsidiary, (2) any liability for federal, state, local or other taxes owed or
owing by the Company, other than reimbursement obligations of the Company in
respect of such taxes that are paid on behalf of the Company pursuant to the
provisions in the Mortgages (as defined in the Bond Indenture) that permit the
mortgagee to make such payment, (3) any accounts payable or other liability to
trade creditors arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities), (4) any indebtedness,
guarantee or obligation of the Company which is subordinate or junior in any
respect to any other indebtedness, guarantee or obligation of the Company
(including, without limitation, the Notes), (5) the portion of any Debt issued
in violation of the covenant concerning "Limitation on Debt" or "Limitation on
Senior Subordinated Debt" or (6) any obligations of the Company or any
Subsidiary with respect to the redemption, repayment or other repurchase of any
Redeemable Stock or Exchangeable Stock.
SENIOR SUBORDINATED DEBT: The term "Senior Subordinated Debt" means
the Notes and any other Debt of the Company, which by its terms or the terms of
the instrument creating or evidencing the same or pursuant to which the same is
outstanding specifically provides that such Debt is to rank pari passu with the
Notes in right of payment to any Debt or other
118
<PAGE>
obligation of the Company which is not Senior Debt of the Company.
STATED MATURITY: The term "Stated Maturity" means, with respect to
any security, the date specified in such security as the fixed date on which the
final payment of principal of such security is due and payable, including
pursuant to any mandatory redemption or prepayment provision.
STOCKHOLDERS' AGREEMENT: The term "Stockholders' Agreement" means
the Stockholders' Agreement, dated as of December 24, 1986, as amended or
restated, among the Company and the parties listed on the signature pages
thereof.
SUBORDINATED OBLIGATION: The term "Subordinated Obligation" means any
Debt of the Company (whether outstanding on the date hereof or hereafter
incurred) which is subordinate or junior in right of payment to the Notes.
SUBSIDIARY: The term "Subsidiary" means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) 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 (i) the Company, (ii) the
Company and one or more Subsidiaries or (iii) one or more Subsidiaries.
TANGIBLE PROPERTY: The term "Tangible Property" means all land,
buildings, machinery and equipment and leasehold interests and improvements
which would be reflected on a consolidated balance sheet of the Company and its
consolidated Subsidiaries, prepared in accordance with generally accepted
accounting principles, excluding (i) all such tangible property located outside
the United States of America, (ii) all rights, contracts and other intangible
assets of any nature whatsoever and (iii) all inventories and other current
assets.
U.S. GOVERNMENT OBLIGATIONS: The term "U.S. Government Obligations"
means direct obligations (or certificates representing an ownership interest in
such obligations) of the United States of America (including any agency or
instrumentality thereof) for the payment of which the full faith and credit of
the United States of America is pledged and which are not callable at the
issuer's option.
VOTING STOCK: The term "Voting Stock" of a corporation means all
classes of Capital Stock of such corporation then outstanding and normally
entitled to vote in the election of directors.
119
<PAGE>
WHOLLY OWNED SUBSIDIARY: The term "Wholly Owned Subsidiary" means a
Subsidiary all the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly Owned Subsidiary.
120
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters
named below have severally agreed to purchase, and the Company has agreed to
sell to them, severally, the respective principal amounts of Notes set forth
opposite their respective names below:
<TABLE>
<CAPTION>
Principal
Underwriter Amount of Notes
- ----------------------------------------- ---------------------
<S> <C>
Morgan Stanley & Co. Incorporated ....... $
CS First Boston Corporation ............
Smith Barney Inc. .......................
____________
Total ..................... $120,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Notes is subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all the Notes if
any are taken.
The Underwriters initially propose to offer the Notes directly to the
public at the public offering price set forth on the cover page hereof and to
certain dealers at a price that represents a concession not in excess of .__% of
the principal amount of the Notes. Each Underwriter may allow, and such dealers
may reallow, a concession to certain other dealers not in excess of .__% of the
principal amount of the Notes. After the initial offering of the Notes, the
offering price and other selling terms may from time to time be varied by the
Underwriters.
The Company does not intend to apply for listing of the Notes on any
securities exchange or to seek approval for quotation of the Notes on any inter-
dealer quotation system. The Notes will be tradeable in the over-the-counter
market, but any such trading may be limited and sporadic. The Underwriters have
advised the Company that they presently intend to make a market in the Notes,
but they are not obligated to do so and any such market-making may be
discontinued by the Underwriters in their sole discretion at any time without
notice. Accordingly, no assurance can be given as to the liquidity of, or the
existence of trading markets for, the Notes.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
121
<PAGE>
Morgan Stanley & Co. Incorporated acted as financial advisor to the Company
in connection with the Prepackaged Bankruptcy. In addition, Morgan Stanley & Co.
Incorporated has provided and may provide, from time to time, certain financial
advisory services to Kelso and its affiliates.
CS First Boston Corporation acted as underwriter in connection with the
Company's offering of the First Mortgage Bonds. In addition, CS First Boston
Corporation has provided and may provide, from time to time, certain financial
advisory services to Kelso and its affiliates.
Smith Barney Inc. acted as financial advisor to the Institutional Investor
in connection with the Prepackaged Bankruptcy. In addition, Smith Barney Inc.
has provided and may provide, from time to time, certain financial advisory
services to Kelso and its affiliates.
122
<PAGE>
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Tonkon, Torp, Galen, Marmaduke & Booth, Portland, Oregon. A member
of Tonkon, Torp, Galen, Marmaduke & Booth currently serves as Secretary to the
Company. The Underwriters have been represented by Debevoise & Plimpton, New
York, New York. Debevoise & Plimpton has acted and may hereafter act as counsel
for the Company and for Kelso from time to time on matters not relating to this
offering.
EXPERTS
The consolidated financial statements and schedules of the Company as
of the last day of February 1994 and 1995 and for each of the years in the
three-year period ended the last day of February 1995, included herein and
elsewhere in the Registration Statement of which this Prospectus is a part, have
been included in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of that firm as experts in accounting and auditing. The reports of KPMG Peat
Marwick LLP refer to changes in accounting for income taxes and postretirement
benefits other than pensions.
ADDITIONAL INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"). Reports and other
information filed by the Company may be inspected and copied at the public
reference facilities of the Securities and Exchange Commission (the
"Commission") at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's regional offices located at Seven World Trade Center, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such materials may be obtained by mail, upon payment of the
Commission's prescribed rates, by writing to the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Company
delivers a copy of its Annual Report on Form 10-K to certain of its equity
security holders and provides and will continue to provide to the holders of its
outstanding debt securities annual reports and other information, documents and
reports specified in Sections 13 and 15 of the Exchange Act and filed with the
Commission pursuant to the terms of the relevant indenture.
The Company has filed a registration statement on Form S-1 under the
Securities Act of 1933, as amended, with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
123
<PAGE>
reference is made to the Registration Statement and the exhibits filed as a part
thereof.
124
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's consolidated financial statements as of the last day of
February 1994 and 1995, the last day of November 1994 and 1995, and related
information listed below, are set forth in the following section of this
Prospectus.
<TABLE>
<CAPTION>
TITLE PAGE
----- ----
<S> <C>
Audited Financial Statements
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of the last
day of February 1994 and 1995............................... F-4
Consolidated Statements of Operations for
years ended the last day of February 1993,
1994 and 1995............................................... F-6
Consolidated Statements of Common
Stockholders' Deficit for years
ended the last day of February 1993,
1994 and 1995............................................... F-8
Consolidated Statements of Cash Flows for
years ended the last day of February 1993,
1994 and 1995............................................... F-9
Notes to Consolidated Financial Statements as
of the last day of February 1994 and 1995................... F-11
Unaudited Financial Statements
Consolidated Balance Sheets as of the last
day of February 1995 and November 1995...................... F-29
Consolidated Statements of Operations for
the Three and Nine Months ended as of
the last day of November 1994 and 1995...................... F-31
Consolidated Statements of Cash Flows for
Nine Months ended as of the last day of
November 1994 and 1995...................................... F-32
Notes to Consolidated Financial Statements
for Nine Months ended as of the last day
of November 1995............................................ F-34
</TABLE>
F-1
<PAGE>
KPMG Peat Marwick LLP Telephone 503 221 6500
Suite 2000 Telefax 503 796 7650
1211 South West Fifth Avenue
Portland, OR 97204
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Americold Corporation:
We have audited the consolidated balance sheets of Americold Corporation as of
the last day of February 1994 and 1995, and the related consolidated statements
of operations, common stockholders' deficit and cash flows for each of the years
in the three-year period ended the last day of February 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with general accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Americold
Corporation as of the last day of February 1994 and 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended the last day of February 1995, in conformity with generally
accepted accounting principles.
Member Firm of Klynveld Peat Marwick Goerdeler
/s/KPMG Peat Marwick
F-2
<PAGE>
KPMG Peat Marwick LLP
The Board of Directors and Stockholders
Americold Corporation
Page 2
As discussed in Note 1 to the consolidated financial statements, Americold
Corporation adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" and No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions" during the year ended the last day of February 1994.
/s/ KPMG Peat Marwick LLP
Portland, Oregon
May 12, 1995, except for Notes
15 and 16, which are as of
June 30, 1995
F-3
<PAGE>
AMERICOLD CORPORATION
Consolidated Balance Sheets
Last day of February 1994 and 1995
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
ASSETS 1994 1995
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents (notes 15 and 16) $ 3,892 $ 33,163
Trade receivables, less allowance for doubtful
accounts of $298 and $313, respectively (note 7) 16,702 20,510
Other receivables, less allowance for doubtful
accounts of $4,100 and $-0-, respectively (note 14) 8,351 2,105
Prepaid expenses 3,972 5,240
Tax refund receivable 1,291 279
Other current assets 628 695
-------- --------
Total current assets 34,836 61,992
Net property, plant and equipment (notes 2, 4 and 7) 375,772 367,248
Cost in excess of net assets acquired, less accumulated
amortization of $17,230 and $19,765, respectively 82,563 80,028
Debt issuance costs, less accumulated amortization of
$5,540 and $6,803, respectively (notes 7 and 12) 9,371 8,953
Other noncurrent assets (note 3) 26,161 26,374
-------- --------
Total assets $528,703 $544,595
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES, PREFERRED STOCK AND
COMMON STOCKHOLDERS' DEFICIT 1994 1995
-------------------------------- ---- ----
<S> <C> <C>
Current liabilities:
Accounts payable $ 5,450 $ 6,741
Accrued interest 17,334 17,683
Accrued expenses (note 5) 7,512 11,345
Deferred revenue 4,772 5,914
Current maturities of long-term debt (notes 7 and 16) 2,281 31,315
Other current liabilities (notes 4 and 6) 4,944 3,912
--------- ---------
Total current liabilities 42,293 76,910
Long-term debt, less current maturities (notes 7 and 16) 467,337 442,912
Deferred income taxes (note 11) 104,558 106,098
Other noncurrent liabilities (notes 4 and 8) 11,744 10,633
--------- ---------
Total liabilities 625,932 636,553
--------- ---------
Preferred stock, Series A, $100 par value. Authorized
1,000,000 shares; issued and outstanding 49,672
and 52,936 shares, respectively (note 10) 5,348 5,789
--------- ---------
Common stockholders' deficit (notes 7, 8 and 9):
Common stock, $.01 par value. Authorized
10,000,000 shares; issued and
outstanding 4,863,999 and 4,860,934
shares, respectively 49 49
Additional paid-in capital 49,082 49,022
Retained deficit (151,653) (146,775)
Adjustment for minimum pension liability (55) (43)
--------- ---------
Total common stockholders' deficit (102,577) (97,747)
Commitments and contingencies (notes 4, 7, 8 and 16) --------- ---------
Total liabilities, preferred stock and
common stockholders' deficit $ 528,703 $ 544,595
========= =========
</TABLE>
F-5
<PAGE>
AMERICOLD CORPORATION
Consolidated Statements of Operations
Years ended last day of February 1993, 1994 and 1995
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Net sales $196,130 $198,887 $215,207
-------- -------- --------
Operating expenses:
Cost of sales 118,846 126,273 138,132
Amortization of cost in excess
of net assets acquired 2,533 2,531 2,535
Selling and administrative expenses 27,192 27,090 25,955
Employee stock ownership plan
expense (notes 8 and 10) 750 - 750
-------- -------- --------
Total operating expenses 149,321 155,894 167,372
-------- -------- --------
Gross operating margin 46,809 42,993 47,835
-------- -------- --------
Other income (expense):
Interest income 323 757 1,870
Interest expense (51,943) (55,403) (55,344)
Amortization of debt issuance costs (1,173) (1,249) (1,276)
Gain on insurance settlement (note 14) - - 16,953
Other, net 289 680 753
-------- -------- --------
Total other expense (52,504) (55,215) (37,044)
-------- -------- --------
Income (loss) before income taxes,
extraordinary item and cumulative
effect of accounting principle
changes (5,695) (12,222) 10,791
Provision (benefit) for income taxes (note 11) 2,455 (1,183) 5,227
-------- -------- --------
Income (loss) before extraordinary
item and cumulative effect of
accounting principle changes (8,150) (11,039) 5,564
Extraordinary item, net of income tax benefit
of $1,192 (note 12) - (1,848) -
Cumulative effect on prior years of
accounting principle changes for:
Income taxes (note 11) - (61,833) -
Postretirement benefits other
than pensions, net of income tax
benefit of $1,490 (note 8) - (2,401) -
-------- -------- --------
</TABLE>
F-6
<PAGE>
<TABLE>
<S> <C> <C> <C>
Net income (loss) $ (8,150) $(77,121) $ 5,564
======== ======== ========
Income (loss) per share:
Income (loss) before extraordinary item
and cumulative effect of accounting
principle changes $ (1.80) $ (2.39) $1.00
Extraordinary item - (.38) -
Cumulative effect of accounting principle
changes:
Income taxes - (12.74) -
Postretirement benefits other than
pensions - (.49) -
-------- -------- --------
Net income (loss) per common share $ (1.80) $ (16.00) $ 1.00
======== ======== ========
Weighted average number of shares outstanding 4,839 4,855 4,864
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
AMERICOLD CORPORATION
Consolidated Statements of Common Stockholders' Deficit
Years ended last day of February 1993, 1994 and 1995
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Adjustment
for
Additional minimum Total common
Common paid-in Retained pension stockholders'
stock capital deficit liability deficit
---------- ----------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Balance last day of February 1992 $48 $48,332 $ (65,237) $(25) $ (16,882)
Purchase of common stock (1,910 shares) - (19) - - (19)
Issuance of common stock (17,476 shares) 1 449 - - 450
14.25% preferred stock dividend - - (183) - (183)
Undeclared cumulative preferred stock dividend - - (387) - (387)
Adjustment for minimum pension liability - - - (4) (4)
Net loss - - (8,150) - (8,150)
-- ------ -------- --- --------
Balance last day of February 1993 49 48,762 (73,957) (29) (25,175)
Issuance of common stock (13,333 shares) - 320 - - 320
13.25% preferred stock dividend - - (194) - (194)
Undeclared cumulative preferred stock dividend - - (381) - (381)
Adjustment for minimum pension liability - - - (26) (26)
Net loss - - (77,121) - (77,121)
-- ------ -------- --- --------
Balance last day of February 1994 49 49,082 (151,653) (55) (102,577)
Purchase of common stock (3,065 shares) - (60) - - (60)
11.5% preferred stock dividend - - (190) - (190)
Undeclared cumulative preferred stock dividend - - (496) - (496)
Adjustment for minimum pension liability - - - 12 12
Net income - - 5,564 - 5,564
-- ------ -------- --- --------
Balance last day of February 1995 $49 $49,022 $(146,775) $(43) $ (97,747)
== ====== ======== === ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
AMERICOLD CORPORATION
Consolidated Statements of Cash Flows
Years ended last day of February 1993, 1994 and 1995
(In Thousands)
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (8,150) $ (77,121) $ 5,564
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation 17,725 19,938 20,140
Amortization of cost in excess
of net assets acquired 2,533 2,531 2,535
Amortization of debt issuance costs 1,173 1,249 1,276
Amortization of original issue
discount 1,068 1,205 1,369
(Gain) loss on sale of assets (63) 8 (286)
Gain on insurance settlement - - (16,953)
Gain on termination of capital lease - (514) -
Other amortization 373 408 302
Employee stock ownership plan expense 450 320 -
Cumulative effect of accounting
principle changes - 64,234 -
Write-off of unamortized issuance costs - 3,040 -
Change in assets and liabilities:
Receivables 1,963 (336) (6,952)
Prepaid expenses (1,569) (1,067) (1,268)
Tax refund receivable (1,384) 93 1,012
Other current assets (42) 165 (67)
Accounts payable 24 (890) 1,291
Accrued interest (161) 7,166 349
Accrued expenses (311) (458) 3,833
Deferred revenue (479) (443) 1,142
Other current liabilities 989 906 (1,032)
Deferred income taxes 1,533 (1,375) 1,540
Other noncurrent liabilities 2,028 (583) (1,111)
-------- --------- --------
Net cash provided by
operating activities 17,700 18,476 12,684
-------- --------- --------
Cash flows from investing activities:
Proceeds from sale of assets $ 16 $ 26 $ 1,105
Expenditures for property, plant and
equipment (7,661) (8,925) (13,203)
Purchase of long-term investment - (1,000) (447)
Proceeds from insurance policies - - 26,343
Expenditures for logistics software - - (1,650)
Other items, net (1,098) (994) 287
-------- --------- --------
Net cash provided (used) by
investing activities (8,743) (10,893) 12,435
-------- --------- --------
</TABLE>
F-9
<PAGE>
<TABLE>
<S> <C> <C> <C>
Cash flows from financing activities:
Net repayments under credit agreement (15,417) (8,583) -
Principal payments under capital lease
and other debt obligations (2,457) (2,496) (2,087)
Proceeds from mortgage - - 13,475
Payoff of note - - (9,044)
Net proceeds, excluding escrow
amounts, from financing lien 3,950 - -
Net proceeds, excluding escrow
amounts, from sale of mortgage bonds - 150,000 -
Retirement of mortgage bonds - (150,000) -
Release of escrow funds 7,000 5,809 2,714
Debt issuance costs (905) (870) (846)
Purchase of treasury stock (19) - (60)
-------- --------- --------
Net cash provided (used) by
financing activities (7,848) (6,140) 4,152
-------- --------- --------
Net increase in cash and cash
equivalents 1,109 1,443 29,271
Cash and cash equivalents at beginning of
year 1,340 2,449 3,892
-------- --------- --------
Cash and cash equivalents at end of year $ 2,449 $ 3,892 $ 33,163
======== ========= ========
Supplemental disclosure of cash flow
information:
Cash paid during the year for interest,
net of amounts capitalized $ 51,036 $ 47,031 $ 53,626
Cash paid during the year for income
taxes 2,415 491 2,675
Supplemental schedule of noncash investing
and financing activities:
Capital lease obligations incurred
to lease new equipment $ 1,217 $ 954 $ 1,120
Warehouse facility purchased by
long-term debt 10,000 - -
Net book value of assets included
in other receivables 1,008 3,623 -
Financing lease proceeds placed in
escrow 12,050 - -
Bond proceeds placed in escrow,
net of debt issuance costs of
$3,966 - 22,284 -
Sale proceeds placed in escrow - - 1,483
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
AMERICOLD CORPORATION
Notes to Consolidated Financial Statements
Last day of February 1994 and 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting policies and methods of their application that significantly affect
the determination of financial position, cash flows and results of operations
are as follows:
(a) BUSINESS DESCRIPTION
Americold Corporation (the Company) provides integrated logistics services for
the frozen food industry consisting of warehousing and transportation
management. These services are provided through the Company's network of 51
refrigerated warehouses and its refrigerated transportation management unit. The
Company has a wholly-owned warehousing subsidiary, Americold Services
Corporation.
In addition, the Company operates a limestone quarry. This business is not
significant to the Company as a whole and is not required to be reported as
separate industry segment.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Americold
Corporation and its wholly-owned subsidiary. All significant intercompany
transactions, profits, and balances have been eliminated.
(c) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is generally
provided on the straight-line method over the estimated useful lives of the
respective assets ranging from 3 to 45 years for financial reporting purposes
and on accelerated methods for income tax purposes where possible. Property
held under capital leases (at capitalized value) is amortized on the straight-
line method over its estimated useful life, limited generally by the lease
period. The amortization of the property held under capital leases is included
with depreciation expense. Estimated remaining useful lives are reviewed
periodically for reasonableness and any necessary change is generally effected
at the beginning of the accounting period in which the revision is adopted.
Maintenance and repairs are expensed in the year incurred; major renewals and
betterments of equipment and refrigerated facilities are capitalized and
depreciated over the remaining life of the asset.
F-11
<PAGE>
(d) COST IN EXCESS OF NET ASSETS ACQUIRED
On December 24, 1986, all the outstanding capital stock of the Company was
acquired by a private group consisting of affiliates of Kelso & Company, Inc.,
certain institutional investors and certain key employees and members of the
Company's management. The acquisition of the Company (the Acquisition) was
accounted for as a purchase. An allocation of the purchase price was made to the
acquired assets and liabilities based on their estimated fair market values at
the date of acquisition. The unallocated purchase price is the Company's
estimate of goodwill associated with the acquisition and is being amortized
using the straight-line method over a period of 40 years.
On March 1, 1990, the Company acquired the warehousing business of an unrelated
third party. The goodwill associated with the acquisition is being amortized
using the straight-line method over a period of 15 years.
The Company assesses the recoverability of the goodwill by determining whether
the amortization of the goodwill balance over its remaining useful life can be
recovered through projected undiscounted future net income. The amount of
goodwill impairment, if any, is measured based on projected discounted future
net income using a discount rate reflecting the Company's current average cost
of funds.
(e) DEBT ISSUANCE COSTS
Debt issuance costs incurred are amortized over the term of the related debt.
(f) INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (Statement
109). Statement 109 requires a change from the deferred method of accounting
for income taxes of APB Opinion 11 to the asset and liability method of
accounting for income taxes. Under the asset and liability method of Statement
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Effective March 1, 1993, the Company adopted Statement 109 and has reported the
cumulative effect of that change in the method
F-12
<PAGE>
of accounting for income taxes in the 1994 consolidated statement of operations
(note 11).
Pursuant to the deferred method under APB Opinion 11, which was applied in 1993
and prior years, deferred income taxes are recognized for income and expense
items that are reported in different years for financial reporting purposes
using the tax rate applicable for the year of calculation. Under the deferred
method, deferred taxes are not adjusted for subsequent changes in tax rates.
(g) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In December 1990, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 106, "Postretirement Benefits Other Than
Pensions" (Statement 106). Statement 106 requires the recognition of a
liability for obligations for postretirement benefits expected to be provided to
or for an employee to be accrued during the service lives of the employees. The
Company previously expensed the cost of such benefits, which are principally
health care, as claims were received.
Effective March 1, 1993, the Company adopted Statement 106 and has reported the
cumulative effect of that change in the method of accounting for postretirement
benefits other than pensions in the 1994 consolidated statement of operations
(note 8).
(h) REVENUE RECOGNITION
The Company's revenues are primarily derived from services provided to customers
in both handling and storing frozen products. Handling and storage revenue is
based primarily upon the total weight of frozen product received into and held
in storage and is recognized as earned, not as billed. Differences between
revenue earned and revenue billed are recorded as deferred revenue.
Approximately 50% of the handling revenue is deferred until the customers'
products are delivered.
The Company's transportation management services revenues are primarily derived
from freight services. Revenues are recognized upon delivery of freight.
(i) INCOME (LOSS) PER SHARE
Income (loss) per common share is computed by dividing net income (loss), less
preferred dividend requirements, by the weighted average number of common shares
outstanding.
F-13
<PAGE>
(j) MAJOR CUSTOMERS
Consolidated net sales to H.J. Heinz Co. and subsidiaries amounted to
approximately $26.6 million, $35.8 million and $45.5 million in the years ended
the last day of February 1993, 1994 and 1995, respectively. For the year ended
the last day of February 1993, consolidated net sales to ConAgra, Inc. and
subsidiaries amounted to approximately $21.3 million. No other customers
accounted for 10% or more of consolidated sales.
(k) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investment instruments with a maturity
of three months or less when purchased to be cash equivalents. There were cash
equivalents of $-0- and $25.2 million as of the last day of February 1994 and
1995, respectively.
(2) NET PROPERTY, PLANT AND EQUIPMENT
Net property, plant and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
Last day
of February
-----------
1994 1995
---- ----
<S> <C> <C>
Land $ 31,476 $ 31,087
Refrigerated facilities, buildings
and land improvements 426,275 433,667
Machinery and equipment 56,702 59,300
-------- --------
514,453 524,054
Less accumulated depreciation 138,681 156,806
-------- --------
Net property, plant and equipment $375,772 $367,248
======== ========
</TABLE>
(3) OTHER NONCURRENT ASSETS
Other noncurrent assets consist of the following (in thousands):
<TABLE>
<CAPTION>
Last day
of February
-----------
1994 1995
---- ----
<S> <C> <C>
Restricted funds held by
trustee (note 7) $ 21,899 $ 20,669
Real estate owned, less
allowance for loss of $43
and $-0-, respectively 440 300
</TABLE>
F-14
<PAGE>
<TABLE>
<S> <C> <C>
Security deposits 424 393
Other 3,398 5,012
-------- --------
$ 26,161 $ 26,374
======== ========
</TABLE>
(4) LEASES
Assets under capital leases are included in net property, plant and equipment
and consist of the following (in thousands):
<TABLE>
<CAPTION>
Last day
of February
-----------
1994 1995
---- ----
<S> <C> <C>
Land, refrigerated facilities,
buildings and land improvements $ 7,140 $ 7,140
Machinery and equipment 4,255 4,249
------- -------
11,395 11,389
Less accumulated depreciation 3,540 3,575
------- -------
$ 7,855 $ 7,814
======= =======
</TABLE>
Future minimum lease payments under noncancelable leases for years ending after
the last day of February 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
Year ending the last Capital Operating
day of February leases leases
- -------------------- ------- ---------
<S> <C> <C>
1996 $1,826 $ 7,962
1997 1,548 6,798
1998 3,773 5,472
1999 522 4,626
2000 402 2,974
Thereafter 1,808 5,006
------ -------
Total minimum
lease payments 9,879 $32,838
=======
Less amounts representing
interest 2,424
------
Present value of net
minimum lease
payments $7,455
=====
</TABLE>
F-15
<PAGE>
Included in expenses for the years ended the last day of February 1993, 1994 and
1995 are approximately $8.7 million, $9.1 million and $9.5 million,
respectively, of rental expense net of sublease rentals for operating leases.
(5) ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
<TABLE>
<CAPTION>
Last day
of February
-----------
1994 1995
---- ----
<S> <C> <C>
Accrued payroll $1,498 $ 4,226
Accrued vacation pay 2,345 2,504
Accrued taxes 837 1,043
Accrued employee stock ownership plan
contribution - 750
Other 2,832 2,822
----- -----
Total accrued expenses $7,512 $11,345
===== ======
</TABLE>
(6) OTHER CURRENT LIABILITIES
Other current liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
Last day
of February
-----------
1994 1995
---- ----
<S> <C> <C>
Workers' compensation $2,527 $1,227
Other 2,417 2,685
----- -----
$4,944 $3,912
===== =====
</TABLE>
F-16
<PAGE>
(7) LONG-TERM DEBT
Long-term debt consists of the following (in thousands) (see note 16):
<TABLE>
<CAPTION>
Last day
of February
-----------
1994 1995
---- ----
<S> <C> <C>
Capital lease obligations (9.6% and
9.5% weighted average interest rate,
respectively) $ 7,591 $ 7,455
Senior subordinated debentures -
11% fixed, due May 1, 1997 with
mandatory sinking fund payments of
$28,750 on May 1, 1995 and 1996 111,212 112,581
First mortgage bonds, Series A -
11.45% fixed, due June 30, 2002,
interest payments only to January 1,
1999 with principal amortization
commencing July 1, 1999 150,000 150,000
First mortgage bonds, Series B -
11.5% fixed, due March 1, 2005,
interest payments only to September 1,
2003 with a mandatory sinking fund
payment of $88,125 on March 1, 2004 176,250 176,250
Mortgage notes payable - various
interest rates ranging from 9.0% to
13.6% requiring monthly principal and
interest payments with maturities
ranging from 2004 to 2017 24,565 27,941
-------- --------
Total long-term debt 469,618 474,227
Less current maturities of
long-term debt 2,281 31,315
-------- --------
Total long-term debt, less current
maturities $467,337 $442,912
======== ========
</TABLE>
On July 2, 1987, the Company sold $300 million in first mortgage bonds. On
March 9, 1993, the Company sold $176.25 million of the Company's 11.5% First
Mortgage Bonds, Series B, due March 1, 2005. The Company used $150 million of
the proceeds from the sale of the Series B bonds to purchase at par $150 million
of outstanding first mortgage bonds. The remaining $150 million of such First
Mortgage Bonds have been redesignated Series A First Mortgage Bonds (together
with the Series B First Mortgage Bonds, the "First Mortgage Bonds"). The
remaining net proceeds of approximately $22.3 million were placed in escrow with
the Mortgage Bond Trustee (note
F-17
<PAGE>
3). The bonds are secured by mortgages or deeds of trust on 31 of the Company's
facilities.
On February 3, 1993, the Company entered into a bank credit agreement with its
principal bank. The bank credit agreement is secured by the Company's trade
receivables. The bank credit agreement has an aggregate availability of $27.5
million consisting of $20 million maximum cash borrowings and $10 million of
letter of credit funding. Any amount by which the letter of credit borrowings
exceed $7.5 million reduces the available cash borrowing amount under the
agreement by a like amount. Availability for cash borrowings is limited by a
defined borrowing base advance formula established on the basis of reviews of
trade receivables. The unused and available amount under the bank credit
agreement was $16.3 million, of which no amount was borrowed as of the last day
of February 1995. There were $7.3 million of letters of credit outstanding as of
the last day of February 1995.
The senior subordinated debentures are presented as of the last day of February
1994 and 1995 net of the original issue discount of approximately $9.4 million
and accumulated accretion of approximately $5.6 million and $7.0 million,
respectively.
The Company entered into an investment agreement in connection with the issuance
of the First Mortgage Bonds which, like the bank credit agreement, requires
the Company to meet certain affirmative and restrictive covenants. Significant
restrictive items include, among others, limitations on additional indebtedness,
liens, dividends, capital expenditures, asset dispositions, lease commitments
and investments. Also, certain "pro-forma debt service" ratios, net worth
levels and senior debt to net worth ratios must be maintained.
As of the last day of February 1995, aggregate annual maturities of long-term
debt are as follows (in thousands):
<TABLE>
<CAPTION>
Year ended the last
day of February
- -------------------
<S> <C>
1996 $ 31,315
1997 2,634
1998 5,169
1999 2,374
2000 2,583
</TABLE>
F-18
<PAGE>
(8) EMPLOYEE BENEFIT PLANS
(a) DEFINED BENEFIT PENSION PLANS
The Company has defined benefit pension plans which cover substantially all
employees other than union employees covered by union pension plans under
collective bargaining agreements. Benefits under these plans are based on years
of credited service and compensation during the years preceding retirement or on
years of credited service and established monthly benefit levels.
Pension expense for all plans, including plans jointly administered by industry
and union representatives totaled $1.5 million, $1.4 million and $1.4 million
for years ended the last day of February 1993, 1994 and 1995, respectively.
Actuarial valuations for defined benefit plans are performed as of the end of
the plan year. The most recent actuarial valuations are as of the last day of
February 1995.
The funded status of the Company's defined benefit pension plans and the accrued
pension expense amounts recognized in the Company's consolidated financial
statements, within other noncurrent liabilities, as of the last day of February
1994 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
Last day of Last day of
February 1994 February 1995
------------------------- -------------------------
Plans with Plans with Plans with Plans with
assets in accumulated assets in accumulated
excess of benefits in excess of benefits in
accumulated excess of accumulated excess of
benefits assets benefits assets
---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Accumulated benefit obligations:
Vested benefits $24,482 $120 $18,025 $6,000
Nonvested benefits 460 - 150 286
------ --- ------ -----
24,942 120 18,175 6,286
------ --- ------ -----
Effect of assumed future
compensation increases 2,892 - 2,616 -
------ --- ------ -----
Projected benefit obligations
for services rendered to date 27,834 120 20,791 6,286
Plan assets at fair value 25,257 57 18,489 5,636
------ --- ------ -----
Projected benefit obligations in
excess of (less than) plan
assets 2,577 63 2,302 650
Unrecognized prior service cost (335) (3) (153) (50)
</TABLE>
F-19
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Unrecognized net gain (loss) from past
experience different from that assumed
and effects of changes in assumptions 2,132 (55) 1,915 212
------ --- ------ -----
Accrued pension liability $4,374 $ 5 $4,064 $ 812
====== === ====== =====
</TABLE>
Net periodic pension expense for the years ended the last day of February 1993,
1994 and 1995 includes the following components (in thousands):
<TABLE>
<CAPTION>
Last day of February
----------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Service cost - benefits
earned during the period $ 1,005 $ 1,013 $ 1,107
Interest cost on projected
benefit obligation 1,984 2,094 2,121
Actual return on plan assets (2,097) (2,202) (2,554)
Net amortization and deferral (214) (233) (143)
------- ------- -------
Net periodic
pension expense $ 678 $ 672 $ 531
======= ======= =======
Actuarial assumptions used for determining pension expenses were:
<CAPTION>
Last day of February
----------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate for
interest cost 9.0% 8.0% 8.5%
Rate of increase in
future compensation levels 5.0 4.0 4.0
Expected long-term rate
of return on plan assets 9.5 10.5 10.5
</TABLE>
Plan assets are assigned to several investment management companies and are
invested in various equity and fixed fund investments in accordance with the
Company's investment policy.
(b) EMPLOYEE STOCK OWNERSHIP PLAN
The Company established an employee stock ownership plan, effective March 1,
1987, which is intended to provide qualifying
F-20
<PAGE>
employees an equity interest in the Company, as well as potential retirement
benefits. The trust established under the plan is designed to invest primarily
in the Company's stock. Contributions by the Company, in the form of common or
preferred stock of the Company, or cash, or a combination thereof, may be made
to the trustee on behalf of eligible participants for each plan year as
determined by the Company's Board of Directors. Participating employees with
vested benefits, upon retirement or termination, have the option of retaining
the stock or selling it back to the Company at its fair market value.
(c) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to providing retirement benefits, the Company provides certain
health care and life insurance benefits for retired employees. These benefits
are provided to substantially all employees other than certain union employees
who have elected not to participate. Prior to 1994, the Company recognized the
cost of providing retirement health benefits and life insurance benefits as the
claims or premiums were incurred.
Effective March 1, 1993, the Company adopted Financial Accounting Standards
Board Statement of Financial Accounting No. 106 (Statement 106), which required
that the expected cost of providing such benefits be accrued over the years that
the employee renders service, in a manner similar to the accounting for pension
benefits. As permitted under Statement 106, the Company elected to recognize
this change in accounting principle on the immediate recognition basis. The
cumulative effect as of March 1, 1993 of adopting the standard resulted in a
decrease in deferred taxes of approximately $1.5 million, an increase in accrued
postretirement benefits of approximately $3.9 million, and a one-time non-cash
charge to fiscal 1994 earnings of approximately $2.4 million.
The total of accumulated postretirement benefit obligation (APBO), which is an
unfunded obligation, is as follows:
<TABLE>
<CAPTION>
March 1, February 28, February 28,
1993 1994 1995
-------- ------------ ------------
<S> <C> <C> <C>
Retirees $2,538 $2,339 $2,314
Active employees 1,353 1,573 1,511
------ ------ ------
Total APBO $3,891 $3,912 $3,825
====== ====== ======
</TABLE>
F-21
<PAGE>
The components of net periodic postretirement expense for the year ended the
last day of February are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
----- ------
<S> <C> <C>
Service cost benefits earned in period $ 90 $ 104
Interest cost on APBO 329 313
Amortization of unamortized prior
service cost - (22)
----- -----
$ 419 $ 395
===== =====
</TABLE>
The discount rate used to determine the APBO and net periodic expense as of
March 1, 1993 was 9%, as of February 28, 1994 was 8.5%, and as of February 28,
1995 was 9%.
For fiscal 1995, an 11.75% increase in the medical cost trend rate was assumed.
This rate decreases incrementally to 6% after nine years. A 1% increase in the
medical trend rate would increase the APBO by $.1 million and increase the net
periodic expense by a negligible amount.
(9) COMMON STOCKHOLDERS' EQUITY
The Company has reserved 300,000 shares of common stock for issuance under a
stock option plan established in 1987. Under the plan, options are granted by
the compensation committee of the Board of Directors to purchase common stock at
a price not less than 85% of the fair market value on the date the option is
granted.
Information with regard to the plan as of the last day of February 1995 follows:
<TABLE>
<CAPTION>
Number of Shares Price Exercisable Expires
- ---------------- ----- ----------- -------
<S> <C> <C> <C>
93,795 $10.00 93,795 May 1998
100,000 18.95 80,000 June 2000
30,000 21.88 6,000 May 2003
30,000 20.40 6,000 December 2003
</TABLE>
No options had been exercised as of the last day of February 1995.
The Company had reserved 500,000 shares of common stock for issuance under a
Stock Incentive Plan effective March 1, 1991. Under the terms of the plan,
officers and key management employees can receive either common stock or cash in
specified amounts depending upon the financial performance of the Company
measured over a four-year period ending February 28, 1995. As of
F-22
<PAGE>
the last day of February 1995, no shares had been issued. Since inception of
the plan, the Board has approved a total award of approximately 106,000 shares.
Total expense accrued under this plan was approximately $1 million with no
expense accrued for each of the years ended the last day of February 1993 and
1994. The Board suspended the plan effective February 28, 1994, and the Company
issued shares previously awarded and paid cash for the specified amounts in
March 1995.
(10) PREFERRED STOCK
The Company contributes shares of its Series A, variable rate, cumulative
preferred stock to the Americold Employee Stock Ownership Plan (ESOP). The
preferred stock is redeemable by participants of the plan (note 8). As of the
last day of February 1994 and 1995, dividends not declared on the Company's
cumulative preferred stock total approximately $381 and $496, respectively.
(11) INCOME TAXES
Prior to 1994, the Company provided for income taxes under APB 11. Effective
March 1, 1993, the Company adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 109 (Statement 109) which
required a change in the method of providing for income taxes. As permitted
under Statement 109, the Company elected to recognize this change in accounting
principle on the immediate recognition basis. The cumulative effects as of
March 1, 1993 of adopting Statement 109 were an increase in net fixed assets of
approximately $31.2 million (the amount of a previous write-down of assets under
APB No. 16 as a result of the purchase of the Company in December 1986, net of
subsequent depreciation), an increase in deferred income taxes of $93 million,
and a one-time, non-cash charge of approximately $61.8 million in fiscal 1994.
Application of Statement 109 has reduced earnings before cumulative effect of
accounting principle change by approximately $1.7 million and $2.0 million as a
result of increased depreciation for the years ended the last day of February
1994 and 1995, respectively.
The provision (benefit) for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Federal:
Current $ 275 $ 500 $2,867
Deferred 1,649 (1,557) 1,494
------ ------- ------
1,924 (1,057) 4,361
------ ------- ------
</TABLE>
F-23
<PAGE>
<TABLE>
<S> <C> <C> <C>
State:
Current 647 68 820
Deferred (116) (194) 46
------ ------- ------
$2,455 $(1,183) $5,227
====== ======= ======
</TABLE>
Following is a reconciliation of the difference between income taxes computed at
the federal statutory rate and the provision for income taxes (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Computed income tax expense
(benefit) at federal
statutory rate $(1,936) $(4,278) $3,777
State and local income taxes,
net of federal income
tax benefits 351 (418) 563
Adjustment to deferred tax
assets and liabilities for
changes in enacted rates - 2,627 -
Amortization of cost in excess
of net assets acquired 861 886 887
Financial statement
depreciation not
deductible for income
tax purposes 3,429 - -
Other, net (250) - -
------- ------- ------
Provision (benefit) for
income taxes $ 2,455 $(1,183) $5,227
======= ======= ======
</TABLE>
Deferred income taxes for 1994 and 1995 reflect the impact of "temporary
differences" between amounts of assets and liabilities for financial reporting
purposes and such amounts as measured by tax laws. These temporary differences
are determined in accordance with Statement 109 and are more inclusive in nature
than "timing differences" as determined under previously applicable accounting
principles.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the related amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets as of February
28, 1994 and 1995 are as follows (in thousands):
F-24
<PAGE>
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment,
due to differences in
depreciation and prior
accounting treatment $(113,372) $(113,457)
Other, net (1,481) (400)
--------- ---------
Total deferred
tax liabilities (114,853) (113,857)
--------- ---------
Deferred tax assets:
Receivables, due to allowance
for doubtful accounts 388 123
Employee compensation and
other benefits 2,382 1,742
Capital leases, net 2,019 1,936
Postretirement benefits other
than pensions, due to accrual
for financial reporting
purposes 1,535 1,500
Net operating loss carryforwards 3,585 -
Alternative minimum tax
credit carryforwards 1,289 3,122
Other, net 417 656
--------- ---------
Total deferred tax assets 11,615 9,079
--------- ---------
Net deferred tax liability
before valuation
allowance (103,238) (104,778)
Deferred tax asset valuation
allowance (1,320) (1,320)
--------- ---------
Net deferred tax
liability $(104,558) $(106,098)
========= =========
</TABLE>
The valuation allowance for deferred tax assets as of March 1, 1993 was
approximately $1.3 million. The valuation allowance is required to reduce the
amount of deferred tax assets to an amount which will more likely than not be
realized.
The Omnibus Budget Reconciliation Act of 1993 resulted in a federal tax rate
increase from 34% to 35% effective January 1, 1993. The tax rate increase
resulted in additional income tax expense for the Company of $2.6 million during
the year ended the last day of February 1994.
F-25
<PAGE>
At February 28, 1995, the Company has an alternative minimum tax credit
carryforward of approximately $3.1 million available to offset future regular
taxes in excess of future alternative minimum taxes.
(12) EXTRAORDINARY ITEM
In conjunction with the fiscal year 1994 retirement of the $150 million of first
mortgage bonds as discussed in Note 7, unamortized issuance costs of
approximately $3.0 million were written off, resulting in an extraordinary loss,
net of taxes, of approximately $1.8 million.
(13) DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS, CASH, TRADE
RECEIVABLES, OTHER RECEIVABLES, ACCOUNTS PAYABLE, AND ACCRUED EXPENSES
The carrying amount approximates fair value because of the short maturity of
these instruments.
LONG-TERM DEBT
The fair values of each of the Company's long-term debt instruments are based on
(a) the amount of future cash flows associated with each instrument discounted
using the Company's current borrowing rate for similar debt instruments of
comparable maturity or (b) in the case of the first mortgage bonds - Series B
and senior subordinated debentures, market price.
<TABLE>
<CAPTION>
As of last day of February 1995
-------------------------------
Estimated fair
Carrying market
amount value
-------- --------------
<S> <C> <C>
Senior subordinated debentures $112,581 $ 88,550
First mortgage bonds - Series A 150,000 150,000
First mortgage bonds - Series B 176,250 160,388
Mortgage notes payable 27,941 27,941
</TABLE>
LIMITATIONS
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
F-26
<PAGE>
(14) GAIN ON INSURANCE SETTLEMENT
Gain on insurance settlement of approximately $17 million relates to the
Company's settlement of its first party claims with its insurance carriers for
business interruption, property damage and out-of-pocket expenses with respect
to the December 1991 fire at the Company's Kansas City, Kansas warehouse
facility.
No previous income recognition was determinable until the Company had settled
all of the lawsuits and claims related to the fire. The settlement amounts have
been used to reduce other receivables recorded as of the last day of February
1994 by $5.7 million.
(15) CASH AND CASH EQUIVALENTS
As of the last day of February 1995, the Company had made a proposal to the Bond
Trustee under the indenture related to its First Mortgage Bonds to substitute
approximately $4.8 million in cash as collateral for the property lost in the
Kansas City, Kansas warehouse facility as a result of the fire. On June 30,
1995, the Company transferred the funds to the Bond Trustee.
(16) SUBSEQUENT EVENTS
On May 9, 1995, the Company filed a prepackaged plan of reorganization (the
"Plan") under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Oregon (the "Court"). The principal
purpose of the Plan was to reduce the Company's short-term cash requirements
with respect to payments due on its subordinated indebtedness and to adjust
certain restrictive financial covenants and certain other provisions contained
in the Amended and Restated Investment Agreement, dated March 2, 1993, between
the Company and Metropolitan Life Insurance Company ("MetLife"). On the filing
date, the Plan had been approved by both of the classes of debtholders entitled
to vote on the Plan.
On June 19, 1995, the Court approved the Company's Disclosure Statement dated
April 14, 1995 and the Company's solicitation of votes to accept or reject the
Plan, and confirmed the Plan. On June 30, 1995, the Plan became effective,
pursuant to which:
(i) each holder of the Company's 11% Senior Subordinated Debentures due
1997 was entitled to receive a corresponding amount of new 15% Senior
Subordinated Debentures due 2007, and an amount in cash equal to the
accrued but unpaid interest on the old Senior Subordinated Debentures
through June 29, 1995; and
F-27
<PAGE>
(ii) the Company repurchased on June 30, 1995, $10.0 million in principal
amount of its 11.45% Series A First Mortgage Bonds due 2002 at par and
paid an agreement modification fee of $2.25 million to MetLife in
conjunction with amending the Amended and Restated Investment
Agreement, dated March 2, 1993, between the Company and MetLife.
The Company also has rejected certain lease agreements relating to four
warehouse facilities. The Company does not believe that the resolution of these
rejections will have a material effect upon the Company.
In addition, the Company amended on June 30, 1995, the existing credit agreement
with its primary bank, which provides an aggregate availability of $27.5
million, to be used for any combination of letters of credit (not to exceed
$10.0 million) and revolving cash borrowings, subject to borrowing base
limitations. The new credit agreement, which terminates on February 28, 1999
unless otherwise extended, is secured by the Company's trade receivables and, at
the Company's option, mortgages on certain of the Company's warehouse
properties.
F-28
<PAGE>
AMERICOLD CORPORATION
CONSOLIDATED BALANCE SHEETS
Last day of February 1995 and November 1995
(In thousands, except share data)
<TABLE>
<CAPTION>
Last day of Last day of
February 1995 November 1995
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (note 6) $ 33,163 $ 7,971
Trade receivables, net 20,510 30,048
Other receivables, net 2,105 5,493
Prepaid expenses 5,240 2,868
Other current assets 974 906
--------- ---------
Total current assets 61,992 47,286
Property, plant and equipment, less
accumulated depreciation
of $156,806 and $169,315, respectively 367,248 382,414
Cost in excess of net assets acquired, less
accumulated amortization of $19,765 and $21,511,
respectively 80,028 77,882
Other noncurrent assets 35,327 15,961
--------- ---------
Total assets $ 544,595 $ 523,543
========= =========
<CAPTION>
LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS' DEFICIT
<S> <C> <C>
Current liabilities:
Accounts payable $ 6,741 $ 15,808
Accrued interest 17,683 13,693
Accrued expenses 11,345 8,544
Deferred revenue 5,914 6,297
Current maturities of long-term debt (note 2) 31,315 2,702
Other current liabilities 3,912 1,319
--------- ---------
Total current liabilities 76,910 48,363
Long-term debt, less current maturities (note 2) 442,912 461,791
Deferred income taxes 106,098 102,401
Other noncurrent liabilities 10,633 10,742
--------- ---------
Total liabilities 636,553 623,297
--------- ---------
Preferred stock, $100 par value; authorized
1,000,000 shares; issued and outstanding
52,936 shares (note 5) 5,789 6,325
--------- ---------
Common stockholders' deficit (note 3):
Common stock, $.01 par value; authorized
10,000,000 shares; issued and outstanding
4,860,934 shares 49 49
Additional paid-in capital 49,022 49,022
Retained deficit (146,775) (155,107)
Equity adjustment to recognize minimum
pension liability (43) (43)
--------- ---------
</TABLE>
F-29
<PAGE>
<TABLE>
<S> <C> <C>
Total common stockholders' deficit (97,747) (106,079)
--------- ---------
Total liabilities, preferred stock and
common stockholders' deficit $ 544,595 $ 523,543
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-30
<PAGE>
AMERICOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and nine months ended last day of November 1994 and 1995
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Three Nine Nine
months ended months ended months ended months ended
last day of last day of last day of last day of
November 1994 November 1995 November 1994 November 1995
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 60,150 $ 86,852 $162,214 $199,897
-------- -------- -------- --------
Operating expenses:
Cost of sales 37,355 62,206 104,188 135,903
Amortization of cost in
excess of net assets
acquired 633 626 1,902 2,146
Selling and administrative
expenses 6,467 7,082 19,500 21,154
-------- -------- -------- --------
Total operating expenses 44,455 69,914 125,590 159,203
-------- -------- -------- --------
Gross operating margin 15,695 16,938 36,624 40,694
-------- -------- -------- --------
Other income (expense):
Interest expense (13,760) (14,009) (41,318) (42,135)
Gain on insurance
settlement (note 8) 16,953 - 16,953 -
Reorganization expenses
(note 2) - (404) - (6,704)
Other, net 248 (171) 720 (347)
-------- -------- -------- --------
Total other income
(expense) 3,441 (14,584) (23,645) (49,186)
-------- -------- -------- --------
Income (loss) before
income taxes and
extraordinary item 19,136 2,354 12,979 (8,492)
(Provision) benefit for
income taxes (note 4) (7,731) (1,169) (5,754) 2,489
-------- -------- -------- --------
Net income (loss) before
extraordinary item 11,405 1,185 7,225 (6,003)
Extraordinary item, net of
income tax benefit of
$1,157 (note 7) - - - (1,793)
-------- -------- -------- --------
Net income (loss) $ 11,405 $ 1,185 $ 7,225 $ (7,796)
======== ======== ======== ========
Income (loss) per common
share (note 5)
Income (loss) before
extraordinary item $2.31 $0.21 $1.38 $ (1.34)
Extraordinary item - - - (0.37)
-------- -------- -------- --------
Net income (loss) per
common share $2.31 $0.21 $1.38 $ (1.71)
======== ======== ======== ========
Weighted average number of
shares outstanding 4,864 4,861 4,864 4,861
======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-31
<PAGE>
AMERICOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended last day of November 1994 and 1995
(In thousands)
<TABLE>
<CAPTION>
Nine months Nine months
ended last ended last
day of day of
November 1994 November 1995
--------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,225 $ (7,796)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating
activities:
Depreciation 15,154 14,505
Amortization and other noncash expenses 3,874 3,915
Changes in assets and liabilities (7,519) (10,743)
Provision for deferred taxes 2,634 (3,697)
Gain on insurance settlement (16,953) -
Write-off of unamortized issuance costs - 962
Write-off of unamortized original issue
discount - 1,988
-------- --------
Net cash provided (used) by operating
activities 4,415 (866)
-------- --------
Cash flows from investing activities:
Net expenditures for property, plant
and equipment (13,213) (29,300)
Proceeds from insurance policies and other
items, net 24,590 1,815
-------- --------
Net cash provided (used) by investing
activities 11,377 (27,485)
-------- --------
Cash flows from financing activities:
Principal payments under capitalized
lease and other debt obligations (1,577) (2,156)
Retirement of mortgage bonds - (10,000)
Release of escrowed funds 2,957 15,315
-------- --------
Net cash provided by financing activities 1,380 3,159
-------- --------
Net increase (decrease) in cash and cash
equivalents 17,172 (25,192)
Cash and cash equivalents at beginning of
period 3,892 33,163
-------- --------
Cash and cash equivalents at end of period $ 21,064 $ 7,971
======== ========
Supplemental disclosure of cash flow
information:
Cash paid year-to-date for interest,
net of amounts capitalized $ 44,196 $ 46,125
======== ========
Capital lease obligations incurred to lease
new equipment $ 671 $ 343
======== ========
Cash paid during the year for income taxes $ 28 $ 395
======== ========
</TABLE>
F-32
<PAGE>
<TABLE>
<S> <C> <C>
Property sale proceeds placed in escrow $ 463 $ -
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-33
<PAGE>
AMERICOLD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated balance sheet as of the last day of November 1995; the
related consolidated statements of operations for the three and nine months
ended the last day of November 1994 and November 1995; and the related
consolidated statements of cash flows for the nine months ended the last
day of November 1994 and November 1995 are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted of
normal recurring items. Interim results are not necessarily indicative of
results for a full year. The financial information presented herein should
be read in conjunction with the financial statements included in the
registrant's Annual Report on Form 10-K for the year ended the last day of
February 1995.
2. PLAN OF REORGANIZATION UNDER CHAPTER 11
---------------------------------------
On May 9, 1995, the Company filed a prepackaged plan of reorganization (the
"Plan") under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the District of Oregon (the "Court"). The
principal purpose of the Plan was to reduce the Company's short-term cash
requirements with respect to payments due on its subordinated indebtedness
and to adjust certain restrictive financial covenants and certain other
provisions contained in the Amended and Restated Investment Agreement,
dated March 2, 1993, between the Company and Metropolitan Life Insurance
Company ("MetLife"). On the filing date, the Plan had been approved by
both of the classes of debtholders entitled to vote on the Plan.
On June 19, 1995, the Court approved the Company's Disclosure Statement
dated April 14, 1995 and the Company's solicitation of votes to accept or
reject the Plan, and confirmed the Plan. On June 30, 1995, the Plan became
effective, pursuant to which:
(i) each holder of the Company's 11% Senior Subordinated Debentures due
1997 was entitled to receive a corresponding amount of new 15% Senior
Subordinated Debentures due 2007, and an amount in cash equal to the
F-34
<PAGE>
accrued but unpaid interest on the old Senior Subordinated Debentures
through June 29, 1995; and
(ii) the Company repurchased on June 30, 1995, $10.0 million of its 11.45%
Series A First Mortgage Bonds due 2002 at par and paid an agreement
modification fee of $2.25 million to MetLife in conjunction with
amending the Amended and Restated Investment Agreement, dated March 2,
1993, between the Company and MetLife.
In addition, the Company has:
(a) Amended on June 30, 1995, the existing credit agreement with its
primary bank, which provides an aggregate availability of $27.5
million, to be used for any combination of letters of credit (up to
$10.0 million) and revolving cash borrowings, subject to borrowing
base limitations. The new credit agreement is secured by the
Company's trade receivables and, at the Company's option, mortgages on
certain of the Company's warehouse properties.
(b) Rejected certain lease agreements relating to four warehouse
facilities at Watsonville, Oakland and San Francisco, California; and
Chicago, Illinois.
In November 1990, the American Institute of Certified Public Accountants
issued Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7"). Under SOP 90-7,
the financial statements for periods including and subsequent to filing a
Chapter 11 petition are structured to distinguish transactions and events
that are directly associated with the reorganization from the ongoing
operations of the Company. Since the Company was in Chapter 11 proceedings
for less than two months, and since the Plan did not differentiate between
prepetition and post-petition liabilities and did not include any
forgiveness of liabilities, the Company has elected not to follow the
presentation proposed by SOP 90-7. The Company has expensed all
professional fees and similar types of expenditures incurred through the
last day of November 1995 directly relating to the Chapter 11 proceedings
as "reorganization expenses." The Company also has not recorded the
effects of any possible damage claims as a result of the rejection of
certain lease agreements in the financial statements for the first nine
months of fiscal 1996.
3. COMMON STOCKHOLDERS' DEFICIT
----------------------------
F-35
<PAGE>
The Company has reserved 300,000 shares of common stock for issuance under
a stock option plan established in 1987. Under the plan, options are
granted by the compensation committee of the Board of Directors to purchase
common stock at a price not less than 85% of the fair market value on the
date the option is granted.
Information with regard to the plan as of the last day of November 1995
follows:
<TABLE>
<CAPTION>
Number of Shares Exercise Number of Shares Expiration
Subject to Option Price Exercisable Date
----------------- -------- ---------------- ----------
<S> <C> <C> <C>
89,656 $10.00 89,656 May 1998
100,000 $18.95 100,000 June 2000
30,000 $21.88 12,000 May 2003
30,000 $20.40 6,000 December 2003
</TABLE>
4. PROVISION FOR INCOME TAXES
--------------------------
The provision for income taxes was computed using a tax rate of 39.2%. The
tax rate was applied to loss before income taxes and extraordinary item,
after adjusting for amortization of cost in excess of net assets acquired.
5. LOSS PER COMMON SHARE
---------------------
Loss per common share is computed by dividing net loss, less preferred
dividend requirements, by the weighted average number of common shares
outstanding. See Exhibit 11, Statement Re Computation of Per Share
Earnings.
6. CASH AND CASH EQUIVALENTS
-------------------------
Cash and cash equivalents includes highly liquid instruments, with original
maturities of three months or less when purchased. There were cash
equivalents totaling approximately $25.2 million and $3.0 million as of the
last day of February 1995 and November 1995.
7. EXTRAORDINARY ITEM
------------------
F-36
<PAGE>
In conjunction with the exchange of the senior subordinated debentures and
the repurchase of the $10.0 million of first mortgage bonds, as discussed
in note 2, unamortized original issue discount of approximately $2.0
million and unamortized issuance costs of approximately $1.0 million were
written off, resulting in an extraordinary loss, net of taxes, of
approximately $1.8 million.
8. GAIN ON INSURANCE SETTLEMENT
----------------------------
Gain on insurance settlement of approximately $17.0 million relates to the
Company's settlement of its first party claims with its insurance carriers
for business interruption, property damage and out-of-pocket expenses with
respect to the December 1991 fire at the Company's Kansas City, Kansas
warehouse facility.
9. NEW ACCOUNTING STANDARD
-----------------------
The Company has not implemented the requirements of Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," although it will be required to do so for fiscal
years beginning March 1, 1996 and thereafter. This statement generally
requires assessment of recoverability of an asset after events or
circumstances that indicate an impairment to the asset and its future cash
flows. Any impairment loss would be recognized as a one-time charge to
earnings affecting results of operations, but would not affect the cash
flow of the Company. At this time, the Company does not believe there will
be an impairment loss to report.
F-37
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution.
All expenses in connection with the issuance and distribution of the
Notes being registered will be paid by Americold Corporation (the "Company").
These expenses are estimated as follows:
<TABLE>
<S> <C>
SEC Registration Fee..................... $ 41,380
NASD Filing Fee.......................... 12,500
Accounting Fees and Expenses*............ __________
Legal Fees and Expenses*................. __________
Blue Sky Legal Fees and Expenses*........ __________
Transfer Agent and Registrar Fees*....... __________
Printing and Engraving*.................. __________
Miscellaneous*........................... __________
Total............................... $
==========
</TABLE>
- -------------------------
* Estimated
ITEM 14. Indemnification of Directors and Officers.
The Oregon Business Corporation Act (the "Act") authorizes the
indemnification of an officer or director, made party to a proceeding because
the officer or director is or was an officer or director, against liability
(including amounts paid in settlement) incurred in the proceeding and against
expenses with respect to the proceeding (including attorney's fees) if: (a) the
conduct of the officer or director was in good faith, (b) the officer or
director reasonably believed that his conduct was in the best interests of the
corporation or at least not opposed to its best interests, (c) in the case of a
criminal proceeding, the officer or director had no reasonable cause to believe
his conduct was unlawful, (d) in the case of any proceeding by or in the right
of the corporation, unless a court otherwise determines, if such officer or
director shall not have been adjudged liable, and (e) in connection with any
other proceeding charging improper personal benefit to the director or officer,
unless a court otherwise determines, in which the director or officer was not
adjudged liable on the basis that personal benefit was improperly received by
the director or officer. The Company's Articles of Incorporation and Bylaws
allow the Company to indemnify officers and directors to the fullest extent
permissible by law.
II-1
<PAGE>
The Act further provides that the Articles of Incorporation of a
corporation may provide that no director shall be personally liable to a
corporation or its shareholders for monetary damages for conduct as a director,
except that such provision does not eliminate the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii) for any unlawful
distribution as defined under the Act, or (iv) for any transaction from which
the director derived an improper personal benefit. The Company's Articles of
Incorporation provide that, to the fullest extent permissible by law, no
director shall be personally liable to the Company or its shareholders for money
damages.
The Company has entered into indemnification agreements with each
director and certain officers which indemnify them to the full extent authorized
or permitted by the Act.
Reference is made to Section ___ of the Underwriting Agreement to be
filed as Exhibit (1) hereto, which provides for indemnification of the
registrant against certain liabilities, including certain liabilities under the
Securities Act, in certain circumstances by the Underwriters.
In addition, the Company has obtained directors' and officers'
liability insurance which insures its directors and officers, and directors and
officers of its subsidiary, against certain liabilities, excluding certain
liabilities under Federal and state securities laws.
ITEM 15. Recent Sales of Unregistered Securities.
During the past three fiscal years, the Company has not engaged in the
sale of any of the Company's securities that were not registered under the
Securities Act, except that the Company has granted options to certain of its
officers to purchase an aggregate of 60,000 shares of common stock pursuant to
the Option Plan, at exercise prices between $20.40 and $21.88 per share. None
of the options granted since December 1993 have been exercised.
ITEM 16. Exhibits and Financial Statement Schedules.
(a) EXHIBITS
--------
(1) Form of Underwriting Agreement
(2) Plan of Reorganization, dated April 14, 1995 (filed as Exhibit
(2) to the Form 10-K, dated May 30, 1995, for the fiscal year
ended
II-2
<PAGE>
February 28, 1995 and incorporated herein by reference)
(3) Articles of Incorporation and Bylaws
(i) Second Restated Articles of Incorporation, as amended
(filed as Exhibit (3)(i) to the Form 10-Q, dated July 14,
1995, for the quarter ended May 31, 1995, and incorporated
herein by reference)
(ii) Restated Bylaws, as amended (filed as Exhibit (3)(ii) to
the Form 10-K, dated May 30, 1995, for the fiscal year
ended February 28, 1995 and incorporated herein by
reference)
(4) Instruments defining the rights of security holders, including
indentures
(i) Articles IV, V and VI of the Second Restated Articles of
Incorporation as amended (see Exhibit (3)(i))
(ii) Articles I, II, V, VII and X of the Restated Bylaws as
amended (see Exhibit (3)(ii))
(iii) Second Restated Stockholders' Agreement dated as of
December 24, 1986, as amended as of April 15, 1987 and
June 22, 1987 (filed as Exhibit (4)(iv) to the Form 10-K,
dated May 27, 1988, for the fiscal year ended February 29,
1988 and incorporated herein by reference)
(iv) Third Amendment dated May 22, 1990 to Stockholders'
Agreement dated as of December 24, 1986, as amended as of
June 22, 1987 (filed as Exhibit (4) to the Form 10-Q dated
July 12, 1990, for the quarter ended May 31, 1990 and
incorporated herein by reference)
(v) Amended and Restated Indenture dated March 9, 1993,
relating to the First Mortgage Bonds (filed as Exhibit
(4)(vi) to the Registration Statement on Form S-1
(Registration No. 33-53584) filed with the Commission on
March 2, 1993 and incorporated herein by reference)
(vi) Stock Pledge Agreement dated as of February 28, 1989,
between Registrant and The Connecticut National Bank
(filed as Exhibit
II-3
<PAGE>
(19)(iii) to the Form 10-Q, dated October 14, 1992, for
the quarter ended August 31, 1992 and incorporated herein
by reference)
(vii) Stock Pledge Agreement dated as of February 28, 1989
between Registrant and United States National Bank of
Oregon, acting as agent pursuant to Article IX of the Bank
Credit Agreement, as amended, dated as of April 30, 1987
(filed as Exhibit (19)(iv) to the Form 10-Q, dated October
14, 1992, for the quarter ended August 31, 1992 and
incorporated herein by reference)
(viii) Form of Amended and Restated Security Agreement relating
to the First Mortgage Bonds (filed as Exhibit (4)(xiv) to
the Registration Statement on Form S-1 (Registration No.
33-53584) filed with the Commission on March 2, 1993 and
incorporated herein by reference)
(ix) Form of Series A Bond (included as part of Exhibit (4)(v)
(x) Form of Series B Bond (included as part of Exhibit (4)(v))
(xi) Form of Amended and Restated Cash Collateral Pledge
Agreement relating to the First Mortgage Bonds (filed as
Exhibit (4)(xix) to the Registration Statement on Form S-1
(Registration No. 33-53584) filed with the Commission on
March 2, 1993 and incorporated herein by reference)
(xii) Form of Amended Stock Pledge Agreement relating to the
First Mortgage Bonds (filed as Exhibit (4)(xx) to the
Registration Statement on Form S-1 (Registration No.
33-53584) filed with the Commission on March 2, 1993 and
incorporated herein by reference)
(xiii) Form of Amended Mortgage, Assignment of Rents and Security
Agreement relating to the First Mortgage Bonds (filed as
Exhibit (4)(xxi) to the Registration Statement on Form S-1
(Registration No. 33-53584) filed with the Commission on
March 2, 1993 and incorporated herein by reference)
II-4
<PAGE>
(xiv) First Supplemental Indenture relating to the First
Mortgage Bonds (filed as Exhibit 4.1 to the Form 10-Q,
dated July 14, 1995 for the quarter ended May 31, 1995 and
incorporated herein by reference)
(xv) Indenture dated as of June 30, 1995, between Registrant
and United States Trust Company of New York, as Trustee
(filed as Exhibit 4.2 to the Form 10-Q, dated July 14,
1995 for the quarter ended May 31, 1995 and incorporated
herein by reference)
(xvi) Second Amended and Restated Investment Agreement relating
to the First Mortgage Bonds (filed as Exhibit 4.3 to the
Form 10-Q, dated July 14, 1995, for the quarter ended
May 31, 1995, and incorporated herein by reference)
(xvii) Form of 15% Senior Subordinated Debentures due 2007
(included as part of Exhibit 4(xv)
(xviii) Form of Indenture relating to the __% Senior Subordinated
Notes due 2008, between Registrant and United States Trust
Company of New York, as Trustee
(xix) Form of ___% Senior Subordinated Notes due 2008
(included as part of Exhibit 4(xviii))
(5) Opinion of Tonkon, Torp, Galen, Marmaduke & Booth regarding
legality of securities being registered
(10) Material Contracts
(i) Americold Corporation Key Employee Stock Option Plan, as
amended, effective July 12, 1988 (filed as Exhibit (4)(i)
to the Form 10-Q dated October 14, 1988, for the quarter
ended August 31, 1988 and incorporated herein by
reference)
(ii) Form of Nonstatutory Stock Option Agreement, as amended,
entered into between Registrant and certain employees
pursuant to the Americold Corporation Key Employee Stock
Option Plan (filed as Exhibit (4)(ii) to the Form 10-Q
dated October 14, 1988, for the quarter ended August 31,
1988 and incorporated herein by reference)
II-5
<PAGE>
(iii) Second Amended and Restated Investment Agreement relating
to the First Mortgage Bonds (see Exhibit (4)(xvi))
(iv) Form of Amended and Restated Security Agreement relating
to the First Mortgage Bonds (see Exhibit (4)(viii))
(v) Stock Pledge Agreement dated as of February 28, 1989,
between Registrant and The Connecticut National Bank (see
Exhibit (4)(vi))
(vi) Stock Pledge Agreement dated as of February 28, 1989,
between Registrant and United States National Bank of
Oregon, a national banking association, acting as agent
pursuant to Article IX of the Bank Credit Agreement, as
amended, dated as of April 30, 1987 (see Exhibit (4)(vii))
(vii) Americold Corporation Management Incentive Plan (filed as
Exhibit (10)(iii) to the Form 10-K, dated May 27, 1988,
for the fiscal year ended February 29, 1988 and
incorporated herein by reference)
(viii) Form of Indemnity Agreement entered into between the
Company and each of its officers and directors (filed as
Exhibit (4)(x) to Form 10-K dated May 29, 1992 for the
fiscal year ended February 29, 1992 and incorporated
herein by reference)
(ix) Second Restated Stockholders' Agreement, dated as of
December 24, 1986, as amended as of June 22, 1987 (see
Exhibit (4)(iii))
(x) Third Amendment dated May 22, 1990 to Stockholders'
Agreement dated as of December 24, 1986, as amended as of
June 22, 1987 (see Exhibit (4)(iv))
(xi) Amended and Restated Indenture relating to the First
Mortgage Bonds (see Exhibit (4)(v))
(xii) Form of Amended and Restated Cash Collateral Pledge
Agreement relating to the First Mortgage Bonds (see
Exhibit (4)(xi))
II-6
<PAGE>
(xviii) Form of Amended Stock Pledge Agreement relating to the
First Mortgage Bonds (see Exhibit (4)(xii))
(xix) Indemnification Agreement dated October 31, 1991 between
the Company and The First Boston Corporation (included as
Exhibit (10)(xx) to the Registration Statement on
Form S-2 (Registration No. 33-41963) filed with the
Commission on July 31, 1991 and incorporated herein by
reference)
(xx) Master Lease Agreement dated February 28, 1989, between
Registrant and Americold Services Corporation (filed as
Exhibit (19)(vi) to the Form 10-Q, dated October 14, 1992,
for the quarter ended August 31, 1992 and incorporated
herein by reference)
(xxi) Americold Transportation Systems Purchase of Joint
Venture Interest, effective November 1, 1991, between
Registrant and Superior Transportation Systems, Inc.
(filed as Exhibit (19)(vii) to the Form 10-Q, dated
October 14, 1992, for the quarter ended August 31, 1992
and incorporated herein by reference)
(xxii) Lease dated May 15, 1992, between Registrant and Oregon
Warehouse Partners, a Texas general partnership (lease
agreement for Ontario, Oregon facility) (filed as Exhibit
(19)(viii) to the Form 10-Q, dated October 14, 1992, for
the quarter ended August 31, 1992 and incorporated herein
by reference)
(xxiii) Form of First Amendment to Master Lease Agreement between
Registrant and Americold Services Corporation (filed as
Exhibit (10)(xxxi) to the Registration Statement on
Form S-1 (Registration No. 33-53584) filed with the
Commission on March 2, 1993 and incorporated hereby by
reference)
(xxiv) Nonstatutory Stock Option Agreement dated May 19, 1993
between the Company and John P. LeNeveu (filed as Exhibit
(10)(i) to the Form 10-Q, dated January 13, 1994 for the
quarter ended November 30, 1993, and incorporated herein
by reference)
II-7
<PAGE>
(xxv) Nonstatutory Stock Option Agreement dated December 17,
1993 between the Company and J. Roy Coxe (filed as
Exhibit 10 (xxvii) to the Form 10-K, dated May 26, 1994
for the fiscal year ended February 28, 1994 and
incorporated herein by reference).
(xxvi) Second Amended and Restated Credit Agreement between the
Company and United States National Bank of Oregon dated
June 19, 1995 (filed as Exhibit 10.1 to the Form 10-Q,
dated July 14, 1994 for the quarter ended May 31, 1995,
and incorporated herein by reference)
(xxvii) Employment Agreement dated November 1, 1995, between the
Company and Ronald H. Dykehouse (filed as Exhibit 10.1 to
the Form 10-Q dated January 16, 1996 for the quarter ended
November 30, 1995 and incorporated herein by reference)
(xxviii) Form of Employment Agreement dated August 1, 1995,
between the Company and certain named executive officers,
and schedule thereto (filed as Exhibit 10.2 to the
Form 10-Q dated January 16, 1996 for the quarter ended
November 30, 1995 and incorporated herein by reference)
(xxix) Form of Covenant Not to Compete and Consulting and Non-
Disclosure Agreement between the Company and certain named
executive officers, and schedule thereto (filed as Exhibit
10.3 to the Form 10-Q dated January 16, 1996 for the
quarter ended November 30, 1995 and incorporated herein by
reference)
(11) Statement regarding computation of per share earnings
(21) Subsidiaries of the Registrant
(23) Consent of KPMG Peat Marwick LLP
(24) Powers of Attorney (included on page II-11)
(25) Statement of eligibility of trustee
II-8
<PAGE>
(b) Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts
II-9
<PAGE>
ITEM 17. Undertakings.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus 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-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Portland,
State of Oregon, on January 30, 1996.
AMERICOLD CORPORATION
By: /s/ Ronald H. Dykehouse
------------------------------
Ronald H. Dykehouse
Chairman of the Board,
President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Ronald H.
Dykehouse, Joel M. Smith and Lon V. Leneve, and each of them, attorneys-in-fact
for the undersigned, each with the power of substitution, for the undersigned in
any and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments) and any subsequent registration
statement filed pursuant to Rule 462(b) promulgated under the Securities Act of
1933 and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITIES DATE
--------- ---------- ----
<S> <C> <C>
/s/Ronald H. Dykehouse Chairman of the Board, January 30, 1996
- ---------------------- President and Chief
Ronald H. Dykehouse Executive Officer
/s/Joel M. Smith Director, Senior Vice January 30, 1996
- ---------------------- President and Chief
Joel M. Smith Financial Officer
(principal financial
officer)
</TABLE>
II-11
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Lon V. Leneve Vice President and January 30, 1996
- ----------------------- Treasurer (principal
Lon V. Leneve accounting officer)
/s/ Frank Edelstein Director January 30, 1996
- -----------------------
Frank Edelstein
/s/ William A. Marquard Director January 22, 1996
- -----------------------
William A. Marquard
/s/ George E. Matelich Director January 30, 1996
- -----------------------
George E. Matelich
Director January , 1996
- -----------------------
James C. Pigott
</TABLE>
II-12
<PAGE>
SCHEDULE II
AMERICOLD CORPORATION
Valuation and Qualifying Accounts
Years ended the last day of
February 1993, 1994 and 1995
(In Thousands)
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance
beginning costs and at end
of period expenses Deductions of period
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended the last day
of February 1993 -
Allowance for doubtful
accounts - other
receivables $ -- $4,100 $ -- $4,100
Year ended the last day
of February 1994 -
Allowance for doubtful
accounts - other
receivables $4,100 $ -- $ -- $4,100
Year ended the last day
of February 1995 -
Allowance for doubtful
accounts - other
receivables $ $ $ $
</TABLE>
S-1
<PAGE>
AMERICOLD CORPORATION
FORM S-1
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
- ------- ----
<C> <S> <C>
(1)* Form of Underwriting Agreement
(4)(xviii) Form of Indenture
(11) Statement re Computation of Per Share Earnings
(21) Subsidiaries of the Registrant
(23) Consent of KPMG Peat Marwick LLP
(25)* Statement of eligibility of trustee
</TABLE>
- -------------------------
* To be filed by amendment
<PAGE>
(Exhibit 4 xviii)
Draft--January 25, 1996
================================================================================
AMERICOLD CORPORATION,
as Issuer,
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
-------------------------
INDENTURE
Dated as of , 1996
---------
-------------------------
% Senior Subordinated Notes, Due 2008
---
<PAGE>
AMERICOLD CORPORATION
% New Subordinated Notes, Due 2008
---
CROSS-REFERENCE TABLE
Between the Indenture and the Trust Indenture Act of 1939
<TABLE>
<CAPTION>
TIA
Section Indenture Section
------- -----------------
<S> <C>
310(a)(1) ................. 7.10
(a)(2) ................. 7.10
(a)(3) ................. Not Applicable
(a)(4) ................. Not Applicable
(b) ................. 7.08; 7.10
(c) ................. Not Applicable
311(a) ................. 7.11
(b) ................. 7.11
(c) ................. Not Applicable
312(a) ................. 4.15
(b) ................. 11.02
(c) ................. 11.02
313(a) ................. 7.06
(b)(1) ................. Not Applicable
(b)(2) ................. 7.06
(c) ................. 7.06; 11.03
(d) ................. 7.06
314(a) ................. 4.03; 4.16; 11.03
(b)(1) ................. Not Applicable
(b)(2) ................. 4.19
(c)(1) ................. 4.19
(c)(2) ................. 4.19
(c)(3) ................. Not Applicable
(d) ................. Not Applicable
(e) ................. 4.20
(f) ................. Not Applicable
315(a) ................. 7.01
(b) ................. 7.05; 11.03
(c) ................. 7.01
(d) ................. 7.01
(e) ................. 5.11
316(a)
(last sen-
tence) ................. 11.04
(a)(1)(A) ................. 5.05
(a)(1)(B) ................. 5.04
(a)(2) ................. Not Applicable
(b) ................. 5.07
317(a)(1) ................. 5.08
(a)(2) ................. 5.09
(b) ................. 4.13
318(a) ................. 11.01
</TABLE>
- --------------------------------
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS/1/
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE ONE Definitions................................................... 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act............. 20
SECTION 1.03. Rules of Construction......................................... 21
ARTICLE TWO Issuance, Description, Execution and Exchange of Securities... 21
SECTION 2.01. Designation, Amount and Issue of Securities................... 21
SECTION 2.02. Authentication and Delivery of Securities..................... 22
SECTION 2.03. Form of Securities and Trustee's Certificate of
Authentication Generally...................................... 22
SECTION 2.04. Denomination and Date of Securities; Payment of Principal
and Interest.................................................. 22
SECTION 2.05. Execution of Securities....................................... 23
SECTION 2.06. Exchange and Registration of Transfer of Securities........... 24
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Securities............... 25
SECTION 2.08. Cancellation of Surrendered Securities........................ 26
SECTION 2.09. Temporary Securities.......................................... 27
SECTION 2.10. Foreign Holder Certification.................................. 27
SECTION 2.11. CUSIP Numbers................................................. 28
ARTICLE THREE Redemption of Securities...................................... 28
SECTION 3.01. Optional Redemption........................................... 28
SECTION 3.02. Notice of Redemption.......................................... 29
SECTION 3.03. Procedures for Redemption..................................... 30
SECTION 3.04. Selection of Securities To Be Redeemed........................ 31
SECTION 3.05. When Securities Called for Redemption Become Due
and Payable................................................... 31
ARTICLE FOUR Particular Covenants, Representations and Warranties of
the Issuer.................................................... 32
SECTION 4.01. Validity of Securities........................................ 32
SECTION 4.02. Payment of Principal of, and Interest on Securities........... 32
SECTION 4.03. SEC Reports................................................... 32
SECTION 4.04. Limitation on Restricted Payments............................. 33
SECTION 4.05. Limitation on Senior Subordinated Debt........................ 36
SECTION 4.06. Limitation on Debt............................................ 37
</TABLE>
- ---------------------
1. This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
i
<PAGE>
<TABLE>
<S> <C>
SECTION 4.07. Limitation on Subsidiary Debt and Preferred Stock............ 39
SECTION 4.08. Limitation on Restrictions on Distributions from
Subsidiaries................................................. 40
SECTION 4.09. Limitation on Sales of Assets and Subsidiary Stock........... 41
SECTION 4.10. Limitation on Transactions with Affiliates................... 45
SECTION 4.11. Change of Control............................................ 46
SECTION 4.12. Appointment of Agents........................................ 47
SECTION 4.13. Paying Agents to Hold Funds in Trust......................... 48
SECTION 4.14. Appointment of Trustee by Issuer............................. 48
SECTION 4.15. Availability of Information.................................. 48
SECTION 4.16. Books of Account; Inspection by the Trustee; Notices;
Statements as to Compliance.................................. 49
SECTION 4.17. Payment of Taxes and Other Claims............................ 50
SECTION 4.18. Corporate Existence and Rights............................... 50
SECTION 4.19. Maintenance of Properties.................................... 51
SECTION 4.20. Maintenance of Insurance..................................... 51
SECTION 4.21. Certificate and Opinion as to Conditions Precedent........... 52
SECTION 4.22. Statements Required in Certificate or Opinion................ 52
SECTION 4.23. Further Instruments and Acts................................. 53
ARTICLE FIVE Events of Default and Remedies............................... 53
SECTION 5.01. Events of Default............................................ 53
SECTION 5.02. Acceleration................................................. 55
SECTION 5.03. Other Remedies............................................... 56
SECTION 5.04. Waiver of Past Defaults...................................... 56
SECTION 5.05. Control by Majority.......................................... 56
SECTION 5.06. Limitation on Suits.......................................... 57
SECTION 5.07. Rights of Holders To Receive Payment......................... 57
SECTION 5.08. Collection Suit by Trustee................................... 57
SECTION 5.09. Trustee May File Proofs of Claim............................. 58
SECTION 5.10. Priorities .................................................. 58
SECTION 5.11. Undertaking for Costs........................................ 59
SECTION 5.12. Waiver of Stay or Extension Laws............................. 59
ARTICLE SIX Discharge of Indenture; Defeasance........................... 59
SECTION 6.01. Discharge of Liability on Securities; Defeasance............. 59
SECTION 6.02. Conditions to Defeasance..................................... 61
SECTION 6.03. Application of Trust Money................................... 62
SECTION 6.04. Repayment to Issuer.......................................... 62
SECTION 6.05. Indemnity for Government Obligations......................... 63
SECTION 6.06. Reinstatement................................................ 63
ARTICLE SEVEN Concerning the Trustee....................................... 63
SECTION 7.01. Duties of Trustee............................................ 63
SECTION 7.02. Rights of Trustee............................................ 64
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 7.03. Individual Rights of Trustee................................ 65
SECTION 7.04. Trustee's Disclaimer........................................ 65
SECTION 7.05. Notice of Defaults.......................................... 65
SECTION 7.06. Reports by Trustee to Holders............................... 66
SECTION 7.07. Compensation and Indemnity.................................. 66
SECTION 7.08. Replacement of Trustee...................................... 67
SECTION 7.09. Successor Trustee by Merger................................. 69
SECTION 7.10. Eligibility; Disqualification............................... 69
SECTION 7.11. Preferential Collection of Claims Against Corporation....... 69
ARTICLE EIGHT Amendments, Supplements and Waivers......................... 69
SECTION 8.01. Without Consent of Holders.................................. 69
SECTION 8.02. With Consent of Holders..................................... 70
SECTION 8.03. Compliance with Trust Indenture Act......................... 71
SECTION 8.04. Revocation and Effect of Consents........................... 71
SECTION 8.05. Notation on or Exchange of Securities....................... 72
SECTION 8.06. Trustee To Sign Amendments.................................. 72
SECTION 8.07. Waiver of Compliance by Holders............................. 72
ARTICLE NINE Successor Company........................................... 73
SECTION 9.01. When Issuer May Merge or Transfer Assets.................... 73
ARTICLE TEN Subordination............................................... 74
SECTION 10.01. Securities Subordinated to Senior Debt...................... 74
SECTION 10.02. No Payment on Securities in Certain Circumstances........... 74
SECTION 10.03. Payment Over of Proceeds Upon Dissolution, etc.............. 76
SECTION 10.04. Subrogation................................................. 78
SECTION 10.05. Obligations of Issuer Unconditional......................... 79
SECTION 10.06. Notice to Trustee........................................... 80
SECTION 10.07. Reliance on Judicial Order or Certificate of Liquidating
Agent....................................................... 81
SECTION 10.08. Trustee's Relation to Senior Debt........................... 81
SECTION 10.09. Subordination Rights Not Impaired by Acts or Omissions
of the Issuer or Holders of Senior Debt..................... 82
SECTION 10.10. Holders Authorize Trustee to Effectuate Subordination
of Securities............................................... 82
SECTION 10.11. Not to Prevent Events of Default............................ 82
SECTION 10.12. Trustee's Compensation Not Prejudiced....................... 83
SECTION 10.13. No Waiver of Subordinated Provisions........................ 83
SECTION 10.14. Payments May Be Paid Prior to Dissolution................... 83
SECTION 10.15. Consent of Holders of Senior Debt Under the Credit
Agreement and First Mortgage Bonds.......................... 83
ARTICLE ELEVEN Miscellaneous Provisions.................................... 84
SECTION 11.01. Trust Indenture Act Controls................................ 84
SECTION 11.02. Communication by Holders with Other Holders................. 84
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 11.03. Notices.................................................... 84
SECTION 11.04. When Treasury Securities Disregarded....................... 85
SECTION 11.05. Rules by Trustee, Paying Agent and Security Registrar...... 85
SECTION 11.06. Legal Holidays............................................. 85
SECTION 11.07. Successors................................................. 86
SECTION 11.08. Multiple Originals......................................... 86
SECTION 11.09. Separability Clause........................................ 86
SECTION 11.10. Governing Law.............................................. 86
SECTION 11.11. Table of Contents; Headings................................ 86
</TABLE>
ACKNOWLEDGMENTS
EXHIBIT A - Form of Security
iv
<PAGE>
INDENTURE, dated as of ________, 1996, by and between AMERICOLD
CORPORATION, an Oregon corporation (the "Issuer"), and UNITED STATES TRUST
COMPANY OF NEW YORK, a New York banking corporation, as Trustee hereunder (the
"Trustee").
R E C I T A L S
- - - - - - - -
WHEREAS, the Issuer has duly authorized the creation of an issue of __%
Senior Subordinated Notes, due 2008 (the "Securities") of substantially the
tenor and amount hereinafter set forth, and to provide therefor the Issuer has
duly authorized the execution and delivery of this Indenture. All things
necessary to make the Securities, when executed by the Issuer and authenticated
and delivered hereunder and duly issued by the Issuer, the valid obligations of
the Issuer, and to make this Indenture a valid agreement of the Issuer, in
accordance with their and its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the
premises and the purchase of the Securities by the Holders thereof, it is
mutually covenanted and agreed, for the equal and proportionate benefit of all
Holders, as follows:
ARTICLE ONE
Definitions
-----------
SECTION 1.01. Definitions. The terms defined in this Section (except as
-----------
herein otherwise expressly provided or unless the context otherwise requires),
for all purposes of this Indenture and of any indenture supplemental hereto,
shall have the respective meanings specified in this Section.
Affiliate: The term "Affiliate" means with respect to any Person, (i)
--------- -
any other Person (or group of Persons acting in concert in respect of such
specified Person) which, directly or indirectly, is in control of, is controlled
by or is under common control with such specified Person or (ii) any other
--
Person who is a director, executive officer or general partner (a) of such
-
specified Person, (b) of any Subsidiary of such specified Person or (c) of any
- -
Person described in clause (i) above. For purposes of this definition, control
-
of a Person means the power, direct or
<PAGE>
indirect, to direct or cause the direction of the management and policies of
such Person, whether by contract or otherwise; and the terms "control" and
"controlled" have meanings correlative to the foregoing; provided, however, that
-------- -------
a Person shall not be deemed to be an Affiliate of another Person solely as a
result of a warehouse management contract entered into between such Persons in
the ordinary course of business.
Asset Disposition: The term "Asset Disposition" means any sale, lease,
-----------------
transfer or other disposition (or series of related sales, leases, transfers or
dispositions) of shares of Capital Stock of a Subsidiary (other than directors'
qualifying shares), property or other assets (each referred to for the purposes
of this definition as a "disposition") by the Issuer or any of its Subsidiaries,
other than (i) a disposition by a Subsidiary to the Issuer or by the Issuer or a
-
Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of property or
--
assets at fair market value in the ordinary course of business, (iii) a
---
disposition of obsolete or worn out assets in the ordinary course of business,
(iv) a disposition subject to and made in accordance with Section 3.01 of the
- ---
First Mortgage Bonds Indenture, (v) a disposition subject to Section 4.04, or
-
(vi) a sale-and-leaseback transaction pursuant to which either (x) the lease in
- --- -
such sale-and-leaseback transaction is for a period, including renewal rights,
of not in excess of three years or (y) the Issuer could incur Attributable Debt
-
subject to Section 4.06.
Attributable Debt: The term "Attributable Debt" in respect of a sale-and-
-----------------
leaseback transaction means, as at the time of determination, the present value
(discounted at the interest rate borne by the Series B Bonds compounded
annually) of the total obligations of the lessee for rental payments during the
remaining term of the lease included in such arrangement (including any period
for which such lease has been extended).
Average Life: The term "Average Life" means, as of the date of
------------
determination, with respect to any Debt or Preferred Stock, the quotient
obtained by dividing (i) the sum of the products of the numbers of years from
-
the date of determination to the dates of each successive scheduled principal
payment of such Debt or redemption payment on such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
--
2
<PAGE>
Bankruptcy Law: The term "Bankruptcy Law" means Title 11, United States
--------------
Code, or any similar federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
Board of Directors: The term "Board of Directors" means the Board of
------------------
Directors of the Issuer or any committee thereof duly authorized to act on
behalf of such Board.
Board Resolution: The term "Board Resolution" means a copy of a resolution
----------------
certified by the Secretary or an Assistant Secretary of the Issuer to have been
duly adopted by the Board of Directors of the Issuer and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
Bond Trustee: The term "Bond Trustee" means the trustee under the First
------------
Mortgage Bonds Indenture.
Business Day: The term "Business Day" means each day which is not a Legal
------------
Holiday.
Capital Lease Obligation: The term "Capital Lease Obligation" of a Person
------------------------
means any obligation which is required to be classified and accounted for as a
capital lease on the face of a balance sheet of such Person prepared in
accordance with generally accepted accounting principles; the amount of such
obligation shall be the capitalized amount thereof, determined in accordance
with generally accepted accounting principles; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty.
Capital Stock: The term "Capital Stock" means any and all shares,
-------------
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) corporate stock, including
any Preferred Stock.
Cash: The term "Cash" means coin or currency of the United States
----
government.
Change of Control: The term "Change of Control" means the occurrence of
-----------------
any of the following events:
3
<PAGE>
(i) prior to the earlier to occur of (A) the first public offering (which,
-
for purposes of this definition, shall mean the sale of shares of common stock
of the relevant entity pursuant to an effective registration statement under the
Securities Act that covers (together with any such prior effective registra-
tions) not less than 25% of the outstanding shares of common stock of such
entity on a fully diluted basis after giving effect to all such registrations)
of common stock of Parent or (B) the first public offering of common stock of
-
the Issuer, the Permitted Holders cease to be 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 a majority in the aggregate of
the total voting power of the Voting Stock of the Issuer, whether as a result of
issuance of securities of the Issuer, any merger, consolidation, liquidation or
dissolution of the Issuer, any direct or indirect transfer of securities by
Parent or otherwise (for purposes of this clause (i) and clause (ii) below, the
Permitted Holders shall be deemed to beneficially own any Voting Stock of a
corporation (the "specified corporation") held by any other corporation (the
"parent corporation") so long as the Permitted Holders beneficially own (as so
defined), directly or indirectly, in the aggregate a majority of the voting
power of the Voting Stock of the parent corporation);
(ii) any "Person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in clause (i) above), directly or indirectly, of
more than 30% of the total voting power of the Voting Stock of the Issuer;
provided, however, that the Permitted Holders beneficially own (as so defined),
- -------- -------
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Issuer than such other Person and do not
have the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the Issuer (for
the purposes of this clause (ii), such other Person shall be deemed to
beneficially own any Voting Stock of a specified corporation held by a parent
corporation, if such other Person "beneficially owns"
4
<PAGE>
(as so defined), directly or indirectly, more than 30% of the voting power
of the Voting Stock of such parent corporation and the Permitted Holders
"beneficially own" (as so defined), directly or indirectly, in the
aggregate a lesser percentage of the voting power of the Voting Stock of
such parent corporation and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the Board of Directors of such parent corporation);
(iii) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the
Issuer (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Issuer was approved by a vote of 66 2/3% of the directors of the Issuer
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Issuer then in office; or
(iv) the Issuer consolidates with or merges with or into any other
Person or conveys, transfers or leases all or substantially all of its
assets to any Person or any Person consolidates with or merges into the
Issuer, in either event pursuant to a transaction in which either (A) the
-
outstanding Voting Stock of the Issuer is changed into or exchanged for
Cash, securities or other property (excluding, however, any such
transaction where the outstanding Voting Stock of the Issuer is changed
into or exchanged for Voting Stock of the surviving or transferee
corporation which is neither Redeemable Stock nor Exchangeable Stock) or
(B) the holders of the Voting Stock of the Issuer immediately prior to such
-
transaction, together with Kelso & Company and Affiliates of Kelso &
Company which are either controlled by or under common control with Kelso &
Company, own, directly or indirectly, in the aggregate, less than 50.01% of
the Voting Stock of the surviving Person immediately after such
transaction.
Consolidated EBITDA Coverage Ratio: The term "Consolidated EBITDA Coverage
----------------------------------
Ratio" as determined on any date means the ratio of (i) the aggregate amount of
-
Consolidated Net Income plus (to the extent deducted in calculating Consolidated
Net Income) Consolidated Interest Expense, income taxes, depreciation expense,
amortization expense,
5
<PAGE>
non-cash write-offs of deferred financing costs, non-cash deductions for
contributions to the ESOP and any loss realized upon the sale or other
disposition of any property, plant or equipment of the Issuer or a Subsidiary,
including pursuant to any sale or leaseback arrangement (but without giving any
effect to any extraordinary gain or loss) for the Reference Period to (ii) the
--
aggregate amount of Consolidated Interest Expense for the Reference Period.
Consolidated Interest Expense: The term "Consolidated Interest Expense"
-----------------------------
means, for any period, the total interest expense of the Issuer and its
consolidated Subsidiaries, including (i) interest expense attributable to
-
capital leases, (ii) amortization of debt discount and debt issuance cost, (iii)
-- ---
capitalized interest, (iv) noncash interest payments, (v) commissions, discounts
-- -
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, (vi) net costs under Interest Rate Protection Agreements
--
(including amortization of fees), (vii) Preferred Stock dividends in respect of
---
all Preferred Stock held by Persons other than the Issuer or a Wholly Owned
Subsidiary, (viii) interest incurred in connection with investments in
----
discontinued operations and (ix) interest actually paid by the Issuer or any of
--
its consolidated Subsidiaries under any guarantee of Debt or any other
obligation of any other Person.
Consolidated Net Income: The term "Consolidated Net Income" means, for any
-----------------------
period, the net income of the Issuer and its consolidated Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles; provided, however, that there shall not be included in
-------- -------
such Consolidated Net Income:
(i) any net income of any Person if such Person is not a Subsidiary,
except that (A) the Issuer's equity in the net income of any such Person
-
for such period shall be included in such Consolidated Net Income up to the
aggregate amount of Cash actually distributed by such Person during such
period to the Issuer or a Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to a Subsidiary,
to the limitations contained in clause (iii) below) and (B) the Issuer's
-
equity in a net loss of any such Person for such period shall be included
in determining such Consolidated Net Income;
6
<PAGE>
(ii) any net income of any Person acquired by the Issuer or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(iii) any net income of any Subsidiary if such Subsidiary is subject
to restrictions, directly or indirectly, on the payment of dividends or the
making of distributions by such Subsidiary, directly or indirectly, to the
Issuer, except that (A) the Issuer's equity in the net income of any such
-
Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of Cash actually distributed by such
Subsidiary during such period to the Issuer or another Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to another Subsidiary, to the limitation contained in this
clause) and (B) the Issuer's equity in a net loss of any such Subsidiary
-
for such period shall be included in determining such Consoli dated Net
Income;
(iv) any gain (but not loss) realized upon the sale or other
disposition of any property, plant or equipment of the Issuer or its
consolidated Subsidiar ies (including pursuant to any sale and leaseback
arrangement) which is not sold or otherwise disposed of in the ordinary
course of business and any gain (but not loss) realized upon the sale or
other disposition of any Capital Stock of any Person; or
(v) the cumulative non-cash effect of a change in accounting
principles, including (A) the cumulative or one-time non-cash charges
-
associated with the implementation of SFAS 106 by the Issuer with respect
to services rendered by employees in periods prior to its implementation,
but excluding any effects of such implementation with respect to services
rendered in periods following such implementation and (B) any cumulative or
-
one-time non-cash charges associated with the implementation of SFAS 109.
Consolidated Net Tangible Assets: The term "Consolidated Net Tangible
--------------------------------
Assets" means the total assets shown on the balance sheet of the Issuer and its
consolidated Subsidiaries, determined on a consolidated basis using generally
accepted accounting principles, as of any date selected by the Issuer not more
than 90 days prior to the taking of any action for the purpose of which the
determina-
7
<PAGE>
tion is being made, less (i) all current liabilities and minority interests and
-
(ii) goodwill and other intangibles.
--
Consolidated Net Worth: The term "Consolidated Net Worth" of any Person
----------------------
means the total amounts shown on the balance sheet of such Person and its
consolidated Subsidiaries, determined on a consolidated basis in accordance
with generally accepted accounting principles, as of the end of the most recent
fiscal quarter of such Person ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
-
or stated value of all outstanding Capital Stock of such Person plus (ii) paid-
--
in capital or capital surplus relating to such Capital Stock plus (iii) any
---
retained earnings or earned surplus less (A) any accumulated deficit, (B) any
- -
amounts attributable to Redeemable Stock and (C) any amounts attributable to
-
Exchangeable Stock, and excluding amounts attributable to cumulative or one-time
non-cash charges associated with the implementation of SFAS 106 and 109.
Corporate Trust Office: The term "Corporate Trust Office" means the office
----------------------
of the Trustee at which at any particular time its corporate trust business
shall be principally administered.
Credit Agreement: The term "Credit Agreement" means the Second Amended and
----------------
Restated Credit Agreement, dated June 19, 1995, between the Issuer and United
States National Bank of Oregon.
Debt: The term "Debt" of any Person means, without duplication,
----
(i) all obligations of such Person in respect of (A) indebtedness for
-
money borrowed and (B) indebtedness evidenced by the Securities, or the
-
First Mortgage Bonds, notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable including,
without limitation (x) all Obligations (as defined in the First Mortgage
-
Bonds Indenture) in respect of money owed under the First Mortgage Bonds
Indenture, (y) interest accruing subsequent to an event of bankruptcy or
-
reorganization relating to the Issuer, whether or not such interest is an
allowed claim enforceable against the debtor under the United States
Bankruptcy Code, and (z) the fees and expenses of the Institutional
-
Investor payable under the Investment Agreement;
8
<PAGE>
(ii) all Capital Lease Obligations of such Person;
(iii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable arising in the ordinary course of business);
(iv) all obligations of such Person for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction (other
than obligations with respect to letters of credit securing obligations (other
than obligations described in clauses (i) through (iii) above) entered into in
the ordinary course of business of such Person to the extent such letters of
credit are not drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the third business day following receipt by such Person
of a demand for reimbursement following payment on the letter of credit);
(v) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Redeemable Stock or
Exchangeable Stock;
(vi) all obligations of the type referred to in clauses (i) through (v)
above of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable as obligor,
guarantor or otherwise; provided, however, that to the extent such Person is
-------- -------
responsible or liable only for the obligation of another Person to pay interest
on Debt, then a designated percentage of such interest or the amount of the
underlying Debt, as the case may be, shall be deemed Debt of the referent Person
and the amount of such deemed Debt of the referent Person shall be equal to the
lesser of (A) the aggregate principal amount of the underlying Debt and (B) the
- -
aggregate amount of interest due or payable over the term of such Debt (or the
term of the Securities, if shorter) determined based upon the rate of interest
in effect as of the date of such determination, together with the maximum
prepayment premium or penalty which could become due or payable with respect to
such Debt if such Debt was prepaid prior to the maturity of the Securities;
9
<PAGE>
(vii) all obligations of the type referred to in clauses (i) through
(vi) above of other Persons secured by any Lien on any property or asset of
such Person (whether or not such obligation is assumed by such Person), the
amount of such obligations being deemed to be the lesser of the value of
such property or assets and the amount of the obligation so secured; and
(viii) all obligations of such Person consisting of modifications,
renewals, extensions, replacements and refundings of any obligations
described in any of clauses (i) through (vii) above.
Default: The term "Default" means any condition or event which constitutes
-------
or which, after notice or lapse of time or both, would constitute an Event of
Default here under.
Default Rate: The term "Default Rate" has the respective meanings
------------
specified in the forms of Securities included in this Indenture.
ESOP: The term "ESOP" means the Issuer's Employee Stock Ownership Plan.
----
ESOP Preferred Stock: The term "ESOP Preferred Stock" means shares of
--------------------
Preferred Stock of the Issuer held by the ESOP.
Event of Default: The term "Event of Default" means any event specified as
----------------
such in Section 5.01, continued for the period of time, if any, and after the
giving of notice, if any, therein designated.
Exchange Act: The term "Exchange Act" means the Securities Exchange Act of
------------
1934, as amended.
Exchangeable Stock: The term "Exchangeable Stock" means any Capital Stock
------------------
which is exchangeable or convertible into another security (other than Capital
Stock of the Issuer which is neither Exchangeable Stock nor Redeemable Stock).
First Mortgage Bonds: The term "First Mortgage Bonds" means the Issuer's
--------------------
First Mortgage Bonds issued under the First Mortgage Bonds Indenture.
First Mortgage Bonds Indenture: The term "First Mortgage Bonds Indenture"
------------------------------
means the Amended and Restated
10
<PAGE>
Indenture, dated as of March 9, 1993, as amended, between the Issuer and Shawmut
Bank Connecticut, National Association.
Holder; Securityholder: The term "Holder" of a Security and the term
----------------------
"Securityholder" means the Person in whose name at the time such Security is
registered on the Security Register kept for that purpose in accordance with the
terms hereof.
Indenture: The term "Indenture" means this Indenture as originally
---------
executed or as it may from time to time be supplemented or amended by one or
more indentures supplemental hereto entered into pursuant to the applicable
provisions hereof.
Independent Accountants: The term "Independent Accountants" means a firm
-----------------------
of independent public accountants meeting the requirements therefor under the
Securities Act and rules and regulations of the SEC, which shall be KPMG Peat
Marwick or another firm of independent certified public accountants of
nationally recognized standing selected by the Issuer and reasonably
satisfactory to the Trustee.
Interest Payment: The term "Interest Payment" has the respective meanings
----------------
specified in the forms of Securities included in this Indenture.
Interest Period: The term "Interest Period" has the respective meanings
---------------
specified in the forms of Securities included in this Indenture.
Interest Rate Protection Agreement: The term "Interest Rate Protection
----------------------------------
Agreement" means any interest rate swap agreement, interest rate cap agreement
or other financial agreement or arrangement designed to protect the Issuer or
any Subsidiary against fluctuations in interest rates.
Institutional Investor: The term "Institutional Investor" means
----------------------
Metropolitan Life Insurance Company.
Investment: The term "Investment" in any Person means any loan or advance
----------
to, any acquisition of Capital Stock, equity interest, obligation or other
security of, or capital contribution or other investment in, such Person.
Investment Agreement: The term "Investment Agreement" means the Second
--------------------
Amended and Restated Investment Agreement, dated as of May 9, 1995, between the
Issuer and the Institutional Investor.
11
<PAGE>
issue: The term "issue" means issue, assume, guarantee, incur or otherwise
-----
become liable for; provided, however, that any Debt or Capital Stock of a Person
-------- -------
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be issued by such
Subsidiary at the time it becomes a Subsidiary.
Issue Date: The term "Issue Date" means, ________, 1996.
----------
Issuer: The term "Issuer" means the party named as such in this Indenture
------
until a successor replaces it, and thereafter, means the successor, and, for
purposes of any provision contained herein and required by the TIA, each other
obligor on the Securities.
Issuer Order: The term "Issuer Order" means a written order signed in the
------------
name of the Issuer by the Chairman of the Board, the President or any Vice
President, and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Issuer, and delivered to the Trustee.
Legal Holiday: The term "Legal Holiday" has the meaning set forth in
-------------
Section 11.06.
Lien: The term "Lien" means any mortgage, pledge, security interest,
----
conditional sale or other title retention agreement, constructive trust or other
similar lien.
Maturity Date: The term "Maturity Date" means, May 1, 2008.
-------------
Net Available Cash: The term "Net Available Cash" from an Asset
------------------
Disposition means Cash payments received (including any Cash payments received
by way of deferred payment of principal pursuant to a note or installment
receivable or otherwise, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring Person of Debt
or other obligations relating to such properties or assets or received in any
other non-Cash form) therefrom, in each case net of all legal, title and
recording tax expenses, commissions and other fees and expenses incurred, and
all federal, state, provincial, foreign and local taxes required to be accrued
as a liability under generally accepted accounting principles, as a consequence
of such Asset Disposition, and in each case net of all payments made on any Debt
which is
12
<PAGE>
secured by any assets subject to such Asset Disposition, in accordance with the
terms of any Lien upon or other security agreement of any kind with respect to
such assets, or which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law be repaid out of the
proceeds from such Asset Disposition, and net of all distributions and other
payments required to be made and actually made to minority interest holders in
Subsidiaries or joint ventures as a result of such Asset Disposition.
Net Cash Proceeds: The term "Net Cash Proceeds", with respect to any
-----------------
issuance or sale of Capital Stock, means the Cash proceeds of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
actually incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
Non-Convertible Capital Stock: The term "Non-Convertible Capital Stock"
-----------------------------
means, with respect to any corporation, any non-convertible Capital Stock of
such corporation and any Capital Stock of such corporation convertible solely
into non-convertible common stock of such corporation; provided, however, that
-------- -------
Non-Convertible Capital Stock shall not include any Redeemable Stock or
Exchangeable Stock.
Non-Recourse Debt: The term "Non-Recourse Debt" means Debt or that portion
-----------------
of Debt of a Subsidiary as to which (i) neither the Issuer nor any Subsidiary
-
(other than a Non-Recourse Subsidiary) (A) provides credit support, (B) is
- -
directly or indirectly liable or (C) constitutes the lender and (ii) no default
- --
with respect to such Debt (including any right which the holders thereof may
have to take enforcement action against such Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Debt of the Issuer or any
other Subsidiary to declare a default on such other Debt or cause the payment
thereof to be accelerated or payable prior to its Stated Maturity.
Non-Recourse Subsidiary: The term "Non-Recourse Subsidiary" means a
-----------------------
Subsidiary (i) which has been organized or acquired after the date of this
-
Indenture, (ii) which has not acquired any assets (other than (x) cash and (y)
-- - -
any receivables purchased by such Subsidiary for fair market value) directly or
indirectly from the Issuer or any Subsidiary, (iii) which has no Debt other than
---
Non-Recourse Debt and (iv) which has been designated as a Non-Recourse
--
13
<PAGE>
Subsidiary by the Board of Directors of the Issuer, as provided below. The
Board of Directors of the Issuer may designate any Subsidiary organized or
acquired after the date of this Indenture as a Non-Recourse Subsidiary,
provided, however, that, notwithstanding the foregoing, no Subsidiary as of the
- -------- -------
date of this Indenture shall be reclassified as a Non-Recourse Subsidiary or
become a Subsidiary of a Non-Recourse Subsidiary. The Trustee shall be given
prompt notice by the Issuer of each resolution adopted by the Board of Directors
under this provision, together with a certified copy of each such resolution
adopted and an Officers' Certificate certifying that such designation complies
with the foregoing conditions.
Obligations: The term "Obligations" means (a) the due and punctual payment
----------- -
of principal of, and interest on the Securities, (b) the due and punctual
-
payment by the Issuer of all other sums due or to become due under the
Securities or this Indenture, and (c) the performance of all covenants,
-
agreements, obligations and liabilities of the Issuer under or pursuant to the
Securities and this Indenture.
Offer: The term "Offer" has the meaning set forth in Section 4.09(b).
-----
Offer Amount: The term "Offer Amount" has the meaning set forth in Section
------------
4.09(c)(2).
Offer Period: The term "Offer Period" has the meaning set forth in Section
------------
4.09(c)(2).
Officer: The term "Officer" means the Chairman of the Board, the
-------
President, any Vice President, the Treasurer or the Secretary of the Issuer.
Officers' Certificate: The term "Officers' Certificate" means a
---------------------
certificate signed by two Officers.
Opinion of Counsel: The term "Opinion of Counsel" means a written opinion
------------------
from legal counsel who is acceptable to the Trustee. The counsel may be an
employee of or counsel to the Issuer or the Trustee.
Outstanding: The term "Outstanding", when used with reference to
-----------
Securities means, subject to the provisions of Section 11.04, as of any
particular time, all Securities authenticated by the Trustee and delivered under
this Indenture, except:
14
<PAGE>
(a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities for the payment or redemption in whole of which Cash in the
necessary amount (including interest, if any) shall have been deposited in trust
with the Trustee or any paying agents (other than in the case of defeasance
pursuant to Article Six), provided that if such Securities are to be redeemed
prior to the maturity thereof, notice of such redemption shall have been given
as in Article Three provided, or provision satisfactory to the Trustee shall
have been made for giving such notice; and
(c) Securities in lieu of or in substitution or exchange for which other
Securities shall have been authenticated and delivered, or which have been paid,
pursuant to the terms of Section 2.07, unless proof satisfactory to the Issuer
and the Trustee is presented that any such Securities are held by Persons in
whose hands any of such Securities is a valid, binding and legal obligation of
the Issuer.
Parent: The term "Parent" means any Person of which the Issuer is a
------
Subsidiary at the relevant time.
Payment Blockage Period: The term "Payment Blockage Period" has the
-----------------------
meaning set forth in Section 10.02(b).
Payment Date: The term "Payment Date" has the respective meanings
------------
specified in the forms of Securities included in this Indenture.
Permitted Holders: The term "Permitted Holders" means Kelso & Company and
-----------------
its Affiliates, the Co-Investors and the Management Shareholders. The terms Co-
Investors and Management Shareholders have the respective meanings specified in
the Stockholders' Agreement, as in effect on the date hereof.
Permitted Investments: The term "Permitted Investments" means (i) U.S.
--------------------- -
Government Obligations maturing within 90 days of the date of acquisition
thereof, (ii) investments in certificates of deposit maturing within 90 days of
--
the date of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States or any state thereof having
capital, surplus and undivided profits aggregating in excess of $500,000,000 or
15
<PAGE>
issued in an amount not to exceed $1 million at any time by United States
National Bank of Oregon (or, if United States National Bank of Oregon ceases to
be the bank with which the Issuer has its principal banking relationship, the
bank with which the Issuer then has its principal banking relationship), (iii)
---
investments in commercial paper given the highest rating (i.e., A-1/P-1 or
- -
better) by two established national credit rating agencies and maturing not more
than 90 days from the date of acquisition thereof and (iv) solely with respect
--
to Investments by the Trustee, in the absence of any direction by the Issuer or
during the continuance of a Default or an Event of Default, shares in any money
market fund registered under the Investment Company Act of 1940, as amended, the
portfolio of which is limited to U.S. Government Obligations and U.S. agency
obligations.
Person: The term "Person" means any individual, corporation, partnership,
------
joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
Preferred Stock: The term "Preferred Stock", as applied to the Capital
---------------
Stock of any corporation, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such corporation, over shares of Capital Stock of any other class
of such corporation.
principal: The term "principal" of a Security means the principal of the
---------
Security which is due or overdue or is to become due at the relevant time.
Public Equity Offering: The term "Public Equity Offering" means an
----------------------
underwritten primary public offering of common stock of the Issuer pursuant to
an effective registration statement under the Securities Act.
Purchase Money Debt: The term "Purchase Money Debt" means Debt (i)
-------------------
consisting of the deferred purchase price of property, conditional sale
obligations, obligations under any title retention agreement and other purchase
money obligations, in each case where the maturity of such Debt does not exceed
the anticipated useful life of the asset being financed, and (ii) incurred to
finance the acquisition or construction by any Subsidiary of such asset,
including additions and improvements; provided, however, that (i) any Lien
-------- -------
arising in connection with any such Debt shall be limited to the specified asset
being financed or, in the
16
<PAGE>
case of real property or fixtures, including additions and improvements, the
real property on which such asset is attached, and (ii) the principal amount of
such Debt does not exceed the lesser of 80% of the cost or 80% of the fair
market value of the asset being financed (such fair market value as determined
in good faith by the Board of Directors, as evidenced by a resolution).
Purchase Date: The term "Purchase Date" has the meaning set forth in
-------------
Section 4.09(c)(1).
Record Date: The term "Record Date" has the respective meanings
-----------
provided in the forms of Securities included in this Indenture.
Redeemable Stock: The term "Redeemable Stock" means any Capital Stock
----------------
that by its terms or otherwise is required to be redeemed on or prior to the
first anniversary of the Stated Maturity of the Securities or is redeemable at
the option of the holder thereof at any time on or prior to the first
anniversary of the Stated Maturity of the Securities.
Reference Period: The term "Reference Period", with respect to any
----------------
computation of the Consolidated EBITDA Coverage Ratio, means the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
determination of the Consolidated EBITDA Coverage Ratio.
Restricted Payment: The term "Restricted Payment" has the meaning set
------------------
forth in Section 4.04.
SEC: The term "SEC" means the Securities and Exchange Commission.
---
Securities Act: The term "Securities Act" means the Securities Act of
--------------
1933, as amended.
Security: The term "Security" means any Security authenticated by the
--------
Trustee and delivered under this Indenture.
Security Register: The term "Security Register" has the meaning set
-----------------
forth in Section 2.06.
Security Registrar; Security Co-Registrar: The terms "Security
-----------------------------------------
Registrar" and "Security Co-Registrar" have the meanings set forth in Section
2.06.
17
<PAGE>
Senior Debt: The term "Senior Debt" means Debt unless, in the
-----------
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are pari passu or junior or
---- -----
subordinate in right of payment to the Securities: provided, however, that
-------- -------
Senior Debt shall not be deemed to include (1) any obligation of the Issuer to
-
any Subsidiary, (2) any liability for federal, state, local or other taxes owned
-
or owing by the Issuer other than reimbursement obligations of the Issuer in
respect of such taxes that are paid on behalf of the Issuer pursuant to the
provisions in the Mortgages (as defined in the First Mortgage Bonds Indenture)
that permit the mortgage to make such payment, (3) any accounts payable or other
-
liability to trade creditors arising in the ordinary course of business
(including guarantees thereof or instruments evidencing such liabilities), (4)
-
any indebtedness, guarantee or obligation of the Issuer which is subordinate or
junior in any respect to any other indebtedness, guarantee or obligation of the
Issuer (including, without limitation, the Securities), (5) the portion of any
-
Debt issued in violation of Section 4.05 or 4.06 of this Indenture or (6) any
-
obligations of the Issuer or any Subsidiary with respect to the redemption,
repayment or other repurchase of any Redeemable Stock or Exchangeable Stock.
Senior Subordinated Debt: The term "Senior Subordinated Debt" means
------------------------
the Securities and any other Debt that specifically provides that such Debt is
to rank pari passu with the Securities in right of payment and is not
---- -----
subordinated by its terms in right of payment to any Debt or other obligation of
the Issuer which is not Senior Debt of the Issuer.
Series B Bonds: The term "Series B Bonds" means the 11 1/2% First
--------------
Mortgage Bonds, Series B, Due 2005 of the Issuer issued pursuant to the First
Mortgage Bonds Indenture.
Stated Maturity: The term "Stated Maturity" means, with respect to any
---------------
security, the date specified in such security as the fixed date on which the
final payment of principal of such security is due and payable, including
pursuant to any mandatory redemption provision.
Stockholders' Agreement: The term Stockholders' Agreement means the
-----------------------
Stockholders' Agreement, dated as of December 24, 1986, as amended or restated,
among the Issuer and the parties listed on the signature pages thereof.
18
<PAGE>
Subordinated Obligation: The term "Subordinated Obligation" means any
-----------------------
Debt of the Issuer (whether outstanding on the date hereof or hereafter
incurred) which is subordinate or junior in right of payment to the Securities.
Subsidiary: The term "Subsidiary" means any corporation, association,
----------
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) 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 (i) the Issuer, (ii) the Issuer
- --
and one or more Subsidiaries or (iii) one or more Subsidiaries.
---
Tangible Property: The term "Tangible Property" means all land,
-----------------
buildings, machinery and equipment and leasehold interests and improvements
which would be reflected on a consolidated balance sheet of the Issuer and its
consolidated Subsidiaries, prepared in accordance with generally accepted
accounting principles, excluding (i) all such tangible property located outside
-
the United States, including the Commonwealth of Puerto Rico and each territory
and possession of the United States and all areas subject to its jurisdiction,
(ii) all rights, contracts and other intangible assets of any nature whatsoever
--
and (iii) all inventories and other current assets.
---
TIA: The term "TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
---
(S)(S) 77aaa--77bbbb) as in effect on the date of this Indenture; provided,
--------
however, that in the event that the Trust Indenture Act of 1939 is amended after
- -------
such date, "TIA" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
Trustee: The term "Trustee" means the corporation or trust company or
-------
national banking association named as Trustee in this Indenture until any
successor Trustee shall have become such pursuant to the applicable provisions
of this Indenture, and thereafter "Trustee" shall mean such successor Trustee.
Trust Officer: The term "Trust Officer" means any vice president,
-------------
trust officer or corporate trust officer of the Trustee, in each case employed
by the Corporate Trust Administration department of the Trustee.
19
<PAGE>
United States: The term "United States" means the United States of
-------------
America, including the states and the District of Columbia.
United States Person: The term "United States Person" means a Person
--------------------
who, for United States federal income tax purposes, is (a) a citizen or resident
-
of the United States, (b) an estate or trust the income of which is subject to
-
United States federal income taxation regardless of its source, or (c) a
-
corporation, partnership or other entity created or organized in or under the
laws of the United States or any state or the District of Columbia.
U.S. Government Obligations: The term "U.S. Government Obligations"
---------------------------
means direct obligation (or certificates evidencing an ownership interest in
such obligations) of the United States of America (including any agency or
instrumentality thereof) for the payment of which the full faith and credit of
the United States of America is pledged and which are not callable at the
issuer's option.
Voting Stock: The term "Voting Stock" of a corporation means all
------------
classes of Capital Stock of such corporation then outstanding and normally
entitled to vote in the election of directors.
Wholly Owned Subsidiary: The term "Wholly Owned Subsidiary" means a
-----------------------
Subsidiary all the Capital Stock of which (other than directors' qualifying
shares) is owned by the Issuer or another Wholly Owned Subsidiary.
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
----------
"indenture securities" means the Securities.
--------------------
"indenture security holder" means a Securityholder.
-------------------------
"indenture to be qualified" means this Indenture.
-------------------------
"indenture trustee" or "institutional trustee" means the Trustee.
----------------- ---------------------
20
<PAGE>
"obligor" on the indenture securities means the Issuer.
-------
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.03. Rules of Construction. Unless the context otherwise
---------------------
requires:
(1) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles as in
effect from time to time;
(2) "or" is not exclusive;
(3) "including" means including, without limitation;
(4) words in the singular include the plural and words in the plural
include the singular;
(5) the principal amount of any non-interest bearing or other discount
security at any time shall be the principal amount thereof that would be
shown on a balance sheet of the Issuer dated such date prepared in
accordance with generally accepted accounting principles and accretion of
principal on such security shall be deemed to be the issuance of Debt; and
(6) the principal amount of any Redeemable Stock shall be the greater
of (i) the maximum liquidation value of such Redeemable Stock or (ii) the
- --
maximum mandatory redemption or mandatory repurchase price with respect to
such Redeemable Stock, whichever is greater.
ARTICLE TWO
Issuance, Description, Execution
--------------------------------
and Exchange of Securities
--------------------------
SECTION 2.01. Designation, Amount and Issue of Securities. The
-------------------------------------------
Securities shall be designated as the Issuer's "__ % Senior Subordinated Notes,
Due 2008." The Securities will be limited to $120,000,000 in aggregate
principal amount, except as provided in Section 2.07.
21
<PAGE>
SECTION 2.02. Authentication and Delivery of Securities. Upon the execution
-----------------------------------------
and delivery of this Indenture, and from time to time thereafter, the Securities
shall be executed by the Issuer and such Securities may thereupon be delivered
to the Trustee for authentication, and the Trustee shall thereupon authenticate
and deliver said Securities upon an Issuer Order.
SECTION 2.03. Form of Securities and Trustee's Certificate of
-----------------------------------------------
Authentication Generally. The Securities and the Trustee's certificate of
- ------------------------
authentication to be borne by the Securities shall be in substantially the form
annexed hereto as Exhibit A, with such appropriate insertions, omissions,
substitutions and other warranties as are required or permitted under this
Indenture, in temporary or definitive form, and may have such letters, numbers
or other marks of identification or designation and such legends or endorsements
as the Issuer may deem appropriate and as are not inconsistent with the
provisions of this Indenture, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any securities exchange on which the Securities may be listed, or to conform
to usage. The terms and provisions contained in the form of the Securities
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Issuer and the Trustee, by
their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
SECTION 2.04. Denomination and Date of Securities; Payment of Principal and
-------------------------------------------------------------
Interest. The Securities shall be issuable in registered form without coupons.
- --------
The Securities shall be numbered, lettered, or otherwise distinguished in such
manner or in accordance with such plan as the officers of the Issuer executing
the same may determine with the approval of the Trustee.
The Securities shall be issuable in denominations of $50,000 and such
greater denominations as are whole multiples of $100,000. Each Security shall be
dated the date of its authentication and shall bear interest on the unpaid
principal amount thereof from and after the most recent Payment Date to which
interest has been paid or, if no interest has been paid, from and after the
Issue Date. Each Security authenticated between the Record Date for any Payment
Date and such Payment Date shall be dated the date of its authentication but
shall bear interest from such Payment Date, unless the Issuer shall default in
the payment
22
<PAGE>
of interest due on such Payment Date, in which case any such Security shall bear
interest from the Payment Date next preceding the date of such Security to which
interest has been paid or, if no interest has been paid on the Securities, from
the Issue Date.
The Person in whose name any Security is registered at 5:00 p.m., New York
City time on any Record Date with respect to any Payment Date for such Security
shall be entitled to receive the Interest Payment payable on such Payment Date
notwithstanding any transfer or exchange of such Security subsequent to the
Record Date and prior to such Payment Date, except that, if and to the extent
the Issuer shall default in the payment of the Interest Payment due on such
Payment Date or shall not have duly provided for the payment thereof, such
defaulted payment shall be paid to the Persons in whose names Securities then
Outstanding are registered on a subsequent date of record established by notice
given by mail by or on behalf of the Issuer to the Holders of Securities not
less than 10 days preceding such subsequent date of record and payment of such
defaulted Interest Payment shall be made not less than five days after such date
of record.
The principal of the Securities at maturity or upon redemption in whole or
in part shall be payable, together with accrued interest, upon surrender of the
Securities at the offices of the paying agent of the Issuer designated for that
purpose, as provided in Section 4.12. Interest Payments on Securities will be
made in U.S. dollars, at the office of the Trustee, but, at the option of the
Issuer, such payments may be made by check drawn on a bank in New York, New York
mailed to the address of the Holder as such address shall appear on the
Security Register.
Interest on the Securities will be computed on the basis of a 360-day year
consisting of twelve 30-day months.
SECTION 2.05. Execution of Securities. Each Security shall be signed in the
-----------------------
name and on behalf of the Issuer manually or by facsimile by its President or
any Vice President under its corporate seal (which may be printed, engraved or
otherwise reproduced thereon, by facsimile or otherwise) attested by the manual
or facsimile signature of its Secretary or an Assistant Secretary, prior to the
authentication of the Security, and the delivery of such Security by the Trustee
upon an Issuer Order, after the authentication thereof hereunder, shall
constitute due delivery of such Security on behalf of the Issuer. In case
23
<PAGE>
any officer of the Issuer who shall have signed, or whose facsimile signature
appears on any of the Securities shall cease to be such officer before the
Securities shall have been authenticated and delivered by the Trustee or
disposed of, such Security nevertheless may be authenticated and delivered or
disposed of as though the Person who signed such Security had not ceased to be
such officer. Any Security may be signed on behalf of the Issuer by such officer
as, at the actual date of the execution of such Security shall be the proper
officer of the Issuer, although at the date of the execution of this Indenture
any such Person was not such an officer.
Only such Securities as shall bear thereon a certificate or authentication
substantially in the form herein recited, executed by the Trustee by manual
signature of one of its authorized officers, shall be entitled to the benefits
of this Indenture or be valid or obligatory for any purpose. Such certificate by
the Trustee upon any Security executed by the Issuer shall be conclusive
evidence that the Security so authenticated has been duly authenticated and
delivered hereunder and that the Holder is entitled to the benefits of this
Indenture.
SECTION 2.06. Exchange and Registration of Transfer of Securities. The
---------------------------------------------------
Issuer shall keep, at the office or agency to be maintained by the Trustee for
such purpose (herein referred to as the "Security Registrar" or the "Security
Co-Registrar") in the Borough of Manhattan, The City of New York, as provided in
Section 4.12, a register (herein sometimes referred to as the "Security
Register") in which, subject to such reasonable regulations as it may prescribe,
the Issuer shall provide for the registration of the Securities and the
registration of transfers thereof as in this Article Two provided. Upon written
notice to the Trustee and any acting Security Registrar, the Issuer may appoint
a successor Security Registrar for such purposes. The Issuer may appoint one or
more Security Co-Registrars for such purposes. At all reasonable times, any
Security Register shall be open for inspection by the Trustee. Upon due
presentment for registration of transfer of any Security at the office or agency
of any Security Registrar or any Security Co-Registrar, the Issuer shall
execute, and the Trustee shall authenticate and deliver, in the name of the
transferee or transferees, one or more new Securities of like tenor of any
authorized denominations for an aggregate principal amount equal to the then
current principal balance of the Security presented for registration of
transfer.
24
<PAGE>
All Securities presented for registration of transfer or for exchange,
redemption or payment, as the case may be, shall (if so required by the Issuer
or the Trustee or the Security Registrar or any Security Co-Registrar) be duly
endorsed by, or be accompanied by a written instrument or instruments of
assignment and transfer in form satisfactory to the Person imposing such
requirement duly executed by, the Holder or his attorney duly authorized in
writing.
No service charge shall be made for any exchange or registration of
transfer of Securities (except the costs of mailing), but the Issuer may require
payment of a sum sufficient to cover any tax, assessment or other governmental
charge that may be imposed in connection therewith.
The Issuer shall not be required to exchange or register the transfer of
any Securities called for redemption or any Securities for a period of fifteen
days before a selection of Securities to be redeemed.
Upon delivery by any Security Registrar or Security Co-Registrar of a
Security in exchange for a Security surrendered to it in accordance with the
provisions of this Indenture, the Security so delivered shall, for all purposes
of this Indenture, be deemed to be fully registered in the Security Register;
provided, however, that in making any determination as to the identity of
- -------- -------
Persons who are Ho1ders of Securities, the Trustee shall, subject to the
provisions of Section 7.01, be fully protected in relying on the Security
Register.
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Securities. In case any
-----------------------------------------------
Security shall become mutilated, destroyed, lost or stolen, the Issuer shall
execute, and the Trustee shall authenticate and deliver, a new Security or
Securities of 1ike series and tenor, bearing a number not contemporaneously
outstanding in an aggregate principal amount equal to the current principal
balance of, and in substitution for, the Security so mutilated, destroyed, lost
or stolen. In every such case, the applicant for a substitute Security shall, at
the expense of the applicant, furnish to the Issuer, the Trustee, the Security
Registrar and any Security Co-Registrar such security or indemnity as may be
required by them to save each of them harmless. Also, in every case of
destruction, loss or theft, the applicant shall furnish to the Issuer, the
Trustee, the Security Registrar and any Security Co-Registrar evidence to their
satisfaction of the destruction, loss or theft of such Security and of the
ownership thereof. In
25
<PAGE>
every case of mutilation, the applicant shall surrender to the Trustee the
Security so mutilated. The Trustee shall authenticate any such substitute
Security and deliver the same. Upon the issuance of any substitute Security, the
Issuer may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses connected therewith. If required by the Trustee or the Issuer, such
applicant shall furnish an indemnity bond sufficient in the judgment of the
Issuer and the Trustee to protect the Issuer, the Trustee, the paying agent, the
Security Registrar and any Security Co-Registrar from any loss which any of them
may suffer if a Security is replaced. In case any Security shall have become
mutilated, destroyed, lost or stolen and has become or is about to become due or
payable, the Issuer may pay or authorize the payment of the same instead of
issuing a substitute Security as permitted by this Section 2.07.
Every substitute Security issued pursuant to the provisions of this Section
2.07 by virtue of the fact that any Security is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Issuer, whether or not
the destroyed, lost or stolen Security shall at any time be found by anyone, and
shall be entitled to all the benefits and be subject to all the terms and
conditions of this Indenture equally and proportionately with any and all other
Securities duly issued and outstanding hereunder. All Securities shall be held
and owned upon the express condition that, to the extent permitted by law, the
foregoing provisions are exclusive with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities and shall preclude any and all
other rights or remedies, notwithstanding any law or statute now existing or
hereafter enacted to the contrary with respect to the replacement or payment of
negotiable instruments or other securities without their surrender.
SECTION 2.08. Cancellation of Surrendered Securities. All Securities
--------------------------------------
surrendered for redemption in whole or in part pursuant to the provisions of
Article Three and all Securities surrendered for payment or for substitution or
exchange or registration of transfer hereunder shall be delivered to the Trustee
for cancellation and shall be canceled by the Trustee, and no Securities shall
be issued in lieu thereof, except as otherwise provided in this Indenture. The
Trustee shall destroy all canceled Securities held by it and shall deliver to
the Issuer a certificate in respect of such destruction. If the Issuer shall
acquire
26
<PAGE>
any of the Securities, however, such acquisition shall not operate as a
redemption or satisfaction of the indebtedness represented by such Securities
unless and until the same are delivered to the Trustee for cancellation. Any
Securities acquired by the Issuer and delivered to the Trustee shall be canceled
by the Trustee upon receipt of written instructions from the Issuer.
SECTION 2.09. Temporary Securities. Until definitive Securities are ready
--------------------
for delivery, the Issuer may prepare and, upon written request signed by two
Officers of the Issuer, the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive
Securities, but may have variations that the Issuer considers appropriate for
temporary Securities, as conclusively evidenced by the execution of such
Securities. Without unreasonable delay, the Issuer shall prepare and the Trustee
shall authenticate definitive Securities and deliver them in exchange for
temporary Securities.
SECTION 2.10. Foreign Holder Certification. Each Holder that is not a
----------------------------
United States Person shall provide the Issuer and the Trustee on or prior to
the date of the acquisition of a Security with two copies of a properly
completed United States Internal Revenue Service Form 4224 or Form 1001 (or, if
a Holder is not described in Section 871(h)(3) or Section 881(c)(3) of the Code,
Form W-8), as appropriate, or any successor forms thereto, in each case together
with such other information or necessary certification establishing to the
satisfaction of the Issuer that such Holder is not subject to United States
federal withholding tax on interest paid by the Issuer under the Securities (or
subject to such tax at a reduced rate of withholding), in each case based on
applicable United States law or the provisions of an applicable United States
treaty as in effect at the time of delivery by such Holder of the appropriate
forms. Further, each such Holder shall provide the Issuer and the Trustee with a
new Form 4224 or Form 1001 (or Form W-8), as appropriate, or applicable
successor forms, together with such other information or necessary certification
as described in the preceding sentence, on or before the date the previously
delivered forms (or such other information or certification) become obsolete or
expire or promptly after the occurrence of any event requiring a change to the
most recent forms (or such other information or certification) previously
delivered. In the case of any payment of interest under the Securities to a
Holder that is not a United States Person, unless the Issuer and the
27
<PAGE>
Trustee shall have received such forms (together with such information or
certification), satisfactory to them, indicating that such payment to such
Holder by the Issuer is not subject to United States federal withholding tax,
the Issuer or the Trustee shall withhold taxes from such payment at the
applicable rate. If such forms indicate that such Holder is subject to United
States federal withholding tax at a reduced rate under an applicable income tax
treaty, the Issuer or the Trustee shall withhold at the applicable reduced
treaty rate. The Trustee may assume that any Holder is a United States Person
unless the Trustee has actual knowledge to the contrary or has received such
forms. Any amounts required to be withheld for taxes under the laws of the
United States shall be so withheld and remitted to the appropriate tax
authorities by the Issuer or the Trustee. The Issuer or the Trustee shall
promptly forward to such Holder an original or certified copy of a tax receipt
evidencing the payment of such taxes.
SECTION 2.11. CUSIP Numbers. The Issuer, in issuing the Securities, may use
-------------
"CUSIP" numbers (if then genera1ly in use), and the Trustee shall use CUSIP
numbers in notices of redemption or exchange as a convenience to Holders;
provided, however, that any such notice shall state that no representation is
- -------- -------
made as to the correctness of such numbers either as printed on the Securities
or as contained in any notice of redemption or exchange and that reliance may be
placed only on the other identification numbers printed on the Securities and
any redemption shall not be affected by any defect in or omission of such
numbers. The Issuer will promptly notify the Trustee of the receipt of or any
change in CUSIP numbers.
ARTICLE THREE
Redemption of Securities
------------------------
SECTION 3.01. Optional Redemption. (a) The Securities may not be redeemed
-------------------
or amortized prior to maturity except under the circumstances specified in this
Section 3.01. No redemption of Securities under this Section 3.01 shall be
permitted if a Default or Event of Default shall have occurred and be
continuing.
(b) Except as provided in Section 3.01(c), no redemptions of the Securities
may be made prior to May 1, 2001. On or after May 1, 2001, the Securities may be
redeemed, in whole or in part, upon notice given pursuant to
28
<PAGE>
Section 3.01, at the following optional redemption prices (expressed in
percentages of principal amount), plus accrued and unpaid interest to the
redemption date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant Payment Date), if redeemed
during the 12-month period commencing on or after May 1 of the years set
forth below:
Redemption
Period Price
- -------------------------------------------------- ------------------
2001 .......................................... %
2002 ..........................................
2003 and thereafter ........................... 100.000
(c) At any time and from time to time prior to May 1, 1999, the Issuer may
redeem in the aggregate up to 35% of the original principal amount of the Notes
with the proceeds of one or more Public Equity Offerings, at a redemption price
(expressed as a percentage of principal amount) of __% plus accrued and unpaid
interest, if any, to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
Payment Date).
SECTION 3.02. Notice of Redemption. In the event that the Issuer elects to
--------------------
redeem the Securities pursuant to Section 3.01 hereof, the Issuer shall deliver
to the Trustee, at least 30 days prior to the date fixed for redemption, an
Officers' Certificate of the Issuer (i) stating that the Issuer is entitled to
-
effect such redemption and (ii) specifying the date fixed for redemption and
--
the principal amount of the Securities to be redeemed. The Trustee will be
entitled to rely conclusively upon such Officers' Certificate. At least 30 but
not more than 60 days prior to any date fixed for redemption, the Trustee shall
mail by first-class mail, postage prepaid, to the Holders of the Securities at
their addresses as the same appear on the Security Register, a notice of such
redemption containing the following information:
(1) the date fixed for redemption;
(2) the redemption price;
(3) the name and address of the paying agent;
29
<PAGE>
(4) that Securities called for redemption must be surrendered to the
paying agent to collect the redemption price;
(5) if fewer than all the Outstanding Securities are to be redeemed,
the identification and principal amounts of the particular Securities to be
redeemed and, if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion will be
issued;
(6) that, unless the Issuer defaults in making such redemption
payment, interest will cease to accrue on Securities called for redemption
on and after the redemption date; and
(7) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed.
The notice, if mailed as herein provided, shall be conclusively presumed to
have been duly given to the Holder of a Security to whom such notice is mailed
whether or not any Holder receives such notice. Neither any failure to give
notice by mail nor any defect in the notice to the Holder of any Security to be
redeemed shall affect the validity of the proceedings for the redemption of any
other Security.
SECTION 3.03. Procedures for Redemption. On or before 3 p.m. New York time
-------------------------
on the Business Day next preceding the date fixed for the redemption of
Securities, the Issuer shall deposit with the Trustee or with the paying agents
an amount of money sufficient to redeem on the date fixed for redemption, the
principal amount of and premium (if any) on the Securities to be redeemed (at
the applicable redemption price thereof, together with any interest accrued
thereon to the date of redemption in the case of redemptions).
The Trustee shall not in any event be liable for the payment of principal
of, or interest on, any Securities called for redemption as herein provided,
except to the extent that money shall have been deposited with it for such
purpose.
30
<PAGE>
Upon any redemption of Securities pursuant to Section 3.01, the Issuer
shall deliver to the Trustee an Officers' Certificate of the Issuer stating
that such Securities have been redeemed.
SECTION 3.04. Selection of Securities To Be Redeemed. In the case of the
--------------------------------------
partial redemption of Securities pursuant to the terms of this Indenture,
selection of the Securities for redemption will be made by the Trustee on a pro
rata basis, by lot or by such other method that complies with applicable legal
and securities exchange requirements, if any, and that the Trustee in its sole
discretion shall deem to be fair and appropriate. Securities and portions
thereof selected by the Trustee for redemption shall be in amounts of $1,000 or
integral multiples thereof (with such adjustments as may be deemed appropriate
by the Trustee so that only Securities in denominations of $1,000 or integral
multiples thereof shall be redeemed). Provisions of this Indenture that apply
to Securities called for redemption also apply to portions of Securities called
for redemption.
SECTION 3.05. When Securities Called for Redemption Become Due and Payable.
------------------------------------------------------------
If notice of redemption has been mailed as provided in Section 3.02, the
Securities called for redemption specified therein shall become due and payable
on the date and at the place or places stated in such notice, at the applicable
redemption price, and on and after said date (unless the Issuer shall default in
the payment of such principal at the applicable redemption price) interest on
such principal so to be redeemed shall cease to accrue.
Upon surrender to the Trustee or a paying agent of a Security to be
redeemed in whole or in part in accordance with the terms of this Indenture, a
payment of principal with respect to such Security shall be made in accordance
with the terms of this Indenture at the redemption price, plus accrued interest
thereon to the redemption date, provided that any Interest Payment the maturity
--------
of which is on or prior to such redemption date will be payable on the relevant
Payment Date to the Holders of record at the close of business on the relevant
record dates referred to in the Securities.
Upon presentation of any Security redeemed in part only, the Issuer shall
execute and the Trustee shall authenticate and deliver to or on the order of the
Holder thereof, at the expense of the Issuer, a new Security or Securities,
31
<PAGE>
of authorized denominations, in principal amount equal to the current principal
balance of the unredeemed portion of the Security so presented.
ARTICLE FOUR
Particular Covenants, Representations
-------------------------------------
and Warranties of the Issuer
----------------------------
The Issuer represents, warrants, covenants and agrees, as follows:
SECTION 4.01. Validity of Securities. The Issuer is duly authorized
----------------------
under applicable law and its charter documents to create and issue the
Securities and to execute and deliver this Indenture; all corporate action and
governmental consents, authorizations and approvals necessary or required
therefor have been duly and effectively taken or obtained. The Securities are
legal, valid and binding obligations of the Issuer.
SECTION 4.02. Payment of Principal of, and Interest on Securities. The
---------------------------------------------------
Issuer will duly and punctually pay or cause to be paid the principal of,
premium (if any) and interest (without deduction or withholding for or on
account of any taxes except as required by law) on each of the Securities at the
places, at the respective times and in the manner provided in the Securities
and this Indenture.
SECTION 4.03. SEC Reports. The Issuer shall file with the Trustee and
-----------
provide Securityholders, within 15 days after it files them with the SEC, copies
of its annual report and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) which the Issuer is required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act. Notwithstanding that the
Issuer may not be required to remain subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Issuer shall continue to file with
the SEC so long as any Securities remain Outstanding and provide the Trustee and
Securityholders with such annual reports and such information, documents and
other reports (or copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe) which are specified in Sections 13 and 15(d)
of the Exchange Act. The Issuer also shall comply with the other provisions of
TIA (S) 314(a).
32
<PAGE>
SECTION 4.04. Limitation on Restricted Payments. (a) The Issuer shall not,
---------------------------------
and shall not permit any Subsidiary, directly or indirectly, to (i) declare or
-
pay any dividend or make any distribution on or in respect of its Capital Stock
(including any distribution in connection with any merger or consolidation
involving the Issuer) or to the direct or indirect holders of its Capital Stock
(except dividends or distributions payable solely in its Non-Convertible Capital
Stock or in options, warrants or other rights to purchase its Non-Convertible
Capital Stock and except dividends or distributions payable to the Issuer or a
Subsidiary), (ii) purchase, redeem or otherwise acquire or retire for value any
--
Capital Stock of the Issuer or of any direct or indirect Parent of the Issuer,
(iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for
---
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment any Subordinated Obligations (other than the purchase, repurchase
or other acquisition of Subordinated Obligations purchased in anticipation of
and used for satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition) or
(iv) make any Investment in any Affiliate of the Issuer, other than a Subsidiary
--
that is not a Non-Recourse Subsidiary or a Person which will become a Subsidiary
that is not a Non-Recourse Subsidiary as a result of any such Investment (any
such dividend, distribution, purchase, redemption, repurchase, defeasance, other
acquisition, retirement or Investment being hereinafter referred to as a
"Restricted Payment") if at the time the Issuer or such Subsidiary makes such
Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
(2) the Issuer is not able to issue $1.00 of additional Debt in accordance
with the provisions of Section 4.06(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments since the date of issuance of the Securities would exceed
the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the date of issuance of the
Securities, to the end of the most recent fiscal quarter ending at least 45
days prior to the date
33
<PAGE>
of such Restricted Payment (or, in case such Consolidated Net Income shall
be a deficit, minus 100% of such deficit) minus 100% of the amount of any
write-downs, write-offs, other negative revaluations and other negative
extraordinary charges not otherwise reflected in Consolidated Net Income
during such period;
(B) the aggregate Net Cash Proceeds received by the Issuer from the
issuance or sale of its Capital Stock (other than Redeemable Stock or
Exchangeable Stock) subsequent to the date of issuance of the Securities
(other than an issuance or sale to a Subsidiary or an employee stock
ownership plan);
(C) the aggregate Net Cash Proceeds received by the Issuer from the
issuance or sale of its Capital Stock (other than Redeemable Stock or
Exchangeable Stock) to an employee stock ownership plan subsequent to the
date of issuance of the Securities, but (if such employee stock ownership
plan incurs any Debt) only to the extent that any such proceeds are equal
to any increase in the Consolidated Net Worth of the Issuer resulting from
principal repayments made by such employee stock ownership plan with
respect to Debt incurred by it to finance the purchase of such Capital
Stock; and
(D) the amount by which Debt of the Issuer is reduced on the Issuer's
balance sheet upon the conversion or exchange (other than by a Subsidiary)
subsequent to the date of issuance of the Securities of any Debt of the
Issuer convertible or exchangeable or Capital Stock (other than Redeemable
Stock or Exchangeable Stock) of the Issuer (less the amount of any Cash, or
other property, distributed by the Issuer upon such conversion or
exchange).
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated Obligations
of the Issuer made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Issuer (other than Redeemable
Stock or Exchangeable Stock and
34
<PAGE>
other than Capital Stock issued or sold to a Subsidiary or an employee stock
ownership plan); provided, however, that (A) such purchase or redemption shall
-------- -------- -
be excluded in the calculation of the amount of Restricted Payments made since
the date of issuance of the Securities and (B) the Net Cash Proceeds from such
-
sale shall be excluded from clauses (3)(B) and (3)(C) of Section 4.04(a);
(ii) any purchase or redemption of Subordinated Obligations of the Issuer
made by exchange for, or out of the proceeds of the substantially concurrent
sale of, Subordinated Obligations of the Issuer; provided, however, that such
-------- --------
purchase or redemption shall be excluded in the calculation of the amount of
Restricted Payments made since the date of issuance of the Securities;
(iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by Section 4.09; provided, however, that
-------- -------
such purchase or redemption shall be excluded in the calculation of the amount
of Restricted Payments made since the date of issuance of the Securities;
(iv) dividends paid within 60 days after the date of declaration thereof if
at such date of declaration such dividends would have complied with this
Section; provided, however, that at the time of payment of such dividends, no
-------- -------
other Default shall have occurred and be continuing (or result therefrom);
provided further, however, that such dividends shall be included in the
- -------- ------- -------
calculation of the amount of Restricted Payments made since the date of issuance
of the Securities;
(v) any repurchase of Capital Stock of the Issuer after the date of
issuance of the Securities pursuant to the terms of the Stockholders' Agreement
from officers and employees (or their estates) of the Issuer or its Subsidiaries
upon death, disability or termination of employment of such officers and
employees; provided, however, that (A) the aggregate amount of all such
-------- ------- -
repurchases (excluding repurchases made with proceeds of life insurance policies
maintained by the Issuer on such employees or officers) in any fiscal year shall
not exceed $500,000; (B) to the extent that the aggregate amount of such
-
repurchases (excluding repurchases made with proceeds of life insurance policies
maintained by the Issuer on such employees or
35
<PAGE>
officers) in any fiscal year is less than $500,000, the difference between
$500,000 and such amount may be carried forward and applied to repurchases in
subsequent fiscal years; and (C) all such repurchases (other than
-
repurchases made with proceeds of life insurance policies maintained by the
Issuer on such employees or officers) shall be included in the calculation of
the amount of Restricted Payments made since the date of issuance of the
Securities;
(vi) Cash dividends paid after the date of issuance of the Securities with
respect to the ESOP Preferred Stock; provided, however, that (A) the aggregate
-------- ------- -
amount of all such dividends paid in any fiscal year shall not exceed
$500,000; (B) to the extent that the aggregate amount of such dividends paid
-
in any fiscal year is less than $500,000, the difference between $500,000 and
such amount may be carried forward and applied to the payment of such
dividends in subsequent fiscal years; and (C) all such dividends shall be
-
included in the calculation of the amount of Restricted Payments made since
the date of issuance of the Securities;
(vii) Investments in Non-Recourse Subsidiaries, not to exceed $5,000,000
in the aggregate during the term of this Indenture; provided, however, that
-------- -------
all such Investments shall be excluded in the calculation of the amount of
Restricted Payments made since the date of issuance of the Securities; or
(viii) Restricted Payments not to exceed $5,000,000 in the aggregate during
the term of this Indenture; provided, however, that all such Restricted
-------- -------
Payments shall be included in the calculation of the amount of Restricted
Payments made since the date of issuance of the Securities.
SECTION 4.05. Limitation on Senior Subordinated Debt. The Issuer shall not,
--------------------------------------
and shall not permit any Subsidiary to, issue, directly or indirectly, any Debt
that is expressly subordinate in right of payment to any Senior Debt unless such
Debt, by its terms or by the terms of any agreement or instrument pursuant to
which such Debt is outstanding, is expressly made pari passu with, or
---- -----
subordinate in right of payment to, the Securities, pursuant to provisions
substantially similar to those contained in Article Ten of this Indenture;
provided, that the foregoing limitation shall not apply to distinctions between
- --------
categories of Senior
36
<PAGE>
Debt of the Issuer that exist by reason of any Liens arising or created in
respect of some but not all of such Senior Debt.
SECTION 4.06. Limitation on Debt. (a) The Issuer shall not issue, directly
------------------
or indirectly, any Debt unless the Consolidated EBITDA Coverage Ratio (as shown
by a consolidated pro forma income statement of the Issuer and its consolidated
Subsidiaries for the Reference Period after giving effect to (i) the issuance of
-
such Debt and (if applicable) the application of the net proceeds thereof to
refinance other Debt as if such Debt was issued and the application of such
proceeds occurred at the beginning of the Reference Period, (ii) the issuance
--
and retirement of any other Debt since the last day of the most recent fiscal
quarter covered by such income statement as if such Debt was issued or retired
at the beginning of the Reference Period and (iii) the acquisition or
---
disposition of any company or business acquired or disposed of by the Issuer
since the first day of the Reference Period, including any acquisition or
disposition which will be consummated substantially contemporaneously with the
issuance of such Debt, as if such acquisition or disposition occurred at the
beginning of the Reference Period), exceeds 1.75 to 1.0 for the Reference
Period.
(b) Notwithstanding Section 4.06(a), the Issuer may issue the following
Debt:
(1) Debt issued as working capital and letter of credit financing in an
aggregate principal amount outstanding at any time not to exceed the greater
of (i) the sum of (A) 85% of the book value of the net trade receivables of
- -
the Issuer and its Subsidiaries and (B) $7.5 million or (ii) up to $27.5
- --
million of Debt incurred pursuant to the terms of the Credit Agreement and
Debt issued in exchange for, or the proceeds of which are used to refund or
refinance, the Debt permitted by this clause (ii);
(2) Debt owed to and held by a Wholly Owned Subsidiary; provided, however,
-------- -------
that any subsequent issuance or transfer of any Capital Stock which results in
any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or
any transfer of such Debt (other than to a Wholly Owned Subsidiary) shall be
deemed, in each case, to constitute the issuance of such Debt by the Issuer;
37
<PAGE>
(3) the Securities and Debt issued in exchange for, or the proceeds of
which are used to refund or refinance, any Debt permitted by this clause (3),
including reasonable fees, expenses, premiums and defeasance costs incurred in
connection with such refunding or refinancing; provided, however, that (i) the
-------- ------- -
principal amount of the Debt so issued shall not exceed the sum of the
principal amount of the Debt so exchanged, refunded or refinanced and the
amount of such fees, expenses, premiums and defeasance costs, and (ii) the
--
Debt so issued (A) shall not mature prior to the Stated Maturity of the Debt
so exchanged, refunded or refinanced and (B) shall have an Average Life equal
to or greater than the remaining Average Life of the Debt so exchanged,
refunded or refinanced; and
(4) Debt (other than Debt described in clause (1), (2) or (3) of this
Section) outstanding on the date of issuance of the Securities and Debt
issued in exchange for, or the proceeds of which are used to refund or
refinance, any Debt permitted by this clause (4), including reasonable fees,
expenses, premiums and defeasance costs incurred in connection with such
exchange, refunding or refinancing; provided, however, that (i) the principal
-------- ------- -
amount of the Debt so issued shall not exceed the sum of the principal amount
of the Debt so exchanged, refunded or refinanced and the amount of such fees,
expenses, premiums and defeasance costs, and (ii) the Debt so issued (A) shall
--
not mature prior to the Stated Maturity of the Debt so exchanged, refunded or
refinanced, (B) shall have an Average Life equal to or greater than the
remaining Average Life of the Debt so exchanged, refunded or refinanced and
(C) shall be subordinated in right of payment to the Securities if the Debt so
exchanged, refunded or refinanced is so subordinated;
(5) Purchase Money Debt, provided, however, that the aggregate amount of
-------- -------
Purchase Money Debt may not exceed $25 million;
(6) Non-Recourse Debt of a Non-Recourse Subsidiary issued after the date of
original issuance of the Notes to finance the acquisition of assets by such
Non-Recourse Subsidiary or to provide working capital for such Non-Recourse
Subsidiary and any Non-Recourse Debt of a Non-Recourse Subsidiary issued in
exchange for, or the proceeds of which are used to refund or refinance, any
Non-Recourse Debt permitted by
38
<PAGE>
this clause (6), including reasonable fees, expenses, premiums and defeasance
costs incurred in connection with such exchange refunding or refinancing;
provided, however, that (i) the principal amount of the Non-Recourse Debt
-------- ------- -
issued in exchange for, or the proceeds of which are used to refund or
refinance, any Non-Recourse Debt shall not exceed the principal amount of the
Debt so exchanged, refunded or refinanced (plus reasonable fees, expenses,
premiums and defeasance costs incurred in connection with such refunding or
refinancing), and (ii) if any such Debt thereafter ceases to be Non-Recourse
Debt of a Non-Recourse Subsidiary, then such event will be deemed to
constitute the issuance of such Debt by the issuer thereof; and
(7) Debt in an aggregate principal amount which, together with a1l other
Debt of the Issuer then outstanding (other than Debt permitted by clauses (1)
through (4) of this paragraph) does not exceed the greater of: (i) $25,000,000
-
and (ii) 5% of Consolidated Net Tangible Assets as of the end of the most
--
recent fiscal quarter of the Issuer ending not less than 45 days from the date
of determination.
The Issuer may issue Debt to finance the reasonable underwriting fees and
other transaction fees incurred by the Issuer in connection with the issuance of
the Debt referred to in clauses (3) and (4) so long as the issuance of such Debt
complies with Section 4.06.
SECTION 4.07. Limitation on Subsidiary Debt and Preferred Stock. The Issuer
-------------------------------------------------
shall not permit any Subsidiary to issue, directly or indirectly, any Debt or
Preferred Stock except:
(1) Debt or Preferred Stock issued to and held by the Issuer or a Wholly
Owned Subsidiary; provided, however, that (i) any subsequent issuance or
-------- ------- -
transfer of any Capital Stock which results in any such Wholly Owned
Subsidiary ceasing to be a Wholly Owned Subsidiary or (ii) any subsequent
--
transfer of such Debt or Preferred Stock (other than to the Issuer or a Wholly
Owned Subsidiary) shall be deemed, in each case, to constitute the issuance of
such Debt or Preferred Stock by the issuer thereof;
(2) Debt or Preferred Stock of a Subsidiary issued and outstanding on or
prior to the date on which
39
<PAGE>
such Subsidiary was acquired by the Issuer (other than Debt or Preferred Stock
issued as consideration in, or to provide all or any portion of the funds
utilized to consummate, the transaction or series of related transactions
pursuant to which such Subsidiary became a Subsidiary or was acquired by the
Issuer);
(3) Debt or Preferred Stock issued and outstanding on or prior to the date
on which the Securities were originally issued, other than Debt or Preferred
Stock described in clause (1) or (2) of this Section;
(4) Non-Recourse Debt of a Non-Recourse Subsidiary issued after the date of
this Indenture to finance the acquisition of assets acquired after the date
hereof; and
(5) Debt or Preferred Stock issued in exchange for, or the proceeds of
which are used to refund or refinance, Debt or Preferred Stock referred to in
the foregoing clause (2) or (3), including reasonable fees, expenses, premiums
and defeasance costs incurred in connection with such exchange, refunding or
refinancing; provided, however, that (i) the principal amount of such Debt or
-------- ------- -
the liquidation value of such Preferred Stock so issued shall not exceed the
sum of the principal amount or liquidation value of the Debt or Preferred
Stock so exchanged, refunded or refinanced and the amount of such fees,
expenses, premiums and defeasance costs; (ii) the Debt or Preferred Stock so
--
issued (A) shall have a Stated Maturity later than the Stated Maturity of the
-
Debt or final redemption date (if any) of the Preferred Stock being exchanged,
refunded or refinanced and (B) shall have an Average Life equal to or greater
-
than the remaining Average Life of the Debt or Preferred Stock being
exchanged, refunded or refinanced; (iii) the Debt so issued shall be
---
subordinate in right of payment to the Securities if the Debt so exchanged,
refunded or refinanced is so subordinate; and (iv) Debt may not be issued in
--
exchange for, and the proceeds of such Debt may not be used to refund or
refinance, Preferred Stock.
SECTION 4.08. Limitation on Restrictions on Distributions from
------------------------------------------------
Subsidiaries. The Issuer shall not, and shall not permit any Subsidiary to,
- ------------
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary to (i) pay
-
dividends or make any other distributions on its
40
<PAGE>
Capital Stock or pay any Debt or other obligation owed to the Issuer or any
Subsidiary, (ii) make any loans or advances to the Issuer or any Subsidiary or
--
(iii) transfer any of its property or assets to the Issuer or any Subsidiary,
---
except:
(1) any encumbrance or restriction pursuant to an agreement in effect on
the date hereof;
(2) any encumbrance or restriction with respect to a Subsidiary pursuant to
an agreement relating to any Debt issued by such Subsidiary on or prior to the
date on which such Subsidiary became a Subsidiary or was acquired by the
Issuer (other than Debt issued as consideration in, or to provide all or any
portion of the funds utilized to consummate, the transaction or series of
related transactions pursuant to which such Subsidiary became a Subsidiary or
was acquired by the Issuer) and outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement effecting a
refinancing of Debt issued pursuant to an agreement referred to in clause (1)
or (2) of this Section; provided, however, that the encumbrances and
-------- -------
restrictions contained in any such refinancing agreement are no less favorable
to the Securityholders than the encumbrances and restrictions contained in the
agreements being refinanced;
(4) any such encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests to the extent
such provisions restrict the transfer of the lease;
(5) restrictions contained in security agreements securing Debt of a
Subsidiary to the extent such restrictions restrict the transfer of the
property subject to such security agreements; and
(6) any such encumbrance or restriction relating to a Non-Recourse
Subsidiary.
SECTION 4.09. Limitation on Sales of Assets and Subsidiary Stock. (a) The
---------------------------------------------------
Issuer shall not, and shall not permit any Subsidiary to, make any Asset
Disposition unless (i) the Issuer or such Subsidiary receives consideration at
-
the time of such Asset Disposition at least equal to the fair market value, as
determined in good faith by the Board of Directors (including a determination as
to the value of
41
<PAGE>
all non-Cash consideration), of the shares and assets subject to such Asset
Disposition, and at Least 90% of the consideration therefor received by the
Issuer or such Subsidiary is in the form of Cash or Cash equivalents and (ii) an
--
amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by the Issuer (or such Subsidiary, as the case may be) either (A) to the
-
extent the Issuer elects (or is required by the terms of any Senior Debt), to
redeem, prepay, repay or purchase Senior Debt or Debt of a Wholly Owned
Subsidiary to the extent the asset disposed of was previously held by such
Wholly Owned Subsidiary (in each case other than Debt owed to the Issuer or an
Affiliate of the Issuer) within 60 days (or such other period as may be required
for compliance with Section 4.12 of the First Mortgage Bonds Indenture) from the
later of the date such Asset Disposition or the receipt of such Net Available
Cash; or (B) to the extent of Net Available Cash not so applied in accordance
-
with clause (A), to the acquisition by the Issuer or any Wholly Owned
-
Subsidiary of Tangible Property of a nature or type or that is used in a
business (or in a company having property and assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the Tangible
Property of, or the business of, the Issuer and its Subsidiaries existing on the
date of such acquisition (as determined by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution); and (C)
to the extent there is Net Available Cash after application in accordance with
clauses (A) and (B), to make an Offer (as defined below) to purchase Securities
pursuant to and subject to the conditions of the following paragraph and to
effect any Offer accepted, in each case within one year from the later of the
receipt of such Net Available Cash and the date the Offer described in Section
4.09(b) is consummated; provided, however, that in connection with any
redemption, prepayment, repayment or purchase of Debt pursuant to clause (A)
above, the Issuer shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so redeemed,
prepaid, repaid or purchased. Not withstanding the foregoing provisions of this
Section, the Issuer and its Subsidiaries shall only be required to apply Net
Available Cash in accordance with this Section to the extent that the aggregate
Net Available Cash from all Asset Dispositions exceeds $20,000,000. Pending
application of Net Available Cash pursuant to this Section, such Net Available
Cash shall be invested in Permitted Investments.
(b) To the extent that there is Net Available Cash from an Asset
Disposition remaining after (i) any elec-
42
<PAGE>
ted or required payment of Senior Debt or Debt of a Wholly Owned Subsidiary as
described in Section 4.09(a)(ii)(A) and (ii) any acquisition of Tangible
--
Property as described in Section 4.09(a)(ii)(B), the Issuer will be required to
purchase Securities tendered pursuant to an offer by the Issuer for the
Securities (the "Offer") at a purchase price equal to the applicable
redemption price set forth in Section 3.01(b), plus accrued interest to the
Purchase Date (subject, in each case, to the right of Holders of record on the
relevant date to receive interest due on the relevant interest Payment Date), in
accordance with the procedures (including prorating in the event of
oversubscription) set forth in Section 4.09(c). If the aggregate purchase price
of Securities tendered pursuant to the Offer is less than the Net Available Cash
allotted to the purchase of the Securities, the Issuer shall apply the remaining
Net Available Cash in accordance with Section 4.09(a)(ii)(A) or (B). The Issuer
shall not be required to make an Offer for Securities pursuant to this Section
if the Net Available Cash available therefor (after application of proceeds as
provided in Section 4.09(a)(ii)(A) and (B)) is less than $5,000,000 for any
particular Asset Disposition (which lesser amounts shall not be carried forward
for purposes of determining whether an Offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 90 days (or such other period as
may be required for compliance with Section 4.12 of the First Mortgage Bonds
Indenture) after the later of the date of each Asset Disposition as to which the
Issuer must apply Net Available Cash in accordance with Section 4.09(a)(ii)(C)
or the receipt of Net Available Cash therefrom, the Issuer shall be obligated to
deliver to the Trustee and send, by first-class mail to each Holder, a written
notice stating that the Holder may elect to have his Securities purchased by the
Issuer either in whole or in part (subject to prorationing as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price specified in
Section 4.09(b). The notice containing an Offer shall specify a purchase date
not less than 30 days nor more than 60 days after the date of such notice (the
"Purchase Date") and shall contain information concerning the business of the
Issuer which the Issuer in good faith believes will enable such Holders to make
an informed decision (which at a minimum will include (i) the most recently
-
filed Annual Report on Form 10-K (including audited consolidated financial
statements) of the Issuer, the most recent subsequently filed Quarterly Report
on Form 10-Q and
43
<PAGE>
any Current Report on Form 8-K of the Issuer filed subsequent to such Quarterly
Report, other than Current Reports describing Asset Dispositions otherwise
described in the offering materials (or corresponding successor reports), or if
the Issuer becomes no longer subject to the Exchange Act, equivalent
information, (ii) a description of material developments in the Issuer's
--
business subsequent to the date of the latest of such Reports, and (iii) if
---
material, appropriate pro forma financial information) and all instructions and
materials necessary to tender Securities pursuant to the Offer, together with
the information contained in clause (3) of this Section 4.09(C).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided below, the Issuer shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer
-
Amount"), (ii) the allocation of the Net Available Cash from the Asset
--
Dispositions pursuant to which such Offer is being made and (iii) the compliance
---
of such allocation with the provisions of Section 4.09(a). On such date, the
Issuer shall also irrevocably deposit in trust with the Trustee or with a paying
agent (or, if the Issuer is acting as its own paying agent, segregate and hold
in trust) in immediately available funds an amount equal to the Offer Amount to
be held by the Trustee or with a paying agent in trust for payment in accordance
with the provisions of this Section. Upon the expiration of the period for which
the Offer remains open (the "Offer Period"), the Issuer shall deliver to the
Trustee the Securities or portions thereof which have been properly tendered to
and are to be accepted by the Issuer. The Trustee shall, on the Purchase Date,
to the extent it has received sufficient funds from the Issuer, mail payment to
each Holder who has surrendered Securities to the Issuer as provided in
paragraph (3) below in the amount of the purchase price. In the event that the
aggregate purchase price of the Securities delivered by the Issuer to the
Trustee is less than the Offer Amount, the Trustee shall deliver the excess to
the Issuer immediately after the expiration of the Offer Period.
(3) Holders electing to have a Security purchased will be required to
surrender the Security, with an appropriate form duly completed, to the Issuer
at the address specified in the notice at least ten Business Days prior to the
Purchase Date. Holders will be entitled to withdraw their election if the
Trustee or the Issuer receives not later than three Business Days prior to the
Purchase Date, a telegram, telex, facsimile transmission or letter setting
44
<PAGE>
forth the name of the Holder, the principal amount of the Security which was
delivered for purchase by the Holder and a statement that such Ho1der is
withdrawing his election to have such Security purchased. If at the expiration
of the Offer Period the aggregate principal amount of Securities surrendered
by Holders exceeds the Offer Amount, the Issuer shall select the Securities to
be purchased on a pro rata basis in accordance with the principles set forth in
Section 3.04 (with such adjustments as may be deemed appropriate by the Issuer
so that only Securities in denominations of $1,000, or integral multiples
thereof, shall be purchased). Holders whose Securities are purchased only in
part will be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered.
(4) At the time the Issuer delivers Securities to the Trustee which are to
be accepted for purchase, the Issuer will also deliver an Officers' Certificate
stating that such Securities are to be accepted by the Issuer pursuant to and
in accordance with the terms of this Section. A Security shall be deemed to have
been accepted for purchase at the time the Trustee, directly or through an
agent, mails or delivers payment therefor to the surrendering Holder.
(d) The Issuer shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Section, the Issuer shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section by virtue thereof.
SECTION 4.10. Limitation on Transactions with Affiliates. The Issuer shall
-------------------------------------------
not, and shall not permit any Subsidiary to, conduct any business or enter into
any transaction or series of related transactions (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
Affiliate of the Issuer or any legal or beneficial owner of five percent or more
of any class of Capital Stock of the Issuer or with any Affiliate of such owner
(other than a Wholly Owned Subsidiary of the Issuer or an employee stock
ownership plan for the benefit of the Issuer's or a Subsidiary's employees)
unless (i) the terms of such business, transaction or series of transactions are
-
(a) set forth in writing and (b) as favorable to the Issuer or such Subsidiary
- -
as terms that would be
45
<PAGE>
obtainable at the time for a comparable transaction or series of related
transactions in arm's-length dealings with an unrelated third Person and (ii)
--
the Board of Directors has, by resolution, determined in good faith that such
business or transaction or series of related transactions meets the criteria set
forth in (i) above. This Section, however, will not prohibit any dividend or
distribution permitted under Section 4.04 hereof.
SECTION 4.11. Change of Control. (a) Upon a Change of Control, each Holder
-----------------
shall have the right to require that the Issuer repurchase such Holder's
Securities at a purchase price in Cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant date to receive
interest due on the relevant interest Payment Date), in accordance with the
terms contemplated in Section 4.11(b).
(b) Within 30 days following any Change of Control, the Issuer shall mail
a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has the
right to require the Issuer to purchase all or part of such Holder's
Securities at a purchase price in Cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest Payment Date);
(2) the circumstances and relevant facts regarding such Change of Control
(including, but not limited to, information with respect to pro forma
historical income, cash flow and capitalization after giving effect to such
Change of Control);
(3) the repurchase date (which shall be a Business Day no earlier than 30
days nor later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Issuer, consistent with this
Section, that a Holder must follow in order to have its Securities purchased.
(c) Holders electing to have a Security purchased will be required to
surrender the Security, with an appropriate
46
<PAGE>
election form duly completed, to the Issuer at the address specified in the
notice at least 10 Business Days prior to the purchase date. Holders will be
entitled to withdraw their election if the Trustee or the Issuer receives not
later than three Business Days prior to the purchase date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Security which was delivered for purchase by the Holder
and a statement that such Holder is withdrawing its election to have such
Security purchased.
(d) On the purchase date, all Securities purchased by the Issuer under this
Section shall be delivered by the Trustee for cancellation, and the Issuer shall
pay the purchase price plus accrued and unpaid interest, if any, to the Holders
entitled thereto.
(e) The Issuer shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.11. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Issuer shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Section by virtue thereof.
SECTION 4.12. Appointment of Agents. As long as any of the Securities
---------------------
remain Outstanding, the Issuer will maintain one or more agencies where notices
and demands (other than in respect of payment on the Securities) by Holders of
Securities to or upon the Issuer in respect of the Securities or this Indenture
may be served and where the Securities may be presented for payment by the
Issuer and for registration of transfer and for exchange as in this Indenture
provided. In addition, the Issuer hereby appoints the Trustee at its Corporate
Trust Office as the paying agent of the Issuer, but the Issuer shall have the
right at any time and from time to time to vary or terminate any such
appointment as paying agent and to appoint additional and other such agents. The
Issuer will give to the Trustee notice of the location of such additional and
other offices or agencies of the Issuer and of any change in the location of any
of such offices or agencies. No agent appointed by the Issuer pursuant to this
Section 4.12 shall be liable to the Issuer or to the Holder of any Security
except in the case of its own negligent action, its own negligent failure to act
or its own willful misconduct.
47
<PAGE>
The Issuer hereby appoints the Trustee as Security Registrar and paying
agent for the Securities. The Corporate Trust Office of the Trustee, at the date
of this Indenture, is at 114 West 47th Street, 15th Floor, New York, New York
10036-1532, Attention: Corporate Trust Division.
The Issuer agrees that at least one of the agencies where the notices and
demands referred to in this Section 4.12 may be served will, for as long as any
of the Securities remain Outstanding, be maintained in New York, New York. The
Issuer hereby initially appoints the Trustee at its Corporate Trust Office as
its agent for receipt of such notices and demands.
SECTION 4.13. Paying Agents to Hold Funds in Trust. Whenever the Issuer
------------------------------------
shall appoint a paying agent other than the Trustee, it will cause such paying
agent to execute and deliver to the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 4.13,
(a) that it will hold all sums held by it as such agent for the payment of
the principal of, and interest on the Securities in trust for the benefit of
the Holders of the Securities or the Trustee and will notify the Trustee of
the receipt of sums to be so held, and
(b) that it will give the Trustee notice of any failure by the Issuer to
make any payment of the principal of, or interest on, the Securities when the
same shall be due and payable.
SECTION 4.14. Appointment of Trustee by Issuer. Whenever necessary to avoid
--------------------------------
or fill a vacancy in the office of the Trustee, the Issuer will appoint, in the
manner provided in Section 7.08, a Trustee, so that there shall at all times be
a Trustee hereunder.
SECTION 4.15. Availability of Information. 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 the Holders of the Securities. From time to
time, whenever reasonably requested by the Trustee, but in any event at
intervals of not more than six months, the Issuer will furnish or make available
to the Trustee such information as may be necessary to permit the Trustee to
carry out its duties hereunder. If at any time
48
<PAGE>
the Trustee shall not be the Security Registrar, the Issuer will furnish or
cause to be furnished to the Trustee monthly not later than five Business Days
before each Payment Date, and at such other times as the Trustee may reasonably
request, a list in such form as the Trustee may reasonably require of the names
and addresses of Holders of Securities as of the Record Date for such Payment
Date.
SECTION 4.16. Books of Account; Inspection by the Trustee; Notices;
-----------------------------------------------------
Statements as to Compliance. (a) The Issuer will keep or cause to be kept proper
- ----------------------------
books of record and account, in which full, true and correct entries shall be
made of all dealings or transactions of or in relation to the Securities.
(b) The Issuer shal1 deliver to the Trustee within 120 days after the end
of each fiscal year of the Issuer an Officers' Certificate stating whether or
not the signers know of any Default or Event of Default that occurred during
such period, describing such Default or Event of Default, if any, and its
status.
(c) The Issuer agrees promptly to give notice to the Trustee of:
(i) the occurrence of any Default or Event of Default;
(ii) any (A) default (after any applicable grace period has expired) under
-
any material provision of any agreement, instrument or undertaking to which
the Issuer or a Subsidiary is a party or by which any of them or any of their
respective properties is bound or (B) litigation, investigation or proceeding
which may exist at any time between the Issuer or a Subsidiary and any Person,
which default or litigation, if adversely determined, could have a material
adverse effect on the business, operations or condition, financial or
otherwise, of the Issuer and its Subsidiaries, taken as a whole, or any of
their properties;
(iii) any litigation or proceeding affecting the Issuer or a Subsidiary in
which the amount involved is $500,000 or more and is either not covered by
insurance or is covered by insurance as to which the insurer has disclaimed
liability or in which injunctive or similar relief is sought; or
49
<PAGE>
(iv) a material adverse change in the business, operations or condition,
financial or otherwise, of the Issuer and its Subsidiaries, taken as a whole.
Each notice given pursuant to this Section 4.16(c) shall be accompanied by an
Officers' Certificate setting forth details of the occurrence referred to
therein and stating what action, if any, the Issuer proposes to take with
respect thereto.
The statements and other information furnished to the Trustee under this
Section are to be retained by the Trustee in its files. Copies of such
information pursuant to this Section shall be provided by the Trustee upon
request only to the Holders of Securities at the Issuer' s expense or their
duly designated representatives or agents, and the Trustee shall be under no
other duty with respect to the same.
SECTION 4.17. Payment of Taxes and Other Claims. The Issuer will, and will
---------------------------------
cause each of its Subsidiaries to, pay or discharge or cause to be paid or
discharged, before any fines or penalties are imposed, (a) all taxes,
-
assessments and governmental charges levied or imposed upon it or upon its
income, profits or property and (b) all lawful claims for labor, materials and
-
supplies which, if unpaid, might by law become a Lien upon its property in such
amount as may be material to the Issuer; provided, however, that the Issuer
-------- -------
shall have the right, at its sole cost and expense, to contest or object in good
faith to the amount or validity of any tax, assessment, charge or claim by
appropriate legal proceedings for which appropriate provisions, if any, as
shall be required by generally accepted accounting principles, shall have been
made, but such right shall not be deemed or construed in any way as relieving,
modifying or extending the Issuer's covenant to pay such tax, assessment,
charge or claim at the time and in the manner provided in this Section, unless
the Issuer has given prior written notice to the Trustee of its intent so to
contest or object.
SECTION 4.18. Corporate Existence and Rights. The Issuer will, and will
------------------------------
cause each of its Subsidiaries to, do or cause to be done all things necessary
to preserve and keep in full force and effect its existence and franchises;
provided, however, that the Issuer shall not be required to preserve any such
- -------- -------
franchise if it shall determine that the preservation thereof is no longer
desirable in the conduct of its business and that the loss thereof is not
disadvanta-
50
<PAGE>
geous in any material respect to the Holders of the Securities and shall deliver
to the Trustee an Officers' Certificate to that effect; provided, further,
-------- -------
however, that this Section 4.18 shall not prohibit the merger of a Subsidiary
- -------
into another Subsidiary or the merger of a Subsidiary into the Issuer. Any
determination by the Issuer reflected in an Officers' Certificate delivered to
the Trustee pursuant to the first proviso of this Section 4.18 shall be binding
on the Trustee.
SECTION 4.19. Maintenance of Properties. The Issuer shall cause all
-------------------------
properties used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Issuer may be necessary so that the business
carried on in connection therewith may be properly conducted at all times;
provided, however, that nothing in this Section shall prevent the Issuer from
- -------- -------
(or require the Issuer to cause any Subsidiary to avoid) discontinuing the
operation or maintenance or disposing of any of such properties if such
discontinuance or disposition is, in the judgment of the Board of Directors or
the board of directors of the Subsidiary concerned, or of any officer (or other
agent employed by the Issuer or any Subsidiary) having been delegated corporate
authority for any such property, in each case, in good faith, desirable in the
conduct of its business or the business of any Subsidiary.
SECTION 4.20. Maintenance of Insurance. The Issuer shall, and shall
------------------------
cause its Subsidiaries to, keep at all times all of their properties which are
of an insurable nature insured (including appropriate self-insurance) against
loss or damage with insurers believed by the Issuer to be responsible to the
extent that property of similar character is usually so insured by corporations
similarly situated and owning like properties in accordance with good business
practice unless such failure to provide or cause to be provided such insurance
would not have a material adverse effect on the business affairs, financial
position, stockholder's equity or results of operations of the Issuer and its
Subsidiaries, considered on a consolidated basis.
51
<PAGE>
SECTION 4.21. Certificate and Opinion as to Conditions Precedent. Upon
--------------------------------------------------
any request or application by the Issuer to the Trustee to take any action under
this Indenture, the Issuer shall furnish to the Trustee upon the Trustee's
request:
(1) an Officers' Certificate, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with;
(2) an Opinion of Counsel, in form and substance reasonably
satisfactory to the Trustee, stating that, in the opinion of such counsel,
all such conditions precedent have been complied with; and
(3) if appropriate, a certificate from Independent Accountants.
SECTION 4.22. Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with regard to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
52
<PAGE>
SECTION 4.23. Further Instruments and Acts. Upon request of the
----------------------------
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
ARTICLE FIVE
Events of Default and Remedies
------------------------------
SECTION 5.01. Events of Default. An "Event of Default" occurs if:
-----------------
(1) the Issuer defaults in the payment of interest on any Security
when the same becomes due and payable, whether or not such payment shall be
prohibited by Article Ten, and such default continues for a period of 30
days;
(2) the Issuer (i) defaults in the payment of the principal of or
-
premium (if any) on any Security when the same becomes due and payable at
its Stated Maturity, upon redemption, upon declaration or otherwise or (ii)
--
fails to redeem or purchase Securities when required pursuant to this
Indenture or the Securities, in either case whether or not such payment
shall be prohibited by Article Ten;
(3) the Issuer fails to comply with the requirements for
consolidation, merger or conveyance, transfer or lease of all or of
substantially al1 of the Issuer's assets, as set forth in Article Nine;
(4) the Issuer fails to observe or perform any of its covenants or
agreements set forth in the Securities or in this Indenture (other than
those referred to in clauses (1), (2) or (3) above) and the Default
continues for a period of 30 days after the notice specified below;
(5) Debt of the Issuer or any of its Subsidiaries is not paid within
any applicable grace period after final maturity or is accelerated by the
holders thereof because of a default, the total amount of such Debt unpaid
or accelerated exceeds $5,000,000 or its foreign currency equivalent and
such default continues for 10 days after the notice specified below;
53
<PAGE>
(6) the Issuer or any of its Subsidiaries pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Issuer or any of its Subsidiaries in
an involuntary case;
(B) appoints a custodian of the Issuer or any of its Subsidiaries
or for any substantial part of their respective property; or
(C) orders the winding up or liquidation of the Issuer or any of
its Subsidiaries;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(8) any judgment or decree for the payment of money in excess of
$5,000,000 is rendered against the Issuer or any of its Subsidiaries and is
not discharged and either (A) an enforcement proceeding has been commenced
-
by any creditor upon such judgment or decree or (B) there is a period of 60
-
days following such judgment or decree during which such judgment or decree
is not discharged, waived or the execution thereof stayed and, in the case
of (B), such default continues for 10 days after the notice specified
below.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by opera-
54
<PAGE>
tion of law or pursuant to any judgment, decree or order of any court or other
order, rule or regulation of any administrative or governmental body.
Notwithstanding the foregoing, a Default under clause (4), (5) or
(8)(B) is not an Event of Default until the Trustee or the Holders of at least
25% in principal amount of the Securities notify the Issuer of the Default and
the Issuer does not cure such Default within the time specified after receipt of
such Notice. Such Notice must specify the Default, demand that it be remedied
and state that such Notice is a "Notice of Default".
The Issuer shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (4), (5) or (8) hereof, its status and what action
the Issuer is taking or proposes to take with respect thereto.
SECTION 5.02. Acceleration. If an Event of Default (other than an
------------
Event of Default specified in Section 5.01(6) or (7) with respect to the Issuer)
occurs and is continuing, the Trustee by notice to the Issuer, or the Holders of
at least 25% in principal amount of the Outstanding Securities by notice to the
Trustee and the Issuer may declare the unpaid principal of and accrued interest
on all the Securities and all other amounts due hereunder or thereunder to be
due and payable; provided that upon the occurrence of an Event of Default
--------
described in clause (6) or (7) of Section 5.01, the principal of and accrued
interest on all of the Securities shall automatically become due and payable,
without presentment, demand or other requirements of any kind, all of which are
hereby expressly waived by the Issuer. Upon such a declaration, such principal,
interest and all other amounts shall be due and payable immediately.
In the case of any Event of Default, other than an Event of Default
specified in clause (6) or (7) of Section 5.01, a premium shall also become and
be immediately due and payable upon acceleration of the Securities to the extent
permitted by law, anything else contained in this Indenture or in the Securities
to the contrary notwithstanding, (i) in the case of the occurrence of an Event
-
of Default at such time as the Issuer could redeem the Securities at its option,
at a premium equivalent to the redemption premium that would be payable upon
such optional redemption with regard to the Securities or (ii) in the case
--
55
<PAGE>
of an Event of Default occurring prior to the date at which the Securities
first become redeemable at the option of the Issuer, at a premium equivalent to
the redemption premium applicable to the Securities when they first become
redeemable.
The Holders of a majority in principal amount of the Securities by
written notice to the Trustee may rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree, if no amounts
have been paid to the Holders as principal or interest on the Securities as a
result of such acceleration, and if all existing Events of Default have been
cured or waived pursuant to the terms of this Indenture except nonpayment of
principal or interest that has become due solely because of acceleration.
SECTION 5.03. Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity or otherwise to collect the payment of principal of or interest on the
Securities or to enforce the performance of any provision of the Securities or
this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of Securities in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 5.04. Waiver of Past Defaults. Subject to Section 8.02, the
-----------------------
Holders of a majority in principal amount of the Outstanding Securities by
notice to the Trustee may waive an existing Default or Event of Default and its
consequences except (a) a Default in the payment of the principal of, or
-
interest on a Security or (b) a Default in respect of any covenant or provision
-
of this Indenture that under Section 8.02 cannot be amended or modified without
the consent of the Holder of each Security affected thereby. When a Default or
Event of Default is waived, it is deemed cured, but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any consequent
right.
SECTION 5.05. Control by Majority. The Holders of a majority in
-------------------
principal amount of the Securities may
56
<PAGE>
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of exercising any trust or power conferred on it.
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture or, subject to Section 7.01, that the Trustee determines is
unduly prejudicial to the rights of other Securityholders or would involve the
Trustee in personal liability.
SECTION 5.06. Limitation on Suits. A Holder of Securities may not
-------------------
pursue any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities do
not give the Trustee a direction inconsistent with the request during such
60-day period.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
SECTION 5.07. Rights of Holders To Receive Payment. Notwithstanding
------------------------------------
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected adversely without the consent of such Holder.
SECTION 5.08. Collection Suit by Trustee. If an Event of Default in
--------------------------
payment of interest or principal speci-
57
<PAGE>
fied in Section 5.01(1) or (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Issuer
(or any other obligor upon the Securities) for the whole amount of principal and
interest remaining unpaid and the amounts provided for in Section 7.07.
SECTION 5.09. Trustee May File Proofs of Claim. The Trustee may file
--------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Issuer, its creditors or its
property and, unless prohibited by law or applicable regulations, may vote on
behalf of the Holders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial proceeding
is hereby authorized by each Holder to make payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.
SECTION 5.10. 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 for amounts due under Section 7.07, including
payment of all compensation, expenses and liabilities incurred, and all
advances made, by the Trustee and the costs and expenses of collection;
SECOND: to Securityholders for the payment of the whole amount then
owing and unpaid upon the Securities for principal, premium (if any) and
interest; and in case such moneys shall be insufficient to pay in full the
whole amount so due and unpaid upon the Securities, then to the payment of
such principal and interest, without preference or priority of principal
over interest, or interest over principal, or of any Interest Payment over
any other Interest Payment, or of any Securities over any other Securities,
ratably to the aggregate of such principal and interest;
THIRD: to the payment of any remaining Obligations; and
58
<PAGE>
FOURTH: the balance, if any, to the Issuer, its successors or assigns
or to whomsoever may be lawfully entitled to receive the same, or as a
court of competent jurisdiction may determine.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such
record date, the Issuer shall mail to each Securityholder a notice that
states the record date, the payment date and amount to be paid.
SECTION 5.11. Undertaking for Costs. In any suit for the enforcement
---------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 5.07 or a suit by Holders of
more than 10% in aggregate principal amount of the Securities then Outstanding.
SECTION 5.12. Waiver of Stay or Extension Laws. The Issuer (to the
--------------------------------
extent it may lawfully do so) shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Issuer (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and shall not hinder, delay or impede the execution
of any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE SIX
Discharge of Indenture; Defeasance
----------------------------------
SECTION 6.01. Discharge of Liability on Securities; Defeasance. (a)
------------------------------------------------
When (i) the Issuer delivers to the Trustee all Outstanding Securities (other
-
than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all
--
Outstanding Securities have become due and payable
59
<PAGE>
and the Issuer irrevocably deposits or causes to be deposited with the Trustee
funds sufficient to pay at maturity all Outstanding Securities, including
interest thereon (other than Securities replaced pursuant to Section 2.07)
solely for the benefit of the Holders for such purpose, and if in either case
the Issuer pays all other Obligations, then this Indenture shall, subject to
Sections 6.01(c) and 6.06, cease to be of further effect. The Trustee shall
acknowledge satisfaction and discharge of this Indenture on demand of the Issuer
accompanied by an Officers' Certificate and an Opinion of Counsel and at the
cost and expense of the Issuer.
(b) Subject to Sections 6.01(c), 6.02 and 6.06, the Issuer at any time
may terminate (i) all its obligations under the Securities and this Indenture
-
("legal defeasance option") or (ii) its obligations under Sections 4.01, 4.03,
--
4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.16 (with respect to clause (a)
and (c)(i) through (c)(iv)), 4.17, 4.18 (as to Subsidiaries), 9.01(iii) and
9.01(iv) and the operation of 5.01(4) (with respect to those provisions of
Article Four cited in this clause (ii)) 5.01(5), 5.01(6) (with respect to any
Subsidiary), 5.01(7) (with respect to any Subsidiary) and 5.01(8) ("covenant
defeasance option"). The Issuer may exercise its legal defeasance option
not-withstanding its prior exercise of its covenant defeasance option.
If the Issuer exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the Issuer
exercises its covenant defeasance option, payment of the Securities may not be
accelerated because of an Event of Default specified in 5.01(4) (with respect to
those provisions of Article Four cited in clause (ii) above), 5.01(5), 5.01(6)
(with respect to any Subsidiary), 5.01(7) (with respect to any Subsidiary) or
5.01(8) or because of the failure of the Issuer to comply with Section 9.01(iii)
or 9.01(iv).
Upon satisfaction of the conditions set forth herein and upon request
of the Issuer, the Trustee shall acknowledge in writing the discharge of those
obligations that the Issuer terminates.
(c) Notwithstanding clauses (a) and (b) above, the Issuer's
obligations in Sections 2.06, 2.07, 2.09, 4.12, 4.13, 4.14, 4.15, 4.16 (with
respect to clauses (b) and (c)(i)), 4.19, 4.20, 6.04, 6.05, 6.06, 7.07 and 7.08,
shall survive until the Securities have been paid in full. There-
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after, the Issuer's obligations in Sections 6.04, 6.05 and 7.07 shall survive.
SECTION 6.02. Conditions to Defeasance. The Issuer may exercise its
------------------------
legal defeasance option or its covenant defeasance option only if:
(1) the Issuer irrevocably deposits in trust with the Trustee Cash or
U.S. Government Obligations for the payment of principal of, premium (if
any) and interest on, the Securities to the date of maturity or redemption,
as the case may be;
(2) the Issuer delivers to the Trustee a certificate from a nationally
recognized firm of independent accountants expressing their opinion that
the payments of principal and interest when due and without reinvestment on
the deposited U.S. Government Obligations plus any deposited Cash without
investment will provide Cash at such times and in such amounts (but, in the
case of the legal defeasance option only, not more than such amounts) as
will be sufficient to pay principal and interest when due on all Securities
to maturity or redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 5.01(6) or (7) with respect to the
Issuer occurs which is continuing at the end of the period;
(4) no Default has occurred and is continuing on the date of such
deposit and after giving effect thereto;
(5) the deposit does not constitute a default under any other
agreement binding on the Issuer;
(6) the Issuer delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(7) in the case of the legal defeasance option, the Issuer shall have
delivered to the Trustee an Opinion of Counsel stating that (i) the Issuer
-
has received from, or there has been published by, the Internal Revenue
Service a ruling, or (ii) since the date of this Indenture there has been a
--
change in the
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applicable federal income tax law, in either case to the effect that, and
based thereon such Opinion of Counsel shall confirm that, the
Securityholders will not recognize income, gain or loss for federal income
tax purposes as a result of such defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same time as
would have been the case if such defeasance had not occurred;
(8) in the case of the covenant defeasance option, the Issuer shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders 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
time as would have been the case if such covenant defeasance had not
occurred; and
(9) the Issuer delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
Six have been complied with.
Before or after a deposit, the Issuer may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article Three.
SECTION 6.03. Application of Trust Money. The Trustee shall hold in
--------------------------
trust Cash or U.S. Government Obligations deposited with it pursuant to this
Article Six. It shall apply the deposited Cash and the Cash from U.S. Government
Obligations through the paying agent and in accordance with this Indenture to
the payment of principal of and interest on the Securities.
SECTION 6.04. Repayment to Issuer. The Trustee and the paying agent
-------------------
shall promptly turn over to the Issuer upon request any excess Cash or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
paying agent shall pay to the Issuer upon request any Cash held by them for the
payment of principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the Cash must look to the Issuer for
payment as general creditors.
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SECTION 6.05. Indemnity for Government Obligations. The Issuer shall
------------------------------------
pay and shall indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against the Trustee with respect to deposited U.S. Government
Obligations or the principal and interest received on such U.S. Government
Obligations.
SECTION 6.06. Reinstatement. If the Trustee or paying agent is unable
-------------
to apply any Cash or U.S. Government Obligations in accordance with this Article
Six by reason of any legal proceeding or by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Issuer's obligations under this Indenture and
the Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article Six until such time as the Trustee or paying agent is
permitted to apply all such Cash or U.S. Government Obligations in accordance
with this Article Six; provided, however, that, if the Issuer has made any
-------- -------
payment of interest on or principal of any Securities because of the
reinstatement of its obligations, the Issuer shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the Cash or U.S.
Government Obligations held by the Trustee or paying agent.
ARTICLE SEVEN
Concerning the Trustee
----------------------
SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in its exercise as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture, and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
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(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 5.02, 5.04 or 5.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Issuer. Money held by
the Trustee in trust hereunder need not be segregated from other funds except to
the extent required by law.
SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any
-----------------
document believed by it to be genuine and to have been signed or presented by
the proper Person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate 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 the
Officers' Certificate or Opinion of Counsel.
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(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided that the Trustee's conduct does not constitute negligence.
--------
(e) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered the Trustee reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in compliance with such work or
direction.
(f) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuer shall be sufficient if
signed by an Officer of the Issuer.
SECTION 7.03. Individual Rights of Trustee. The Trustee in its
----------------------------
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Trustee. Any paying agent, Security Registrar or
Security Co-Registrar may do the same with like rights. However, the Trustee
must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
--------------------
responsible for and makes no representation as to the validity, adequacy or
enforceability of this Indenture or the Securities. The Trustee shall not be
accountable for the Issuer's use of proceeds from the Securities or any money
paid to the Issuer or upon the Issuer's direction under any provision of this
Indenture, the Trustee shall not be responsible for the use or application of
any money received from any paying agent other than the Trustee, and the Trustee
shall not be responsible for any statement or recital herein or in the
Securities or any other document in connection with the sale of Securities or
pursuant to this Indenture other than its certificate of authentication.
SECTION 7.05. Notice of Defaults. If a Default or an Event of
------------------
Default occurs and is continuing and if it is
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known to the Trustee, the Trustee shall mail to each Holder of Securities,
as their names and addresses appear on the Security Register, notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default in payment of principal of or interest on, any Security, the
Trustee may withhold such notice if and so long as a committee of its Trust
Officers in good faith determines that the withholding of such notice is in the
interests of Holders of Securities. The Trustee shall not be deemed to have
knowledge of any Default or Event of Default except (i) any Event of Default
occurring pursuant to Section 5.01(1) or Section 5.01(2) of this Indenture, if
the Trustee is then acting as paying agent, or (ii) any Default or Event of
Default of which a Trust Officer shall have received written notification from
the Issuer or a Securityholder, and such notification shall not be deemed to
include receipt of information contained in any report or other document
furnished under Section 4.03 of this Indenture.
SECTION 7.06. Reports by Trustee to Holders. As promptly as
-----------------------------
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, and in any event prior to July 15 in each year, and within 12
months from the date the prior report hereunder was transmitted to the Holders
of Securities, the Trustee shall mail to each Holder of Securities in accordance
with TIA (S) 313(c), a brief report dated as of May 15 that complies with TIA
(S) 313(a) (but if no event described in TIA (S) 313(a) has occurred within the
twelve months preceding the reporting date, no report need be transmitted). The
Trustee also shall comply with TIA (S) 313(b).
A copy of each report at the time of its mailing to Holders of
Securities shall be filed with the SEC and each stock exchange, if any, on
which, to the Trustee's actual knowledge, the Securities are listed; the Issuer
agrees to notify promptly the Trustee whenever the Securities become listed on
any stock exchange and of any delisting thereof.
SECTION 7.07. Compensation and Indemnity. The Issuer shall pay to the
--------------------------
Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall reimburse the Trustee upon the
Trustee's request, in addition to compensation for its services for all
reasonable out-of-pocket expenses, disbursements and advances incurred or made
by it, in-
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cluding, without limitation, the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents and counsel. The Issuer
shall indemnify the Trustee against any loss, liability or expense incurred by
it without negligence or bad faith on its part in connection with the
acceptance or the administration of this trust and the performance of its
duties hereunder, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder. The Trustee shall notify the Issuer promptly of
any claim for which it may seek indemnity. However, failure by the Trustee to
so promptly notify the Issuer shall not relieve the Issuer of its obligations
under this paragraph except to the extent such failure shall have materially
prejudiced the Issuer. The Issuer shall defend the claim and the Trustee shall
cooperate in the defense. If the Trustee is advised by counsel that it may
have available to it defenses which are in conflict with any defenses available
to the Issuer, then the Issuer may have separate counsel and the Issuer shall
pay the reasonable fees and expenses of such counsel. The Issuer need not pay
for any settlement made without its consent, which consent shall not be
unreasonably withheld. The Issuer need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through negligence or bad
faith.
To secure the Issuer's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Securities on all Cash or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities .
The Issuer's payment obligations pursuant to this Section 7.07 shall
survive the discharge of this Indenture and the resignation or removal of the
Trustee. When the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in subsection 5.01(6) or (7), the
expenses and compensation for the services are intended to constitute expenses
of administration under the Bankruptcy Law.
SECTION 7.08. Replacement of Trustee. The Trustee may resign and be
----------------------
discharged from the trust created hereby by so notifying the Issuer. The
Holders of a majority in aggregate principal amount of the Outstanding
Securities may remove the Trustee by so notifying the Trustee and the Issuer
and may appoint a successor Trustee. The Issuer may remove the Trustee if:
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(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, then, unless the Holders of Securities have
appointed a Successor Trustee as provided above, the Issuer shall promptly
appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Immediately after
receiving such acceptance, the retiring Trustee shall transfer all property held
by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07, the resignation or removal of the retiring Trustee shall then become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Holder of Securities. Notwithstanding
replacement of the Trustee pursuant to this Section, the Issuer's obligations
under Section 7.07 hereof shall continue for the benefit of the retiring
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of a majority in aggregate principal amount of the Outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder of
Securities may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee. In determining whether
the Trustee has conflicting interests as defined in TIA Section 310 (b)(1), the
provisions contained in the proviso to Section 310(b)(1) shall be deemed
incorporated herein.
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SECTION 7.09. Successor Trustee by Merger. If the Trustee
---------------------------
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee.
SECTION 7.10. Eligibility; Disqualification. The Trustee shall at al1
-----------------------------
times satisfy the requirements of TIA (S)(S) 310(a)(1) and (a)(2). The Trustee
shall have a combined capital and surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA (S) 310 (b) during the period of time required thereby.
SECTION 7.11. Preferential Collection of Claims Against Corporation.
-----------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311 (a) to the extent indicated therein.
ARTICLE EIGHT
Amendments, Supplements and Waivers
SECTION 8.01. Without Consent of Holders. The Issuer and the Trustee
--------------------------
may amend or supplement this Indenture or the Securities without notice to or
consent of any Holder of Securities:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article Nine;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(4) to make any change that does not adversely affect the rights of
any Holder of Securities; or
(5) to comply with any requirement of the SEC in connection with the
qualification of this Indenture under the TIA.
After an amendment under this Section becomes effective, the Issuer
shall mail to Securityholders a notice
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<PAGE>
briefly describing such amendment. Failure to mail such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment under this Section.
SECTION 8.02. With Consent of Holders. The Issuer may amend or
-----------------------
supplement this Indenture or the Securities without notice to any Holder but
with the written consent of the Holders of at least a majority in aggregate
principal amount of the Outstanding Securities. The Holders of a majority in
aggregate principal amount of the Outstanding Securities may waive any past
default or compliance by the Issuer with any provision of this Indenture or the
Securities without notice to any Holder. However, without the consent of each
Holder affected, an amendment or supplement to this Indenture or waiver may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the fixed maturity of any
Security;
(4) make any Security payable in money other than that stated in the
Security;
(5) make any change in Article Ten that adversely affects the rights
of any Securityholder;
(6) reduce the premium payable upon the redemption of any Security
or change the time at which or circumstances under which any Securities
may be redeemed or repurchased;
(7) impair the right of any Securityholder to receive payment of
principal of and interest on such Securityholders' Securities on or after
the due dates thereof or to institute suit for the enforcement of any
payment on or with respect to such holders' securities;
(8) make any change in Section 5.04 or 5.07 or this Section; or
(9) waive any Default in the payment of principal of or interest on
any Security.
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<PAGE>
It shall not be necessary for the consent of the Holders of the
Securities under this Section 8.02 to approve the particular form of any
proposed amendment or supplement, but it shall be sufficient if such consent
shall approve the substance thereof.
An amendment under this Section may not make any change that adversely
affects the rights under Article Ten of any holder of Senior Debt then
outstanding unless the holders of the issue required pursuant to its terms
consent to such change.
After an amendment under this Section becomes effective, the Issuer
shall mail to Holders a notice briefly describing such amendment. The failure to
mail such notice to all Holders shall not affect the validity of an amendment
under this Section.
SECTION 8.03. Compliance with Trust Indenture Act. Every amendment to
-----------------------------------
or supplement of this Indenture executed pursuant to this Article Eight shall
comply with the TIA as then in effect.
SECTION 8.04. Revocation and Effect of Consents. A consent to an
---------------------------------
amendment, supplement or waiver by a Holder of a Security shall bind such Holder
and every subsequent Holder of that Security or portion of the Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent is not made on the Security. However, any such Holder or subsequent
Holder may revoke the consent as to such Holder's Security or portion of the
Security if the Trustee receives the notice of revocation before the date the
amendment, supplement or waiver becomes effective. After an amendment,
supplement or waiver becomes effective, it shall bind every Holder unless it
makes a change described in clauses (1) through (6) of Section 8.02. In that
case the amendment, supplement or waiver shall bind each Holder of a Security
who has consented to it and every subsequent Holder of a Security or portion of
a Security that evidences the same Debt as the consenting Holder's Security.
The Issuer may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons or Securityholders at such record
date (or their
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duly designated proxies), and only those Persons, shall be entitled to give
such consent or to revoke any consent previously given or to take any such
action, whether or not such Persons continue to be Holders after such record
date. No such consents shall be valid or effective for more than 120 days after
such record date.
SECTION 8.05. Notation on or Exchange of Securities. If an amendment,
-------------------------------------
supplement or waiver changes the terms of a Security, the Trustee may require
the Holder of the Security to deliver it to the Trustee. The Trustee may place
an appropriate notation on the Security regarding the changed terms and return
it to the Holder. Alternatively, if the Issuer or the Trustee so determines,
the Issuer in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure to make an
appropriate notation or issue a new Security shall not affect the validity and
effect of such amendment, supplement or waiver.
SECTION 8.06. Trustee To Sign Amendments. The Trustee shall sign any
--------------------------
amendment, supplement or waiver authorized pursuant to this Article if the
amendment, supplement or waiver does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. If it does, the Trustee may but need
not sign it. In signing such amendment, supplement or waiver the Trustee shall
be entitled to receive, and (subject to Section 7.01) shall be fully protected
in relying upon, an Officers' Certificate and an Opinion of Counsel stating
that such amendment, supplement or waiver is authorized or permitted by this
Indenture and that it is not inconsistent herewith and that it will be valid
and binding on the Issuer in accordance with its terms.
SECTION 8.07. Waiver of Compliance by Holders. Anything in this
-------------------------------
Indenture to the contrary notwithstanding, any of the acts which the Issuer is
required to do or is prohibited from doing by any of the provisions of this
Indenture may, to the extent that such provisions might be changed or eliminated
by a supplemental indenture pursuant to Section 8.02 hereof upon consent of the
Holders of a majority in aggregate principal amount of the Securities at the
time Outstanding, be omitted or done by the Issuer if there is obtained the
prior written consent thereto of the Holders of a majority of the aggregate
principal amount of the Securities at the time Outstanding, or the prior written
waiver of compliance with any such provision or provisions signed by such
Holders. The Issuer agrees promptly to file
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with the Trustee a duplicate original of each such consent or waiver.
ARTICLE NINE
Successor Company
-----------------
SECTION 9.01. When Issuer May Merge or Transfer Assets. The Issuer
----------------------------------------
shall not consolidate with or merge with or into, or convey, transfer or lease
all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (if not the Issuer)
shall be a Person organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and such
Person shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Issuer under the Securities and this
Indenture;
(ii) immediately prior to and after giving effect to such transaction
(and treating any Debt which becomes an obligation of the resulting,
surviving or transferee Person or any Subsidiary as a result of such
transaction as having been issued by such Person or such Subsidiary at
the time of such transaction), no Default shall have occurred and be
continuing;
(iii) immediately after giving effect to such transaction, the
Consolidated EBITDA Coverage Ratio of the Successor Company is at least
1:1; provided, however, that, if the Consolidated EBITDA Coverage Ratio
-------- -------
of the Issuer before giving effect to such transaction is within the range
set forth in column (A) below, then the Consolidated EBITDA Coverage Ratio
of the Successor Company, as the case may be, shall be at least equal to
the lesser of (1) the ratio determined by multiplying the percentage set
forth in column (B) below by the Consolidated EBITDA Coverage Ratio prior
to such transaction and (2) the ratio set forth in column C below:
(A) (B) (C)
----- ----- -----
1.11:1 to 1.99:1 . . . . . . 90% 1.50:1
2.00:1 to 2.99:1 . . . . . . 80% 2.10:1
3.00:1 to 3.99:1 . . . . . . 70% 2.40:1
4.00:1 or more . . . . . . . 60% 2.50:1
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(iv) immediately after giving effect to such transaction, the
resulting, surviving or transferee Person shall have Consolidated Net Worth
in an amount which is not less than the Consolidated Net Worth of the
Issuer prior to such transaction; and
(v) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel prior to the consummation of such
transaction, each stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with this Indenture.
The resulting, surviving or transferee Person shall be the successor
Issuer and shall succeed to, and be substituted for, and may exercise every
right and power of, the Issuer under this Indenture, but the predecessor Issuer
in the case of a conveyance, transfer or lease shall not be released from the
obligation to pay the principal of and interest on the Securities.
ARTICLE TEN
Subordination
-------------
SECTION 10.01. Securities Subordinated to Senior Debt. The Issuer and
--------------------------------------
the Trustee each covenants and agrees and each Securityholder, by its acceptance
of a Security, likewise covenants and agrees that al1 Securities shall be issued
subject to the provisions of this Article; and each Person holding any Security,
whether upon original issue or upon transfer, assignment or exchange thereof,
accepts and agrees that this Debt shall, to the extent and in the manner set
forth in this Article, be subordinated in right of payment to the prior payment
in full, in cash or cash equivalents, of all amounts payable under Senior Debt,
including, without limitation, the Issuer's obligations under the Credit
Agreement, the First Mortgage Bonds Indenture and the Investment Agreement
(including any interest accruing subsequent to a bankruptcy event specified in
Sections 5.01 (6) or 5.01 (7) of this Indenture, whether or not such interest is
an allowed claim enforceable against the debtor under the United States
Bankruptcy Code).
SECTION 10.02. No Payment on Securities in Certain Circumstances. (a)
-------------------------------------------------
No direct or indirect payment or distribution by or on behalf of the Issuer on
account of
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principal of, interest on and premium (if any) and penalties and fees
("Other Subordinated Obligations") with respect to this Debt, whether pursuant
to the terms of the Securities or upon acceleration or otherwise, and no
payment to acquire, repurchase, retire, redeem or defease any of the Securities
shall be made if, at the time of such payment, there exists a default in the
payment of all or any portion of the obligations on any Senior Debt, and such
default shall not have been cured or waived or the benefits of this sentence
waived by or on behalf of the holders of such Senior Debt.
(b) During the continuance of any other event of default with respect
to the Credit Agreement, the First Mortgage Bonds, the Investment Agreement or
other Senior Debt pursuant to which the maturity thereof may be accelerated and
(A) upon receipt by the Trustee of written notice from any holder or holders (or
-
representatives thereof) of such Senior Debt in the aggregate principal amount
of $10 million or (B) if such event of default under the Credit Agreement, the
-
First Mortgage Bonds, the Investment Agreement or other Senior Debt results from
the acceleration of the Securities, from and after the date of such
acceleration, no payment of principal of, interest on, and Other Subordinated
Obligations with respect to this Debt may be made by or on behalf of the Issuer
upon or in respect of the Securities for a period (a "Payment Blockage Period")
commencing on the earlier of the date of receipt of such notice or the date of
such acceleration and ending 179 days thereafter (unless such Payment Blockage
Period shall be terminated by written notice to the Trustee from the relevant
entity giving notice commencing the Payment Blockage Period or such event of
default has been cured or waived or by repayment in full of cash or cash
equivalents of such Senior Debt). Not more than one Payment Blockage Period
pursuant to this Section 10.02(b) may be commenced with respect to the
Securities during any period of 360 consecutive days. Notwithstanding anything
in this Indenture to the contrary, there must be 180 consecutive days in any
360-day period in which no Payment Blockage Period is in effect. For all
purposes of this Section 10.02(b), no event of default (other than an event of
default pursuant to the financial maintenance covenants under the Credit
Agreement, the First Mortgage Bonds Indenture or the Investment Agreement) that
existed or was continuing (it being acknowledged that any subsequent action that
would give rise to an event of default pursuant to any provision under which an
event of default previously existed or was continuing shall constitute a new
event of default
75
<PAGE>
for this purpose) on the date of the commencement of any Payment Blockage
Period with respect to the Credit Agreement, the First Mortgage Bonds, the
Investment Agreement or other Senior Debt initiating such Payment Blockage
Period shall be, or shall be made, the basis for the commencement of a second
Payment Blockage Period by the representative for, or the holders of, such
Senior Debt, whether or not within a period of 360 consecutive days, unless such
event of default shall have been cured or waived for a period of not less than
90 consecutive days.
(c) In the event that, notwithstanding the foregoing, any payment
shall be received by the Trustee or any Holder when such payment is prohibited
by Section 10.02(a) or 10.02(b) of this Indenture, the Trustee shall promptly
notify the holders of Senior Debt of such prohibited payment and such payment
shall be held in trust for the benefit of, and shall be paid over or delivered
to, the holders of Senior Debt or their respective representatives, or to the
trustee or trustees under any indenture pursuant to which any of such Senior
Debt may have been issued, as their respective interests may appear, but only to
the extent that, upon notice from the Trustee to the holders of Senior Debt that
such prohibited payment has been made, the holders of the Senior Debt (or their
representative or representatives or a trustee) within 30 days of receipt of
such notice from the Trustee notify the Trustee of the amounts then due and
owing on the Senior Debt, if any, and only the amounts specified in such notice
to the Trustee shall be paid to the holders of Senior Debt and any excess above
such amounts due and owing on Senior Debt shall be paid to the Issuer.
SECTION 10.03. Payment Over of Proceeds Upon Dissolution, etc. (a)
----------------------------------------------
Upon any payment or distribution of assets or securities of the Issuer, as the
case may be, of any kind or character, whether in cash, property or securities,
upon any dissolution or winding up or total or partial liquidation or
reorganization of the Issuer, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership or other proceedings, all amounts due or to become due
upon all Senior Debt (including any interest accruing subsequent to a bankruptcy
event specified in Sections 5.01(6) or 5.01(7) of this Indenture, whether or not
such interest is an allowed claim enforceable against the debtor under the
United States Bankruptcy Code) shall first be paid in full, in cash or cash
equivalents, before the Securityholders or the Trustee on behalf of the
Securityholders shall be entitled to receive any payment by
76
<PAGE>
or on behalf of the Issuer on account of principal of, interest on, and
Other Subordinated Obligations with respect to, this Debt, or any payment to
acquire, repurchase, retire, redeem or defease any of the Securities for cash,
property or securities, or any distribution with respect to the Securities of
any cash, property or securities. Before any payment may be made by, or on
behalf of, the Issuer on account of principal of, interest on, and Other
Subordinated Obligations with respect to this Debt upon any such dissolution,
winding up, liquidation or reorganization, any payment or distribution of
assets or securities of the Issuer of any kind or character, whether in cash,
property or securities, to which the Securityholders or the Trustee on behalf
of the Securityholders would be entitled, but for the provisions of this
Article, shall be made by the Issuer or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person making such payment or
distribution, or by the Securityholders or the Trustee if received by them or
it, directly to the holders of Senior Debt (pro rata to such holders on the
basis of the respective amounts of Senior Debt held by such holders) or their
representatives, or to any trustee or trustees under any other indenture
pursuant to which any such Senior Debt may have been issued, as their
respective interests appear, to the extent necessary to pay all such Senior
Debt in full, in cash or cash equivalents, after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders of
such Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on behalf
of the Issuer, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar Person under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then if such payment is recovered by, or paid over
to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar Person, the Senior Debt or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred. To the extent the obligation to repay any Senior Debt is
declared to be fraudulent, invalid, or otherwise set aside under any bankruptcy,
insolvency, receivership, fraudulent conveyance or similar law, then the
obligation so declared fraudulent, invalid or otherwise set aside (and all other
amounts that would come due with respect thereto had such obligation not been so
affected) shall be deemed to be reinstated and
77
<PAGE>
outstanding as Senior Debt for all purposes hereof as if such declaration,
invalidity or setting aside had not occurred.
(c) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Issuer of any kind or character, whether in cash, property
or securities, shall be received by the Trustee or any Securityholder at a time
when such payment or distribution is prohibited by Section 10.03(a) of this
Indenture and before all obligations in respect of Senior Debt are paid in full,
in cash or cash equivalents, such payment or distribution shall be received and
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of Senior Debt (pro rata to such ho1ders on the basis of the respective
amount of Senior Debt held by such holders) or their representatives, or to the
trustee or trustees under any other indenture pursuant to which any such Senior
Debt may have been issued, as their respective interests appear, for
application to the payment of Senior Debt remaining unpaid until all such Senior
Debt has been paid in full, in cash or cash equivalents, after giving effect to
any concurrent payment distribution or provision therefor to or for the holders
of such Senior Debt.
(d) The consolidation of the Issuer with, or the merger of the Issuer
with or into, another corporation or the liquidation or dissolution of the
Issuer following the sale, conveyance, transfer, lease or other disposition of
all or substantially all of its property and assets to another corporation upon
the terms and conditions provided in Article Nine of this Indenture shall not be
deemed a dissolution, winding up, liquidation or reorganization for the
purposes of this Section 10.03 if such other corporation shall, as a part of
such consolidation, merger, sale, conveyance, transfer, lease or other
disposition, assume the obligations of the Issuer with respect to Senior Debt
and otherwise comply with the conditions stated in Article Nine of this
Indenture.
SECTION 10.04. Subrogation. (a) Upon the payment in full of all Senior
-----------
Debt, in cash or cash equivalents, the Securityholders shall be subrogated to
the rights of the holders of Senior Debt to receive payments or distributions of
cash, property or securities of the Issuer made on such Senior Debt until the
principal of and interest on the Securities shall be paid in full; and, for the
purposes of such subrogation, no payments or distributions
78
<PAGE>
to the holders of the Senior Debt of any cash, property or securities to
which the Securityholders or the Trustee on their behalf would be entitled
except for the provisions of this Article, and no payment pursuant to the
provisions of this Article to the holders of Senior Debt by the Securityholders
or the Trustee on their behalf shall, as between the Issuer, its creditors
other than holders of Senior Debt, and the Securityholders, be deemed to be a
payment by the Issuer to or on account of the Senior Debt. It is understood
that the provisions of this Article are intended solely for the purpose of
defining the relative rights of the Securityholders, on the one hand, and the
holders of the Senior Debt, on the other hand.
(b) If any payment or distribution to which the Securityholders would
otherwise have been entitled but for the provisions of this Article shall have
been applied pursuant to the provisions of this Article, to the payment of all
amounts payable under Senior Debt, then, and in such case, the Securityholders
shall be entitled to receive from the holders of such Senior Debt any
payments or distributions received by such holders of Senior Debt in excess of
the amount required to make payment in full, in cash or cash equivalents, of
such Senior Debt of such holders.
SECTION 10.05. Obligations of Issuer Unconditional. (a) Nothing
-----------------------------------
contained in this Article or elsewhere in this Indenture or in the Securities)
is intended to or shall impair, as among the Issuer and the Securityholders, the
obligation of the Issuer, which is absolute and unconditional, to pay to the
Securityholders the principal of, and interest on, and Other Subordinated
Obligation with respect to the Securities as and when the same shall become due
and payable in accordance with their terms, or is intended to or shall affect
the relative rights of the Securityholders and creditors of the Issuer other
than the holders of the Senior Debt, nor shall anything herein or therein
prevent the Securityholders or the Trustee on their behalf from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article of the holders of
the Senior Debt.
(b) Without limiting the generality of the foregoing, nothing
contained in this Article will restrict the right of the Trustee or the
Securityholders to take any action to declare the Securities to be due and
payable prior to their stated maturity pursuant to the acceleration
79
<PAGE>
provision of this Indenture or to pursue any rights or remedies hereunder;
provided, however, that all Senior Debt then due and payable or thereafter
- -------- -------
declared to be due and payable shall first be paid in full, in cash or cash
equivalents, before the Securityholders or the Trustee are entitled to receive
any direct or indirect payment of principal of, interest on, and Other
Subordinated Obligation with respect to this Debt from the Issuer.
SECTION 10.06. Notice to Trustee. (a) The Issuer shall give prompt
-----------------
written notice to the Trustee of any fact known to the Issuer that would
prohibit the making of any payment to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article. The Trustee shall not be
charged with knowledge of the existence of any default or event of default with
respect to any Senior Debt or of any other facts that would prohibit the making
of any payment to or by the Trustee unless and until the Trustee shall have
received notice in writing at its Corporate Trust office to that effect signed
by an Officer, or by a holder of Senior Debt, or trustee or agent therefor; and
prior to the receipt of any such written notice, the Trustee shall, subject to
other provisions hereof regarding the rights and obligations of the Trustee, be
entitled to assume that no such facts exist; provided that, if the Trustee shall
--------
not have received the notice provided for in this Section 10.06 at least two
Business Days prior to the date upon which, by the terms of this Indenture, any
monies shall become payable for any purpose (including, without limitation, the
payment of the principal of, interest on, and Other Subordinated Obligations
with respect to any Security), then, notwithstanding anything herein to the
contrary, the Trustee shall have full power and authority to receive any monies
from the Issuer and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it on or after such prior date except for an acceleration of the
Securities prior to such application. Nothing contained in this Section 10.06
shall limit the right of the holders of Senior Debt to recover payments as
contemplated by this Article. The foregoing shall not apply if the Paying Agent
is the Issuer. The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of any
Senior Debt (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such Senior
Debt or a trustee or representative on behalf of any such holder.
80
<PAGE>
(b) In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article and, if such evidence is not furnished to the
Trustee, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 10.07. Reliance on Judicial Order or Certificate of
--------------------------------------------
Liquidating Agent. Upon any payment or distribution of assets or securities
- -----------------
referred to in this Article Ten, the Trustee and the Securityholders shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding up, liquidation or
reorganization proceedings are pending, or upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other similar Person making
such payment or distribution, delivered to the Trustee or to the Securityholders
for the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Debt and other Debt of the Issuer, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article.
SECTION 10.08. Trustee's Relation to Senior Debt. (a) The Trustee and
--------------------------------
any Paying Agent shall be entitled to all the rights set forth in this Article
with respect to any Senior Debt that may at any time be held by it in its
individual or any other capacity to the same extent as any other holder of
Senior Debt and nothing in this Indenture shall deprive the Trustee or any
Paying Agent of any of its rights as such holder.
(b) With respect to the holders of Senior Debt, the Trustee undertakes
to perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article, 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 (except as provided in Sections 10.02(c) and
10.03(c) of this Indenture) and shall not be liable to any
81
<PAGE>
such holders if the Trustee shall in good faith mistakenly pay over or
distribute to Securityholders of Securities or to the Issuer or to any other
person cash, property or securities to which any holders of Senior Debt shall
be entitled by virtue of this Article or otherwise.
SECTION 10.09. Subordination Rights Not Impaired by Acts or Omissions
------------------------------------------------------
of the Issuer or Holders of Senior Debt. No right of any present or future
- ---------------------------------------
holders of any Senior Debt to enforce subordination as provided in this Article
will at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Issuer or by any act or failure to act, in good faith, by
any such holder, or by any noncompliance by the Issuer with the terms of this
Indenture, regardless of any knowledge thereof that any such holder may have or
otherwise be charged with. The provisions of this Article Ten are intended to be
for the benefit of, and shall be enforceable directly by, the holders of Senior
Debt.
SECTION 10.10. Holders Authorize Trustee to Effectuate Subordination
-----------------------------------------------------
of Securities. Each Securityholder by his acceptance of any Securities
- -------------
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article, and appoints the Trustee his attorney-in-fact for such purposes,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Issuer (whether in bankruptcy, insolvency, receivership,
reorganization or similar proceedings or upon an assignment for the benefit of
creditors or otherwise) tending towards liquidation of the property and assets
of the Issuer, the filing of a claim for the unpaid balance of its Securities in
the form required in those proceedings. If the Trustee does not file a proper
claim or proof of indebtedness in the form required in such proceeding at least
10 days before the expiration of the time to file such claim or claims, each
holder of Senior Debt is hereby authorized to file an appropriate claim for and
on behalf of the Securityholders.
SECTION 10.ll. Not to Prevent Events of Default. The failure to make a
--------------------------------
payment on account of principal of, interest on or Other Subordinated
Obligations with respect to the Securities by reason of any provision of this
Article will not be construed as preventing the occurrence of an Event of
Default.
82
<PAGE>
SECTION 10.12. Trustee's Compensation Not Prejudiced. Nothing in this
-------------------------------------
Article will apply to amounts due to the Trustee pursuant to other sections of
this Indenture.
SECTION 10.13. No Waiver of Subordinated Provisions. Without in any
------------------------------------
way limiting the generality of Section 10.09 of this Indenture, the holders of
Senior Debt may, at any time and from time to time, without the consent of or
notice to the Trustee or the Securityholders, without incurring responsibility
to the Securityholders and without impairing or releasing the subordination
provided in this Article or the obligations hereunder of the Securityholders to
the holders of Senior Debt, do any one or more of the following: (a) change
-
the manner, place or terms of payment or change the time of payment of, or renew
or alter, Senior Debt or any instrument evidencing the same or any
agreement under which Senior Debt is outstanding or secured; (b) sell, exchange,
-
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Debt; (c) release any Person liable in any manner for the
-
collection of Senior Debt; and (d) exercise or refrain from exercising any
-
rights against the Issuer and any other Person.
SECTION 10.14. Payments May Be Paid Prior to Dissolution. Nothing
-----------------------------------------
contained in this Article or elsewhere in this Indenture shall prevent (i) the
-
Issuer, except under the conditions described in Section 10.02 or 10.03 of this
Indenture, from making payments of principal of, interest on, or Other
Subordinated Obligations with respect to the Securities, or from depositing with
the Trustee any money for such payments, or (ii) the application by the Trustee
--
of any money deposited with it for the purpose of making such payments of
principal of, interest on, or Other Subordinated Obligations with respect to the
Securities to the holders entitled thereto unless, at least two Business Days
prior to the date upon which such payment becomes due and payable, the Trustee
shall have received the written notice provided for in Section 10.02(b) of this
Indenture (or there shall have been an acceleration of the Securities prior to
such application) or in Section 10.06 of this Indenture. The Issuer shall give
prompt written notice to the Trustee of any dissolution, winding up, liquidation
or reorganization of the Issuer.
SECTION 10.15. Consent of Holders of Senior Debt Under the Credit
--------------------------------------------------
Agreement and First Mortgage Bonds. The provisions of this Article (including
- ----------------------------------
the definitions contained in this Article and references to this Article
83
<PAGE>
contained in this Indenture) shall not be amended in a manner that would
adversely affect the rights of the holders of Senior Debt under the Credit
Agreement, the First Mortgage Bonds, the Investment Agreement or any other
Senior Debt, and no such amendment shall become effective unless the holders of
such Senior Debt shall have consented (in accordance with the provisions of the
Credit Agreement, the First Mortgage Bonds Indenture, the Investment Agreement
or other relevant instrument, as the case may be) to such amendment.
ARTICLE ELEVEN
Miscellaneous Provisions
------------------------
SECTION 11.01. Trust Indenture Act Controls. If any provision of this
----------------------------
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 11.02. Communication by Holders with Other Holders. Holders of
-------------------------------------------
Securities may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Securities. The Issuer, the
Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
SECTION 11.03. Notices. Any notice or communication shall be
-------
sufficiently given if in writing and delivered in person or mailed by first-
class mail, postage prepaid, addressed as follows:
if to the Issuer:
Americold Corporation
7007 S.W. Cardinal Lane, Suite 135
Portland, Oregon 97224
Attention: Joel M. Smith
84
<PAGE>
if to the Trustee:
United States Trust Company of New York
114 West 47th Street, 15th Floor
New York, New York 10036-1532
Attention: Corporate Trust Division
The Issuer or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder of Securities shall be
mailed to such Holder at his address as it appears on the registration books of
the Registrar and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Holder of Securities or
any defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 11.04. When Treasury Securities Disregarded. In determining
------------------------------------
whether the Holders of the required principal amount of Securities have
concurred in any direction, waiver or consent, Securities owned by the Issuer
or by any Affiliate of the Issuer shall be disregarded and deemed not to be
Outstanding, except that for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which the Trustee knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities Outstanding at the time shall be
considered in any such determination.
SECTION 11.05. Rules by Trustee, Paying Agent and Security Registrar.
-----------------------------------------------------
The Trustee may make reasonable rules for action by or a meeting of Holders of
Securities. The Security Registrar and the paying agent may make reasonable
rules for their functions.
SECTION 11.06. Legal Holidays. A "Legal Holiday" is a Saturday, a
--------------
Sunday or a day on which banking institutions are not required to be open in the
State of New York or the State of Oregon. If a Payment Date is a Legal Holiday,
payment shall be made on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the
85
<PAGE>
intervening period on such amounts to be paid on such Payment Date; provided
--------
that if the Maturity Date is a Legal Holiday, interest shall accrue for such
intervening period. If a regular record date is a Legal Holiday, the record
date shall not be affected.
SECTION ll.07. Successors. All agreements of the Issuer in this
----------
Indenture and the Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION ll.08. Multiple Originals. The parties may sign any number of
------------------
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION ll.09. Separability C1ause. In case any provision in this
-------------------
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION ll.l0. Governing Law. This Indenture and each of the
-------------
Securities issued hereunder shall be deemed to be contracts made under the laws
of the State of New York and shall for all purposes be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the laws of another jurisdiction would be required thereby.
SECTION ll.ll. Table of Contents; Headings. The table of contents and
---------------------------
the titles and headings of the Articles and Sections of this Indenture have been
inserted for convenience of reference only, are not being considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
86
<PAGE>
IN WITNESS WHEREOF, AMERICOLD CORPORATION has caused this Indenture to
be signed and acknowledged by its Vice President, and its corporate seal to be
affixed hereunto, and the same to be attested by its Assistant Secretary; and
UNITED STATES TRUST COMPANY OF NEW YORK has caused this Indenture to be signed
and delivered by one of its vice Presidents and its corporate seal to be affixed
hereunto, and the same to be attested by one of its Authorized Persons, all as
of the day and year first above written.
AMERICOLD CORPORATION
By________________________________
Name: Joel M. Smith
Title: Senior Vice President and
Chief Financial Officer
Attest:
__________________________________
Name: Lon V. Leneve
Title: Secretary
[Seal]
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By________________________________
Name:
Title:
Attest:
__________________________________
Name:
Title:
[Seal]
87
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this _____ day of ______ 1996, before me persona1ly came Joel M.
Smith, to me known, and who, being by me duly sworn, did depose and say that he
resides at ___________, that he is the Senior Vice President and Chief
Financial Officer of AMERICOLD CORPORATION, one of the corporations described in
and which executed the above instrument; that he knows the corporate seal of
said corporation; that one of the seals affixed to the said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors of
said corporation; and that he signed his name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
________________________
Name:
Commission Expires______
1
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ______ day of _______ 1996, before me personally came
____________, to me known, and who, being by me duly sworn, did depose and say
that he resides at ________________ , that he is the______________ of UNITED
STATES TRUST COMPANY OF NEW YORK, one of the corporations described in and which
executed the above instrument; that he knows the corporate seal of said
corporation; that one of the seals affixed to the said instrument is such
corporate seal; that it was so affixed by authority of the Board of Directors of
said corporation; and that he signed his name thereto by like authority.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
[NOTARIAL SEAL]
_____________________________
Name:
Commission Expires __________
2
<PAGE>
[FORM OF FACE OF SECURITY]
AMERICOLD CORPORATION
No. R- $
___% Senior Subordinated Debenture, Due 2008
AMERICOLD CORPORATION, an Oregon corporation, promises to pay
to , or registered assigns, the aggregate
principal sum of Dollars on or before May 1, 2008.
Interest Payment Dates: May 1 and
November 1
Record Dates: April 15 and October 15
Additional provisions of this Security are set forth on the other
side of this Security.
Dated:
AMERICOLD CORPORATION,
By
_____________________________
Vice President
_____________________________
Secretary
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
UNITED STATES TRUST COMPANY OF NEW
YORK, as Trustee, certifies that [SEAL]
this is one of the Securities
referred to in the Indenture.
By
_______________________________
Authorized Signatory
Date of Authentication:
<PAGE>
[FORM OF REVERSE SIDE OF SECURITY]
AMERICOLD CORPORATION
__% Senior Subordinated Debenture, Due 2008
1. Payment of Interest; Default Rate; Payment of Principal.
-------------------------------------------------------
Americold Corporation (the "Issuer", which term includes any successor
as defined in the Indenture hereinafter referred to) promises to pay interest on
the outstanding principal amount of this Security (a "Security") from the date
hereof to maturity at a rate of __% per annum, and to pay, on demand, interest,
compounded monthly, on any overdue principal, premium and (to the extent not
prohibited by applicable law) interest at a rate (the "Default Rate") equal to
the lesser of (a) the greater of (i)__% per annum and (ii) 4% per annum over the
- - --
prime rate or equivalent rate of interest from time to time in effect as
announced by United States Trust Company of New York, and (b) the maximum rate
of interest on this Security then permitted by applicable law, in each case
computed on the basis of a 360-day year of twelve 30-day months. This Security
shall bear interest on the unpaid principal amount hereof from and after the
most recent Payment Date (as hereinafter defined) to which interest has been
paid or, if no interest has been paid, from and after the date of original
issuance of the Securities.
Such principal and interest (other than any interest payable at the
Default Rate, which is payable on demand) shall be payable in the manner set
forth in Section 3 below in lawful money of the United States of America, as
follows:
(i) the full amount of all interest accrued on the outstanding
principal amount of this Security shall be due and payable on May 1 and
November 1 of each year, commencing November 1, 1996; and
(ii) payment of principal shall be due and payable on May 1, 2008.
The payments described in clause (i) above are herein called the "Interest
Payments" and the dates upon which such payments and the payment described in
clause (ii) above are due are herein called the "Payment Dates"; provided that,
--------
if any Payment Date would otherwise be on a day which is not a
<PAGE>
Business Day, then such Payment Date shall be the next succeeding Business
Day. Capitalized terms used herein without definition shall have the meanings
specified in the Indenture (as hereinafter defined).
The Interest Payment payable on any Payment Date will, subject to
certain conditions set forth below, be paid to the Person in whose name this
Security (or one or more predecessor Securities) is registered at the close of
business on the April 15 or October 15 next preceding such Payment Date, as the
case may be; provided that any Interest Payment not punctually paid or duly
--------
provided for on such Payment Date shall cease to be so payable, but instead
shall be payable to the Person in whose name this Security is registered at the
close of business on such date as shall be determined by the Issuer in
accordance with the Indenture (as hereinafter defined).
2. Indenture.
---------
This Security is a general unsecured obligation of the Issuer and is
one of a duly authorized issue of securities of the Issuer designated as its __%
Senior Subordinated Notes, Due 2008, limited in aggregate principal amount to
$120,000,000, except as provided in the Indenture (as hereinafter defined), all
issued or to be issued, under and pursuant to the Indenture, dated as of ______,
1996 (herein, together with all supplements and amendments thereto, called the
"Indenture"). This Security has been duly executed and delivered by the
Issuer to United States Trust Company of New York (herein, together with its
successors and assigns as trustee under the Indenture, called the "Trustee"), as
Trustee for authentication. Reference is hereby made to the Indenture and all
indentures supplemental thereto for a description of the nature and extent of
the security, the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Issuer and the Holders of the
Securities, and this Security is subject in all respects to such Indenture.
3. Method of Payment; Tax Withholding.
----------------------------------
(a) Interest Payments on the Securities will be made in U.S. dollars,
at the office of the Trustee, but, at the option of the Issuer, such payments
may be made by check drawn on a bank in New York City mailed to the Holder at
such Holder's registered address, except as otherwise provided in the Indenture.
Payment of principal of or premium (if any) on this Security upon maturity or
redemption in
2
<PAGE>
whole or in part, together with accrued interest, will, except as otherwise
provided in the Indenture, be made against surrender hereof at the office of
the paying agent or co-paying agent maintained by the Issuer in New York City,
which initially shall be at the office of the United States Trust Company of
New York, 114 West 47th Street, 15th Floor, New York, New York 10036-1532.
(b) No deduction or withholding from any payment of interest on this
Security for or on account of any taxes will be made except as required by
law. Applicable United States federal taxes will be withheld from payments on
this Security for any year in which the Trustee has not received from any
Holder hereof that is not a United States Person (as defined in the Indenture)
properly executed Form 4224 or Form 1001 (or Form W-8) (or successor thereto)
in accordance with the provisions of the Indenture, certifying to the effect
that such Holder is not subject to United States federal withholding tax on
interest payable under this Security.
4. Denominations.
-------------
Securities are issuable only in fully registered form without coupons
and may be transferred in minimum denominations of $50,000 and such greater
denominations as are whole multiples of $100,000, only in the manner and upon
payment of the charges provided in the Indenture. The Trustee will authenticate
and deliver Securities for issue in an aggregate principal amount not to exceed
$120,000,000 upon a written order of the Issuer.
5. Defaults and Remedies.
---------------------
If an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal amount of each Security may become or
be declared to be due and payable. Upon payment by the Issuer of such principal
amount, the premium (if any) specified in Section 3.01 of the Indenture and all
accrued interest, the obligations of the Issuer with respect to the payment of
principal of, premium (if any) and interest on this Security shall terminate.
The Indenture provides that a declaration that the Securities are due
and payable upon the occurrence of certain Events of Default and the
consequences of such declaration may be annulled by the Holders of a majority in
aggregate principal amount of the Securities then Outstanding,
3
<PAGE>
considered as a single class. It is also provided in the Indenture that
under certain circumstances prior to any such declaration the Holders of a
majority in aggregate principal amount of the Securities at the time
Outstanding may on behalf of the Ho1ders of all the Securities waive any past
Default or Event of Default under the Indenture and its consequences except a
default in the payment of principal of, premium (if any) or interest on any of
the Securities, or a default in respect of a covenant or provision of the
Indenture which cannot be amended or modified without the consent of the Holder
of each Security affected.
6. Amendment; Supplement; Waiver.
-----------------------------
The Indenture contains provisions permitting the Issuer and the
Trustee, without the consent of the Holders of Securities, to modify and amend
the terms and conditions of the Indenture and the Securities for certain
purposes including, without limitation, (a) adding to the covenants of the
-
Issuer for the benefit of the Holders of Securities, (b) curing any ambiguity
-
or correcting or supplementing any defective provisions contained therein, or
(c) making such other provisions in regard to matters or questions arising under
-
the Indenture as shall not adversely affect the interests of the Ho1ders of the
Securities. The Indenture contains provisions permitting the Issuer and the
Trustee, with the consent of the Holders of a majority in aggregate principal
amount of the Securities then Outstanding, evidenced as in the Indenture
provided, to execute supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture or
any supplemental indenture or modifying in any manner the rights of the Holders
of Securities under the Indenture; provided that no such supplemental indenture
--------
shall, without the consent in each case of the Ho1der of each Security so
affected, (a) extend the fixed maturity of any Securities, or reduce the
-
principal amount thereof or premium thereon, or change the time at which or
circumstances under which any Security may or shall be redeemed or repurchased,
or reduce the rate of or extend the time of payment of interest thereon, or make
the principal thereof or premium or interest thereon payable in any coin or
currency other than that hereinbefore provided, or impair the right to institute
suit for the enforcement of any such payment, make any changes to the
subordination provisions set forth in the Indenture that adversely affect the
rights of any Securityholder, or (b) amend certain provisions of the Indenture
-
to reduce quorum or voting requirements, or reduce the aforesaid percentage in
aggregate principal amount of
4
<PAGE>
Securities the consent of the Holders of which is required for any such
supplemental indenture, or reduce the percentage of Securities the Holders of
which are required to give certain directions or to consent to certain waivers
or (c) modify or affect in any manner adverse to the Holders of the Securities
-
the terms and conditions of the obligations of the Issuer in respect of the due
and punctual payment of the principal of and premium (if any) and interest on
the Securities.
Any such consent or waiver by the Holder of this Security (unless
revoked as provided in the Indenture) shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and any Security which may
be issued in substitution or exchange hereof, irrespective of whether any
notation of such consent or waiver is made upon this Security or such other
Security.
7. Optional Redemption.
-------------------
The Securities will be redeemable, at the Issuer's option, in whole or
in part, at any time and from time to time on or after May 1, 2001 upon not less
than 30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's registered address, at the following redemption prices (expressed in
percentages of principal amount), plus accrued interest to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant Payment Date), if redeemed during the 12-
month period commencing on or after May 1, of the years set forth below:
Redemption
Period Price
____________________________________________ ______________________________
2001 .................................... %
2002 ....................................
2003 and thereafter ..................... 100.000
In addition, at any time and from time to time prior to May 1, 1999,
the Issuer may redeem in the aggregate up to 35% of the original principal
amount of the Notes with the proceeds of one or more Public Equity Offerings, at
a redemption price (expressed as a percentage of principal amount) of ___% plus
accrued and unpaid interest, if any, to the redemption date (subject to the
right of Holders of
5
<PAGE>
record on the relevant record date to receive interest due on the relevant
Payment Date).
In the case of any redemption of Securities, the Issuer is required to
deliver to the Trustee an Officers' Certificate of the Issuer stating that the
Issuer is entitled to effect such redemption and setting forth in reasonable
detail a statement of facts showing that the conditions precedent, if any, to
the right of the Issuer to redeem the Securities have occurred.
8. Subordination.
-------------
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and subject in right of payment to the prior
payment in full of all Senior Debt and this Security is issued subject to the
provisions of the Indenture with respect thereto. Each Holder of this Security,
by accepting the same, (a) agrees to and shall be bound by such provisions and
-
(b) authorizes and directs the Trustee on his behalf to take such action as may
-
be necessary or appropriate to effectuate the subordination so provided.
9. Put Provisions.
--------------
Upon a Change of Control, any Holder of Securities will have the right
to cause the Issuer to repurchase all or any part of the Securities of such
Holder at a repurchase price equal to 101% of the principal amount of the
Securities to be repurchased plus accrued interest to the date of repurchase, as
provided in, and subject to, the Indenture.
10. Asset Sales.
-----------
The Indenture provides, under certain circumstances, for the payment
of principal of the Securities from certain asset sales.
11. Defeasance.
----------
Subject to certain conditions, the Issuer at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Issuer deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
6
<PAGE>
12. Persons Deemed Owners.
---------------------
The Issuer, the Trustee and any agent of the Issuer or the Trustee may
deem and treat the Person in whose name this Security shall be registered upon
the Security Register (as such term is defined in the Indenture) as the absolute
owner of this Security (whether or not this Security shall be overdue and
notwithstanding any notation of ownership or other writing thereon) for the
purpose of receiving payment thereof and for all other purposes, and neither the
Issuer nor the Trustee nor any agent of the Issuer or the Trustee shall, except
to the extent required by applicable law, be affected by any notice to the
contrary. All such payments so made to any such Person shall be valid and, to
the extent of the sum or sums so paid, effectual to satisfy and discharge all
liability for the money payable hereupon.
13. Validity; Authentication.
------------------------
The Indenture and this Security shall be deemed to be contracts made
under the laws of the State of New York and shall for all purposes be governed
by, and construed in accordance with, the laws of such State without giving
effect to applicable principles of conflicts of laws to the extent that the
application of the laws of another jurisdiction would be required thereby.
This Security shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been manually signed
by the Trustee under the Indenture.
14. Unclaimed Money.
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or paying agent shall pay the money back to the
Issuer at its request. After any such payment, Securityholders entitled to the
money must look only to the Issuer and not to the Trustee for payment unless an
abandoned property law designates another person.
15. Abbreviations.
-------------
Customary abbreviations may be used in the name of a Securityholder 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
7
<PAGE>
common), CUST (custodian), and U/G/M/A (Uniform Gifts to Minors Act).
16. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Security or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
8
<PAGE>
- -------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- -------------------------------------------------------------------------------
(insert assignee's social security or taxpayer I.D. number)
and irrevocably appoint________________________________________________________
agent to transfer this Security on the books of the Issuer. The agent may
substitute another to act for him.
Date: _____________
Signature: _____________________________________________________________________
(Sign exactly as your name appears on the other side
of this Security)
- -------------------------------------------------------------------------------
<PAGE>
(Exhibit 11)
AMERICOLD CORPORATION
STATEMENT REGARDING COMPUTATION OF
PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year-ended last day of February
1993 1994 1995
--------- --------- -----------
<S> <C> <C> <C>
Net income (loss) $(8,150) $(77,121) $5,564
Less: total accrued preferred
dividend
(43.860 shares x 13.25% x 8/12 yr) (387) - (60)
(38.389 shares x 14.25% x 4/12 yr) (183) - -
(49.672 shares x 11.50% x 8/12 yr) - (381) -
(43.860 shares x 13.25% x 4/12 yr) - (194) -
(49.672 shares x 11.50% x 4/12 yr) - - (190)
(55.384 shares x 13.50% x 7/12 yr) - - (436)
(52.936 shares x 13.50% x 1/12 yr) - (183) (60)
------- -------- ------
Net income (loss) for per share
calculation $(8,720) $(77,696) $4,878
======= ======== ======
Weighted average number of shares
outstanding 4,839 4,855 4,864
======= ======== ======
Net income (loss) per share $(1.80) $(16.00) $1.00
======= ======== ======
</TABLE>
<PAGE>
(Exhibit 21)
AMERICOLD CORPORATION
List of Subsidiaries
<TABLE>
<CAPTION>
Names
State of Under Which
Name Incorporation Does Business
- ---- ------------- ----------------
<S> <C> <C>
Americold Services Delaware Americold Services
Corporation Corporation
</TABLE>
<PAGE>
(Exhibit 23)
Accountants' Consent and Report
-------------------------------
on Financial Statement Schedules
--------------------------------
The Board of Directors
Americold Corporation:
The audits referred to in our report dated May 26, 1995, except for Notes 15 and
16 which are as of June 30, 1995, included the related financial statement
schedule as of the last day of February 1995, and for each of the years in the
three-year period ended the last day of February 1995, included in the
Registration Statement. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audits. In our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
We consent to the use of our reports included herein and to the reference to our
firm under the headings "Experts" and "Selected Consolidated Financial and Other
Information" in the Prospectus. Our report refers to changes in accounting for
income taxes and postretirement benefits other than pensions.
/s/ KPMG PEAT MARWICK LLP
Portland, Oregon
January 30, 1996
